Home Listed Tech Kogan beats revenue and earnings forecasts with strong growth (CORRECTED)

Kogan beats revenue and earnings forecasts with strong growth (CORRECTED)

Online retailer Kogan has outstripped profit predictions for the first half of its first year of trading as a public company. (We have republished this story as we had made an unfortunate error in a previous report. We apologise for the mistake).

Kogan reported a statutory after-tax net profit of $1.5 million for 1H17 on revenues of $143.9 million.

The revenues exceeded prospectus 1H17 forecast (provided on a full-year basis only) by $20.6 million and gross profit was 37.8% above 1H17 forecast at $25.9 million.

Highlights of the Kogan results include:

•    1H17 Pro Forma Trading  EBITDA of $7.3 million (1H16: $2.6 million), exceeding the FY17 full year prospectus forecast of $6.9 million, reflecting revenue growth and gross margin expansion;

•    1H17 Pro Forma Trading NPAT of $3.7 million (1H16: $1.3 million), exceeding the FY17 full year prospectus forecast of $2.5 million. Statutory NPAT in 1H17 was $1.5 million;

•    1H17 Revenue of $143.9 million (1H16: $104.7 million);

•    Growth in active customer base to 830,000, up 18.2% from 30 June 2016, driven by strategic marketing initiatives and growth in the Kogan brand;

•    Gross margin improvement to 18.0% (1H16 15.1%) due to precision sourcing and analytics;

•    Strong balance sheet with net cash of $26.5 million and inventories of $42.4 million, where ~90% of inventories in warehouse are less than 90 days old;

•    Kogan.com is now further upgrading its FY17 Pro Forma Trading EBITDA forecast to between $10.5 million to $11.5 million; and

•    The board has declared an interim dividend of 3.9 cents per share (fully franked).

Kogan said improved gross margin for the business was driven by analytics, precision sourcing and improved efficiencies/automation in processes.

Ánd the company’s pro forma trading EBITDA of $7.3 million (1H16 $2.6 million), exceeded the FY17 full year prospectus forecast of $6.9 million, reflecting revenue growth and gross margin expansion, the company said.

Kogan also reported growth in its active customer base to 830,000, up 18.2% from 30 June 2016, and driven by what the company said was “strategic marketing initiatives and growth in the Kogan brand”.

Chief executive and founder Ruslan Kogan said the results demonstrated the company was on track to continue to build the Kogan.com business in line with its long-term business strategy.

"Following the IPO, we have deployed proceeds into precision purchasing of inventory. This is enabling us to respond to demand for our products. We have also expanded our gross margin as a result of our investments in systems and analytics.”

Factors which Kogan said positively impacted the results included:

•    Growing Brand - in the 12 months to 31 December 2016, active customers grew by 33.7% to 830,000.

•    Proprietary eCommerce Platform: Kogan.com's multi-channel proprietary world class platform allows personalisation in marketing and scalability of the consumer offering.

•    Precision purchasing of Private Label: Kogan.com deployed proceeds from the IPO to respond to pent up demand for its Private Label products. Utilising an analytical approach to purchasing decisions enabled Kogan.com to diligently service demand while maintaining healthy inventory levels.

•    Strong growth in Kogan Mobile: Kogan Mobile is continuing to grow at a strong pace with new customer acquisitions and repeat customers, demonstrating the strength of the Kogan brand in launching and growing new verticals.

•    Gross margin expansion: Gross margin was 18.0%, exceeding the Prospectus forecast by 2.8pp. The drivers of margin expansion included precision purchasing of Private Label inventory, enhanced analytics and the accelerated growth of Kogan Mobile.

•    ERP efficiencies and stable cost base: The years of work undertaken by the team to optimise the business' proprietary ERP implementation is continuing to deliver efficiencies in time and cost. The business is continuing to achieve further automation across various functions, and is continutally improving reporting and business insights.

Kogan said significant funds raised from last year’s IPO had been invested in accelerating the company's growth strategy, including investment in new Private Label products and categories, as well as marketing.

"Following the IPO, we have sought to capitalise on growth opportunities in Private Label, while being disciplined in our purchasing decisions. Most of the products ordered with the IPO proceeds arrived in our warehouse in the second quarter and, as a result, that quarter saw strong growth in the Private Label product division.

"Kogan Mobile is continuing to deliver new plans and promotions into market, demonstrating the strength of the Kogan brand in launching and growing new verticals.

"Our trading results reflect the culmination of years of work from our world-class team in building the systems, processes, and platforms that allow us to scale our diversified portfolio of product divisions and new verticals.”

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Peter Dinham

Peter Dinham is a co-founder of iTWire and a 35-year veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).