Uber Eats, Deliveroo and Menulog drivers are keeping the nation supplied with burritos, pizzas and bubble tea.
They also delivered a major surprise in the nation's jobs market and may be hiding real issues facing the million or so people looking for work.
There was collective shock in the ministerial wing of the Federal Parliament, Treasury and financial trading rooms around the country on Thursday when the Australian Bureau of Statistics reported the jobless rate had fallen to 6.8 per cent in August.
Analysts had been tipping unemployment to rise to around 7.7 per cent from its 7.5 per cent level in July.
But after the sticker shock of the headline figure passed, it became clear the nation's businesses had not suddenly got their mojo back and started re-hiring teams of workers.
In original terms, total employment grew by 44,500 between July and August. The ABS found there had been a 50,200 jump in the number of people working as sole-traders without any staff on their books.
Ahead of the coronavirus outbreak there were about 1 million people in this role. Within three months of the pandemic, their numbers had fallen by more than 8 per cent.
In August, a large chunk of these people came back to work. Not that they did a lot of work.
The bureau reported that while the total number of people in employment lifted by almost a full percentage point, hours worked increased by just 0.1 per cent.
So even though there was a big lift in jobs, those with work were left twiddling their thumbs outside the local burger place waiting for an order.
Deutsche Bank economist Phil Odonaghoe said it appeared online drivers and riders - who almost all are sole traders without any workers - had driven the result.
"[There's] a surge in employment, but not via employees in a typical business structure, and it is fair to infer that most of those new workers hardly worked for many hours," he said.
As much as we all appreciate the chance of having a jalapeno-filled burrito bowl delivered to our door, it's unlikely to spice up the economy enough to be the basis of our recession recovery.
Worryingly, the total number of sole-traders is almost back to where it was pre-coronavirus. But among traditional employees - who number more than 10 million Australians - there is still a substantial shortfall.
That shortfall did not close in August.
Perhaps a wave of entrepreneurial spirit will sweep across the country in coming months, and more people will put a virtual shingle on a web page and open a new business.
Or more likely, the hard grind out of the worst recession since the 1930s still has a long way to go.
14 Sep, 2020
MyDeal seeks $258.8m value for float; Morgans, RBC launch IPO
E-commerce group MyDeal.com.au is in front of investors with an initial public offering valuing the business 2.1-times its forecast gross transaction value.
Stockbrokers Morgans and RBC Capital Markets blasted terms to fund managers on Thursday morning.
The terms said MyDeal, an online retail marketplace selling household goods, would seek to raise $40 million at $1 a share for a $258.8 million indicative market capitalisation and $221 million enterprise value.
The price implied 2.1-times forecast 2021 gross transaction value, the term sheet said.
The first $35 million raised at the IPO would be injected into the business, while some existing shareholders would take the other $5 million.
Potential investors were told MyDeal acted as an intermediary between consumer and sellers, with 800 active sellers and 5 million product SKUs on its platform. It said more than 1 million products were sold via MyDeal in the 2020 financial year.
Funds were told the IPO roadshow would begin next week and a bookbuild was slated for September 21.
If successful, the company's shares would trade on the ASX in the second half of October.
MyDeal's run at the ASX-boards has been coming since it booked its first half year profit, more than one year ago.
10 Sep, 2020
Zoom CEO's wealth jumps by $9b after results stun Wall Street
Zoom Video Communications CEO Eric Yuan has extended the scorching pace of his wealth accumulation after the company's results came in well ahead of expectations.
Yuan's net worth soared by $US6.64 billion ($9 billion) as shares of his virtual-meeting company surged 41 per cent to $US457.69 in New York following its bumper results. The boost lifted the chief executive officer's fortune to around $US23 billion, according to the Bloomberg Billionaires Index.
The founder of the California-based company, whose net worth is mostly made up of his more than 50 million Zoom shares, is one of the biggest gainers this year. Yuan, 50, has seen his fortune grow by $US19.5 billion in 2020.
