7 Jul, 2022
Carsales to raise $1.2b for takeover of US truck, RV group
The Sydney Morning Herald

Vehicle listing business, which runs Australia’s largest online marketplace for cars, motorbikes and boats, is seeking to raise $1.2 billion from shareholders to fully acquire US listings business Trader Interactive.

Carsales, which took a 49 per cent stake in Trader Interactive last year, will acquire the remaining 51 per cent of the US company it does not already own for about $1.17 billion.

Chief executive Cameron McIntyre said he expected the takeover to generate “attractive financial returns for shareholders”.

“During the course of the last 12 months we have become even more excited about the value of the Trader Interactive business and its growth potential,” McIntyre said.

“Culturally, there is strong alignment between the carsales and Trader Interactive teams and we are looking forward to working more closely together to unlock the significant potential in the business.”

Carsales is looking to raise $1.2 billion by issuing 68 billion new shares at $17.75, a 14.5 per cent discount from Friday’s closing price of $20.76.

Trader Interactive hosts branded online marketplaces and offers digital marketing services primarily for trucks and recreational vehicles (RVs) in the US. The company had an adjusted revenue of $US125 million ($181 million) in the 2021 financial year.

Trader Interactive boss Lori Stacy said the company was “thrilled” to join the Carsales group.

“We have thoroughly enjoyed working with Cameron and the carsales team over the last twelve months and we can see how compatible we are from a culture and strategy perspective.

“Trader Interactive is a great business with a proud history and we are incredibly excited about the value that we can generate by leveraging carsales’ product and technology capability.”

Carsales’ share price has fallen from an all-time high of $26.44 in December 2021 but prices are still higher compared to their pre-pandemic price. The cost of cars on the site rose 30 to 40 per cent during lockdowns and demand for trucks, boats and caravans spiked.

The company reported profits of $131 million last financial year and expects to report profits of between $161 million-$163 million this year, up 23-25 per cent.

17 Jun, 2022
Bank developers and engineers want 10pc more pay
Robert Walters’ Andrew Hanson: “We have seen the top end move up in these areas where skills are in very short supply.”

Annual salaries demanded by IT workers specialising in software development, DevOps and user experience design in the financial services sector have risen by 10 to 17 per cent over the past six months, according to global recruiter Robert Walters.

Securing information technology staff is an international battle where job candidates typically field multiple offers amid “intense competition to secure talent with industry related experience”. Banks and start-ups are struggling with high turnover as the average tenure for in-demand tech workers falls to 1½ years, the firm said.

At the start of this calendar year, senior software developers and engineers were asking for between $140,000 and $180,000 a year. The figure as of this month is $150,000 to $200,000, Robert Walters said.

Senior DevOps engineers, who help companies increase the speed of development of applications and services, had been seeking $150,000 to $200,000 in January but are now seeking $160,000 to $220,000, 10 per cent higher at the top end.

“There is movement,” Robert Walters’ NSW managing director, Andrew Hanson, said. “We have seen the top end move up in areas where skills are in very short supply.

3 Jun, 2022
The scourge of adjusted EBITDA is coming to an end
Uber management says it wants to prioritise free cash flow over adjusted earnings measurements

When Uber chief executive Dara Khosrowshahi quoted Jerry Maguire in an all-staff email a few weeks ago, my ears pricked. “We need to show (shareholders) the money”, he wrote. “We have made a ton of progress in terms of profitability, setting a target for $5bn in adjusted EBITDA in 2024, but the goalposts have changed. Now it’s about free cash flow.”

Good. “Adjusted EBITDA” is a scourge on the accounting profession. EBITDA stands for earnings before interest, tax, depreciation and amortisation. Those expenses after the word “before” are all very real. And there are no prizes for guessing which way the adjustments go when companies calculate “adjusted” EBITDA. And the investment community was duped into using these vastly overstated estimates of profitability to value companies.

But the companies themselves use these make-believe profit numbers for internal decision making. That results in a lot of misallocated capital and overpaid staff.

