2021 AGM Chairmans & CEOs Addresses
2021 ANNUAL GENERAL MEETING 25 November 2021 Chairman’s address SLIDE 6: Chairman’s address Before I pass you onto our Founder, CEO and Executive Director - Ruslan Kogan for a detailed review of the year that was, and the strategic direction of your business into the new ?nancial year and thereafter, I will take the opportunity to recap some highlights of the 2021 ?nancial year. We are all well versed in the continuing pandemic and the uncertain nature of the State lockdowns throughout the year. We empathise with businesses, big and small, that have had to navigate these dif?cult times and, indeed, with individuals and families who have seen their lives in?uenced and changed in so many ways. Throughout the year, we stayed true to the Company’s mission and values in spite of these continued obstacles - pioneering new ways to delight over three million Active Customers by making the most in-demand products and services more affordable and accessible. We do this by making data-driven decisions and pioneering technology-based solutions to bene?t our loyal community. This ensures that we are able to deliver on long-term strategies, which in turn continues to bene?t customers and Shareholders alike. Our ability to be agile and promptly respond to the changing conditions throughout the year, is a testament to the strength and capabilities of our team. During the year our Exclusive Brands portfolio continued to achieve year-on-year Revenue growth, contributing 51.6% of the Group’s overall Gross Pro?t in FY21. Kogan Marketplace continued its rapid growth, nearly doubling its Gross Sales to over $300 million. There continues to be a strong pipeline of sellers ready to be onboarded in addition to the increased number of sellers already using the platform throughout FY21, enabling more choice for customers. We are delighted to see our customers respond positively to our member program, Kogan First. Over the last 12 months our customers have enjoyed millions of dollars of bene?ts in the form of incentives and rewards - Ruslan will speak to this later in the presentation. We see enormous potential in this loyalty program as it is an opportunity for us to build a stronger value proposition for our most loyal customers. Mighty Ape joined Kogan.com in December 2020 and is progressing well. Mighty Ape shares a similar story to Kogan.com, being a founder-led pure-play online retailer prominent in the New Zealand market. The business has signi?cant potential for growth and we are excited to be part of that journey and we welcome everyone f rom Mighty Ape to the Kogan.com team. The second half of the year presented a challenging inventory position coming out of the tail winds of the ?rst half, however, what originally presented as a challenge was met with an astute response f rom our team. This was a pivotal point for our business as the global supply chain is still seeing the effects of product shortages and escalation of costs. Our business is in an optimal position readily able to supply products directly to our customers, in time for the holiday season. In line with our growth, we further strengthened our Board this year welcoming two additional Independent, Non-Executive Directors - James Spenceley and Janine Allis. James and Janine each have formidable entrepreneurial business credentials and are well versed in ASX requirements. They have been wonderful additions to our Board providing valuable insight and a greater diversity of thought and experience. You may also have seen that we have increased our reporting and transparency in regard to Modern Slavery and ESG, and we welcome all Shareholders to view our reports at our Corporate website. SLIDE 7: FY21 Kogan Group Results Turning to group results, the business surpassed $1 billion in Gross Sales for the ?rst time ever and delivered exceptional growth across key metrics, with: ? Gross Sales of nearly $1.2 billion, up 52.7% on FY20 ? Gross Pro?t of $203.7 million, up 61% on FY20 ? Adjusted EBITDA of $61.8 million, up 24.5% on FY20 ? Adjusted NPAT of $42.9 million, up 43.2% on FY20. In terms of Total Shareholder Return - the ultimate measure of the value we are providing to you, our Shareholders, the Company has achieved exceptional outperformance since the Company’s IPO in July 2016. From IPO to 31 October 2021, over ?ve years and three months, our business has delivered a Total Shareholder Return of 517%, compared to the ASX200 return of 74%. Total Shareholder Return over the long-term is the ultimate measure of your Board and executive team’s success and on this measure it’s fair to say we have absolutely delivered on our promises. Strategic opportunities From the Board’s perspective we are excited by the potential our Company has to further build and grow our trusted brands. Over the next 12 months we expect to see strong growth in Kogan First subscriptions, ongoing growth in Exclusive Brands, further enhancement and development of the Kogan Marketplace and the bene?ts f rom Mighty Ape growth and synergies ?owing through. We have an exciting future ahead of us as we continue our focus on delivering great value to our customers, team members and our Shareholders. Ruslan will discuss these growth opportunities further in his review. Our Team I would like to commend our team at Kogan.com. Their safety, health and wellbeing are at our top priorities. Our business takes all measures necessary to ensure that our team is safe, including the mental health of our team members. As our team is transitioning their return to the of?ce, they are supported by a ?exible work model and various health and wellbeing initiatives. I am extremely proud of the Kogan.com team who, through all the