Step One details behind-the-scenes scramble ahead of profit warning
by Simon Evans, Senior Reporter, AFR, 19-May-2022 - 4:13pm
Underwear group Step One has been forced to detail the behind-the-scenes scramble that led to its dramatic profit downgrade on May 16.
The ASX issued a “please explain” compliance notice asking when Step One became aware of the large profit declines, with the company on Thursday replying with a blow-by-blow description of the events that included hasty phone calls to some board members last week.
Step One chief executive and founder Greg Taylor.
Step One, founded in 2017 by former rower Greg Taylor, promises a “no-chafing” experience to wearers of the bamboo fibre underwear. The stock reached $3 on November 19 in the weeks after a float when the issue price was $1.53, but its shares halved to 22¢ on Monday after the downgrade was announced to the ASX. The shares recovered slightly on Thursday to 35¢.
Step One told the ASX on Thursday in its reply to the compliance query that the extent of the deterioration in the group’s trading and full-year outlook didn’t become clear until the evening of May 11.
The company then re-worked some of its forecasts that night.
“Given the significance of the possible deterioration, management consulted with available board members between 9.49am and 9.55am on Thursday May 12 and agreed that additional time was required to validate both the new data and the reforecasting”.
The company secretary rang the ASX requesting a trading halt in a phone call which lasted two minutes from 10am on the same Thursday, and that was granted. The board and senior management worked over the weekend to further validate the situation and approve an announcement, which went to the ASX on May 16.
Step One said it complied with the ASX’s listing rules in the lead-up to the profit slide announcement.
The company on May 16 said profits for financial year 2022 were expected to be less than half of what was forecast seven months ago.
The group found the going much tougher than expected in both the US and the UK. It projected losses in the US would blow out to $3 million this financial year. The chairman of Step One is David Gallop, a former CEO of both the National Rugby League competition and Australia’s governing body for soccer, Football Federation Australia.
Chief executive Taylor said on May 16 he was disappointed to have to bring bad news to investors but the “challenges are by no means insurmountable”. The company has begun selling a small range of its products on Amazon.com to try to help build more awareness.
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Simon Evans writes on business specialising in retail, manufacturing, beverages, mining and M&A. He is based in Adelaide. Connect with Simon on Twitter. Email Simon at simon.evans@afr.com
Further Reading:
Step One underwear group suffering overseas growing pains (afr.com) Simon Evans, 16-May-2022, "Rapid shrinkage for Step One underwear group"
Step One founder Greg Taylor sells in float, skips wedgie (afr.com) Myriam Robin, Columnist, AFR, 16-May-2022.
Step One hopes UK rugby star will fix British stumble (afr.com), Simon Evans, 22-Feb-2022.
Step One back on the horse after early stumble (afr.com), Simon Evans, 17-Jan-2022.
Step One ASX: Bamboo underwear company quickens its pace with a strong IPO (afr.com), Simon Evans, 01-Nov-2021.
Greg Taylor, the founder and CEO of Step One underwear, trimmed his stake in the company from 100 per cent to 66.4 per cent in the IPO. [photo: James Brickwood]
Step One underwear tries US on for size (afr.com), Simon Evans, 12-Oct-2021
Step One wraps up IPO, on track to list late October (afr.com), Anthony Macdonald, Yolanda Redrup and Kanika Sood, 07-Oct-2021.
Step One underwear ready to crack ASX (afr.com), Simon Evans, 16-Mar-2021.
Disclosure: I wear Step One Boxers but I have never owned STP shares either here or IRL. They're like the Red Bull of men's underwear, in terms of their set-up, being basically a marketing company that farms out all of the manufacturing and distribution, and just does the ads and other marketing, but without the Red Bull following and success.
The best of the further reading set above is probably this one:
Step One founder sells in float, skips wedgie
by Myriam Robin, Columnist, AFR, 16-May-2022 - 4:41pm.
Elite rower turned Step One bamboo underwear entrepreneur Greg Taylor made $41.3 million selling 27 million shares at the $1.53 float price when his four-year-old company listed in November. It’s more than the whole shebang is worth these days.
On Monday, Step One’s share price fell 55.2 per cent to 22¢. Its market capitalisation is now $39 million, after it slashed in half the $15.1 EBITDA guidance made in its October prospectus. Taylor’s remaining 123 million shares are currently worth $26 million, or 85 per cent less than they were the day Step One debuted.
Former NRL and FFA chief David Gallop may rue being partially paid in scrip by Step One. [photo: James Brickwood]
Seemingly not blessed with Taylor’s luck is Step One chairman and ex-football administrator David Gallop, who’s being paid partly in rapidly depreciating scrip. In December, he kicked in another $29,806.53 to buy 18,900 shares on-market at $1.58 a pop.
Another loser is Corporate Travel Management’s Jamie Pherous, who bought 150,000 shares in Step One’s float. We suppose Corporate Travel’s ever-loyal house broker Morgans – also the lead manager on Step One’s IPO – brought it to his attention.