1
Pro Forma Results highlights
Variances refer to pro-forma FY15 highlights compared to pro-forma FY14 highlights
$210.9mup 25.6%
Sales
Up 51.8%
$33.1mEBIT
margin
21.6%
LFL salesgrowth
Gross profit
62.0% down from 46.5%
44.1% of salesCODB
$22.0mNPAT
1. Operational highlights – Strong gains and milestones achieved
2. Financial performance – FY15 ahead of Prospectus Forecast
3. Outlook – Well positioned for continued growth and achievementof FY16 Prospectus Forecast
Agenda
3
FY15 operational highlights
Continued focus on product and range differentiation• Strong performance from fashion bedlinen and home furnishings• Improved performance of Adairs Kids category
Continued focus on product and range differentiation• Strong performance from fashion bedlinen and home furnishings• Improved performance of Adairs Kids category
Four net new stores opened with ongoing store refurbishments• Three Adairs, two Adairs Homemaker (one closure - underperforming)• Fully refurbished seven stores (four Adairs, three Adairs Homemakers)
Four net new stores opened with ongoing store refurbishments• Three Adairs, two Adairs Homemaker (one closure - underperforming)• Fully refurbished seven stores (four Adairs, three Adairs Homemakers)
First Urban Home Republic concession stores opened in Myer• Sydney CBD, Geelong, HighpointFirst Urban Home Republic concession stores opened in Myer• Sydney CBD, Geelong, Highpoint
Online continues to grow significantly above market• 35.2% sales growth (second half 48.3% growth)Online continues to grow significantly above market• 35.2% sales growth (second half 48.3% growth)
New ERP implemented enabling opportunities for the future• Warehouse, Product and Finance implemented successfully• POS roll out on track for second half FY16
New ERP implemented enabling opportunities for the future• Warehouse, Product and Finance implemented successfully• POS roll out on track for second half FY16
Keysborough DC opened building capacity for growth• New 6700m facility for store replenishment and online operational January
2015
Keysborough DC opened building capacity for growth• New 6700m facility for store replenishment and online operational January
2015
Successful ASX listing Successful ASX listing
All store formats delivering strong LFL sales growth
31 consecutive months of LFL sales growth
Second half delivered 24.1% growth
Growth in transaction numbers driving sales
Core formats performance driven by expansion indecorator categories and growth of fashion &decorator product categories
Emerging formats driven by continued productimprovement
LFL sales growth
4
LFL sales momentum strong +21.6%
* Three of the 135 stores represent concession stores within Myer
Adairs Stores (incl. Outlet)
Homemaker Stores
Adairs Kids Stores
UHR Stores (inc. Myer concessions)DC and HQ
11 5
1
44
27
12
2214 1
18 6 2
5 1
1
1
Number of stores
5
Growth in all categories
Fashion & Decorator vs Staples Sales Mix Both Fashion & Decorator and Staples salesgrowing above market
Staples growing above market at 12% Fashion & Decorator category remains the key
driver, growing at 39% Expanding our offer in new categories such as
wall art, lighting etc. Business focused on growing the decorator
category Sales mix continues to move to higher margin
Fashion & Decorator categories
Category Total Sales Growth
1. Operational highlights – Strong gains and milestones achieved
2. Financial performance – FY15 ahead of Prospectus Forecast
3. Outlook – Well positioned for continued growth and achievementof FY16 Prospectus Forecast
Agenda
7
FY15 above Prospectus Forecast
$ million Statutory FY15 Pro-forma FY15
Pro-forma FY15Prospectus
forecast Variance
Sales 210.9 210.9 203.4 3.7%
Gross Profit 130.7 130.7 127.5 2.5%
EBITDA 23.0 37.7 35.8 5.2%
EBIT 18.4 33.1 31.4 5.7%
NPAT (continuing operations) 2.9 22.0 20.7 6.3%
EPS (cents per share)* 0.5 14.5 n/a
Net Debt 32.2 39.4 40.0
Note: Variance measures pro-forma FY15 vs pro-forma FY15 Prospectus forecast
Adairs has successfully executed it’s strategy to deliver pro-formaFY15 results above Prospectus Forecast
* EPS based on 165.9m shares on issue is 13 cents (Prospectus forecast 12.5 cents)
