Written on the 24 January 2017

REDBUBBLE, the online marketplace for independent artists, will miss a series of forecasts set out in its IPO in its first-half results due late next month.

In unaudited market guidance released today, the company (ASX: RBL) says it will miss forecasts on gross transaction value, revenue, margins, profit, and operations expenditure.

Gross transaction value (GTV) for the first half of FY17 is expected to be $98.6 million (up 22.8 per cent on the previous year), but $11.6 million lower than the expectations underpinning the IPO forecast.

The company's 38.1 per cent growth in gross profit to $28.3 million was a 47.7 per cent growth on constant currency basis compared to forecast growth of 50.4 per cent.

Additionally, the company will make an EBIDTA loss of $1.1 million for the half, compared to a $500,000 forecast profit for the period.

The company says the strong Australian dollar impacted performance. Foreign exchange changes account for 29 per cent of the difference between its IPO forecast GTV and what was achieved in the first half.

Martin Hosking (pictured), CEO, says he is disappointed the company has fallen short of growth targets, but is pleased with the continued "resilient progress" made by Redbubble during the first half of FY17, despite significant headwinds.

"We experienced stable growth throughout the six months. Importantly, the growth in gross profit after paid acquisition ($21.7 million, up 33.7 per cent) combined with lower operating expenditure growth reflects a business scaling to profitability," he says.

Another headwind has been the quick shift to mobile traffic, which has a short-term impact on GTV as non-mobile devices convert more easily to sales.

However, the company expects to profit from this shift in the long run as mobile grows in dominance.

The company also blames macro-economic uncertainty in its two biggest markets, UK and United States, for slowing the company's predicted growth.

Looking ahead, Redbubble expects its full-year GTV to be in the range of $175 million to $185 million, compared to the $215 million forecast in its IPO.

Revenue is expected to be $140 million to $148 million compared to the IPO forecast of $172 million.

The 10-year-old company will increase its marketing spending $13 million but is cutting operating expenses to between $44.5 million and $45.5 million compared to the $47.4 million it forecast.

Redbubble is trading down 5.79 per cent at $0.895 per share this afternoon.





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