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Koovs has given an update on trade for the third consecutive quarter since it has been able to deploy funding raised in 2018. A 69% increase in Visits to the Koovs website and 100% increase in Gross Order Value (GOV) speak to improved fundamentals. Trading margin rose to 12% (7% 2Q 2018/19). These metrics are in line with pre-existing forecasts and are in line with this stage of the long-term plan. The company continues to report progress in its relationship with Future Lifestyle Fashions Ltd (FLFL) in areas like range development for FLFL, website services and physical trading in FLFL retail space.
Koovs
Koovs has announced expansion of its activities with Future Lifestyle Fashions Limited. These relate to a deeper relationship on product between the two groups. Koovs will be designing and sourcing an exclusive menswear brand – called Chelsea King – for introduction into 25 of FLFL’s Brand Factory stores this month (out of a total of 93). Additionally Koovs Private Label concessions will opened in five further Central department Stores (taking total to eight) and Koovs Private Label Menswear will be trialled in three Brand Factory stores. In total these extensions to its offer will add just under £1m of revenues and be profitable. So numerically they are of reasonable significance in our view – plus offering scope to be increased.
Koovs FY/1Q results/update showed progress on both a transactional front and in terms of re-establishing the differentiation given by its branding that should underpin longer term prospects.
The important information from Koovs’ FY19 results is not the results for the year but the trading since the company secured its additional financing. With Gross Order Value (GOV) up 104% in 1Q20, Koovs is once more showing the sort of growth associated with online success. FY19 itself was a lost year, as the company conserved cash while it successfully sought new investors; they eventually arrived – not only with money but with important synergistic benefits too. The GOV data is a function of being able to finance growth again. The benefits of the Future Lifestyle (FLFL) tie-up are still to come in additional distribution and improved buying.
Koovs latest update covering 1Q 2019/20 shows good recovery from a weak comparative in-line with its own and consensus estimates. Improvement in web traffic +148% yoy, conversion (orders/visit) and trading margin (gross margin) all suggest that the initial phase of trading with the benefit of adequate funding is going according to plan. The company has stated that it is happy with current year consensus estimates which we believe are for Gross Order Value (GOV) of £22-23m and EBITDA of c£17m loss.
Koovs has updated on trade over the second half of the financial year. This period included roughly a quarter where its operations were running with renewed marketing support following its re-financing. We think these results are encouraging.
Following on from Wednesday’s announcement of the tie-up with Future Lifestyle Fashions Ltd (FLFL), part of The Future Group, Koovs has announced that its offer of new shares has closed early and has been oversubscribed: 70m new shares at 15p, raising £10.5m gross, plus an additional £1.5m investment from the Chairman. With the capital now committed and the partners in position, Koovs now has a very strong platform on which to build India’s leading fashion e-tailer.
Shortly after its deal with Hindustan Times, Koovs has announced an even more important tie-up with a major Indian partner: Future Lifestyle Fashions Ltd (FLFL), part of The Future Group, will take a 29.9% strategic stake in Koovs, providing not only financial firepower but all the major synergistic benefits possible from one of India’s largest fashion retailers. Simultaneously, Koovs has announced an additional £10m equity raise at 15p per share. With the capital and the partners, Koovs now has the substantial platform on which to build India’s leading fashion e-tailer and has financially de-risked the whole venture.
Koovs has today announced a major deal with Hindustan Times Media (“HT”). HT is taking a substantial stake in Koovs in exchange for advertising and marketing credit, providing a cornerstone investor for Koovs’ fundraising and endorsing Koovs’ strategy to become a major player in Indian fashion e-commerce. We would expect this deal to provide significant encouragement to other investors looking to fund Koovs’ next stage of development. We have not yet adjusted any of our forecasts as the deal remains conditional on further fund raising, which has not yet been agreed – but the company remains confident that terms will be agreed.
Koovs sells affordable western fashion online in India. It has an established customer base of half a million active users and has been growing brand recognition rapidly. It has achieved the highest net promoter score (NPS) across its vertical. Its success will come on the back of the growing Indian economy breeding millions of online shoppers. Having spent a few days with Koovs in Delhi, we believe all the ingredients are in place; only the pace is uncertain. To exploit this opportunity, Koovs needs to raise a substantial amount of capital.
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