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8
Pro-forma, $ million FY15 FY14 Change
Sales 210.9 167.9 25.6%
Gross Profit 130.7 103.8 25.9%
EBITDA 37.7 25.8 46.1%
EBIT 33.1 21.8 51.8%
NPAT 22.0 n/a
EPS (cps) 15 n/a
LFL sales growth 21.6% 14.0%
Gross profit margin 62.0% 61.8%
CODB as % of sales 44.1% 46.5%
EBIT margin 15.7% 13.0%
Sales revenue growth +25.6% Like for like sales growth +21.6%
Gross Profit Margin of 62.0%, belowProspectus forecast of 62.7% Pro active approach taken to finish
the year with clean inventory Increased volume through
Distribution Centre to supportsales growth increased distributioncosts
Foreign exchange impact in linewith Prospectus forecast
CODB as a % of sales down 240bp Reduction driven by operating
leverage from strong LFL sales Further investment made in product
development, omni-channel and DCinfrastructure
EBIT +51.8% EBIT margin +270bp
Strong growth across key metrics
Note: Variance measures pro-forma FY15 vs pro-forma FY14
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Continued operational improvement
Cost of doing business down to 44.1%, from46.5% prior year
Lower than FY15 pro-forma ProspectusForecast of 45.0%
Significant investment in recent years haspositioned the business to leverage the teamand infrastructure for future growth
Key infrastructure projects in final stages ofimplementation
Focus on operational improvements within theDistribution Centre
Focus on optimising ERP
Rollout of POS on track for second half FY16
Cost of doing business (CODB)
10
10
Strong balance sheet supports growth
$ millionStatutory
28 Jun 2015Pro-forma
28 Dec 2014 Change
Cash and equivalents 9.4 (11.5)
Inventories 23.2 20.9 11.1%
Other assets 124.7 124.7 -
Total assets 157.4 134.1 17.3%
Interest bearing liabilities 41.7 41.6 0.1%
Other liabilities 37.7 27.8 36.1%
Total liabilities 79.4 69.4 14.4%
Net assets 78.0 64.8 20.4%
Balance sheet in line withexpectations
Pro-forma net debt of $39.4m(adjusted for transaction costspending payment at June 15)
Closing statutory net debt of$32.2m
Inventory clean with improving stockturns
Inventory +11.1% with sales+25.6%
Pro-forma Net Debt / EBITDA of1.05x
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11
Strong cash flow from operations
$ millionPro-forma
FY15
FY14(continuingoperations) Change
Net cash flows fromoperating activities 26.2 21.8 20.3%
Net cash flows frominvesting activities (6.9) (6.3) 10.0%
Net cash flows fromfinancing activities - (2.6)
Net cash (decrease) /increase in cash 19.3 12.9 49.2%
• $26.2 million cash from operatingactivities
Strong operating cash flow due toimprovement in working capitalmanagement (i.e. stock turns) andincrease in profitability
• $6.9 million cash used for investingactivities
5 new stores plus 3 concessionstores, 9 refurbs/relocations and anumber of LED upgrades
Other major capital expenditureincluded the ERP implementation
• $0 cash from financing activities There is no requirement to make
annual repayments under the newdebt facility
All prior year financing activityrelates to the company restructureand IPO
• No dividends paid since IPO as perProspectus
Pro-forma excludes all cash flows from IPO, refinancing anddivestment of Dusk.
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Investing for growth
Capital expenditure Continued focus on opening new stores
Pleasing results from stores refurbished inFY15
Remain committed to ongoing investmentin existing stores
Continue to seek opportunities to expand inhigh performing homemaker centres
Majority of ERP expenditure completed asplanned
Trial of 3 Myer Urban Home Republicconcessions commenced. Continue to assesstrading performance
Capex above Prospectus forecast ($6.2m)due to UHR concessions, store expansionsand ERP capex brought forward
1. Operational highlights – Strong gains and milestones achieved
2. Financial performance – FY15 ahead of Prospectus Forecast
3. Outlook – Well positioned for continued growth and achievementof FY16 Prospectus Forecast
Agenda
14
Positioned for category growth
Adairs has the structure to support continued product andrange differentiation and expansion.
