26th Mar 2019 07:00
MySale Group plc
(the "group'')
Half Year Results
Action plan implemented to address key challenges and improve profitability
MySale Group plc (AIM: MYSL), the leading international online retailer, today announces its unaudited interim results for the six months to 31 December 2018 (H1 FY19).
Financial Overview
· First half results reflect the significant challenges faced within the core ANZ(1) market, due principally to the impact of changes to the GST legislation for low value e-commerce import transactions
· Group revenue decreased 17% to A$126 million (H1 FY18: A$152 million)
· Online revenue decreased 13% to A$120 million (H1 FY18: A$138 million)
· Gross profit decreased 35% to A$29.5 million (H1 FY18: A$45.6 million)
· Gross margin reduced to 23.4% (H1 FY18 30.1%)
· Underlying(2) EBITDA loss of A$5.0 million (H1 FY18: A$5.5 million profit)
Operational Overview
· Action plan implemented in December 2018 to address key challenges with:
o Changes to product mix and strategy including relocation of own-buy (1P) inventory to ANZ
o Cost savings anticipated of approximately $14m representing c.20% reduction in operating costs on an annualised basis
· Benefits of the action plan to be fully realised in FY20.
· The scale and disruption of the change programme is greater than initially estimated and FY19 performance now expected to be materially below previous guidance.
Carl Jackson, Chief Executive Officer of MySale Group plc, commented;
''Performance during the first half was disappointing, however we took immediate action to address the issues the group faced. Our technology platform's capabilities allowed us to streamline and automate the business, delivering significant cost savings, albeit more slowly than envisaged, with more to come before the end of this year.
"The changes to product strategy, while still ongoing, will be completed in the second half of the current financial year and should stabilise revenues and improve gross margin.
''The disruption of implementing the significant changes to our business has led to reductions in revenue and profitability for longer than expected, however we anticipate this will end in the current financial year, with positive underlying EBITDA to be restored in FY20.
"We believe the reconfigured business will be stronger, leaner, more efficient and well positioned, for the future, as we continue, via our 'ANZ First' strategy, to provide a compelling consumer offer while delivering unique solutions for our brand partners.''
(1) Australia and New Zealand
(2) Underlying EBITDA excludes the impact of items of a one-off, non-cash or non-trading nature
The information contained within this announcement is deemed to constitute inside information for the purposes of article 7 of the Market Abuse Regulation (EU) no. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
Enquiries:
MySale Group plc |
|
Carl Jackson, Chief Executive Officer | +61 (0) 414 817 843 |
Graeme Burns, Investor Relations | +44 (0) 777 585 4516 |
|
|
|
|
N+1 Singer (Nominated Adviser and Broker) | +44 (0) 20 7496 3000 |
Mark Taylor James White |
|
|
|
MHP Communications (Financial PR Adviser) | +44 (0) 20 3128 8570 |
Simon Hockridge Giles Robinson Pete Lambie |
|
|
About MySale Group
MySale is a leading international online retailer with established retail websites in Australia, New Zealand, South-East Asia and the United Kingdom. Founded in 2007, the Group provides customers with access to outstanding brands and products at discounted prices whilst simultaneously providing brand partners unique international inventory and sales solutions.
The Group provides a flexible marketplace solution in ANZ, SE Asia and the UK for domestic and international brands The Group offers a number of solutions for brands including 1P, 3P (strategic partners, managed and self-managed). The core product categories are womenswear, menswear, footwear, sports, health & beauty, homewares, technology and personalised gifts.
Customers' shopping experiences are enhanced by the Group's deployment of leading edge technology to ensure personalised and localised product offerings. The customer experience has been at the heart of the Group's technology development since the earliest days and now mobile commerce is the Group's main sales channel. Proprietary technology innovations deployed include the Ourpay 'buy-now, pay-later' solution which has proved popular with over 180,000 customers using the solution.
The Group's online sales are supported by a robust and flexible network of in-house supply chain infrastructure and technology that enables MySale to offer products from around the world for sale and delivery to customers in each territory.
As a result of these exceptional capabilities in inventory management and international sales MySale has built an enviable portfolio of over 2,500 brand partners from whom products are sourced.
The Group operates websites under a number of different brands all of which operate on a uniform technology platform and a single international logistics infrastructure.
