Kogan Shares fell a massive 15.77% after releasing the Kogan FY21 Annual Report to the market yesterday. Shares have fallen close to 50% this year, so we take a look into their latest FY21 Earnings Report.
Kogan FY21 Annual Report Overview
The headline results from the FY21 Earnings report was that the company has achieved over A$1 billion in gross sales in the period. However, straight away it is clear that revenue is significantly less coming in at $780million.
Delving into the comparison between “gross sales” and revenue Kogan mention that Gross Sales is a key metric of the Business, given that gross transaction values of Kogan Marketplace, Kogan Mobile and other New Verticals are not reflected in Revenue. However, Kogan does not offer any further information on how this is made up.
Headline Results from the Kogan Annual Report:
- Gross Sales of $1.179 billion outperformed the prior year by 52.7%, and a CAGR of 46.2% since FY19
- Revenue, Gross Profit, Adjusted EBITDA3 and Adjusted NPAT3 outperformed the prior year by 56.8%, 61.0%, 24.5% and 43.2%, respectively, and a CAGR2 of 33.4%, 49.9%, 40.0% and 51.8% since FY19
- The Group’s FY21 NPAT4 of $3.5 million and EPS4 of $0.03 per Share w ere materially impacted by the various items detailed in Annexure 2 of this Presentation
- The Group finished the year with a net cash position (total cash less drawn debt) of $12.8 million
Revenues in FY21 increased 56.8% when compared to FY20. However, it appears that this revenue has slowed in the second half from their peak pandemic heights. This is compared to an 88.6% increase from H1-2020 to H1-21
Kogan FY21 Financial Results
Kogan delivered Gross Sales of $1.179 billion in FY21, however as mentioned above this includes transaction values from other verticals not shown in revenue. Whilst we are still getting our head around this we would love to know in the comments if anyone has figured out exactly what this means?
The group delivered a gross profit of 61% which is significantly high for the ASX. One of our favourite shares Ansarada however commands nearly a 90% gross margin for example.
The group’s Earnings Per Share has dropped in comparison to the FY2020 result, with reported EPS down from $0.29 to $0.03. However, Adjusted EPS actually grew 27.2% up to 0.41c per share.
The group provides the following explanation in regards to Reported and Adjusted EPS: Given the various adjustments (including provision for the likely payment of Mighty Ape Tranche purchase price instalments and equity-based compensation) the Company believes the percentage change from prior periods may not be a useful metric of business performance.
Kogan Shares Price
The Kogan Share Price has fallen a massive ~49% alone this year, however, long term holders have been rewarded with the shares still up +625% over the past five years.
Kogan shares have a 52-week range of $8.70 – $25.57 and are currently trading towards the bottom end of the range.
|Kogan Share Price||$11.06 per share|
|Kogan Market Cap||$1.4billion|
|Price to Earnings||333x|
Kogan Stock trades on a price to earnings of ~330 times which is significant and is also above the average of the broader ASX market. The company would need to be growing at a significant rate in order to justify such a PE ratio.
Kogan Shares Dividend History
Kogan currently pays a dividend yield of 1.7% or a fully grossed-up yield of ~2.21%. This is decent for a growth company. The company has paid a fully franked dividend each year since listing on the ASX.
The KGN ASX dividend has been typically increasing each year since its commencement in 2017. However, this year Kogan has decided to suspend their dividend!
To support the Company with its growth plans, the Board has decided to conserve cash for business investment and has paused dividends – having not
declared a FY21 final Dividend.
What Prophet Was Looking For In KGN Annual Report?
In the Should I Buy Kogan Shares, we were sitting on the sidelines waiting in anticipation. We wanted to confirm additional measures around the below.
- Reduction of inventories – Undecided
Kogan reported inventory value on their H1 FY21 balance sheet of 225million, the group continues to carry ~227million of inventory on their balance sheet. This potentially suggests that Kogan is not being able to move stock as fast as initially anticipated.
- Increasing gross profit margins – H2 Lower Than H1
The group reported revenues of $414million and GP of $112million in the H1FY21 report and has reported $780million and $203million of GP for the FY21 result. This equates to 27% and 26% respectively. This suggests slightly less GP was achieved in the 2nd half.
- Increasing usage of the Kogan Marketplace platform – Achieved
Kogan Marketplace gross sales achieved significant growth year-on-year with a 91% growth rate from FY20 – FY21. Whilst we couldn’t find any figures provided in the H1 report we are very satisfied that the Marketplace is tracking well.
- Growth rates as compared to COVID-19 peak rates. – H2 Lower Than H1
Kogan Delivered $414 million of revenue in the H1FY21, meaning that the group only delivered $366million in the second half. This seems to show that there may have been a COVID induced rush of online shopping. As COVID lockdowns are still continuing the re-opening in Australia will be interesting to see if shoppers continue online.
Kogan Earnings Report – Prophets Take
In the key metrics Prophet was tracking from our Should I Buy Kogan Shares report, the group failed to deliver 3 of the 4 KPI’s against which we were tracking the company in the KGN FY21 annual report.
We also are going to start tracking Kogan against another KPI moving forwards which is the level of debt in the business, we would like to see this reduced from the current level of debt/equity of ~45% currently.
The group have also suspended their Full-year dividend for the first time since listing on the ASX, we find this quite worrying. This may be a measure to preserve cash whilst the inventories are reduced.
For the above reasons, we will be remaining on the sidelines, very happy with Kogan taking a place in our VAS (ASX 200 ETF), however, we cannot justify the risk vs reward at this point in time.
The company is competing in a space we greatly believe will continue to grow, however, there is still the key risk of other competitors entering the space. We will continue to monitor the growth of other major players such as industry incumbent Amazon and re-evaluate the company at their next performance update.