Lovisa Holdings Ltd. · ASX:LOV
Lovisa — H1 2020 Earnings Presentation
25 slides from Lovisa's earnings presentation, Feb 19, 2020
Slide 1: Lovisa Holdings Limited 2020 Half Year
Lovisa Holdings Limited 2020 HALF YEAR SHANE FALLSCHEER MANAGING DIRECTOR CHRIS LAUDER CHIEF FINANCIAL OFFICER
Slide 2: Forward-looking statements
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 the current intentions, plans, expectations, assumptions and beliefs about future events of Lovisa
Slide 3: Contents
CONTENTS 1. HALF YEAR OVERVIEW 2. FINANCIAL OVERVIEW 3. TRADING PERFORMANCE 4. CASHFLOW AND BALANCE SHEET 5. STORE GROWTH 6. USA UPDATE 7. EUROPE UPDATE 8. OPERATIONAL UPDATE 9. TRADING UPDATE AND OUTLOOK 10. SUMMARY 11. APPENDICES 3
Slide 4: Half Year Overview
HALF YEAR OVERVIEW1 • EBIT up 10.7% to $40.4m, with NPAT up $2.3m to $27.8m • US market rollout now into 8 states • Total sales up 22.2% and comparable store sales up 2.1% • CODB at 50% to sales with improved performance in store for the half year wage costs in new markets offset by ongoing investme
Slide 5: Financial Overview
FINANCIAL OVERVIEW1 Continued earnings growth from store rollout • Revenue up 22.2% with comparable store sales up 2.1% for the period HY20 HY201 HY19 Variance ($000) (Statutory) (Pre AASB 16) (Pre AASB 16) (Pre AASB 16) • Gross profit of $128.5m up 19% reflecting strong sales growth Revenue 162,761
Slide 6: Trading Performance – Sales
TRADING PERFORMANCE – SALES Total sales up 22.2% from continued global rollout 180 • Total Global Sales Revenue up 22.2% to $162.8m from 160 acceleration in store rollout 140 • Continued positive comparable store sales for the period at +2.1%, with solid performance in most markets 120 Sales ($AUDm)
Slide 7: Trading Performance - Sales by Region
TRADING PERFORMANCE - SALES Region ($AUD '000) HY20 HY19 Variance Sales growth driven by new regions • Australian region delivered strong growth benefiting Australia / NZ 82,798 77,943 6.2% from solid comparable store sales as well as growth in the online channel Asia 17,580 18,233 -3.6% • Europe an
Slide 8: Trading Performance - Gross Margin
TRADING PERFORMANCE - GROSS MARGIN Gross margin decreased to 79% 100.0% Gross Margin % Gross Margin at Constant Currency* 80.0% HY20 HY20 HY19 60.0% Currency USD 0.71 0.77 0.77 40.0% 78.3% 75.0% 77.8% 80.4% 81.0% 79.0% Sales 162,761 162,761 133,195 20.0% Cost of Sales (34,308) (31,528) (25,370) Gros
Slide 9: Cost of Doing Business
COST OF DOING BUSINESS1 Continued investment in global rollout 60% CODB % Sales1 • Acceleration of rollout in new territories has increased 50% CODB in recent years with higher initial operating costs in these markets compared to existing averages 40% • Work on improving these cost structures beginn
Slide 10: Cash Flow
CASH FLOW1 Continued investment in store rollout • Cash flow from operating activities was $46.0m with HY20 HY19 (A$000s) (pre AASB 16) (pre AASB 16) operating cash conversion at 98% as a result of working capital investment into new store rollout Cash from operating activities 45,969 49,142 • Capit
Slide 11: Balance Sheet
BALANCE SHEET1 HY20 FY19 HY19 Strong Balance Sheet Available To Fund Growth (A$000s) (pre AASB 16) (pre AASB 16) (pre AASB 16) Net Cash 12,572 11,192 32,284 • Investment in fitout and inventory for new stores funded from existing Receivables 7,121 7,413 4,631 cash, and net cash of $12.6m at period e
Slide 12: Store Growth
STORE GROWTH International Rollout Continues with a Net Increase of 49 Stores Store number growth • Number of international stores growing with offshore territories now 65% of the store network Country HY20 FY19 Var • Net increase of 49 stores for the period as we constantly focus on Australia 155 1
Slide 13: USA Update
USA UPDATE • We were trading in the following states at the end of December 2019: California (19) Texas (7) Florida (5) Illinois (5) Minnesota (2) New Jersey (1) Oregon (1) • Since the end of December we have also opened our first store in Arizona, and are currently trading from 43 sto
