Vaibhav Global Limited (NSE: VAIBHAVGBL) Q2 FY23 Earnings Concall dated Oct. 28, 2022
Corporate Participants:
Mit Shah — Assistant Manager
Sunil Agrawal — Managing Director
Vineet Ganeriwala — President Shop LC
Analysts:
Nitin Panwad — Vaibhav Global Ltd — Analyst
Pritesh Chedda — Lucky Investments — Analyst
Nilesh Shah — Envision Capital — Analyst
Sachin Kasera — Swan Investments — Analyst
Presentation:
Operator
Ladies and gentlemen good day and welcome to Vaibhav Global Limited Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and, there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]. Please note that this conference is being recorded.
I now hand the conference over Mr. Mit Shah, of CDR India. Thank you and, over to you Mr. Shah.
Mit Shah — Assistant Manager
Thank you. Good evening everyone. And thanks for joining us on Vaibhav Global’s Q2 FY ’23 earning conference Call. Today, we have with us Mr. Sunil Agrawal, Managing Director, Mr. Vineet Ganeriwala, Corporate President, Shop LC USA, Mr. Nitin Panwar, Group’s CFO and, Mr. Prashant Saraswat, Head of Investor Relations.
We will begin the call with the brief opening remarks by Mr. Sunil Agrawal, on the business operations, key initiatives and a broader outlook. Followed by discussion on the financial performance by Mr. Vineet Ganeriwala, the Management will open the forum for an interactive Q&A session.
Before we begin I’d like to point out that certain statements made or discussed on today’s call may be forward-looking in nature and, must be viewed in conjunction with the risks and uncertainties we face. A detailed statement and explanation of these risks was included in earnings presentation, which has been shared with you earlier. The company does not undertake to update these forward-looking statements publicly.
I like to invite, Mr. Sunil Agarwal, to make his opening remarks. Thank you. And, over to you sir.
Sunil Agrawal — Managing Director
Thank you, Mit. We, welcome you all to Vaibhav Global’s Q2 FY ’23 earnings call. I hope you have reviewed the results as well as the presentation, that provides details on the business and the environment, we are operating in.
Before we start results discussions, I take this opportunity to announce that upon the recommendation of the Nomination and Remuneration, the Board has elevated, Vineet Ganeriwala as President of Shop LC U.S. Vineet has demonstrated key business segment, services approach and leadership skills, since he have joined VGL early 2020, as our Group CFO. Vineet has over two decades of rich experience across diverse industries and multiple geographies.
Further, the Board has now elevated Nitin Panwad, as Group CFO in place of Vineet. Nitin is chartered accountant and trainee and a finance leader VGL Group for last 11 years. He has worked across diverse profiles and multiple geographies. He is an excellent business partner, providing valuable strategic input to support growth of our business.
He has successfully led various transformation initiatives in process improvements, cost efficiencies, margin improvements, et-cetera. He played a pivotal role in setting up of our German subsidiary and also serving as Deputy Group CFO of the company, before this promotion.
I’m confident that these changes will further strengthen the management bandwidth of VGL.
Let me now take you through the operational performance of the quarter. Sales for the quarter were INR646 crores, up 1.8% from INR635 crores in the second-quarter of last year. This performance is encouraging versus pre-COVID level of Q2 FY ’20, with a growth of 33%. This performance backdrop of current high inflationary environment in western economies.
Consumer is also spending larger share of their disposable income on experiences rather than products having stayed indoors during COVID years. In Q2, our gross margin continues to remain healthy at 60.9%. We continue to successfully balance our product cost pressure, while maintaining our differentiated value proposition.
EBITDA for the quarter has been at 8.1% compared to 7% last quarter and 11.4% of Q2 FY ’22. Our judicious investment in Germany, new OTA homes, and digital marketing have short term EBITDA impact. But these investments are building blocks which will result in significant operating leverage in the medium and long term. Inspite of these investments, our margins has bottomed-out in Q1 and has started seeing a sequentially improvement and I expect it to continue to improve in H2.
During the quarter, our Germany business has grown exponentially, clocking monthly revenue of more than EUR1 million in recent months. In Germany, we recently started Live and Interactive shopping on our website and are seeing good customer traction. We intend to increase its coverage going-forward, if the trends remain positive.
