Slide 1: Adairs FY18 Investor Presentation
Adairs FY18 Investor Presentation MARK RONAN MANDY DRAKE CHIEF EXECTIVE OFFICER CHIEF FINANCIAL OFFICER 27 AUGUST 2018
Slide 2: 1. Results Overview
1. RESULTS OVERVIEW
Slide 3: Record Sales and Profit Result
A recap: Our strategy Record Sales and Profit Result LFL sales drives growth Sales +19% to $315m LFL sales +14.3% (cycling -1.4% FY17) Online growing substantially Online is now a material contributor to earnings growth Online sales +75% to $42m Online accounts for 13% of total sales Strong gross pr
Slide 4: 2. Financial Results
2. FINANCIAL RESULTS
Slide 5: Growth across all P&L metrics
AGrowth recap: Our strategy across all P&L metrics ($ Million) FY18 FY17 Change 50 EBIT $m 45.3 25.0% 39.2 45 23.0% 40 Sales 314.8 265.0 18.8% 33.1 30.8 21.0% 35 Gross Profit 189.6 156.8 20.9% 30 19.0% 25 22.5 EBIT% EBIT% 15.7% 15.9% EBIT% 17.0% Gross Profit % 60.3% 59.2% 20 15 EBIT% 14.4% 13.4% 15.
Slide 6: Sales $m: strong sales momentum across all channels
Sales $m 314.8 Strong sales momentum across all 247.4 265.0 210.9 channels 167.9 ► LFL sales of +14.3% achieved through continued focus on product and retail execution (+13.8% 2H18) ► Online delivering 75% LFL growth and now contributing 13% of total sales (9% FY17) FY14 FY15 FY16 ^ FY17 FY18 ► New
Slide 7: Online delivers strong sales growth
Online Sales $m 41.5 Online delivers strong sales growth ► Online delivered 75% LFL growth and contributed 13% of total sales (9% FY17) 23.7 ► Improvement in key online metrics, more traffic to the 18.8 site , improved conversion rate and maintained average transaction value 11.6 8.7 ► Growth delive
Slide 8: Gross profit margins improving
A recap: Our strategy Gross Profit $m 189.6 Gross profit margins improving 151.0 156.8 130.7 Gross profit increased +20.9% to $189.6m 103.8 Gross margin up 110 basis points to 60.3% attributed to ► Improved product offering ► Reduced frequency and depth of discounting throughout the year FY14 FY15 F
Slide 9: CODB: improved operating leverage
ACODB recap:- Our strategy Improved operating leverage CODB % improvement of 160bp achieved ($ Million) FY18 FY17 Change ► Salaries as percentage of sales reduced by 60bp • In Stores we achieved operating leverage as Salaries & Employee Benefits 22.8% 23.4% 0.6% salaries were well controlled on a gr
Slide 10: Strong Balance Sheet supports growth
AStrong recap:Balance Our strategy Sheet supports growth ► Strong closing cash position of $12.7m with net debt ($ Million) FY18 FY17 position improving $15.4m over the year Cash and Cash Equivalents 12.7 14.3 ► Borrowings reduced by $17.0m as additional cash generated used to pay down debt. Debt fa
Slide 11: Capital investment
A recap: Our strategy CAPEX $m Capital investment New Store 11.3 ► Overall CAPEX under guidance due to higher landlord Refurbs 10.3 contributions and postponed centre redevelopment 0.8 2.1 impacting the store refurbishment schedule ERP 1.1 ► Spend down on prior year with 5 less new stores Other 1.1
Slide 12: Strong growth in operating cash flow and dividends
AStrong recap:growth Our strategy in operating cash flow and dividends ► Strong growth in operating cash flow, up 42% in line $ Million FY18 FY17 Change with EBITDA growth to $39.1m ► Financing cash outflow increased $17m as a result of Operating Cash Flow 39.1 27.5 11.6 application of surplus cash
Slide 13: 3. Key Growth Drivers
3. KEY GROWTH DRIVERS
Slide 14: Key growth strategy