uncertainty this pandemic continues to bring, remain focused and continue to ?nd new ways to support our customers when they need us most. On behalf of the Board, thank you for your continued commitment to the Kogan.com mission, values and community. Finally, I note that, while the majority of Shareholders and proxy advisers have voted or recommended in favour of the Remuneration Report, not all proxy advisors took this position and I expect we will have a degree of adverse sentiment expressed in today’s vote on the Remuneration Report. From my position, and that of our Board, I wish to reinforce that we are always listening to the feedback f rom our Shareholders on how to review and improve our Company, which is demonstrated in the signi?cant changes made over the past 12 months, including changes to the composition of our Board and the implementation of new policies and f rameworks of governance of your Company. I would also like to reinforce that we are delighted to have Ruslan and David - two exceptional executives - retained and inspired to aim high. I would now like to invite our Founder, Ruslan Kogan, to address the meeting and provide a more comprehensive review of the business during the 2021 ?nancial year, and an update on trading for the start of ?nancial year 2022. CEO’s address SLIDE 8: CEO’s Address Thank you, Chairman. It’s a pleasure to address you all today at our 2021 Annual General Meeting. Thank you for taking the time today. Since last year’s AGM we have spent nearly half the year in lockdown, working remotely, being away f rom our families, f riends and loved ones. Needless to say, it was a challenging year for many in the country and around the world. Our team remained focused through dif?cult COVID-impacted operating conditions, and worked hard to support our customers when they needed our help most. By making the most in-demand products and services more affordable and accessible, we made sure that all our customers could get what they needed, delivered directly to their door. Our millions of customers have seen lots of great new things at Kogan.com and on the Kogan app. But behind the scenes, our team has been inventing new ways to deliver more choice, more value, and even faster delivery. I’m excited to tell you more about these things today. SLIDE 9: Creating choice for our customers If you’re shopping online, there are three things you are looking for - choice, value and speed. Combined, they create the ultimate convenience. It's been a long time since I started this business in my parent’s garage with just a handful of products. Today, when a customer visits one of our sites, they get the incredible choice of more than 13.8 million products. So whether it’s a Fortis treadmill, a 55” Kogan QLED Smart TV, or a Matt Blatt Hans Wegner elbow chair f rom our Exclusive Brands range, a Natio skin care product f rom our Third-Party Brands or one of the millions of products on the Kogan Marketplace - if you are looking for it, we not only have it available, but we have it available at a great price and ready to be quickly delivered to your door. This makes Kogan.com more relevant to more customers, and makes us the ?rst and best choice for Aussies and Kiwis to ?nd and buy what they need. SLIDE 10: Improving customer value This huge increase in the scale of what you can now buy on Kogan.com has underpinned the strong growth in active customers and increased loyalty and repeat customers. The number of repeat customers and repeat orders is rising sharply. These customers obviously know they’re getting a great deal. What’s really exciting here is that these customers are also leaving product reviews, meaning people new to online shopping can see what previous buyers thought of a product. We also act on these reviews and ratings, together with internal data sources, to improve our purchasing decisions and ensure we have the best value and range to offer our millions of visitors to the platform. We believe that once you’ve been able to shop for virtually everything you need with a few clicks or taps while sitting on your couch, why would you go back to battling parking lots and crowds? With a huge range, great value and ?rst class service, Kogan.com and Mighty Ape are well-positioned to continue delighting customers in Australia and New Zealand. SLIDE 11: Improving delivery to customers I’m very excited to share something new with you today. We’ve been developing our own last mile delivery service, fully operated by Kogan.com. Kogan Delivery Services is currently operating in Melbourne, Sydney and Brisbane. We’re using smart software to provide the most ef?cient delivery routes, reducing the average time between when your item has been dispatched f rom our warehouse, to its delivery at your door. Customers who have experienced it so far have been able to track their delivery vehicle once the order has left one of our hubs, knowing exactly when to expect delivery. We’ve delivered nearly 60,000 orders in the last few months. It’s early days, but feedback f rom our customers has been great and we’re excited about scaling this. SLIDE 12: Kogan Marketplace The success of Kogan Marketplace has resulted in the platform nearly doubling its Gross Sales year-on year to over $300 million. And the ?rst quarter of FY22 has outperformed the prior corresponding period by nearly 50%. I talked earlier about the importance of range. Customers want to know that if they go to Kogan.com, we’ll have what they need. Kogan Marketplace has been a huge driver of this — enabling us to grow in?nitely without ongoing investment in inventory. In the relatively short time since its launch in late FY19, our Kogan Marketplace sellers have grown to over 1,200 sellers. Kogan