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Godfreys Group Limited 1H 2015 Results Presentation
23 February 2015
Tom Krulis Managing Director
Bernie Bicknell
COO/CFO
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Financial Highlights
Godfreys 2
Total sales increase of 3.5% on previous corresponding period
Reaffirm F15 Prospectus pro forma EBITDA of $22.1 million, and pro forma NPAT
forecast of $12.2 million
Gross Profit improvement of 220bp on corresponding period, and 50bp better
than pro forma forecast despite unfavourable exchange rate movement
Seven new company-owned stores opened (net of four after three franchise store
closures)
Five Franchise stores bought back into company-owned store network
Earnings per share of 10.6 cents on the current Issued Share Capital
On 10 December 2014 the shareholders of the International Cleaning Solutions Group Pty Ltd (ICSG) undertook a capital reconstruction process, through which the Godfreys Group
Limited acquired ICSG. Under the principles of capital reconstruction in accordance with the Australian Accounting Standards, the Half Year Statutory Financial Report includes the
historical financial information of ICSG. Consequently, earning per share of 14.8 in the Half Year Statutory Financial Report represents the blended earning per share for the Issued
Share Capital under ICSG, and the new Issued Share Capital under Godfreys Group Limited.
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Gross profit reflects the margin on sales after incorporating direct material costs including hedged foreign exchange gains/losses resulting from procurement of goods from
international suppliers. On 1 July 2014, Godfreys Group Ltd made a decision to implement hedge accounting for foreign exchange hedge contracts, hence realised and
unrealised exchange gains/losses are recognised in costs of sales once the hedged inventory is sold.
CODB includes uplift executive remuneration (including short term incentives and expense in relation to performance rights issued under the new long term incentive plan) and
corporate costs expected to arise in FY15 as a consequence of the company becoming ASX listed.
Profit and Loss (Pro Forma)
Godfreys 3
1H2015 FY15
(A$m) Pro Forma Prospectus
Sales 90.6 185.0
Gross Profit 56.9 115.4
Gross margin 62.8% 62.3%
Other costs of sales 7.4 13.8
Operating gross profit 49.5 101.6
Other income 2.3 4.0
CODB 40.5 83.4
CODB/Sales 44.7% 45.1%
EBITDA 11.3 22.1
EBITDA margin 12.4% 12.0%
Depreciation 1.6 3.8
EBIT 9.7 18.4
EBIT margin 10.7% 9.9%
Interest 0.6 1.0
Profit before tax 9.1 17.4
Tax 2.7 5.1
NPAT 6.4 12.2
Headline Statistics:
Earning per share - basic (cents) 14.8
Earning per share - diluted (cents) 14.3
Stores 210 216
Gross margin improved and ahead of Prospectus
forecast
Other income relates to franchise fee revenue,
and advertising contribution. 1H2015 on track
with forecast
EBITDA margin at 12.4%, ahead of Prospectus
forecast
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Profit and Loss – Country segment
Godfreys 4
AUS NZ NZ Consolidated
(A$m) (A$m) (NZ$m) (A$m) (A$m)
Sales 78.7 13.1 11.9 90.6
LFL Sales growth -1.2% -3.4% -1.6%
Gross Profit 49.6 8.0 7.3 56.9
Gross Profit margin 63.0% 60.9% 60.9% 62.8%
Other cost of sales 6.3 1.2 1.1 7.4
Operating gross profit 43.3 6.8 6.2 49.5
Other income 2.1 0.2 0.2 2.3
CODB 35.5 5.5 5.0 40.5
CODB % of Sales 45.1% 42.3% 42.3% 44.7%
EBITDA 9.9 1.5 1.4 11.3
EBITDA margin 12.5% 11.5% 11.5% 12.5%
Depreciation 1.4 0.2 0.2 1.6
EBIT 8.5 1.3 1.2 9.7
EBIT margin 10.8% 10.3% 10.3% 10.7%
LFL results consistent with forecast. Prospectus
forecast growth based on the significant increase
in Sales in 1H2014, and the impact on average
selling prices of introducing a higher share of
Company-branded products in FY2015. The shift
in selling product mix delivers higher profit margin
and lower cost to sell
EBITDA Margin strong at 12.5%. Group EBITDA
margin 50bp ahead of F15 prospectus EBITDA
margin forecast
Gross Profit margin ahead of F15 prospectus
forecast by 50bp
Group EBIT margin at 10.7%
New Zealand benefitted from stronger currency
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Trading Performance - Sales
Godfreys 5
Negative LFL sales (1.6%) as forecast, due to changing sales product mix
Overall growth of 3.5%
New Product launches of Hoover Allergy Bagged and Bagless product highly
successful
Store expansion program on track
New Product rollout on track for 1H2015 including the Sauber excellence,
Hoover Allergy bagged, Wertheim W2500, etc…
Strong January trading result
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Trading Performance – Gross Margin
Godfreys 6
Group
62.8% blended Gross Margin across Australia and new Zealand
Ahead of forecast Gross Margin percentage and Last Year
Margin has improved despite FX deterioration
New products introduced in first half have improved Margin
Suppliers have assisted with price reductions in many areas, to
offset FX impact
Price increases have been taken, where appropriate
Australia
Gross margin of 63.0%, higher than prior year.