Zoom has been one of the clearest beneficiaries of the coronavirus pandemic, with businesses and educational institutions turning to the service to work and teach remotely.
The software maker reported on Monday (US time) that sales jumped 355 per cent to $US663.5 million in the three months through July 31 from a year earlier. It was the second-largest surge among Nasdaq 100 Index members last quarter, only behind biotech firm Moderna, data compiled by Bloomberg show. Zoom said sales will be as much as $US2.39 billion in the fiscal year ending in January, meaning revenue would almost quadruple in just one year.
At the current level, Zoom's market value exceeds the combined value of two storied automakers, General Motors and Ford, and is more than double the aggregate value of the nation's four biggest airlines.
"I'm at a loss for words," said Rishi Jaluria, an analyst at DA Davidson who is bullish on the stock. "After Q1, my colleagues and I said this is one of the best quarters in software history. How do you follow this up? I think they've done it. Outside of the massive acceleration in growth, the biggest positive surprise is how much profitability is going to the bottom line."
Zoom gave a forecast suggesting the explosive growth will continue. The company said sales will be as much as $US2.39 billion in the fiscal year ending in January - meaning revenue would almost quadruple in just one year. Analysts, on average, expected sales of $US1.81 billion. Zoom previously projected fiscal-year revenue of $US1.8 billion.
Fiscal-year adjusted profit will be $US2.40 to $US2.47 a share, the company said. Analysts, on average, estimated $US1.25.
It's been a year filled with eye-popping rallies for the richest names in the tech world - Amazon.com Inc.'s Jeff Bezos saw his net worth grow by $US13 billion in one day in July, and Tesla's Elon Musk added $US8 billion in 24 hours last month. Both men have reached record levels of wealth, with Bezos crossing $US200 billion and Musk surpassing $US100 billion last week.
The US Federal Aviation Administration said on Monday it had granted Amazon approval to deliver packages by drones.
Amazon says the approval is an “important step” but it is still testing and flying the drones.
It hasn’t yet said when it expected drones to make deliveries to shoppers.
The online shopping giant has been working on drone delivery for years but it has been slowed by regulatory hurdles.
CEO and founder Jeff Bezos said in a December 2013 TV interview drones would be flying to customer’s homes within five years.
Last year, Amazon unveiled self-piloting drones that are fully electric, can carry 2.25 kiograms of goods and are designed to deliver items in 30 minutes by dropping them in a backyard.
At the time, an Amazon executive said deliveries to shoppers would be happening “within months”.
Seattle-based Amazon is the third drone delivery service to win flight approval, the FAA said.
Delivery company UPS and a company owned by search giant Google won approval last year.
2 Sep, 2020
Zoom’s sales surge beats even most optimistic forecasts
San Francisco | Soaring demand for the Zoom video conferencing service exceeded even the most optimistic Wall Street forecasts in the latest three months, lifting quarterly revenue higher than the company reported for the whole of 2019.
The boom fuelled a 25 per cent leap in Zoom’s shares in after-market trading on Monday and left it with a stock market value of $US114 billion ($155 billion), more than four times the value of Telstra.
This virus crisis has given Zoom an instant base of large business and government customers that would normally have taken years to build.
The company, whose name has become almost synonymous with working and learning from home during the pandemic, reported revenue of $US663.5 million for the quarter to the end of July – a 355 per cent increase from the year before – and an acceleration from the 270 per cent growth in the months after the pandemic hit.
Most analysts had expected quarterly revenue of about $US500 million. Revenue for the year ended in January was $US623 million.
Zoom’s ability to reach a massive new global audience has made it one of the biggest corporate winners from the crisis. Still, the scale of the demand has also brought problems, leading to a temporary service failure last week just as schools around the US asked students to log in for classes.
