Slide 1: FY16 results presentation
FY16 results presentation 26 August 2016
Slide 2: FY16 pro forma results highlights
FY16 pro forma results highlights Outperformed FY16 EBIT Prospectus forecast and our guidance LFL sales Sales Update photo $247.4m 11.7% up 17.3% Cycling +21.6% pcp Gross profit margin CODB 43.1% of sales 61.0% down from 44.1% Full Year EBIT NPAT Dividend $39.2m $26.1m 11.5cps Up 18.4% Up 18.9% full
Slide 3: Agenda
Agenda 1. Business Highlights - Continuing to deliver outstanding results 2. Financial Results - Outperformed FY16 EBIT Prospectus Forecast 3. Key growth drivers 4. Company Outlook
Slide 4: Key business highlights – FY16
Key business highlights – FY16 Outperformed FY16 EBIT guidance and Prospectus forecast • 3rd consecutive year of >10% LFL sales growth Omni channel strategies delivering above market sales growth: • LFL +11.7% • Online +63.8% (Now 7.9% of total sales) Increasing momentum from Australian store ro
Slide 5: Strong LFL sales growth of +11.7%
Strong LFL sales growth of +11.7% Continuing to deliver LFL sales growth while Strong LFL sales growth cycling strong prior periods (FY15: +21.6% pcp) Continuing to grow market share with a competitive market position Sales growth largely driven by increased transaction numbers (i.e. larger cu
Slide 6: Agenda
Agenda 1. Business Highlights - Continuing to deliver outstanding results 2. Financial Results - Outperformed FY16 EBIT Prospectus Forecast 3. Key growth drivers 4. Company Outlook
Slide 7: Outperformed Prospectus & guidance
Outperformed Prospectus & guidance Statutory Pro-forma Pro-forma Pro-forma ($ million) FY16 vs FY15 FY16 Variance FY16 FY16 Act FY16 (52 Wks) FY15 Change to Prospectus (53 Wks) (52 Wks) Prospectus (52 Wks) Sales 253.2 247.4 231.1 210.9 17.3% 7.1% Gross Profit 154.3 151.0 142.1 130.7 15.5% 6.3% CODB
Slide 8: Actively managing Gross Profit
Actively managing Gross Profit Achieved top end of guidance range for GP Impact of stock turns (~3-4 mths) and the effect margin of our hedging program (~3-4 mths) results in a 6-8 month “lag” in the full financial impact of FX FY16 GP margin reduced to 61% from 62% changes (holding all other
Slide 9: Strong cash flows
Strong cash flows • Underlying operating cash flow was Pro-forma Pro-forma strong, with some relatively minor timing Change $ $ million FY16 FY15 differences, and continued investment in key growth drivers EBITDA (52 Wks) 44.4 37.7 6.7 • Operating cash flow impacted by increased inventory to support
Slide 10: Strong balance sheet to support growth
Strong balance sheet to support growth $ million 3 July 2016 28 Jun 2015 Change $ Working Capital increased over the year Trade and Other 6.6 4.8 1.8 to support store expansion and +11.7% Receivables LFL sales growth: Inventories 26.3 23.2 3.1 Increase in inventory of ~$3m Trade Payables and (24
Slide 11: Investing for growth (Capex)
Investing for growth (Capex) Capital expenditure ($m) 13 new stores opened 9 stores fully refurbished Continuing to see pleasing results from store refurbishments $10.3m capex compared to $9.4m in Prospectus Opened 2 more stores Higher mix of homemaker format Final phase of significant
Slide 12: Agenda
Agenda 1. Business Highlights - Continuing to deliver outstanding results 2. Financial Results - Outperformed FY16 EBIT Prospectus Forecast 3. Key growth drivers 4. Company Outlook
Slide 13: Strategy: Key growth drivers
Strategy: Key growth drivers Consistent with our long term strategic initiatives, revenue growth has 6 controllable key drivers supported by excellence in customer service, retail execution and scalable infrastructure. ‘Market growth’ now broadly in line with long term averages. 1. Differentiated an
Slide 14: 1. Differentiated & innovating product range
1. Differentiated & innovating product range Driving customer appeal by consistently delivering fashionability, value and quality Invested heavily in building a highly capable in-house product design, development and sourcing team (key competitive advantage) Innovative fabrications & bring new p
Slide 15: 2. Building on category range extension
2. Building on category range extension Adairs has expanded its product range materially over the last 5 years This strategy is inextricably linked to the success of our Homemaker Decorative store format, and our strategy to Lighting Occasional increase the average size of our Furniture stores Can
