INTERIM REPORT Q2:2019

INTERIM REPORT

Q2:2019 JANUARY - JUNE SPORTAMORE AB (PUBL) ORG. NR. 556788-8614

Table of Contents

Summary of the period......................................................................................................................... 03 CEO’s comments.................................................................................................................................. 04 The Group’s business activities during the period............................................................................... 05 Operating income and total sales.................................................................................................. 05 Profit/loss and margins................................................................................................................... 05 Investments.................................................................................................................................... 05 Cash flow and financial position..................................................................................................... 06 The share........................................................................................................................................ 06 Authorisations................................................................................................................................. 06 Other significant information................................................................................................................ 07 Significant events during the period.............................................................................................. 07 Significant events since the end of the period............................................................................... 07 Statement about the future............................................................................................................. 07 Ongoing investment in automated facility...................................................................................... 07 Seasonal variations........................................................................................................................ 07 Significant risks and uncertainties in business activities............................................................... 07

Financial summary

Consolidated statement of comprehensive income............................................................................. 09 Consolidated statement of financial position – in summary................................................................. 10 Consolidated statement of changes in equity – in summary............................................................... 10 Consolidated cash flow statement – in summary................................................................................. 11 The Group’s key indicators.................................................................................................................. 12 Note 1 Accounting policies and valuation principles........................................................................... 13 Note 2 Reporting of segments............................................................................................................. 15 Note 3 Reconciliation of total sales to operating income..................................................................... 15 Note 4 Transactions with related parties.............................................................................................. 16 Note 5 Investments in Property, plant and equipment......................................................................... 16 Note 6 Warrant scheme ..................................................................................................................... 16 Note 7 Deferred tax.............................................................................................................................. 16 Note 8 Contingent liability.................................................................................................................... 16 Note 9 Pledged assets......................................................................................................................... 16 Parent company’s income statement................................................................................................... 17 Parent company’s statement of comprehensive income..................................................................... 17 Parent company’s statement of financial position – in summary......................................................... 18 Parent company’s statement of changes in equity – in summary........................................................ 18 Signatures and auditor’s audit............................................................................................................. 19

Other information

Financial calendar................................................................................................................................ 21 Financial statements............................................................................................................................. 22 Definitions of key indicators................................................................................................................. 23

Q2 - January - June 2019

Summary of the period 1 April – 30 June • Total sales1 totalled SEK 244.1 (206.4) million with a growth of 18.3 (19.4) per cent. • Operating income totalled SEK 240.5 (205.6) million. • Earnings per share before dilution totalled SEK -0.80 (-0.57). • Cash flow from operating activities was SEK -17.4 (-34.8) million. • EBIT totalled SEK -9.5 (-6.2) million.

1 January – 30 June • Total sales1 totalled SEK 481.8 (416.3) million with a growth of 15.7 (20.2) per cent. • Operating income totalled SEK 474.2 (415.3) million during the period. • Earnings per share before dilution totalled SEK -1.54 (-0.58). • Cash flow from operating activities was SEK -44.9 (-46.4) million. • EBIT totalled SEK -19.3 (-5,3) million.

Summary of financial results

2019 Apr-Jun

2018 Apr-Jun

2019 Jan-Jun

2018 Jan-Jun

Rolling 12 month

2018 Jan-Dec

Total sales1, SEK thousand

244,134

206,403

481,811

416,266

1,018,468

952,897

Sales growth, %

18.3%

19.4%

15.7%

20.2%

22.9%

25.6%

240,519

205,613

474,236

415,257

1,006,311

947,332

Growth operating income, %

17.0%

19.0%

14.2%

19.9%

21.6%

24.9%

Gross margin, %

37.6%

37.4%

37.1%

36.9%

36.4%

36.3%

EBIT, SEK thousand

-9,542

-6,194

-19,314

-5,290

-11,021

3,002

EBIT margin, %

-4.0%

-3.0%

-4.1%

-1.3%

-1.1%

0.3%

-17,400

-34,775

-44,899

-46,427

-18,132

-19,659

Number of visits, thousands

14,326

12,215

29,617

25,399

58,554

54,336

Proportion of visits on mobile devices

82.6%

76.2%

80.5%

75.6%

79.0%

76.6%

Number of orders, thousands

488

435

955

819

1,971

1,835

Active customers, thousands

1,041

869

1,041

869

1,041

975

Average number of orders per active customer

1.89

1.85

1.89

1.85

1.89

1.88

Average order value, SEK

500

474

504

508

517

519

13.2%

12.4%

12.6%

11.5%

11.8%

11.3%

Operating income, SEK thousand

Cash flow from operating activities, SEK thousand Key indicators

Marketing expenses (% of operating income) See definitions at the end of the report.

1. Own sales plus the total value of products sold from commission-based revenues, where own sales refers to operating income less provision from commission-based sales.

Sportamore AB (publ) | Interim report

03


Accelerating growth and improved gross margin During the second quarter of the year, Sportamore increased its rate of growth to 18.3 per cent and total sales1 reached SEK 244 (206) million. The gross margin is stronger, compared with both the previous quarter and the previous year, totalling 37.6 (37.4) per cent for the period. The acid test for the physical sports retail sector is continuing in the wake of the rapid transition to digital shopping, and despite good weather prospects the market has been characterised by a high level of campaign intensity. Sportamore is showing that we can control our gross margin even in these conditions. We expect, during the second half of the year, to further strengthen the gross margin compared with the previous year and at the same time to deliver growth in accordance with our financial goals.

