Thank you for standing by, and welcome to the Temple and Webster Group Limited Full Year 2021 Results Investor Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. I would now like to hand the conference over to Mr. Mark Coulter, Chief Executive Officer.
Please go ahead.
Thank you. Good morning, everybody, and thank you for your time today. This morning, Mark Taylor and I will take I'll begin by giving you an overview of the year, after which I'll hand over to Mark to take you through the numbers in more detail. I will then quickly take you through our strategy before throwing it open for questions. Before beginning, I would like to acknowledge the difficult period that many Australians are currently living through.
At Temple and Webster, we do not take for granted how fortunate we are to still be able to trade during these lockdowns. Our singular goal is to keep delivering a great customer experience and hopefully have our customers enjoy their homes even just a little bit more during these challenging times. Turning to Page 2 of the deck, you can See that once again Tamsin Webster has delivered a record set of results with full year revenue up 85% to 326,000,000 This growth is across all major categories, geographies, channels and demographics. Our market remains massive and subject to accelerating tailwinds And we are well positioned financially to capitalize on our scale. Importantly, we were a high growth business pre COVID growing 30% to 50% given on any given period.
And while the lockdowns have no doubt accelerated the underlying trends of the shift to online shopping, What was pleasing to see was that we maintained growth when there was little to no restrictions on retail. Our final quarter actually grew a healthy 26% up in the final quarter of FY 2020, which in turn was up 130% on the final quarter of FY 2019. What we've seen this year is that the growth has translated into operating leverage with EBITDA up 141% to $20,500,000 We want to reiterate that we feel that this is the time to be reinvesting some of this profit into growth initiatives to cement our market leadership. Mark will take you through these in more detail. On Page 5, You can see our customer chart.
Active customers are up 62% year on year with growth even on COVID periods from last year. Now it's worth noting that active customers are mostly a function of first time customers, Since if a customer repeats in the period, they are unaccounted once. Obviously, the final quarter of FY 2020 and the 1st 2 quarters of FY 2021 delivered a massive amount of first time customers as you can see on the right hand chart. This was a result of many Australians turning to our channel Now we were never going to be able to replicate that kind of once in a generation growth in 1st time customers and we've been open about that. Our job was to give those customers a great experience to get them to continue shopping online and more relevantly keep shopping with us.
The great news is that you can see on the right hand chart that orders from repeat customers are growing quite significantly and have now overtaken first time customers for the first time. This goes to our public position that we feel COVID has resulted in a permanent shift up the adoption curve. The growth in repeats will help us maintain a high growth rate even while working through the lapping of the spike in first time customers from last year. As previously communicated, we've begun to invest into building our brand with the goal of becoming the top of mind retailer for Strand Shopping for their homes. While we have a long way to go on this journey, the return on investment from our TV experiments continues to be positive.
We've expanded our brand marketing team And now preparing plans for future campaigns. On Page 6, you can see that as predicted, the customer acquisition costs have increased due to These longer payback periods longer payback challenge. However, pleasingly, this has somewhat been offset by a 12% increase in annual revenue per active customer, which is now over $4.25 as you can see on the right. This is due to a higher repeat rate and a higher average order value for both new and repeat orders. While a lot goes into this, it indicates customers continue to get comfortable We are doing a better job at driving cross sell by surfacing more relevant items from our catalog on-site and in our various marketing channels.
Before taking you through some of the notable launches of the year in more detail, it's worth commenting on the customer satisfaction chart as measured by Net Promoter Score on the right of Page 7. The Net Promoter Score is a standard measure of customer satisfaction Ranges from negative 100 percent to a positive 100%. So a score of 65% is actually world class, especially for an online retailer. Look, unfortunately, the consequence of a record peak period towards the end of the first half was that the 3rd party logistics network and our internal customer service team stretched beyond breaking point. This was further exacerbated by a crunch in our capacity at our 3PL warehouses due to an incredible spike in demand for warehouse basins around the country.
Over the half, we have increased our capacity in our 5 warehouse locations and worked hard at improving our internal and logistics partner systems and processes to allow for smoother scaling. The good news is that our NPS has returned to our target levels. Now while we have no immediate plans to our own sheds or trucks, We continue to investigate how we can take more control of the Skolent journey to ensure we are delivering a great customer experience. Our own inventory program or private label has been a strategic focus for the business for Warner. We have publicly stated a goal of getting the share of revenue to these products to 30%.
