zooplus SE — Interim / Quarterly Report 2016

Nov 23, 2016

2016 9-monthly report

Notes Consolidated interim financial statements Interim Group management report To the shareholders

Highlights of the first nine months of 2016

Strong growth continues with sales rising 28.2% to EUR 655.3 m (previous year: EUR 511.0 m)

Growth drivers include larger customer base, strong customer loyalty, and high sales retention rate

Earnings before taxes (EBT) rise to EUR 11.1 m (previous year: EUR 9.1 m)

Higher efficiency and greater economies of scale in all key operating areas

Sales and earnings forecast for full-year 2016 confirmed

Revenue of at least EUR 900.0 m and EBT in the range of EUR 14.0 m and EUR 18.0 m expected

Table of contents

Subsequent events 14 Report on outlook, risks and opportunities 14

To the shareholders	2	Consolidated interim financial statements	16
The zooplus AG share	2	Consolidated balance sheet	17
		Consolidated statement of comprehensive income	19
		Consolidated statement of cash flows	20
		Group statement of changes in equity	21
Interim Group Management Report	4	Notes	22
Business report	5	Notes	23

Imprint 28

The zooplus AG share

Stock chart zooplus AG: January 4 to September 30, 2016

Overview

zooplus AG's shares were admitted to the Frankfurt Stock Exchange's Entry Standard segment on May 9, 2008. About a year and a half later, on October 22, 2009, the company made a successful move to the Prime Standard segment (which is the market segment requiring the highest transparency and disclosure requirements in Germany). After a continual rise in the company's market capitalization and the share's trading volume, zooplus AG entered the SDAX on September 29, 2011.

In the current financial year, zooplus shares have experienced moderate price declines. On the first trading day of the year, January 4, 2016, the shares closed on the Xetra exchange at a price of EUR 141.10. The share price subsequently declined amid a generally nervous market environment reaching a low for the reporting period of EUR 104.70 on February 8. The shares then moved firmly

higher and surpassed the EUR 120 mark at the end of March. At the end of the first half-year, on June 30, 2016, shares of zooplus AG closed on the Xetra exchange at EUR 127.60. On July 13, the shares traded at EUR 137.65, approaching their high for the year. At the end of the third quarter, on September 30, 2016, the shares closed at EUR 129.00, marking a decline of 8.6 % for the first nine months of 2016. During this same period the DAXsubsector All Retail Internet sector index, which includes the zooplus shares, experienced a somewhat lower decline of 6.9 %. The SDAX, which also includes the zooplus shares, rose 3.9 % in this period. As of the September 30, 2016 reporting date, zooplus AG's market capitalization amounted to roughly EUR 909.6 m. At the end of September, the company's free float as defined by the Deutsche Börse was 86.45 %.

Analysts

Institution	Analyst	Date	Recom menda tion	Target price (EUR)
Baader Bank	Volker Bosse	10 / 20 / 2016	Buy	175.00
Berenberg	Gunnar Cohrs	10 / 10 / 2016	Buy	150.00
	Commerzbank Andreas Riemann 11 / 09 / 2016		Buy	160.00
	Deutsche Bank Benjamin Kohnke 10 / 20 / 2016		Hold	129.50
Hauck & Aufhäuser	Christian Schwenkenbecher	09 / 21 / 2016	Buy	148.00
Bankhaus Lampe	Christoph Schlienkamp	11 / 11 / 2016	Hold	133.00
montega	Timo Buss	10 / 20 / 2016	Hold	135.00
Oddo Seydler Bank AG	Martin Decot	10 / 21 / 2016	Hold	137.00
Warburg Research	Thilo Kleibauer	08 / 19 / 2016	Buy	150.00
quirin Bank	Ralf Marinoni	06 / 13 / 2016	Sell	105.00

Shareholder structure

Others: 34.92 %*	Maxburg Beteiligungen GmbH & Co. KG: 13.55 %
	Capital Research and Management Company: 12.57 %
Management: 5.00 %	Ruane, Cunniff & Goldfarb: 10.00 %
Bestinver Gestión S.G.I.I. S.A.: 3.04 %	Deutsche Asset & Wealth Management Investment: 6.85 %
Wasatch Advisors, Inc.: 3.19 %	Norges Bank Investment Management: 4.35 %
Pelham Capital Ltd: 3.20 %	Foxhaven Asset Management, LP: 3.32 %

As of November 2, 2016

Ownership according to published voting rights notifications

* Free float stands at 86.45 % according to Deutsche Börse's definition

Key data

WKN	511170
ISIN	DE0005111702
Ticker symbol	Z01
Trading segment	Regulated market (Prime Standard)
Class of shares	No-par-value ordinary bearer shares
Share capital in EUR as of December 31, 2015	6,995,182.00
Share capital in EUR as of September 30, 2016	7,051,302.00
Number of shares as of September 30, 2016	7,051,302
Initial listing	05 / 09 / 2008
Initial issue price *	EUR 13.00
Share price as of January 4, 2016	EUR 141.10
Share price as of September 30, 2016	EUR 129.00
Percentage change	–8.58 %
Period high	EUR 141.10
Period low	EUR 104.70

Closing prices in Deutsche Börse AG's Xetra trading system

* This takes into account the capital increase from company

resources in July 2011

2016 financial calendar

November 21, 2016	German Equity Forum, Frankfurt
January 26, 2017	Preliminary sales figures FY 2016
March 23, 2017	Annual Report 2016

Business report	5
Subsequent events	14
Report on outlook, risks and opportunities	14

Interim Group Management Report

Interim group management report as of September 30, 2016

1. Business report

A. Business performance and economic environment

a. Group structure and business activities

i. Business divisions

zooplus AG, the parent company of the Group, was founded in Munich in 1999. The Group operates in the e-commerce segment as a web-based retailer of pet supplies to private end consumers. The zooplus Group is the distinct market leader in Europe in this segment measured in terms of sales and active customer base.

The overriding business objectives are sustained growth, the systematic penetration of existing markets, and the expansion of the company's online market leadership in Europe. zooplus is working to achieve these objectives by continually expanding its infrastructure so that it can maintain its technological edge in the segment.

