Grays eCommerce Group embraces B2B focus
Last week, Grays eCommerce Group, reported revenue growth in its half year results, though reported an overall loss as the company exited the fixed price retail (FPR) segment.
The online auction site said gross sales from continuing operations was up 12.9 per cent to $267.8 million from the previous corresponding period, which was $237.2 million.
Revenue from continuing operations was up 3.3 per cent to $62.2 million, with growth in industrial B2B of 21.1 per cent.
The company’s earnings before interest, tax, depreciation and amortisation rose 9.3 per cent to $8.1 million which was, according to Grays’ CEO Mark Bayliss, driven by cost savings from their B2C auction business, “which more than offset increased investment into B2B resources to support growth initiatives.” Bayliss said their B2C cost inefficiencies centered around outsourcing, warehousing and logistics, producing a savings of $4.4 million.
Regarding their B2C operations, Bayliss said their revenue was up 32 per cent to $5.2 million but a loss of $7.9 million EBITDA was generated.
“This compared to a loss of $1.7 million in the first half of the 2015 financial year, which only included seven weeks of trading. The increased loss was also driven by a controlled inventory sell-down and increased variable costs, as we exited the business following the sale of its goodwill and customer lists to MySale,” he said.
The company’s net loss after tax of $22 million is inclusive of just under $25 million of significant items relating to the sale of FPR, Bayliss added.
Bayliss said the sale of their FPR business (Deal Direct, Topbuy and oo.com.au) last November to MySale was a “pivotal move allowing the group to focus on what it does best and leverage its competitive advantage in online auctions.”
With the competitive dynamics and high fixed costs of the online FPR market, Bayliss said they decided the best outcome in terms of shareholder value was to dispose of those operations and focus on their core assets. He said the sale of FPR also allowed them to reduce the fixed cost base of their total business.
The company CEO said, however, that their remaining B2C auction business is growing and is profitable. “We undertook several strategic initiatives over the first half that focused on reducing costs, optimising warehouse space and management of volume seasonality to produce a leaner business.
Bayliss said they are pleased by the results they’ve taken in B2B, “particularly in our strongest segments of Auto, Mining and Transport,” which, he said, achieved a 30-per cent plus growth in revenue in aggregate during the half year.
He said they are expecting an improvement in their EBITDA margins in the second half.
“While it is still early days, we are seeing a strong pipeline of potential sales activity from our expansion into the South East Asia market,” he added.