RESULTS - Supercheap Automedia.supercheapauto.com.au/corp/files/documents... · Total Group LFL sales growth of 2.9% Total Segment EBITDA of $314.7m up by 7.0% on pcp Segment D&A

RESULTS

ANTHONY HERAGHTYGroup Managing Director and Chief Executive Officer

FOR THE 52 WEEKS TO 29 JUNE 2019

DAVID BURNSChief Financial Officer

15 August 2019

S U P E R R E T A I L G R O U P

KEY STRENGTHS AND OPPORTUNITIES

Content

2

GROUP HIGHLIGHTS

2018/19 FINANCIAL RESULTS

2019/20 TRADING AND OPERATING UPDATE

APPENDICES Performance TrendsBusiness SnapshotsSegment Notes 2018/19 and 2017/18


-

• Over six million active customers in our

loyalty programs

• Loyalty club members represent over

56% of total Group sales

• Loyalty club members have a higher

ATV than non club members

• Opportunity to create closer

relationships with our customers by

refreshing our loyalty programs and

utilising customer data analytics to

deliver more personalised offers

LARGE, GROWING AND

HIGHLY ENGAGED CUSTOMER

LOYALTY BASE

• Recognised brands with market

leading positions in growing

lifestyle categories

FOUR

POWERFUL BRANDS

• Investing in digital capability to

develop a seamless omni-channel

platform and grow online market share

• Leveraging store network to mitigate

online cost to serve via click and

collect

• Scale allows us to fractionalise the cost

of our investment in technology and

systems across our entire brand

portfolio, store network and customer

transaction base

FOCUS ON SEAMLESS OMNI-

RETAIL EXECUTION

Key Strengths and Opportunities

3


Powerful Brands in Growing Lifestyle Categories

86%

2018/19REVENUE

BRAND AWARENESS1

$0.5b

74%

2018/19REVENUE

BRAND AWARENESS1

$1.0b

94%

2018/19REVENUE

BRAND AWARENESS1

$0.1b2018/19REVENUE

BRAND AWARENESS1,2

(1) Source: Stellar Market Research, Australia Apr – Jun(2) Macpac brand awareness is for New Zealand

4

$1.0b

82%


Large and Highly Engaged Customer Loyalty Base

5

ACTIVE CLUB MEMBERS

2.57M

1.65M

0.41M

1.45M

SUPERCHEAP

AUTO

REBEL

BCF

MACPAC

6.1MACTIVE CLUB

MEMBERS

GROWING PARTICIPATION AND ENGAGEMENT

GROWTH IN ACTIVE CLUB MEMBERS1 IMPROVEMENT IN AVERAGE CLUB

MEMBER NPS2

(1) Includes Macpac active club members. Excluding Macpac 4 year CAGR is 9.4%.(2) Supercheap Auto, Rebel and BCF only. Macpac NPS not measured in 2018/19 but will be introduced in 2019/20.

