The Kogan.com Ltd
(ASX: KGN) share price will be on watch this morning after the eCommerce business announced its FY20 result.
Kogan.com FY20 result
The company announced that its gross sales increased by 39.3% to $768.9 million with revenue growth of 13.5% to $497.9 million. This helped gross profit grow by 39.6% to $126.5 million. The gross margin increased by 4.7% (470 basis points) to 25.4% showing the increasing profitability of the online business.
‘Exclusive brands’ saw revenue growth of 26.4%. Kogan marketplace gross sales rose by 71.2%. Kogan Mobile’s performance was similar to FY19, contributing to more than 10% of total gross profit. Kogan Internet customers grew by 90.9%. Kogan Insurance’s commission-based revenue rose 36%.
In FY20, the company launched Kogan Cars, Kogan Credit Card, Kogan Superannuation, Kogan Energy and Kogan Mobile NZ.
Its active customer base grew by 35.7% to 2,183,000 people as customers looked to buy goods online during this difficult COVID-19 year.
Adjusted EBITDA (click here to learn what EBITDA means) increased by 57.6% to $49.7 million and net profit after tax (NPAT) rose by 55.9% to $26.8 million.
It was the COVID-19-affected second half that delivered accelerated growth. FY20 second half gross sales rose 62.5%, gross profit went up 68.3% and adjusted EBITDA rose by 74.1%.
During FY20, Kogan acquired and integrated Matt Blatt, an online furniture retailer. Management boasted that the new Matt Blatt was operating within one day of signing the deal. The company is going to be looking for more acquisition opportunities.
Balance sheet and dividend
At 30 June 2020, the company had cash of $146.7 million with an undrawn bank facility of $30 million. This doesn’t include the $20 million share purchase plan which was completed in July 2020.
The financial strength allowed Kogan.com’s board to implement a large final dividend. Kogan.com’s dividend was increased by 64.6% to 13.5 cents.
Outlook
Kogan.com said that it’s going to continue to invest and improve Kogan Marketplace, grow its active customer base by investing in the platform and expanding its exclusive brands and third-party brands product divisions.
As the company has already announced, in July 2020 gross sales were up more than 110%, gross profit was up over 160% and adjusted EBITDA was more than $10 million.
It may be too simple to annualise that adjusted EBITDA and say FY21 adjusted EBITDA could be more than $120 million (up 141%). Who knows what FY21 is going to look like? Will a COVID-19 vaccine be produced? Will online sales continue to soar? What happens when government stimulus stops?
I think Kogan.com has done very well over the past six months. But I don’t know what’s going to happen next, which makes it hard to estimate what FY21 or FY22 earnings may look like.
The Kogan.com share price could be a buy for the long term – things are steadily moving online – but there are other ASX growth shares I’d rather buy first like Bubs Australia Ltd (ASX: BUB) or Pushpay Holdings Ltd (ASX: PPH).
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