At Shop TJC UK, the freeview channel upgradation continues to give positive outcomes in terms of new customer acquisition. New TV customer acquisition rate was negative 17% in Feb 2022, and is now positive 49% in
[Technical Issues].
Operator
Excuse me, this is the operator, kindly be online. We’ll reconnect the management line, as it is disconnected. Thank you.
Sir, you are back online. Thank you.
Sunil Agrawal — Managing Director
My apologies for getting disconnected. So I don’t know how much you’ve heard, whether I repeat last couple of lines.
New TV customer acquisition rate were negative 17% in Feb 22 in UK, and is now positive 49% in Sept ’22. We expect that the current trend willl continue to benefit TJC, with market leading in the long run. Overall performance in UK is positive, except momentary impact of Queens demise and political changes. In U.S. also, the macroeconomic environment continues to impact the customer sentiments. Current revenue growth is not a true reflection of potential of U.S. and UK markets for us. However, we continue to gain market-share owing to our low-cost vertical business model.
A fully integrated supply chain spanning across 30 countries is our moat. We manufacture majority of our jewellery products allowing bulk sourcing and
Therefore strong margin. Our vertically-integrated supply-chain has works favorably for us. Besides costs, our vertical model also helps reduce delivery time and offers great storytelling opportunities to our retail units.
[Technical Issues]
Operator
Participant, kindly be online, we’ll reconnect the management line.
The management line is connected. Kindly proceed, sir.
Sunil Agrawal — Managing Director
Yes, apologies again. I am now connecting from my mobile, so hopefully should be fine now.
Our fully-integrated supply chain spanning 30 countries is our moat. We manufacture majority of our jewellery products allowing bulk sourcing and therefore strong margins. Our vertically-integrated supply-chain has worked favorably for us. Besides cost, our vertical model also helps reduced delivery and offers great storytelling opportunities to our retail units.
Further, our four Rs framework, that is, widening Reach, new customer Registration, customer Retention and Repeat purchases, remains to be our key levers
For growth. The reach of our TV networks by end of Q2 FY ’23 was approximately 135 million TV homes, which is 23% higher YoY. We reach TV homes
Through cable, satellite, telco networks, and over-the-air antenna, also called OTA platforms. Our products are also available on digital channels, including proprietary websites, smartphone apps, OTT platforms, and marketplaces. Our sustained investments on OTAs and digital channels is leading to increased new customer acquisition. Our unique customer base is at half a million. New customer acquisition on TTM basis stands at 2.5 lakhs, which is higher by 9.8% YoY and significantly higher by 16.3% over Q2 FY ’21
On the sustainability aspects, we are glad to announce that two of our office buildings in U.S. have received LEEDS GOLD certificate. This certification reaffirms our focus on efficient operations and recognizes our efforts towards sustainability. Another important aspect of sustainability efforts is our midday meal program, Your Purchase Feeds. Recently, we crossed a milestone of 69 million meals with a run rate of approximately 51,000 meals donated every single school day.
We continue to monitor — closely monitor the macro-environment and business trends. I believe that we have capabilities in and experience to effectively managed growth in this environment.
Despite near-term uncertainties, we believe that the long-term demand remains strong and we are well-prepared to leverage our competitive advantage. Our outlook for the year and the mid-term remains intact and we expect to deliver 2% to 4% growth in this fiscal year. And mid-teens revenue growth in subsequent years.
Further, the Board of Directors of your Company have declared an interim dividend INR1.50 per share for the quarter. We look forward to maintaining a balance between growth, investment and quarterly payouts to generate sustainable value for our stakeholders.
Over to you, Nitin — over to you Vineet.
Vineet Ganeriwala — President Shop LC
So first of all, let me thank VGL Group, for this opportunity being offered to me. My journey as, Group CFO, has been great and enterprising. And I’d like to thank all my colleagues who share this journey with me and supported me.
I now look forward to the new challenges and opportunities that this position of President Shop LC will offer. I would also like to congratulate Nitin, who are being promoted as Group CFO of VGL. Nitin has been a core asset of our company since last 11 years and have great business acumen. I’m sure that he will continue to deliver in this role of Group CFO as well.
