Slide 1: Adairs FY20 Results Presentation
Adairs FY20 Results Presentation 10 August 2020 MARK RONAN ASHLEY GARDNER CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
Slide 2: FY20 highlights
FY20 highlights COVID-19 has highlighted the resilience of our model and strength of our brands Omni-channel strategy ► Group Sales +12.9% to $388.9m drives record sales ► Group online sales up 110.5% to $124.2m - now represents 34.8% of total sales1 ► Adairs online sales up 61.4%; Mocka sales up 30
Slide 3: FY20 in review
FY20 in review Pre COVID-19 (Jun 2019 – mid March 2020) LFL Sales growth - 1H20 & Jan-Mar 2020 (Q3) ► Until mid March Adairs was tracking ahead of expectations 35% 32.9% ► Strong 1H: LFL Sales +6.9%, Online +29.9%/LFL Stores +2.4% 29.9% 30% ► Supply chain in China rebounded well to COVID-19 closure
Slide 4: Profit and Loss
Profit and Loss Adairs Mocka Group Record sales and profit Underlying Underlying Change 30-Week Underlying Change ($ Million) FY20 FY19 (%) Contrib. FY20 (%) ► Group underlying EBIT up 39.7% to $60.7m Online Sales 95.2 59.0 61.4% 29.0 124.2 110.5% ► Adairs EBIT up 24.3% to $54m Store Sales 264.7 285
Slide 5: Strong sales/margins with all channels profitable
Strong sales/margins with all channels profitable ► Sales growth continues to be strong with online now representing FY20 contribution margin by channel 1 c.35% of total group sales on an annualized basis (excludes JobKeeper wage subsidy) ► Adairs and Mocka both have attractive margins ► All of our
Slide 6: Capital Management
A Capital recap: Our strategy Management Strong balance sheet Cash flow ► Inventory is clean and stock turns have improved ► Strong underlying growth in operating cashflows ► Adairs inventory down $7.8m to $35m (-18%) ► Additional borrowings of $48m to fund the – Active stock management at onset of
Slide 7: Strategy update
Strategy update 6
Slide 8: Adairs – Omni channel strategy delivers growth and cashflow
Adairs – Omni channel strategy delivers growth and cashflow COVID-19 has accelerated Adairs online penetration and 1 Strong online customer growth growth rate with long term benefit to be realised as new customers return and shop both our channels. ► The combination of stores and online delivered FY
Slide 9: “Home” is better with Stores
“Home” is better with Stores Inspiration and discovery Customer service It’s the real thing ► Curating a home is a process of ► An experienced, customer-friendly ► Being able to touch and feel a discovery, inspiration and store team can product is very important to change many Home customers – creat
Slide 10: … and our Stores are an asset that performs
… and our Stores are an asset that performs 1 Our store formats are profitable with strong margins 3 Allows us to strategically manage our stores % Store Contribution ► open new stores, with an emphasis on larger stores, Store Format Stores where the business case is supportive Sales FY20 margin Ada
Slide 11: Loyalty is important: 800k+ engaged Linen Lovers
Loyalty is important: 800k+ engaged Linen Lovers Customers that engage with Adairs on multiple channels make purchases more often and spend more with each purchase than those who only engage via only one channel Improved Customer Experience Our Linen Lovers ► We gain a complete understanding loyalty
Slide 12: Mocka
Mocka Adairs acquired Mocka in December 2019. FY20: Mocka is: ► 880k website visits / 6.4m page impressions ► 185k active customers / 415k email subscribers – online pure-play – vertically integrated ► Exclusive product offering – home and living products designer and retailer ► In-house design / Co
Slide 13: Future growth - The drivers
Future growth - The drivers Our current business model is proven, resilient and offers material scope to grow 1 Proven and resilient business model Strong brands (that we own and control) High exposure to online growth ► Lower cost of customer acquisition and retention ► Adairs online sales +61.4% a