The Group operates 24 websites in eight countries; OzSale and BuyInvite in Australia; NzSale in New Zealand; SingSale in Singapore; MySale in Malaysia, Thailand, the Philippines, the United Kingdom and Hong Kong, and Cocosa in the United Kingdom, Australia and New Zealand; whilst the Group's retail websites are Deals Direct, OO.com and Top Buy in Australia and Identity Direct in Australia and New Zealand.
Chairman's statement
During the first half of the current financial year, the group experienced challenging trading conditions in Australia, its largest market. This was due primarily to the market disruption caused by changes to GST regulation, exacerbated by the group's product mix and inventory location. This had a negative impact on revenue and to a greater extent gross profit, resulting in an EBITDA loss for the period.
Whilst disappointing, the group responded with an action plan to address these challenges, which included the following:
· The capability of the technology platform has unlocked cost savings, via significant headcount and premises cost reductions, allowing the group to operate with lower fixed costs.
· Immediate changes to the group's product mix, including relocation of inventory to ANZ and increased local sourcing, in order to improve gross profit margins. These changes are working through our buying and shipping cycles and will be complete by the end of the current financial year.
The group's overall strategic aims (which now include tactics necessary to address the changes in the Australian marketplace) remain as before and are to:
· Provide the group's large online customer base with exceptional value, brands, choice and service;
· Provide the e-commerce platform of choice to domestic and international brands in ANZ region;
· Leverage the significant strength and efficiency of our proprietary technology platform and international logistics network;
· Focus on activities and opportunities in the ANZ region, through our 'ANZ First' strategy. This aims to optimise the group's significant scale, resources and market position in this region.
The Board is confident that the action plan will be complete before the end of this financial year with the benefits to be fully realised in FY20.
_____________________________
Charles Butler
Interim Non-executive Chairman
25 March 2019
Chief Executive Officer's operational and financial review
Introduction
The group's first half results reflect the significant challenges faced within its core ANZ market, due principally to the impact of changes to the GST legislation for low value e-commerce import transactions.
An action plan was implemented in December 2018 which addressed these challenges by changing the product mix and reducing operating costs. Whilst the FY19 financial year is expected to show sharp decline in both revenue and profitability, it is anticipated that the group will emerge as a leaner, more focused business.
The group's key strengths and USP's remain intact; providing compelling consumer value whilst offering brands unique sales solutions via its proprietary technology platform.
The action plan, which has already delivered significant cost savings, will be fully implemented before the end of this financial year, with the full benefits realised in FY20 when the group's performance is expected to deliver improved profitability.
Although changes to the product mix and the business structure will lead to better long term performance the short term impact of such a substantial reorganisation programme has negatively impacted trading in the second half of the current financial year.
Operational review
| H1 FY19 |
| vs PY | H1 FY18 |
| |||
A$ 000's | Revenue | Gross profit | GP% | Revenue | Gross profit | Revenue | Gross Profit | GP% |
Group | 126.2 | 29.5 | 23.4% | -16.9% | -35% | 151.9 | 45.6 | 30.1% |
ANZ | 101.6 | 24.3 | 23.9% | -19% | -37% | 125.8 | 38.9 | 30.9% |
S-E Asia | 15.1 | 2.9 | 19.1% | -13% | -37% | 17.5 | 4.6 | 26.4% |
ROW | 9.5 | 2.3 | 24.3% | +10% | +9% | 8.6 | 2.1 | 24.5% |
|
|
|
|
|
|
|
|
|
GST impact and response
The group's core operations in ANZ suffered considerable disruption in the first half of the financial year, with declines in revenue, gross profit and gross margin.
On 1 July 2018, changes to Australian GST legislation were introduced, in respect of the reporting of e-commerce import transactions of less than A$1,000. The group made allowance for some disruption and had plans in place to accommodate this change through a combination of input cost savings, supply chain changes and selective price increases. In Q1 the business traded in line with expectations, however in Q2, the group's peak trading period, the ongoing disruption caused by these legislative changes was more acute than anticipated and there was a negative impact on the group's revenue and particularly gross profit, as the additional costs were absorbed.
Revenue was also adversely affected by selective price increases, which have now been reversed, reducing transaction volumes as price competition and comparison increased. This, together with the product mix, resulted in higher levels of discounting and postage promotions being deployed in order to mitigate lower demand. Further headwinds were encountered with the product mix due, in part, to an insufficient proportion of the group's 1P (own-buy) inventory being located in its local Australian distribution centre.