Altogether, zooplus offers customers roughly 8,000 different food and accessory products for dogs, cats, small animals, birds, fish, and horses. These products include everyday staples, such as brand name foods generally available at specialty retailers, zooplus' own private labels, and specialty articles like toys, care and hygiene products, as well as other accessories. zooplus also offers a wide range of free content and information on its websites including veterinary and other animal-related advice and interactive features such as discussion forums and blogs.

zooplus derives its sales from selling products out of its four central fulfillment centers located in Hörselgau, Germany; Tilburg, Netherlands; Wroclaw, Poland; and Chalon-sur-Saône, France. A smaller fulfillment center in Strasbourg does the processing for certain types of orders for the French and German markets. The Group will expand its logistics infrastructure even further in the

fourth quarter of 2016 by opening a fifth fulfillment center in Antwerp, Belgium. This additional capacity will enable zooplus to keep pace logistically with the company's continued strong growth.

The locations of the central warehouses help the company ensure rapid and efficient deliveries and maintain a high degree of general product availability for its customers across Europe. "Final-mile" deliveries to end customers are made using national and international parcel service providers.

From a customer perspective, zooplus sets itself apart from the competition based on its business model that combines a broad product range, attractive prices, an efficient flow of goods, and simple and convenient handling.

ii. Markets

zooplus operates in 30 countries across Europe through a variety of localized and cross-national online shops. zooplus estimates that the overall market volume in the European pet supplies segment in 2015 was roughly EUR 25 bn (gross). According to the company's own estimates, zooplus AG is the clear online market leader in terms of sales and active customer base by a wide margin in both the European high-volume markets of Germany, France, Netherlands, Spain and Italy, as well as within Europe overall. The company also estimates that it is the fastest growing company in its sector.

As of November 2016, zooplus operated a total of 25 localized online shops: In addition to the five highvolume markets mentioned above, the company also operates online shops in the United Kingdom, Belgium, Denmark, Finland, Ireland, Croatia, Austria, Poland, Romania, Slovakia, Switzerland, Slovenia, Sweden, the Czech Republic, Hungary, Portugal, Bulgaria, Norway, Greece, and Turkey. This effectively makes zooplus the sector's dominant provider in the online segment across Europe by a substantial margin compared to smaller local and national competitors.

In parallel with its zooplus brand, the Group also operates under its bitiba brand, which is a discount concept with a limited range of products that is already available in 13 countries.

iii. Key influential factors

Two critical influential factors define the online retailing business for pet supplies: the evolution of the European pet supplies market and the general and sector-specific development of Internet users' online purchasing behavior.

Evolution of the European pet supplies market

The European pet supplies market currently comprises a total gross market volume of approximately EUR 25 bn. The high-volume markets in Germany, France, the United Kingdom, Spain, the Netherlands, and Italy alone account for some EUR 17 bn of this total.

In all European countries, the primary sales channels for pet supplies are the bricks-and-mortar pet stores, garden centers, DIY stores, conventional supermarkets, and discounters. The key differences among the individual bricks-and-mortar retail concepts for pet supplies are the product range and product positioning: While largescale supermarkets and discounters usually limit themselves to a product range of approximately 150 – 200 products in smaller, typically lower-priced pet food products, larger pet store chains offer a complete product range of pet food (from entry-level to premium prices) and accessories (including toys, hygiene products, pet furniture, and equipment). zooplus has defined its relevant market segment as the conventional specialty retailer segment, including the related specialty product areas of the core supermarket segment.

Overall, zooplus expects the market's volume to remain stable or increase slightly in the years ahead.

For 2016, zooplus expects market growth of roughly 2% to 3% in Europe. In Germany, around one-third of all households own one or more pets. zooplus assumes that the other key high-volume European markets are at a similar level. The changes in the market are due to changes in the animal population, as well as a shift in sales towards higher value products and categories within the food and accessories sector ("premiumization"), as well as an increasing "humanization" of pets.

Thanks to recurring patterns of demand, especially in the pet food segment, the pet supplies market has very low seasonality. Around 82% of total demand relates to pet food at zooplus, which means the Group enjoys exceptionally stable medium- to long-term demand.

Development of online retailing

The Internet's development as a distribution channel for pet supplies is critically important to the Group. The availability of fast and reliable Internet access to large segments of the population is a basic prerequisite for European online retailing to consumers. The primary drivers are the availability of high-speed fixed Internet access and growing mobile access. zooplus customers, for example, can access the zooplus websites using their desktop computers, tablets, smartphones, or by using the zooplus app. Expanded access has driven the number of Internet users sharply higher in recent years, which in combination with the higher everyday use of search engines and other Internet platforms such as price information services and sites offering product comparisons, has prompted a significant increase in the general interest and participation in online shopping.

Over the past several years, e-commerce has gained in significance as an ever more important shopping distribution channel. According to publications by the German Retail Federation (Handelsverband Deutschland), B2C e-commerce sales in Germany totaled roughly EUR 42 bn in 2015, which corresponds to a yearon-year increase of 12%. Further growth in European online retailing appears more than likely, particularly given the inherent advantages of online retailing compared to existing bricks-and-mortar retail concepts such as a broader product range and more convenient shopping. In addition, logistics service providers and parcel services are making a significant effort to further improve their quality of service for customers, which will also provide an added boost to the online market's growth momentum. Based on these trends, independent market observers such as Statista expect online retailing to continue to enjoy annual double-digit percentage growth rates in the years to come.

The amount of products sold over the Internet in the pet supply segment is still relatively low compared to other consumer product categories and largely driven by the sales zooplus itself generates across Europe. The company's internal estimates show that until now only 6% to 7% of the total European pet market has migrated online.

This means, zooplus as the market leader is in a unique position to benefit from these lasting shifts in the existing distribution and retailing structures.

iv. Competitive position

Advantage over online competitors

Generally, there are lower barriers to market entry in online retail than in bricks-and-mortar retail. As a result, zooplus not only faces international (online) retailers in the European market, but also a number of mostly regional providers such as independent pet stores with their own web shops and local delivery alternatives.

A growing number of larger bricks-and-mortar retailers are also setting up online retail infrastructure while other local online retailers are entering new countries and competing directly with zooplus.