YOYGROWTH

10.9%YOY

GROWTH

3.0%4 YR

CAGR

11.3%4 YR

CAGR

12.7%

36.9%

43.1%

53.5%57.9% 59.6%

Jun 15 Jun 16 Jun 17 Jun 18 Jun 19

4.0M4.5M

5.2M5.5M

6.1M

Jun 15 Jun 16 Jun 17 Jun 18 Jun 19


Click & Collect

Home Delivery

94% 4% 2%

91% 2% 7%

93% 5% 2%

90% N/A 10%

TOTAL GROUP 93% 3% 4%

6

• 25% growth in online sales to

over $200m

• 7% online sales penetration

• Online cost to serve mitigated

by click & collect omni

customer behavior

• Click & collect represents

over 40% of online sales

• Only 4% of total sales are on-

line orders delivered to home

GROWING ONLINE SALES AND

LEVERAGING STORE NETWORK

TO LOWER COST TO SERVE

IN-STORE ONLINE

Focus on Seamless Omni-Retail Execution

SALES BY CHANNEL



7

GROUP HIGHLIGHTS





Total Group sales of $2.71b up by 5.4% on

pcp

Total Group LFL sales growth of 2.9%

Total Segment EBITDA of $314.7m up by 7.0%

on pcp

Segment D&A increased by 16.2% to $86.6m

reflecting increased omni-retail investment

Total Segment EBIT of $228.1m up by 3.9% on

pcp

Normalised NPAT of $152.5m up by 5.0% on

pcp

Final fully franked dividend of 28.5 cents per

share contributing to full year dividends

totalling 50.0 cents per share

FINANCIAL PERFORMANCE

All core businesses delivering solid LFL and

total sales growth

Over six million active loyalty club members

driving increased spending and higher NPS

Continued strong cash generation and lower

net debt

Investment in omni-channel capability

underpinning 25% growth in Group online

sales

Improved team member safety performance

Highly experienced leadership team

in place

OPERATING PERFORMANCE

8

Group Highlights


Group Highlights

CORE BUSINESSES

DELIVERING SOLID

TOTAL

AND LFL SALES GROWTH

Club member % of sales 39% 61% 81% 65%

Club member NPS 61% 57% 61% N/A3

ACTIVE

LOYALTY CLUB

MEMBERS DRIVING

INCREASED SPENDING

AND HIGHER NPS(1) Macpac was owned for 12 months in FY2018/19 compared to 3 months in FY2017/18. (2) Includes Adventure Hubs post April Easter trading period, week 44(3) NPS measure not measured for Macpac in 2018/19 but will be introduced in 2019/20.

9

Total sales growth 3.4% 3.8% 3.3% 70.3%1

LFL sales growth 2.3% 3.3% 3.2% 7.3%2


Group Highlights

10

INVESTMENT IN OMNI-CHANNEL CAPABILITY UNDERPINNING 25%

GROWTH IN GROUP ONLINE SALES

• Operating cashflow of

$240.9m

• 94% normalised EBITDA

cash conversion

• Normalised net debt/

EBITDA decreased to 1.2x

• Net debt decreased by

$36.2m

CONTINUED STRONG

CASH GENERATION AND LOWER NET DEBT

Online sales ($m) $60m $95m $34m $12m1

Online sales growth 25% 33% 6% 24%1

(1) Macpac only. Excludes Rays.


Group Highlights

11

H E A LT H Y, H A P P Y A N D E N G A G E D T E A M M E M B E R S

• Awarded an Aon Best Employer for Australia (2019), as part of Aon Best Employers

global certification

• certification assessed on four measures: employee engagement,

organisational agility, engaging leadership and talent focus

• Continued improvement in safety performance

• Total Recordable Injury Frequency Rate (TRIFR) decreased by 10% in

2018/19 on pcp

• Ongoing investment in leadership capability and team members’ skills and

knowledge

• strengthened retail experience at the executive level

• targeted leadership capability program for senior management levels

• continuous learning program focused on technical skills for all team

members


Group HighlightsH I G H L Y E X P E R I E N C E D L E A D E R S H I P T E A M I N P L A C E