Over to you Nitin, to say a few words.
Nitin Panwad — Vaibhav Global Ltd — Analyst
Thanks you, Vineet, and Sunil for your kind words. First of all I would like to congratulate Vineet, for well deserved elevation as President of Shop LC U.S.. I worked with Vineet since 2020 and would like to say that he carry a good business acumen and good leader. I’m sure that he will once again demonstrate performance and lead Shop LC U.S. in market leading group.
Further, I would like to thank VGL Group and the Board for showing this faith upon me and promoting to this position of Groups CFO. This position carry challenges as well as opportunities and I’ll give my best to meet the expectation of the VGL Group. Back to you Vineet. Thanks.
Vineet Ganeriwala — President Shop LC
Thanks, Nitin. So let me now start with the discussion on quarterly financial performance. As Sunil mentioned earlier, demand outlook is muted, with refreshing fears impacting consumer sentiments. Overall revenues stood at INR646 crores, a growth of 1.8% year-on-year.
As against the pre COVID period of quarter 2 FY ’20, growth is stronger at 33%. Suggesting a healthy CAGR of 10%. In local-currency terms, Shop LC U.S. revenue declined by 6.4% year-on-year, impacted by the subdued demand and a very-high base of last year. In UK, our investments on upgrading freeview channel position, has really contributed favorably. Also due to the sad demise of Queen in UK, there was an impact on this quarter’s revenue, which resulted in flattish growth for UK.
Germany continues to perform better and is evolving much stronger. Though these are unprecedented and difficult times but we are rapidly adjusting our offerings to changing consumer demand and the same is reflected in improved revenue numbers month-on month which you can see in our results presentation.
Our TV revenue stands at INR397 crores and digital revenue added INR233 crores. The numbers are up by 2.1% and 3.1% year-on-year respectively. Although that I am comparing against pre COVID period of quarter 2 FY ’20 the growth is encouraging at 27% and 57% respectively. Our OTA reach continues to grow, we have added few key cable markets to our distribution portfolio during the quarter. All these sustained efforts has resulted in additional 10 million households in the U.S. across OTA and the cable TV platforms.
Additionally our investments on expanding omni-channel distribution have resulted in 59% of the new customer acquisition, happening on digital platforms during the quarter. This omni-channel distribution model promotes and encourages customer to transact on both TV as well as digital platforms. It gives them a unique shopping experience and a cross selling potential to us.
Omni-channel customer tends to be more sticky and have a significantly higher lifetime value than customers who buy only on TV or only on digital. I would like to highlight that our Budget Pay sales, which allows customers to purchase on EMI basis continues to grow and presently it is contributing 39% of the total retail sales. This feature enables purchase easier and makes it convenient, thus driving deeper customer engagement.
The non-jewelry segment comprising of fashion accessories, lifestyle products, beauty products, apparel and home products constitutes 27% of our total retail revenues. This non-jewelry segment has enabled us to take higher wallet share out-of-the same household.
EBITDA margin for the quarter was 8.1%. As communicated earlier, we intend to achieve double-digit EBITDA margins in the medium-term, led by continued focus on cost optimization across-the-board and improved productivity and operating leverage. Current EBITDA margin has seen sequential improvement, current EBITDA revenue delivery and cost rebate initiatives started few months back.
Profit after tax for the quarter is INR23 crores as against INR42 crores of last year. Operating cash-flow and free-cash flows whereas INR77 crores and INR62 crores, respectively. The continue year-on year improved cash generation due to capex coming to normal levels, alongside efficient capital allocation and focus on costs.
On a TTM basis ROE and ROCE were at 13% and 18% respectively. These return ratios suggest a effect of conscious investments on affiliates, digital marketing, German operations and broader economic environment, throughout trends and execution we remain committed and are confident to deliver strong returns for our stakeholders in the medium-to-long term.
We continue to create value and, I’m pleased to announce that the Board of Directors has approved second interim dividend of the fiscal year of INR1.50 per equity share. In the current macro-environment we are intensifying our efforts on driving growth, through disciplined execution of our value offering digital led and customer centric content. This is enabling imbalancing our near-term responses to broader economic environment. We believe we have huge opportunities ahead of us. And having required technological management and financial bandwidth. We are confident to successfully navigate the current environment.
