MYSL.L Regulatory News (MYSL)

MySale Group plc (AIM: MYSL) (the ''the group''), the leading international online retailer, is pleased to announce its audited preliminary results for the year to 30 June 2017.

Financial highlights

· Underlying basic earnings per share increased 500% to 2.5 cents

· Underlying EBITDA increased by 59% to A$8.7 million

· Gross profit increased 14% to A$76 million, as gross margins increased 190bp

· Online revenue grew by 10%, to A$238 million, driven by the growing active customer base

· Group revenue grew 6% to A$268 million (CER3 growth 9%)

· Underlying profit before tax increased 226% to A$3.3 million (FY16: A$1.0 million)

· Reported loss before tax of A$1.5 million (FY16: A$0.2 million)

Strategic highlights

· Technology, supply and customer developments significantly strengthen our capability

· Expansion of our marketplace platform

· Creation of our Endless Aisle concept to leverage platform and supply-side strengths

· Further long-term partnerships formed with notable global retail brands

· M&A activity increased and Identity Direct acquired at end of the year

Technology highlights

· Accelerated investment into our data-driven proprietary technology

· New platform launched including a scalable and flexible marketplace

to leverage the large customer database

· Single live view of all global inventory available to all websites

· Launch of Ourpay a proprietary 'buy-now, pay-later' payments system

Operational highlights

· Active customer base like-for-like increase of 11% to 0.9 million

· Including Identity Direct active base now increased to 1.0 million

· Strategic plan to increase own-buy inventory continues - now 17% of online revenue

· Integration of Identity Direct business progressing ahead of schedule

KPI's

· Continued focus on activating customers with higher lifetime-value

o Average order value (AOV) stable at A$87

o Robust average revenue per active customer A$292

o Steady average frequency of 3.3x

· Mobile activity continues growing and represented 59% of orders

· Returns rate remains at low level of only 5%

Outlook

· Good start to current year - revenue growth accelerating and underlying profitability growing strongly

· Underlying EBITDA for the year expected to be at least in line with upper end of market expectations

Carl Jackson, Chief Executive Officer commented;

''We are very pleased with the group's progress during the year and the improved financial performance, which delivered significantly increased underlying EBITDA. Sustained focus on our strategic goals has delivered yet another year of growing revenue and, more importantly, increasing profitability.

''Our new partnerships are testament to the strength and quality of our international marketplace platform demonstrating further progress in our strategy of working with global brands and retailers to provide our customers with unrivalled value as well as the best possible choice and service. Our partners include some of the largest, most successful international fashion, sports and general retailers.

''There is a structural shift underway in how online and offline retail brands manage their inventory cycle with increased integration and efficiency key criteria. MySale's established international platform is uniquely placed to partner with these brands and deliver the integrated inventory solutions and new sales channels that they seek.

''Investment into our proprietary technology has accelerated and this year saw the launch of a brand new platform which will support all the group's activities, including marketplace, in the future. This enhanced, data-driven, platform transforms our opportunities with brands and customers. We have a fully customisable, integrated proposition for brands to seamlessly support all their needs. We have even greater data insights to our customers' needs and now they have access to our 'Endless Aisle' with an even greater choice of products at compelling discounted prices.

''The Endless Aisle combines our increasingly long tail of inventory, now over 300,000 SKU, with our new, single live view of that global inventory, to which all our websites are linked, providing increased customer choice and merchandising opportunities.

''We also launched Ourpay the group's proprietary 'buy-now, pay-later' payment solution. This further enhances our value proposition and initial experience suggests it is popular with our customers. We anticipate we will see further take-up within our own customer base and also have the potential strategic option to leverage Ourpay, as a standalone product, with others. We shall shortly launch a subscription-delivery model for customers which will be fully integrated to the Ourpay platform.

''We carried good momentum into this year and have a number of exciting strategic initiatives that will support our continued growth in revenue and profitability.  This year has started well with revenue growth accelerating from last year and strong growth in underlying profitability. Whilst our peak trading period is still ahead of us we expect that underlying EBITDA for the year will be at least in line with the upper end of market expectations.''

