Adairs Ltd. · ASX:ADH
Adairs — H1 FY2019 Earnings Presentation
24 slides from Adairs's earnings presentation, Feb 25, 2019
Slide 1: Adairs 1H FY19 Results Presentation
Adairs 1H FY19 Results Presentation 25 February 2019 MARK RONAN MANDY DRAKE CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
Slide 2: 1. Results Overview
ESULTS OVERVIEW Kis S SS
Slide 3: Strong first half results
A recap: Our strategy Strong first half results Sales growing across both channels Sales +10.6% to $164.4m(1) LFL sales +7.3% (cycling +14.8% 1H FY18) Online sales +42% to $24.3m (cycling +99% 1H FY18) Online now accounts for 15% of total sales Strong gross profit result Gross profit +11.3% to $100.
Slide 4: Sales growth across both channels
$164 Store Sales $m 28% Sales growth across both channels $149 $160 Online $24 Total sales up $15m with like for like sales up 7.3% 23% $140 Online Contribution $17 $125 Stores: Sales up $8.5m or 6.4% on LY with LFL growth of 2.0% $118 18% $9 ► Sales growth driven by performance of expansion categor
Slide 5: Product strategy driving LFL growth
A recap: Our strategy Product strategy driving LFL growth Our focus on range expansion saw our ‘expansion categories’ increase to 42% of sales. Our ability to continue to grow these expansion categories whilst growing our core categories allows us to drive LFL growth. Adairs Product Mix% Core Core C
Slide 6: New Zealand profitable
New Zealand profitable New Zealand was profitable over the 1H, ahead of our previous guidance ► Sales up 30% assisted by increased brand awareness and improved management of inventory ► Improved stock turns and inventory freshness in store have been keys to sales and margin growth. Still significant
Slide 7: Consistently executing on strategy
AConsistently recap: Our strategy executing on strategy Product, Product, Growth of the expansion categories is driving like for like sales Product ► Opened four new stores and upsized two stores More Inspiring Larger ► Refurbished a further four stores to enhance the customer experience Stores ►
Slide 8: 2. Financial Results
2. FINANCIAL RESULTS
Slide 9: Profit and Loss
AProfit recap: Our and strategy Loss ($ Million) 1H FY19 1H FY18 Change EBIT $m 21.9 Pro-forma 19.9 20.5 Sales 164.4 148.6 10.6% 15.2 Gross Profit 100.0 89.9 11.3% 12.0 Gross Profit % 60.9% 60.5% 0.4% CODB 74.3 66.2 -12.4% CODB % 45.2% 44.5% EBITDA 25.7 23.8 8.1% 1H FY15 1H FY16 1H FY17 1H FY18 1H F
Slide 10: Sales and Gross Profit
$180.0 Sales Sales & Gross Profit $m 164 Sales $160.0 Gross Profit 149 $140.0 118 125 ► LFL sales back in line with our medium term outlook 97 100 $120.0 $100.0 90 ► Growth driven from increased transaction volume 74 74 $80.0 61 from our growing customer base $60.0 $40.0 Gross Profit $20.0 - 1H FY15
Slide 11: CODB
ACODB recap: Our strategy Total CODB % increased 70bp vs 1H18 CODB 1H FY19 1H FY18 Change Salaries up 20bp from investment in digital talent and increased labour costs in supply chain Salaries & Employee Benefits 23.6% 23.4% -0.2% Occupancy cost down 50bp with continued progress on Occupancy Exp
Slide 12: Balance Sheet
ABalance recap: Our strategy Sheet ($ Million) Dec-18 Jun-18 ► Closing with net debt position of $10.1m improving $2.1m over the half Cash and Cash Equivalents 14.8 12.7 ► Borrowings remain in line with FY18. Capacity to draw a further $25m under our current facility if required Inventories 43.1 33.
