29 August 2019 The PAS Group Limited – FY2019 Results Briefing ABN 25 169 477 463
FY2019 Results Summary Financial Summary • Total sales up by 9.2% to $272.6 million . • Wholesale sales increased by 29.7% to $148.6 million driven by our Designworks business which was up 46% year on year with net sales of $118.5 million as the business delivered on new contracts won in FY2018 in fashion apparel, sports equipment, footwear and accessories. • Net Loss after Tax from the continuing business of $1.6 million was • Online sales grew 5.7% on top of the 17.2% growth achieved in FY2018 an improvement of 35.8% on the prior year. with Loyalty membership up 37% year on year to 1.3 million members. • The Company is taking active steps to divest the White Runway business. The results of this business have been disclosed as part of • Retail sales reduced by 8.2% to $124 million driven by the closure of 25 discontinued operations. The Net Loss after Tax for the total marginal or unprofitable stores in line with plan and a decline in like-for- business, including White Runway, was $1.8 million . like Retail sales of 4.1% due to the continuation of challenging trading conditions which included reduced concession sales in Department • The Group closed the year debt free with a cash surplus of $0.3m. Stores. • Gross profit margin of 49.2% reflected the 9% change in mix with lower- margin Designworks wholesale sales making up a larger proportion of FY2019 FY2018 overall sales compared to FY2018. Total Sales Revenue $272.6 million $249.6 million • A CODB decrease of 4.2% of sales due to tight cost control, economies of scale achieved through the expansion of Designworks and the planned Underlying EBITDA 1 $8.6 million $11.7 million retail portfolio rationalisation. • Underlying EBITDA 1 from continuing business of $8.6 million was in line NPAT – Continuing ($1.6 million) ($2.5 million) with guidance and was net of $1.8 million in normalisations, including $0.9m relating to strategic action costs. NPAT – Total ($1.8 million) ($2.9 million) 1 Underlying EBITDA is a non-IFRS unaudited measure defined for the purpose of this document as earnings before interest, tax, depreciation, amortisation, non-recurring income/expenditure and certain non-cash items such as share based payment expenses recognised in accordance with AASB 2 Share-based payment . 1.
FY2019 Results Summary Operational Summary • Whilst the success of the Designworks wholesale business in growing sales by 46% resulted in increased working capital usage, this was offset by the positive effects of exiting the Black Pepper Independent Wholesale market in H1 FY2019. The net benefit was a $1.4m or 3.9% decrease in the Group’s total working capital year on year. • The implementation of our new Customer Data Platform was successfully completed in the first half and has helped deliver annual membership growth of 37% in our loyalty program, which now totals 1.3 million members contributing 78% of total Retail sales. • The Group continued its strategic retail portfolio rationalisation which culminated in the closure of 25 marginal or unprofitable bricks and mortar stores, in line with the Company’s strategy to close stores where returns were sub-optimal or landlord rental expectations uneconomic. • We have tempered our new store roll-out program in line with our strategy, we have continued to open new stores in strategically targeted locations, with 5 new stores opening during the period. • Implementation of an international swimwear infrastructure to facilitate international sales growth. 2.
Wholesale, Design & Distribution FY2019 Wholesale Sales up $34.0m (29.7%) to $148.6 million Wholesale Sales by Division – FY2018 v FY2019 Designworks • Designworks delivered record sales of $118.5 million which was up 46% 16% 21% 4% year on year as the business delivered on new contracts won in FY2018 8% in fashion apparel, sports equipment, footwear and accessories including: 80% 71% Successful execution and delivery of the new Coles Women’s Mix range; A full year of Lonsdale in Target; The launch of our Suburban and Zoo York brands in Target, which FY2018 FY2019 performed ahead of expectations; Continued growth in Sports Equipment following new licence Designworks Black Pepper Other agreements with Dunlop and The Australian Open; Continued growth in Footwear, including the successful launch of Designworks Product Mix – FY2018 v FY2019 Lonsdale footwear in Target; and The successful relaunch of Russell Athletic in Australia which has FY2018 FY2019 performed ahead of expectations. Private Private Label, Label, 20% 13% Sports, Other Wholesale Sports, 44% 36% • The strategic closure of Independent Wholesale and transition to Retail within Black Pepper was executed with final wholesale orders delivered in H1 and the ongoing benefits of the transition to be realised from FY2020. • The Group has invested in infrastructure to support the international growth of JETS however the international take-up of JETS continues at a Licensed - Licensed Apparel & slower rate than anticipated. Apparel & Accessories, Owned Accessories, Owned 39% Brand, 2% 41% Brand, 5% 3.
