Just months after announcing their first ever profitable year, eCommerce middleman eCargo Holdings (ASX: ECG), which connects Chinese companies to global brands to grow sales, has announced today the sale of its only profitable business – Amblique.

eCargo, trading on the ASX with a market cap around $10m, works by providing a complete set of end-to-end services, from logistics, market activation, content generation, and brand management, all the way down to sales and distribution for businesses situated around Asia – primarily China. 

Operating since 2014, the Company has connected brands in fashion, beauty, personal care and food, where most of its other end customers are Australian companies. 

Its most significant asset, Amblique Pty Ltd, was sold off today to Commercial Group Limited for a total cash consideration of USD $5 million (approx AUD $7.04 million).

Amblique provides eCommerce services to brands located in Australia to boost sales internationally. Established in 1999, they have since delivered solutions to clients including; Cotton On Group, Michael Hill International, Apparel Group and Mecca Cosmetica.

Amblique was purchased by eCargo in February 2015, practically less than a year after its $6m IPO on the ASX which aimed to stimulate and boost its service offerings for its retail and fashion merchants. 

However, the reasoning for today’s divestment is quite ambiguous and comes with minimal context. eCargo has stated that it is “not core to eCargo’s Asia-focused growth strategy”, but this doesn’t correlate to the fact that Amblique has been the business’s most profitable and valuable asset – which provided more than 44% of total revenue in FY21. 

This sale is effectively gutting the Company, and what may come as a surprise is that none of it required shareholder approval. On the other hand, long-standing CEO of Amblique, Stephanie Byrne, will be taking the Company private where it was purchased at 6x net profit made in FY21. 

Based on the $7.04m sale price of Amblique at 6x NPAT, the business earned $1.17m NPAT, while the eCargo Group as a whole reported $160k NPAT.

“After 11 years working in the business, I am excited to be leading the next chapter of Amblique back to independent ownership,” said Amblique CEO, Stephanie Byrnes.

The reasoning behind this divestment is that the Company needed cash. Included in the FY21 report, the Company only had A$5.7 million in the bank, and probably burned through that in the first half of this year, but nothing can be said until the Company releases its half-year report. 

The sales proceeds will go towards acquiring and investing equity positions in Australian brands with high potential to scale in Asia. But how long will it be until the Company is producing positive revenue again?

“We plan to employ Amblique’s sales proceeds to expand our business development team in our Australia office, ensuring we are best capturing the opportunities to scale Australian brands in Asia, and can provide clients with hands-on support and expertise,” commenting on the divestment, Lawrence Lun, CEO of eCargo.

*All dollar amounts listed are in AUD unless stated otherwise.