12(1) Commencing employment with the Group on 25 November 2019

Managing Director and CEO

Anthony Heraghty

Chief Strategy & Customer OfficerKatie McNamara

Chief Financial Officer

David Burns

Chief Human Resources Officer

Jane Kelly

Chief Information Officer

Paul Hayes

Chief Supply Chain Officer

Darren Wedding

Group GeneralCounsel and Company

Secretary Peter Lim

Managing Director Supercheap AutoBenjamin Ward

Managing Director Rebel

Gary Williams

Managing DirectorBCF

Paul Bradshaw1

CEOMacpac

Alex Brandon



13

GROUP HIGHLIGHTS





• Total sales increased 5.4% reflecting solid sales and LFL

sales growth across all brands and full 12 month

contribution from Macpac

• Group segment EBITDA increased by 7.0% to $314.7m

• Segment D&A increased by 16.2% to $86.6m reflecting

investment in omni-retail capability

• Group segment EBIT increased by 3.9% to $228.1m

• Normalised NPAT increased by 5.0% to $152.5m

• Profit attributable to owners includes $6.2m after tax

costs of wages underpayment and remediation costs,

$3.9m after tax costs from investments and $3.1m after

tax costs of restructuring

• Full year dividends totalling 50.0 cents per share,

representing payout ratio of 65% of underlying net profit

after tax

• Strong operating cashflows supporting a $36.2m

reduction in net debt

• Normalised net debt/ EBITDA decreased to 1.2x

Group Results2018/19

$mChange on PCP

Total sales 2,710.4 5.4%

Total segment EBITDA 314.7 7.0%

Segment D&A 86.6 16.2%

Total segment EBIT 228.1 3.9%

Normalised NPAT 152.5 5.0%

Other items not included in

normalized NPAT(13.2) $3.8m

Profit attributable to owners 139.3 8.6%

Normalised EPS (cents) 77.3 5.0%

Full Year dividends (cents) 50.0 1.0

Net debt 386.7 422.9

14


Segment Results

15

2018/19

$m

2017/18

$m

Segment % Group EBIT Sales EBIT Sales EBIT

Supercheap Auto 1,040.6 120.6 1,006.4 116.4

Rebel1 1,016.4 93.8 979.2 91.5

BCF 514.6 20.8 498.3 27.3

Macpac (incl Rays)2,3

138.8 13.0 81.52 2.32

Group and

Unallocated(20.1) 5.0 (17.9)

Total 2,710.4 228.1 2,570.4 219.6

38%

8%

5%

(1) Includes Infinite Retail(2) Macpac business was only owned for 3 months in 2017/18 compared to 12 months in 2018/19(3) Revenue and EBIT for Macpac includes Rays business revenue and losses


• Total sales growth of 3.4% driven by like for like sales

growth and contribution from new stores

• Like for like sales growth of 2.3% driven by higher average

item value and items per transaction

• Like for like sales growth was achieved in all Australian

states and New Zealand

• Gross margin in line with pcp and operating expenses as

a percentage of sales improved by 0.3%

• Segment EBITDA increased by 5.3% to $156.1 million and

EBITDA margin of 15.0% was 0.3% higher than pcp

• Auto maintenance and auto accessories were the

strongest performing categories

• 25% growth in online sales following the successful

replatforming of the website in August 2018

• SCA opened 5 new stores, closed 1 store and completed

8 refurbishments and relocations, with 323 stores at period

end

16

Supercheap Auto

2018/19

$m

Change on

PCP

Sales 1,040.6 3.4%

LFL sales growth 2.3%

Segment EBITDA 156.1 5.3%

EBITDA margin % 15.0% 0.3%

Segment EBIT 120.6 3.6%

Segment EBIT margin % 11.6% 0.0%


• Total sales growth of 3.8% driven by LFL sales growth

and new store openings

• Like for like sales growth of 3.3% was supported by

transaction growth and higher average transaction

value

• Queensland, Victoria and South Australia delivered the

strongest like for like sales growth

• Gross margin was in line with pcp and operating

expenses as a percentage of sales improved by 0.3%

• Segment EBITDA increased by 6.0% to $122.6 million

and EBITDA margin of 12.1% was 0.3% higher than pcp

• Key categories of clothing, footwear and fitness

accessories performed well offset by a decline in

hardgoods

• 33% growth in online sales following successful

relaunch of website in July 2018

• Rebel opened 4 stores, closed 2 stores and completed

15 refurbishments, with 161 stores at period end

Rebel

2018/19

$m1

Change on

PCP

Sales 1,016.4 3.8%


Segment EBITDA 122.6 6.0%

EBITDA margin % 12.1% 0.3%

Segment EBIT 93.8 2.5%

Segment EBIT margin % 9.2% (0.1%)

17

(1) Includes Infinite Retail


• 3.2% like for like sales growth was driven by higher ATV

resulting from increased units per sale

• LFL sales growth across all Australian states

• Overall performance reflects significant investment in

price to maintain market leading position

• Gross margins declined due to increased promotional

mix of sales and deeper discounting of key value

items as competitors increased their footprint and

pricing intensity

• Segment EBITDA decreased to $40.2 million and

EBITDA margin of 7.8% was 1.1% lower than pcp

• Segment EBIT decreased to $20.8m and overall EBIT

margin declined to 4.0%

• Online sales increased by 6% compared to pcp

• BCF opened 3 stores and closed 1 store during the

year, resulting in 136 stores at period end

BCF

2018/19

$m

Change on

PCP

Sales 514.6 3.3%


Segment EBITDA 40.2 (9.0%)