In contrast to both of these groups, zooplus has the advantage that its size and market leadership in Europe give it the structural capacity to reap crucial benefits from higher efficiency and economies of scale that are not equally available to smaller providers. This structural advantage in areas such as purchasing, private label development, logistics, technology, customer service, and marketing is decisive for zooplus confidence that it is competitively well positioned. Other relative advantages such as brand recognition and the Group's financial strength also play a role.

At the same time, the company's existing base of active European customers helps ensure that there is substantial momentum for acquiring new customers through word-of-mouth recommendations.

Advantages over bricks-and-mortar competitors

zooplus' business model is based on a lean, technologically efficient, and scalable value creation chain combined with an outstanding shopping experience in terms of selection, price, and convenience and particularly home delivery.

zooplus does not operate any physical stores or outlets. Instead, from four large central warehouses it supplies customers throughout Europe with a significantly larger product range than existing bricks-and-mortar retailers. At the same time, the Group's centralized structure and related efficiency advantages combined with predominantly automated business processes help offset certain size-based advantages still enjoyed by the larger bricks-and-mortar pet store chains, especially in product procurement. zooplus assumes that it is already today's cost leader in the online retailing of pet supplies.

zooplus goal is and will continue to be to solidify and expand its lead in the online segment and at the same time to strengthen its position in the overall online and bricks-and-mortar markets while continuing to profit considerably from the ongoing substantial growth of online retailing.

v. Group structure

As of September 30, 2016, the Group's scope of fully consolidated companies included zooplus AG, Munich, and the following subsidiaries:

Subsidiary	Interest in share capital	Business activity
MATINA GmbH, Munich, Germany	100%	(private label business)
BITIBA GmbH, Munich, Germany	100%	(secondary brand business)
zooplus services Ltd., Oxford, Great Britain	100%	(service company for Great Britain)
zooplus italia s.r.l., Genoa, Italy	100%	(service company for Italy)
zooplus polska Sp. z.o.o., Cracow, Poland	100%	(service company for Poland)
zooplus services ESP S.L., Madrid, Spain	100%	(service company for Spain)
zooplus france s.a.r.l., Strasbourg, France	100%	(service company for France)
zooplus Pet Supplies Import and Trade ltd., Istanbul, Turkey	100%	(sales company for Turkey)

The following companies are not included in the consolidated financial statements:

• the wholly owned subsidiary zooplus EE TOV, Kiev, Ukraine, founded in the second quarter of 2011, with share capital of kEUR 10;
• the wholly owned subsidiary zooplus Nederland B.V., Rotterdam, the Netherlands, founded in November 2012, with share capital of kEUR 10;
• the wholly owned subsidiary zooplus d.o.o., Zagreb, Croatia, founded in February 2013, with share capital of kEUR 3; and
• the wholly owned subsidiary Tifuve GmbH, Munich, Germany, founded in May 2013, with share capital of kEUR 25.

These four companies did not conduct any business activities during the reporting period and were not included in the consolidated financial statements because of their minor importance.

zooplus AG was managed by the following Management Board members during the 2016 financial year and as of September 30, 2016:

• Dr. Cornelius Patt, CEO (Corporate Management, overall responsibility for Business Development & System Development, IT, Logistics, Supply Chain Management and HR)
• Andrea Skersies (Sales & Marketing)
• Andreas Grandinger (Finance, Controlling, Legal, Investor Relations, Auditing, Procurement)

At its meeting of September 15, 2016, the Supervisory Board of zooplus AG extended the contracts of Dr. Cornelius Patt, chairman of the Management Board, and board members Andrea Skersies and Andreas Grandinger for a further term of office.

The Management Board is advised and controlled by the Supervisory Board. During the 2016 financial year and as of September 30, 2016, the Supervisory Board consisted of the following members:

• Christian Stahl (Chairman of the Supervisory Board), freelance entrepreneur in the investment business, London, United Kingdom (since May 31, 2016)
• Moritz Greve, Partner and Managing Director of Maxburg Capital Partners GmbH, Munich, Germany (Deputy Chairperson since May 31, 2016)
• Henrik Persson, Founder and Manager of Sprints Capital Management Ltd, London, United Kingdom (since May 31, 2016)
• Dr. Norbert Stoeck, freelance corporate consultant, Munich, Germany
• Dr. Felix Treptow, Authorized Officer at Maxburg Capital Partners GmbH, Munich, Germany (since May 31, 2016)

• Michael Rohowski, (Chairman of the Supervisory Board), Spokesperson for the management board of Burda Direkt Services GmbH, Offenburg, Germany (until May 31, 2016)

• Thomas Schmitt, Member of the Management Board for contract logistics/SCM of Schenker AG, Essen, Germany (until May 31, 2016)

• Dr. Rolf-Christian Wentz (Deputy Chairperson), freelance corporate consultant, Bonn (until May 31, 2016)
• Stefan Winners, Member of the Management Board responsible for national digital brands at Hubert Burda Media Group, Munich, Germany (until May 31, 2016)

b. Corporate strategy – Sustainable and profitable pan-European growth

The Group's aim is to maintain and significantly expand its market leadership in the European online pet supplies segment and thereby dramatically increase the company's medium- and long-term earnings potential. From the company's standpoint, both the Internet and Internet retailing in Europe continue to offer excellent growth opportunities. This is the reason it is important for the Group to set up the necessary structures and position itself today to generate significant mediumand long-term positive returns by virtue of its size and market leadership.

With this in mind, the following goals stand at the core of the company's activities:

• Defend and expand market leadership
• Expand the customer base and continue to increase customer loyalty in all major European markets
• Further penetrate existing regional markets
• Increase the sales and contribution margin per customer each year

The overriding priority is to continue generating high growth while maintaining and increasing lasting operating profitability. Management sees this as the most logical strategy for promoting the long-term

appreciation in the company's value in the quarters and years to come based on the excellent growth opportunities for the Group still available throughout Europe.

Targets are managed and monitored in all areas using key performance indicators that are reviewed regularly and modified over the short- to medium-term when necessary. The company places special importance on clearly communicating its goals to employees and the public.

c. Technology and development

zooplus views itself first and foremost as a technologydriven Internet retailing group. The new and continued development of the core processes and key components of the company's business model is usually initiated and executed internally. External partners are brought in when they can make a meaningful contribution to the company's internal expertise and implementation capacity.

