The Kogan.com Ltd (ASX: KGN) share price has gone bananas. It’s up by 16% today after releasing its FY24 first-half update.
This company sells a wide array of products on its website Kogan.com, as well as other services like mobile, internet and insurance. It also owns the online NZ business Mighty Ape.
Strong profit growth
Kogan’s unaudited management accounts showed gross sales of $445.4 million, which represented a decline of 5.6% year on year after “optimisations” of its quality of revenue and the focus on platform-based sales, which resulted in a significant reduction in inventories. Kogan is working on becoming a capital-light business, which may be a big help for the Kogan.com share price over time.
Impressively, gross profit improved 42.1% to $89.5 million thanks to a 13.2 percentage point improvement of the gross profit margin to 36% thanks to its growing proportion of platform-based and improved profitability of in-warehouse inventory sales after the prior sell-through of excess inventory.
Platform-based sales for Kogan.com (excluding Mighty Ape) grew to 62.8% of gross sales. A key contributor has been the new Kogan.com advertising platform, which achieved $1.3 million of advertising revenue in the half.
Active customers came to 2.74 million at 31 December 2023, being 2 million for Kogan.com and 718,000 for Mighty Ape. Kogan First subscribers reached 466,000 at December 2023, up from 404,000 at December 2022. Might Ape Primate subscribers rose to 24,000 at December 2023, up from 16,000 at December 2022.
Profitability
Kogan generated $19.3 million of EBITDA (EBITDA explained) in HY24, compared a loss of $23 million in the first half of FY23.
It made $11.8 million of EBIT in HY24, compared to an EBIT loss of $31.3 million in HY23. This level of improvement is great and likely a big driver of the Kogan.com share price.
Balance sheet
It ended December 2023 with $83.3 million of cash and no debt, compared to net cash (after borrowings) of $74 million at December 2022.
Kogan finished the period with inventory of $68.2 million, a reduction of 30.6% year on year thanks to the shift to a more capital-light business.
Final thoughts on the Kogan.com share price
The business aims to offer people a competitively-priced product, so it may be able to excel during a time period like this where people are looking for bargains.
If Kogan.com can keep growing its platform-based sales, then its margins and overall profit could keep rising. That would be a really good outcome and enable the share price to rise over time.
It could be underrated today if its profit increases significantly in the coming years, but there’s no guarantee of that considering how the last few years have gone.
