Cashrewards makes modest gains on debut

Sue MitchellColumnist

Dec 2, 2020 – 2.24pm

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Cashrewards chief executive Bernard Wilson says the shopper rewards platform will focus on growing customers rather than profits after raising $65 million in an initial public offering and listing on the stock exchange.

Cashrewards shares, issued at $1.73, opened at $2.01 on Wednesday and closed at $1.75. That gave new investors, including 19 per cent shareholder ANZ Bank, a very modest paper profit.

Cashrewards chief executive Bernard Wilson says the company hopes to capitalise on interest in loyalty programs.

Mr Wilson said Australian consumers remained largely unaware of cashback rewards – despite their fondness for discounts and deals – and market penetration was a fraction of that overseas. Only about 3 per cent of online retail transactions start with cashback rewards, compared with penetration rates of about 13 per cent in the US and Britain.

Cashrewards would use $45 million of the IPO proceeds to raise awareness, grow customer and merchant numbers, reduce debt, develop new products and defend its turf from its ambitious Singapore-based rival, ShopBack.

"That single-minded focus on the Australian consumer will hold us in good stead and help us to drive awareness and penetration," Mr Wilson said.

The remaining $20 million of the IPO proceeds enabled existing shareholders, including founder Andrew Clarke and Alium Capital, to sell a portion of their shares.

According to the prospectus, Cashrewards lost $5.7 million in 2020 after losses of $3.4 million in 2019. Revenue fell to $17.1 million from $18 million as the pandemic crunched spending on accommodation and travel, which accounted for about 30 per cent of total transaction value this time last year.

Cashrewards made no profit forecasts in the prospectus but said total transaction values (excluding gift cards) rose by 8 per cent in August and 9 per cent in September. Excluding travel and gift cards, transaction values rose as much as 79 per cent in September and continued to grow in the December quarter to date, particularly during the Black Friday/Cyber Monday promotion.

"It's a fin-commerce growth story for the foreseeable future and I think our investors' best interests will be served by us investing in the business to further that growth," Mr Wilson said.

Co-existing with loyalty programs

While awareness of cashback programs in Australia is only 31 per cent, thousands of new customers sign up every month to get a portion of their purchase back.

Retailers pay a commission of between 2 and 20 per cent to cashback providers for referring customers and the providers give a portion of this commission to customers in the form of discounts.

Mr Wilson, a former Quantium, Myer and Woolworths loyalty, data and e-commerce executive who took the helm in July, said Australian consumers were highly engaged in traditional loyalty programs – the average consumer is a member of seven loyalty programs.

But cashback rewards were growing in popularity because they offered money rather than points and could be used across thousands of merchants.

Cashrewards, which currently has about 800,000 active members, offers cash back on in-store or online purchases at more than 1500 merchants including Adidas, Amazon, Apple, Booking.com, Cellarmasters, Chemist Warehouse, Dan Murphy’s, Dell, Expedia, Myer, Nike, The Iconic, and Microsoft.

"We certainly intend to capitalise on that factor as well as the fact that we're diversified across all categories versus limited to some. I think we can co-exist," he said.

Cashrewards is the first ASX-listed company to pledge 1 per cent of its equity to charity.

The company is part of the Pledge 1 per cent movement, which was started by Silicon Valley tech giant Salesforce, in which companies pledge to donate 1 per cent of equity, time, profit or product.

Sue Mitchell writes the fortnightly Window Shopping column for the Financial Review and has covered retailing for over 30 years. Connect with Sue on Twitter. Email Sue at smitchell2045@gmail.com