Increasing value

We can confirm a significant improvement in the average order value, which increased by six per cent for the period. This trend is being driven by both an increasing number of items per order and a rising average sale price. Towards the end of the period we also introduced a minimum order limit for free delivery in all markets. This change was preceded by a detailed analysis of customer behaviour and is expected to have a number of positive effects. Not only is it expected to contribute to increasing the average order value in the quarters ahead, it will also free up resources from less profitable customer orders that we can use instead to improve our delivery offering and service level for our profitable customer orders. Another important aspect is that this change has the potential to drive rapid change in the cost structure per order, which is expected to make a positive contribution to Sportamore’s profitability trend.

New market - France

Towards the end of the period we launched Sportamore in France and are now starting work to grow and adapt this market. Through our focus on automation and scalable processes we have laid strong foundations for the opportunity to scale up our overall geographical market. The customer base is growing according to plan with an annual growth rate of around 175,000 customers and now totals 1,041,000 active customers, at the same time the average number of orders per active customer is increasing. Furthermore during the second quarter we invested in the development of both brand concept and a new platform for managing our existing customer base – an exciting project, the results of which will start to be implemented during the third quarter.

of the investments we made in infrastructure and automation for scalability and efficiency is growing.The benefits of these investments when net sales increase was seen not least in the fourth quarter of 2018. Scalability is also evident in the fact that operating expenses excluding product and marketing costs as a proportion of sales during the period developed positively during the period and fell from 28.8 per cent in the first quarter to 28.3 per cent in the second quarter as an effect of rationalisation and growth in net sales. We are now moving into a phase with profitability focus and are taking a number of measures to drive our development, the first of which is the implementation of a limit for free delivery. It is our assessment that continued rationalisation combined with a rising order value will contribute to an improved cost structure in the quarters ahead and that 2019 on a full-year basis will generate an improved profit compared with 2018, while at the same time the strong growth of the customer base increases the potential for the future.

Healthy finances and saleable stock

The Group’s financial position remains healthy, with cash in hand on the balance sheet date totalling SEK 25.5 (44.0) million, excluding an overdraft facility of SEK 40.0 million. The value of stock at the end of the period totalled SEK 275 (229) million, a planned reduction compared with both the turn of the year and the end of the previous quarter, which means that the stock turnover rate is now rising in accordance with previous communication. The stock remains saleable, with less than 18 per cent being more than six months old. We also maintain our ambition to increase the stock turnover rate during the second half of 2019.

Bromma, Sweden, July 2019, Johan Ryding, CEO, Sportamore

Scalability and efficiency for an improved full-year profit

During the period we have been significantly affected by increased freight costs as a consequence of capacity restrictions, exchange rate changes and rising oil prices. This had a negative impact on EBIT for the quarter that totalled SEK -9.5 (-6.2) million. With this background, the importance 1. Own sales plus the total value of products sold from commission-based revenues, where own sales refers to operating income less provision from commission- based sales.


04


The Group’s business activities during the period Operating income and total sales

Operating income totalled SEK 240.5 (205.6) million, corresponding to an increase of 17.0 per cent compared with the same period in 2018. Operating income (SEK million) 350

1200

300 250 200 150 100

1000 800 600 400

50 0

200 15Q115Q215Q315Q416Q116Q216Q316Q417Q117Q217Q317Q418Q118Q218Q318Q419Q119Q2 Operating Income

Investments

Investments during the second quarter of 2019 totalled SEK 14.8 (9.6) million. The investments consist primarily (SEK 11.8 million) of IFRS 16 related right of use in respect of the head office in Bromma. The rental agreement for the head office in Bromma has in previous quarters been classified as a shortterm lease. During the second quarter in 2019 an agreement with the landlord was reached and the rental agreement was extended, accordingly an IFRS 16 related right of use were recorded during the second quarter 2019.

0

Operating income rolling 12

Total sales amounted to SEK 244.1 (206.4) million, corresponding to an increase of 18.3 per cent relative to the same period in 2018. The growth in total sales is driven primarily by an increase in active customer base and average number of orders per active customer. Sportamore has also seen an increase in commission-based sales within the commissionbased program.

Profit/loss and margins

Sportamore strengthened its gross margin compared with the previous quarter and the previous year, totalling 37.6 (37.4) per cent for the period. EBIT totalled SEK -9.5 (-6.2) million, affected by marketing expenses associated with increased brand awareness and increased freight costs. EBIT (SEK million) 30 20 10 0 -10 -20 -30 -40 -50

15 Q1 15 Q2 15 Q3 15 Q4 16 Q1 16 Q2 16 Q3 16 Q4 17 Q1 17 Q2 17 Q3 17 Q4 18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 19 Q2

EBIT

EBIT rolling 12


05


Cash flow and financial position

The Group’s cash in hand at the end of the period totalled SEK 25.5 (44.0) million, and total cash flow during the second quarter was SEK -25.2 (-35.7) million. Cash flow from operating activities totalled SEK -17.4 (-34.8) million during the quarter. The positive cash flow trend is primarily attributable to good and efficient stock management. Cash flow from investing activities totalled SEK -2.5 (-0.5) million, attributable to capitalized development expenses and inventories. Cash flow from financing activities totalled SEK -5.2 (-0.4) million and is attributable to repayment of lease liabilities in respect of the right of use in respect of the logistics facility in Kjula and the head office in Bromma.