Speaking on a call with analysts late on Monday (Tuesday AEST), Eric Yuan, Zoom’s founder and chief executive, admitted the company had faced plenty of challenges from the rapid growth. But he said it had completed the emergency fixes it promised after a spate of security and privacy lapses earlier this year.
Instant customer base
This crisis has given Zoom an instant base of large business and government customers that would normally have taken years to build. That has raised hopes on Wall Street that it can cross-sell other services to become a full-scale communications company – starting with an internet-based voice service to replace the PBX systems from traditional phone companies that are still widely used today.
Mr Yuan hinted at the next phase of Zoom’s growth, commenting that many customers were “moving beyond immediate business needs” in the crisis to make longer-term plans for operating with more remote workers. He also said the coronavirus crisis was prompting customers to look at updating all their communications, including voice systems.
One of Zoom’s biggest priorities now is to hire salespeople and engineers fast enough to take advantage of the demand, said Kelly Steckelberg, chief financial officer. It had opened two new research and development centres in the US and was “rebalancing” its engineering workforce in a way that was making it less dependent on its outpost in China, she said.
Asked if geopolitical tension had led the company to rethink its R&D presence in China, Ms Steckelberg would only say: “We don’t have any current plans to move our engineering talent out of China”.
The number of large customers with 10 or more employees jumped to 370,200 in the quarter, up from about 80,000 a year ago, and 39 per cent more than at the end of April.
However, Zoom has had even faster growth in demand from smaller customers, adding a new and unpredictable twist to its business. The share of its revenue from businesses with fewer than 10 employees jumped to 36 per cent, from 20 per cent a year ago, the company said.
Many of these pay by the month rather than by annual contracts, leading to a higher churn rate as more customers give up the service each month.
The shift also hit its gross profit margin, which fell by about 10 percentage points in the quarter, to 71 per cent. Despite that, profit jumped as Zoom was able to spread its fixed costs over a far larger revenue base.
Pro forma earnings per share – excluding stock compensation benefits and some other costs – reached US92¢, up from US8¢ a year before and more than double the US45¢ analysts had expected.
Based on formal accounting principles, net income rose to $US186 million, from $US6 million the year before.
For the current fiscal year, Zoom said it expected revenue to reach $US2.37 billion to $US2.39 billion, about 30 per cent ahead of analysts’ estimates, with pro forma earnings per share of $US2.40 to $US2.47, or 85 per cent ahead of expectations.
Macquarie Group-owned data analytics startup Nuix is beefing up its roster of talent as it plots a path to a potential IPO on the Australian Securities Exchange, which could value the company at over a billion dollars.
The Sydney headquartered startup has hired Richard Ledgett, the former deputy director at the National Security Agency, as an advisor to Nuix's subsidiary in the United States, Nuix US Government.
Nuix is used around the world to manage cyber security, risk and compliance threats and investigate fraud using its data analytics engine, which can process over 1,000 different file types to trawl through emails and attachments.
Nuix was started by Australian scientist David Sitsky in 2000 and demand for its services has grown significantly since then, driven by greater data volumes and an increased focus on governance, risk, privacy and compliance functions.
It has around 1,000 clients in 79 countries, including the Australian Defence Force, US Securities and Exchange Commission, HSBC and Amazon. Nuix's software was also used by the International Consortium of Investigative Journalists to review documents for the Panama Papers investigation.
The company recorded revenue of $175 million in the last financial year with a gross profit margin of greater than 85 per cent.
Missteps for the company have been rare but it did attract unwanted attention in 2018 when former chair and Macquarie adviser Anthony Castagna was found guilty and then acquitted of money laundering and tax evasion.
Unlike other home grown technology startups, which have often opted for venture capital funding Nuix has been largely self-funded and profitable since 2008. It has raised limited external capital other than for the acquisition of the Ringtail software business from FTI Consulting in 2018 for $US55 million ($76 million).