As Sunil mentioned, that we have seen a visible sequential improvement during the last few months with revenue trends improving month-over month. We firmly believes that this project is in transient phase will be behind us soon.
Considering the current macro-environment, we expect to deliver a 2% to 4% top-line growth for this year with 8% to 9% EBITDA margin for this financial year. Our medium-term outlook remains intact and we expect to deliver mid-teens revenue growth in subsequent years with operating leverage.
With this I hand it over back to the moderator.
Questions and Answers:
Operator
Thank you, sir. [Operator Instructions] The first question is from the line of Pritesh Chheda from Lucky Investments. Kindly proceed.
Pritesh Chedda — Lucky Investments — Analyst
Yes. Sir, I have two questions, one, it’s quite surprising that your realizations are now about $35 a piece, which is a 20% higher numbers. Depth of the gross margins are lower, so if, you could just explain that phenomena and we used to be at 65% type range. So any comment there on the gross margin, you have given your comments on margin EBITDA. As my first question.
And my second question is, sir, at the EUR1 million Germany operations per month. What is the EBITDA burn in Germany, so that we can understand, ex of Germany, what kind of margins are now happening on your more stabilized U.S. and UK operations?
Vineet Ganeriwala — President Shop LC
Sure, hello Pritesh. So the increased average selling price of $35 is a result of current business environment. We have a lower eyeballs currently because people have gone out for experiences and they have more protection of gold products. Like, not heavy gold products, but gold products, like two to five grams kind of chains and what people are picking-up. And that has increased our ASP currently. And we believe that this is transient because of the current inflationary environment.
So second question was about the lower gross margin. So we give guidance of 60% plus gross margin and we stay true to the guidance. Within that range between 60% to 65% it keeps on fluctuating depending on the product mix and the business environment. So the business environment is a little bit of subdued because of inflationary fears and some changes in the UK, the political change of the Queens demise. And that led to some dilution of margins.
The third point was about Germany. 1 million run-rate is I see it in recent months. Now the gross margin wise Germany is ahead of U.S. and UK but, EBITDA is negative. Now sequentially compared to last year, Q2 and this year Q2 it was slightly better in absolute dollar– absolute Euro terms. And as we proceed to next quarters that the defense will continue to improve the losses will continue to be lower than last year same-period. So, there’ll be some gain in terms of losses from Germany.
We expect H2 of next financial year to be profitable for Germany.
Pritesh Chedda — Lucky Investments — Analyst
Can you quantify, $1 million, EUR1 million revenue what is the EBITDA burn?
Vineet Ganeriwala — President Shop LC
We don’t have EBITDA burn number, so we don’t have EBITDA burn, but approximately EUR400,000 a month currently is the burn rate. EUR400,000 a month.
Pritesh Chedda — Lucky Investments — Analyst
EUR400,000.
Vineet Ganeriwala — President Shop LC
Yes. And sequentially it keep on-going down as we assemble more unique customer-base and also the longevity of customers improves the repeat purchase. So we already achieved 15 repeat purchase for a rich customer in trailing 12 months, which is quite good based on our earlier — better than our earlier estimates.
Pritesh Chedda — Lucky Investments — Analyst
Okay. So lastly. I do not have — I haven’t calculated it. But, the margins in U.S. and UK, at what run-rate those margins are running at combine?
Vineet Ganeriwala — President Shop LC
Sorry, even gross margin?
Pritesh Chedda — Lucky Investments — Analyst
No, no, EBITDA.
Vineet Ganeriwala — President Shop LC
Now, I don’t have the specific number. But, in our Investor presentation I have broken-down UK as well as U.S. So you could have that information currently from that.
Pritesh Chedda — Lucky Investments — Analyst
So let’s say I’ve ordered EUR1000, so that’s above the likelihood. So we have about 10 crore burn, so 96%, [Indecipherable]. So I am just — so basically we would be at — we had a stable margin in U.S. and UK, is that the assumption, correct?
