Adairs Ltd. · ASX:ADH
Adairs — FY2019 Earnings Presentation
27 slides from Adairs's earnings presentation, Aug 26, 2019
Slide 1: Adairs FY19 Results Presentation
Adairs FY19 Results Presentation 26 August 2019 MARK RONAN ASHLEY GARDNER CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
Slide 2: Results Overview
- 1. RESULTS OVERVIEW
Slide 3: FY 2019 results
A recap: Our strategy FY 2019 results Sales growing across both channels ► Sales +9.7% to $344.4m with like for like (LFL) sales +7.2% ► Online sales +42% to $58.8m (now 17% of total sales) Solid gross profit result ► Gross profit +6.7% to $197.1m ► Gross margin rate -110bp to 59.2% pre AASB 15 adju
Slide 4: Financial Results
2. FINANCIAL RESULTS
Slide 5: Key P&L metrics
AKey recap: P&LOur strategy metrics ($ Million) FY19 FY18^ %D EBIT $m Sales 344.4 314.0 9.7% 44.5 43.4 38.9 Gross Profit 197.1 184.7 6.7% 32.1 30.4 Gross Profit % 57.2% 58.8% Add back AASB 15 impact 7.1 5.0 Underlying Gross Profit % 59.2% 60.3% (Pre AASB 15) CODB 146.0 133.3 9.5% FY15^ FY16^ FY17^ F
Slide 6: Sales growth across both channels
344.8 Sales growth across both channels Store Sales $m^ 314.8 35% Total sales +9.5% to $344.8m, with LFL sales +7.2% Online 58.8 300.0 Online Contribution 41.5 30% Stores: Sales +4.7% to $286m, with LFL growth of 1.5% 265.0 ► Sales growth continues to be driven by performance of 247.4 286.0 expansio
Slide 7: Online delivers strong sales growth
70.0 Online Sales $m Online delivers strong sales growth 58.8 ► Online delivered 42% LFL sales growth and contributed 60.0 17% of total sales (FY18 13%) 41.7% 41.5 growth Online sales growth continues to be driven by growing 50.0 ► 40.0 social media engagement, enhancing search engine marketing, and
Slide 8: Product strategy driving LFL growth
A recap: Our strategy Product strategy driving LFL growth ► Continued focus on range expansion saw ‘expansion categories’ increase to 41.2% of sales ► Growing these expansion categories drives like for like sales growth, and diversifies our business Adairs Product Mix % 41.2% 39.5% Expansion 37.4% E
Slide 9: Gross Profit and Gross Margin drivers
Gross Profit and Gross Margin drivers Gross Profit $m (and GM%)^ Underlying gross profit margin fell 110 bp to 59.2% Gross Margin GM % 204.2 The drivers of this decline were: 189.6 151.0 156.8 55% A weaker AUD/USD buy rate v FY18 130.7 ► This will remain a headwind in FY20 however GM % we have worke
Slide 10: Cost of doing business (CODB)
ACost recap: Our strategy of doing business (CODB) CODB increased by $15.2m (+11%) ► Other Expenses accounted for c.30% of the increase (% Sales) FY19 FY18 Change in CODB (up $4.9m on FY18), and represented >100% of the increase in our Comparable CODB%, Salaries & Employee driven by: 22.7% 22.8% -0.
Slide 11: Strong Balance Sheet supports growth
AStrong recap:Balance Our strategy Sheet supports growth ($ Million) FY19 FY18 FY19 saw further balance sheet improvement ► Strong closing cash position of $16.7m with net debt Cash and Cash Equivalents 16.7 12.7 position improving $4.0m over the year to $8.2m Inventories 42.8 33.6 ► Borrowings larg
Slide 12: Investing for growth
A recap: Our strategy New Store Capital Investment $m Investing for growth Refurbs 11.3 ERP 10.3 ► Opened 5 new stores in FY19 Other 2.1 ► 11 refurbishments completed including the 0.8 upsizing of 5 stores 1.1 1.1 ► Other CAPEX of $2.3m consists of purchases 6.9 7.0 7.0 of fixtures for the secondary
Slide 13: Strong free cashflow and higher FY19 dividend
AStrong recap:free Ourcashflow strategy and higher FY19 dividend ► Free Cash Flow from Operations remains strong ($29.2m) but down $4.2m on FY18 due to an ($ Million) Statutory Statutory Change increased investment in inventory and the timing of FY19 FY18 tax payments ► Net debt reduced by $4.0m to
Slide 14: Executed on strategy in FY19
AExecuted recap: Our on strategy strategy in FY19 Product, Product, Growth of the expansion categories drove like for like sales +7.2% Product Focus remains on providing differentiated on-trend product More Inspiring Opened 5 new stores, refurbished 11 stores including 5 upsized stores Larger
Slide 15: Agile and efficient supply chain
A recap: Our strategy Agile and efficient supply chain – our 6th strategic pillar ► In FY19 we exceeded capacity in our primary DC which materially increased our operating costs and this, combined with the weaker Australian dollar, offset the benefits of our sales growth ► The restructure of our sup
Slide 16: Company Outlook
3. COMPANY OUTLOOK
Slide 17: FY20 Outlook
AFY20 recap: Our strategy Outlook Sales Pre AASB 16 impact FY20 Guidance ► Top line revenue growth to remain strong with LFL growth underpinned by continued growth in both stores and online Year End Stores 169 – 171 ► We expect to open 4-6 net new stores (incl. NZ) during FY20 Sales ($m) 360 – 375 G
Slide 18: Questions?