Foreign currency hedging arrangements have been entered into up
until August 2015. Current hedged average rate of:
• US$, 1A$ = 0.85 US$; and
• EUR, of 1A$ = 0.65 EUR
New Zealand
Gross Margin of 60.9%, impacted by products sourced from
Australia
0.57
0.58
0.59
0.6
0.61
0.62
0.63
0.64
57.0%
58.0%
59.0%
60.0%
61.0%
62.0%
63.0%
64.0%
F12 F13 F14 1H2015 F15Forecast
GM (group) GM (AU) GM (NZ)For
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Trading Performance - CODB
Godfreys 7
Group
Pro Forma CODB at 44.7%, 0.4% favorable against Prospectus
forecast
Year-on-year favorable CODB margin, a reduction of 1.2%
compared to the previous corresponding period
Costs reduction benefited from lower cost to sale (Commission
and Interest finance) as a result of the shift in product mix, and
support office costs.
Combination of CPI rental increases offset by rental reductions on
lease renewals
No unexpected costs in first half
0.38
0.39
0.4
0.41
0.42
0.43
0.44
0.45
0.46
0.47
0.48
38.0%
39.0%
40.0%
41.0%
42.0%
43.0%
44.0%
45.0%
46.0%
47.0%
48.0%
F12 F13 F14 1H2015 F15Forecast
CODB (group) CODB (AU) CODB (NZ)For
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Balance Sheet
Godfreys 8
(A$'m) 1H2015 FY2014
Assets
Cash and cash equivalents 1.5 7.4
Trade and other receivables 7.6 5.3
Inventories 34.4 25.2
Total current assets 43.6 37.9
Trade and other receivables 0.4 0.5
Property, plant and equipment 11.8 11.4
Intangible assets 91.2 89.8
Deferred tax assets 5.2 2.7
Total non-current assets 108.7 104.5
Total assets 152.3 142.4
Liabilities
Trade and other payables 23.3 16.4
Interest-bearing loans and borrowings - 6.0
Other current liabilities 7.2 6.8
Total current liabilities 30.5 29.2
Interest-bearing loans and borrowings 20.0 54.4
Other liabilities 4.0 3.3
Total non-current liabilities 24.0 57.7
Total liabilities 54.6 86.9
Net assets 97.7 55.4
Equity
Share capital 109.5 28.0
Capital reconstruction reserves (43.5) 0.1
Retained earnings 31.6 27.3
Total equity 97.7 55.4
Trade Debtors higher than FY14 due to higher
trading volumes with Franchises and a temporary
extended franchisees payment terms. Extended
terms balance now fully paid.
Goodwill increased as a result of Franchise store
buybacks.
Inventory build for January and pre Chinese New
Year in 1H2015. Inventory balance normalised in
March 2015.
New non-current debt facility drawn. All bank
covenants met.
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Cash Flow
Godfreys 9
(A$'m) 1H2015 1H2014
Cash Flows From Operating Activities
Receipts from customers 92.2 87.0
Payments to suppliers and employees (83.9) (72.5)
Income taxes (0.4) (0.2)
Net cash provided by operating activities 7.9 14.3
Cash Flows From Investing Activities
Payment for property, plant and equipment (1.9) (1.5)
Acquisition of intangible assets (1.4) (0.1)
Net cash used in investing activities (3.4) (1.5)
Cash Flows From Financing Activities
Proceeds from Issue of equity securities 77.7 -
Proceeds of new debt facility 20.0 -
Payment for the acquisition of shares in ICSG (46.2) -
Repayment of old debt facility (59.4) -
Interest and other costs of finance paid (2.5) (4.1)
Net cash used in financing activities (10.4) (4.1)
Net Increase / (Decrease) In Cash Held (5.9) 8.6
Cash At The Beginning Of The Period 7.4 (0.3)
Cash At The End Of The Period 1.5 8.4
Payments to suppliers include payments for
additional temporary Inventory build for January
and pre-Chinese New Year.
