Why Ruslan Kogan’s results show he spotted a bargain buying Dick Smith

Ruslan Kogan (r) fishing with his dad Alex. Image: Supplied

Kogan.com’s 2016 purchase of the Dick Smith online business shows that in addition to offering bargains, the company has a sharp eye for spotting a bargain itself.

The company smashed market expectations for its half-year results this morning, as revenue increased by 137.9% to $143.9 million in the first half FY17 and it’s a reasonable assumption the Dick Smith part of the business made a key contribution to that growth, despite its failures as a bricks and mortar retailer during its previous life as an ASX-listed entity.

Kogan.com’s active user base increased by 37% during calendar year 2016 and now stands at 830,000. It’s unclear how much Kogan’s purchase of Dick Smith’s online assets contributed to that number – there’s no mention of Dick Smith in the company’s half-year report, but it certainly looks like a nimble and opportunistic acquisition by Kogan that had a material effect on customer numbers and sales figures.

Kogan snapped up the Dick Smith Electronics online business for $2.61 million in March 2016, and it became operational two months later. The assets purchased included the online mailing list of Dick Smith customers.

A spokesperson for Kogan declined to comment on the contribution to half-year sales revenue from the Dick Smith online store. But based on early projections from the middle of last year combined with the red-hot sales figures released today, it’s likely that Kogan has already reaped a tidy return on its Dick Smith investment.

Kogan’s 2016 Annual Report stated that the launch of Dick Smith had generated sales of $6.5 million in under two months to the end of June 2016.

Extrapolate that out over the subsequent six months reported today and that’s an extra $39 million in revenue. With 18% gross margins announced today – 2.8% above the prospectus forecast – that’s around $7 million, which suggests a pretty fast ROI.