And it's great to announce that we grew the share from 19% to 26% in the year as you can see on Page 8. This was done by increasing our buying and merchant planning teams, diversifying our factories outside of China, adding multiple warehouses including now in Sydney, Investing in our data and analytics to improve forecasting accuracy and expanding our quality and compliance team. We are able to make a step up in inventory while maintaining our target Wix cover and a very low level of aged stock. Importantly, we have no plans to change our negative working capital and asset light model. However, our conservative level of inventory allows us to take Another goal has been to launch both iOS and Android apps and target a native mobile customer experience.
We now have apps in both app stores The Ios app, which was launched during the first half, now has more than 4,000 reviews with an average rating of 4.8 star out of 5. The adcast is more engaged customer with a high conversion rate and repeat rate. Interestingly, now more than 50% of customer orders, Consumer orders, so excluding B2B are now placed on a mobile device, which we expect will only increase. One of the benefits of the mobile experience, both app and mobile website, is the ability to use functionality such as the phone's camera to use augmented reality. While there are many use cases for augmented reality, one of the most straightforward ones is seeing an Object New Home, a feature which is now being piloted as detailed on Page 10.
With AR, customers can judge the look of the item and its size relative to their room or other pieces of furniture. We believe features such as AR can only help in reducing the barriers to buying online, building a library of 3 d assets remains the focus of the business to enable this use case. Along with AR, during the year, we launched an artificial intelligence interior design service, again aimed at reducing friction of shopping a mine. It is in partnership with an Israeli startup in which we have made a second round of investment after a successful pilot and service. The first version of the product is a 2 d version with flat images as you can see on Page 11.
The next version will be using our 3 d models to generate photorealistic room. We love this service as it exposes our huge range of beautiful products across our many categories to our customers. And after difficult to enter the previous financial year, it was great to see our business customers come back in full force during FY 2021, with our Trade and Commercial division growing 110% year on year. Again, it's worth noting that these are great customers with high repeat activity and large order sizes. This year, we continue to focus on the rebounding residential property development sector and the Regional Hospitality Industry.
Our range and flexible go to market model has allowed us to quickly pivot and chase these growth sectors. I'll now hand over to Mark to take you through the numbers in more detail.
Thank you, Mark. Good morning, all. So as we've stated publicly, our medium term strategy is all about growing as fast as we can And continuing to take a disproportionate share in our market. So it's pleasing to present some results today that reflect that strategy. I'm going to start on Page 15, which runs through the profit and loss results for FY 'twenty one in comparison to FY 'twenty.
Revenue for the year, as Mark mentioned, was up 85% year on year to $326,300,000 and Q4 was up 26% year on year, which was a pleasing result given Q4 last year grew 130%. In terms of margins, gross margin percentage increased from 44.6% in FY 2020 to 45.4 percent in FY 2021, primarily driven by increased Required us to transfer stock Now by June 30, the issues were resolved and alternative percent in FY 2021 from 11.9 percent in FY 2020. This is primarily due to the step up investment of $3,000,000 in TV in FY 2021. This is certainly a medium which we will continue to invest further in FY 'twenty two. Contribution margin after 1 off distribution costs came in at 14.6% of revenue or 15.5% before the 1 off distribution costs.
Our updated short to medium term target range is now 12% to 15% to allow for our stated reinvestment strategy in which we will be aggressively going out the market share through better pricing, tactical promotional activity and increasing investment in brand building marketing initiatives. This reinvestment activity will also extend into the fixed cost line. Although FY 'twenty one saw a reduction in fixed As a percentage of revenue, now down to 7.9% versus 10% excluding share based payments. We expect fixed costs as a percentage of revenue to land Somewhere between these two points in FY 'twenty two as we continue to invest in areas that will build essentially build strategic moats around our business. As a result, the group produced a record level of profitability on the prior year.
So where to from here in terms of our financial profile? So if you turn to Page 16, we have reiterated our commitment to above market growth and reinvesting for the future to be the number one player in our home market. So what does this mean? It means we will be running the business to the highest possible revenue growth rate, all staying profitable and staying within our 2% to 4% EBITDA range. Reinvestment will take the form of more variable type investment, as I mentioned Before pricing, promotional activity marketing and more fixed cost type investment, primarily people in areas Such as mobile technology, augmented reality, AI, 3 d, our trading commercial division, improving our delivery experience, growing the size of our catalog in our private label ranges and data and personalization.