Vineet Ganeriwala — President Shop LC
No, no. So, U.S. and UK both have a supress margin because of the environment. Yes, before just its driven margin of last year, than the German burn would not have any impact. So we expect UK and U.S. both to comeback to improve margin in next year. So we’ll have leverage coming in from next financial year. This year we are giving guidance of 8% to 9% EBITDA, including Germany burn.
Pritesh Chedda — Lucky Investments — Analyst
And H1 FY ’22 had Germany operations, or it did not have Germany?
Vineet Ganeriwala — President Shop LC
FY ’22, we have very [indecipherable] Germany operation. We have started in April of — May of 2021. So the have burn.
Pritesh Chedda — Lucky Investments — Analyst
Their last year.
Vineet Ganeriwala — President Shop LC
Yes. So, those are call substantial burn last year, so this year burn will be lower than last year. And next to it, will be yet lower in H1, there’ll be a burn, in H2, that will be profitable. But for the whole year there’ll be burn.
Pritesh Chedda — Lucky Investments — Analyst
Okay, so FY ’22 was a higher burn versus FY ’23, that’s how it is, right?
Vineet Ganeriwala — President Shop LC
Yes.
Pritesh Chedda — Lucky Investments — Analyst
Okay thank you.
Vineet Ganeriwala — President Shop LC
Thank you Pritesh.
Operator
Thank you. [Operator Instructions] The next question is from the line of Nilesh Shah from Envision Capital. Kindly proceed.
Nilesh Shah — Envision Capital — Analyst
Thank you for the opportunity. Congratulations, Sunil on a steady performance, otherwise difficult environment especially in terms of sequential improvement in margins and strong cash-flow generation. And congratulations both Vineet and Nitin for the new opportunities as Head of Global.
Sunil my first question is around, the volume de-growth that we are seeing in our TV business, through the the TV channel. This year this first-half we’re seeing a 25% decline in volumes over the same-period last year. Now last year’s base not a high base, I mean this is not in comparison to FY ’21, which of course was a high base.
But, on a base of last year it looks to be kind of slightly — significantly higher-volume de-growth, any — I mean apart from of course the general environment consumer sentiment and those factors. But anything specific, which is leading to such a sharp decline in volumes on the TV side?
Sunil Agrawal — Managing Director
Hi Manish. So volume de-growth is the factor of the audience that we have at any given time. So there are two factors, one is the people went out quite a bit during the year, especially for experiences, because they bound for a couple of years and the holidays, visits and outing has been quite a bit.
Second thing was, the inflation fears. In this current environment we found that, people are buying more investment kind of product, although that’s not really a great investment but people purchase them as the investment. So gold product has been selling well. So the gold chain, so gold ring, or gold bracelets purchasing in that. And that led to higher ASP and therefore lower-volume.
So. If we were to go for — if we were to stay at a lower-price, earlier as Pritesh mentioned, our revenue growth would have more impacted. In order to meet the revenue numbers and what the customer looking was with higher ASP and that led to lower volume. But the $35 ASP, that you saw last quarter is not a long-term statistic business plan. We’ll come back to around $30 ASP in longer-term, once we are behind what the inflationary environment and recessionary fear environment and the steady-state of consumer behavior is back to the normal.
Nilesh Shah — Envision Capital — Analyst
Just as equal to that I mean you don’t think that the volume decline that we have seen the significant volume decline is like the start of a structural downtrend in terms of TV as a medium essentially kind of going out of woke, you don’t think this is anything like that this is more like kind of just a temporary blip for the reasons which you outlined.
Sunil Agrawal — Managing Director
Absolutely, it is transient and we’re seeing this across U.S. and UK. UK has little bit less impact because we acquired quite quite a lot of new customers, because of new channel position, but otherwise from the older channel distribution the similar behavior. So it is the transient current environment.
Nilesh Shah — Envision Capital — Analyst
My second question is around our private-label strategy, so we have a very interesting slide in our presentation on the private-label strategy. Looking at I mean if you can just kind of elaborate a bit in terms of what your thought processes is? But what I was more keen to know that slide showcases several brands and what is the thought process, do we intend to have such a large number of brands of our own. And obviously each brand will require some kind of investment which might accelerate going-forward and therefore impact margins.
