Adairs Ltd. · ASX:ADH
Adairs — H1 2017 Earnings Presentation
24 slides from Adairs's earnings presentation, Feb 27, 2017
Slide 1: 1H FY17 results presentation
For personal use only 1H FY17 results presentation 27 February 2017
Slide 2: 1H FY17 results snapshot
1H FY17 results snapshot For personal use only Sales LFL sales $124.5m -4.0% up 5.7% Cycling +15.4% pcp Gross profit margin CODB 47.4% of sales 59.3% PCP 62.9% up from 43.8% INTERIM DIV EBIT NPAT 3.5 cps $12.0m $8.6m fully franked Down 39.6% Down 35.3% Variances refer to 1H FY17 highlights compared
Slide 3: Agenda
Agenda 1. 1H17 Business Overview For personal use only 2. 1H17 Financial Performance 3. Strategic Update 4. 2H17 Outlook
Slide 4: 1H17: Snapshot
1H17: Snapshot 1H17 financial performance was disappointing For personal use only • Sales up 5.7% vs pcp to $124.5m • LFL sales down -4% (cycling +15.4% in pcp) • Issues most acute in Bed Linen product category, and geographically in northern states • Online sales growth: +6.0% (7.4% of total sales)
Slide 5: Sales Performance
Sales Performance Total sales increase of 5.7% on PCP (but -4% LFL) For personal use only Sales ($m) Driven by: • New stores opened in line with plan • 8 new stores in Australia • Refurbished 4 stores • Opened 2 New Zealand stores • Continued growth online +6%, despite growth impacted by product iss
Slide 6: Sales Performance cont
Sales Performance cont For personal use only LFL sales growth • LFL Sales down 4% with poor trading emerging clearly in 2Q • LFL sales decline was a result of: • Fashion Linen issues that began emerging through first quarter continuing through the second quarter - 1H down LFL 8% • Overall softer Chr
Slide 7: Managing Gross Profit Margin
Managing Gross Profit Margin For personal use only • 1H17 gross profit margin reduced to 59.3% from 62.9% (vs pcp) • Impacted by: • FX impact on gross margin dollars was a reduction of $3.1m vs pcp (~260bp) • Additional promotional activity to drive sales and clear inventory in underperforming categ
Slide 8: Cost of Doing Business
Cost of Doing Business For personal use only • Group Cost of Doing Business increased as percentage of sales to 47.4%: • Operating costs as a % of sales increased due to declining LFL sales – leverage impact • Wage increases have been offset against productivity efficiencies and reduced hours • Land
Slide 9: 1H17 Strategic Projects Completed
1H17 Strategic Projects Completed For personal use only ERP POS Rollout completed (Microsft Dynamics AX) • All stores trading on the new system and operated smoothly over the key Christmas trading period • Finalising some enhancements over 2H including: • Migration of online stock available for purc
Slide 10: Agenda
Agenda 1. 1H17 Business Overview For personal use only 2. 1H17 Financial Performance 3. Strategic Update 4. 2H17 Outlook
Slide 11: 1H17 performance
1H17 performance $ million 1H FY17 1H FY16 Change For personal use only Sales 124.5 117.8 5.7% • Sales revenue growth +5.7% vs pcp Gross Profit 73.9 74.2 0.4% • Gross Profit Margin of 59.3% down from 62.9% EBITDA 14.8 22.5 34.3% • FX negative impact 260bp or $3.1m EBIT 12.0 19.9 39.6% • CODB as a %
Slide 12: Strong balance sheet
Strong balance sheet Working Capital decreased on the For personal use only • $ million 1H17 1H16 Change corresponding period: Trade and Other • Inventory increased c$2.4m pre FX 6.9 6.2 10.9% Receivables impact on 1H16 to support net 17 new stores Inventories 31.1 29.7 4.8% • FX impact on valuation
Slide 13: Cash flow – strong operating cashflows
Cash flow – strong operating cashflows For personal use only $ million 1H17 1H16 • Strong Cash flow position despite disappointing trading performance with EBITDA 14.8 22.5 $9.6m cash on hand Change in Working Capital / Other 8.5 (3.6) • Improvement in working capital obtained through negotiation of
Slide 14: Investing for growth (Capex)
Investing for growth (Capex) For personal use only Capital expenditure ($m) • $6.5m capex compared to $5.5m in 1H16 • 10 new stores opened in 1H17 (8 in Australia and 2 in New Zealand) vs 5 in 1H16 • 4 stores refurbished • Continuing to see pleasing results from store refurbishments • Remain committ
Slide 15: Agenda
Agenda 1. 1H17 Business Overview For personal use only 2. 1H17 Financial Performance 3. Strategic Update 4. 2H17 Outlook
Slide 16: 1H17: Delivering Strategy
1H17: Delivering Strategy For personal use only Differentiated and innovative product range • We have continued to invest in building capability with additional product manager and merchandising manager. Accelerating Australian multi store format roll out • Successfully opened 3 Homemaker, 3 Regular
Slide 17: Agenda
Agenda 1. 1H17 Business Overview For personal use only 2. 1H17 Financial Performance 3. Strategic Update 4. 2H17 Outlook
Slide 18: FY17 Outlook
FY17 Outlook FY17 Guidance: For personal use only Our revised guidance is provided against the backdrop of emerging but inconclusive signs of improved trading, the ongoing implementation of remedial actions, and the prospect of a continued subdued trading environment FY17 Revised H2 Guidance Guidanc
Slide 19: 2H17 Outlook
2H17 Outlook For personal use only • The continuation of current strategies are still the right direction for the business • While there are early signs of an improvement in the execution of product, the softer retail environment may extend the time taken to achieve the expected turnaround in LFL sa
Slide 20: 2H17 Outlook
2H17 Outlook For personal use only Gross Margin 58.0% - 59.5%: • Gross Margins held to guidance levels and entering the season with no significant inventory build up • Entering the 2H with no significant inventory build up • Currency headwinds are largely neutralised in 2H supported by our current h
Slide 21: Questions?
For personal use only 20 Questions?
Slide 22: Appendix
For personal use only Appendix 21
Slide 23: Growing store footprint: +10 in 1H17
Growing store footprint: +10 in 1H17 For personal use only 1 1 97 - Adairs Stores (incl. Outlet) 20 6 2 41 - Homemaker Stores 10 6 11 - Adairs Kids Stores 5 2 8 - UHR Stores (inc. 3 Myer concessions) 1 1 DC and HQ 11 3 1 1 28 1 30 6 14 5 2 1H17 stores refurbished 1H17 new stores Adairs – Victoria Ga
Slide 24: Disclaimer
Disclaimer For personal use only 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, assumptions