The Kogan.com Ltd (ASX: KGN) share price has taken a tumble on Tuesday morning.
At the time of writing the ecommerce company's shares are down 4% to $4.96 following the release of its half year results.
What did Kogan report?
During the six months ended December 31, Kogan reported a 16.4% increase in gross sales to $322.9 million. Key drivers of this growth were strong Exclusive Brands sales and another increase in active customers. Kogan reported a 10.2% increase in active customers to 1,699,000.
Revenue for the period came in at $219.5 million, down 5.3% on the prior period. This was largely due to the fact that seller fees for the newly launched Kogan Marketplace are now only recognised as revenue.
Gross Profit came in 10.6% higher at $49.9 million and adjusted EBITDA rose 35.2% to $18.2 million. On the bottom line, net profit after tax grew 20.8% to $8.9 million. This allowed the Kogan board to declare a fully franked interim dividend of 7.5 cents per share, up 22.9% on FY 2019's interim dividend.
At the end of the period the company had cash of $34.1 million, an undrawn bank debt facility of $30 million and inventories of $94.7 million. The latter comprises $13.1 million of inventory in transit and $81.6 million of inventory in its warehouses. This reflects the company's investment over the course of the half in inventory in order to meet customer demand. This is particularly the case in relation to its Exclusive Brands.
What were the drivers of its growth?
Exclusive Brands was arguably the standout performer. It delivered a 17% increase in revenue during the half. This means it now represents 46% of its overall gross profit. Management put its strong performance down to its ongoing investment in inventory to broaden its range and meet consumer demand from its growing base of active customers.
Third-Party Brands acted as a drag on its performance and reported a decline in revenue. This has been impacted by the growth of Kogan Marketplace, which has increased competition on its platform.
Kogan Marketplace performed positively during the half. Particularly in the all-important December quarter, where gross sales increased by 44.6% quarter on quarter. Management notes that the platform is resonating with sellers. Sellers on its marketplace increased 55.2% quarter on quarter in the second quarter and there continues to be a long backlog of sellers ready to be onboarded.
Elsewhere, Kogan Internet customers grew 344.4% year-on-year, resulting in commission-based revenue increasing by 642% over the same time period. Kogan Mobile Australia delivered a 5.1% increase in customers, with commission-based revenue growth of 6.8% year-on-year. Kogan Insurance reported commission-based revenue growth of 44% year-on-year. And finally, the Advertising business continues to grow. Advertising has now grown to become 5.3% of total gross profit. Management believes this demonstrates the potential for it to become a significant growth area.
Outlook.
Consistent with prior years, Kogan has not provided earnings guidance for the second half. Though, it intends to provide regular business updates during the period and has provided an update on its performance in January.
During January, its unaudited management accounts show year on year gross sales growth of more than 17%.