1.Online: the group's online web-based retail activities (A$238 million of total group revenue A$268 million)

2.Underlying: is the group's EBITDA, profit after tax expense or earnings per share calculated having excluded certain expenditure of a one-off, non-trading or non-cash nature in order to allow clearer understanding of the underlying performance of the year. Full details are contained within Notes 6, 7 and 27 to the financial statements. EBITDA: earnings before interest, taxation, depreciation and amortisation

3.CER: measure of annual growth based on constant exchange rates

Enquiries:

About MySale Group

MySale is a leading international online retailer with established online flash-sales and retail websites in Australia, New Zealand, South-East Asia and the United Kingdom. Founded in 2007, the Group provides customers with access to outstanding brands and products at discounted prices whilst simultaneously providing brand partners unique international inventory and sales solutions.

The group provides a marketplace solution to brands offering both retail and flash-sale websites. The flash sales websites host time limited sales in each of its territories. These flash sales are focused on fashion, apparel, health, beauty and homeware categories and are predominantly undertaken on a consignment inventory basis. The retail websites operate in Australia and New Zealand and focus on similar product categories using mostly drop-shipped inventory.

Customers' shopping experiences are enhanced by the group's deployment of leading edge technology to ensure personalised and localised product offerings. Customer convenience has been at the heart of the group's technology development since the earliest days and now mobile commerce is the group's main sales channel.

The group's online sales are supported by a robust and flexible network of in-house supply chain infrastructure and technology that enables MySale to offer products from around the world for sale and delivery to customers in each territory.

As a result of these exceptional capabilities in inventory management and international sales MySale has built an enviable portfolio of over 2,500 brand partners from whom products are sourced.

The group operates websites under a number of different brands all of which operate on a uniform technology platform and a single international logistics infrastructure.

The Group's flash sales brands are; OzSale and BuyInvite in Australia; NzSale in New Zealand; SingSale in Singapore; MySale in Australia, New Zealand Malaysia, Thailand, the Philippines, the United Kingdom and Hong Kong, and Cocosa in the United Kingdom, Australia and New Zealand; whilst the Group's retail websites are Deals Direct, OO.com and Top Buy in Australia and Identity Direct in Australia and New Zealand.

Chairman's statement

Whilst the financial year 2015-16 was all about restoring the business to underlying profitability, this year our aim was to demonstrate that we could build on this as well as producing real step change improvements in our proprietary technology platform.

I am delighted to report a 59% improvement in underlying EBITDA to A$8.7milllion which was ahead of the market expectations at the beginning of the period. Furthermore we increased our technology investment from $4.0 million to $7.5 million which has allowed us to launch a significantly enhanced marketplace platform, an in-house payments solution ("OurPay") and multiple improvements in marketing automation.

In the last 12 months we have signed notable new brand partnerships, including gilt.com. Global brands and retailers recognise the strength of our international/contra-seasonal platform and our ability to support their inventory management and to connect them to new customers. They increasingly want to deal with a smaller number of regionally dominant partners with leading technology platforms. We are ideally placed to deliver this.

We have made no secret of the fact that strategic acquisitions are a core element of our growth strategy and we continue to refine our process and criteria in this regard. Essentially, we are targeting deals which can either widen the range of products which our existing customers are likely to want to buy or which grow our routes to market in our core geographies. Ideally both.

During the year, we acquired the trade and assets of Identity Direct in Australia and New Zealand. This has opened a new vertical for us in product personalisation; a sector we have been targeting for some time given its attractive margin structure, strong underlying growth and differentiated product set. It has also provided further evidence of our ability to integrate acquisitions onto our platform and add value through cost and revenue synergies.

We have started the current financial year very well and whilst there is much to accomplish both revenue and underlying profitability have grown strongly. Our plans for this year are ambitious and our new partnerships, product verticals and platform enhancements will support these growth plans.

Whilst we are very much a technology focussed business the group owes its success to the ability, intelligence and drive of the hundreds of team members working 24-7 in our global operations and I would like to place on record the board's appreciation of their exceptional hard work.

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Iain McDonald

Chairman

25 September 2017

Review of operations by the Chief Executive Officer

MySale Group Plc ('the group') has made excellent progress in the year to 30 June 2017. Planned strategic initiatives have delivered another year of improved financial performance and positioned the group for further, profitable, growth.