In the past, proprietary systems and highly specialized software solutions in all key company segments have played a decisive role in the success of zooplus AG and the zooplus Group and, from today's perspective, will remain a fundamental building block to reaching the company's goals.

The existing proprietary software will be partially integrated and replaced in part by the future introduction of the new ERP system. Business areas in which these proprietary systems play a key role include:

• Price and margin management
• Logistics management and controlling
• Domestic and international payment processes
• Online marketing and customer acquisition
• Working capital management and procurement
• International Group controlling

There is still a risk that the euro debt crisis and currency exchange rates both within and outside Europe will have a major adverse impact on Europe's real economy. In addition, it is not yet clear what additional risks and consequences may arise from the Brexit vote. Although the German economy has been able to decouple itself to a large extent from the rest of the eurozone, it cannot be ruled out that negative economic developments may have an impact on zooplus AG's business in the future. The management believes that a key influence on zooplus AG – compared to the general economic overview provided above – still remains the development of the specific industry and online retailing environment in the respective individual markets.

ii. Performance of the zooplus Group in the reporting period

The Management Board is pleased with the zooplus Group's continued positive performance in the first nine months of 2016 and believes the Group is ahead of its original plan to achieve its sales target and on track to reach its earnings (EBT) target for the 2016 financial year. The Group continued along its growth path in the first nine months of 2016 achieving a year-on-year rise in sales of 28%. The Group also continued expanding its market position versus competitors. The Group's sales growth in Great Britain, however, declined sharply as a result of the Brexit decision and the related steep depreciation of the British pound.

B. Net assets, financial position, and results of operations

a. Financial and non-financial performance indicators

i. Financial performance indicators

The zooplus Group analyzes sales, margins, fulfillment and marketing costs to manage and monitor the earnings situation.

The yardstick for the Group's growth and business success is sales. As of the 2016 financial year, zooplus has been following the common market practice of reporting sales as its key growth indicator and no longer report total sales as in prior years. The key earnings figure for measuring the Group's success is earnings before taxes (EBT).

The performance indicator for the financial position is the equity ratio. The key ratios are calculated at the Group level in accordance with IFRS.

ii. Non-financial performance indicators

In addition to financial performance indicators, the Group also steers its activities using non-financial performance indicators. The key non-financial performance indicator is the company's degree of market leadership in the European online pet supplies segment.

Two other key performance indicators are the sales retention rate and the number of new customers – both of which have an influence on zooplus AG's sustained growth and stand at the center of the company's corporate management.

b. Business performance 9M 2016

i. The economy and overall market

After the results for the first nine months of 2016, the Management Board continues to stand by its full-year sales forecast of at least EUR 900 m that was revised higher with the publication of the first half-year results. The Management Board confirms its original forecast for earnings before taxes (EBT) in the range of EUR 14 m to EUR 18 m.

In the first nine months of 2016, zooplus continued to benefit from economies of scale and efficiency gains achieved in all of its key operating areas. The company also saw a further improvement in other operating income in the form of higher refunds for marketing. The key figure for measuring customer loyalty remained above 90%, close to the prior year's level. As a result, zooplus generated earnings before taxes (EBT) of EUR 11.1 m in the first nine months (9M 2015: EUR 9.1 m), reporting an improvement over the previous year's comparable period.

c. Results of operations

i. Development of sales and other income

As the European online market leader based on the company's own assessment, zooplus was able to significantly increase sales again in the first nine months of 2016. Sales in the reporting period were up 28.2% reaching EUR 655.3 m following their level of EUR 511.0 m in the comparable period of 2015.

This growth was primarily driven by the continued expansion of the customer base in all the Group's geographic markets, high customer loyalty (sales retention rate among existing customers), and the growth in sales with new customers. The sales retention rate was close to the high level achieved in the prior year. Sales generated with new customers also increased sharply in the first nine months of 2016. Both of these trends highlight and attest to the sustainability of the company's business model.

The share of sales generated abroad rose to 74% after a level of 72% in the previous year's comparable period.

Other operating income in the first nine months of 2016 increased substantially compared to the prior year growing from EUR 20.2 m to EUR 30.7 m and now amounts to 4.7% of sales compared to 4.0% of sales in the first nine months of 2015. Sales consist solely of merchandise sales whereas other operating income mainly reflects customary industry refunds for marketing and other compensation.

Sales of pet supplies are largely immune to seasonal fluctuations.

The performance of sales and other operating income clearly shows that zooplus, as the market leader, is profiting comparatively more from the continual migration of demand from the traditional bricks-andmortar sales channels to online retailing. The company's strategic market position was further reinforced by persistent double-digit growth rates in all local markets.

ii. Expense items

In contrast to previous reports, expense items are now reported as a percentage of sales – the company's key indicator – and are no longer reported as a percentage of total sales (sales plus other operating income).

Cost of materials

The company's cost of materials increased at a slightly faster rate than sales year-on-year in the reporting period. The cost of materials ratio increased 1.9 percentage points to 74.8% in the first nine months of 2016 compared to the prior year (72.9%). The company's gross margin (sales less cost of materials) declined from 27.1% in the previous year's comparable period to 25.2% in the first nine months of the 2016 financial year. The decline was caused by a higher share of lower-margin food sales in relation to total sales and price adjustments made amid a continued intensely competitive e-commerce environment so that the company could continue offering customers the best value for money. This also served to reinforce the company's market leadership in Europe and was a key driver of the continued strong sales growth. The cost of providing customers a better value for money and a more attractive product range were almost fully offset by operating improvements in all cost items and an improvement in other operating income in the form of higher refunds for marketing.

Personnel costs

Personnel costs in the first nine months of 2016 increased to EUR 21.0 m compared to EUR 18.1 m in the comparable period of 2015. This represents a year-onyear decline in the personnel cost ratio of 0.4 percentage points for a total personnel cost ratio of 3.2% (in relation to total sales).

Depreciation and amortization

Scheduled depreciation and amortization in the first nine months of the 2016 financial year was slightly higher than the previous year's level and amounted to EUR 0.8 m.