Authorisations

At the 2019 AGM a resolution was passed in accordance with the Board’s proposal to authorise the Board, on one or more occasions before the next AGM, to take a decision on the issuing of shares, convertibles and/or warrants in Sportamore AB (publ). The shares, convertibles and/or warrants are to be issued with or without preferential rights for Sportamore’s shareholders and with the issuing of, conversion to or new subscription to no more than the number of shares, and representing the share capital, that corresponds to ten per cent of the number of shares at the time when the authorisation to issue is exercised for the first time. Payment shall be possible not only in cash, but also by payment in kind, through offsetting or otherwise in accordance with the terms and conditions.

The Group has interest-bearing liabilities totalling SEK 196.3 (58.6) million, of which SEK 30.1 (7.5) million are current liabilities. The increase compared to the same quarter last year is attributable to the expansion of the warehouse automation facility and the IFRS 16-related right of use in respect of the logistics facility in Kjula and the head office in Bromma. The debt/equity ratio the end of the period was 37.3 (51.2) per cent.

The share

Share capital at the end of the period was SEK 1,337 thousand. The number of shares at the end of the period totalled 9,694,351.

Largest shareholders Name

No. of shares & votes

Proportion (%)

J3 BRUNKEBERG INVEST AB

1,215,073

12.53%

AB, TAJETE

1,186,382

12.24%

KALIN SETTERBERG AB

869,584

8.97%

SWEDBANK ROBUR SMÅBOLAGSFOND SVERIGE

630,000

6.50%

AMF AKTIEFOND SMÅBOLAG

416,815

4.30%

AKTIA NORDIC MICRO CAP

380,000

3.92%

NORDEA LIVFÖRSÄKRING SVERIGE AB

357,060

3.68%

UNION BANCAIRE PRIVEE, UBP SA

355,000

3.66%

HANDELSBANKEN LIV FÖRSÄKRINGSAKTIEBOLAG

335,000

3.46%

ERIK MITTEREGGER FÖRVALTNINGS AB

250,000

2.58%

OTHERS

3,699,437

38.16%

Total

9,694,351

100%

Confirmed as of 30 juni 2019


06


Other significant information Significant events during the period

In April, the Board of Directors of Sportamore AB (publ) adopted updated financial goals. See below section Financial goals.

Significant events since the end of the period No significant events occurred after the period end.

Statement about the future

The overarching focus on an annual basis will be to improve the underlying profitability. This, in combination with our ambition to improve the stock turnover rate, means that 2019 on a full-year basis is expected to generate both improved profit and operational cash flow compared to 2018. We also make the assessment that continued efficiency improvements in combination with growth and recently introduced minimum limit for free delivery in all markets will contribute to an improved cost structure for the coming quarters. Sportamore intends to continue its efforts to increase brand awareness and to attract additional customers to further enhance its position in the Nordic markets. Financial goals The Board of Directors of Sportamore AB (publ) decided in April 2019 on updated financial goals for the Group. Sportamore’s financial goals, which are described below, should not be considered to constitute a forecast, but rather an ambition that the Board and management believe represents reasonable long-term expectations for Sportamore. The Board of Directors of Sportamore has confirmed the following financial goals: Growth To achieve annual growth in sales for the Group of 15-25 per cent. Total sales include own sales and the full product value in connection with commission-based sales. EBIT margin The Group shall have a positive, increasing EBIT margin over the period as a consequence of increased operational efficiency and economies of scale. The margin shall be five per cent by 2022 at the latest. To achieve an EBIT margin in excess of five per cent for markets outside the Nordic region in the medium term following a launch.

Ongoing investment in automated facility

During 2019, the extension of the automated warehouse facility will be completed. The extension aims to increase the proportion of orders being automated and to add additional capacity for storage and order processing. The facility has been extended on an ongoing basis in four stages during 2018, with a smaller part of it to be completed in 2019. The total investment in automation, including parts already completed in 2017 and 2018, is estimated to total approximately SEK 110 million over three years (2017-2019). The increased investment is being financed on equivalent leasing terms as the automation investment in 2017.

Seasonal variations

The weather has an effect on sales of sports items. Early and clearly defined seasonal changes tend to benefit sales. A mild autumn and winter normally have a negative impact on sales, while a warm, early spring normally contributes to higher sales figures. Sales of sports items also vary with the seasons, and as a rule the second and fourth quarters are the strongest. Revenue in the fourth quarter exceeds the other quarters because of Black Friday and Christmas trade.

Significant risks and uncertainties in business activities

There are a number of factors that can affect Sportamore’s financial results and activities. Most of these can be managed through internal procedures and guidelines, while others are governed by external factors and conditions. Risks include weather patterns, fashion trends and the Christmas trade. The weather is a factor that has a significant impact on demand in the sports industry. Currency risk is another risk for the Group, which arises through future business transactions, recorded assets and liabilities, and net investments in foreign businesses. The Group has sales in the other Nordic countries via branches, in the local currency in each of the countries. In addition to this there are risks and uncertainty factors in areas including IT operations, suppliers and other seasonal variations, but there can also be a change in consumer behaviour in e-commerce, the economic situation, etc. Please refer to the annual report for 2018 for a more detailed description of risks and uncertainty factors.