Leverage product design, development and sourcingcapabilities to drive:
On trend fashionable merchandise
Speed to market
Product quality
Coordinated ranging
Expanded range
Superior value for customers
The business has proven the capability of this strategy todrive like for like sales growth
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Core store format provides proven growth path
Roll out of core store formats remains the largest driver of growth of our store network
7 – 10 of the new stores to be opened annually for the next 5 years expected to be Adairs and
Adairs Homemaker
Majority of new sites are expected to be in New South Wales and Queensland
Where possible, up-size selected existing Adairs Homemaker stores (nine potential stores identified)
FY16 store roll out on track with Prospectus forecast
16
Emerging formats offer growth opportunity
Adairs Kids
Improving performance metrics will see more stores open inFY16
New store format developed and will be progressively rolled out
Urban Home Republic
Currently trialing concession format in three Myer stores
Looking to add standalone stores in key markets
Medium term focus to open 2 – 4 stores per annum and faster ifthese formats continue to perform
Adairs will recommence the roll-out of Adairs Kids andUrban Home Republic
17
Leveraging investments to support growth
Excellence in retail execution supportsAdairs’ future growth
Enhance online customer experience and omni-channelmarketing
Growing online email database
More product available online
Continue to switch marketing dollars from mass marketingto higher performing omni-channels (EDM / Social etc.)
Increased focus on social media and brand ambassadors
Leverage ERP to improve customer experience
New POS will enable improved customer delivery channelse.g. click and collect CY16
Faster transaction speeds and superior data integrity
Enhances execution of loyalty program in store
Reduces administrative tasks in store providing moreselling hours
18
International expansion opportunity
A disciplined and selective international expansion may offer an additional pathwayto growth
Adairs is evaluating the potential to commence international expansion trial stores in New Zealand orSouth Africa
Further diligence on these two markets is currently being undertaken by management
Reaffirm the prospectus dividend expectation of11 cents per share fully franked in FY16Reaffirm the prospectus dividend expectation of11 cents per share fully franked in FY16
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Well positioned for continued growth
Attractive growth opportunities – new products, new stores, new marketsAttractive growth opportunities – new products, new stores, new markets
Successfully listed on ASX in JuneSuccessfully listed on ASX in June
FY15 result ahead of Prospectus forecastFY15 result ahead of Prospectus forecast
Well positioned to achieve FY16 Prospectus forecastWell positioned to achieve FY16 Prospectus forecast
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Leading Australian home furnishings retailer
Adairs has a long history in Australia and now supplies home furnishings across fivedifferent formats nationwide, plus an online store
Strong sales and profitability growth across allformats
“Core” formats key to growth over next fiveyears (bias to new homemaker stores)
“Emerging” formats support growth
Medium term focus to open 2 – 4 storesover next five years and faster if theseformats continue to perform
“Online” fastest growing channel
Critical to optimising and growing customerexperience
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Pro-forma – statutory profit and loss reconciliation
$’000 FY15 Notes
Statutory profit / (loss) after income taxfor continuing operations 2,942 $1m ahead of Prospectus forecast
Transaction expenses 14,727 IPO transaction costs in line with Prospectus
Finance expenses 12,094 Pro-forma adjustment for post IPO Capital Structure
Other Operating Costs (28) Net other movements
Income tax benefit/(expense) (7,747) Adjustment to reflect pro forma tax of 30%
Pro-forma Profit / (loss) after income tax 21,988 $1.3m ahead of Prospectus forecast
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Pro-forma – statutory cash flow reconciliation
$’000 FY15 NotesStatutory net increase in cash and cashequivalents (7,896)
Income tax (paid)/refunded (9,355) Difference between income tax paid and pro formaassumed tax paid at 30% of profit before tax.
Net incremental costs as a public company (144)
Operating cash flow from discontinuedoperations (4,692) Dusk net operating cash flow
Investing cash flows from discontinuedoperations 1,374 Dusk capex pre divestment
IPO Transaction costs 10,165 Cash Transaction costs paid – $7.1m will be paid in FY16
Pre IPO restructure costs expensed 309 Transaction and adviser fees relating to pre IPOdivestment and refinancing activities
Proceeds from share issue (35,645) IPO related
Net proceeds from borrowings (Bank Debt) (5,808) Impact of refinancing activity excluded from pro forma
Repayment of RPS including interest 71,477
Cash retained on divestment (500) Dusk dividend received as part of divestment
Pro-forma net increase in cash and cashequivalents 19,285
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Disclaimer
Some of the information contained in this presentation contains “forward-looking statements” which may not directly orexclusively relate to historical facts. These forward-looking statements reflect Adairs Limited current intentions, plans,expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many ofwhich are outside the control of Adairs Limited.Important factors that could cause actual results to differ materially from the expectations expressed or implied in theforward-looking statements include known and unknown risks. Because actual results could differ materially from AdairsLimited current intentions, plans, expectations, assumptions and beliefs about the future, you are urged to view all forward-looking statements contained herein with caution.
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