Other expenses

Other expenses, which mostly consist of logistics/fulfillment, marketing and payment transaction costs, increased from EUR 130.5 m in the 2015 comparable period to EUR 162.6 m in the reporting period. As a percentage of sales, other expenses fell from 25.5% of sales in the first nine months of 2015 to 24.8% in the first nine months of 2016. The main contributors to this decline were the efficiency gains and economies of scale achieved in logistics, marketing, customer acquisition, payment transactions and other costs, which helped to offset the fall in gross margin.

Logistics and fulfillment costs

Logistics and fulfillment costs in the first nine months of 2016 comprised 19.5% of sales compared to 20.0% in the previous year's period, showing an improvement despite a greater number of international shipments and a very high level of capacity utilization, particularly at the logistics center in the Netherlands. This improvement resulted, among others, from greater efficiency at existing logistics centers combined with advances made throughout the entire logistics network.

Marketing expenses

Expenses for customer acquisitions and marketing as a percentage of sales remained stable at the prior year's level of 1.5% in the first nine months of 2016 despite the 28.2% year-on-year increase in sales. This again confirms the high effectiveness of the company's marketing approach for acquiring new customers.

Payment transaction costs

Payment transaction costs in the first nine months of 2016 totaled EUR 6.9 m compared to EUR 5.5 m in the previous year's period. At 1.0% of sales, they comprised a slightly lower percentage of sales than in the previous year.

Other costs

Other costs in the reporting period, in addition to the costs for logistics, fulfillment, marketing, and payment transactions described above, included costs for customer relationship services, office rentals and technology, as well as general administrative expenses and other expenses incurred as part of the ordinary operating activities. Other costs as a percentage of sales in the first nine months of 2016 were driven lower by economies of scale and amounted to 2.8% compared to their level of 3.0% in the same period of 2015.

iii. Earnings development

During the first nine months of 2016, zooplus generated earnings before taxes (EBT) of EUR 11.1 m for a year-onyear rise (9M 2015: EUR 9.1 m) of EUR 2.0 m. This solid earnings performance was primarily driven by the improvements in operating efficiency described above, a continued highly effective marketing strategy and ongoing strong sales growth. Higher other operating income also contributed to the rise in earnings. The combined impact of the effects described compensated almost fully for the decline in gross margin.

The consolidated net profit/loss generated in the first nine months of 2016 amounted to EUR 6.8 m (9M 2015: EUR 5.7 m). At EUR 7.1 m (9M 2015: EUR 4.2 m), total comprehensive income differed from the consolidated net profit/loss due to the hedge reserve of EUR 0.4 m and currency translation differences of EUR -0.2 m.

d. Net assets

Non-current assets totaled EUR 11.4 m as of September 30, 2016, compared to EUR 11.3 m as of December 31, 2015. The major items include intangible assets of EUR 8.6 m and property, plant and equipment of EUR 2.7 m. The decline in deferred tax assets is primarily a result of the positive earnings development through the use of available tax losses carried forward.

Current assets amounted to EUR 158.6 m as of September 30, 2016 compared to their level of EUR 154.0 m at the end of 2015. This increase mainly resulted from the combination of a sharp rise in cash and cash equivalents from EUR 45.5 m to EUR 53.7 m, an increase in advance payments from EUR 1.4 m to EUR 5.0 m, a rise in accounts receivable from EUR 13.6 m to EUR 20.3 m, and an increase in derivative financial instruments from EUR 0.6 m to EUR 1.2 m. These increases were partly offset by a decline in other current assets from EUR 18.3 m to EUR 11.0 m and a reduction in inventory from EUR 74.5 m to EUR 67.4 m.

As of September 30, 2016, equity was slightly higher than its level on the December 31, 2015 reporting date and amounted to EUR 101.9 m. The equity ratio as of September 30, 2016 amounted to 60% and was above the level recorded at the end of 2015.

Accounts payables declined to EUR 25.7 m as of September 30, 2016 compared to EUR 35.3 m at the end of 2015.

As at the end of the previous year, there were no financial liabilities as of September 30, 2016. The Group continues to have flexible lines of credit totaling EUR 40.0 m. zooplus AG is not obliged to provide any collateral for these credit lines.

Total assets as of September 30, 2016, amounted to EUR 170.0 m and were therefore only slightly higher than their level of EUR 165.3 m on December 31, 2015, allowing the company to maintain solid balance sheet ratios despite the strong growth in sales.

e. Financial position

Cash flows from operating activities reached a level of EUR 9.6 m in the reporting period compared to EUR 13.5 m in the first nine months of 2015. Operating cash flows were mainly influenced by a solid level of earnings before taxes during the reporting period and changes in working capital. Cash flows from investing activities amounted to EUR -2.7 m in the first nine months of 2016 compared to EUR -1.9 m in the comparable period of 2015.

Free cash flow in the first nine months of 2016 totaled EUR 6.8 m compared to EUR 11.6 m reported in the same period of 2015.

Cash flows from financing activities in the reporting period amounted to EUR 1.1 million and were mainly the result of proceeds from a capital increase from conditional capital in the form of the exercise of employee stock options.

As a retail company, zooplus is subject to a considerable level of volatility in its balance sheet and cash flow related items such as inventories, liabilities, and VAT, which results in a much higher natural fluctuation in these figures throughout the year compared to the earnings figures presented.

f. Overall statement on the financial position

With sales growing 28% to EUR 655 m in the reporting period and EBT improving year-on-year by EUR 2.0 m to a total of EUR 11.1 m, the performance for the first nine months of 2016 overall can be viewed as very positive. Another positive highlight was the strength of the equity ratio, which totaled 60% as of the September 30, 2016 reporting date.

2. Subsequent events

After the end of the first nine months of 2016, there were no events of particular importance that impacted the net assets, financial position, or results of operations.

3. Report on outlook, risks and opportunities

A. Outlook

Based on the latest forecasts, the underlying economic conditions are not expected to change materially in 2016. zooplus expects overall sales in the pet supply sector to increase slightly over the previous year. Irrespective of this, the company anticipates that the Internet will continue to grow in importance as a sales channel (e-commerce) and develop at a faster rate than the market overall. zooplus will benefit substantially from these trends.