Sales by Customer Sales by Customer / Channel – FY2018 Sales by Customer / Channel – FY2019 Myer - Big W International Myer - Wholesale 2.7% Rebel 2.4% Big W Wholesale 2.3% 2.2% Rebel 1.0% 2.8% 2.6% International David Jones 3.2% 3.4% David Jones 4.0% Own Retail Coles Own Retail Stores 7.0% Stores Target 42.4% 36.4% 6.6% Myer - Concessions 8.3% Myer - Concessions Independent 9.9% Wholesale 10.1% Independent Wholesale Kmart Target 10.5% 13.6% 12.8% Kmart 15.7% • Strong growth and expansion of the Designworks wholesale business resulting in lower % contribution from own stores • FY2019 included a new wholesale sales stream through the delivery of the Coles Women’s mix range • Significant growth in Target through Lonsdale, Suburban and Zoo York • Sales to Independent Wholesale customers are expected to reduce due to Black Pepper’s planned strategic exit from this market in FY2019 4.
Retail Segment FY2018 to FY2019 Retail Sales Bridge ($ million) Summary • Retail sales reduced by 8.2% to $124.0m • Movement was as a result of: (5.4) 1.6 135.0 1.4 (8.7) Continued consolidation within the store portfolio with 5 new o 124.0 stores opened during the financial year, offset by the closure of 25 marginal or loss making stores; Negative LFL sales particularly in Myer concessions; o Online sales growth of 5.7% in addition to the 17.2% growth o achieved in FY2018; FY2018 Sales LFL Growth New Stores Annualised Closed Stores FY2019 Sales The annualised impact of new stores and closed stores in FY2018 o Stores Retail Sites Total Retail Sites by Brand • 5 new Retail sites opened in FY2019: FY2018 Opened Closed FY2018 Black Pepper; 1 store o Black Pepper 136 1 (13) 124 Review; 2 stores, 1 concession o JETS; 1 store Review 116 3 (10) 109 o • The Group’s retail brands currently operate within 69 department New Businesses & 4 1 (2) 3 store concessions representing 29% of the retail bricks and mortar Other portfolio. Total Retail Sites 256 5 (25) 236 5.
Operational Highlights - Online & Customer Loyalty 1 Online and Loyalty Growth 1 • Online sales continued its positive trend now representing 14.5% of the Group’s (FY2014 – FY2019) total retail sales in FY2019, up from 12.6% in FY2018. • Total online sales growth of 5.7% was achieved in addition to the 17.2% in FY2018. 14.5% • Online revenue from email campaigns has increased by 45% using our new 12.6% Customer Data Platform providing highly personalised communication. 10.6% • A new Russell Athletic E-Commerce site was launched in H2 FY2019. 7.6% • The Group continued to evolve predictive content by turning on AI-powered 4.5% product recommendation and Visual Search. 2.6% • New features and benefits are being introduced across all loyalty programs with the goal of growing top customer participation and encouraging new customer engagement. Online % of sales FY14 FY15 FY16 FY17 FY18 FY19 • A new Black Pepper Loyalty program and the implementation of our new Customer Data Platform were launched during the year assisting to drive Group Loyalty membership up to 1.3 million members – an increase of 37% since June 1,290 2018. • Our VIP Dress Circle membership for top tier loyalty members in Review has grown 943 by 73% since launch and drove $4.8m in sales. 754 • The Review Loyalty App was upgraded in H1 FY2019 and has since grown this 534 revenue channel by 51% versus FY2018. 342 108 Loyalty ('000 members) 1 Information concerning Online and Customer Loyalty including prior period data has been amended to remove the impact FY14 FY15 FY16 FY17 FY18 FY19 of White Runway which has been classified as a Discontinued Operation. 6.
Gross Margin and Exchange Rates • Gross margin has continued to be well managed through foreign currency cycles. • Reduction in GP % predominately due to the 9% increase in the total Wholesale vs Retail mix for FY2019. • Despite the material depreciation in the $AUD over the past two years the Group has maintained a relatively consistent AUD/USD hedge rate to prior year. • Forward US dollar currency requirements for retail businesses covered beyond H1 FY2020. Exchange Rate and Margin 100.0% $0.88 90.0% 80.0% $0.76 $0.75 $0.74 $0.73 70.0% 55.9% 55.2% 55.7% 54.9% 60.0% 49.2% 50.0% 40.0% FY2015 FY2016 FY2017 FY2018 FY2019 AUD $ Gross Margin % 7.
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