Baby Bunting Group Ltd. · ASX:BBN
Baby Bunting — H1 FY2018 Earnings Presentation
27 slides from Baby Bunting's earnings presentation, Feb 16, 2018
Slide 1: Baby Bunting Group Limited Half Year Results Presentation
Baby Bunting Group Limited Half year ended 31 December 2017 Results presentation 16 February 2018 Matt Spencer Chief Executive Officer & Managing Director Darin Hoekman Chief Financial Officer
Slide 2: Important Notice
Important Notice This document is a presentation of general background information about the activities of Baby Bunting Group Limited (Baby Bunting) current at the date of the presentation (16 February 2018). The information contained in this presentation is for general background information and do
Slide 3: Agenda
Agenda 1 Results summary 2 Financial and trading performance 3 Baby goods market and category dynamics 4 Growth strategy 5 Outlook 6 Appendices 3
Slide 4: Results summary
1. Results summary
Slide 5: 1H FY18 Results summary
1H FY18 Results summary Clear leader in sector consolidation – with short term financial impact 1 • Sales of $148.3 million, up 9.8% on the prior corresponding period (pcp) • Comparable store sales -1.7%, price deflation of 4.3% Trading(1,2) • Gross profit income up 5.7%, gross margin of 33.2% • Cos
Slide 6: Financial and trading performance
2. Financial and trading performance
Slide 7: Overview – Trading performance
Overview – Trading performance 1H FY18 saw competitor closures, supply issues, price deflation & gross margin contraction. These factors are now stabilising 1 • 16% unit sales growth in 1H converted into 9.8% sales growth Sales • Competition and competitor distress resulted in price deflation in 1H
Slide 8: Total sales growth to recover as trading stabilises
Total sales growth to recover as trading stabilises Baby Bunting continued to achieve market share growth 9.8% 50.0% Total business sales ~20% 18.1% across all regions 140.0 CAGR 45.0% 120.0 30.3% 40.0% • 4 year sales compound annual growth rate 35.0% (CAGR) of ~20% 100.0 14.3% 30.0% 80.0 20.1% • 1H
Slide 9: Strong sales growth in key strategic focus areas
Strong sales growth in key strategic focus areas % of Total Sales – Private Label & Exclusive Products Private Label & Exclusive Products 18.4% • 83% growth in sales of Private Label and Exclusive Products – 11.4% primarily in prams and nursery furniture with some additions to 10.0% our car safety r
Slide 10: Gross margin recovery ahead of our forecast expectation
Gross margin recovery ahead of our forecast expectation 60.0 60.0% Gross margin $ Gross50.0 Margin ~20% 55.0% CAGR • 4 year average gross margin $ CAGR of ~20% 40.0 50.0% 30.0 45.0% • Gross profit % of 33.2% is 127 bps below pcp, primarily due to competition 20.0 40.0% 10.0 35.0% • 1H GP% finished a
Slide 11: Managed investment in costs
Managed investment in costs Cost of Doing Business metrics (% sales) (1) Operating Expenses • Cost of Doing Business (pro forma) in 1H FY18 was 27.5% of Store expenses sales, from 26.8% in 1H FY17 20.3% • Store expenses increased by $3.5 million or 13.2% (vs pcp) 20.2% 19.9% 19.7% ($3.2 million of w
Slide 12: Summary Pro Forma Income Statement
Summary Pro Forma Income Statement Pro forma statement of profit or loss Pro Forma Pro Forma Change 1H FY18 1H FY17 Financial Summary $ million • Total sales of $148.3 million, up 9.8% Sales 148.3 135.1 9.8% ̵ Comparable store sales declined by 1.7% Cost of sales (99.1) (88.5) Gross Profit 49.2 46.5
Slide 13: Balance Sheet
Balance Sheet Statement of financial position Statutory Statutory Capital structure 1H FY18 FY17 • $1.5 million net debt position $ million Cash and cash equivalents 4.6 6.4 • Inventory increase reflects 2 new stores added ~$1.5 Inventories 55.1 47.9 million, and ~$5 million of inventory to support
Slide 14: Cash Flow Statement
Cash Flow Statement Statement of cash flows Statutory Statutory Financial highlights 1H FY18 1H FY17 • Change in working capital reflects 2 new stores $ million and investment in inventory to support sales growth Underlying Statutory EBITDA1 8.4 10.4 Movement in working capital (1.1) 0.2 • Tax paid
Slide 15: Baby goods market and category dynamics
3. Baby goods market and category dynamics
Slide 16: Baby Bunting is well positioned in a changing market
Baby Bunting is well positioned in a changing market Specialty retailer changes • Significant competitor store closures • Increased intensity of competition as we expand our market share Arrival of Amazon • Baby Bunting is well placed • Our online presence is supported by our national store network
Slide 17: Fragmented competitive landscape
Fragmented competitive landscape Large number of small, Strict Australian mandatory Baby goods is a $5.1bn BBN estimated addressable specialty players & product safety standards market in Australia market is $2.4bn department stores provide barriers to entry +3 Specialty baby goods retailers in Aust
Slide 18: Growth strategy
4. Growth strategy
Slide 19: Growth strategy
Growth strategy Growing market share through: Growth from new store roll-out – (Mature network of 80+ stores) 1 • Disciplined roll out of new stores in identified trade catchments with a target of opening 4 to 8 new stores each year Growth from existing stores and online 2 • Maturing stores – 40% of
Slide 20: Baby Bunting's store network update
Baby Bunting’s store network update 45 stores across Australia, with significant roll-out potential to over 80 stores Queensland Helensvale Fortitude Valley North Lakes Capalaba Kawana Macgregor Burleigh Waters Townsville Aspley (25 Jan) Booval New South Wales and ACT Penrith Auburn Campbelltown Bla
Slide 21: Business initiatives update
Business initiatives update Our core purpose is to support new and expectant parents in navigating the early years of parenthood Improving customer Delivering the best value to Increasing customer experience the customer engagement • “Live chat” launched online • Implemented EDLP on the core • Net P
Slide 22: Business initiatives update
Business initiatives update Our Vision is to be the most loved baby retailer for every family, every where Investing in the online Merchandise Supply Chain strategy channel • Online sales up 56% on pcp; • Private Label and Exclusive • GM Supply Chain commenced conversion up and 22% growth Products r
Slide 23: Outlook
5. Outlook
Slide 24: Outlook
Outlook FY18 EBITDA guidance unchanged • FY18 EBITDA guidance (unchanged) expected to be around $23.0 million, excluding employee equity incentive expenses • 2H FY18 comparable store sales growth is 4.5% (at 11 February 2018); we expect comparable store sales growth to continue around this level for
Slide 25: Appendices
6. Appendices
Slide 26: Statutory - Pro Forma Income Statement Reconciliation
Statutory - Pro Forma Income Statement Reconciliation 1H FY2018 1H FY2017 Statutory Add Pro Forma Statutory Add Pro Forma 1H FY18 Pro Forma 1H FY18 1H FY17 Pro Forma 1H FY17 adjustments (a) adjustments (a) $ million Sales 148.3 148.3 135.1 135.1 Cost of sales (99.1) (99.1) (88.5) (88.5) Gross Profit
Slide 27: Glossary
Glossary Comparable Store Sales Growth • Calculated as a percentage change of the total sales generated from stores (including the online store) in a relevant period, compared to the total sales from the same set of stores in the prior financial year, provided the stores were open at the beginning o