Based on these two trends, the company expects to achieve the following results in the 2016 financial year:

• sales growth to a level of at least EUR 900 m
• earnings before taxes (EBT) in a range of EUR 14 m to EUR 18 m

Notes Consolidated interim financial statements Interim Group management report To the shareholders

15

In terms of the development of the key factors influencing net assets, financial position, and results of operations we expect

• a slight decline in the 2016 gross margin (in relation to sales);
• logistics and fulfillment costs as a percentage of sales to decline slightly in 2016 as a result of efficiency increases and economies of scale;
• marketing expenses related to customer acquisitions to fall marginally as a percentage of sales;
• an equity ratio between 40 % and 60 %;
• another year in which the company maintains its leading market position in the online retailing of pet supplies; and
• the sales retention rate to remain stable.

As in previous years, the priority in 2016 will be growth. Sustainable positive earnings development is also a key element of the company's strategy.

B. Risk report

The risk environment for zooplus AG has not changed materially in comparison to the presentation in the 2015 annual report (pages 54 to 59).

C. Opportunity report

The opportunity environment for zooplus AG has not changed materially in comparison to the presentation in the 2015 annual report (pages 60 to 61).

Consolidated balance sheet	17
Consolidated statement of comprehensive income	19
Consolidated statement of cash flows	20
Group statement of changes in equity	21

Consolidated interim financial statements

Consolidated balance sheet as of September 30, 2016 according to IFRS

Assets

	in EUR	09/30/2016	12/31/2015
A.	NON-CURRENT ASSETS
I.	Property, plant and equipment	2,705,332.70	1,373,161.41
II.	Intangible assets	8,625,712.32	8,049,517.78
III.	Other financial assets	47,708.71	47,708.71
IV.	Deferred tax assets	0.00	1,849,223.00
	Non-current assets, total	11,378,753.73	11,319,610.90
B.	CURRENT ASSETS
I.	Inventories	67,410,722.74	74,507,693.18
II.	Advance payments	5,043,185.45	1,449,171.98
III.	Accounts receivable	20,250,496.94	13,621,488.45
IV.	Other current assets	10,954,933.98	18,255,442.75
V.	Derivative financial instruments	1,224,569.02	609,168.69
	VI. Cash and cash equivalents	53,703,978.40	45,530,788.75
	Current assets, total	158,587,886.53	153,973,753.80
		169,966,640.26	165,293,364.70

Equity and Liabilities

	in EUR	09/30/2016	12/31/2015
A.	EQUITY
I.	Subscribed capital	7,051,302.00	6,995,182.00
II.	Capital reserves	94,305,980.37	92,769,312.66
III.	Other reserves	225,195.61	5,868.77
IV.	Profit for the period and profit/losses carried forward	300,907.69	–6,543,888.23
	Equity, total	101,883,385.67	93,226,475.20
B.	NON-CURRENT LIABILITIES
I.	Provisions	1,852,000.00	1,780,232.32
II.	Deferred tax liabilities	59,162.35	0.00
	Non-current liabilities, total	1,911,162.35	1,780,232.32
C.	CURRENT LIABILITIES
I.	Accounts payable	25,734,071.00	35,266,274.27
II.	Derivative financial instruments	479,883.87	526,561.75
III.	Other current liabilities	25,614,603.93	23,370,191.04
IV.	Tax liabilities	2,241,258.50	693,616.79
V.	Provisions	9,804,235.39	8,385,853.93
	VI. Deferred income	2,298,039.55	2,044,159.40
	Current liabilities, total	66,172,092.24	70,286,657.18
		169,966.,640.26	165,293,364.70

Consolidated statement of comprehensive income from January 1 to September 30, 2016 according to IFRS

in EUR	9M 2016	9M 2015
Sales	655,343,762.66	511,004,478.45
Other income	30,653,368.37	20,245,969.79
Cost of materials	–490,381,312.82	–372,760,348.79
Personnel costs	–21,009,926.30	–18,145,937.36
of which cash	(–20,662,438.59)	(–17,708,583.68)
of which stock-based and non-cash	(–347,487.71)	(–437,353.68)
Depreciation and amortization	–792,796.27	–603,541.38
Other expenses	–162,648,000.22	–130,477,009.85
of which logistics/fulfillment costs	(–127,993,853.02)	(–102,182,152.09)
of which marketing costs	(–9,585,113.30)	(–7,524,502.35)
of which payment transaction costs	(–6,876,103.95)	(–5,485,458.68)
of which other costs	(–18,192,929.95)	(–15,284,896.73)
Earnings before interest and taxes (EBIT)	11,165,095.42	9,263,610.86
Financial income	736.90	30,933.30
Financial expenses	–109,585.36	–151,681.70
Earnings before taxes (EBT)	11,056,246.96	9,142,862.46
Taxes on income	–4,211,451.04	–3,417,971.08
Consolidated net profit/loss	6,844,795.92	5,724,891.38
Other gains and losses (after taxes)
Differences from currency translation	–224,431.08	–270,636.71
Hedge reserve	443,757.92	–1,219,728.29
Items subsequently reclassified to profit or loss	219,326.84	–1,490,365.00
Total comprehensive income	7,064,122.76	4,234,526.38
Earnings per share
basic (EUR/share)	0.98	0.82
diluted (EUR/share)	0.96	0.80

Consolidated statement of cash flows from January 1 to September 30, 2016 according to IFRS

in EUR	9M 2016	9M 2015
Cash flows from operating activities
Earnings before taxes	11,056,246.96	9,142,862.46
Adjustments for:
Depreciation and amortization	792,796.27	603,541.38
Non-cash personnel costs	347,487.71	437,353.68
Other non-cash business transactions or business transactions with payments relating to other periods	–224,431.08	–270,636.71
Interest and similar expenses	109,585.36	151,681.70
Interest and similar income	–736.90	–30,933.30
Changes in:
Inventories	7,096,970.44	4,475,640.58
Advance payments	–3,594,013.47	–1,870,115.16
Accounts receivable	–6,629,008.49	–3,188,320.55
Other current assets	7,300,508.77	5,762,791.01
Accounts payable	–9,532,203.27	–4,121,952.26
Other liabilities	2,244,412.89	3,322,078.74
Provisions	1,418,381.46	808,979.89
Non-current liabilities	71,767.68	314,000.00
Deferred income	253,880.15	376,656.89
Income taxes paid	–1,119,366.60	–2,402,526.16
Interest received	736.90	30,933.30
Cash flows from operating activities	9,593,014.78	13,542,035.49
Cash flows from investing activities
Payments for property, plant and equipment/intangible assets	–2,744,934.74	–1,914,827.01
Cash flows from investing activities	–2,744,934.74	–1,914,827.01
Cash flows from financing activities
Proceeds from capital increase	1,245,300.00	122,990.00
Interest and similar expenses	–109,585.36	–151,681.70
Cash flows from financing activities	1,135,714.64	–28,691.70
Currency effects on cash and cash equivalents	189,394.98	–121,783.84
Net change of cash and cash equivalents	8,173,189.65	11,476,732.94
Cash and cash equivalents at the beginning of the period	45,530,788.75	31,966,234.96
Cash and cash equivalents at the end of the period	53,703,978.40	43,442,967.90
Composition of cash and cash equivalents at the end of the period
Cash on hand, bank deposits	53,703,978.40	43,442,967.90
	53,703,978.40	43,442,967.90