Macquarie owns about 65 per cent of Nuix and Armitage Associates, the Melbourne-based investment house controlled by Alan and Carol Schwartz's Trawalla Group is also a substantial shareholder.
Nuix has engaged Morgan Stanley and Macquarie Capital to prepare for an IPO, which is expected to value the company at around $1.5 billion, and has gone out to fund managers to book in non-deal roadshow meetings from Wednesday September 2.
The company will canvas local and international fund managers with a strong emphasis on overseas fund managers, given that more than half of its clients are located internationally.
Nuix has made a big push in the United States where it set up a separate subsidiary to enable it to do business with government enforcement and security agencies.
Mr Ledgett, who will advise Nuix, retired from the secretive NSA in 2017 after spending almost 20 years there, a tenure that saw him lead the investigation of Edward Snowden’s surveillance leaks.
He said he looked forward to getting Nuix's software into the hands of agencies that could "truly take advantage" of its powers.
"Nuix is ideally positioned to help government agencies with its dedication to creating superior software and mission of 'finding truth in a digital world'," Mr Ledgett said.
A spokesperson for Nuix said adding someone of Mr Ledgett's stature and experience was an "incredible step forward" for Nuix.
"The board of Nuix is considering the next phase of the company’s journey, and how to take advantage of emerging opportunities to best accelerate its growth," the spokesperson said. "This evaluation process is ongoing, and no final decisions have been made regarding an IPO."
Nuix first unveiled its plans to float on the ASX in 2016 and a successful IPO would provide a bright spot in a lean year for listings on the exchange and enable the startup to join the ranks of listed technology unicorns Afterpay, Wisetech and Xero.
28 Aug, 2020
Scale to profit: Afterpay, Zip plot global domination
Rapid offshore expansion propelled by the accelerating shift to e-commerce during the coronavirus pandemic has helped buy now, pay later leaders Afterpay and Zip double their revenue over the past financial year but kept their bottom lines in the red.
Afterpay co-founder Anthony Eisen said the move away from credit cards has increased during the crisis as customers take a more prudent approach to managing budgets.
"We need to make sure we make the most of these structural shifts," he said. “The momentum we have seen in the last few years is continuing and accelerating. It makes perfect economic sense to be investing in this scale opportunity."
Buy now, pay later is an increasingly popular instalment payment service which is mainly paid for by merchants and free to customers unless they incur late fees.
Afterpay, which is expanding from its Australian base to Canada and Europe with parts of Asia next, halved its net loss for the year to June 30 to $22.9 million. Zip, which is expanding in the US and Britain and operates in South Africa, doubled its loss to $20 million.
The share prices of both companies have traded at record highs this week, as a doubling of transactions through each company's app over the past year has fuelled colossal valuations on the ASX.
Afterpay's share price is up 15 per cent just this week and closed at $91.26 on Thursday; Zip eased 4.7 per cent to $9.20 but is up 40 per cent this week.
Supporters say these can be justified because both companies provided a template for credit risk management during the crisis, with the number of customers behind on repayments falling to record lows.
Massive government stimulus has helped, but Afterpay and Zip say short repayment terms and customer loyalty to their apps – which kick off late re-payers – are helping them collect debts.
"These are simple-to-understand products: there is no interest," said Zip co-founder Peter Gray. "And because they repay in months, not years, it is easy for users to manage finances over a short period of time and maintain payments."
With payments one of the hottest sectors on global stockmarkets – Chinese fintech giant Ant Financial, which owns Alipay, is preparing to float in Hong Kong and Shanghai – Afterpay and Zip are rare examples of Australia exporting financial services innovation to the world. Both are facing tough competition, including from CBA-backed Klarna in the US and UK.
"We need to maintain a really strong core business in Australia and New Zealand while we invest in growth globally, and capitalise on what is an immediate opportunity – one we have to run incredibly fast at, given the land grab," said Zip co-founder Larry Diamond.
Both companies say the trend playing out in Australia – bad debts falling as the platforms attract more regular users – will be a global phenomenon underpinning the economics of the model.
