QXL: ratios pointing in the right direction

The results came after a year that was described by CEO Jim Rose as “consistent with [QXL's] strategy and vision to be the leading pan-European online auction company”.

Turnover for the year increased by 170% to 6.9m and was also up on a quarter-on-quarter basis, growing by 40% during the final quarter to 2.18m. The increase reflects the growth in the company's registered users, which were up 50% in the final quarter to over 600,000.

The group expanded substantially, mainly through European strategic acquisitions aimed at exploiting synergies and increasing user numbers and revenue streams. The merger with Ricardo.de of Germany to form QXL Ricardo thorough a share swap followed the acquisitions of Bidlet AB, Jubii Auktion, SurfStopShop, Dinsdale and Humpty Dumpty and will enable the new entity to consolidated its European position and take on the might of US-based rival eBay on a more equitable base. Industry insiders said that the deal “made sense” as it brought together entities with leading market positions in their respective home markets - which are key to a pan-European presence.

Despite still very substantial pre-tax losses of 75.8m for the year to 31 March 2000- more than ten times revenues - the online auction company can point to a number of positive developments in a number of other metrics, especially over the fourth quarter. Gross auction value was up 87% over the previous quarter to 9.7m and membership was up 85% to 557,000 over the same period. Even operational losses before exceptional items such as amortisation payments and National Insurance contributions - down in Q4 as the share price has come back to earth - declined between Q3 and Q4 from 11.4m to 11.1m as gross margins improved from 10.4% to 14.2%.

In terms of operating expenses in the fourth quarter, sales and marketing costs were down, technology and development costs remained pretty much static, but acquisition and development costs were up by 5m and administrative costs were also up by 600,000 as a result of the growing number of European operations.

The only ratio heading in the wrong direction was turnover per registered user at the end of the quarter, with the figure falling from 3.4 in Q3 to 3.2 in Q4. Increasing the value of both members and register users could enable QXL - now QXL Ricrado - to start fulfilling the promise the company was offering at the time of its IPO last year.