Consolidated statement of changes in equity as of September 30, 2016 according to IFRS

	Subscribed capital	Capital reserves	Other reserves	Profit for the period	Total
in EUR				and profit/losses carried forward
As of January 1, 2016	6,995,182.00	92,769,312.66	5,868.77	–6,543,888.23	93,226,475.20
Increase from stock options	56,120.00	1,536,667.71	0.00	0.00	1,592,787.71
Currency translation differences	0.00	0.00	–224,431.08	0.00	–224,431.08
Net profit for 9M 2016	0.00	0.00	0.00	6,844,795.92	6,844,795.92
Hedge reserve	0.00	0.00	443,757.92	0.00	443,757.92
As of September 30, 2016	7,051,302.00	94,305,980.37	225,195.61	300,907.69	101,883,385.67
As of January 1, 2015	6,984,450.00	92,011,390.94	1,667,848.60	–14,471,014.94	86,192,674.60
Increase from stock options	7,028.00	553,315.68	0.00	0.00	560,343.68
Currency translation difference	0.00	0.00	–270,636.71	0.00	–270,636.71
Net profit for 9M 2015	0.00	0.00	0.00	5,724,891.38	5,724,891.38
Hedge reserve	0.00	0.00	–1,219,728.29	0.00	–1,219,728.29
As of September 30, 2015	6,991,478.00	92,564,706.62	177,483.60	–8,746,123.56	90,987,544.66

Notes	23
Imprint	28

Notes

Notes to the consolidated financial statements

Notes and explanations to the interim consolidated financial statements

Accounting principles

This nine-month financial report as of September 30, 2016, was prepared in accordance with International Financial Reporting Standards as applicable in the European Union (EU). These consolidated financial statements comply with IAS 34 "Interim Financial Reporting".

The same accounting policies were applied as those applied to the consolidated financial statements for the financial year ended December 31, 2015.

Stock Option Program

Based on the resolution of the Annual General Meeting of May 31, 2016, the company's Management Board and Supervisory Board resolved the creation of the Stock Option Program 2016 for the issue of stock options with subscription rights for shares of zooplus AG to members of the Management Board and selected executives of zooplus AG and affiliated companies in Germany and abroad. Under the Stock Option Program 2016, Management Board members can subscribe to up to 100,000 no-par value shares while executives of zooplus AG and affiliated companies in Germany and abroad can subscribe to up to 150,000 of the company's no-par value shares.

In September 2016, a total of 100,000 stock options were issued to Management Board members and 48,400 stock options were issued to zooplus AG employees. Each option gives the holder the right to subscribe to one no-par value bearer share of zooplus AG with a notional interest in the share capital of EUR 1.00 per share. The subscription price for these options, issued in September 2016, is EUR 124.45 per share.

Fair value disclosures

Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing, and mutually independent parties in an arm's length transaction.

The table below shows financial instruments measured at fair value broken down by the levels of the fair value hierarchy. The different levels are defined as follows:

• Level 1: Unadjusted quoted prices on active markets for identical assets and liabilities
• Level 2: Directly or indirectly observable inputs that are not allocated to Level 1
• Level 3: Unobservable inputs

The following table shows the assets and liabilities measured at fair value on September 30, 2016:

	Level 1	Level 2	Level 3
Assets in kEUR
Derivative financial instruments as hedging instruments	0	1,225	0
Liabilities in kEUR
Derivative financial instruments as hedging instruments	0	480	0

The following table shows the assets and liabilities measured at fair value on December 31, 2015:

	Level 1	Level 2	Level 3
Assets in kEUR
Derivative financial instruments as hedging instruments	0	609	0
Liabilities in kEUR
Derivative financial instruments as hedging instruments	0	527	0

There were no reclassifications within the respective levels during the reporting period. The reclassification of items is carried out on a quarterly basis when circumstances arise that require a change in classification.

The fair value of financial instruments that are traded on an active market is based on the quoted market price on the reporting date. A market is considered to be active if quoted prices are easily and regularly available on a stock exchange or from a dealer, a broker, an industry group, a pricing service or regulatory authority, and if these prices represent current and regularly occurring market transactions at arm's length conditions. For assets held by the Group, the appropriate quoted market price corresponds to the bid price offered by the buyer.

The fair value of financial instruments that are not traded on an active market (e.g., over-the-counter derivatives) is determined using valuation methods based as much as possible on market data and as little as possible on companyspecific data. If all data required to determine the fair value are observable, the instrument is assigned to Level 2. If one or more important data are not based on observable market data, the instrument is assigned to Level 3.

Specific valuation methods used to measure financial instruments include net present value models based on market data applicable on the reporting date.

