Slide 1: Adairs 1H FY20 Results Presentation
Adairs 1H FY20 Results Presentation 21 February 2020 MARK RONAN ASHLEY GARDNER CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
Slide 2: 1H FY20 highlights
A recap: Our strategy 1H FY20 highlights Omni-channel strategy continues to drive sales across both channels ► Sales +8.6% to $178.9m with LFL sales +6.9% ► Online sales +31.6% to $31.6m (18% of total sales) ► Stores sales +4.9% with LFL store sales +2.4% Strong gross profit result ► Gross profit +9
Slide 3: Profit and strategy
A recap: Our Loss Profit and strategy Pro forma Pro forma Record sales and profit ($ Million) 1H FY20 1H FY19 % ► Omni-channel strategy drove sales +8.6% with Sales 178.9 164.7 8.6% LFL sales +6.9% Gross Profit 109.3 100.3 9.0% ► Gross Profit +9.0% over 1H FY19 Gross Profit % 61.1% 60.9% +20bps ► Gr
Slide 4: Sales growth across both channels
$210.0 Sales $m 40% Sales growth across both channels Online 35% Total sales (ex Mocka) up 8.6% with like for like sales up 6.9% Stores $178.9 Stores: Sales up 4.9% on LY with LFL growth of 2.4% $190.0 Online % Total Sales $164.7 ► Sales growth driven by strong performance across our core 30% $170.0
Slide 5: Gross Profit and Gross Margin drivers
Gross Profit and Gross Margin drivers Gross Margin $m (and GM%) Underlying gross profit margin rose 20 bps to 61.1% Impact of the weaker AUD has been fully offset by: Gross Margin 109.3 ► sourcing initiatives to reduce suppliers landed GM % 100.3 costs 90.3 89.9 ► review of price points with selecti
Slide 6: CODB
CODB Stores/Online CODB % CODB as % Sales Operating leverage achieved in both Stores and Online ► Store contribution increased as LFL sales growth exceeded 46.0% store cost growth 45.1% ► Lower occupancy cost (as a % of sales) through: 3.2% 2.9% – upsizing stores, and 9.0% 40.0% 7.4% – favourable re
Slide 7: Balance Sheet
A Balance recap: Our strategy Sheet Dec-19 Dec-19 Jun-19 ($ Million) Mocka IFRS16 ► Inventory is clean and well managed. Pro forma Statutory Statutory Increase of $3.5m reflects: Cash and Cash Equivalents 8.4 2.5 - 10.9 16.7 – current year growth in selected Inventories 46.3 7.5 - 53.7 42.8 product
Slide 8: Mocka acquisition – financial impact
A recap: MockaOur strategy – financial impact acquisition Acquisition structure Financial implications for Adairs ► Mocka was acquired by Adairs in December 2019 Pro forma FY20 EBIT1 (A$m) ► Adairs has recognised an initial purchase price of c.$81.8m ~53 for 100% of Mocka on a cash and debt free bas
Slide 9: Investing for growth
A recap: Our strategy Investing for growth Capital Investment $m 6.5 ► Opened 5 new stores in 1H FY20 5.4 1.9 ► 2 refurbishments completed including 1 upsized store 1.2 4.6 ► Other capex of $1.6m consists of Customer Support Office, supply chain and digital platform capex 1.1 3.5 3.2 1.6 ► Acquisiti
Slide 10: Cash flow and dividend
A recap: Our and Cash flow strategy dividend Pro forma Pro forma Cash flow Change ($ Million) 1H FY20 1H FY19 ► Strong growth in operating cashflow Opening Cash 16.7 12.7 4.0 ► Additional borrowings of $48m to Operating Cash Flow 25.9 18.9 7.0 fund the acquisition of Mocka and Investment Cash Flow (
Slide 11: Executing on strategy
A recap: Our strategy Executing on strategy Our omni-channel strategy is delivering … and will be further enhanced by the new National Distribution Centre (“NDC”) ► Sales +8.6% with online sales +31.6% and LFL store sales +2.4% is confirmation that our integrated omni-channel strategy is working ► O
