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MySale Group plc

MySale Group plc H1 Trading Statement in line with expectations Zeus Capital Comments

MySale Group plc (LON:MYSL) the leading international online retailer today provided a trading update for the six months to 31 December 2015, Zeus Capital commented:

Following on from the positive AGM statement at the end of November, MySale has announced that H1 trading was in line with expectations as the business continues to turnaround. Revenue increased 4% to A$128.2m, while gross margin has improved by 250bps, resulting in a 16% uplift in gross profit. Momentum built throughout the half, with sales and gross profit improving in Q2 versus Q1, delivering EBITDA of A$1.5m versus a loss of A$11.4m on the prior H1 period. Margin and profitability are expected to continue to improve throughout H2, driven by continued focus on the customer value proposition that is supported by product and the proven digital marketing channels.

* Business is on target to meet full year EBITDA expectations of A$4.7m. As expected, profitability will be skewed to one third/two thirds in H1/H2, with room for continued margin improvement in H2 driven by steady improvement in the core ANZ region as well as the more mature territories in South-East Asia that have seen the most significant growth, in particular Hong Kong, Singapore and Malaysia. South-East Asia delivered 8% revenue growth in H1 as well as “significant gross margin gains”. The first signs of growth have been seen in the UK following last year’s refocusing of the business, however this remains early stage in terms of contribution.

* Cash balance at period end of A$30.0m reflects increased investment in higher margin “own buy” inventory versus consignment model. Own buy stock, where MySale Group plc buyers are able to secure significant discounts by purchasing products in advance of flash sales events, has historically represented c.10% of sales, but we expect this to have increased to c.15%. As well as boosting margins, own buy stock gives access to better stock and results in improved delivery times to customers. Adjusted for this and seasonal working capital, the underlying cash balance at A$51.1m.

* Acquisition of the Grays Online business in Australia on course to complete on 31 January 2016. This will provide the opportunity to grow the active customer base and widen the online offering. The three websites that are being acquired from Grays receive c.3.1m average monthly hits, while their database has 6.5m customers and 512k active customers, of which only 50k overlap with MySale’s existing active customer base.

* With a current market cap of £65m and with a solid cash underpinning, the business should re-rate as forecasts are achieved and the recovery continues.

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