AKey recap: Our drivers growth strategy On trend, well coordinated product for our broad customer base remains the focus Product, Product, Continue to differentiate our product through fashionability, quality and enhanced value Product Look to continue to grow our various expansion categories
Slide 15: Store footprint
Store footprint New stores opened Upsized stores ► Uni Hill (outlet) ► Coffs Harbour* ► Melbourne Central ► Greensborough ► Greenhills ► Chermside* ► Hamilton (NZ)* ► Myaree* ► Mandurah Forum ► Moorabbin* ► Riccarton (NZ) ► Wollongong ► Busselton* * Homemaker or Mini Homemaker stores Continue growin
Slide 16: Omni channel: evolving our capabilities to drive growth
AOmni recap: Our strategy channel – evolving our capabilities to drive growth Online Sales and % Mix FY18 was a very successful year for our online channel. 15% 45 16% With sales growth of 75% we increased online to 13% of 13% 40 14% total sales (9% FY17). 35 12% 30 9% 10% As we look to the future o
Slide 17: Loyalty and Omni channel delivering results
ALoyalty recap: and Our Omni strategy channel delivering results Our Omni Approach Linen Lovers - driving loyalty and repeat purchase ► Our ‘multi-channel’ customer is more engaged and LL Represent Member base growing more valuable to Adairs ► We appear to get a materially higher share of her wallet
Slide 18: New Zealand rollout progressing
New Zealand rollout progressing New Zealand result lower than expected ► Stores were initially overstocked and this has limited the flow of ‘fashion and newness’ into the NZ market. This execution error has been corrected over FY18 ► Further supply chain challenges impacted visibility leading to poo
Slide 19: 4. Company Outlook
4. COMPANY OUTLOOK
Slide 20: FY19 Outlook
AFY19 recap: Our strategy Outlook Sales FY19 Guidance ► Our outlook implies LFL sales growth of between 5% and 8% underpinned by growth in both store and online channels Year End Stores 171 – 173 ► We expect to open 7 - 10 stores and upsize 3 - 5 Sales ($m) 345 – 360 stores during FY19 ► Sales range
Slide 21: Questions?
QUESTIONS?
Slide 22: Appendix
APPENDIX 1. Store footprint 2. Sales LFL history 3. Statutory profit to EBIT reconciliation 4. Cash flow
Slide 23: Appendix 1 – Store footprint
AAppendix recap: Our 1 –strategy store footprint Total Stores: 167 (FY17: 160) 1 FY18 New Stores 1 Adairs – Melbourne Central, Greenhills, Riccarton 20 (NZ), Wollongong, Mandurah Forum 11 7 Homemaker – Hamilton (NZ), Busselton 2 7 Adairs Outlet – Uni Hill 2 5 1 1 15 3 29 FY18 Refurbished Stores 1 4
Slide 24: Appendix 2 – Adairs sales LFL history
AAppendix recap: Our 2 –strategy Adairs sales LFL history Adairs LFL Sales Growth Last 5 Years Sales LFL% (5 Year Average of +11.8%) Average 24.1% 18.8% 16.0% 15.4% 14.8% 13.8% 11.9% 9.0% 8.7% 1.0% -4.0% 2H FY13 1H FY14 2H FY14 1H FY15 2H FY15 1H FY16 2H FY16 1H FY17 2H FY17 1H FY18 2H FY18 23
Slide 25: Appendix 3 – Statutory profit to EBIT/EBITDA reconciliation
AAppendix recap: Our 3 –strategy statutory profit to EBIT/EBITDA reconciliation FY18 FY17 FY16 (1) FY15 (2) Statutory Profit After Income Tax 30,561 21,017 27,172 2,942 Add back: Finance Expenses 1,489 1,946 2,006 14,267 Interest Income (44) (55) (81) (446) Income tax expense 13,255 7,904 11,651 1,6
Slide 26: Appendix 4 – Cash flow
AAppendix recap: Our 4 –strategy Cash flow FY18 FY17 Change EBITDA 52.1 36.7 15.4 Movements in Working Capital (0.2) 7.8 (8.0) Cash Tax Paid (11.4) (15.2) 3.8 Capex (7.1) (11.3) 4.2 Free Cash Flow from Operations 33.4 18.0 15.4 Net Interest & Borrowing Costs (1.4) (1.8) 0.4 Dividends Paid (16.6) (16
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