Kogan, Ramsay Underwhelm as Costs Bite – ShareCafe

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On Friday, two updates from independent sectors linked by a common theme, as rising costs drove down profits at online retailer Kogan and private hospital operator Ramsay Health Care.

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Ramsay – who is currently a private equity takeover target – reported a drop in profits for the first nine months of the year as Covid continued to hurt his hospital operations.

The company, which is considering a $20 billion bid from a KKR-led takeover group, told the ASX it made a profit of $269.7 million for the nine months to March. , down 6.8% compared to the same period of the 2020-21 financial year.

But that was after ignoring “one-time” items, including IT costs and transaction costs.

If these costs were included, unaudited earnings fell 38.9% to $201.6 million from the first 9 months of 2020-21.

Lower earnings were hit by a 5.7% rise in revenue for the period to over $3.44 billion.

Ramsay said in the business update on Friday that while the company is “well positioned” to capitalize on a backlog of surgeries, Covid continues to impact costs.

In the Australian sector alone, the revenue impacts of COVID-19 are estimated at $196.2 million, including $89.2 million in the March quarter alone.

“While COVID cases remain at high levels in the community, Ramsay expects to continue to experience disruptions and the additional costs associated with operating in the current environment,” the company said in its update. day.

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For online retailer Kogan, the March quarter was a dismal three months, with the company’s sales slipping and the business posting a loss as consumer demand dried up and unsold inventory soared. .

In a third-quarter update on Friday, Kogan said overall sales moderated in the first three months of the year, falling 3.8% to $262.1 million.

Lower-than-expected sales and higher inventory and operating costs mean the retailer posted a loss of $800,000 for the quarter, down 110% from the same quarter in 2021.

The company said it had positioned itself for continued high growth through the start of the year, which did not happen, a development the company blamed on “general market factors,” including including a general slowdown in online shopping (which has been observed by other online retailers and sellers, such as Wesfarmers’ Catch).

Because it expected sales growth, it had raised its inventory and operational levels accordingly (it had also suffered from higher inventory a year ago). The company will now cut operating costs to be more in line with its current growth levels over the rest of the year – meaning more losses

Inventory levels rose in the first half, totaling $193.9 million for Kogan and its New Zealand subsidiary Mighty Ape. Kogan did not give a comparative figure for inventory a year ago, but in the March 2021 quarter, slow sales had forced the company “to store higher inventory levels than expected, resulting in costs storage and high demurrage costs”.

In Friday’s latest statement, Mr Kogan said: “While market conditions are currently challenging, the foundations laid over the past 16 years hold us in good stead.”

“Our current focus on recalibrating inventory levels and core operating costs is aimed at bringing the business back to its historical margins and also positioning the business for its next phase of growth.”

Judging from the March quarter reports of the past two years, Kogan managers have a poor track record of forecasting consumer demand, sales and inventory for the new year.

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