I know it’s, still early days for that, but what are your thoughts on that, does it make sense to have like one umbrella brand, like say the way you have CZ Zara, which sells everything under Zara. Or you think that having multiple brands in our private-label kind of strategy is that a better way forward?
Sunil Agrawal — Managing Director
Yes, a very good question, Nilesh. So we have a process in the company that our collection with certain attributes and the price point of discipline and the brand personality is designed by our branding team. And then we take that to the consumer. The minimum requirements for that each brand should achieve at least a $1 million sales with in India. Otherwise it won’t be — it’ll be discontinued. The benefit of this is the customer engagement with that brand and customer repeat purchase with the brand and we’ve seen the brand performance in margin slightly better than the normal non-branded product.
And to your point, we do have umbrella brand, that Shop LC and TJC, the customers do associate with the umbrella brand and the high repeat purchase is mainly with umbrella brand. The product brand does improve further customer engagement and repeat purchase. So that has been our experience, but we always so closely looking at the data and refining the strategy that needs to be. But we do believe that we want to improve the in-house brands further and the third-party brands to keep at minimum.
Nilesh Shah — Envision Capital — Analyst
Great. Thank you so much and good luck to the team.
Sunil Agrawal — Managing Director
Thanks, Nilesh.
Operator
Thank you. [Operator Instructions] The next question is from the line of Sachin Kasera from Swan Investments. Kindly proceed.
Sachin Kasera — Swan Investments — Analyst
Good evening. My question was on the gross margin. So in, slide number 31, you have highlighted that the major reason for this 3% decline in gross margin was product mix and default price transition. So can you comment a bit and how are we looking at in the next, one to two quarters, would it be a special product mix and default price shouldn’t, hence could we see some improvement in gross margins here?
Sunil Agrawal — Managing Director
Yes. Thanks for the question, Sachin. So you constantly guide for 60% plus margin. Because the consumer pull for particular product at any given time is not 100% definite. For example last couple of quarters consumer has been pulling a lot of gold products. And there is slightly lower-margin, but meaningful, but slightly lower-margin.
And if you are able to sell more $10 $20 product, that gets a higher margin. So that depends on the pull and our guidance will stay at 60% plus margin for coming period. Other than that, we don’t — I am not able to give specific guidance.
Sachin Kasera — Swan Investments — Analyst
No, I’m not asking for specific guidance, I’m just trying to understand this impact of product mix and default price transition that we have seen in this quarter. Will it impact reduced and hence you see some price transition happening here, product mix improving as we go just as a direction or you think that the way you are seeing the environment this will remain there for some time?
Sunil Agrawal — Managing Director
So the part of the reason for very-high gross margin last year was essential. We sold quite a bit of masks and other essential products, with a higher gross margin. And also this year there are some cost increase, there’s shipping cost increase, that we could not pass-on to the customer. So we can’t predict, whether we would be able to increase margin from this level depending on where the macro-environment will be. So our guidance is to have 50% plus.
Sachin Kasera — Swan Investments — Analyst
Sure. The second one was on this other — I think that you’ve mentioned about the investment in digital broadcasting. So, have you seen these the number that we are seeing this quarter is it the peak number hence the revenue growth we see some leverage coming out this investments or is there any will keep increasing we continue to see excellent investment in digital broadcasting, and it continue to impact the more of EBITDA level.
Sunil Agrawal — Managing Director
Yes, so last two quarters we were kind of fortunate to get opportunities to get into some additional markets. Now typically these markets take anywhere from one year to two years to really mature, mature our affiliate costs, at our steady-state level. So these two quarters are pretty good for us in terms of getting near distribution. Now there is new distribution we always make an effort to have more distribution, we still have a lot of runway in front of us to get additional distribution in U.S. For example, $4 OTA, we are only in 4 million homes compared to total 20 — almost 21 million available. So there still lot of runway in front of us.
Cable homes we still have about 15 million more cable homes to get into. If we get the opportunity we’ll, get them done. But we don’t really have visibility or when exactly we’ll be able to get into them because they have more opportunity bound and whenever we can get the opportunity as the chance we give it by another player and we can offer to it as we are able to bid at a share price they we are happy with, we’ll take that on.