Dividend In connection with the updating of the financial goals, the Board of Directors is adopting an updated dividend policy, which states: A dividend shall be paid when free cash flow exceeds attractive investments in profitable growth.


07

Financial summary


Consolidated statement of comprehensive income (SEK thousand)

2019 Apr-Jun

2018 Apr-Jun

2019 Jan-Jun

2018 Jan-Jun

Rolling 12 month

2018 Jan-Dec

232,897

199,757

457,422

401,672

978,199

922,449

7,622

5,856

16,814

13,585

28,112

24,883

240,519

205,613

474,236

415,257

1,006,311

947,332

Operating income Net sales Other operating income Operating expenses Goods for resale

-150,105

-128,745

-298,472

-261,826

-640,220

-603,574

Other external expenses

-66,409

-56,351

-128,477

-105,568

-257,928

-235,019

Costs of employee benefits

-25,865

-24,346

-51,792

-47,371

-98,245

-93,823

-282

-203

-1,319

-1,608

-1,998

-2,288

-7,401

-2,162

-13,489

-4,174

-18,940

-9,625

-250,061

-211,807

-493,550

-420,547

-1,017,332

-944,330

-9,542

-6,194

-19,314

-5,290

-11,021

3,002

2

5

4

7

8

11

Other operating expenses Depreciation of tangible and intangible non-current assets

Operating profit/loss Profit/loss from financial items Financial income Financial expenses

-829

-214

-1,644

-420

-2,157

-932

-827

-210

-1,640

-412

-2,149

-921

-10,369

-6,404

-20,954

-5,702

-13,170

2,081

2,587

1,064

6,021

246

4,849

-926

-7,782

-5,340

-14,933

-5,457

-8,321

1,155

Earnings per share before dilution, SEK

-0.80

-0.57

-1.54

-0.58

-0.87

0.12

Earnings per share after dilution, SEK

-0.80

-0.57

-1.54

-0.58

-0.87

0.12

2019 Apr-Jun

2018 Apr-Jun

2019 Jan-Jun

2018 Jan-Jun

Rolling 12 month

2018 Jan-Dec

-7,782

-5,340

-14,933

-5,457

-8,321

1,155

435

319

656

584

362

290

-7,347

-5,021

-14,277

-4,872

-7,959

1,445

Earnings after financial items Income tax Earnings for the period

(SEK thousand) Earnings for the period Translation differences for the period when translating foreign business activities Other comprehensive income

The profit/loss and comprehensive income for the period are attributable in full to the parent company’s shareholders.


09


Consolidated statement of financial position – in summary (SEK thousand) Intangible non-current assets Property, plant and equipment Financial assets

2019 30 Jun

2018 30 Jun

2018 31 Dec

8,652

4,004

6,371

200,737

68,407

103,245

41,596

36,471

35,575

274,962

229,285

280,018

Current receivables

35,780

33,631

56,030

Cash and cash equivalents

25,508

44,043

80,664

Total assets

587,233

415,841

561,903

Equity

218,827

212,830

233,676

Non-current liabilities

166,183

51,101

81,824

Inventories

Current liabilities

202,223

151,910

246,403

Total equity and liabilities

587,233

415,841

561,903

Consolidated statement of changes in equity – in summary (SEK thousand)

2019 Apr-Jun

2018 Apr-Jun

2019 Jan-Jun

2018 Jan-Jun

2018 Jan-Dec

Opening amount

226,776

217,533

233,677

217,067

217,067

-7,347

-5,021

-14,277

-4,872

1,445

Total comprehensive income for the period New share issue, net Warrants Share-based compensation Translation difference Closing amount

-

-

-

-

13,421

-7

-

1,778

-

-

318

318

636

636

1,271

-912

-

-2,987

-

472

218,827

212,830

218,827

212,830

233,676


10


Consolidated cash flow statement – in summary (SEK thousand) Cash flow from operating activities before change in working capital

2019 Apr-Jun

2018 Apr-Jun

2019 Jan-Jun

2018 Jan-Jun

Rolling 12 month

2018 Jan-Dec

2,215

-3,604

-6,713

-309

7,404

13,268

Change in working capital

-15,185

-31,171

-38,726

-46,118

-25,536

-32,928

Cash flow from operating activities

-17,400

-34,775

-44,899

-46,427

-18,132

-19,659

-1,968

-209

-3,561

-858

-4,994

-2,291

Investments intangible non-current assets Investments property, plant and equipment Cash flow from investing activities New share issue, net Warrants

-542

-280

-994

-414

-3,353

-2,775

-2,510

-489

-4,555

-1,272

-8,347

-5,066

-

-

-

-

13,421

13,421

-7

-

1,779

-

1,779

-

Repayment of lease liability

-5,236

-444

-7,482

-521

-7,256

-295

Cash flow from financing activities

-5,243

-444

-5,703

-521

7,944

13,126

-25,154

-35,708

-55,157

-48,220

-18,535

-11,599

Cash and cash equivalents at beginning of period

50,662

79,751

80,664

92,263

44,043

92,263

Cash and cash equivalents at end of period

25,508

44,043

25,508

44,043

25,508

80,664

Cash flow for the period


11


The Group’s key indicators (KSEK)