"With returning customer rates, you are also seeing an improvement in loss rates," Mr Eisen said.
'We have more confidence with this investment now'
Early adopters of Afterpay in Australia five years ago use it on average 25 times per year, compared to just five times a year for users that have signed up this year. Newer users present a larger credit risk, as Afterpay has less data about their behaviour. Zip said its older cohorts of users are transacting at a rate 3.5 times higher than in their first year.
"If we stand firm on keeping a focus on the underlying metrics, we will see leverage come out of our cost base over the medium term," Mr Eisen said. "We have more confidence with this [overseas] investment now, because we have seen the business deliver, and with greater scale it will lead to a very profitable outcome over the medium term."
Analysts on the Afterpay earnings call focused on both the top line – seeking detail on customer numbers to come from expansion into southern Europe and Asia – and the bottom line, including the impact of bad debts.
The company said it was too early to provide guidance on how fast user numbers would rise above the current 10 million but it is confident that losses will not rise significantly when stimulus measures are withdrawn.
Afterpay reported gross losses of $94.5 million, while Zip said its bad debt expense was $53.6 million. Both were up sharply in dollar terms on the back of higher sales, but lower as a proportion of overall sales.
Investors were impressed about bad debts remaining depressed in the midst of a pandemic crisis.
"Afterpay have maintained their top-line pricing at 3.9 per cent [of the cost of goods sold, paid by the merchant] and reduced loss rates, which makes sense as repeat customers grow," said Will Curtayne, a portfolio manager at Milford Asset Management, which has a small stake in Afterpay in its high risk funds.
"There is still a question about whether loss rates might rise, given this is not a true recession due to the level of fiscal support which some customers must be benefiting from. But if loss rates don’t materialise soon, that will give confidence to investors around the model's long-term sustainability."
Afterpay and Zip remain polarising companies and not all payments sector watchers were impressed with what they saw on Thursday.
"It is clear from these numbers that buy now, pay later companies will never make great profits: they are high volume, very low margin businesses," McLean Roche managing director Grant Halverson said.
"I think the results are very disappointing when you consider the massive once in a lifetime free kick e-commerce has given due to lockdowns in every market they operate in. Afterpay is not keeping pace with the massive online explosion: Klarna has over 100 million consumers and $US50 billion ($69 billion) in sales."
Scaling up
With Afterpay set to operate in nine global markets and maybe more, Mr Halverson also pointed to "all the issues around multiple regulation, languages, systems, currencies and scale [that] come into play".
Mr Eisen said "scale is never an easy thing to master" but said he is confident the company has hired the right people with capability to execute on the growth plan.
Bank of America Merrill Lynch analyst Sameer Chopra probed the company on its "operating leverage", questioning why EBITDA growth in Australia was not stronger given the maturity of the market.
Chief financial officer Luke Bortoli said there were extra costs in Australia supporting global expansion but the local market would provide a "blueprint of profitability over time".
Debate continues on whether the ASX has overvalued Afterpay: it has a multiple of enterprise value to forward revenue much larger than the biggest US technology stocks.
Local investors say it's hard to determine the appropriate valuation for high growth stocks and supporters are backing the ability of Mr Eisen and Afterpay's other co-founder, Nick Molnar, to execute on the global opportunity to drive more sales through the platform.
"While the stock has had a strong run in recent weeks, we see potential for the share price to react positively to the merchant additions in US and UK, as well as the expansion into Asia," said Citi analyst Siraj Ahmed.
After saying earlier this week it would expand into Spain, France and Italy, and possibly Portugal and Germany, via an acquisition, Afterpay announced on Thursday the acquisition of Singapore-based EmpatKali to explore opportunities in Asia, while it works with China's Tencent on the same.