In addition to these factors gross profit was affected by the product mix being overweight in categories with lower gross margins and underweight in 1P (own-buy) inventory which delivers higher margins. This imbalance was magnified by the peak trading volumes of November and higher levels of discounting.
The group's plans now assume that the gross profit percentage earned on certain product categories will be permanently lower.
In response to this market disruption, an action plan was instigated in December 2018 to restore revenue, gross profit and underlying profitability by reducing operating costs and implementing significant changes to the group's product mix and strategy.
The group was able to quickly address the fixed cost base by accelerating the existing cost reduction programme. Annualised savings in excess of A$14 million, representing circa 20% of operating costs, are anticipated to be realised, with the majority achieved before the end of the current financial year.
Utilising the strength of the group's technology platform and its ability to increase automation is facilitating reductions in headcount, while off-shoring certain roles in turn reduces property costs. Centralisation of resources in Australia is also allowing a reduction in headcount whilst improving operational effectiveness in the long-term.
The product mix and strategy were changed to restore revenue and gross profit performance, recognising that to remain competitive in the ANZ markets prices should remain low and additional costs would need to be absorbed and offset elsewhere. As such, the group has been;
· Increasing the focus on brands for its marketplace platform towards core fashion product categories, particularly women's and kids', and health & beauty, which have good repeat buyer metrics
· Increasing the mix of 1P (own-buy) product to support margins and availability and locating all the 1P (own-buy) inventory in local facilities, thus optimising the pools and locations of own buy and 3P stock
· Sourcing more inventory, particularly lower-price product, from the domestic market
· Reducing freight costs by centralising inventory
The first half headline figures are also impacted by the planned reduction in the group's offline activities in retail and wholesale. The latter had been used as a tool to build partnerships, which are now well established, reducing the requirement for this working capital-intensive activity without any detrimental effect on the development of the online business. Offline activity reduced by around 50% in the first half and it is anticipated that this activity will reduce further in the second half of the current financial year and in FY20.
ANZ First Strategy
As previously announced, since the beginning of the current financial year, the group has focused on its activities and opportunities in the ANZ region, through its 'ANZ First' strategy. This strategy aims to optimise the group's significant scale, resources and market position in this region.
The group commenced a review of its operations in the United Kingdom and South East Asia (which together represented circa 15% of group revenue in FY18) in order to assess how best to deliver maximum long-term value to shareholders. The review concluded that shareholder value could be enhanced by consideration of selective disposals and the group has subsequently engaged external advisors to support that process. Further updates shall be provided in due course.
United Kingdom (ROW)
This territory trades predominately under the Cocosa brand, which is focussed on providing customers with compelling value in premium branded products. The United Kingdom had a good first half, as revenue increased by more than 10% to A$9.5 million (H1 FY18: A$8.6 million) and gross profit increased by 9% to A$2.3 million (H1 FY18: A$2.1 million).
South East Asia
During the period, the group reported reduced revenue in South-East Asia as marketing spend was re-directed to the core ANZ market. This territory trades under separate brands for each country and in aggregate had revenue of A$15.1 million (H1 FY18: A$17.5 million) and gross profit of A$2.9 million (H1 FY18: A$4.6 million).
Customer Engagement
Whilst volumes of customers and revenue were lower in the period due to the GST led factors outlined above, the core customer base remains loyal and engaged.
Underlying customer metrics remained stable; repeat customers made up between 75-80% of transactions, whilst average order value, frequency and items per basket increased modestly during the period. Mobile remained the predominant channel for online engagement, representing 64% of orders.
Technology
Despite a challenging trading environment, the group made a number of very positive steps in the development of its proprietary technology platform in the period.
The benefits of the investment programme over FY17 and FY18, which created the group's existing marketplace platform, are being realised. The advanced capabilities of the platform were used to successfully create revenue opportunities and operational efficiencies. This allowed swift action to accelerate the cost savings programme when challenges arose during the first half of the financial year.
The group's marketplace platform has recently partnered with leading global marketplace management providers, Channel Advisor and Fusion Factory. The technical integrations are complete and it is anticipated that joining the select group of ANZ partners will significantly strengthen the development of our marketplace customer offering with new and additional brands.