Slide 16: 3. Upsizing of our ‘Core’ store formats
3. Upsizing of our ‘Core’ store formats A key enabler of our category range extension strategy Opportunity to further improve profitability and Adairs ‘Regular’ drive further differentiation by selectively ‘upsizing’ existing Adairs ‘Regular’ and Adairs A new ‘mini homemaker’ store format ‘Homem
Slide 17: 4. Accelerating Australian multi store format roll out
4. Accelerating Australian multi store format roll out In FY16, Adairs rolled out 13 new stores in Australia, and successfully trialled 3 UHR concession stores in Myer Looking forward, we expect to open (net) ~8-12 new stores per annum across ‘core’ and ‘emerging’ store formats with the potentia
Slide 18: 5. Highly effective omni channel marketing & online store
5. Highly effective omni channel marketing & online store Growing & investing in Online & Linen Lovers loyalty program Linen Lovers is core to our operations and the centrepiece of our customer engagement ~40% activities CAGR The program continues to grow strongly and members of Linen Lovers con
Slide 19: 6. International omni store expansion (NZ)
6. International omni store expansion (NZ) First store in NZ to open in October 2017 (Sylvia Park – a Homemaker format store in a shopping centre) Two additional sites secured to open 2H Up to 5 stores planned to open by the end of FY17 focused solely on the ‘core’ Adairs store formats If su
Slide 20: 7. Positive market fundamentals
7. Positive market fundamentals We estimate our market has a long term growth rate of ~2% pa driven largely by volume (units) growth The broader market growth rate reflects: Consumer confidence & related factors (including interest rates, fuel prices, elections, employment certainty, housing p
Slide 21: Growing shareholder value
Growing shareholder value Continued delivery of a focused growth strategy Outperformed FY16 EBIT guidance and Prospectus forecast Continuing to grow market share Committed to key strategic drivers to deliver ongoing growth First year 11.5cps dividend fully franked – above Prospectus Final
Slide 22: Agenda
Agenda 1. Business Highlights - Continuing to deliver outstanding results 2. Financial Results - Outperformed FY16 EBIT Prospectus Forecast 3. Key growth drivers 4. Company Outlook
Slide 23: FY17 Outlook
FY17 Outlook Adairs will continue to execute our proven strategies to drive sales and earnings growth. FY17 earnings growth will increasingly bias to an accelerated store roll out as LFL sales growth moderates to “mid single digit” growth. FY17 Forecast Earnings growth driven through: Sales ($ milli
Slide 24: Questions?
Questions? 23
Slide 25: Appendix
Appendix 24
Slide 26: Store footprint
Store footprint 1 87 - Adairs Stores (incl. Outlet) 15 8 2 43 - Homemaker Stores 10 6 11 - Adairs Kids Stores 6 - UHR Stores (inc. 3 Myer concessions) 5 1 DC and HQ 15 3 1 28 1 27 6 13 4 1 FY16 stores refurbished FY16 new stores Adairs – Pacific Fair, Werribee, Chadstone, Eastland Adairs – Orion, We
Slide 27: Continued Growth in All Categories
Continued Growth in All Categories Expansion vs Traditional sales mix % Fashion & Decorator vs Staples sales mix % Expansion vs Traditional YoY Growth % Fashion & Decorator vs Staples YoY Growth % Note: Expansion includes Cushions, floor rugs, throws, wall art, lighting, furniture, home décor & Adai
Slide 28: Proforma Statutory Reconciliations
Proforma Statutory Reconciliations Statutory Profit and Loss Bridge to Pro-Forma Statutory Profit and Loss Bridge to Pro-Forma $000 Notes Profit/(loss) after income tax 27,172 Transaction expenses 101 IPO transaction costs Pro forma tax has been applied 53 Week EBIT (1,571) at the corporate tax rate
Slide 29: Proforma Statutory Reconciliations
Proforma Statutory Reconciliations Statutory Cash Flow Bridge to Pro-Forma $ million FY16 Statutory net increases in cash and cash 5,239 equivalents Cash flow impact of week 53 (1,645) Dividends 8,294 Transaction costs on issue of shares 7,229 Pro Forma Operating Cash Flow 19,114 28
Slide 30: Disclaimer
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, assumptions and beliefs about fut