CAPEX spent mainly relates to Store fit out:
New & conversion stores $1.0m
Store Refurbish $0.4m
Other $0.5m
Total $1.9m
Franchise store buybacks $1.1m
Software $0.3m
Total $1.4m
New non-current debt of $20m, Interest paid of
$2.5m relates to old debt facilities.
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170 170 175 178 181 185
23 24 26 28 29 31
0
50
100
150
200
250
F11 F12 F13 F14 1H2015 F15 forecastNew Zealand Australia
1H2015 stores movement Seven new stores opened • VIC: Traralgon, Sunbury • WA: Geraldton, Claremont • NSW: Coffs Harbour • TAS: Kingston • NZ: Gisborne
Five conversion to company-owned stores • VIC: Camberwell, Richmond, • NSW: Blacktown • SA: Ridgehaven • QLD: Bundaberg
Three stores closed • WA: North Perth • NSW: Bathurst (store concession) • TAS: Kingston (store concession)
2H2015 planned new stores • VIC: Wangaratta, West Gosford • NSW: Caringbah, Mt Druitt, Dubbo, Bathurst
One conversion to franchise own store in 2H2015 • WA: Whitford City
Retail Store Network
Godfreys 10
193 201 206 210 216 194
NZ
18
11
WA
5
18
NSW
37
11
SA
12
7
VIC
19
23
TAS
6
1
ACT
3
-
128 Company-owned stores
82 Franchised stores
QLD
28
10
NT
-
1
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FY2015 Outlook
Godfreys 11
Strong January sets up good Full Year trading result in line with forecast
Additional 6 company stores expected to open in 2H2015
New Product rollout on track (Hoover regal launched in January)
Improve Gross Margin to achieve Prospectus forecast
CODB improvements continue in both cost to sale (finance interest and commission) and support
office
Anticipated to meet Prospectus Profit and Cash targets
Continue with foreign currency hedging strategy to limit exposure to changes in the cost of
internationally sourced inventory
Relocation of the main distribution centre in Victoria to complete in 2H2015.
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Appendix: Statutory to Pro Forma reconciliation
Godfreys 12
Half-year ending 26 December 2014$A’m
1H2014 statutory results 90.6 5.9 7.6 4.3 (5.9)
IPO costs - 3.3 3.3 3.3 -
IPO Bonus paid to Management - 1.8 1.8 1.8 -
Proceeds from IPO - - - - (77.7)
Refinancing of borrowings - - - - 39.4
Payment to the owner of ICSG - - - - 46.2
Impact of first time adopting of hedge accounting - (0.8) (0.8) (0.8) -
Tax consolidation adjustment - - - (3.2) -
Underlying Statutory results 90.6 10.3 11.9 5.4 2.0
Public company costs - (0.5) (0.5) (0.5) (0.5)
Incremental executive remuneration - (0.1) (0.1) (0.1) -
Change in interest costs - - - 2.0 2.0
Tax impact of Pro Forma adjustments - - - (0.4) (0.4)
Underlying Pro Forma results 90.6 9.7 11.3 6.4 3.0
Sales EBIT EBITDA NPATNet cash
flow
Half-year ending 27 December 2013$A’m
1H2014 statutory results 87.5 10.5 11.9 6.4 8.6
Forward contracts unrealised gain - (0.8) (0.8) (0.8) -
Tax consolidation adjustment - - - (2.0) -
Underlying Statutory results 87.5 9.7 11.1 3.7 8.6
Public company costs - (0.5) (0.5) (0.5) (0.5)
Incremental executive remuneration - (0.1) (0.1) (0.1) -
Change in interest costs - - - 3.6 3.6
Tax impact of Pro Forma adjustments - - - (0.9) (0.9)
Underlying Pro Forma results 87.5 9.1 10.5 5.7 10.8
Sales EBIT EBITDA NPATNet cash
flow
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