Potential catalysts, page-16

Circling back to the triggers for a RE:RATE, I'd like to spend some time discussing Point 2. getting the Company cashflow positive.

At a high level this only requires two key things:
- Reducing expenses
- Increasing revenue & margin

In respect of reducing expenses, pretty much anyone can do this. The trick is doing it a way that does not impact growth. Time will tell how SV has gone on that front. My expectation is that an almost equal amount of revenue would have been lost to achieve the savings as a business unit was closed down. The silver lining to this is that, this probably dampened the underlying revenue growth rate. Based on the previous write downs of the D2C division, I'd expect the division wasn't generating any growth and was most likely dragging the overall result down. Therefore the normalised operating revenue growth in Q2 was probably much higher than 13% reported. In any instance the upcoming release of the half year report should provide some clarity on what the actual burn rate is and how close the company is to breakeven / profitability.

In terms of increasing revenue and margin...at the moment, the majority of the revenue is generated by the Fulfilment division. Therefore this division has much greater leverage when it comes to moving the dial.

For example, if MP increased GMV by $7m per quarter (double current sales) it would increase revenue by $175k / qtr at a blended margin of 2.5%.
Whereas, if the Fulfilment division put their rates up by say 10% it would increase revenue by $650k / qtr or $2.6m per year. The majority of this would flow through to the bottom line.

The last rate reported rate increase in the Fulfilment division took effect in June / July last year. If SV is making the tough calls required to turn the business around, then surely a material rate increase is on the cards.

In fact, to encourage more Marketplace participation from Fulfilment customers (overlap was last reported at being <10%), introducing a tiered rate card with much higher rates for non-marketplace users could help both divisions perform better.

I'm therefore adding Confirmation of a Rate Increase to the list of potential catalysts.