Lovisa Holdings Ltd. · ASX:LOV
Lovisa — H1 2019 Earnings Presentation
24 slides from Lovisa's earnings presentation, Feb 20, 2019
Slide 1: Lovisa Holdings Limited 2019 Half Year
Lovisa Holdings Limited 2019 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: Half year headline results
EBIT up 5.1% NPAT $25.5M $36.5M up 2.7% Like for Like Sales Revenue up 12.3% -1.8% $133.2M Total Stores Interim Dividend 366 18.0 CPS Net increase of 40 stores Fully Franked 3
Slide 4: Contents
CONTENTS 1. FULL 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. PEOPLE UPDATE 10. TRADING UPDATE AND OUTLOOK 11. SUMMARY 12. APPENDICES 4
Slide 5: Half Year Overview
HALF YEAR OVERVIEW • EBIT up 5.1% to $36.5m • CODB at 50.4% to sales impacted by investment in global structures and costs of • Total sales up 12.3% and comparable store rollout in new territories sales down -1.8% for the half year, impacted by continued tougher trading • eCommerce trading in the Au
Slide 6: Financial Overview
FINANCIAL OVERVIEW Continued earnings growth from store rollout and gross margin expansion ($000) HY19 HY18 Variance • Revenue up 12.3% with comparable store sales down 1.8% for the half year Actual Actual Actual • Gross profit of $107.8m up 13.0% reflecting improved margins Revenue 133,195 118,615
Slide 7: Trading Performance - Sales
TRADING PERFORMANCE - SALES Total sales up 12.3% from continued global rollout • Total Global Sales Revenue up 12.3% to $133.2m from acceleration in store rollout • Comparable store sales down 1.8% impacted by difficult conditions in the Australian market and cycling strong comp sales from prior yea
Slide 8: Trading Performance - Sales by region
TRADING PERFORMANCE - SALES Sales growth driven by new regions *Sales revenue Region ($AUD '000) HY19 HY18 Variance excluding franchise income Australia / NZ 77,943 76,479 1.9% Asia 18,233 17,267 5.6% Africa 17,683 15,998 10.5% Europe 17,089 8,112 110.7% USA 1,414 151 836.4% Total 132,362 118,007 12
Slide 9: Trading Performance - Gross Margin
TRADING PERFORMANCE - GROSS MARGIN Gross margin increased to 81.0% Gross Margin at Constant Currency* • Gross profit increased 13% to HY19 HY19 HY18 $107.8m Currency USD 0.77 0.75 0.75 • Gross Margin was 81.0% up 60 Sales 133,195 133,195 118,615 basis points from 80.4% in the prior period Cost of Sa
Slide 10: Cost of Doing Business
COST OF DOING BUSINESS Continued investment in global rollout 60% CODB % Sales 50% 40% 30% 50% 50% 48% 50% 47% 20% 10% 0% HY15 HY16 HY17 HY18 HY19 • Investment into the growth of the business continued with the addition of a number of senior leadership roles into the structure to lead both existing
Slide 11: Cash Flow
CASH FLOW Strong Cash Conversion and capex investment (A$000s) HY19 HY18 • Cash flow from operating activities lifted 9.4% to Cash from operating activities 49,142 44,929 $49.1m with operating cash conversion at 121% Net interest paid 99 (6) • Capital expenditure of $12.5m for the half year, Tax pai
Slide 12: Balance Sheet
BALANCE SHEET Strong Balance Sheet with Significant Capacity (A$000s) HY19 FY18 HY18 Net Cash 32,284 21,057 33,034 Available To Fund Growth Receivables 4,631 4,881 3,781 Inventories 19,474 14,945 14,670 • Balance sheet continues to be strong, with investment in fitout Derivatives 1,268 1,429 - and i
Slide 13: Store Growth
STORE GROWTH International Rollout Accelerates with a Net Increase of 40 Stores • Number of international stores growing with offshore Store number growth territories now 58% of the store network Est. Store Country HY19 FY18 Var • Net increase of 40 stores for the half year, with 51 Capacity new sto
Slide 14: USA Update
USA UPDATE • We are currently trading from 8 stores in California • Performance to date has been pleasing with strong customer reaction and landlord engagement • Operating costs of this market currently higher than some other markets, in particular store build costs • Store metrics and range perform
Slide 15: Europe Update
EUROPE UPDATE • We are currently trading from 36 stores in the UK, 7 in France, and 8 in Spain • UK rollout has continued with 12 stores opened for the period • Performance of our stores in Spain has been inconsistent, and we will continue to take a cautious approach and slow any further store openi
Slide 16: Operational Update
OPERATIONAL UPDATE • We continue to focus on investment in people and processes to ensure we remain efficient as we grow and able to execute on our strategic plans • Key operational and IT changes completed during the half: • Move of our third party logistics hub from Hong Kong to Qingdao China comp
Slide 17: People Update
PEOPLE UPDATE • Significant senior executive appointments were made during the period, including: • Chief Operating Officer • Executive Vice President Europe & Africa • Vice President Retail Stores & Operations USA • Leasing Manager - France • Leasing Manager - US East Coast • Global Property Direct
Slide 18: Trading Update and Outlook
TRADING UPDATE AND OUTLOOK • We continue to cycle 4 years of particularly strong comparable store sales. This has made a continuation of the strong comparable store sales delivered in FY18 more challenging • Trading since the end of the half year has seen an improvement across all markets with posit
Slide 19: Summary
SUMMARY • EBIT of $36.5m and 81.0% gross margin (80.5% on constant currency) • Comparable store sales of -1.8% • Lift in margin benefiting from currency tailwinds and tight inventory and promotion management • Continued CODB investment focused on laying the platform for future growth • Tight stock a
Slide 20: Appendices
Aisa. APPENDICES 20
Slide 21: Appendix 1 - Non-IFRS financial information
APPENDIX 1 ASIC Regulatory Guide 230 Disclosing non-IFRS financial information In December 2011 ASIC issued Regulatory Guide 230. To comply with this Guide, Lovisa Holdings Limited is required to make a clear statement about the non-IFRS information included in the Profit announcement and Full Year
Slide 22: Appendix 2 - Profit and Loss Statement
APPENDIX 2 – PROFIT AND LOSS STATEMENT ($’000) HY19 HY18 Variance Actual Actual Actual Revenue 133,195 118,615 12.3% Cost of sales (25,370) (23,227) 9.2% Gross profit 107,825 95,388 13.0% Employee expenses (32,451) (28,167) 15.2% Property expenses (20,074) (16,407) 22.4% Distribution expenses (3,995
Slide 23: 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 Store Growt
Slide 24: 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