The year's success was delivered by; our relentless focus on providing customers with exceptional value, choice and service and; our excellence in delivering unique sales channels and world-class inventory management to brand partners; whilst simultaneously leveraging the significant strength and efficiency of our proprietary technology platform and international logistics network.

The group's focus on customer engagement saw the active customer base grow 11% and in turn online revenue, which represents 90% of the group total, grew 10%, to A$238.7 million (FY16: A$217.9 million). Following the acquisition of Identity Direct, covered in more detail below, the group now has over 1 million active customers.

Total group revenue for the year rose 6% to A$268.4 million (FY16: A$252.3 million) which reflects the strong online growth referred to above, together with a planned reduction in lower margin offline revenue. The group's focus on growing gross profit has delivered an increase of 14% to A$76.0 million (FY16: A$66.7 million) which was underpinned by a 190 bp increase in gross margin to 28.3% (FY16: 26.4%).

This improved trading performance is driven primarily by the group's clear plan to prioritise the growth of gross profit and secure higher lifetime-value customers. Key elements of this plan include localised merchandising and pricing, increased proportion of own-buy inventory and reduced delivery promotions. The increased levels of revenue and gross profit combined with a carefully controlled cost base delivered a 59% increase in underlying EBITDA to A$8.7 million (FY16: A$5.5 million).

This plan was established in 2015 when the group re-focused the business on its core aims of providing exceptional value in branded products to customers and exceptional inventory management solutions to brand partners within the group's three core territories. The operational achievements and significantly improved financial performance of FY17 represent another step on the group's path of profitable growth, with further significant growth anticipated in the current financial year.

Total underlying operating expenses increased 10% to A$67.4 million (FY16: A$61.2 million) reflecting the increased activity and volumes of trade during the year. The group made a planned investment into additional staff members in key senior management and departments such as buying, merchandising and marketing in order to ensure that the choice and service we provide to customers is maintained as we grow. The same increases are not anticipated in future years and the group will be able to leverage its fixed cost base which represents around 56% of the total operating expenses.

During the period, and across all territories, the group continued to dedicate its marketing resources and spend, which was circa 7% of revenue, almost exclusively into measurable, digital channels to attract and engage both new and existing customers. Our ongoing communication programme has seen those loyal and engaged customers continue to spend with reliable frequency and with stable purchasing metrics.

During the year the group diversified the digital marketing spend, notably in Australia and New Zealand (ANZ), by increasing the emphasis of spend into customer re-engagement activity. The early results of this diversification were encouraging as marketing efficiency improved. This has led to a re-calibrated marketing plan for the entire group. From the beginning of the current financial year marketing objectives have been refocused based on these learnings, and improved data analysis capabilities, to better measure marketing costs and returns per purchase and buyer. Whilst early in this revised programme the initial results have been positive and further improvements in marketing efficiency are anticipated during the year.

Technology Development

During the year the group increased capital expenditure, as planned, in order to further develop its proprietary technology capabilities. An important phase of work reached a conclusion and saw the release of a new and enhanced version of the group's technology platform during the year. This new platform's functionality supports our key objectives of increasing revenue and decreasing costs with more efficiency.

This new, marketplace enabled, platform allows fuller integration across all the group's sales channels and to date all of the group's websites, other than the recently acquired Identity Direct, have migrated to this platform. The group now has a single, live view of global inventory and both 1P (owned) and 3P (consignment or drop-ship) products can be sold by any of our websites simultaneously. Similarly the platform allows a single live view of each customer and their individual journeys allowing us to better serve their preferences across all websites and mobile device apps. As always the mobile buyer is at the heart of our capabilities and this channel accounted for 59% of orders received in the past year.

A key element of the development has been to enhance the group's data capabilities for better collection and analysis, improved machine learning and automation which in turn is driving improved customer experiences, increased revenue and more efficiency. The platform allows for campaigns to be launched faster and more efficiently as well as providing seamless user interaction across all devices. These developments provide a step change in capability which will support further growth.