So for your model, you should take the current investment we’re making into our affiliate as continued dollar terms, not in revenue percentage terms but in dollar terms. If we are able to get more distribution we may be able to get, but we don’t give specific guidance for that. Our guidance this quarter that we have given for H2 is 8% to 9% of EBITDA number for the whole year.
Sachin Kasera — Swan Investments — Analyst
Sure. And my last question was in this cost-saving of 2.6% that we have seen and there’s a slide number 32 which you mentioned sir on three areas. So, if $5 to $7 million savings is basically part of this 2.6% of these are further additional program that we’re going to run over and above this enough 2.6% benefit that we seen in H1 in terms of EBITDA margin benefits?
Vineet Ganeriwala — President Shop LC
I’ll take that Sunil. So, yes this 2.6%, which you see as average, so this some part of the cost-savings have already started kicking-in and that’s part of this.
Sachin Kasera — Swan Investments — Analyst
But, fair to assume that when you are mentioning, $5 to $7 million on a if like almost half in H1 or H2, or would you say that a larger benefit of this $5 million to $7 million would come in H2.
Vineet Ganeriwala — President Shop LC
So a larger benefit would come in H2 so these savings started flowing in partly from Q1 and is now maturing month-on month but like in terms of weightage higher weightage will be in H2. Having said that, when we are giving the EBITDA margin guidance for the full-year so this is already factored in from keeping that in mind.
Sachin Kasera — Swan Investments — Analyst
Sure. And lastly in case from Germany you mentioned that the gross margins are better than U.S. and UK. Any reason and is this like the nature of this market and this should sustain as we grow there and become a much larger entity or is it that initially because the base is lower because of certain product mix changes and on the gross margins in Germany are better than U.S. and UK?
Vineet Ganeriwala — President Shop LC
So in Germany the reason for higher gross margin is that the shipping revenue is lower and also the return shipping customers don’t have to pay if they want to return, while in US the customer pays for return shipping. Because of the structure of that, we tend to get higher gross margin.
When we launched we didn’t expect the consumer to be able to comfortably pay a higher-margin but they’re doing. And that will has to become profitable one year sooner than we expected.
Sachin Kasera — Swan Investments — Analyst
Sure so just wanted to make sure you’re saying in case of Germany the gross margins are higher but we may end-up incurring higher on the logistic cost, whereas in case of U.S. and UK the gross margin are below, but then the logistics cost would also lower, at EBITDA it may not be that much of a difference in that, correct?
Vineet Ganeriwala — President Shop LC
Yes. So there is some dilution because of the higher logistics costs, but net-net the overall margin is better than we originally expected. Therefore the accelerated time for breakeven by [Indecipherable].
Sachin Kasera — Swan Investments — Analyst
And if I got you right, you said the current burn in Germany is approximately EUR400,000 revenue and EBITDA EUR4 million?
Vineet Ganeriwala — President Shop LC
Correct. So that was the current — last two months runway, but going-forward. So for this current quarter, it was about INR12 crores from last quarter. This is noteworthy of EUR400,000. And the next coming quarters will be lower than that.
Sachin Kasera — Swan Investments — Analyst
Sure. And on, slide number 22, in which you given a month trend, will you be able to, give us some comments on how the October month has gone, like you shown that versus September has started to see a recovery with some pause in September because of the fix debt. Will you be able to comment anything on how October sustaining this trend at least so again because of network, we’re seeing October is started to increase.
Vineet Ganeriwala — President Shop LC
So October is still not completed and they don’t really have data, but we are fairly confident of our guidance, to get to 2% to 4% guidance it has to be positive trend, and we are seeing that.
Sachin Kasera — Swan Investments — Analyst
Sure. Thank you.
Vineet Ganeriwala — President Shop LC
Sure, thank you.
Operator
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Vineet Ganeriwala — President Shop LC
I want to thank all the participants for your time and great questions. And also. I also want to thank for your support to VGL in past years. If you have any further question please, feel free-to reach Prashant, or Mit Shah, both, and we’d be happy to answer your questions. Thank you once again.
Operator
[Operator Closing Remarks]