Slide 14: Future growth - The drivers
Future growth - The drivers Our stores are key to being omni and retain significant growth potential 2 Profitable store formats ► All Stores are profitable with relatively short lease terms ► Larger stores more profitable. Significant upsizing opportunities remain within the portfolio – showcase mor
Slide 15: Future growth - The drivers
Future growth - The drivers Our digital strategy was the engine room for growth in FY20 and this will continue well into 3 Digital transformation the future Development of our digital channel ► Accelerating our digital transformation through additional investment in customer acquisition, customer ex
Slide 16: Future growth - The drivers
Future growth - The drivers Our new NDC will assist in enabling our digital strategy and delivering profitable growth for the next decade 5 Omni Supply Chain Strategy New National Distribution Centre ► DHL to operate – we will focus on customers and product ► Faster and more efficient deliveries – d
Slide 17: Future growth - The opportunity for our Brands
Future growth - The opportunity for our Brands We have a very large addressable market … and we have a strong record of growing market share in Australia ► online is expected to move towards Sales CAGR – Adairs/Mocka v Market (Home3) 15%-20% of category sales in line with overseas experience ► being
Slide 18: FY21 Outlook
FY21 Outlook Trading and hedging update For the first five weeks of FY21 Adairs recorded the following sales (over the same period in FY20): ► Group Total Sales +32.3% ► Adairs Online sales +103.2% ► Stores sales +18.6% with LFL store sales +15.8% ► Mocka sales +46.8%1 ► The Group is hedged at 0.70
Slide 19: QUESTIONS?
QUESTIONS?
Slide 20: APPENDIX
APPENDIX 1. Store footprint 2. Sales LFL history 3. Profit & Loss reconciliation 4. Balance Sheet reconciliation 5. Cashflow reconciliation
Slide 21: Appendix 1 – Store footprint
A recap: Our strategy Appendix 1 – Store footprint Store Activity (FY20) Total Stores: 167 (Jun 19: 165) New Stores (5) Regular – Orange City Central, Northland Homemaker – Shellharbour, Waurn Ponds Adairs Outlet – Liverpool Upsized and Refurbished Stores (4) Regular – Indooroopilly Homemaker – Newf
Slide 22: Appendix 2 – Sales LFL history
A recap: Our strategy Appendix 2 – Sales LFL history 21
Slide 23: Appendix 3 – Profit & Loss reconciliation
A recap: Our strategy Appendix 3 – Profit & Loss reconciliation FY20 reconciliation FY19 Mocka Underlying Mocka Statutory Statutory AASB 16 Impact transaction ($ Million) FY20 trading FY20 FY19 costs Sales 359.9 29.0 388.9 344.4 Gross Profit 210.5 11.6 222.1 197.1 Gross Profit % 58.5% 57.1% 57.2% CO
Slide 24: Appendix 4 – Balance Sheet reconciliation
A Appendix recap: Our4strategy - Balance Sheet reconciliation Jun-20 Jun-20 Jun-19 ($ Million) Mocka IFRS16 Underlying Statutory Statutory Cash and Cash Equivalen 13.7 10.2 - 23.9 16.7 Inventories 35.0 8.4 - 43.4 42.8 Plant and Equipment 20.3 0.5 - 20.8 20.9 Goodwill and Intangibles 195.8 0.2 0.1 19
Slide 25: Appendix 5 – Cashflow reconciliation
AAppendix recap: Our 5 –strategy Cashflow reconciliation FY20 FY20 FY19 Change ($ Million) AASB16 Statutory Underlying Underlying Underlying Cash flows from operations 97.3 -26.9 70.4 35.0 35.4 Capital expenditure -7.5 -7.5 -7.0 -0.5 Borowings to acquire Mocka 48.0 48.0 48.0 Mocka acquisition, net o
Slide 26: Disclaimer
Strong Omni Channel Execution Disclaimer Some of the information contained in this presentation contains “forward-looking statements” which may not directly or exclusively relate to historical facts. These forward-looking statements reflect Adairs Limited current intentions, plans, expectations, ass