EBITDA margin % 7.8% (1.1%)

Segment EBIT 20.8 (23.8%)

Segment EBIT margin % 4.0% (1.5%)

18


2018/19

AUD m1

2017/18

AUD m1

Sales

- Macpac

- Rays

119.32

19.5

138.8

31.4

50.1

81.5

EBITDA

- Macpac

- Rays

17.42

(1.8)

15.6

8.1

(4.4)

3.7

EBIT

- Macpac

- Rays

15.42

(2.4)

13.0

7.8

(5.5)

2.3

LFL sales growth 7.3%4 circa 8%

19

MacpacMacpac

• Completed integration of Macpac

• Sales of $119.3m supported by new stores and 7.3% like for like

growth (moderated in the fourth quarter)

• EBITDA of AUD17.4m(2) is 18.4% higher than acquisition case of

NZD16m(3) and in line with business plan

• includes annualised costs of ~$1m reflecting investment in

capability (merchandising, product design, marketing, digital

and supply chain) to position the Macpac brand for growth

• includes overhead costs relating to Adventure Hubs

• opportunity to fractionalise these overheads over time as

formats mature and store network expands

• Macpac includes 3 month contribution from Adventure Hubs

following conversion of nine Rays stores in March

Rays

• 9 month contribution prior to closure. Business discontinued.

• $1.8m EBITDA losses – non repeating

Store network

• Macpac opened 16 stores, resulting in 61 small format stores and

nine Adventure Hubs at the end of the period

(1) Macpac was acquired effected 31 March 2018 and owned for 3 months in 2017/18 compared to 12 months in 2018/19

(2) Contribution of small format stores and Adventure Hubs(3) Pro forma estimated revenue of NZD95m (AUD87.1m) and EBITDA of NZD16m

(AUD14.7m) for 12 months to 31 March 2018 as per ASX announcements(4) Includes Adventure Hubs post April Easter trading period, week 44


• Group and Unallocated includes:

• Corporate costs not allocated to segments

• Commercial operations

• Omni-retail development

• Corporate costs of $20.1m (EBIT) in line with

guidance provided at May trading update

• Un-utilised distribution centre costs $0.2m higher than

previous comparative period

• Omni-retail and digital costs reflect increased focus

of the Group on developing its omni-retailing

capability

Group & Unallocated2018/19

$m

Change

$m

Sales 0.0 5.0

EBITDA (19.8) (2.1)

EBIT (20.1) (2.2)

Comprising:

Corporate costs (12.2) (1.8)

Un-utilised distribution

centre costs(3.3) (0.2)

Digital (1.5) (1.2)

Omni-retail development (3.1) 1.0

20


• Strong operating cash flow represents 94% normalised

EBITDA cash conversion and reflects ongoing focus on

working capital together with a strategic decision to

invest in inventory to increase in-store availability of

products

• Financing cashflow reflected debt repayments resulting

in $36.2m decrease in net debt in 2018/19 (compared

to $42.2m increase in prior comparative period)

• The overall profile of the Group’s capital expenditure

reflects increased investment in omni-retail capabilities

while moderating the spending on the growth and

refurbishment of its store network

• Investment in new and refurbished store capex is split:

$7.6m in Supercheap Auto, $9.1m in Rebel, $10.0m in

BCF and $1.9m in Macpac

• Other capital expenditure is higher due to investments

in omni-retailing capabilities including new web

platform, data, cyber, networking, core information

systems and inventory planning and execution projects

Group Cash Flow2018/19

$m

2017/18

$m

Operating cash flow (pre store set up

investment)257.4 322.1

Store set up investment (16.5) (13.7)

Operating cash flow 240.9 308.4

Stores (28.6) (46.6)

Other Capex (61.2) (60.5)

Acquisitions (0.7) (134.1)

Investing Cash flow (90.5) (241.2)

Dividends & interest (115.1) (108.1)

Finance Leases (3.3) (2.7)