Additional information on financial instruments

The following table shows the carrying amounts and fair values of all financial instruments recognized in the consolidated financial statements and the allocation of assets, liabilities, and some of the balance sheet items to measurement categories in accordance with IAS 39:

	Measurement	Carrying amount		Fair value
in kEUR	category	09/30/2016	12/31/2015	09/30/2016	12/31/2015
Financial assets
Accounts receivable	LaR	20,250	13,621	20,250	13,621
Other financial assets	AfS	48	48	n/a	n/a
Other current assets of which financial instruments in accordance with IFRS 7	LaR	5,626	15,373	5,626	15,373
Derivative financial instruments	n/a	1,225	609	1,225	609
Cash and cash equivalents	LaR	53,704	45,531	53,704	45,531
Total		80,853	75,182	80,805	75,134
Financial liabilities
Accounts payable	FLaC	25,734	35,266	25,734	35,266
Other liabilities of which financial liabilities in accordance with IFRS 7	FLaC	4,999	3,841	4,999	3,841
Derivative financial instruments	n/a	480	527	480	527
Total		31,213	39,634	31,213	39,634

LaR (Loans and Receivables)

AfS (Available for Sale)

FLaC (Financial Liability at amortized Cost)

The market values of the cash and cash equivalents, accounts receivable, current assets, accounts payable and other current liabilities reported as of September 30, 2016, and December 31, 2015, correspond to their carrying amounts. This is mainly due to the short-term maturities of such instruments.

The measurement of other financial assets (interests in non-consolidated Group companies) cannot be based on an active market or a quoted price, and the fair value cannot be determined by other means. Therefore, the disclosure of fair value has been refrained from. The company does not intend to sell these instruments.

All of the Group's financial liabilities are of a short-term nature with maturities of up to one year. Existing financial liabilities are repaid out of operating cash flows.

Aggregated by IAS 39 measurement categories, the Group's financial assets and liabilities are as follows:

	Measurement	Carrying amount		Fair value
in kEUR	category	09/30/2016	12/31/2015	09/30/2016	12/31/2015
Financial assets
Loans and receivable	LaR	79,580	74,525	79,580	74,525
Available for sale	AfS	48	48	n/a	n/a
Financial liabilities
Financial liability at amortized cost	FLaC	30,733	39,107	30,733	39,107

Scope of consolidation

As of September 30, 2016, the Group's scope of fully consolidated companies comprised zooplus AG, Munich, and the following subsidiaries:

Subsidiary	Interest in share capital	Business activity
MATINA GMBH, MUNICH, GERMANY	100%	(private label business)
BITIBA GMBH, MUNICH, GERMANY	100%	(secondary brand business)
zooplus services Ltd., Oxford, Great Britain	100%	(service company for Great Britain)
zooplus italia s.r.l., Genoa, Italy	100%	(service company for Italy)
zooplus polska Sp. z o.o., Cracow, Poland	100%	(service company for Poland)
zooplus services ESP S.L., Madrid, Spain	100%	(service company for Spain)
zooplus france S.A.R.L, Strasbourg, France	100%	(service company for France)
zooplus Pet Supplies Import and Trade ltd., Istanbul, Turkey	100%	(sales company for Turkey)

The following companies are not included in the consolidated financial statements:

• the wholly owned subsidiary zooplus EE TOV, Kiev, Ukraine, founded in the second quarter of 2011, with share capital of kEUR 10
• the wholly owned subsidiary zooplus Nederland B.V., Rotterdam, the Netherlands, founded in November 2012, with share capital of kEUR 10
• the wholly owned subsidiary zooplus d.o.o., Zagreb, Croatia, founded in February 2013, with share capital of kEUR 3
• the wholly owned subsidiary Tifuve GmbH, Munich, Germany, founded in May 2013, with share capital of kEUR 25

These four companies did not conduct any business activities during the reporting period and were not included in the consolidated financial statements because of their minor importance.

Segment reporting

The zooplus Group operates in only one business segment – the distribution and sale of pet supplies in the EU and other European countries. The products sold by the company are homogeneous and cannot be sub-divided. As an online retailer, the company offers its products centrally from one location irrespective of the end customers' geographic location. Consequently, there are no geographical segments as defined by IFRS. There is also no internal reporting by segment at present and, for this reason, the Group does not prepare segment reporting.

Earnings per share

Basic earnings per share is computed using the net profit for the period attributable to parent company shareholders divided by the weighted average number of ordinary shares outstanding during the reporting period. Consolidated net profit for the first nine months of 2016 amounted to EUR 6.8 m (previous year: EUR 5.7 m). The average number of shares outstanding in the first nine months of 2016 was 6,997,722, resulting in basic earnings per share of EUR 0.98 (previous year: EUR 0.82).

Diluted earnings per share is computed using the net profit for the period attributable to parent company shareholders divided by the weighted average number of ordinary shares outstanding during the reporting period plus any share equivalents that could lead to dilution. This computation results in notional earnings per share of EUR 0.96 (previous year: EUR 0.80).

Information in accordance with Section 37w (5) of the WpHG

As with all of the company's regular interim reports, these interim financial statements, and the interim management report have not been reviewed by an auditor.

German Corporate Governance Code

zooplus Aktiengesellschaft has submitted the declaration on the German Corporate Governance Code that is required under Section 161 of the German Stock Corporation Act (Aktiengesetz) and has made this declaration available to its shareholders on its website at http://investors.zooplus.com/en/corporate-governance/ corporategovernancestatement.html.

Munich, November 17, 2016

The Management Board

Dr. Cornelius Patt Andrea Skersies Andreas Grandinger

Imprint

Publisher

zooplus AG Sonnenstraße 15 80331 Munich Germany Tel.: +49 (0) 89 95 006 – 100 Fax: +49 (0) 89 95 006 – 500

Email: kontakt@zooplus.de www.zooplus.com

Investor Relations

cometis AG Unter den Eichen 7 65195 Wiesbaden Germany Tel.: +49 611 20 58 55 – 0 Fax: +49 611 20 58 55 – 66

Email: info@cometis.de www.cometis.de

Concept, editing, layout and typesetting:

cometis AG

Photos:

zooplus AG

This 9-monthly report is also available in German. In case of discrepancies the German version prevails. A digital version of this zooplus AG 9-monthly report and the annual reports can be downloaded from the section "Investor Relations/Financial Reports" at www.zooplus.com.

Forward-looking statements

This report contains forward-looking statements that are based on the Management Board's current experience, assumptions, and projections and any information currently available to the Management Board. Forward-looking statements should not be considered a guarantee of the future developments and results mentioned therein but are, in fact, dependent upon a variety of factors. The forward-looking statements contain various risks and uncertainties and are based on assumptions of future events that may not be accurate. Such risk factors include those discussed in the Risk Report on page 14. We undertake no obligation to update the forward-looking statements contained in this report.

zooplus AG Sonnenstraße 15 80331 Munich Germany