2019 Apr-Jun

2018 Apr-Jun

2019 Jan-Jun

2018 Jan-Jun

Rolling 12 month

2018 Jan-Dec

Total sales1

244,134

206,403

481,811

416,266

1,018,468

952,897

18.3%

19.4%

15.7%

20.2%

22.9%

25.6%

Sales growth, % Operating income

240,519

205,613

474,236

415,257

1,006,311

947,332


17.0%

19.0%

14.2%

19.9%

21.6%

24.9%

Gross margin, %

37.6%

37.4%

37.1%

36.9%

36.4%

36.3%

Marketing expenses (% of operating income)

13.2%

12.4%

12.6%

11.5%

11.8%

11.3%

EBIT

-9,542

-6,194

-19,314

-5,290

-11,021

3,002

EBIT margin, %

-4.0%

-3.0%

-4.1%

-1.3%

-1.1%

0.3%

EBITDA

-2,142

-4,032

-5,825

-1,116

7,919

12,627

EBITDA margin, % Cash flow, operating activities

-0.9%

-2.0%

-1.2%

-0.3%

0.8%

1.3%

-17,400

-34,775

-44,899

-46,427

-18,132

-19,659

Cash flow from operating activities per share, SEK

-1.8

-3.7

-4.6

-4,9

-1.9

-2.0

Equity per share, SEK

22.6

22.7

24.1

22.7

22.6

24.1

-

-

-

-

-

-

Share dividend paid per share, SEK Net liability (+), cash in hand (-)

170,797

14,580

170,797

14,580

170,797

17,049

Equity/assets ratio, %

37.3%

51.2%

37.3%

51.2%

37.3%

41.6%

Investments

14,815

9,625

113,262

10,726

155,028

52,492

134

124

138

125

131

156

Number of shares on balance sheet date

9,694,351

9,392,351

9,694,351

9,392,351

9,694,351

9,694,351

Average number of shares before dilution

9,694,351

9,392,351

9,694,351

9,392,351

9,565,277

9,415,518

Average number of shares after dilution

9,764,351

9,770,351

9,764,351

9,770,351

9,565,277

9,485,518

Earnings per share before dilution, SEK

-0.80

-0.57

-1.54

-0.58

-0.87

0.12

Earnings per share after dilution, SEK

-0.80

-0.57

-1.54

-0.58

-0.87

0.12

2

Average number of employees

1. Own sales plus the total value of products sold from commission-based revenues, where own sales refers to operating income less provision from commissionbased sales. 2. Calculation of net debt: Interest-bearing liabilities (196.3) minus cash and cash equivalents (25.5).


12


Note 1 Accounting policies and valuation principles Accounting policies These consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU that were presented in the Group’s annual report for 2018, with the exception of new and revised standards and interpretations that came into force on 1 January 2019. The Group’s functional currency is the Swedish krona, which is also the reporting currency for the Group. This report has been prepared in accordance with IAS 34 Interim Financial Reporting, the Swedish Annual Accounts Act and RFR 1 Complementary Accounting Rules for Groups. The report applies ESMA’s guidelines in respect of alternative key indicators. The Group applies the same accounting policies, valuation principles and calculation methods in this interim report as those described in the annual report for 2018. The subsidiary company Sportamore Incentive AB is dormant. The parent company The parent company Sportamore AB (Publ) prepares financial statements in accordance with the Swedish Annual Accounts Act and the Swedish Securities Market Act, which is in accordance with the provisions set out in RFR 2 Accounting for Legal Entities. All lease contracts are recorded operationally in the parent company. New standards, amendments and interpretations that have been applied by the Group as of 1 January 2019 IFRS 16 Leases In January 2016, the IASB published the new standard IFRS 16 Leases, which was approved by the EU in November 2017 and is to be applied as of the financial year 2019. IFRS 16 Leases and associated interpretations IFRIC 4, SIC-15 and SIC-27 replace IAS 17 Leases. The standard requires assets and liabilities attributable to leases, with the exception of short-term lease agreements or agreements with underlying assets of low value, to be recorded in the balance sheet. This recording standard is based on the view that the lessee has a right to use an asset over a specific period of time and at the same time an obligation to pay for this right. This will mean that Sportamore will record a small number of operational lease agreements in the balance sheet from January 2019 in addition to existing agreements. Transition method and effects Sportamore has chosen to use the simplified method, limited retroactivity, which means that there is no recalculation of the financial year 2018 in order to create a comparative year. Recalculation takes place from 1 January 2019.

Leases that are classified as financial lease agreements in accordance with IAS 17 Leases are reclassified in accordance with IFRS 16 at the amount at which they were recorded the day immediately before the application of the new standard, and have therefore had no effect on Sportamore’s opening balance and the financial position and profits. In 2018, Sportamore completed a full review of all the Group’s lease agreements. Sportamore’s lease portfolio consists of approx. 10-15 agreements relating to offices and warehouses, vehicles and office equipment. This review showed that Sportamore can apply both the rule on relief for short-term leases and lease agreements with assets of low value, and Sportamore has chosen to apply these as of the transition date. The current rental agreement for the office in Bromma expires in November 2019 and therefore has a lease term of less than 12 months at the starting date. An assessment was done that the options to extend in the rental agreement would not be exercised, which means that the exception for short-term leases can be used. Until such time as another agreement is reached with the landlord, these lease agreements will continue to be recorded as an expense on a straight-line basis over the term of the lease (please see section Investments). The most significant lease contract that is affected by IFRS 16 relates to the Group’s rental agreement for the warehouse premises in Kjula. The effect in respect of the lease liability as of 1 January 2019 totals SEK 95.7 million, with the recording of a corresponding asset held with a right of use. The marginal loan rate has been estimated at two per cent. Below is an explanation of the difference between them operational leasing commitments reported in accordance with IAS 17 as of December 31, 2018 and leasing liabilities reported according to IFRS 16 on the first day of application on January 1, 2019. (SEK millions)

Amount

Operational lease agreements in accordance with Note 32 in the annual report for 2018

87.3

Discounted in accordance with the Group’s marginal loan rate of 2%

-9.6

Supplement for financial lease liabilities as of 31/12/2018

97.7

Deduction for short-term leases recognised as expenses on a straight-line basis

-2.5

Addition/deduction for adjustment associated with changes in lease period.