The group has also continued to use its technology innovation for tactical improvements in the customer proposition to drive revenue, one example being the development of Ourpay, a 'buy-now, pay-later' programme. This instalment payment option helps customers manage their finances and has been shown to increase both the spend and the frequency of those customers accepted to the programme. This payment solution was developed in-house in order to deliver a more flexible, cost-efficient and integrated system, which is better suited to the group's requirements than that provided by third parties. The system automates all aspects of the programme including credit scoring and monitoring, an aspect of the programme where the group has adopted a conservative policy. The debtor balance associated with Ourpay was A$1.8 million at the year end and is anticipated to grow as transaction volumes increase.

The initial trials of Ourpay have been very positive. Customer's average spend increased 19% and the frequency of purchase increased by around 30%. Ourpay shall now be rolled out to all territories and websites where legislation currently allows. In addition we shall shortly launch a subscription-delivery model for customers which will be fully integrated to the Ourpay platform. 

Brands and Strategic Partnerships

The group has secured a number of new brand partners during the last 12 months, the most notable being the launch of a strategic relationship with gilt.com, a US based online retailer which is part of The Hudson's Bay Company. This and other strategic partnerships have already provided significant additional product choice to customers in all the group's territories.

The partnership launched with Sports Direct with access to more than 150,000 products from their inventory is now operational and the group commenced live sales on its retail marketplace during the year. Good progress has been made. We have direct inventory feeds, tailored merchandising and volumes continue to grow.

Forging partnerships with flagship retail brands such as Gilt.com and Sports Direct is a strong endorsement of the group's capabilities in supporting brands in establishing new sales channels as well as in inventory management. The retail landscape is undergoing some structural change and increasingly large brands recognise the benefits that more integrated inventory partnerships can bring to their operations. The group's well established international network, flexible and scalable technology platform and resources in key territories means it is an ideal partner for international brands and retailers. Our platform allows us to customise our integration with any brand thus delivering a tailored solution to their requirements.

We have invested more time and funds into product selection during the year, ensuring customers have the best possible choice available and by the end of the year we had more than doubled listed SKU's to over 300,000. Nearly all of the increased product selection has come from relationships with 3P suppliers and thus the group does not take any inventory risk as the terms of business are on a consignment or dropship basis. In order that customers can easily find and navigate to their favourite brands and products the group delivers highly personalised experiences and communications to each customer.

Aligned with this materially increased product selection has been an expansion of the product categories in which we have excellent coverage. Refurbished technology is one such example of a category that the group has launched and which resonates strongly with our existing customer base. Finally, the acquisition of Identity Direct has brought significant licensing expertise and licensing relationships with global brands to the group and this is a revenue opportunity the group plans to develop further.

Marketplace

The group's new technology platform ensures that the retail and flash websites operate on the same platform which provides numerous advantages including: better sharing of data; more efficient use of resources; greater visibility of inventory; and reduced buying administration. This will allow the group to substantially increase the range of products available via our websites, particularly 3P inventory, whilst minimising variable costs.

This platform facilitates the group's marketplace and allows the integration of all websites directly with brands and retailers, whether that be as part of supporting an inventory clearance or providing a brand with a new retail channel. It also has created the group's Endless Aisle concept.

The group has always offered a wide range of products but the marketplace development now means that this range shall be significantly expanded and as we now have a live feed of global inventory to all websites, there is an opportunity to extend the length of time products are available and merchandised to customers - our Endless Aisle. Importantly the expansion of this very long tail of product inventory will be driven by 3P vendor relationships which incur limited marginal cost to the group.

The retail websites within the group's marketplace, predominantly operate on a 3P supplier drop-ship basis and serve the product verticals of sports (dealsdirect), home (oo), gifting (topbuy) and personalised goods (Identity Direct) and are founded on the acquisitions undertaken in ANZ over the last two years. The experience gained during the successful integration and launch of these sites will serve the group well as further verticals are added in the future. As over 80% of our revenues are derived from 3P product listings the group has a relatively light working capital requirement and further reductions in this requirement are targeted in the future.

The creation of the retail marketplace platform represents a step change in the potential addressable audience and in future revenue opportunities of the group. Designed with mobile commerce at its heart and to be simple and intuitive for vendors to use, this platform will further support our brand partners and their sales ambitions. Increasingly brands use marketplace solutions to support their international sales as it provides local knowledge, existing audiences, and a cost-effective launch in a new territory.

