Higher expenses resulted in a 75% cut in net profit to $18.5 million

Durrant Pate/ Contributor

Logistics company, Mailpac Group is feeling the pinch of its integration of MyCart Express, with its profitability being eroded during the June quarter.

Mailpack, whose principal activities are the provision of international and domestic courier and mail order services, as well as online shopping, has integrated the assets and operations of MyCart Express, which it acquired in March this year.

MyCart operations were fully absorbed into the Mailpac Group on April 1st, 2024 but this has come at an added cost, which has impaired its bottom line. Executive Chairman Khary Robinson explained that “the cost of the acquisition and integration had a one-time adverse impact on the company’s financial performance this quarter”.

Gross margin for the logistics company fell due to integration costs related to bringing the two operations under one platform, particularly in package clearance and logistics. However, these enhancements have bolstered the overall service capacity and contributed meaningfully to future performance.

Expenses almost doubled

Operating expenses for the quarter climbed to $220.3 million, reflecting a 95% year-over-year increase. This rise was largely attributable to new fixed costs related to MyCart’s 13-store operation and meaningful acquisition and integration costs, including legal fees, personnel training, system upgrades and restructuring initiatives aimed at harmonizing the two brands. 

Robinson, in his foreword to the June quarter report, comments, “While these expenses resulted in a 75% decrease in net profit to $18.5 million, they represent necessary investments expected to drive greater operational efficiencies and profitability in the future.”

There is some good news from the consolidation in that with the second brand MyCart, the Mailpac Group is now better positioned to expand its market share and customer-affinity by positioning each brand to best serve its core market.

As such, Mailpac is being positioned as a more high-touch, service-driven client while MyCart is being packaged for the value-driven, budget-conscious consumer. At the end of the second quarter, Mailpac recorded revenue of $623.9 million, a 54% increase from the prior year.

This growth was driven primarily by the strategic integration of MyCart Express but was also positively impacted by the continued robust performance of Mailpack’s core brands. As of June 30, 2024, Mailpac’s total assets were valued at $841.6 million with a cash position of $161 million. Shareholder’s equity stood at $693.6 million.

While the June second quarter marked the first quarter following the acquisition of MyCart, the period allowed Mailpack to assess the performance of both brands simultaneously and began the integration process. Given the findings, the Mailpack Executive Chairman anticipates significant synergistic benefits, enhanced revenue streams, operational efficiencies, and increased shareholder value from the transaction.

The company has expressed its confidence in the decision to bring both brands under the same umbrella, which should position the group for continued growth, industry leadership and future success in e-commerce.