Adairs Ltd. · ASX:ADH
Adairs — H1 2018 Earnings Presentation
24 slides from Adairs's earnings presentation, Feb 26, 2018
Slide 1: 1H FY18 Results Presentation
1H FY18 Results Presentation February 2018
Slide 2: 1. Results Overview
1. RESULTS OVERVIEW
Slide 3: 1H FY18 results overview: Back on track!
1H FY18 results overview: Back on track! LFL sales drives growth • Sales +19.7% to $149.0m • LFL Sales +14.8% (cycling 1H FY17 -4.0%) Online growing strongly • Online sales +98.7% to $17.1m • Online now accounts for 11.5% of sales Strong Gross Profit result • Gross Profit +22.2% to $90.3m • Gr
Slide 4: 2. Financial Results
2. FINANCIAL RESULTS
Slide 5: Growth across all P&L metrics
Growth across all P&L metrics $ Million 1H FY18 1H FY17 % EBIT $m Change 20.9 19.9 Sales 149.0 124.5 19.7% 15.2 Gross Profit 90.3 73.9 22.3% 12.0 Gross Profit % 60.6% 59.3% 10.3 CODB 66.2 59.1 -12.0% CODB % 44.4% 47.4% EBITDA 24.2 14.8 63.4% EBITDA % 16.2% 11.9% 1H FY14 1H FY15 1H FY16 1H FY17 1H FY
Slide 6: Strong sales momentum
Strong sales momentum • Strong overall LFL sales achieved in first half across Q1 and Q2 against poor performance in Sales $m 149.0 the prior year 117.8 124.5 • LFL sales of +14.8% delivered through 97.0 improved product and retail execution driving 79.7 increased transactions • Increased transactio
Slide 7: Gross profit continuing to grow
Gross profit continuing to grow • Gross Profit +22.2% to $90.3m Gross Profit $m 90.3 • Gross Margin rate up 130 basis points to 74.2 73.9 60.6% due to: 60.8 ➢ Strong performance of fashion and 52.1 decorator ranges ➢ Promotional price points are competitive ➢ Less markdowns and tighter promotional p
Slide 8: CODB shows improved operating leverage
CODB shows improved operating leverage CODB in absolute terms grew by $7.1m v 1H FY17 CODB % of Sales 1H FY18 1H FY17 • Salaries as percentage of sales remain well controlled Salaries & Employee Expenses 23.4% 24.7% ➢ We continue to maintain our investment in store salaries. We also incurred higher
Slide 9: Strong Balance Sheet supports growth
Strong Balance Sheet supports growth • Strong closing cash of $13m with free cash utilised $ Million Dec-17 Dec-16 to pay down debt Cash and Cash Equivalents 13.0 9.6 • Closing inventory well managed despite strong growth of sales and opening of new stores Inventories 32.9 31.1 • Continuous investme
Slide 10: Capital Investment
Capital Investment Investing for growth Other Capital Investment $m • 4 new stores opened in 1H ERP 6.5 • 5 stores refurbished with 3 of them upsized Refurbs 5.5 1.3 • Other includes upgrade of computer New Store equipment, DC equipment and small 0.6 fixtures in store 2.1 1.1 • 2H Capex investment e
Slide 11: Strong growth in operating Cash Flow and Dividends
Strong growth in operating Cash Flow and Dividends • Strong growth in operating cash flow, up 76% to $ Million 1H FY18 1H FY17 $21.3m Operating Cash Flow 21.3 12.1 • Capital investment below LY due to major projects delivered in the 1H of LY Investment Cash Flow (3.1) (6.5) • Financing cash flow mov
Slide 12: 3. Key Growth Drivers
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Slide 13: Key growth drivers
Key growth drivers Long term strategy is to furnish more of our customers’ home • Maintain focus on delivering great product through investment in team and in house design, Product, Product & development and planning capabilities Product • Continue to evolve and strengthen our process of creating, r
Slide 14: Store footprint
Store footprint Growing store footprint across Australia and New Zealand • New stores opened ➢ Uni Hill (Outlet) ➢ Melbourne Central ➢ Greenhills ➢ Hamilton (NZ) • The current retail environment provided opportunities to cost effectively upsize stores ➢ Coffs Harbour ➢ Greensborough ➢ Chermside • Ou
Slide 15: New Zealand rollout progressing
New Zealand rollout progressing As part of Adairs International expansion strategy, New Zealand is undergoing continuous improvements in its operations • Product range and mix is resonating with the NZ customer with sales in line with managements expectations • 3 Homemaker stores opened since 1H FY1
Slide 16: Omni channel
Omni channel Growing & investing in Online & Linen Lovers loyalty program Evolving our omni retail capabilities as a key growth driver A very strong half with sales up 98.7% and well Online Sales $m 17.1 positioned to continue to drive growth over 2H Growth being driven by: • Capitalising on the re-
Slide 17: 4. Company Outlook
4. COMPANY OUTLOOK
Slide 18: FY18 Outlook
FY18 Outlook Continued Strong Retail Execution to Deliver Growth 2H FY18 Outlook includes: FY18 FORECAST • Growth in store network with a further 3 – 5 stores to open in FY18 including up to 2 Year End Stores 166 – 168 in NZ Sales ($m) 300 - 310 • Continued growth in online although moderating from
Slide 19: Questions?
QUESTIONS ? 18
Slide 20: Appendix
APPENDIX 1. Store footprint 2. Sales LFL History 3. Statutory profit to EBIT reconciliation 19
Slide 21: Appendix 1 Store Footprint
Appendix 1 Store Footprint 1 Total Stores: 164 (FY17: 160) 1 96 - Adairs Stores (incl. Outlet) 20 7 2 49 - Homemaker Stores 11 - Adairs Kids Stores 10 6 8 - UHR Stores (inc. 3 Myer concessions) 5 2 DC and HQ 1 15 3 28 1 1 4 30 6 13 6 2 1H FY18 New Stores 1H FY18 Store Refurbished Adairs – Melbourne
Slide 22: Appendix 2 Adairs Sales LFL History
Appendix 2 Adairs Sales LFL History Adairs LFL Sales Growth Last 5 Years (5 year aveage of +11.6%) 24.1% 18.8% 16.0% 15.4% 14.8% 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 21
Slide 23: Appendix 3 Statutory Profit to EBIT/EBITDA reconciliation
Appendix 3 Statutory Profit to EBIT/EBITDA reconciliation 1H FY18 1H FY17 Statutory Profit After Income Tax 13,940 8,580 Add back: Finance Expenses 816 937 Interest Income (19) Income tax expense 6,142 2,530 EBIT 20,880 12,048 Depreciation 3,300 2,751 EBITDA 24,180 14,799 22
Slide 24: Disclaimer
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, assumptions and beliefs about fut