Kogan (ASX:KGN) share price lower on AGM and trading update

The Kogan.com Ltd (ASX:KGN) share price is dropping lower on Friday after the release of its AGM presentation which included a trading update…

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Kogan share price

Source: Kogan presentation

The Kogan.com Ltd (ASX: KGN) share price is dropping lower on the day of its annual general meeting (AGM).

At the time of writing, the ecommerce company’s shares are down 1% to $18.12.

What happened at the Kogan AGM?

Arguably the hottest topic at the AGM was not its trading update but rather its controversial decision to award its CEO, Ruslan Kogan, and CFO, David Shafer, some very generous retention options.

For more background on this topic, I would suggest you read this article by my colleague Eddy Sunarto.

At the AGM, Kogan’s chairman Greg Ridder, remained defiant on the options and believes the two executives deserve them.

Speaking about recent meetings with shareholders, Mr Ridder said: “What became clear from the meetings I had was that we should have held an EGM in May when we announced the grant of Retention Options to Ruslan and David.”

“At the time, Shareholders could only have dreamed that the value created for Shareholders would be where it is today. With the benefit of hindsight, I think that, had the EGM been held shortly after announcement of the Retention Options, proxy advisers and media would not have been distracted by the recent gains in share price when considering the value of the executive awards at the time they were announced.”

Despite proxy advisors suggesting shareholders vote against the options, Mr Ridder appears to expect them to gain enough votes to be actioned.

However, the company’s remuneration report looks set to get a first strike, which the chairman admitted was “perplexing” given its strong performance and low executive pay.

The chairman commented: “…it was perplexing to see proxy advisers recommend a vote AGAINST the adoption of the Remuneration Report, and for many super funds to follow the proxy advisers’ recommendations. While the Remuneration Report is retrospective, it appears many of the votes received are prospective and we will receive a “strike”, albeit that – based on Proxies – it does seem that a majority of Shareholders are in favour of adopting the report.”

Trading update.

Today’s presentation reveals that the company’s strong form continued through to the end of October.

According to the release, gross sales for the first four months of FY 2021 are up 99.8% on the prior corresponding period. Gross profit is up 131.7% and earnings before interest, tax, depreciation and amortisation (EBITDA) has jumped 268.8%.

At the end of October the company had 2,682,000 active customers. This is up 9% since the end of August.

Management commented: “In the first four months of the financial year, we have seen strong performance from our Product Divisions and Kogan Marketplace. We are now entering the peak Christmas trading period. November and December are typically the most important months of the year for the Business, with strong trading performance in these months throughout prior years.”

“There has been an increase in variable and marketing costs as a result of the significant growth of the Business. While delivering a significant YoY increase in Adjusted EBITDA, we have also made a series of the largest ever monthly marketing investments into building the customer base and brand, which we expect will have long term benefits for the Company,” it concluded.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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