This strategy was deployed in the second half and will accelerate our growth and competitive positioning. Longer term, we will take advantage of our market leadership position by leveraging our scale and strategic notes by improved trading terms, Lowering our marketing spend as a percentage of sales as a result of much larger brand awareness and lowering our fixed costs as a percentage of sales as the natural operating leverage comes through. Page 17 shows our current balance sheet position, which Continued to strengthen. Cash ended the year at $97,500,000 off the back of a strong trading period, Capital raise which took place in July 2020 and the benefits of the Group's capital light negative working capital business model. In terms of outflows, we continued our step up investment in our private label range to complement our dropship range, which With really strong results across the board with private label now making up 26% of sales as we mentioned before.
We will continue to invest in private label where it makes sense to do so. However, we do not take an investment in private label widely. We have invested in a team of experienced buyers, the platforms that we're using, quality and compliance teams and have strict controls in place to ensure our key inventory metrics remain strong and the inventory we hold is low risk and it's high turn. Also, as Mark mentioned earlier, we have increased our investment in our Israeli based AI interior design startup. Initial investment was $500,000 And we have increased this initial investment by further $1,500,000 in July 'twenty one to accelerate their growth, but also the speed of product deployment.
So look, all in all, some really pleasing results off the back of a very challenging year for many people. We're starting FY 'twenty two in a position of financial strength with the balance sheet to take advantage of both organic and inorganic opportunities. I'll now hand you back to Mark.
Thanks, Mark. So before taking you through the strategy, it's always worth retouching on the On Pages 1920, you can see that we operate in a large $16,000,000,000 market, Fill in with a B. Importantly, this excludes any of our second or third horizon growth opportunities such as The B2B furniture market or the home improvement market is just currently sold online, which compares to circa 25% in the U. S, which is showing no signs of slowing down even in this point by the way. Millennials, the oldest of whom are turning 40 this year, which is either comforting or horrifying depending on which side of the fence you're on, We will be driving this penetration for years to come.
We believe that this high growth part of the adoption curve is the time to invest in scale and market leadership. This is the period where customers are choosing their trusted brands and we want to be that brand. We have a simple strategy Aligned on Page 21.
We want to have
the biggest and best range, Having everything you need for the home, importantly, the best bit of this means we won't list everything. We want to be seen as a place for quality, but at an affordable price. We want to be a source of inspiration in the place you go to when you want to make your home more beautiful. And we want a seamless customer experience, both at support level and delivery into the home. As Page 22 sets out, with scale comes benefits such as being able to forge close relationships, And obtaining better terms in exclusive product ranges, making bigger investments in the areas that Mark outlined.
In effect, the bigger we get, the better and stronger our customer proposition becomes, which is the flywheel effect. This is leading us to increase our market share. Page 23 is our 1 page growth strategy. Again, it's pretty simple and doesn't change that much. We want to keep improving our range to ensure it becomes and maintain it stays the biggest and best.
This includes expanding our private label range. We will be driving our digital advantage, including making better use of METs Better use of our immense amount of data through initiatives such as personalization. Half the country knows about us. We want the other half to. One of our key pillars is inspiration.
We've added editorial design, 3 d artists, video resources across the team. We'll be adding more of those resources. And as I said, we're in the process of building out a 3 d model library. We'll be improving our customer care teams, a better training and platform with specialization And we want to be seen as the home for innovation for delivery experience, particularly around bulky delivery, which is the hard bit. And of course, Trade and Commercial provides another growth market and we'll be building our team, building out a range and service proposition Trading update is on Page 24.
The year has started strongly with the revenue growth of 39%, that's from the 1st July to 24th July. We continue to experience strong tailwinds As I talked about the adoption of online shopping due to these structural and demographic shifts, the acceleration of those trends due to COVID, Next, increasing discretionary income due to travel restrictions and as we're all reading about the continued recovery of the housing market. As Mark has said, we will be continuing our investment strategy, investing into growth areas of the business, our online market leadership and drive market share. Now as always, a big shout out to the Tempur team. Once again, you have shown an incredible resilience.
While we have bounced in and out of the office, And you've had to cope with the business bursting at the seams. You've done so with the humility and grace and a customer first mindset. Thank you everyone for your time this morning. As you've heard another great year with record revenue, profit and customers. Our market serves a ton of growth there And we continue to make great progress on ensuring our customer proposition is the best in our category.
We will now take any questions you may have.
Thank Your first question comes from Owen Humphries from Canaccord. Please go ahead.
Good day, guys. And again, congratulations on another great results. Pretty much flawless. Just a couple of questions for me. I might just start just to understand the supply chain of your business.