17.9

Recorded lease liability as of 01/01/2019

190.8

Sportamore as a lessor Sportamore sublets approximately 25 per cent of the warehouse premises. In the transition to IFRS 16, Sportamore has reassessed whether the operational lease agreement under IAS 17 for subletting should be classified henceforth as an operational lease agreement or a financial one in accordance with IFRS 16. Sportamore has made the assessment that it should henceforth be classified as an operational lease agreement as the letting arrangement only relates to part of the total term of the lease for the Group’s asset held with right of use for the warehouse premises in Kjula.


13

Q2 - January - June 2019 IFRIC 23 Uncertainty over Income Tax Treatments IFRIC 23 Uncertainty over Income Tax Treatments is being applied by Sportamore as of 1 January 2019. The interpretative statement considers how uncertainty in respect of amounts of income tax should be recorded, for example how a tax asset should be recorded when the amount has been appealed and a discussion is being conducted with a tax authority. IFRIC 23 has no effect on Sportamore’s financial statements, and the opening balances as of 1 January 2019 have therefore not been adjusted.


14


Note 2 Reporting of segments

The Group’s activities are divided into the segments Sweden, Norway, Finland, Denmark and France. Because of the Group’s major investments in an automation facility and the implementation of IFRS 16, there has been a significant increase in depreciation and the segments are being monitored at EBIT level. Warehousing activities and product costs are primarily in the Sweden segment, which charges this segment’s gross margin and EBIT to a much greater extent than the other segments. 2019 Apr-Jun

2018 Apr-Jun

2019 Jan-Jun

2018 Jan-Jun

Rolling 12 month

2018 Jan-Dec

143,358

120,594

281,474

246,685

587,202

552,413

18.9%

14.4%

14.1%

15.2%

17.6%

18.3%

-11,367

-6,684

-25,056

-9,320

-27,156

-11,834

14,815

9,625

113,262

10,726

155,028

52,492

4,403

2,162

8,000

4,174

13,451

9,625

Operating income, external customers

36,992

33,390

70,870

62,646

155,886

147,663


10.8%

36.6%

13.1%

22.8%

29.7%

35.9%

-523

-438

450

635

994

1,175

1,164

-

2,049

-

2,049

-


44,933

39,037

91,516

81,275

198,479

188,239


15.1%

19.6%

12.6%

30.7%

24.0%

33.6%

EBIT

2,501

1,097

5,171

3,433

14,104

12,366

Depreciations

1,361

-

2,573

-

2,573

-


15,236

12,592

30,376

24,651

64,742

59,018


21.0%

22.1%

23.2%

30.3%

34.6%

39.3%

-153

-169

121

380

1,037

1,295

473

-

867

867

-


0

-

0

-

0

-


-

-

-

-

-

-

EBIT

-

-

-

-

-

-

Depreciations

-

-

-

-

-

-

(SEK thousand) Sweden Operating income, external customers Growth operating income, % EBIT Investments Depreciations Norway

EBIT Depreciations Finland

Danmark

EBIT Depreciations France

Total for segments Operating income, external customers

240,519

205,613

474,236

415,257

1,006,311

947,332


17.0%

19.0%

14.2%

19.9%

21.6%

24.9%

EBIT

-9,542

-6,194

-19,314

-5,290

-11,021

3,002

Investments

14,815

9,625

113,262

10,726

155,028

52,492

7,401

2,162

13,489

4,174

18,940

9,625

Amortisations & depreciations

Distribution of revenue The Group’s revenue from agreements with customers relates to goods for resale. Revenue is divided into categories broken down by geographical market and corresponds to the Group’s reporting of segments. Revenue recognition takes place when the products are delivered to delivered to an independent freight forwarder.

Note 3 Reconciliation of total sales to operating income (SEK million) Operating income Less: Provisions from commission-based sales Own Sales Plus: The total value of products sold from commission-based revenues Total Sales

2019 Apr-Jun

2018 Apr-Jun

2019 Jan-Jun

2018 Jan-Jun

Rolling 12 month

2018 Jan-Dec

240.5

205.6

474.2

415.2

1,006.3

947.3

-1.7

-0.5

-2.9

-0.6

-5.1

-2.8

238.8

205.1

471.3

414.6

1,001.2

944.5

5.3

1.2

10.5

1.6

17.3

8.4

244.1

206.4

481.8

416.3

1,018.5

952.9


15


Note 4 Transactions with related parties

There were no transactions with related parties during the reporting period.

