Transcript
Speaker: we are able to learn and to shape how the industry is actually evolving and ultimately have a seat at the table in defining you know the next level of customer experiences around discovery and search and all those types of things and how transactions actually materialize ah between you know the different front ends.
Speaker: Hello, I'm Russell Poynton from Edison Group and today it's great to have with me again the management team of Global Fashion Group. Kristof Bartcevic is the CEO and Helen Hittman is the CFO. ah Global Fashion Group released their H1 results today, which were very good at the profit level and we'll talk more about that.
Speaker: Welcome again. Thank you. Nice to be here. So Helen, let's start with you in terms of the H1 performance. you Good growth in profit despite the decline in NMV.
Speaker: um The first H1 profit for the current footprint. Yep. Could you just talk about the drivers behind that and what you think that says about the resilience of the business? Yes, definitely, Russell. So as you say, a milestone today that it's our first profitable um half one at a group level. And importantly, each of our regions are also profitable um in the first half. So having made significant adjusted EBITDA margin gains year on year, which obviously we're very pleased about. So drivers of that, um as we've spoken with you before, our sort of focus around um increasing our marketplace share, our platform services business, so whether that's be um around our single stock solution in Southeast Asia, focusing on retail media across all of our regions, and also marketplace and and the growth that we're starting to see in our fulfilled by operations, especially in um Australia and and to Latin America to some extent. um We've also had a continued focus around cost control and delivered significant, um both sort of cost, but also efficiency savings across the group. and As you say, we've delivered 9 million adjusted EBITDA improvement in that first half against a backdrop of slightly lower year-on-year NMV. I'm pleased with the sort of the profit resiliency and see of the group despite some of the headwinds we've seen on the top line.
Speaker: and and When you're talking about the company, you're talking you you're emphasizing this shift from volume to value. so Can you just talk about what you how you think investors should think about that? Yeah, very much so. So we're very much taking a a broad view around order and customer economics and seeing significant improvements um in profitability at all levels per customer and per order. So we take some sort of data points over the last three years, our active customers and our orders have broadly reduced by about a quarter.
Speaker: um But within that time frame we've seen our profitability per transaction, so per order or per customer, increase significantly. So at a point of sort of profit, gross profit after marketing and after fulfillment, we've seen those metrics increase by sort of close to 90% at a group level but also improvements across all of our regions. So it very much is how we're working to ensure that we retain the the higher value, the better quality and and customers and attract and and retain those to build loyalty um build loyalty with with that customer base. And I think it's not just purely cost efficiency that's driving that. If we look at things like our order frequency, so our customer order frequency is starting to increase. along with their average order value as well. So some good indicators around that more resilient and more profitable customer base.
Speaker: Good, thanks for that. We'll come back to you later when we talk about the outlook, but let's shift across to Christophe to talk about the regional performance. um Christophe, ANZ continues to be the engine of the business with NMV growth of about 3% through the first half. And that's despite more challenges on the Australian consumer, as we know. Could you just talk about that resilience and how um how you think how sustainable you think that growth is going forward for the ANZ business?
Speaker: Yeah, certainly. i mean, we're definitely pleased with the performance in the context, right? I think we have medium term growth a but ambitions that are certainly beyond where we are in the first half. But I think in the environment that we've been facing, especially in the last couple of months, I think this is a very solid result.
Speaker: growing and also improving profitability. I think the key drivers that is number one, the assortment. um We have an excellent assortment across categories, across pis and price points, and marketplace and retail, the two business models are really kind of playing together there, making sure that we're as relevant as possible for the customer.
Speaker: We're disciplined on the inventory side, so that remains healthy. And yes, in some areas we need to be a bit more aggressive on pricing to meet the competitors where they are or to to really entice customers.
Speaker: um But generally, we've been able to maintain gross margin and we've then improved the bottom line through very disciplined ah cost ah side, in particular marketing, where similar to what Helen just said around the the customer economics, We're really targeting ah the highest value customers, the most relevant transactions, and also pulling back spending in areas where we think we could actually get the transaction irrespective of the marketing and spend. And so making sure we don't spend marketing where we don't have to.
Speaker: And with the Google UCP pilot announcement, which is a bit of a mouthful, it looks as though ANZ is going to be ah a key testbed for AI-enabled commerce going forward. yeah um Could you just talk about what AI means strategically for GFG groups?
Speaker: yeah it plays a huge role across the entire business. and I think on the UCP specifically, this is the very beginning of agentic commerce, as the industry is calling it um it. To be clear, we don't expect this to be a big commercial driver, but I think what is critical is to be the first fashion retailer in Australia to be part of that very important pilot with Google. um We are able to learn and to shape how the industry is actually evolving.
Speaker: um and ultimately have a seat at the table in defining you know the next level of customer experiences around discovery and search and all those types of things and how transactions actually materialize between you know the different front ends and obviously our app playing a critical role in that.
Speaker: If you think more broadly about AI, we really think that is a driver of both efficiency and growth. Short term, we think it's probably more balanced towards efficiency. So examples we we've talked about as well as certainly the obvious things like customer service automation where you know we're shifting towards the majority of our customer service requests and inbounds being dealt with by AI-enabled systems.
Speaker: um And interestingly, at the highest ever, customer satisfaction. So often people think automation is a trade-off and the human will deliver a better customer satisfaction, that's actually shifting now.
