MySale Group plc (AIM: MYSL) has given DirectorsTalk its Interim Results for the six months ended 31 December 2015.
H1 Financial Highlights
— A positive first half with underlying EBITDA of A$1.5 million; a A$12.9 million improvement on the prior year
-- Good revenue momentum; overall growth of 4% at an accelerating rate through the period -- Strong gross profit growth of 15% driven by 250bp margin improvement
— Performance building well in South-East Asia with 8% revenue growth and gross profit increased 187%
-- Group overheads now at materially lower level of 24% of revenue (2014: 28%)
— Strong balance sheet with cash balance of A$30 million and an underlying cash position of A$52.2 million, representing c 17 pence per share
— This position follows an investment in H1 of A$17.2 million, representing c 6 pence per share, into additional inventory levels to support margin improvement
— Good trading momentum has continued into the second half with 20% revenue growth in the first six weeks
H1 Operational Highlights
-- Focus on improving gross margins and activating customers with higher lifetime-value -- Average order value increased 17% to A$84 (2014: A$72) -- Average revenue per active member increased 6% to A$293 (2014: A$278)
— Further growth in mobile which now represents 59% of orders (2014: 55%) with over 5.5 million mobile apps now downloaded
— Active members reduced, as planned, by 10% in H1 to 731,000 as growth in gross margin was prioritised and unprofitable postage promotions from a year earlier curtailed
-- Active member numbers have returned to growth in H2 -- Increase in own-buy inventory in-line with strategic plan to grow gross margin -- Returns rate remains steady at c 5-6%
— Technology improvements; enhanced search functionality across the platform to drive customer engagement; and more efficient logistics to reduce unit costs
-- Acquisition of Australian online retail business completed after the period end
Carl Jackson, Chief Executive Officer, commented
“The group had a good start to FY2016 as the planned strategic initiatives have delivered both improved financial performance and positioned the group for further, profitable, growth.
Our focus for the first half of the financial year was to restore the business to profitability and to re-focus around our simplified strategy. This was successfully achieved and we were also able to grow our revenues once again.
Gross margin has increased in all regions and whilst currency headwind has constrained this growth in our core ANZ market, our focus on providing exceptional value and a wider range of product for our customers is proving effective. Our recently announced bolt-on acquisition in Australia provides a cost effective way of growing our active customer base and widening our proposition.
Further afield, the hard work undertaken in South-East Asia to localise our offer has delivered great results and means traction is beginning to build in these exciting markets.
We are pleased with the start to the second half of the year as we have seen good momentum in revenue growth. There is still a lot of hard work ahead, but we have a well invested technology, marketing, buying and distribution platform capable of supporting a much bigger business, so we look to the future with confidence. ”
MySale Group Plc Business review 31 December 2015
Strategy
The group’s planned strategic initiatives have delivered improved financial performance in the first half and positioned the group for further, profitable, growth in the second half and beyond. To maintain the momentum in performance the group is focused on the following key strategic aims:
1. Drive increased activity levels with our existing customers
2. Grow our active customer base
3. Improve our gross margins
The tactics that have or will be adopted to achieve these strategic aims include:
1. Deploy proven digital marketing and engagement tactics – acquire loyal customers and frequent customers
— The group has established and proven marketing capability that is almost exclusively dedicated to digital channels.
— This digital acquisition of customers provides measurable returns on the initial marketing investment and the targeting of those prospective customers with most propensity to become repeat buyers and generate attractive returns.
— Use of social media channels with both prospective and existing customers to maintain reach and relevance and build engagement.
2. Use technology to improve conversion, engagement and each customer’s journey – drive conversion, and activity
— The group has focused on development of mobile commerce and data capabilities to provide improved customer experiences and thus improve frequency and volume of purchases.
— The customer’s mobile commerce experience has been at the heart of the group’s strategy for many years and generates the majority of orders. Our mobile technology roadmap includes live personalisation, trending recommendations, intelligent notifications, enhanced images, wish lists, credit card capture and an Apple Watch App.
— The group now has a dedicated team of data scientists focused on utilising live data streams and statistical models to drive business KPI’s, identify business insights and deliver personalisation and trending recommendations. The group’s capture and analysis of data allows for delivery of increasingly personalised shopping experiences to customers which improves engagement.
3. Focus on geographies with better growth prospects - drive active customer base
— Expansion into territories where the group can achieve higher long-term growth rates, such as South-East Asia and United Kingdom has been successfully achieved and is a key element of future growth and diversification from the home ANZ market.
— The deployment of a localisation plan including; merchandising, pricing payment and delivery brings local relevance to our internationally sourced product range.
— S-E Asia offers a large addressable population, increasing disposable income, lack of off-price competition and high mobile penetration. This region is well served by the group’s strong value, branded sales offer and exceptional mobile commerce capability.
— As the UK has a large and well developed online marketplace where engaged and active consumers can be acquired successfully and, given there is no online flash sale operator of scale, the group has targeted becoming a leading operator in the country.
-- Expanding the active user base further will allow economies of scale to be achieved 4. Utilise our international sourcing capability - drive frequency and volumes
— Access to European and USA brands means the group is able to offer great product selection to consumers in ANZ and S-E Asia which in turn helps drive customer engagement and frequency.
5. Owning more stock - drive activity and gross margin
— Whilst the majority of our activity shall be conducted on a consignment inventory basis we are selectively increasing the proportion of inventory that we own as this gives the group access to a wider range of products, improving customer engagement, and enhances gross profit margins.
— Strengthens relationships with brands which in turn can lead to exclusive supply arrangements.
6. Adding new categories and more products - drives activity and gross margin
— Development of new categories and channels, both organically and by acquisition, will expand range of merchandise available to customers and enhance engagement and frequency of purchase.
— New categories and expanded product ranges will be undertaken predominantly on a consignment, drop-ship or third party supplier basis so that group has an efficient working capital structure.
7. Selective bolt-on M&A - drives active customer base and expands range of merchandise
— The group has a robust, scalable international ecommerce platform which allows for the swift and cost effective expansion by way of bolt-on acquisitions.
— As illustrated by the recent acquisition of Australian online business this can provide a step change in active customer numbers and immediate access to significant numbers of new suppliers and products.
— M&A activity is and shall be focused on existing and complementary product categories and particularly those in which the group has experience of high-margin and strong repeat purchase metrics.
— Such activity is targeted within existing territories where the group can leverage existing assets and infrastructure and de-risk the integration, as illustrated by the acquisition of Cocosa in the United Kingdom.
— The group’s core flash sales heritage has built expertise in a range of categories and products and as such the group’s flexible logistics infrastructure will support a wide variety of product categories.