Marketplace is a true win/win as it gives our customers incredible choice and enables thousands of sellers to grow their business. SLIDE 13: Exclusive Brands strategy Our business started with just one exclusive brand. Now more than 15 years later, our Exclusive Brands remain a pillar of our Company and a highlight of our customer offering. We now have more than a dozen Exclusive Brands in our stable and they all represent ridiculously good value for our customers. SLIDE 14: Kogan First We’ve started talking more about Kogan First, and for good reason. Kogan First is something I get a lot of great feedback about f rom customers. It’s more than just f ree shipping — subscribers of our loyalty program are offered exclusive deals on top of everyday discounts on our platform, Kogan First Reward Credits, and priority Customer Care. By the end of October we had over 220,000 Kogan First Members — and our medium-term goal is to reach one million members. Kogan First members have received nearly $17 million of member bene?ts in the last 12 months. Any Australian smart shopper that shops online should be a Kogan First member. SLIDE 15: Kogan Verticals Operational Update I’ve talked a lot about the products people can get delivered to their door. Many of these customers are also enjoying the same great value in some of their most essential services — things like mobile and internet access, home energy, and credit cards. In FY22 we are looking at developments to tweak, improve and review these offers across a wide range of verticals, and customers will see these changes and bene?ts very soon. SLIDE 16: Mighty Ape As Greg mentioned earlier, Mighty Ape operations are progressively integrating into the Kogan Group to deliver better value, choice and faster delivery to customers. FY22 will see the launch of Jungle Express, a last-mile delivery service which is owned and operated by Mighty Ape, replicating the launch of Kogan Delivery Services in Australia. Like Kogan Delivery, Jungle Express will increase the speed of delivery in New Zealand, and will allow customers to live track their orders once they have left the warehouse to when they are delivered. We have high expectations for the ongoing success of Mighty Ape as we work to optimise group purchasing decisions and enhance logistics and operational systems over the course of FY22. SLIDE 17: Shareholder value I know many of you have been long-term Shareholders since our IPO in July 2016. As we execute on our long-term strategy and grow our business, we have delivered a Total Shareholder Return of 517% f rom IPO to 31 October 2021. This is a signi?cant outperformance relative to the market over the same period, and we’re proud to continue to have the backing of Shareholders who understand and support our long-term vision. SLIDE 18: Kogan Group trading - November update Turning now to FY22 year-to-date trading, that’s July 2021 through October 2021 trading. Based on unaudited management accounts, we are proud to have delivered another period of top line growth. The business has right-sized inventory levels since the end of FY21 and brought warehousing costs down as a result. The business has also continued to strategically invest for long-term growth through expanding marketing activity to grow the Kogan First member base. We are con?dent this will have long-term bene?ts for the Company. We have seen strong performance f rom Kogan Marketplace and Kogan First, and we are well placed to drive growing sales through the Christmas trading period of November and December. These are usually the most important trading months of the year for us. SLIDE 19: Increasing market share in a rapidly growing market Most of you already know that online retail is still in its infancy in Australia — around 13% of total retail sales which is far lower than comparable economies. There’s a lot of runway ahead for online shopping in Australia and New Zealand. We are proud to have continued to take market share in a rapidly growing market. SLIDE 20: Kogan Group ?ve year goal Even after 15 years, it feels like we’re just getting started. I am so proud of our team who are relentless in our pursuit of excellence and our obsession with delighting our customers. When we listed the Company, we had just over $200m of Gross Sales, and in ?ve years we have managed to grow to more than $1 Billion in Gross Sales. Five years on, and taking a moment to look forward across our next ?ve year plan - we aim to achieve $3 Billion in annual Gross Sales and 1,000,000 Kogan First Subscribers by FY26. I believe we can do this by continuing to re-invest in our customers. Ensuring that our customers get the best deals, on a wide range of products, delivered quickly and ef?ciently. The trust and con?dence we build with our customers will have customers coming back to our platform time and time again. The Kogan First Member bene?ts are only just beginning and the investment we are placing in Kogan First will have long-term bene?ts as loyal customers continue to re-purchase. Finally, I would like to echo Greg’s sentiment and thank the incredibly hard working and dedicated team we have at Kogan.com. What we are achieving would not be possible without their relentless commitment, alignment in values, and obsession with delighting our customers. It’s this obsession to delight our customers while focusing on digital ef?ciency and innovation that makes this business possible. I know many of you have enjoyed our previous AGMs where you got to chat with our team leaders in person after the formalities - I hope we can all do that again very soon! I will now hand back to our Chairman for the formal business of today. Thank you.
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