Ext Debt (repay)/proceeds (40.0) 39.0

Financing Cash flow (158.4) (71.8)

Net Cash flow (8.0) (4.6)

21


Group Balance Sheet

22

Jun 19

$m

Jun 18

$m

Inventory

- Supercheap Auto

- Rebel

- BCF

- Macpac

- Group & Unallocated

200.9

181.1

135.6

42.6

-

204.5

180.8

124.6

35.6

-

Total Inventory 560.2 545.5

Trade and other payables (362.7) (342.3)

Net inventory investment 197.5 203.2

Property, plant and equipment &

computer software382.3 382.8

Net external debt 386.7 422.9

• Total inventory has increased due to growth in private

brand volumes, decision to invest in inventory to lift

stock availability and lower A$

• Supercheap Auto inventory per store has increased

modestly due to currency

• Rebel and BCF inventory per store have increased

reflecting decision to improve in-store availability

• Macpac inventory increases reflect new store

acquisitions and opening of Adventure Hubs

• Net inventory has decreased. Increase in inventory

investment has been fully funded through ongoing

supply chain efficiencies

• Net debt decrease compared to pcp reflects strong

operating cashflows and disciplined capital allocation


Returns and Capital Ratios

23

2018/19 2017/18

Normalised EPS 77.3c 73.7c

Basic EPS 70.6c 65.0c

Reported Annualised Post Tax Return on Capital (ROC)1 13.3% 13.1%

Average Net Debt $448m $379m

Jun 19 Jun18

Fixed charge cover – normalised

EBITDAL2.1x 2.1x

Net Debt / EBITDA - normalised 1.2x 1.4x

Net Debt/Total Capital2 32.2% 35.3%

(1) Based on normalised net profit after tax

(2) Jun18 restated due to prior period adjustment. Previously reported as 33.5%.

• Normalised EPS of 77.3c an increase of 5.0% on pcp

• Basic EPS of 70.6 cents an increase of 8.6% on pcp

• Normalised fixed charge cover ratio is near target of 2.2

times

• While average net debt increased, reflecting the debt

funding of the Macpac acquisition in April 2018, closing

net debt decreased by $36.2m

• Debt facilities are operating comfortably in compliance

with financial covenants

• Return on Capital increased to 13.3% and remains

above WACC

• Effective AUD/USD rate for the period was 0.72 down

from 0.77 in pcp. The AUD/USD hedge rate for next 12

months is circa 0.71


• Super Retail Group will adopt the new lease accounting

standards (AASB 16) from 1 July 2019

• The Group will adopt the modified retrospective

approach (comparative amounts will not be restated)

• Recognise on balance sheet

• Lease asset: right of use underlying leased assets

• Lease liability: present value of future lease

payments

• Depreciation of lease assets and interest on lease

liabilities will be recognised in the income statement

over the relevant lease term

• Estimated pro forma impact in 2019/20 includes:

• Positive impact on EBIT of between $35m and

$70m

• Impact on NPAT of between neutral ($0m) and

positive $30m

• No impact on cashflows

• No impact on credit profile

• No impact on debt covenants

New Lease Accounting StandardsEstimated pro forma impact of new lease accounting standards on

2019/20 1,2

Balance sheet (1 July 2019)

Assets (right of use) $800m to $850m

Liabilities (leases) $900m to $950m

Retained earnings $50m to $150m

Income statement (2019/20 full year impact)

Depreciation $150m to $175m

Finance cost (interest) $25m to $35m

Ocupancy cost (rent) $210m to $220m

24

(1) Estimated pro forma impact may be different from actuals due to:

• Changes in lease portfolio and incremental borrowing rate used

• Foreign currency fluctuations

(2) In the first half of 2019/20 the Group has entered into two new operating leases for Brisbane and Sydney support offices which are expected to increase its operating lease commitments by approximately $70m. The impact of these new lease arrangements are not reflected in the table above.