Can you maybe if I go back and look at my notes from Many moons ago, you guys had maybe 600, 700 Supplies where you guys source from. Can you maybe talk through How that's evolved where we are today? Maybe talk a little bit around have you been able to diversify and maybe
It's a good question, Alan. The total number of suppliers hasn't changed that much, it's definitely grown from those numbers. So we've definitely added suppliers, but we are a bit militant about pruning the catalog and pruning supplies as we add to make sure the ones that we have are delivering not only the right product quality for our customers, but also the right operational Quality for our suppliers. And so we track how quickly the suppliers can fill the cancellation rate, the refund rate, They're quick with the answer, our queries, etcetera. So we have a scorecard by supplier and go through that every month our suppliers and the peak team manage their suppliers.
I think suppliers are not managing are meeting our operational KPIs, including things like average star rating by products and Any kind of issues around the product from themselves, we will delist. So it's a bit of Given taking the catalog at any given moment, some plies are coming on, some plies are coming off, we're putting in remediation where we try to fix them actually. But the total number has gone a bit, but definitely in terms of offshore diversification, You can see that the percentage of the businesses from private label has increased, Which means more of a business we're importing ourselves and within that we have made deliberate strides to diversify Our factory base, that's grown. And that's not because of any issues, but it's really a risk. As we get bigger, we want to make sure That we're not vulnerable to any particular market.
COVID has shown the world that On the single market or single supply chain can be problematic. So we are making a concerted effort to diversify that supply chain.
Okay. Good one. And just around
I would just sort of add one more very quick point, and that is all on the diversification Point that Mark made, which is really important for us from a risk perspective, but we've also done that on the drop ship side as well. So we're always evaluating How much particular drop shippers are making up as a percentage of our revenue. It's really important for us not to be single point sensitive to Any particular factory nor drop ship supplier as well. So we've got big diversification in terms of category mix and big diversification in terms of All of our suppliers, in particular categories, you'll have key accounts, but we don't have any drop ship supplies that make up A significant percentage of our revenue base, which is really important from a risk perspective.
Good one. And maybe just a quick one on private label. So private label nudging up to 26% of the growth. It's been pretty phenomenal the last 12 months. 30% is the target.
Is that A steady state target, particularly given the medium term.
It's look,
there's obviously there's pros and cons with private label. We mean importantly, when we talk about private label, we're not talking about our house label or white label because actually most of the site It's sold under brands that we've made up. It's actually we talk about private label, we talk about import, and that's products that are on our balance. But of 30% is a number which we think balances those pros and cons. It's a number which means that it doesn't flip our Working cat model to be a positive working cat model, so we can still fund our growth from cash flow.
So Look, I think it's a number which we think is a number good target for now. Obviously, within each category that It's into a different amount. So it's not that's an aggregate amount, but then every category has a different percentage level. We will keep monitoring that number and Update the market if we think that makes a change.
Okay, good one. And last one for me, obviously Wayfair Saw some very positive gains as they launched their mobile app. Can you just talk through, I know it's early, but around the different purchasing patterns Conversion rates through the app versus through, I guess, the desktop or mobile native, Just talk through ARPUs or conversion rates, if that's possible?
Yes, we don't disclose the conversion rate or ARPU by channel. I can say though, And what we said here and I said before that what we're seeing is the app customer is actually Converting to a higher rate is repeating more and is getting more engaged, and actually having a higher AOD as well. Now, Obviously, there is the great customers or the customers are fine and are naturally going to be However, what we try to do is isolate those customers and look at the same customers pre and post app usage. So it's actually same people, how do they behave Pre installing the app and how they behave post installing the app. And it does definitely look like the app itself is driving better behaviors, which means we We're pushing our customers.
So we have started marketing it. You can do so on your own back of the envelope. If you look at we've got 4,000 reviews, it means we have A lot more installed. So we're pushing it, our app install base is growing and once we've Tested the Android app a bit more, then we will start doing bigger scale marketing campaigns because we can promote both.
Awesome. Well done, guys. I'll step back in the queue.
Thanks, Alan.
Thank you. Your next question comes from Tim Lawson from Macquarie. Please go ahead.
Hi, guys. Just two questions for me. I've asked a It is in terms of the repeat versus first time customers. Is that sort of cross that line Earlier than you expected or was that sort of what you thought would play out?