QUESTIONS?
Slide 19: Appendices
APPENDICES 1. Store footprint 2. Sales LFL history 3. Statutory profit to EBITA/EBIT reconciliation 4. FY18 Statutory to Pro-forma reconciliation 5. AASB 16 (Lease Standard) explained 6. Inventory Bridge FY18 to FY19 7. GM% Bridge FY18 to FY19
Slide 20: Store footprint
AAppendix recap: Our 1 –strategy Store footprint Total Stores: 165 (FY18: 167) New Stores (5) Adairs – Midland Gate, Coomera, Perth DFO Homemaker – Cannington, Noosa 1 Refurbished Stores (6) 1 20 Adairs – Carousel, Townsville, The Glen, Moorabbin Outlet, Kids Essendon 8 13 Homemaker – Essendon 2 8 5
Slide 21: Sales LFL history
AAppendix recap: Our 2 –strategy Sales LFL history Adairs LFL Sales Growth Last 5 Years Sales LFL% (5 Year Average of +10.7%) Average 24.1% 18.8% 15.4% 14.8% 13.8% 8.7% 7.3% 7.1% 1.0% -4.0% 1H FY15 2H FY15 1H FY16 2H FY16 1H FY17 2H FY17 1H FY18 2H FY18 1H FY19 2H FY19 15
Slide 22: Statutory profit to EBITA/EBIT reconciliation
AAppendix recap: Our 3 –strategy Statutory profit to EBITA/EBIT reconciliation ($ million) FY19 FY18^ Profit after Income Tax 29.6 30.6 AASB 15 Revenue adjustment - (0.5) Statutory Profit After Income Tax 29.6 30.0 Add back: - - Finance Expenses 1.2 1.5 Interest Income (0.1) (0.0) Income tax expense
Slide 23: FY18 Statutory to Pro-forma reconciliation
AAppendix recap: Our 4 –strategy FY18 Statutory to Pro-forma reconciliation FY18 Adjustments^ FY18 FY18 FY19 ($ Million) 1 2 $D %D Statutory Pro forma Statutory Sales 314.8 (0.7) - 314.1 344.4 30.3 9.6% Gross Profit 189.6 (0.7) (4.2) 184.7 197.1 12.4 6.7% Gross Profit % 60.3% 58.8% 57.2% -1.6% CODB
Slide 24: AASB 16 (Lease Standard) explained
AAppendix recap: Our 5 –strategy AASB 16 (Lease Standard) explained Current treatment Expected Proforma ► Finance leases are recorded on balance sheet and lease expenses Metric Impact v Current Presentation included below EBITDA, within financing cost and amortization / Asset Turnover Decrease depre
Slide 25: Inventory Bridge FY18 to FY19
AAppendix recap: Our 6 –strategy Inventory Bridge FY18 to FY19 ($m) FX on YE New & Upsized Sales Growth Jun-19 carrying value Stores $1.2 M $42.8 M $43.0 M Stock in $1.5 M $0.6 M transit ^ $5.9 M $41.0 M $39.0 M $37.0 M Jun-18 $35.0 M $33.6 M $33.0 M $31.0 M $29.0 M $27.0 M $25.0 M $23.0 M Jun-18 Re
Slide 26: GM% Bridge FY18 to FY19
FY18 60.3% Statutory GM% AAppendix recap: Our Inclusion of postage 1.3% in COGS (AASB15) Deferred Linen Lovers revenue 0.2% 7 –strategy recognition (AASB15) Comparable GM% 58.8% AASB 15 reduced margin by 150bps Weaker AUD/USD 0.6% buy price Increased freight 0.2% costs in COGS Increase in GM% Bridge
Slide 27: 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