Operations

In FY15 the group began implementing a strategy to increase the proportion of inventory that is purchased outright as 'own-buy' (1P), rather than on a consignment basis (3P) and during this year 1P goods increased to 17% of orders, consistent with that strategy. Whilst the vast majority of goods sold are still done so on a consignment or drop-ship basis, this 1P strategy supports deeper relationships with brand partners, slightly higher gross margins and wider product selection for customers. 1P activity is focused on staple, branded goods.

During the year the group's highly efficient platform processed record numbers of transactions. The volumes are remarkable and underline the efficient processes and systems that the group has in place to support brands and serve customers; on average more than 20,000 new products were launched daily and 180,000 digital images were created or edited each month. In the year 2.9 million orders were processed and 12 million units shipped which was only possible due to high levels of automation and streamlined workflows. The strength and capability of this platform will be leveraged to further improve efficiency in coming years as our volumes increase further.

The combination of the group's high quality sourcing, compelling consumer value, product selection and reliable service means that returns remain at industry leading levels of only 5% overall.

Investment in the development of the group's capabilities continues and this year saw a number of key senior hires strengthen the executive team and also enhancement of staff within our marketing, data science and merchandising teams.

Acquisition of Identity Direct

The group acquired the business of Identity Direct, in ANZ, during the fourth quarter of the financial year. Identity Direct is a retailer of personalised products with strong licensing relationships, particularly with entertainment brands, such as Disney and Marvel. In relation to the group it is a relatively small business, with annual revenues of circa A$10 million. The long term commercial opportunity in this complementary vertical is very attractive and generates high gross margin, in excess of 60%. The products are strong in childrens and sports categories which fits well with existing MySale customer base. There are good opportunities to leverage efficiencies by deploying the group's scale and platform and also growing revenue with enhanced marketing and cross selling between the two customer bases. The group believes that development of its product licensing capability will lead to significant opportunities to generate incremental revenue in the medium term.

The integration of the Identity Direct business is ahead of plan and, with property and resources now rationalised, cost savings and synergies will accrue to the group in the current year. Operational integration will be complete shortly allowing the group to capitalise on the fourth calendar quarter when Identity Direct generates around 60% of its annual revenues. This is the second integration to our platform undertaken in the last two years and the positive results give the group confidence it can successfully execute further, larger integrations in the future.

Australia & New Zealand (ANZ)

Within this operating territory the group has continued to successfully implement its strategic initiatives and delivered much improved gross profit, up by 15% to A$65.6 million (FY16: A$57.1 million) and gross margin to 29.6% (FY16: 27.1%) whilst also growing revenue by 5% to A$221.5 million (FY16: 210.7 million). The significant increase in AOV to c. $85 achieved in FY16 has been maintained by continued focus on a localised offer with strong merchandising, pricing and overall ANZ customer proposition.

As noted above the group's nascent retail marketplace was launched in ANZ at the end of the prior year and is an opportunity to significantly increase the group's addressable market in the region. To date the group has already seen in excess of 500 suppliers join this marketplace. The first flagship retailer to join this marketplace, as a 3P vendor, was Sports Direct and they are now fully integrated to the group's platform allowing our ANZ team to efficiently market and merchandise the 150,000 products available. The sporting goods market in ANZ is estimated to be worth in excess of A$3 billion annually and the strong value offer provided by Sports Direct combined with group's experience in connecting customers with brands is anticipated to create a compelling proposition in this vertical in the medium term.

The group is one of the pre-eminent online, off-price retailers in ANZ and has further attractive growth possibilities due to both the lower levels of internet penetration, in comparison to territories such as the United Kingdom and the USA, and this region's relative lack of off-price retailers. In ANZ the group has a small network of physical outlets which is used both to clear the group's own surplus inventory and test brands and products in that offline channel.

The group is actively looking to expand further the breadth and depth of our online and offline sales channels in this region in order to fully leverage our customer base, physical resource, buying power and expertise.