I mean, obviously, the line the incredible period of first time customers growth that we've experienced last year Has led to a growth in repeat because all those first time customers because when all not a lot of them are now repeating, Which has been driving the repeat customer growth. So yes, it happened earlier than expected because obviously COVID wasn't in any of our plans. And the year we've had has been a phenomenal year in terms of customer acquisition. It was always going to happen at some point because it's almost mathematical that The once your installed base becomes so big, then the repeat levels are going to outweigh the first time customers. That's what happened Pretty much every business ever.
So do we still think that heaps of first time customers? Of course there are. And many customers that have transaction with us in the past that are repeat rates will most of the business will be repeat.
Yes, okay. And then just if you adjust for that $2,900,000 one off that the EBIT margin or EBITDA margin goes above Sort of 5% in the second half. Obviously, you're holding that sort of 2% to 4% sort of target range. The reason why it was on an adjusted basis still above 5% and can you just sort of talk to the mechanism to get it back below 4?
Yes, I'll take this one. Look, when we announced that, we were rolling out that strategy with throughout the second half to start playing within those ranges. So it does take a bit of time obviously to adjust your Investment and your spending to that sort of level. But I think now that sort of sets the tone for the next So a couple of years for us, 2, 3 years and then we'll sort of reassess things. And the investor will be going into those areas that we kind of spoke about before.
So there'll be I suppose a variable type investment, which will be focused on both promotions and pricing points, But also a fairly significant investment, a continuation and continued step up in terms of brand building marketing. So what that will do, That will naturally bring the contribution percentage contribution margin percentage down to within the ranges that we are talking about At the moment, and then if you kind of work back from that sort of 2% to 4% range, the residual investment is going into the fixed Cost based, which is primarily people and it's primarily people into the growth areas that we sort of spoke about before. So look, it's not easy managing a business to a particular profit outcome, but we're going to do our best to manage the business to that point and reinvest The leverage that we're building off the back of strong growth back into the business to really be driving that above market growth rate.
Yes, okay. And then just I
think it's worth noting obviously that everything takes time. In Real world, it's great to put out a plan, but everything in the real world, recruitment takes longer, building teams and technology, etcetera, takes longer. So There's a bit of delay in terms of some of our investment cash as well, which is just real world delay.
Yes. And then just maybe outside that the warehouse One off that you've called out, just general sort of cost pressures in the supply chain, what are you seeing there?
Yes, look, there's certainly some inflationary pressures that have been placed on a lot of businesses throughout FY 'twenty one. If you look at container costs, in particular, there are multiples as to what they've been historically. A lot of that is a result of a variety of different things. So we're certainly not immune to those increases and we'll be watching it. We'll be watching it very closely.
Thankfully for us, we have a business model that in terms of our supply chain is quite diversified. So obviously, 70 5% to 4% of the business is dropship and then the residual is private label. We'll feel a direct impact on private label because we're sourcing directly from factory, we're managing the inflows and outflows or the inflows. Whereas drop ship is a little bit different. We're not really seeing material price inflation coming through the drop ship network.
And I think for us, Given how material we are now to most of our suppliers and the growth that we're delivering to those suppliers, I think that's kind of helping us in terms of Our terms with our dropship suppliers, but certainly on the private label, there's been some inflationary pressures that have come through in FY 'twenty one. And look, we'll wait and see how Sort of plays out in FY 'twenty two. We're watching it very closely. Thankfully for us, we've got quite a flexible business model, quite a it's The cost base is very variable. So we can scale up our pricing points quite quickly.
We can scale up and down our investment in marketing and branding quite quickly. We can scale up our fixed cost investments up and down quite quickly. So that for us on a relative basis to
our peers probably puts us in a pretty good position.
Okay. That's great. Thank you.
Thank you. Your next question comes from Wissam Kesselani from Jarden. Please go
ahead. Yes, good morning, guys.
Can I ask around the trading through June July? Obviously, a very strong start To this financial year, but compositionally, does that look any different to trading over the last 12 months in terms of The types of customers, the demographics or the categories that are coming through?
Look, With lockdowns, there's always a little bit of spike in things like gym equipment and things like that, which is a tiny part
of our
sales. And office category does better obviously with the home office, but broadly it's pretty consistent to In our general category mix, we're at the size now. There's not a huge there's not huge shifts in those categories in month to month.
And the trading in the non lockdown states, has that sort of been is it trading is the July update sort of indicative Right. And broadly across the business or is that due to what's happening in Sydney?