No one seems to care while share prices were rocketing. In this new-age tech bubble, even adjusted EBITDA became a boomer metric. All that mattered was revenue and growth.

But the bubble has burst. Uber’s share price is now half its IPO price and 55 per cent down on where it traded a year ago. And it is one of the better performing tech companies.

Zoom is down 75 per cent from its peak. Australia’s tech darlings haven’t faired much better. Xero’s share price is down more than 40 per cent and most smaller companies have performed even worse.

Highly valuable companies will undoubtedly emerge from this tech wreck.

Many are generating billions of dollars of revenue, unlike the Pets.coms of the dotcom bubble. Many have great products and subscription-based revenue models that make their revenue relatively reliable and predictable.

But they ultimately need to generate cashflow for their shareholders. Bubbles come and go, but share prices always, eventually, depend on investors wanting to earn a real return on their investment. Show them the cash and your share price will go up.

That’s why Khosrowshahi’s email piqued my interest. He’s an industry leader and he gets it. And Uber is already making moves to deliver on what long-term investors want to see. I’m seeing more and more chief executives follow the lead. We own ASX-listed companies Whispir, Nitro and Bigtincan in our Australian Shares Fund and all three have become recently vocal about generating cashflow for shareholders.

Many CEOs, however, are still in denial. And even Khosrowshahi hasn’t yet got the full picture. Generating cashflow is one thing. How much of that money ends up in shareholders’ pockets is just as important.

Uber issued more than US$1bn ($1.39bn) worth of shares to staff last year. Khosrowshahi isn’t talking about that expense anywhere. It isn’t in adjusted EBITDA and it isn’t in free cashflow because it isn’t a cash cost. It is a very real one.

Electronic signature company DocuSign claims to be nicely profitable already. It reported “adjusted operating profit margins” of 20 per cent in 2021. Those margins translate to healthy cash generation. But it is not counting “non-cash” share compensation to staff in those numbers. It has been issuing shares worth 20 per cent of revenue to staff every year – that’s all of the reported operating profit.

Over the past three years, DocuSign’s generous grants have translated to one-third of the company being gifted to staff. It’s not cash remuneration, but giving a third of the company away is a very real expense for shareholders.

DocuSign’s response to a precipitous decline in its share price (down more than 70 per cent from its peak) has been to suggest it might need to issue more shares to staff, not less, to compensate for the lower price.

Cryptocurrency exchange Coinbase wants to compensate staff for losses on previous share issues by – of course – issuing them even more shares.

The largesse in this tech bubble has been unprecedented. Hundreds of billions of dollars of capital have been thrown at the sector with very few questions asked. Much of that money has ended up in the pockets of founders and staff.

It cannot be easy for insiders to accept that the largesse needs to end. But with interest rates rising, share prices falling and access to capital becoming far more contingent, they are going to get the message.

When Khosrowshahi starts talking about free cashflow after stock-based compensation, then reality will finally be sinking in.

17 May, 2022
Temple & Webster takes fight to Bunnings with new online DIY store
The Age
Home improvement is a “natural extension” for Temple & Webster, says CEO Mark Coulter

Online furniture retailer Temple & Webster is moving into the home improvement and DIY market with an online store aimed at challenging the dominance of Australia’s biggest hardware chain Bunnings.

The company plans to spend $10 million over this financial year and the next establishing The Build, an online store selling home improvement products such as ceiling fans, lighting fixtures, bathroom vanities and wallpaper. Further categories, such as tools and building equipment, will be added over the coming months, Temple & Webster told its shareholders on Wednesday morning.

The retailer announced the plans as it updated shareholders on its trading performance through the second half of the 2022 financial year so far, with sales up 23 per cent for January through to the end of April. The company expects its earnings margin to be around 3 per cent for the full year.

Investors weren’t impressed, sending the stock down 6.7 per cent to $5.04 in late afternoon trade.