Note 5 Investments in Property, plant and equipment

For the second quarter in 2019 investments in Property, plant and equipment amounted to 12,8 MSEK. The investments consist primarily (SEK 11,8 million) of IFRS 16 related right of use in respect of the head office in Bromma. The rental agreement for the head office in Bromma has in the previous quarter been classified as a short-term lease. During the second quarter in 2019 an agreement with the landlord was reached and the rental agreement was extended, accordingly an IFRS 16 related right of use was recorded.

Note 6 Warrant scheme

The total number of outstanding warrants on the balance sheet date is 370,000, corresponding to the same number of shares. If all warrants are exercised to subscribe to shares, the number of shares will increase by 370,000 in total, from 9,694,351 shares to 10,064,351 shares, and the dilution effect will be at the most approximately 3.68 per cent. A description of the terms and conditions for previously issued option schemes may be found in the annual report for 2018, which is available on Sportamore’s website.

Note 7 Deferred tax

A deferred tax asset relating to tax loss carryforwards is recorded to the extent that it is probable that the deficits can be offset against future profits for tax purposes. Following the Swedish Parliament’s decision to gradually reduce the 2018 tax rates in future, the Group has revalued the deferred tax asset in the balance sheet using the new tax rates.

Note 8 Contingent liability

The Group has a commitment to a supplier (see also under “Ongoing investment in automation facility”) attributable to the extended construction of the warehouse’s automation facility. Construction took place on an ongoing basis during 2018 and is continuing during 2019. The amount of the contingent liability is estimated at SEK 5 million. When the automation facility becomes operational and is capitalised, the contingent liability will be converted into a lease liability.

Note 9 Pledged assets

Pledged assets consist of blocked bank funds to the order of SEK 9.6 (9.6) million in respect of a rental deposit. There are mortgaged floating charges of SEK 53.5 million, of which SEK 5.2 million is held by the Norwegian Tax Administration and Swedbank SEK 40.0 million.


16


Parent company’s income statement (SEK thousand)

2019 Apr-Jun

2018 Apr-Jun

2019 Jan-Jun

2018 Jan-Jun

Rolling 12 month

2018 Jan-Dec

232,897

199,757

457,422

401,672

978,199

922,449

7,622

5,856

16,814

13,585

28,112

24,883

240,519

205,613

474,236

415,257

1,006,311

947,332

Operating income Net sales Other operating income Operating expenses Goods for resale

-150,105

−128,745

-298,472

-261,826

-640,220

-603,574

Other external expenses

-72,429

−58,338

-139,743

-109,382

-272,742

-242,381

Payroll expenses

-25,946

-24,400

-51,937

-47,467

-98,508

-94,039

-282

-203

-1,319

-1,608

-1,998

-2,288

Other operating expenses Depreciation of tangible and intangible non-current assets

Operating loss

-1,115

-604

-2,018

-1,148

-3,358

-2,488

-249,877

-212,290

-493,489

-421,432

-1,016,827

-944,770

-9,358

-6,677

-19,251

-6,175

-10,516

2,562

Profit/loss from financial items Other interest income and similar income statement items Interest expenses and similar profit/loss items

Earnings after financial items Income tax Earnings for the period

2

5

4

7

8

11

-1

-2

-3

-6

-5

-8

1

3

2

1

3

3

-9,358

-6,674

-19,251

-6,174

-10,513

2,564

2,109

1,203

-3,545

867

335

-2,342

-7,249

-5,471

-15,707

-5,306

-10,178

222

Parent company’s statement of comprehensive income (SEK thousand) Earnings for the period Translation differences for the period when translating foreign business activities Other comprehensive income

2019 Apr-Jun

2018 Apr-Jun

2019 Jan-Jun

2018 Jan-Jun

Rolling 12 month

2018 Jan-Dec

-7,249

-5,471

-15,707

-5,306

-10,178

222

435

319

656

584

362

290

-6,814

-5,152

-15,050

-4,722

-9,816

512


17


Parent company’s statement of financial position – in summary (SEK thousand) Intangible non-current assets Property, plant and equipment

2019 30 Jun

2018 30 Jun

2018 31 Dec

8,652

4,004

6,371

5,247

5,493

5,426

37,753

37,143

34,209

274,962

229,285

280,018

Current receivables

46,985

40,747

63,013

Cash and bank balances

25,458

43,994

80,614

Total assets

399,056

360,666

469,650

Equity

216,687

212,547

232,309

Current liabilities

182,369

148,119

237,341

Total equity and liabilities

399,056

360,666

469,650

Financial assets Inventories

Parent company’s statement of changes in equity – in summary (SEK thousand)

2019 Apr-Jun

2018 Apr-Jun

2019 Jan-Jun

2018 Jan-Jun

2018 Jan-Dec

Opening amount

224,101

217,381

232,309

216,633

216,633

-6,814

-5,152

-15,050

-4,722

512 13,421

Total comprehensive income for the period New share issue, net Warrants Share-based compensation Translation difference Closing amount

-

-

-

-

-7

-

1,778

-

-

318

318

636

636

1,271

-911

-

-2,987

-

472

216,687

212,547

216,687

212,547

232,309


18


This information is information that Sportamore AB (publ) is obligated to disclose pursuant to the EU Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted, through CEO Johan Ryding, for publication on July 19th 2019 at 08:00 CET.

