A news and media website dedicated to modern design, Design Milk (ASX: DMC) has decided to sell its online business to a newly incorporated US-based entity for $521k which will take over existing contracts and an array of digital assets, leaving behind a shell of an Australian entity.
In regards to the Company named Design Milk, the Milk is a metaphor for a “fresh and never sour” design. They’re not designing dairy products but in this day and age, you’d never rule it out.
The Company claims that it has been doing well in its online business, but the Board thinks they need more money to keep growing and make a profit. However, because it’s hard to get funding right now and Design Milk is not sure if investing more money will give it a good return, it thinks the Company and its shareholders should sell the online business to help get their act together, even if it means leaving behind a shell whose shares have been suspended from trading since July 2022.
The sale would involve all assets owned and managed by the Company for its eCommerce websites that support independent brands and designers worldwide. These include Design Milk’s contracts, customer lists, intellectual property, licenses, business records, business name registrations, registered domain names and social media handles, and rights and the goodwill associated with the assets of the existing online business.
The list of domain names owned by Design Milk was not disclosed by the Company which boasts more than 10 million social followers.
The completion of the sale is contingent upon the approval of the proposed sale by Design Milk’s shareholders. The Company will soon send a meeting notice to the shareholders to seek their approval.
In H1 FY23, with its ASX suspension continuing, Design Milk Co. reported a 74% fall in revenue to $375k. It incurred losses amounting to over $506k. Its EBITDA fell by 55% on H1 FY22 to $481.3k. Its commission from the sale of goods declined significantly, going from $350k to a mere $37k in H1 FY23.
Design Milk realised that it would have to keep pumping in money if it wanted to see its eCommerce business thrive, and decided that it wasn’t worth the effort. Within Australia at least.
In light of these results, it shifted its strategy from an eCommerce-first business to an advertising revenue-only model. Even though its ad revenue also fell in the first half, it managed to remain in six digits, a huge plus for the Company whose cash equivalents fell by over 80% to $272k.
To address losses, its initial plan was to shut down its eCommerce arm altogether, but then, another Design Milk came along.
If the shareholders approve the sale and it goes through, the Company plans to utilize the sale proceeds to explore new opportunities and for general working capital.
In keeping with that, Design Milk (the seller) is planning to acquire a high-growth technology company. Although these talks are not yet final, they are well-progressed, and the Board anticipates making an official statement regarding this potential acquisition soon.
Alinda is a Business Reporter for The Sentiment
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