Slide 14: Europe Update
EUROPE UPDATE • At half year end we were trading from 42 stores in the UK, 18 in France, and 9 in Spain • UK rollout has continued with 4 stores opened in the period, with site availability at appropriate rents slowing progress, but good progress being made in this market in terms of sales growth an
Slide 15: Operational Update
OPERATIONAL UPDATE • We continue to focus on investment in people and processes to ensure we remain efficient as we grow and are able to execute on our strategic plans • Investment made into a number of senior roles in the US market to support expansion into new states and support operation of the e
Slide 16: Trading Update and Outlook
TRADING UPDATE AND OUTLOOK • Trading for the month of January was in line with that achieved in the first half with comparable store sales at +2.1%, however with the impact on store traffic from the publicity surrounding the Coronavirus, we have seen a slowing of trading performance with second half
Slide 17: Summary
SUMMARY • EBIT of $40.4m and 79% Gross Margin (80.6% on constant currency) • Comparable store sales up 2.1% for the period • Reduction in gross margin impacted by currency headwinds • CODB stable despite continued investment focused on building the platform for future growth • International expansio
Slide 18: Appendices
APPENDICES 18
Slide 19: Appendix 1 – Non-IFRS financial information
APPENDIX 1 ASIC Regulatory Guide 230 Disclosing non-IFRS financial information In December 2011 ASIC issued Regulatory Guide 230. To comply with this Guide, Lovisa Holdings Limited is required to make a clear statement about the non-IFRS information included in the Profit announcement and Half Year
Slide 20: Appendix 2 – Impact of AASB 16
APPENDIX 2 – Impact of implementation of new lease accounting standard AASB 16 The implementation of AASB 16 has significantly changed reported results however does not have any economic impact on the company, its cash flows, debt covenants or shareholder value. The impact on transition and going fo
Slide 21: Appendix 2 – Profit and Loss Statement
APPENDIX 2 – PROFIT AND LOSS STATEMENT1 Impact of HY20 HY19 Variance Variance ($’000) HY20 (Statutory) application of (pre AASB 16) (pre AASB 16) (Statutory) (pre AASB 16) AASB 16 Revenue 162,761 0 162,761 133,195 22.2% 22.2% Cost of sales (34,308) 0 (34,308) (25,370) 35.2% 35.2% Gross profit 128,45
Slide 22: Appendix 2 – Balance Sheet
APPENDIX 2 – BALANCE SHEET Impact of HY20 FY19 HY19 (A$000s) HY20 (Statutory) application of (pre AASB 16) (pre AASB 16) (pre AASB 16) AASB 16 Net Cash 12,572 0 12,572 11,192 32,284 Receivables 7,121 0 7,121 7,413 4,631 Inventories 28,372 0 28,372 22,769 19,474 Derivatives 0 0 0 645 1,268 Total curr
Slide 23: Appendix 2 – Cash Flow
APPENDIX 2 – CASH FLOW Impact of HY20 HY20 HY19 (A$000s) application of (Statutory) (pre AASB 16) (pre AASB 16) AASB 16 Cash from operating activities 64,248 18,279 45,969 49,142 Net interest paid (8) 0 (8) 99 Tax paid (9,517) 0 (9,517) (12,360) Net cash from operations 54,723 18,279 36,444 36,881 P
Slide 24: Appendix 3 – Key Risks
APPENDIX 3 – KEY RISKS Foreign Currency • Majority of goods that are imported are priced in USD. Consequently Lovisa is exposed to movements in the USD exchange rate • As international growth continues Lovisa will be exposed to movements in the exchange rates of the countries it operates in Store Gr
Slide 25: Appendix 4 – Global Brand Strategy
APPENDIX 4 – GLOBAL BRAND STRATEGY Vision • Internationally recognised brand • Global footprint • Brand of choice for fast fashion jewellery Growth Engine • High margin business operating in small store footprint • Fit out cost generally low with compelling return and pay back period • Inexpensive e