Signatures and auditor’s audit This report has not been audited by the Group’s auditors. Jan Friedman Birgitta Stymne Göransson Mariette Kristenson Chair Board member Board member

Emil Ahlberg Thomas Ekman Board member Board member


19

Other information


Financial calendar 22/10/2019 (08:00): Interim Report, January-September 2019 21/02/2020 (08:00): Year-end accounts bulletin, January-December 2019

Financial statements The annual report and interim reports are available on the website: http://www.sportamore.se/ir

For further information please contact: Johan Ryding, CEO tel.: +46 705 56 22 26 Sportamore AB (publ) Gustavslundsvägen 151E SE-167 51 Bromma Reg. office: Stockholm Corp. ID no.: 556788-8614


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Definitions of key indicators

These are key indicators Sportamore uses from time to time.

Definitions

Purpose

The total number of customers who placed at least one order in the last 365 days counting from the last day of the period, excluding returns.

This measure provides a good picture of active customers and development of the Group’s customer base.

An investment where the expected return exceeds the risk-adjusted return requirement.

The measure shows when an investment is favorable for the Group.

Average number of employees

Number of employees in the Group converted into full-time equivalents, i.e. number of full-time equivalents who performed work during the year/period.

Relevant measure in the e-commerce sector. This measure shows how many fulltime equivalents performed work during the year or the period.

Average number of orders per active customer

The total number of orders during the last 365 days counted from the last day of the period divided by the number of active customers.

This measure is very important for monitoring changes associated with orders placed by active customers between different periods.

Average order value

Total sales divided by the number of orders.

This measure is very important for monitoring changes in average order values between different periods.

Cash flow from operating activities per share

Cash flow from operating activities in relation to weighted average number of shares before dilution during the period.

A measure that provides a good picture of the contribution per share from operating activities in the cash flow.

Operating profit/loss after depreciation/amortisation and impairments.

Indicates the Group’s operating profit/loss after depreciation/ amortisation and impairments.

Operating profit/loss after depreciation/amortisation and impairments divided by income for the period.

Shows the Group’s operating profit/loss as a percentage after depreciation/amortisation and impairments divided by income for the period.

Operating profit/loss before depreciation/amortisation, impairments and interest.

Shows the Group’s operating profit/loss before depreciation/ amortisation and interest.

Operating profit/loss before depreciation/amortisation and interest, divided by income for the period.

Shows the Group’s operating profit/loss as a percentage before depreciation/amortisation and interest divided by income for the period.

Alternative key indicators Active customers

Attractive investment

EBIT

EBIT margin, %

EBITDA

EBITDA margin, %


22

Q2 - January - June 2019 Equity as a percentage of the balance sheet total.

A traditional measure to show financial risk, ability to pay in the long term.

Equity per share

Equity in relation to the number of shares on the balance sheet date, adjusted for share issues and conversions.

This measure shows equity per share on the balance sheet date.

Free Cash Flow

Cashflow from operating activities plus cash flow from investment activities.

Measures the amount of cash and cash equivalents left after the group’s net amount of cash spending’s for operating purposes and after the net amount of cash spending’s after investment activities.

Gross profit/loss as a percentage of operating income during the period.

The gross margin provides a picture of what proportion of sales revenue remains when the purchase price has been deducted. The remaining amount has to cover other expenses.

Trend in total operating income in relation to the same period in the previous year.

This measure is very important for monitoring growth in operating income driven by changes in volume, price and product mix between different periods.

Direct and indirect expenses for marketing, excluding personnel costs, divided by the operating income in the period.

This measure shows in percentage terms how much is spent on marketing in relation to operating income.

Net liability/cash in hand

Interest-bearing liabilities minus cash and cash equivalents. Net liability is a positive figure. Net cash in hand is a negative figure.

This measure shows whether the Group has more cash in hand than liabilities and the ability to repay interest-bearing lease liabilities.

Number of orders

The total number of orders placed by customers during the period excluding returns but including cancellations. All visits to the Group’s websites during the period, regardless of whether the visitor is new or repeat. Non-unique visitors.

This measure shows order input and is a relevant measure of order growth for Sportamore.

See definition of EBIT.

See definition of EBIT.

Sum of the segments Norway, Finland and Denmark.

Used to gain a good picture of the segments in the Nordics.

Operating income less provisions from commission-based sales.

Measures Operating income without the provision from commissionbased revenues.

Equity/assets ratio

Gross margin

Growth in Operating Income

Marketing expenses

Number of visits

Operating profit/loss (EBIT) Other Nordic countries Own Sales

This measure shows all visits to the Group’s sites. Provides a good picture of awareness of the Group and its reach.


23


Number of visitors via smartphones and tablets in relation to total number of visits.

This measure provides a good picture of what kind of devices the Group’s customers are using to visit the Group’s sites.

Sales Growth

Trend in Total Sales in relation to the same period in the previous year in percentage.

This measure is very important for monitoring growth in Total Sales between different periods.

Total Sales

Own Sales plus the total value of products sold from commissionbased revenues, less VAT and returns.

Measures the Groups Operating income as if Sportamore owned the products sold from commissionbased revenues.

Proportion of visits on mobile devices

IFRS key indicators Earnings per share before dilution

Earnings per share after dilution

Definitions Earnings per share before dilution is calculated as the profit/loss for the period divided by the average number of outstanding shares. Earnings per share after dilution is calculated by adjusting the average number of shares to include all potential dilution of shares. Potential dilution exists when the redemption price for warrants issued is lower than the current market price. Potential ordinary shares give rise to dilution only if a conversion of them generates a lower profit per share or a higher loss per share.


24

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INTERIM REPORT Q2:2019

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