Looking at aggregate figures risks missing some important...

Looking at aggregate figures risks missing some important operating trends, notably deteriorating unit economics.

When you provide a service from which each of your customers generates 30% less revenue for you than he/she did 12 months ago, and 45% less than peak levels, then you have no choice but to drive down unit costs (which leaves you in a squeeze when it comes to being able to make much-needed investment in your business just in order to remain relevant, let alone become all-conquering).

Which is why SWF management was forced to come back to equity market for capital in the last quarter; it knew it had to invest in the business in order to attempt to arrest the decline in unit revenues, which have been on a secular decline since the Covid-peak in JH2020 (see blue columns in the chart below).

For there is only so much juice that can be squeezed out of the unit cost lemon, which is what has been happening between JQ20 and JQ21 (the red columns).

But obviously that isn't sustainable and - with the cost rubber band having become fully stretched -  management bit the bullet at the end of FY21 and raised the money to throw at the problem - Staff and Admin expenditure rose by a significant 53%, and Advertising/Marketing spend almost trebled, in SQ21 vs JQ21

That sharp increase in costs, not just in aggregate but also on a unitised basis), combined with the decline in unit revenues, resulted in a cash loss of $10/customer in SQ21 (as can be seen by the black line):





Akin to a duck facing the opposite direction of the flow of a river, that remaining stationary only because it it is paddling furiously below the surface of the water, SWF looks like a running-harder-to-stand-still business.

Until there is clear evidence of a sustainable opening of the Revenue-Cost jaws, it's difficult for this analyst to envisage the stock outperforming.

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