Revenue opportunities are being created with functionality such as the Select programme (membership provides a number of exclusive benefits and access to discounted delivery packages), which has shown to strengthen customer engagement and increase frequency. Accelerated operational efficiencies have been unlocked in areas such as buying and merchandising where significant automation of processes has reduced the headcount in key departments and supported centralisation of functions.
Having achieved the platform's key development objectives in prior years capital investment levels are anticipated to reduce to around half the prior year with further reductions envisaged in future periods.
As previously advised the platform development included the creation of Ourpay, a buy now, pay later solution, and this solution has been developed further during the period. Ourpay has continued to prove very effective and attractive to customers and has now been used by more than 180,000 buyers and represents in excess of 20% of transaction volumes.
The group embarked on its first trial with a third-party retailer which is proving successful and both parties have agreed to continue the trial. This project has been useful in refining the Ourpay product to enhance features and performance, both internally in MySale and for future deployment with additional third parties.
Marketing
There has been an increase in the relative cost of marketing in the first half due to lower revenue. In the medium term marketing investment circa 7-8% per annum are anticipated to continue. The marketing investment is almost entirely digital and revised marketing plans put in place are having beneficial effect in the second half and improved number of first time buyers have been recorded.
Board changes
The group continues its search for a non-executive chairman, but in the meantime Charles Butler will remain as Interim non-executive chairman. The group will provide further updates on progress in due course.
Financial review
Revenue and Gross Profit
For the six months ended 31 December 2018, group revenue decreased by 17% to A$126.2 million (H1 FY18: A$151.9 million) and gross profit decreased by 35% to A$29.5 million (H1 FY18: A$45.6 million). This reduced performance came as a result primarily of the market factors described above.
Operating Expenses
Remedial action was taken to reduce costs in light of the reduced revenue. As a result, underlying operating expenses were lower by 14% at A$34.5 million (H1 FY18: A$40.2 million) in the six months. During the period, the group accelerated pre-existing cost reduction programmes including reduced staff numbers in a number of operational departments, facilitated by the increased automation possible following deployment of a new technology platform in the prior year.
Profit/Loss before Tax
The underlying loss before tax for the six months is A$8.7 million (H1 FY18: A$2.3 million profit) and the reported loss before tax for the period is A$10.2 million (H1 FY18: A$0.1 million loss). This reported loss is after the inclusion of a number of one-off and non-cash costs which are shown in more detail below and in note 4 to the financial statements in order to provide greater insight as to the underlying profitability of the group.
Profit/Loss after Tax and earnings per share
The underlying loss after tax for the six months is A$5.1 million (H1 FY18: A$3.0 million profit) and the reported loss after tax for the period is $A6.7 million (H1 FY18: A$0.6 million profit). As above this reported loss is after the inclusion of a number of one-off and non-cash items which are shown in more detail below and in note 4 to the financial statements in order to provide greater insight as to the underlying profitability of the group.
Note 16 to the financial statements shows the detailed calculations of basic earnings per share for the financial year which were a loss of 3.3 cents per share (H1 FY18: 2.0 cents earnings) on an underlying basis and was 4.3 cents loss (H1 FY18: 0.4 cents earnings) on a reported basis.
Taxation
The group has recorded a tax benefit of A$3.6 million for the six months (H1 FY18: A$0.7 million) which diverges from the group's long-term guidance of an effective tax rate of approximately 30%. This divergence arises due to various tax adjustments and timing differences. Full details are provided in note 5 to the financial statements. The group has total tax losses of A$46.7 million (H1 FY18: A$32.8 million) with the majority located in Australia. The entire tax loss has been recognised with the provision of a deferred tax asset of A$15.9 million (H1 FY18: A$11.1 million).
Balance Sheet, Cash and Working Capital
The group's closing cash balance was A$16.6 million (H1 FY18: A$13.7 million) and the net cash balance was A$2.7 million (H1 FY18: A$8.4 million). While the closing net cash balance at December 2018 was slightly ahead of expectations, following better working capital inflows, the group anticipates there will be a corresponding seasonal working capital outflow in the second half of the financial year.
In the previous two full financial years the trade receivables balance has built up as the group's offline activities, particularly wholesale syndication, increased. However, now that key objectives, of building partner relationships and proving the marketplace capability, have been achieved, the forward strategy is to reduce that offline wholesale activity which shall deliver a steady reduction in trade receivables and in turn steady increase in working capital inflows.