South-East Asia

During the period South-East Asia had revenue growth of 7% to A$33.8 million (FY16: A$31.6 million) and a corresponding 7% increase in gross profit to A$8.1 million (FY16: A$7.5 million). On a CER basis the underlying revenue growth was 11%. The continued growth in revenue and profitability has been driven by the group's localisation plan which ensures that merchandising, pricing, payment and shipping solutions are all tailored to the needs of local consumers.

Here the strategy has been to grow the active customer base, so acquisition marketing is a priority, to build gross profitability and then leverage this increasing scale to use resources more efficiently and achieve lower shipping rates. With a more profitable local model now established and first mover advantage South-East Asia is an important element of the group's long-term profitable growth.

In the medium to long term this region is anticipated to be increasingly significant as the group grows its customer base and demand for branded products, particularly European and USA brands, continues to increase. With a substantial addressable population, increasing disposable income, lack of off-price competition and high mobile penetration this region is well served by the group's strong value, branded sales offer and exceptional mobile commerce capability.

Rest of World

This territory comprises the group's operations within the United Kingdom, which trade predominately under the Cocosa brand, relaunched in FY15, which provides customers with compelling value in premium branded products.

The United Kingdom had a good year, as revenue increased by more than 30%, thereby achieving revenue of A$13.1 million (FY16: A$10.0 million). On a CER basis the underlying revenue growth was 59%.This growth was underpinned by increased numbers of active customers which is our key objective in a newer territory. Gross margin was lower than the previous year as the group used products and pricing as promotional tools to develop the customer base. This form of promotion is used by the group much more in an early stage territory than in established territories.

These are encouraging results and position the business for further growth in the current financial year. Whilst currently a relatively small part of the group's overall activities, this business operates in the UK's large and well developed online marketplace where engaged and active consumers can be acquired successfully and cost effectively. Given there is no online flash sale operator of scale in the UK the group has targeted becoming a leading operator in the country.

The group has a material presence in the UK as it an important centre for the group's product sourcing team for both UK and European brands. Brands from these territories, along with USA, have grown their weighting within group revenues over the past few years and now account for over half worldwide revenue.

Outlook

The group had an excellent FY17 with significantly improved financial performance and great progress against our strategic goals. Increasing numbers of active customers are driving revenue and efficiency forward.

We have a unique set of brand partners which in turn means that we are able to offer our loyal customers access to a fantastic range of goods and products. When this is combined with our flexible and efficient business platform it gives customers an easy-to-use, compelling value, shopping experience.

The group has carried good momentum into the current year and built on the excellent foundations and initiatives put in place last year. This year has started well with revenue growth accelerating from last year and strong growth in underlying profitability. Whilst our peak trading period is still ahead of us the board has confidence in the current year's prospects and expects that underlying EBITDA for the year will be at least in line with the upper end of market expectations.

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Carl Jackson

Chief Executive Officer

25 September 2017

Financial review by the Chief Financial Officer

Revenue and Gross Profit

For the year ended 30 June 2017 group revenue increased by 6% to A$268.4 million (FY16: A$252.3 million) and gross profit increased faster, by 14%, to reach A$76.0 million (FY16: A$66.7 million). This improved performance came as a direct result of the strategic plan implemented by the group in 2015.

On a constant currency basis the growth rates of revenue and gross profit were higher, at 9% and 16% respectively, reflecting the strengthening of the group's reporting currency AUD during the year.

Operating Expenses

The increase in activity and gross profit led underlying operating expenses to increase 10% to A$67.4 million (FY16: A$61.2 million) in the period. During the year the group increased staff resources in a number of operational departments to support further growth and ensure the group delivers outstanding service to its customers. This increase included a number of key hires within the senior management team.

Profit/Loss before Tax

The underlying profit before tax for the year is A$3.3 million (FY16: A$1.1 million) and the reported loss before tax for the period is A$1.5 million (FY16: A$0.2 million profit). This reported loss is after the inclusion of a number of one-off and non-cash items which are shown in more detail in note 6 to the financial statements in order to provide greater insight as to the underlying profitability of the group.

Profit/Loss after Tax and earnings per share

The underlying profit after tax for the year is A$3.9 million (FY16: A$0.6 million) and the reported loss after tax for the period is $A1.0 million (FY16: A$0.2 million). This reported loss is after the inclusion of a number of one-off and non-cash items which are shown in more detail in note 6 to the financial statements in order to provide greater insight as to the underlying profitability of the group.