I mean, obviously, the parts of the country which Can't go to stores, growing faster, I mean that's been every lockdown, but now we've seen growth around the country. So it's not We've seen that throughout the year. There are some areas of the country which actually have been No, not affected that much at all and they're still growing.
Okay, great. And then you touched on some Opportunities, inorganic opportunities, if they come
up, are you able to elaborate
on that in terms of where the priorities are And whether there are indeed opportunities to deploy your cash balance in a broader sense?
Yes, look, we're always looking. There's always opportunities out there, being the Largest online retailer being listed and having a good balance sheet obviously It helps our position and we do tend to see pretty much everything that is out there. For us M and A It isn't the strategy. M and A for us is a tactical response to a strategy. So we're always working with our different departments to look at Their growth strategies and whether our M and A can assist or if it's something that may hinder rather than help.
So we'll continue to be assessing a number of different opportunities as we are all the time. Having the cash on the balance sheet means a couple of things. It means that We can transact in a way in which it means that there's going to be less dilution for shareholders to start off with. But secondly, it means that we can act quickly. And a lot of the opportunities that we've seen in the past, particularly the opportunistic ones, you've got to act pretty quickly.
So having that The balance sheet will allow us to do it. But we're very cognizant of the fact that these types of deals aren't easy. And usually they're not a slam dunk. There's a lot of work that goes into them. So we will make sure We're very diligent in what we're looking at, who we're looking at, why we're looking at them.
For us, I think in terms of the landscape, We've said it in the past, I don't think it's going to be anything sort of transformational for the group, but it's going to be more about sort of bolt on opportunities that are going to be Some of those capabilities or some of those strategic modes for the business. It could be technology led, it could be AI, AR, personalization data led, Could be logistics led to improve our last mile logistics, could be in the B2B, a lot of opportunities in the B2B space. So I think I'm sure there'll be something done in the future and utilizing that balance sheet the way we're currently assessing a number of those opportunities. Thanks
Mark. Thank you. Your next question comes from Ian Noorozi from Barrene Joey. Please go ahead.
Hi, guys. Hope you're well. Just in terms of the July 'twenty one update, are you seeing a similar marketing return on investment And the 2.3 times you've done during the half or have you sort of further stepped up your customer acquisition cost to get that customer transacting fleet?
I mean, we don't disclose our ROI by month, that gets disclosed, Release the report, but actually, I've only been on TV 1 week of this month. So that gives you an answer, I guess.
Perfect. Thanks. And second one, just in terms of your brand awareness, I think you called out it's about 55% and it's pretty similar to the first half. Is that 55% for the particular half?
Or I mean, I would have put That's from the number. That's right. So we will be we want to do the brand awareness Annually, I think any shorter periods, it kind of there's too much fluctuations and noise and you have to get campaigns at times. So we will be releasing that brand awareness Result each year, once a year.
Yes, perfect. And last one, just in terms of the customers you've acquired during sort of calendar 2020, that The COVID peak period, what are you noticing in terms of their behavior of those cohorts? Your average revenue per customer is obviously up strongly, which likely suggests that They're giving you strong sort of characteristics. Can you just run us through maybe some numbers of qualitatively how that sort of transaction plays?
Yes. No, this is a great question. So, yes, the cohorts that we acquired during the COVID period, So end of FY 'twenty and the first half of FY 'twenty one. Definitely, you can see have a higher repeat rate. So they're Ordering more frequently and spending more when they do, both in terms of the type of item they spend and the number of items they put in their basket.
So All in all, pretty good customers. I think it goes to a couple of things. One is, I mean, I've got to take credit for everything we do, but a lot of large part of But there is definitely things we're doing better. So we're doing Finvark, the AI interior design service, so we're servicing more of the content. So if you're shopping For a coffee table now, we're showing you the lamp and the rug and the sofa that goes with it, so you can complete your room and that's generated on the fly.
So things like that, we're doing cross sells. Actually, as you check out and other parts of the site, We're doing more personalized marketing and communications. In your email, you'll see kind of product suggestions based on what you bought or what you've looked at. So there's lots of stuff we're doing to drive Cross sells and items basket. Also in terms of the actual Dollar amount or how expensive an item is, we continue to focus on furniture.
We're experimenting with things like cap shipping, Okay. To reduce shipping as a barrier. So all in all, there's a lot of things we're doing. However, I think This is also an element of these customers are just better customers generally because early adopters tend to be a little bit more fickle, a bit Price sensitive, they're just by definition, they're an early adopter, so therefore they're probably an early Adoptive, other things and other competitors, whereas the kind of customers coming to market now are a bit stickier, probably a bit Wealthier and once they've had a good experience, they're going to spend more money in the channel and more specifically spend more money with us. So I think there's also That kind of as we move up the curve in adoption, you should see customers look better.