Capital expenditure decreased significantly, as planned, to A$2.9 million (H1 FY18 A$4.2 million) as the group required less investment in the development of its proprietary technology platform following launch of a new platform in the prior year. It is anticipated capital expenditure shall continue to reduce in future years.
Underlying Basis
As noted above the group manages its operations by looking at the underlying EBITDA which excludes the impact of a number of one-off and non-cash items of a non-trading nature as this, in the Board's opinion, provides a more representative measure of the group's performance. A reconciliation between reported profit before tax and underlying EBITDA is included at note 4 to the financial statements and outlined below.
A$ million | H1 FY19 | H1 FY18 |
Reported EBITDA | (6.6) | 3.1 |
Share based payments | 0.5 | 0.5 |
One-off costs & discontinued activities | 0.9 | 1.0 |
Unrealised foreign exchange loss | 0.2 | 0.9 |
| 1.6 | 2.4 |
Underlying EBITDA | (5.0) | 5.5 |
Depreciation & Amortisation | 3.5 | 3.1 |
Net interest expense | 0.2 | 0.1 |
Underlying profit/(loss) before tax | (8.7) | 2.3 |
Included within one-off items are items of a non-trading, non-recurring nature including reorganisation costs, termination charges and other costs associated with the action plan described above.
Key Performance Indicators
The group manages its operations through the use of a number of key performance indicators (KPI's) such as revenue, revenue growth, gross margin percentage, average order value (AOV), frequency of customer purchase, items in customer basket and underlying EBITDA.
Current Trading and Outlook
Whilst the December 2018 action plan is being implemented as previously stated progress has been slower than originally anticipated and the disruption of such a significant reorganisation has impacted the operational effectiveness of the business in the short term.
The cost reduction programme is already achieving significant savings however the final benefits are not expected to be secured until the end of FY19.
The product mix and strategy changes outlined have been implemented with buying resources now consolidated in Australia. The group's 1P (own-buy) inventory is in the process of being relocated to the core ANZ region, but recent shipping delays mean that during the second half the group has had to operate with reduced availability in this key inventory category.
To protect margin the volume of low price products sourced internationally has been reduced. However the replacement, locally-sourced products, which support higher margins have not yet come online in sufficient volumes to fully replace the international products. This reduction in low priced product within the customer offer has had a temporary impact on volumes of repeat buyers, which has acted as drag on performance.
Additionally, the group's expectations for its off-price wholesale activity have also now changed. In the last few weeks this market has seen unprecedented volumes of product become available due to generally challenging global retail markets. This significant oversupply and associated price volatility make the potential wholesale trade less stable and of higher risk. As a result the group has taken the extremely conservative step of assuming it will conclude no wholesale trade in quarter four, a historically significant period of activity.
The group anticipates that the combination of the factors above will result in full year performance being materially below management's previous expectations.
The action plan will be fully implemented before the end of this year with its benefits fully realised in FY20 when the group is expected to return to profitability. The Board is confident that the group's plans will create a leaner, more focused, business.
_____________________________
Carl Jackson
Chief Executive Officer
25 March 2019
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||
|
The above statements of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The interim financial statements of MySale Group Plc (company number 115584 (Jersey)) were approved by the Board of Directors and authorised for issue on 25 March 2019. They were signed on its behalf by:
__________________________ __________________________ Carl William Jackson Ian James Jackson Director Director
|
The above balance sheets should be read in conjunction with the accompanying notes
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
The above statements of changes in equity should be read in conjunction with the accompanying notes
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
The above statements of cash flows should be read in conjunction with the accompanying notes
|
Note 1. General information
MySale Group Plc is a group consisting of MySale Group Plc (the 'Company' or 'parent entity') and its subsidiaries (the 'Group'). The financial statements of the Group, in line with the location of the majority of the Group's operations and customers, are presented in Australian dollars and generally rounded to the nearest thousand dollars.
The principal business of the Group is the operation of online shopping outlets for consumer goods like ladies, men and children's fashion clothing, accessories, beauty and homeware items.
MySale Group Plc is a public company, limited by shares, listed on the AIM (Alternative Investment Market), a sub-market of the London Stock Exchange. The Company is incorporated and registered under the Companies (Jersey) Law 1991. The Company is domiciled in Australia.