The expansion into home improvement is a notable deviation for the online furniture retailer, which has established itself as a significant player in Australia’s home goods market during the pandemic, thanks to a boom in demand for home office equipment such as desks and office chairs.

Chief executive Mark Coulter said the move was a “natural extension” for the ASX-listed business as Australians were drawn to home improvement projects.

“Australia is a country of home renovators, we love our homes, and we love making them more beautiful,” he said. “We believe our expertise in ecommerce and the home will help make The Build become Australia’s first-stop shop when it comes to renovating and redecorating.”

The market for online improvement in Australia could be worth around $16 billion and the category was yet to make its mark online, with just 4 per cent of DIY shopping happening online compared to around 25 per cent in the UK, the company said.

Investors were sceptical, with RBC Capital Markets analyst Wei-Weng Chen saying the company’s sales were tracking well below estimates and that shareholders would look upon the launch of The Build with caution.

“While the total addressable market, margin opportunity and online-penetration story for the home improvement category looks attractive in the medium [and] longer term, we expect the market to approach the launch [...] with an element of caution, given the current macro headwinds facing the Australian property market,” the analyst said.

The company will also face a tough job when squaring off against Wesfarmers’ Bunnings juggernaut, which - despite only recently launching an online store - holds around 50 per cent market share for home improvement in Australia.

Perhaps in recognition of this, Temple & Webster said it doesn’t expect The Build to make a material contribution to its overall sales and earnings for the first four years. However, it expects the long-term-margins for the business will be better than its furniture and homewares category.

17 May, 2022
Ruslan Kogan-backed eStore Logistics readies for buyer talks
eStore Logistics founder Leigh Williams

Third party logistics provider eStore Logistics has called in advisers to hold talks with potential suitors, as part of a wider strategic review.

Street Talk understands eStore Logistics has appointed Highbury Partnership and law firm Allens to help test potential buyer appetite in the business, and see whether there’s a big offer that can be put to the company’s shareholders.

Sources said the review was prompted by a low-ball unsolicited bid to acquire the company. Fingers were pointing to Australia Post as the mystery suitor.

Instead of hitting the bid – said to have been pegged at circa $100 million – it is understood eStore Logistics opted to test interest more broadly. The review’s expected to include talks with potential private equity investors and other logistics sector companies.

eStore Logistics was founded in 2008 and is Australia’s biggest provider of specialised third party logistics, including warehousing and order fulfilment for traditional and online retailers.

The group, founded by managing director Leigh Williams, opened its eighth site late last year, which was a 19310 square metre fulfilment centre at Bankstown Airport, in western Sydney. Other sites include retail warehousing facilities in Derrimut, Melbourne, and in Erskine Park, Sydney.

Retailers serviced by eStore include online sellers and Temple & Webster (for which it opened a dedicated Melbourne fulfilment centre in May) as well as outdoor clothing company Patagonia and pharmacy chain Chemist Warehouse. founder and major shareholder Ruslan Kogan is also an eStore Logistics investor.

Williams, 39, is also the company’s biggest shareholder with a 76 per cent stake, according to filings with the corporate regulator, and is joined on the share register by Kogan Management Pty Ltd, which has another 19 per cent. Kogan Management Pty Ltd is owned by Ruslan Kogan.

17 May, 2022
Woolworths launches QR code payments after ‘big shift’ towards adoption
The Age
Woolworths has launched QR code payments across its stores nationally

Shoppers at major supermarket Woolworths can now scan a code to both check-in and check out, with the retailer being the first to roll out QR code payments across their stores nationally.

Customers will be able to link their chosen payment method to a digital wallet, through the company’s Everyday Rewards app. Scanning the QR code at checkout will then process the payment and scan the customers’ loyalty card simultaneously, with a receipt being sent to their phone afterwards.

QR code payments were touted as the next step in Australia’s payments landscape late last year, with major payments service Eftpos saying the option could become as prevalent as tap-and-go given how comfortable consumers are with using the technology in light of the pandemic.

