eCargo Holdings Limited (ASX:ECG) Group CEO Lawrence Lun discusses recent results, strategy, opportunities post lockdown and milestones ahead.
Tim McGowen: Today, we're talking to eCargo Holdings (ASX:ECG). Market cap of around $30m. The company's an ecommerce and offline sales enabler that helps brands sell more products in Asia, particularly China and Australia. We have with us the Group CEO, Lawrence Lun. Lawrence, nice to see you again. Welcome back to the network.
Lawrence Lun: Thanks, Tim, for having me.
Tim McGowen: Lawrence, for those investors who don't know the eCargo story, can you talk us through your business model?
Lawrence Lun: Yes, Tim. So, eCargo helps brands get into Asia, primarily focused in China. And how we do this is we provide solutions across supply chain, distribution, marketing, and sales services. Now, since 2014, we've helped over 80 brands enter the China market. And across industries in health and wellness, personal care, baby and maternal, food and beverage, as well as fashion and apparel. Now, eCargo also has a proprietary technology arm that develops platforms to allow brands to sell direct to consumers as well as direct to distributors. These platforms include… First one is eCoreOS, which is a platform we've launched since 2014 as really an online order management and warehouse management system, allowing brands to have access to over thousands of online channels in China, just through leveraging our warehouse facilities in China. Second one is our B2B distribution platform, which used to be called "JJX", but we've rebranded as "Flow" this year. And it's really a B2B trading platform for suppliers and distributors to connect with each other while eCargo provides all the services in between, such as supply chain, credit management, as well as logistics. Lastly is our direct-to-consumer online marketplace solutions, which we've utilised to launch our own platform, which is called "PJF Wines" back in 2021, and now has become the leading cross-border online marketplace for fine wine into China. So, all in all, we are a full-service partner to help brands access the China market as well as other parts of Asia a lot quicker, and to build their sales in a more accelerated manner.
Tim McGowen: And Lawrence, you've recently announced your full-year results for 2022. Can you talk us through some of the highlights?
Lawrence Lun: Yeah. So, in 2022, we've sold our Amblique Australian business, which means that this year is actually our first year that we've actually published our financial performance purely on the China business. Now, I'm pleased to say that this year in 2022, we've achieved revenue growth of over 43 per cent and profitability across all our business segments. And this is really contributed by two major factors. One is our trading and distribution portfolio of brands that are still high in demand by Chinese consumers. And second is our B2B distribution platform called "Flow". Now, with our B2B distribution platform, Flow, having operating for the full year in 2022, it really helped us to grow our revenue and at the same time scale our business. So, you'll see it that in our operating expenses, we've dropped about 17 per cent. So, all in all, our net profit contribution on just our continued business, so excluding the sale of Amblique, went up about 400 per cent, which is about Australian $820,000 versus the year before it was only about $170,000. Now lastly, as a touch on, is that we are very strong in our balance sheet position right now, so we'll continue to invest in our technology, as well as grow profitability in the business this way.
Tim McGowen: And, Lawrence, you touched on your results. Looking ahead, what are some of the key drivers looking forward?
Lawrence Lun: Yeah, so in eCargo, we can really summarise as two major business segments. One, what I call the trading and distribution side of the business, and the other one is called our technology platform business. So, in our trading and distribution side of the business, where I see key drivers of growth is going to be in our exclusive brand portfolio that we've been able to acquire new brands in this portfolio that we can offer to our Chinese buyers, as well as Chinese consumers. And these are all products and brands that are very highly sought after by China's consumers due to a shift in consumer behaviour. Consumers these days are more health-conscious. They care about products that they intake. So they're always looking for something better quality. So our strategy since end of 2021, we've actually signed on a number of new brands that are supporting our growth in our business, and we see that, going forward, will be still a major contributor. As well as we shifted the strategy around brand acquisition. So, we used to really focus on bringing on new brands into market, but now China, after so many years, there's an abundance of brands already in market that now we're focusing on brands that have already been in China and we're helping them to really take over and grow their business. And these are some of the new brand portfolios that we've announced in our recent performance. In our proprietary technology aspect, we'll continue to see growth in our B2B platform, Flow. Flow has acquired a number of new suppliers that are in new industries, so in fashion, apparel space, as well as semiconductors, which have now exclusively used our service from Flow, including supply chain management, credit management, as well as logistics services. So, this is where I see major factors as our key drivers for growth in the coming years.
Tim McGowen: And, of course, China had some fairly strict COVID restrictions in place. It's now all opened up. Where are those opportunities emerging for eCargo?
Lawrence Lun: Yeah, so China's been in COVID lockup for three years, right, and this is where we've seen a lot of consumer behaviour shifts from offline to online spending. And online has always been a large proportion of retail sales, but we saw that even more happen during the COVID period. And we also saw domestic consumption fall, right, especially second half of 2022, where we've seen, in terms of… online sales and offline sales across the board has dropped. So, with COVID restrictions now finally lifted, there are a couple of opportunities that we see that will benefit eCargo going forward. Number one is we expect domestic consumption to return, and probably at a steadier pace. And really where we probably see growth happen will probably be in the second half of this year. But this will contribute in terms of our offline channels that we've had, because offline has generally been weak over the last three years due to COVID restrictions. But, when lifted, we see higher demand coming, and we already kind of see that coming already with better products that these offline channels are looking for. Second is, because I mentioned before, consumer behaviour has shifted to be more health-conscious, now consumers are looking for products that are probably higher, better quality, overseas, in areas such as health and wellness, as well as personal care, and all categories that eCargo has been focusing on over the last 24 months. Lastly is you'll see a return of Chinese tourists, right, travellers, finally going overseas. And I see that there's an opportunity for brands to capture here by spending a bit of marketing to kind of capture the attention of these Chinese travellers when they actually come to their countries. And, therefore, these are services that all eCargo can provide. And we see that as a benefit with the COVID restrictions finally lifted.
Tim McGowen: And, Lawrence, just finally, as we move into 2023, what are some of the milestones you're hoping to achieve?
Lawrence Lun: Yeah, absolutely. So, our strategy has always been to develop and invest on our distribution platforms, right, leveraging on what we have in infrastructure, data and talent. So, what that means is we'll continue to invest into what I'm calling a 360-degree digital ecosystem of platforms that we've created to offer to our brand principals. And this will already include what we have in our B2B platform distribution flow, our D2C marketplace solutions. We're soon to launch a social commerce platform that will be focusing around social commerce, given the rise of social commerce in the region, as well as our existing eCoreOS, which is our online order and warehouse management system. We finally have a full suite of products that we can offer to brand principals to help them drive sales in a more accelerated manner. And how this will contribute to eCargo as well, with our brand principals generating more sales, it has incredible value that eCargo can capture in our business segments that we offer.
Tim McGowen: Lawrence Lun, thanks for your time.
Lawrence Lun: Thank you, Tim, for having me.
Ends
Copyright 2023 – Finance News Network
Source: Finance News Network