Speaker: um Same on content production, on pricing, there's just so many areas and we really see artificial intelligence kind of start to be embedded in pretty much everything we do in the business and in every single area there's some use case and obviously we then need to prioritize on the deployments and test and learn and progress as as this technology evolves and our business evolves.
Speaker: Great. um Let's shift over to LATAM. It's a profitable first half. Top-line trends are a little weak there, and you've talked about competitive pressures that have affected the top-line growth.
Speaker: um But the profitability has come through, so could you just talk about how you've protected that profitability in the region? Yeah, in ah in a fairly tough environment, and and know the World Cup in particular is huge in in Brazil, also in Colombia, actually. So um things kind of go a little bit into pause while all the football's on.
Speaker: um But beyond that, I think it's been ah ah a bit of a tougher trading environment in the first half. I think we're very pleased to see that on a gross margin perspective, we've been basically been flat year on year, so you know very healthy level of gross margin.
Speaker: And then where we've really been able to improve um the three points on the adjusted EVIDA that's coming basically from the fulfillment and and the efficiency around that and also growing the fulfilled by business and thereby increasing the usage of our infrastructure.
Speaker: ah It is on the marketing side being very, very targeted and selective, again, going back to this customer profitability and kind of very targeted approach. And then we continue to take out costs also at the overhead level wherever we can. And, you know, obviously lot of that has happened in the last couple of years already, and there's not as much um happening there anymore, but there's still some opportunities that we have delivered in the first time.
Speaker: Great. And finally, Southeast Asia, um a good job of improving profitability as Helen said already. Still quite weak trends at the top line. um so And there's a lot of operating cost over changes over the last 12 months. What have you done in the the the last six months to help protect the business going forward? Yeah, I mean, we've done a lot of um work on the cost structure and that's obviously um driven the profitability. But I think to the point of the top line trends, which we're definitely not happy with. Nobody wants to be in a business with ah with a double digit top line decline.
Speaker: But having said that, we think there's a couple of green shoots and and underlying initiatives that are really working towards turning that around. And I think the ones I would call out is clearly both of the areas of the commercial side and the marketing side. So on the commercial side, um our top 30 brands are actually doing better than the overall assortment. And so they're performing more strongly, they're gaining share within it. Part of that is us deprioritizing the very long time. And part of that is really ah prioritizing the big brands and and working more closely with them.
Speaker: That then goes into topics like unlocking better segmentation, so more exclusivity for our platform, more relevance, and really kind of that weekly, monthly cadence with the brands to make sure that we have the most relevant offer for the consumer on the platform at the right price.
Speaker: 50% of the business is marketplace, so some of this is what we buy, but some of it is also you know how we work with our partners to bring the relevant product through the marketplace ah channel. So that's been a big priority, and I think we've made some good progress there.
Speaker: On the marketing side, um we have ah done a few things. We've invested a lot more into all the CRM and, let's say, the organic channels, and a lot of that is happening on the app. We're 90% app business in the region. So I think if you would compare what you see on the app now versus what you saw a year ago, it's a lot more exciting, relevant, fashion-forward than what we used to do.
Speaker: And then also on the performance marketing side, we are again applying this very selective lens. And I think the discipline we're trying to hold is you know we want to be an order profitable and customer profitable business. And so within those constraints, um you know the top line is kind of an output versus an input, but we see the inputs moving in the right direction. And and just a quick follow-up on that, and and the are the trends in the region fairly uniform across the countries? There's no there's no one country which is yeah There's volatility month-on-month between the countries and there's external factors that play out within them.
Speaker: But I would generally say the four core markets, Philippines, Indonesia, Malaysia and Singapore, it's pretty similar. Hong Kong is a market where we have put less priority. It's the smallest of the five markets we're in. So we're willing to give up a little bit more volume even there because we see it as less core to to the overall footprint.
Speaker: Great, thank you. Finally, Helen, ah on the outlook, so good profit performance in the first half and you actually narrowed up your guidance on profitability for the year despite taking down ah your guidance for NMV for the year. what What gives you confidence in that profit delivery for the year?
Speaker: So, and I think, so maybe just to to recap, so as as you say on our our top line guidance, we've we've narrowed it and we've taken down the top now, so it's between 0 and minus 4%, but our profit, we've kept the top end of guidance at 25, but moved from a bottom of 15 to the The drivers of that really are um focused around the half-one delivery that that we've got to date. So we're as we've sort of spoken about very pleased about about that delivery. And really where we then get to between the 18 and the 25 is pretty dependent on the the top line. um But what we're
Speaker: clear on and what we've demonstrated to date is despite that volatility in the top line, we have enough, um whether it's business model initiatives or cost of and effectiveness initiatives to then drive through and be resilient against that top line to be confident around that profit guidance.
Speaker: And does that affect your guidance for normalised free cash flow breakeven? So, um no, so we we don't guide on normalised free cash flow, but we're very clear that becoming break-even is our is our number one milestone. So maybe if I take a a couple of numbers to help share on that. So last year we were um we used 32 million of cash from normalised free cash flow. If I now take the the last 12 months and move it on six months, that's now at minus 19. So year on year, we've stepped forward 28 million on our cash position. So I feel comfortable that that that that delivery in in half one very much goes towards us becoming normalized free cash show break even.
Speaker: Great. Sorry for using the word guidance there instead of expectations. Don't worry. It's a key metric. So we're itselff we're all focused on it. Great. Well, Helen, Christophe, thanks very much. Great delivery on profits in the first half. And we'll look forward to seeing the progress in the second half.
Speaker: Thanks, Russell.