Woolworths’ managing director of Everyday Rewards, Hannah Ross, told The Age and The Sydney Morning Herald the ubiquity of QR codes post-COVID was a significant factor in the company’s decision.

“We’ve seen a big shift in digital adoption as customers are feeling more comfortable scanning QR codes while on the move, which we weren’t really doing so much before the pandemic,” she said. “The ability to pay with a QR code now seems so much more normal than it did years ago.”

Woolworths is the first major retailer to allow customers to pay via QR, a service it is offering in its supermarkets, Metro stores and Big W locations.

The codes will be available at both self-serve and traditional checkouts, appearing on the point-of-sale terminals where shoppers usually enter their payment details.

Ross says around one million Woolworths customers already use the company’s Everyday Rewards app each week and the retailer expects those shoppers to be quick adopters of the new payment method.

“It’s really about solving that customer pain point of missing out on their rewards points when they forget to scan, and just making a more convenient, seamless experience at the checkout,” she said.

Woolworths’ recently established Wpay payments arm built the QR payments technology for the retailer and could offer the same tech to other businesses down the track, Ross said.

A number of other retailers and banks are also trialling QR payments tech, meaning Woolworths will likely be the first of many Australian merchants supporting the new offering.

“It is something we’re expecting to see a lot more of,” Ross said. Woolworths has a total of 13 million Everyday Rewards members across Australia, the country’s second-largest rewards program behind Qantas’ Frequent Flyer scheme.

A spokesperson for Coles told The Age and The Sydney Morning Herald the supermarket was also working on deploying QR code payments across its stores and online platforms.

“We plan to create an omnichannel store experience for our customers using QR code payments through flypay via the Coles App,” the spokesperson said.

3 May, 2022
Amazon reports weaker sales growth and predicts the slowdown may continue
The Age
Amazon’s growth has slowed as online sales are stalling.

In the face of the highest levels of inflation in four decades, Amazon on Thursday posted its slowest quarterly growth in years.

The company reported $US116.4 billion ($164 billion) in revenue in the first three months of the year, up 7 per cent from a year earlier. That was down from 44 per cent sales growth in the first quarter of 2021. The number of products that Amazon sold in the quarter was flat from a year ago and its costs to sell those items also increased.

Amazon lost $US3.8 billion in the quarter, its first such loss since 2015. The loss included a decline of $US7.6 billion in the value of its investment in Rivian Automotive, an electric truck maker whose shares have fallen this year. The losses also stemmed from Amazon’s consumer businesses in North America and internationally, although its cloud services division continued to grow and make money.

The results fell far short of Wall Street’s expectations, causing Amazon’s share price to fall more than 10 per cent in after-hours trading.

“Our teams are squarely focused on improving productivity and cost efficiencies throughout our fulfillment network,” Andy Jassy, the company’s CEO, said in a statement. “We know how to do this and have done it before. This may take some time, particularly as we work through ongoing inflationary and supply chain pressures.”

The company’s forecasts for the current quarter of a 3 per cent to 7 per cent increase in sales indicated its growth could continue to slow.

Amazon benefited from the coronavirus pandemic as people flocked to online shopping. But as vaccines have become widespread and as inflation in the US - its biggest market - hit 8.5 per cent in March, shoppers have become more skittish. According to US Commerce Department data released on Thursday, consumer spending on the kinds of nondurable products that people often buy on Amazon was down 2.5 per cent in the first quarter compared with the final three months of 2021.

Facing rising costs, Amazon has increased prices for customers and sellers on its marketplace. The price of its Prime membership program rose in February to $US139, from $US119, the first increase since 2018. This month, the company announced an additional “fuel and inflation” fee for sellers whose inventory it warehouses and delivers to customers.

At one point in mid-March, Amazon forced employees at several warehouses to take mandatory time off without pay because customer demand was weak.

Labour shortages have also cost Amazon billions of dollars recently as it has responded by raising wages and offering other incentives. The company barely grew its workforce during the quarter, with a total of 1.62 million employees.