Reflecting diversity of opinion about the valuation, Morgan Stanley put a share price target on Afterpay of $106 this week. But the analysis included a bearish scenario with a price of $26.23, and a bull case with a price of $255.80 which assumes Canada takes off rapidly, the US economy re-opens and Afterpay wins rapid uptake of in-store sales in the world's largest retailing market.
For the first time, Adore Beauty has a CEO who was not involved in starting the business 20 years ago.
Tennealle O’Shannessy has taken on the top job at the fast-growing online retailer from Seek, where she was previously managing director of the Americas.
She has replaced James Height, one of the co-founders of Adore Beauty along with Kate Morris, who served as CEO for the past 2.5 years.
Morris, the face of the business, was CEO for most of the company’s history, before handing the baton to Height and transitioning into the role of executive director in January 2018.
Both Height and Morris will now serve as executive directors, though Morris will continue to be the face of the business.
“We are thrilled to welcome Tennealle to the Adore Beauty team,” Morris said in a statement about the appointment.
In addition to O’Shannessy’s expertise in business operations, strategy, leadership and business transformation, Morris said her values-led approach was an important factor in the hiring decision.
“We felt that Tennealle clearly shared our values and would absolutely be the right person to come onboard as our new CEO. I am looking forward to working closely with her,” she said.
Morris and Height have worked with Tennealle for the past few months to ensure a smooth transition.
“Having built this business from the ground up over a 20-year period, our commitment to supporting the future success of Adore Beauty is unwavering,” Height said.
The appointment comes nearly one year after the co-founders sold a 60 per cent stake in the company to Quadrant Private Equity to accelerate Adore Beauty’s growth in the booming cosmetics sector.
Justin Ryan, managing partner at Quadrant and chairman at Adore Beauty, said O’Shannessy “adds further strength” to the leadership team and enhances its “capability to deliver the company’s future growth potential”.
For her part, O’Shannessy said the company is “well placed for is next phase of growth” and is excited to be part of the journey.
“I have admired Adore Beauty as a disruptive digital business and have been impressed by Kate and James’ focus on values, execution and continuous innovation,” she said.
“They have built an incredible business that implicitly understands their customers’ needs in a unique and personal way.”
Australia Post chief executive Christine Holgate says every day is like Christmas for parcel deliveries in our pandemic world.
"We had a massive Monday," Holgate says after recording 2.3 million deliveries on August 17, the third-biggest day ever behind last year's Cyber Monday – "an international day created for online deals" – and Easter Tuesday this year.
But this was just an ordinary pandemic Monday in a shift Holgate says has become the norm. To reward those working around the clock, Australia Post has given more than 33,000 frontline staff an average payment of $600 this week as a sort of pre-Christmas bonus.
"It's a bloody huge number, we're still delivering these volumes which we've never seen before except at Christmas," Holgate says.
"The volumes continue to be really high. The numbers I've just been given for the first week of August, we are up 157 per cent in Victoria and up 90 per cent in volume across the nation."
Holgate says there is also massive growth – an increase of 127 per cent – in parcels lodged over the counter in Victoria. These included the case of one of her executives "who used to live next door to an old man but couldn't visit him for his birthday, so sent him something by express post", she says.
"We are seeing a lot of that – people outside the state sending things into loved ones. Although clearly, by far, the largest part is [business to consumer] deliveries."
Holgate, a director of the Collingwood Football Club who has mostly been working from Australia Post's Sydney headquarters in Redfern during the pandemic, described the volumes as a "Suez Canal coming down a drainpipe" two weeks ago when the postal service was hit with Melbourne's stage four lockdown rules for business.
After The Australian Financial Review ran a series of front-page stories about the threat to supply lines, including basic medicines, home tech, school equipment, food and drinks, the federal government stepped in and the Victorian government granted concessions for the postal service's distribution centres.
It still faces some restrictions on parcel processing, including a 10 per cent reduction in staff, but it has been able to split shifts to keep working 24/7 while complying with COVID-19 safe workplace rules. Holgate says delivery delays have mostly been limited to one or two days.