The registered office of the Company is Ogier House, The Esplanade, 44 Esplanade Street. Helier, JE4 9WG, Jersey and principal place of business is at 3/120 Old Pittwater Road, Brookvale, NSW 2100, Australia.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 25 March 2019. The directors have the power to amend and reissue the financial statements.
|
Note 2. Significant accounting policies
These financial statements for the interim half-year reporting period ended 31 December 2018 have been prepared in accordance with International Accounting Standards IAS 34 'Interim Financial Reporting'.
| ||||||||||||
These interim financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with the annual report for the year ended 30 June 2018 and any public announcements made by the Company during the interim reporting period.
| ||||||||||||
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the periods presented, except for the policies stated below.
New or amended Accounting Standards and Interpretations adopted The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the International Accounting Standards Board that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The following Accounting Standards and Interpretations are most relevant to the Group:
| ||||||||||||
IFRS 9 Financial Instruments The Group has adopted IFRS 9 from 1 July 2018. The standard introduced new classification and measurement models for financial assets. A financial asset shall be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows which arise on specified dates and that are solely principal and interest. A debt investment shall be measured at fair value through other comprehensive income if it is held within a business model whose objective is to both hold assets in order to collect contractual cash flows which arise on specified dates that are solely principal and interest as well as selling the asset on the basis of its fair value. All other financial assets are classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading or contingent consideration recognised in a business combination) in other comprehensive income ('OCI'). Despite these requirements, a financial asset may be irrevocably designated as measured at fair value through profit or loss to reduce the effect of, or eliminate, an accounting mismatch. For financial liabilities designated at fair value through profit or loss, the standard requires the portion of the change in fair value that relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk management activities of the entity. New impairment requirements use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment is measured using a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. For receivables, a simplified approach to measuring expected credit losses using a lifetime expected loss allowance is available.
| ||||||||||||
IFRS 15 Revenue from Contracts with Customers The Group has adopted IFRS 15 from 1 July 2018. The standard provides a single comprehensive model for revenue recognition. The core principle of the standard is that an entity shall recognise revenue to depict the transfer of promised goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard introduced a new contract-based revenue recognition model with a measurement approach that is based on an allocation of the transaction price. This is described further in the accounting policies below. Credit risk is presented separately as an expense rather than adjusted against revenue. Contracts with customers are presented in an entity's balance sheet as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity's performance and the customer's payment. Customer acquisition costs and costs to fulfil a contract can, subject to certain criteria, be capitalised as an asset and amortised over the contract period.
| ||||||||||||
Impact of adoption IFRS 9 and IFRS 15 were adopted using the transitional rules or modified retrospective approach and as such comparatives have not been restated. The impact of adoption on opening accumulated losses as at 1 July 2018 was A$nil.
There has been no material impact on adoption of IFRS 9 and IFRS 15, other than the changes to disclosure as required by these standards, and consequential amendments to other standards, which includes:
| ||||||||||||
| ||||||||||||
Revenue recognition The Group recognises revenue as follows:
Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Group: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.
| ||||||||||||
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are initially recognised as deferred revenue in the form of a separate refund liability.
| ||||||||||||
Sale of goods The Group operates an online retail business selling men's, ladies and children's apparel, accessories, beauty and homeware items. Revenue from sale of goods is recognised at the point in time when the customer obtains control of the goods, which is generally at the time of delivery. Sales represent product shipped less actual and estimated future returns, and slotting fees, rebates and other trade discounts accounted for as reductions of revenue. Online sales are usually by credit card or online payment.
It is the Group's policy to sell its products to the customer with a right of return within 14 days. Accumulated experience is used to estimate and provide for such returns at the time of sale.
| ||||||||||||
Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
| ||||||||||||
Other revenue Other revenue is recognised when it is received or when the right to receive payment is established.
| ||||||||||||
Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days of recognition.
| ||||||||||||
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
| ||||||||||||
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
| ||||||||||||
Right of return assets Right of return assets represents the right to recover inventory sold to customers and is based on an estimate of customers who may exercise their right to return the goods and claim a refund. Such rights are measured at the value at which the inventory was previously carried prior to sale, less expected recovery costs and any impairment.
| ||||||||||||
Contract liabilities Contract liabilities represent the Group's obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the Group recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the Group has transferred the goods or services to the customer.
