FY17 was yet another year of progress for MySale Group plc (LON:MYSL), with sustained focus on the strategic goals achieving growth in both revenue and profitability. FY revenue increased by 6.2% to A$268.4m, reflecting strong online growth of 10%, coupled with a planned reduction in lower margin offline revenue. Gross profit grew by 14.1% to A$76.0m, underpinned by a 190bps increase in gross margin to 28.3%, with improved performance as a direct result of the strategic plans implemented by the group in FY15 and 16. Adj. EBITDA grew 59% to A$8.7m, which as stated at the pre-close, was slightly ahead of our previous A$8.5m forecast. Management remain focused on running efficient and effective marketing strategies, with increased emphasis on customer re-engagement and retention, together with an accelerated investment programme to continue to improve customer experience, KPIs and ultimately drive profitable growth. The business has made a good start to the new financial year, with EBITDA for the full year expected to be “at least in line with the upper end of market expectations”.
Introducing FY19 estimates. For FY19, we are forecasting top line growth of 10%, delivering sales of c.A$268m, with modest growth of c.7.5% in the core ANZ region. We expect a 40bps improvement in the gross margin, while operating leverage delivers a 60bps improvement in the EBITDA margin to 4.3% or A$14.5m, +26% growth YoY.
Robust KPIs, continued focus on activating customers with a higher lifetime value. Focus on customer engagement saw the active customer base increase 11% to 0.9m, (1.0m including Identity Direct). Both AOV and average revenue per customer remained stable, at A$87 vs A$90 and $A292 vs A$302 respectively. The percentage of sessions from mobile increase to 59% from 58%, while the returns rate remains low at only 5%.
Strategic M&A set to remain element of core strategy. The company will continue to target deals which can either widen the range of products that existing customers would likely purchase and which grows routes to market in the core geographies. The integration of Identity Direct, a leading online retailer of personalised products that was acquired for A$2.9m in April, is running ahead of plan, and with property and resources now rationalised, cost savings and synergies will be realised in the current year.
Successful strategic initiatives launched. MySale secured a number of new brand partners during the last 12 months, the most notable being the strategic partnership with gilt.com, which helps scale the group’s retail marketplace platform. The partnership with Sports Direct also gives access to 150k+ products from their inventory. There has been a strategic plan to increase own-buy inventory, now comprising 17% of online revenue, alongside an increase in investment in technology to A$7.5m from A$4.0m. This has allowed MySale to launch a significantly enhanced marketplace platform and improve marketing automation. In addition, the in-house payments solution ‘Ourpay’ has launched.
Overall view. MySale Group Plc is building a strong track record of performance as well as innovation, as it continues to deliver against the management plan with improved operational and financial performance. It is particularly encouraging to see continued growth coupled with a significant improvement in the margin. We see possible upside coming from new income streams, such as the proprietary Ourpay ‘buy-now, pay-later’ solution, while the technology investment to improve and establish the MySale platform’s ‘endless aisle’ approach, brings security and supply of inventory. MySale is a business that generates substantial revenues that are currently valued on an EV/Sales multiple of just 0.9x. The e-commerce peer group trades on an average FY1 EV/Sales multiple of 2.1x. If MySale traded on 1.5x it would equate to 189p.