"When [The Financial Review] put that [Suez Canal] quote in the paper, a lot of politicians saw it," Holgate says. "We are working with 10 per cent less people and 33 per cent less people at peak times, yet you've got to deliver almost double the amount.
What we are seeing with the likes of JB Hi-Fi is e-commerce has become a really serious part of their retail proposition.
— Christine Holgate, Australia Post CEO
"It's extremely challenging for our people and it is all hands on deck. If we had to operate under the first [lockdown] suggestion, we would have been gridlocked by Wednesday night, there is no doubt about it."
Holgate says there have been only about 50 virus cases among the 36,000 staff – 80,000 people, when Australia Post's partnerships and outlets are included – which she attributes to a combination of good luck and preparation.
"We have embraced the whole PPE, temperature testing, sanitising, right from the beginning of this. Our people have already been operating this way since late March," she says.
Holgate says Australia Post has agreed to retrain 2000 motorcycle posties – almost a quarter of the cohort – to deliver parcels in vans to help save jobs.
"We've got about 1000 posties fully trained and operating in vans to help with those parcels," Holgate says. "By the end of August, we will have 1500 posties in vans and they will deliver over 6 million more parcels than we could have otherwise. We will have the full 2000 switched over by the end of October."
Australia Post has also struck a peace deal with unions over changes by the federal government to loosen restrictions that require letters to be delivered every day. Labor had opposed the move and the Morrison government accused the opposition of reviving its "Mediscare" campaign.
Communication Workers Union national secretary Greg Rayner has been brought onto Australia Post's leadership council for safety, and Holgate says she has made a commitment not to cut jobs.
"I think that's a reflection of the respect [in which] I hold them," she says. "We will always on occasions have different points of view. But back in July we signed an MOU with them which gave confirmation of their support for this temporary, regulatory relief.
"One of the things they are really keen on, and so am I actually, is we move to what we call a one network operation where we have more streaming into posties of parcels and we stop this sort of separation which had taken place between parcels and letters and we sort of bring it together and keep the postie's job alive."
"We always said from day one, we wouldn't change their wages, there won't be any drastic job cuts. The one-year agreement gives them assurances of no cuts to any salary, and nobody will lose their jobs as a result of rolling this temporary relief out."
Staying in the black
Holgate says the change is inevitable, with the volume of letters falling on average by 25 per cent nationally and as much as 47 per cent in parts of Victoria from two years ago.
She says it is also a requirement of Australia Post's authorising act to remain in the black and, so far, "they are keeping their head above water".
Australia Post reported a half-year profit before tax in January of $83 million, despite an $87 million loss in its letters division, after securing $129 million in cost savings and a 4 per cent increase in revenue to $3.8 billion.
"We have put in place a number of different things to keep our costs really under control," Holgate says. "Operating at the moment does come at a much higher cost. We are still chartering aeroplanes, we've still got this extra cost of PPE."
Almost 260,000 small and medium businesses were trading online in the last quarter and "a lot of those businesses had never traded online before". Holgate believes the pandemic has accelerated a "five-year trend".
JB Hi-Fi and Kogan have reported record online sales during the pandemic. Woolworths has beefed-up delivery chains through partnerships with last-mile couriers Sherpa and Drive Yello, and this week announced it is buying a majority stake in family owned PFD Food Services.
Uber Eats and the Amazon-backed Deliveroo are also pushing into delivery of basic food and drug supplies amid the pandemic. Deliveroo, whose new 16 per cent shareholder Amazon was recently cleared by UK regulators, has partnered with BP and EzyMart to deliver groceries, personal items and basic drugs such as Panadol.
Holgate believes coronavirus has enabled shoppers to get used to shopping online and thinks the change is permanent.
"What we are seeing with the likes of JB Hi-Fi is e-commerce has become a really serious part of their retail proposition. Big W just changed their mission statement and it is about leading in e-commerce, so I think you will see some retailers quite significantly change their model after COVID-19."
