With its business catapulted by the pandemic and a massive shift towards e-commerce shopping, Mailpac Group Limited is looking to acquire an existing e-commerce platform as it looks to broaden its reach across the country and Caribbean region.
The company, which provides international and domestic courier services for persons ordering goods from various businesses, including Amazon and Pricesmart, has experienced a surge in growth as more consumers choose e-commerce to source their products for their everyday needs.
Following a multimillion-dollar expansion in 2021 to accommodate greater capacity, Mailpac is now looking to build on its pillars of growth through organic and inorganic means.
“Our third pillar of growth will come from acquisitional growth that the economies of scale will provide. Having settled into the realities of a post-COVID world, Mailpac is again looking to leverage its proven technologies and strategies across other platforms and geographies. Accordingly, we’re actively in dialogue with an existing e-commerce platform that we believe will flourish under the ownership and leadership of the Mailpac Group,” states executive chairman of Mailpac Khary Robinson at the company’s first annual general meeting, which was held in a virtual format.
Robinson is the executive chairman of Norbrook Equity Partners Limited which has notable businesses such as Express Fitness, Hertz, Pure National Ice and Epay.
When pressed by a senior investment strategist about infusing Mailpac with leverage to grow the business, Robinson rebuffed that statement as he desribed Mailpac as being a strong cash flow generator. However, Robinson did note that if any of its acquisition targets were to bear fruit, it would consider taking on debt as part of the capital mix for that deal.
Mailpac had JM$191.26 million in cash at the end of the second quarter ending June 30, 2021. Net profit was flat at JM$198.37 million for the six months.
Although Robinson wouldn’t get into the details of the target, he explained, ”We would not acquire a business just for its customers as we find that, at times, customers are transient in our industry. An acquisition would have to be for some other fundamental value proposition that allows Mailpac to expand its scope or scale in a more permanent manner.“
Despite seeing its cost of sales jump by 35 per cent to JM$244.87 million in the first quarter, the company has spent JM$22 million in capital expenditure and leased new properties to allow Mailpac to sufficiently manage the increased business activity. As a result of these investments, Mailpac’s cost of sales only grew by five per cent relative to its second-quarter revenue growth of 16 per cent to JM$426.05 million.
Mailpac isn’t exposed to significant movements in sea freight costs as its business utilises mainly air freight to bring goods into the island.
With the recent seven no-movement days imposed in Jamaica, Robinson noted that there is a correlation between lockdowns and curfews with respect to business for Mailpac Local. On the eve of the new lockdown measures, Mailpac Local sent out a message to customers that there would be delays in processing orders due to the immense demand from customers.
“We are likely to announce a major change in that business soon that will see Mailpac Local offering significant reduced pricing for groceries. This would allow us to not only offer safety and convenience for our customers, but also the trifecta of value of safety, convenience and savings. We made a significant investment in expanding the capacity with the right people and the right processing capabilities and technology has put us in a much more favourable position,” noted Robinson.
Even with the company noting that the reopening of the country might reduce consumer dependency on online shopping, Robinson noted that short-term guidance is less important rather than the long-term outlook. He further emphasised that Mailpac was not afraid to spend and invest in the business as they were in it for the long haul.
“Managing through COVID has been a unique exercise for us as a management team. Everyday there are new learnings and there are increased unknowns. Our strategy was not built for short-term economic and social changes but was built for long-term sustainable growth as ecommerce further evolves as the dominant form of retail in the region. E-commerce has only scratched the surface in the Caribbean and we plan to be instrumental in ensuring it continues to be a significant value driver for our customers as well as our shareholders. We’re going to ensure that we continue to expand and refine our platform so that 10 years from now, you as shareholders can look back and say that we invested in our margins properly.”