MySale makes loss but UK Cocosa operation is strong

By

Sandra Halliday

Published
Mar 26, 2019

Cocosa owner MySale Group reported its half-year results on Tuesday and said it has implemented an action plan “to address key challenges and improve profitability.”

The online retailer, which operates in Asia-Pacific and the UK, said that in the six months to December 31, it faced significant challenges within its core Australia and New Zealand market “due principally to the impact of changes to the GST legislation for low value e-commerce import transactions.”

The result of that was that revenue dropped 17% to A$126 million and online revenue fell 13% to A$120 million. Gross profit was down 35% to A$29.5 million and the gross margin reduced to 23.4% from 30.1%. It made an underlying EBITDA loss of A$5 million, a sharp contrast to the equivalent A$5.5 million profit of a year earlier.

Its action plan that was launched in December takes in changes to the product mix and strategy including relocation of own-buy inventory to ANZ. It has been increasing the focus on brands for its marketplace platform towards "core fashion product categories, particularly women's and kids, and health & beauty, which have good repeat buyer metrics.”

The action plan also includes cost savings of approximately A$14m representing an annual cost cut of around 20%. The benefits should be “fully realised” in FY20 but “the scale and disruption of the change programme is greater than initially estimated and FY19 performance [is] now expected to be materially below previous guidance.”

LOCAL ISSUES

The issues in its local ANZ market were clear from the fact that revenue fell 16.9% there, while gross profit was down 35%. In South East Asia, revenue fell 13% and gross profit fell 37%. But in the rest of the world region (that is, the UK), revenue was up 10% and gross profit rose 9%. UK revenue rose to A$9.5 million and gross profit increased to A$2.3 million.

Of course, with that being the only operation to turn a profit this time, it’s interesting that the company is focusing away from it overall. As part of its ‘ANZ First’ strategy, it had previously launched a review of its operations in the UK and South East Asia (which together represented 15% of group revenue in FY18) “in order to assess how best to deliver maximum long-term value to shareholders." It said on Tuesday that the review “concluded that shareholder value could be enhanced by consideration of selective disposals and the group has subsequently engaged external advisors to support that process. Further updates shall be provided in due course.”

VIEW FROM THE TOP

CEO Carl Jackson said of the company’s results: ''Performance during the first half was disappointing, however we took immediate action to address the issues the group faced. Our technology platform's capabilities allowed us to streamline and automate the business, delivering significant cost savings, albeit more slowly than envisaged, with more to come before the end of this year.

"The changes to product strategy, while still ongoing, will be completed in the second half of the current financial year and should stabilise revenues and improve gross margin.

"We believe the reconfigured business will be stronger, leaner, more efficient and well positioned, for the future, as we continue, via our 'ANZ First' strategy, to provide a compelling consumer offer while delivering unique solutions for our brand partners.”