MySale in profit warning, launches review of UK ops
today Dec 11, 2018
Australia's MySale issued a profit warning on Tuesday with the Cocosa owner saying that it has seen “challenging conditions during its peak, second quarter, trading period.” The board now believes that revenue and profits for the financial year to June 30 2019 will be “significantly below market expectations.”
And it’s looking closely at the business, which could mean that its small UK ops don’t have a future as part of the group.
But first, profits. It expects a small underlying EBITDA loss for the first half of the financial year, but performance in H2 should be “significantly improved”, following measures taken to reduce costs and improve margins, resulting in a small underlying EBITDA profit for the full year.
What’s gone wrong? It said that “the principal challenge has been greater than anticipated market disruption arising from changes to general sales tax (GST) regulations in Australia, the group's largest market, which has been exacerbated by the product mix and an insufficient proportion of the own-buy inventory being located in the local distribution centre.”
It’s taking action “to improve the product mix and inventory availability with immediate effect” and “all senior management and product teams are being centralised in the Sydney head office to facilitate more local sourcing and margin improvement.”
The group thought it had done enough in advance to avoid the disruption of GST, but seems to have underestimated the overall impact.
But it wasn’t the only problem during the half. Revenue was also “adversely affected by selective price increases, which have now been reversed, reducing transaction volumes as price competition and comparison increased,” it said. “This, together with the product mix, resulted in higher levels of discounting and postage promotions being deployed in order to mitigate lower demand.”
It also said its product mix veered too much towards categories with lower gross margins and less to its higher-margin own-buy inventory that meant gross profits took a hit.
Its actions to counter this have been a priority but they’re happening alongside a strategy review that can be summed up as “Australia and New Zealand first” to make the most of its “significant scale, resources and market position in this region.”
And that means the company has also launched a review of its operations in the UK and South East Asia “in order to assess how best to deliver maximum long term value to shareholders, including consideration of strategic disposals.” These regions represented around 15% of group revenue in the last financial year and the board said it “will update on the outcome of this review in due course.”
Even if it sheds its UK ops, it doesn’t mean that country will be unimportant to the company. It says that it has been preparing for deployment of its Ourpay 'buy-now, pay-later' platform with third-party customers, “and is pleased to confirm it has now completed the technology integration and is undertaking a live trial on the Australian website of a UK retailer.”
This is an important step in the commercialisation of the Ourpay platform, and “initial experiences have been encouraging,” we’re told. So it seems that the firm’s international focus in future could be more closely connected to deals with foreign retailers rather than direct consumer-facing ops in foreign countries.
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