Slide 13: Investing for growth
A recap: Our strategy New Store Capital Investment $m 7.0 Refurbs 6.8 Investing for growth ERP Upgrade FY16 $0.7m 6.5 Other FY17 $0.6m $0.9m Web 6.0 replatforming 5.8 ► Opened 4 new stores in 1H FY19 5.4 1.9 ► 6 refurbishments completed including upsizing 2 stores 5.0 4.8 1.2 ► Other CAPEX of $1.4m
Slide 14: Cash flow and dividends
ACash recap: Our flow strategy and dividends ► Net cash flow up $3.4m on LY $ Million 1H FY19 1H FY18 ► Operating cash flow down $2.4m due to increased investment in inventory Operating Cash Flow 18.9 21.3 ► Financing cash flow decreased $6.2m due to • Lower loan repayments Investment Cash Flow (3.6
Slide 15: 3. Company Outlook
3. COMPANY OUTLOOK
Slide 16: FY19 Outlook
AFY19 recap: Our strategy Outlook Sales FY19 Guidance ► Full year LFL sales growth of between 5% and 8% underpinned by growth in stores and Online Year End Stores 167 – 170 ► We expect to open up to 3 stores and upsize 3 stores Sales ($m) 340 – 355 during 2H FY19 Gross Margin Gross Margin% 59 – 61%
Slide 17: Questions?
QUESTIONS?
Slide 18: Appendix
APPENDIX 1. Store footprint 2. Sales LFL history 3. Statutory profit reconciliation 4. Cash flow 5. Inventory bridge
Slide 19: Store footprint
AAppendix recap: Our 1 –strategy Store footprint Total Stores: 166 (1H FY18: 164) 1H FY19 New Stores 1 1 Adairs – Midland Gate, Coomera 21 Homemaker – Cannington 13 7 8 2 Adairs Outlet – Perth DFO 2 5 1 15 1H FY19 Refurbished Stores 2 29 1 4 Adairs – Carousel, Townsville, The Glen, Moorabbin 29 4 Ou
Slide 20: Sales LFL history
AAppendix recap: Our 2 –strategy Sales LFL history Adairs LFL Sales Growth Last 5 Years Sales LFL% (5 Year Average of +11.4%) Avg 24.1% 18.8% 16.0% 15.4% 14.8% 13.80% 11.9% 8.7% 7.30% 1.0% -4.0% 1H FY14 2H FY14 1H FY15 2H FY15 1H FY16 2H FY16 1H FY17 2H FY17 1H FY18 2H FY18 1H FY19 19
Slide 21: Statutory profit to EBITA/EBIT reconciliation
AAppendix recap: Our 3 –strategy Statutory profit to EBITA/EBIT reconciliation 1H FY18 1H FY19 Pro forma ($’000) ($’000) Profit After Income Tax (pre AASB 15) 15,108 13,940 AASB 15 Adjustments (215) (295) Profit After Income Tax (post AASB 15) 14,893 13,646 Add back: Finance Expenses 698 816 Interes
Slide 22: Cash flow
AAppendix recap: Our 4 –strategy Cash flow ($ Million) 1H FY19 1H FY18 Change EBITDA 25.7 24.2 1.5 Change in Working Capital (0.1) 4.1 (4.2) Cash Tax Paid (6.0) (6.2) 0.2 Operating Cash Flow 19.6 22.0 (2.4) CAPEX (3.6) (3.1) (0.4) Cash after Investing 16.0 18.9 (2.9) Net Interest Paid (0.6) (0.8) 0.
Slide 23: Inventory Bridge 1H18 to 1H19
AAppendix recap: Our 5 -strategy Inventory Bridge 1H18 to 1H19 $M As at 30.12.18, management estimate we have ~$2.2m of $44.0 genuine overstock, which can Overstock Dec-18 be readily cleared in 2H $2.2 $43.1 Sales Growth $2.5 $42.0 New/Upsized $40.0 Stores $0.9 Normalised Understock $37.5 $38.0 FX $
Slide 24: 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