Online retailer Kogan.com is gearing up for another year of record sales and earnings in the expectation that consumers who shopped online for the first time during the pandemic will become e-commerce converts.
"There is a retail revolution taking place as more and more shoppers learn about the benefits of e-commerce," Kogan.com co-founder and chief executive Ruslan Kogan told investors on Monday after delivering a 56 per cent increase in net profit to $26.8 million in the year ended June.
"We're seeing record numbers of first-time customers, who then go on to make repeat purchases at a 40 per cent faster pace than previously," Mr Kogan said.
"Once someone discovers the benefits of online shopping, I struggle to see why they would ever go back to the old ways of doing things."
The pure-play e-tailer reaped the benefits of an acceleration in the shift to e-commerce during the pandemic as consumers stuck as home splashed out on consumer electronics, appliances, furniture, kitchenware and pet accessories.
Revenues rose 13.5 per cent to $497.9 million – falling just short of the $500 million mark. But gross sales, including marketplace commissions, jumped 39.3 per cent to $768.9 million, rising 62.5 per cent in the June-half.
Sales growth accelerated in the June quarter, almost doubling year-on-year, and the strong growth continued into July, with gross sales up 110 per cent.
The number of active customers rose by 36 per cent or 574,000 to 2.18 million and consumers who started shopping with the e-tailer during lockdown in March and April made repeat purchases in May and June.
Earnings before interest, tax, depreciation and amortisation rose 54.5 per cent to $46.5 million – jumping 80 per cent in the June-half – as strong sales offset record investment in marketing and customer acquisition costs.
Marketplace booming
On Kogan Marketplace, which was launched only last year, gross sales rose 71.2 per cent in the June-half, exceeding the company's expectations.
Mr Kogan said the marketplace enabled the company to become even more scaleable by increasing its range and growing sales without a corresponding increase in inventory.
Sales from Kogan's exclusive brands, such as Ovela and Komodo, rose 26.4 per cent, countering flat sales of third-party brands.
Kogan.com's verticals also did well, with Kogan Internet customers rising 91 per cent and Kogan Insurance's commission-based revenues up 36 per cent, while Kogan Mobile revenue slipped about 3 per cent. Kogan is aiming to achieve 1 per cent market share in each new vertical.
The profit result included $900,000 in short-term incentives for management, foreign exchange losses of $1.4 million and $700,000 of provisions for Federal Court penalties. Last month the Federal Court found Kogan.com misled consumers over taxtime discounts by lifting prices then "discounting" them, breaching Australian Consumer Law.
Kogan.com is cashed up to the tune of $147 million after raising $100 million through a share placement in June at $11.45 a share.
It acquired replica vintage furniture retailer Matt Blatt in June and Mr Kogan has flagged further bolt-on acquisitions.
"We expect 2021 will see further growth in exclusive brands, scaling up Kogan Marketplace, new verticals and further growth in active customers," he said.
Kogan.com has been one of the strongest stocks on the market this year, with its shares rising almost three-fold, from $7.47 in January to $21.84 last week, valuing the company at more than $2.2 billion.
The stock slipped 5 per cent to $20.75 on Monday as investors took profits, but is still trading on a multiple of about 50 times forecast 2021 earnings per share.
Morningstar analysts say the stock is "materially overvalued" and the market is extrapolating the current level of sales growth too far into the future.
However, Royal Bank of Canada analyst Tim Piper believes the shares could reach $22.
"With government stimulus measures still in place and retail store re-closures, Kogan's continuing sales momentum together with efficient cost of customer acquisition can drive sustained medium-term growth, as Kogan's repeat order rates are the highest in our ecommerce coverage," Mr Piper said on Monday.
Kogan.com increased its final dividend 5.3¢ to 13.5¢ a share, payable October 19, taking the full year payout to 21¢ a share.