25

GROUP HIGHLIGHTS





Trading and Operating Update

26

Group LFL sales growth for first 6 weeks

• Supercheap Auto – circa 3%

• Rebel – circa 2%

• BCF – circa 5%

• Macpac – circa negative 3% LFL sales reflecting a shift in the timing and duration of the key winter promotion

Store development program for 2019/20

• Supercheap Auto: open 6 new stores, close 1 store and undertake 12 relocations and extensions

• Rebel: close 3 stores and undertake 10 refurbishments, relocations and extensions

• BCF: open 4 new stores, close 1 store and undertake 1 relocation

• Macpac: open 8 new stores including 1 Adventure Hub

Enterprise agreement

As previously flagged in the Group’s ASX announcement on 30 April , the anticipated store wage inflation from the proposed enterprise

agreement, if approved, represents a one off incremental EBITDA impact of ~$9m in the first year. The enterprise agreement is expected

to be approved by the end of H1 2019/20

Team member back payment remediation

• All team members back payments expected to be finalised and paid in 2019/20

Group capex

• Targeting capex in 2019/2020 of between $85 and $90m for investment in digital & omni-retail and to fund store development program


AGM and Investor Strategy Day

27

• Deployed Salesforce CC• Enterprise Omni capability

• Endless aisle• Instore integration• Product Information

Management

• Market share growth• Margin improvement

• National DC network• Asian sourcing capability

• Omni deliveryorchestration• Vertical supply integration

• Delivery cost reduction• Increasedutilisation• Working capital reduction

• Overlapping remit• Powerful execution skill

• Duplication of capabilities• Complex legacy

environment

• Cost and revenue synergy• Reduction of obsolescence

• Emerging capability• Single view of customer

• Loyalty & CRM• Segment performance• Promotion and pricing

• Real-time marketing• Margin improvement• Property optimisation

• Powerful retail brands• Private labels• Services

• Enhanced branded offering

• Subscription and service offering

• New profit pools• Gross margin

improvement

Gap

Model Simplification Customer Analytics Brand DevelopmentSeamless Omni-retail Integrated Supply Chain

• Super Retail Group’s AGM will be held at 11.30am (AEST) on 22 October at Level 23, 480 Queen Street, Brisbane

• Super Retail Group will also be holding an investor strategy day on 8 November in Sydney

• The Group’s corporate strategy will build upon the focus areas previously identified in the Company’s April 2019 investor presentation

F I R S T 1 0 0 D AY S I N I T I A L F O C U S A R E A

Current

Goal



28

GROUP HIGHLIGHTS




S U P E R R E T A I L G R O U P 29

938 1,0921,654

2,020 2,112 2,239 2,422 2,466 2,570 2,710

Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun 19

Reported Sales ($m)

32.140.9 46.4

52.3 55.149.4

31.8

51.665.0

70.6

Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun19

Reported EPS (c)

16.8 17.315.9

12.611.3 10.6 10.7

12.9 13.1 13.3


Normalised Reported Post Tax ROC (%)

65.8 87.5 140.7172.3 182.6 170.2 175.3

207.3 219.6 228.1


Reported Total Segment EBIT ($m)

• Historical EPS adjusted to take into account the bonus element in the 2011 entitlement offer• Jun 15 continuing operations only; Jun 14 not adjusted for discontinued operations

• Post Tax ROC adjustment due to capital calculation reclassification• Jun 15 continuing operations only; Jun 14 not adjusted for discontinued operations

Performance Trends


Business Snapshots

30

Rebel - Key Statistics Snapshot

Active club members 2.57m

Club members NPS 57%

Club sales % total sales 61%

Store numbers 161

Online sales % total sales 9%

Click and collect % online sales 26%

Private brand mix 11%

Supercheap Auto - Key Statistics Snapshot




Store numbers 323




BCF - Key Statistics Snapshot




Store numbers 136




Macpac - Key Statistics Snapshot


Club members NPS n/a


Store numbers 70


Click and collect % online sales n/a



Segment Note2 0 1 8 / 2 0 1 9

31

S U P E R R E T A I L G R O U P 32

Segment Note2 0 1 7 / 2 0 1 8

Documents

RESULTS - Supercheap Automedia.supercheapauto.com.au/corp/files/documents... · Total Group LFL sales growth of 2.9% Total Segment EBITDA of $314.7m up by 7.0% on pcp Segment D&A