Note 27 shows the detailed calculations of basic earnings per share for the financial year which increased by 500% to 2.5 cents per share (FY16: 0.4 cents) on an underlying basis and was 0.6 cents loss (FY16: 0.1 cents loss) on a reported basis.

Taxation

The group has recorded a tax benefit of A$0.6 million for the year (FY16: tax expense of A$0.4 million) which diverges from the group's long term guidance of an effective tax rate of approximately 30%. This divergence arises due to various tax adjustments and timing differences. Full details are provided in note 9 to the financial statements. The group has total tax losses of A$30 million (FY16: A$31 million) with the majority located in Australia. The entire tax loss has been recognised with the provision of a deferred tax asset of A$10.5 million (FY16: A$10.3 million).

Balance Sheet, Cash and Working Capital

The group's closing cash balance was A$19.0 million (FY16: A$34.0 million) and the net cash balance was A$8.9 million (FY16: A$27.5 million).

The closing cash balance reflects a number of significant working capital outflows which occurred towards the end of the financial year which are temporary in nature and will reverse in the following period. The group's strategic plan allows for selective investment into inventory balances and other working capital deployments to ensure the group is able to take advantage of commercially beneficial opportunities. The group anticipates that working capital balances will normally lie between 1-3% of annual revenue.

Capital expenditure increased, as planned, as the group invested principally in the development of its proprietary technology platform together with expenditure related to property and equipment upgrades. Total capital expenditure was A$8.5 million (FY16: A$4.0 million).

During the period the group's acquisition activity was focused around the purchase of Identity Direct, a personalisation business, for consideration of A$2.9 million.

Banking Facilities

The group has significant cash balances, held principally with HSBC with whom the group currently has trade finance multi option debt facilities of A$13.1 million. In addition the group has finance facilities of A$0.2 million with ANZ Bank. All facilities are renewed on an annual basis.

Underlying Basis

As noted above the group manages its operations by looking at the underlying EBITDA which excludes the impact of a number of one-off and non-cash items of a non-trading nature as this, in the Board's opinion, provides a more representative measure of the group's performance. A reconciliation between reported profit before tax and underlying EBITDA is included at note 6 to the financial statements and outlined below.

Included within one-off items acquisition expenses, post-acquisition reorganisation costs, charges arising from system migration and IPO costs.

Key Performance Indicators

The group manages its operations through the use of a number of key performance indicators (KPI's) such as revenue, revenue growth, gross margin percentage, average order value (AOV), average revenue per active customer (RPAC), and underlying EBITDA.

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Andrew Dingle

Chief Financial Officer

25 September 2017

Note 2. Significant accounting policies

Basis of preparation

This condensed consolidated financial information for the year ended 30 June 2017 has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards as adopted by the European Union ("Adopted IFRSs"), IFRS IC Interpretations and the Companies (Jersey) Law 1991.

The financial information contained in this preliminary announcement for the years ended 30 June 2017 and 30 June 2016 does not comprise the group's statutory financial statements within the meaning of Companies (Jersey) Law 1991. Statutory accounts for the year ended 30 June 2017 will be filed with the Jersey Companies Registry in due course. The auditors' report on the statutory accounts for each of the years ended 30 June 2017 and 30 June 2016 is unqualified, does not draw attention to any matters by way of emphasis and does not contain any statement under any matters that are required to be reported by exception under Companies (Jersey) Law 1991.

Going concern

The directors have reviewed the group's forecast and projections, including assumptions concerning capital expenditure and expenditure commitments and their impact on cash flows, and have a reasonable expectation that the group has adequate financial resources to continue its operations for the foreseeable future. For this reason they have continued to adopt the going concern basis in preparing the financial statements.

In preparing the preliminary announcement, the directors have also made reasonable and prudent judgements and estimates and prepared the preliminary announcement on the going concern basis. The preliminary announcement and strategic report contained herein give a true and fair view of the assets, liabilities, financial position and profit and loss of the group.

Changes to accounting standards

There have been no changes to accounting standards during the year which have had or are expected to have any significant impact on the group.