| ||||||||||||
Refund liabilities Refund liabilities are recognised where the Group receives consideration from a customer and expects to refund some, or all, of that consideration to the customer. A refund liability is measured at the amount of consideration received or receivable for which the Group does not expect to be entitled and is updated at the end of each reporting period for changes in circumstances. Historical data is used across product lines to estimate such returns at the time of sale based on an expected value methodology.
|
Note 3. Operating segments
Identification of reportable operating segments The Group's operating segments are determined based on the internal reports that are reviewed and used by the Board of Directors (being the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The CODM reviews revenue and gross profit by reportable segments, being geographical regions. The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in these financial statements.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Group operates separate websites in each country that it sells goods in. Revenue from external customers is attributed to each country based on the activity on that country's website. Similar types of goods are sold in all segments. The Group's operations are unaffected by seasonality.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intersegment transactions Intersegment transactions were made at market rates and are eliminated on consolidation.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating segment information
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Note 4. EBITDA reconciliation (earnings before interest, taxation, depreciation and amortisation)
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 5. Income tax benefit
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The tax rates of the main jurisdictions are Australia 30% (2017: 30%), Singapore 17% (2017: 17%), New Zealand 28% (2017: 28%), United Kingdom 19% (2017: 19%) and United States 42.8% (2017: 42.8%).
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 6. Current assets - cash and cash equivalents
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 7. Non-current assets - property, plant and equipment
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 8. Non-current assets - intangibles
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 9. Non-current assets - deferred tax
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred income tax assets are recognised for tax losses, non-deductible accruals and provisions and capital allowances carried forward to the extent that realisation of the related tax benefits through future taxable profits is probable.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profit or loss.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 10. Current liabilities - contract liabilities - deferred revenue
| |||||||||||||||||||||||||||||||||||
Note 11. Current liabilities - borrowings
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets pledged as security The Group has a A$28,105,000 (30 June 2018: A$28,105,000 and 31 December 2017: A$23,483,000) borrowing facility with Hong Kong and Shanghai Banking Corporation Plc ('HSBC') which is secured by a Corporate Guarantee and Indemnity. There are no financial covenants in relation to this total borrowing facility. The average interest rate incurred on these bank borrowings was 2.96% (30 June 2018: 2.75% and at 31 December 2017: 2.4%). The borrowings are expected to be repaid within 90 days.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The lease liabilities are effectively secured as the rights to the leased assets, recognised in the balance sheet, revert to the lessor in the event of default.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 12. Equity - dividends
There were no dividends paid, recommended or declared during the current or previous financial period.
|
Note 13. Fair value measurement
Fair value hierarchy The following tables detail the Group's assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs)
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
There were no transfers between levels during the financial period.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. The carrying amounts of trade receivables and trade payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest rate that is available for similar financial instruments. Also, there is no material difference between the fair value of cash and cash equivalents and the carrying amounts.
|
Note 14. Contingent liabilities
The Group issued bank guarantees through its banker, Hong Kong and Shanghai Banking Corporation, in respect of lease obligations amounting to A$1,508,000 (30 June 2018: A$1,537,000 and 31 December 2017: A$979,000).
The Group has issued bank a bank guarantee through its banker ANZ Bank New Zealand Limited, in respect of customs and duties obligations amounting to NZ$150,000 (30 June 2018: NZ$150,000 and 31 December 2017: NZ$150,000).
|
Note 15. Related party transactions
Parent entity MySale Group Plc is the parent company of the Group.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Transactions with related parties The following transactions occurred with related parties:
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivable from and payable to related parties The following balances are outstanding at the reporting date in relation to transactions with related parties:
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 16. Earnings per share
| |||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||
Comment at 31 December 2018 8,047,850 employee long-term incentives have been excluded from the diluted earnings calculation as they are anti-dilutive for the period.
Comment at 30 June 2018 8,047,850 employee long-term incentives have been excluded from the diluted earnings calculation as they are anti-dilutive for the year.
Comment at 31 December 2017 10,855,345 employee long-term incentives have been excluded from the diluted earnings calculation as they are anti-dilutive for the period.
|
Note 17. Events after the reporting period
No matter or circumstance has arisen since 31 December 2018 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
|
Related Shares:
MYSL.L