MAILPAC Group Limited is now moving quickly to integrate the operations of MyCart Quick Limited into its operations following the $137.19-million acquisition of the entity on April 1.

The courier company’s acquired MyCart Quick Limited through an entity it created called MyCart Express which resulted in the company reporting second-quarter revenue of $623.91 million, a 54 per cent rise above the $406.15-million figure reported in Q2 2023. According to Mailpac Executive Chairman Khary Robinson, this rise in revenue was largely attributed to the MyCart acquisition as the core Mailpac business saw flat revenues on a comparative basis.

Now, Robinson and the team are looking to integrate the two businesses across three phases to fully optimise both businesses that are expected to deliver more than 1.5 million packages from more than 22 locations, with more than 200 employees.

“The first phase is just to actually get the businesses as one from an organisational standpoint, leadership standpoint, and so on. The refinement of synergies [is the second phase] — whether there are revenue synergies or cost synergies — which are meaningful. Those sometimes come at a cost. The third phase is in leveraging the platform. Now, you have more volume, more stores, capacity, relationships. How do you then leverage that to grow the business,” Robinson explained to the Jamaica Observer in an interview on Friday.

MyCart Quick Limited was founded by Kamar Palmer and Aldane Smith in October 2019, with Palmer serving as managing director. The company operated as a value-focused courier for both personal and business customers from 13 stores. Upon the consummation of the acquisition by Mailpac Group, the assets and operations of the company were moved into MyCart Express, which was registered as a business on March 11 with number 3374/2024. That business was registered by Mailpac Group.

According to Mailpac’s Q2 report, the company acquired assets worth $51.52 million which resulted in goodwill of $85.67 million being added to its intangible assets. Goodwill represents the attributed value by an acquirer above the net assets of a company/business and can represent the intrinsic value of a business not readily captured by its net assets.

The Mailpac chairman highlighted that both businesses were trying to service every market segment, which would have caused both businesses to expend more resources to compete in those segments. Now, Mailpac will focus on the premium, high-touch, high-service customers market while MyCart will focus on the value-driven customers from a community-focused standpoint. Both businesses will see additional investments, along with improved efficiencies, in the subsequent months.

While the acquisition caused an immediate bump in revenues, the company’s gross profit margin dipped from 49.57 per cent to 42.10 per cent due to the integration costs related to bringing both operations under one platform in the period. Operating expenses also increased 95 per cent, from $113.09 million to $220.32 million, due to one-time transaction costs, integration costs, and restructuring initiatives to harmonise both businesses.

These higher operating expenses resulted in the operating profit dipping 52 per cent, from $88.26 million to $42.35 million. After accounting for finance and policy costs, Mailpac’s Q2 reported net profit of $18.54 million — a 75 per cent decrease from the $74.43 million in the prior period.

“The plan from a revenue standpoint — which we hit immediately — and from a growth standpoint you see that the combination of these businesses has definitely expanded the business and now, it’s a matter of making sure that falls to the bottom line in the three phases that I described,” Robinson added on the ongoing initiatives to grow net profit.

The company’s Pack Yuh Barrel business just got back online after 2.5 months due to it changing its Miami shipping partner. Robinson noted that there are big plans for the online barrel packing platform launched in November 2022.

Mailpac’s six-month revenue is up 23 per cent to $992.41 million but its operating profit was down by a third to $109.46 million from the integration expenses with MyCart Express. Net profit also came in 49 per cent lower at $68.67 million, with earnings per share moving from $0.05 to $0.03.

The acquisition has resulted in total assets rising by a quarter to $841.66 million for the six-month period, with the company ending the period with $161.01 million in cash. Total liabilities increased 32 per cent to $148.08 million due to the increased lease liability from the acquisition. Shareholders’ equity is up 23 per cent to $693.58 million, with a new line item of shares to be issued of $137.19 million being the main contributor.

While Robinson wasn’t able to mention when the company’s annual general meeting (AGM) will be, he noted that it should be held later this year. Mailpac will likely have an extraordinary resolution to issue new ordinary shares to the sellers of MyCart. Based on the company’s closing price of $2.12 on Monday, this would translate to 64,711,445 new ordinary shares, but the conversion price could likely be lower based on the contingency element for net earnings up to March 31, 2025, in the agreement.

If the shares are issued, the company’s share capital would become $404.54 million — just under the current $500-million Junior Market share capital limited. Mailpac listed on Jamaica Stock Exchange in December 2019, which means that the company’s 100 per cent tax remission will be ending in its fourth quarter. It will pay 50 per cent on the regular 25 per cent tax rate for the next five years.

A resolution to change the company’s name to MyPac Group Limited and a vote by shareholders to elect Kamar Palmer and Sheree Martin as directors should be on that AGM agenda. Both Palmer and Martin were appointed to Mailpac’s board on June 1.

Mailpac’s stock price is down 3.38 per cent in 2024, which left it with a market capitalisation of $5.29 billion. The company has only paid one dividend of $0.03, totalling $75 million, on March 11 compared to 2023 when it paid $275 million.