The company has also faced a surge in labour activism. In April, workers at a warehouse in New York voted to be the first Amazon facility in North America to unionise.

Some investors have been optimistic that the costs will taper off. Amazon has spent heavily to expand its warehousing infrastructure, including opening delivery depots across the country that let its network of contractors quickly bring packages to people’s doorsteps.

3 May, 2022 profits sink as online shopping slows
Ruslan Kogan’s online group is grappling with slowing sales and profits.

The boom in online shopping that dominated the first two years of the pandemic is starting to unwind, as shoppers freed from lockdowns head back into bricks and mortar retail stores.

The pure-play e-commerce sharemarket darlings are having a tougher time also as supply chain disruptions and hefty shipping and freight costs eat into profits.

One of the highest-profile e-commerce companies, was severely punished again on the stockmarket on Friday as profits slipped in the three months ended March 31. is also still carrying large amounts of inventory in warehouses as a buffer against potentially long delays for some orders, which is weighing on profits. founder and chief executive Ruslan Kogan said on Friday there had been a general slowdown in e-commerce across the market in the March quarter, as he foreshadowed a crackdown on costs in the business to preserve profit margins.

“Over the coming year, the company will be recalibrating its organisational costs in line with current growth levels to support a return to the historical operating margins previously generated,” Mr Kogan said.

3 May, 2022
Pub, restaurant ordering biz me&u readies raising; Record Point hired
Stevan Promutico (middle) with Tyro CEO Robbie Cooke and Justin Hemmes, whose companies have invested in me&u.

Justin Hemmes and Neil Perry backed QR-code hospitality ordering business me&u is sounding investors for a $50 million capital raise, riding on the wave of interest in rival Mr Yum.

me&u lets restaurant and pub patrons order food and drink (and pay for them) via a QR-code placed on their tables, cutting out traditional wait staff. It makes money by taking 1.5 per cent of the order value as commission.

The business has been around since 2018 and was founded by Stevan Premutico, who also established restaurant reservations start-up Dimmi and sold it to TripAdvisor in 2015.

me&u’s mandated Record Point to help drum up investor interest, for what sources said was expected to be a $50 million capital raise.

Flyers sent to potential investors said me&u cut out wait times and drove serious labour efficiencies. It said the business usually achieved a 30 per cent spending uplift (being better at upselling than busy staff), and could feed back proprietary data-driven insights to help pubs and restaurants with their operational decisions and menu presentation.

3 May, 2022
Mr Yum bites off its first major acquisition
Mr Yum’s Kim Teo is flanked by MyGuestlist co-founders Damian Janeski (left) and Andy Marcus, after an acquisition deal was reached.

Fast growing Melbourne-based mobile restaurant ordering and payments start-up Mr Yum has used a chunk of its recently raised capital to make its first major acquisition, buying out fellow Melbourne tech firm MyGuestlist, in a deal it said would expedite its international growth ambitions.

Details of the deal are not being disclosed, but Mr Yum’s co-founder and chief executive Kim Teo said it was in the “tens of millions”, and would include MyGuestlist subsidiary Sprout and all of its 23 staff – based mainly in Melbourne and London – moving across to Mr Yum.

Mr Yum grew rapidly during the pandemic by offering restaurants, cafes and pubs a way to deal with customers during lockdowns with QR code-based menus, and has raised significant external capital, including $US65 million ($92 million) in a round led by Tiger Global, AirTree Ventures and Scott Farquhar and Kim Jackson’s Skip Capital, last November.

At the start of 2021 Mr Yum employed just 15 people, but following the close of the acquisition this will have grown to 260. Ms Teo said MyGuestlist and Sprout would add much more capability to its products, which would otherwise have taken a huge amount of time and resources to build itself.

MyGuestlist is a customer relationship management platform used by hospitality operators including Nando’s, Shake Shack, Solotel Group and Accor Hotels. Sprout meanwhile is a customer communication tool, that lets operators deal with customers via email and SMS.



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