So I think it's a factor of both External and internal factors that are driving that. That's perfect. Thanks guys.
Thank you. Your next question comes from Scott Hudson from MST. Please go ahead.
Yes, morning, gents. Just a couple of questions. Firstly, surprised that there's no impact on the gross margin line from I guess what looks like a pretty heavy period of price promotions. Can you maybe just understand why that wasn't evident through the half?
Yes. Hi, Scott. You will actually see that come through. If you look at the Look at the margins coming through from the first half and second half. So there is a little bit of an impact there.
But they've held pretty strong. And like I said, in terms of some of the investments that we were making in the second half, a lot of that actually went into the marketing Why in terms of TV? I think you'll start to see some of the impacts or some of that investment In pricing and promotional points, us testing a number of different initiatives, particularly with shipping as well. We can see the direct correlation there between conversion and what we charge to be shipping. So we'll be testing a number of those types of initiatives in FY 'twenty two.
But We didn't go too hard in the second half, but certainly we'll start to be testing some of those things in FY 'twenty two. But in terms of that variable investment, the bulk of that variable investment above the contribution line will be in marketing.
Got you. Thanks.
And then I guess
in terms of Controlling that delivery experience, obviously, the cost you had to Incurred through the second half is indication that some of these things are outside of your control. I guess what are you doing Going forward to ensure that you don't have those negative impacts on NPS and I guess how do you take more control of that Delivery piece to customer experience stays strong?
Yes, that is the $64,000 question or the 65% NPS question. Look, to be honest, it's hard. Bulky delivery is hard. And if it was really easy, everyone would be doing it. So I kind of like hard things strategically, businesses should do Hard things, because if you can crack hard things, you've got a really solid moat.
We have been Pivoting the business or shifting focusing on furniture and bulkies for a while now for years. So There's a bunch of reasons why that is a good business to be in, but the con is that the logistics is hard. So We I mean the short answer of what we're doing is that we're scaling our capability in the area. So we've added People with significant experience in logistics into the team. We are now working much closely more closely with our logistics partners to integrate with them.
And actually to the point where we're Providing things like technology advice to those partners. We TBD how we What we do going forward, at the very least, I can say at the very least, we will be ensuring that we take more control over the delivery And that may mean actually making sure that we know and can control the various legs of the delivery Network from pickup to middle mile to last mile. Now that does not mean that we will necessarily have our own trucks doing any or all of those bits. It may mean for some parts, for some customers in some areas that has to be worked out. And it doesn't necessarily mean that we will have our own shares in the order and that We may have, but we are likely to have much tighter contracts and SLAs and dedicated partners running the bits of the fulfillment chain for us.
Essentially, what we're doing is that we're as we get bigger and we're increasing our sophistication, it's allowing us to actually start Putting in place the bits of the pieces to take us more to take more control and therefore ensure The customer experience. Now we're actually pretty confident we can do it without increasing cost per orders. We think we can do it While maintaining at least maintaining our costs. And so we should be able to avoid those kind of one off costs You've seen as we take more control and have make sure our partners are on tighter contractual positions. Look, as I said, the goal is customer service.
That's the number one goal. I'd probably pay a little bit more if we can ensure a great customer service. I think that's a business case in terms of repeat and everything else will pay for that. But we have no desire to become an asset heavy Company, we don't want to become a logistics company. We just want to make sure that we're controlling the end to end experience.
Thanks. And how long, I guess, before you have those contracts in place?
It's already starting to happen. So for example, the 1 of the 3PL, for example, has now opened a dedicated site for Temple Webster in Melbourne. That is our own site. It's run Based on the variable contract and the economics are the same, but it's outpaced. We get tighter control of those who work there, the processes, everything else.
So you can see through and that's a function of scale. We have to scale now to go. We want our entire site because we're big enough. We want you to still run it, so we're not just we won't change the economics, But we have tighter control over how that space operates and the processes put in place. That's an example of funding that's already happening.
