Mad Paws appoints financial advisor as suitors start sniffing around for assets

Pet services group Mad Paws (ASX: MPA) has appointed Highbury Partnership as its financial advisor amidst expressions of interest for "various elements of the business", while reporting strong customer growth this month after the company broke even on cash EBITDA terms in the September quarter.

Highbury Partnership has a strong bent towards transactions and placements involving property, infrastructure and energy companies, but its notable deals with consumer-facing businesses include the sale of SILK Laser Australia to the owner of Priceline last year, and Finder's Series A in early 2022.

Mad Paws has not revealed which specific aspects of the business are under the spotlight. The marketplace division, which accounts for around a third of revenue but is Mad Paws' most profitable segment, includes services such as pet hosting, sitting, walking, grooming, training and more.

The marketplace's operating revenue jumped 20 per cent to $7.8 million in FY24 while its operating EBITDA almost doubled to $1.3 million.

In the most recent quarter, the marketplace's gross merchandise value (GMV) was up 12 per cent, compared to a 7 per cent decline for its leading source of revenue, e-commerce, which was dragged down by lower performance from the Waggly and Sash beds brands.

In late August the group launched a new marketing campaign in Brisbane and Melbourne, which Mad Paws claims has accelerated positive momentum. In October to date the group has seen a 19 per cent lift in new customers, a 16 per cent rise in GMV, and an 18 per cent spike in booked revenue.

"This has been an exciting quarter for the Mad Paws team, highlighted by the launch of our above-the-line media campaign in August," says CEO Justus Hammer, who co-founded the business in 2014 with Alexis Soulopoulos and Jan Pacas.

"This milestone was the result of our ongoing efforts in brand consolidation, enabling us to position Mad Paws as the go-to destination for pet lovers.

"Our continuous focus on profitability has allowed us to achieve Cash EBITDA break-even for the quarter — a significant accomplishment, especially in the face of a challenging macroeconomic environment."

For a company that was supported by advertising inventory-based investment from Scaleup Mediafund prior to its 2021 initial public offering (IPO), Mad Paws has continued to deploy this exposure-for-shares strategy with Seven West Media (ASX: SWM) pumping $5.25 million into the company earlier this year, $4 million of which is in the form of ads across the investor's television, publishing and digital media assets. 

But Mad Paws is not exhausting all that inventory at once, letting the market know today that it still has $3.2 million of Seven West's marketing contra to be deployed with plans to accelerate customer growth in the current quarter.

The group notes that with more than 400,000 pet profiles in its system, it is better positioned than ever to cross-sell - an activity that has grown 35 per cent year-on-year from both its Mad Paws-branded e-retail through to Tweed Heads-headquartered Pet Chemist, acquired in 2022.

Mad Paws plans to spend $1.2 million on branding this quarter with a campaign that will extend well into Christmas trading - the busiest time for the marketplace and its retail offerings.