Slide 12: Mocka acquisition
acquisition Mocka is a vertically integrated pure-play online home and living products designer and retailer operating in Australia and New Zealand ► Consistent strong sales growth and margins with high levels of profitability and cash generation ► Operates independently of Adairs, with existing man
Slide 13: Supply chain strategy
A recap: SupplyOur strategy chain strategy Strategic review completed and heads of agreement signed with DHL as 3PL partner for our new National Distribution Centre DHL are a global leader in the design, implementation, and operation of flexible warehousing and distribution solutions. The new supply
Slide 14: Supply chain outcome
Supply chain outcome DC operating model ► 3PL (DHL) as operator ► Single dedicated National Distribution Centre in Victoria to replace 4 existing DC facilities Benefits of 3PL over own operation ► Lower risk – DHL are a global operator for whom project management and DC operation are a core expertis
Slide 15: FY20 Outlook
A recap: Our strategy FY20 Outlook Trading Update FY20 Guidance For the first seven weeks of 2H FY20: ► In balancing the solid 1H FY20 performance against ► Adairs generated LFL sales growth of 2.3% and the uncertainties that exist over the near to medium LFL Gross Profit growth of 8.5% term, includ
Slide 16: Questions?
QUESTIONS?
Slide 17: Appendix
APPENDIX 1. Store footprint 2. Sales LFL history 3. P&L Statutory to Pro forma reconciliation 4. Cashflow Statutory to Pro forma reconciliation 5. CODB analysis
Slide 18: Appendix – Store footprint
A recap: Our strategy Appendix 1 – Store footprint Store Activity (1H FY20) Total Stores: 169 (Jun 19: 165) New Stores (5) Adairs – Orange City Central, Northland 1 1 Homemaker – Shellharbour, Waurn Ponds Adairs Outlet – Liverpool 20 Upsized/Refurbished Stores (1) 8 Adairs – Indooroopilly 2 2 Refurb
Slide 19: Appendix – Sales LFL history
A recap: Our strategy Appendix 2 – Sales LFL history Adairs LFL Sales Growth Last 5 Years (5 Year Average of +10.4%) 24.1% 15.4% 14.8% 13.8% 8.7% 7.3% 7.1% 6.9% 1.0% -4.0% 2H FY15 1H FY16 2H FY16 1H FY17 2H FY17 1H FY18 2H FY18 1H FY19 2H FY19 1H FY20 16
Slide 20: Appendix – P&L Pro forma to Statutory reconciliation
A recap: Our strategy Appendix 3 – P&L Pro forma to Statutory reconciliation 1H FY20 reconciliation 1H FY19 reconciliation Mocka Pro forma AASB 16 AASB 15 Mocka Statutory Pro forma AASB 15 Statutory transaction ($ Million) 1H FY20 Impact1 Impact2 trading3 1H FY20 1H FY19 Impact 1H FY19 costs4 Sales
Slide 21: Appendix – Cashflow Pro forma to Statutory reconciliation
A recap: Our strategy Appendix 4 – Cashflow Pro forma to Statutory reconciliation 1H FY20 reconciliation Pro forma AASB 16 Mocka Statutory Pro forma ($ Million) 1H FY20 Impact (1) Impact (2) 1H FY20 1H FY19 Opening Cash 16.7 16.7 12.7 Operating Cash Flow 25.9 15.0 (1.6) 39.3 18.9 Investment Cash Flo
Slide 22: Appendix – CODB analysis
A recap: Our strategy Appendix 5 – CODB analysis Change CODB 1H FY20 1H FY19 (bps) Salaries & Employee Benefits 23.7% 23.6% +10 Occupancy Expenses 12.2% 12.8% -60 Advertising Expenses 2.6% 2.5% +10 Other Expenses 7.5% 6.3% +120 Total CODB % 46.0% 45.1% +90 Total CODB ($ million) $82.3m $74.3m +10.7%
Slide 23: 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