It doesn't hit The actual cost base because it's the same model that is allowing us to have much tighter control over that fulfillment from that space. Great. And
then just the last one for me, I guess 26% top line growth through the 4th quarter, any noticeable Trends through that quarter, I mean was it fairly evenly spread month to month or was there any
So we announced our April trading, which is lower. You can see there was as the quarter went on, the growth rate improved, but that was that's also a function of April last year was the month that Basically the whole country was locked down. That was our fastest growing month and so that was the hardest. Obviously the harder the fastest periods we grew last year, the tougher it is to Right, it's math. So there are last year, there were higher than peaks and there weren't any troughs, but There were peaks and less peaky bits.
And the peakier bits are going to be slightly lower growth rate and the less peaky bits will be higher So there is a fluctuation throughout the year.
Yes, good. Thanks very much.
Thank you.
Your next question comes from Joseph Michael from Morgan Stanley. Please go ahead.
Good morning, Mark and Mark. Congrats on a great result. Just a couple of questions from me. Maybe first one just around the mobile apps. I guess now that Android app is up and running, do you have plans To go harder on marketing and push uptake and download of that app now that you've got both iOS and Android working?
Yes. As soon as we're happy that the Android, we only launched very recently in the App Store. So we're still In that piloting, testing, getting enough customers to ensure that all the bugs are worked out, stability issues or performance issues. So While we test to iterate, at the same time, we have pretty high levels of Performance and standards that we put on ourselves on our public release products. So As soon as it passes all that and we're okay with that, which is probably another couple of months away, then yes, we will be in a position to go, okay, we're now Happy to stand behind both our iOS and our Android app and we'll do more public marketing campaign.
That could be as things like Changing the end card of the TV to say TV ad to say install the app today and get a dollar off some discount off your next order, but We'll work that out.
Okay, got it. And just a follow-up there. I mean, I look at some third party Download data and it did look like the iOS, the number of downloads started taking off from sort of April, May, so was that part of the deliberate strategy to push people into the app?
It's been taking off Probably it was a bit before then. So we launched the app in the first half of the year. Again, we went through the same process, Scale it right, iterate it, test it, pilot it, make sure we're okay before pushing it. And then when we got in a position that we're okay with the iOS, then we started pushing it from a Digital marketing perspective, it's more targeted. We're targeting iOS users, so you won't see it unless you're an iOS user.
So it's been growing for the last few months. It will be the same with the Android, the same with Android. As soon as we're ready, we'll start pushing
Okay, got it. And then next question just on the B2B division, Obviously, really strong growth rates there, 100% plus. Do you think that's a sustainable growth rate given it's still You're growing a small basin, clearly residential property has been quite strong. Do you think you can continue those kind of Growth Rates?
I think, look, we're not obviously, we didn't put out guidance for any But
I can say, look, it's a small
we are a tiny bit of a pretty big Market segment. So we're now back to the envelope for B2B. We can't find Research reports, but we've done our own in house and commissioned our own research to understand the opportunity. But no matter how we cut it, it does suggest that multi 1,000,000,000 of dollars Is the furniture market for B2B? Because think about this, basically Every room in Australia outside of the ones you live in at home.
So think about all the rooms you go into over a course of the day. You're not Back at home, obviously, but like whether it be schools or restaurants or hotels or offices or there's so many different So that's why it kind of adds up quite quickly. And we are the businesses, Yes, it's going quite strongly, but it's still a very small part of the overall Temple and Webster revenue line, which suggests we've got Lots and lots of opportunity. And the other thing is that it's quite fragmented from a competition point of view. You have specialists In things like premium office furniture or you have specialty in hospitality furniture or Education, etcetera.
There's very few national brands in this space that do multi category, Multi offering, multi product even offers. So We think the Temple and Webster by leveraging the B2C bit, by leveraging the range we've already built for the B2C, by adding more bespoke Commercial Craft Furniture into that, which is for our B2B customers. Having that national offering built into our business model because it's an online retailer, we can scale nationally. And then supplementing that with people to chase down, so it tells people to chase down the actual We think we can actually have a scale of proposition that could become that national brand. And
If you
play that out, if we become a national brand and get a relatively even a okay market share in that category, the multi
Okay, great. That's clear. That's all I had this morning. Thanks for your time.
Thank you.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Coulter for closing remarks.
Thank you, everyone. So as you can see, it was a great year. I reiterate, obviously, that It is a tough period and we are we don't take as granted that we can be delivering these sorts of numbers in this period of history. It was a record year of revenue, profit and customers. As I said before, markets still have a ton of growth left and we continue to make great progress on our customer proposition.
So on that note, thank you for your time.
Thanks, all.
That does conclude our conference for today. Thank you for participating. You may now disconnect.