The Kogan.com Ltd (ASX: KGN) share price is in focus today after the e-commerce retailer announced its FY21 result.
Kogan’s FY21 result
Kogan has been telling investors about a very difficult second half of FY21 for a while, including demurrage costs. This has come through in the statutory numbers it reported.
Other e-commerce businesses have also seen volatility in recent months like Redbubble Ltd (ASX: RBL), Temple & Webster Group Ltd (ASX: TPW) and Cettire Ltd (ASX: CTT). The Kogan share price has been very volatile since COVID-19 appeared.
Gross sales increased by 52.7% to $1.18 billion, whilst revenue increased by 56.8% to $780.7 million.
Kogan.com active customers increased by 46.9% to 3.2 million. Mighty Ape finished with 764,000 active customers.
There are a few moving parts to Kogan, so let’s look at some of the different segments.
Kogan’s exclusive brands saw revenue grow by 62.5% to $378 million, with gross profit growth of 63.4%. Third party brands revenue growth was 18.9% to $271.7 million, with gross profit growth of 10.1%.
Kogan Marketplace saw gross sales rise by 91% and revenue increased by 79% to $23.4 million.
For the seven months to 30 June 2021, Mighty Ape added $80.2 million of revenue for Kogan, $19.9 million of gross profit, $6.9 million of adjusted EBITDA (EBITDA explained) and $3.7 million of adjusted net profit. For the 12 months to 31 March 2021, Mighty Ape forecast $14.3 million of EBITDA, which was achieved.
Now back to the overall business.
Overall profitability
Total gross profit increased 61% to $203.7 million. Total adjusted EBITDA increased 24% to $61.8 million. But statutory EBITDA more than halved to $22.5 million.
Adjusted net profit was up 43.2% to $42.9 million. Management believe this is a good measure of underlying profitability as it removes items like foreign exchange, share-based compensation, and ‘one-off non-recurring items’. Those items include $7.7 million of COVID-19 related logistics costs and $12.8 million of Mighty Ape acquisition costs.
Actual net profit was down 86.8% to just $3.5 million. Adjusted earnings per share (EPS) was up 27.2% to $0.41 whilst statutory EPS fell 88.3% to $0.03.
Net cash at the end of the period was $12.8 million. But Kogan decided not to pay a final dividend.
Is there a good outlook for the Kogan share price?
In FY22 it’s expecting to deliver “strong growth” in Kogan First members, ongoing growth in exclusive brands, further enhancement and development of Kogan Marketplace and the benefits of the full integration of Mighty Ape.
Kogan expects to implement logistics projects that wouldn’t require significant capital and can be supported by the current balance sheet.
July 2021 showed some positive signs. Gross sales grew 5.1% year on year, with a gross profit margin improvement on June 2021, though below July 2020. It made adjusted EBITDA of $2.1 for the month, reflecting high operating costs which are gradually reducing. The business had $215.4 million.
In the first 18 days of August 2021, it has seen growth compared to July 2021 with 24.5% growth of gross sales and 25% growth of gross profit.
Summary thoughts on the Kogan share price
In reaction to this report, the Kogan share price is down 9%. A lower price may be helpful for prospective investors.
If it Kogan can stabilise and start growing profit margins again, whilst seeing continued revenue growth, it could be a decent idea from here because of the network effects of being a scalable e-commerce business.
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