ScS Group plc Interim results for the half year ended 27 January March 2018

Transcription

1 ScS Group plc Interim results for the half year ended 27 January March 2018

2 Agenda Introduction, objectives and highlights Financial review Review of the period and outlook David Knight Chief Executive Officer Chris Muir Chief Financial Officer David Knight 2

3 Objectives Deliver profitable and sustainable growth Improve quality of earnings Improve business resilience Increase shareholder returns 3

4 Highlights Like-for-like orders Stores & concessions Customer experience +2.2% Two-year: +5.3% Jan 18 Operating profit + 0.3m Dividend (interim) 5.30p Cash 51.8m Jan m 4.90p 36.8m Jan m 4.67p 32.2m 4

5 Financial review 5

6 Financial highlights Gross sales EBITDA EPS Jan m 2.9m +0.1p Jan m + 0.1m -5.6p Jan m m -7.1p Free cash flow 16.7m HY m Cash 51.8m HY m Dividend (interim) 5.30p HY p 6

7 Gross sales ScS - Furniture ScS - Flooring HoF Online Jan m 21.3m 11.0m 6.0m Jan m 20.1m 12.8m 5.4m Jan m 17.5m 10.4m 4.3m ScS Furniture ScS Flooring House of Fraser Online Increase of 2.5m (+2.0%) Increase of 1.2m (+5.7%) Decrease of 1.8m (-14.2%) Increase of 0.6m (+11.3%) Two year increase of 17.0m (+15.0%) Two year increase of 3.8m (+21.7%) Two year increase of 0.6m (+5.8%) Two year increase of 1.7m (+39.5%) Two year CAGR (+7.3%) Two year CAGR (+10.3%) Two year CAGR (+2.8%) Two year CAGR (+18.1%) 7

8 0.1m 2.4m 2.9m ( 0.3m) 1.4m ( 0.1m) ( 0.3m) ( 0.3m) ScS Group plc interim results for the half year ended 27 January 2018 EBITDA FY18 EBITDA improved 2.8m Gross profit increased 2.4m to 75.3m (2017: 72.9m) Marketing expenditure re-phased. HY reduced 1.4m to 15.2m Payroll costs increased 0.1m due to 0.6m increase in performance related bonuses (including new stores) 0.2m of salary costs from new stores 0.7m decrease driven by a reduction in headcount across the existing store network and improved cost control across the business 5 new stores opened since September 2016 provided EBITDA contribution of 0.7m 8

9 Flexible cost base 75% m % Gross sales EBITDA Total costs Cost of goods sold (inc. credit) (93.1) (93.0) 56.3 Distribution costs (8.6) (8.3) 5.2 Marketing costs (15.2) (16.6) 9.2 Payroll costs (performance related) (7.6) (7.0) 4.6 Other payroll (16.9) (17.4) 10.2 Other costs (5.7) (5.5) 3.4 Rent, rates, heat and light (18.4) (18.0) 11.1 Flexibility Proportion of cost variability remained consistent year-on-year All sales are made to order creating a flexible business model 75% of the cost base is variable with sales 14% is semi variable Rent, rates, heat and light account for 11% of the overall cost base Variable Semi-variable Fixed costs 9

10 40.1m 51.8m 2.9m ( 1.5m) 16.4m ( 3.9m) ( 1.1m) ( 1.1m) ScS Group plc interim results for the half year ended 27 January 2018 Cash flow Strong cash flows together with continued expansion in the store network Free cash flow in the period of 16.7m (2017: 18.4m) Working capital movement mainly due to increases in customer deposits since year end Customer deposits 24.9m (2017 HY: 22.8m, 2017 FY: 11.5m) 0.8m capex spend on the new Chelmsford store and new Basildon distribution centre Negative working capital model Cash or card sales - deposits received at point of order, balance settled before delivery Credit sales - loan provider pays ScS approximately seven days after delivery Majority of suppliers paid at the end of month following delivery into our distribution centres 10

11 20.3m 26.6m 32.2m 36.8m 51.8m ScS Group plc interim results for the half year ended 27 January 2018 Resilience 50m 10 years 40m 9 years 30m 8 years 20m 7 years 10m 6 years 0m years Cash Strong operating cash flows No debt Further protection from 12.0m committed revolving credit facility to November 2021 Store leases average remaining tenure length No significant long term commitments Most recent leases 10 years in length Increasing flexibility to exit or relocate 11

12 Review of the period 12

13 Who we are Mosaic ScS Core Customers HoF Customers Prestige Positions Country Living Senior Security Suburban Stability Domestic Success Aspiring Homemakers Family Basics Transient Renters Modest Traditions Value retailer An excellent customer experience, with outstanding value, quality and choice Continue to target core customer ScS and HoF selling channels focus on separate demographics Note: Based on 2017 Experian Mosaic profiling of a range of the Group s customers 13

14 Growth focus Strategy for growth Increase sales densities Maximise the opportunity with House of Fraser customers Optimise online presence Achieve strong financial returns from new store openings 14

15 Strategy for growth (1) Increase sales densities per square foot Increase of 12.5% over the past two years Note: Sales per sq. ft. for 6 month period Progress Continued improvement in conversion Further growth in average order values Further development of flooring offer Re-launch of our dining and living furniture range Continued investment in online capability Focus on the customer journey 15

16 Sofas Choice and value Strong links with leading suppliers Development of new products to meet consumer trends and expectations Continually working with suppliers to further improve quality and reliability 16

17 Supply chain 17 major sofa suppliers All purchases in sterling Key customer to suppliers (typically their number one account) Product exclusivity Far east product is imported through UK suppliers No minimum purchase commitments 95% special order, no stock risk % Turnover By Country UK (59.3%) Far East (33.8%) Europe (6.9%) 17

18 Flooring Large range with only a small footprint Over 120 ranges / 5000 SKUs Sample only operation no stock costs, with a Just in Time customer delivery system Leading brands Closely managed, self employed fitting teams Experienced in-house support network structure 18

19 Customer experience Trustpilot introduced in 2014 Over 93,000 reviews so far (FY17 YE: 73,000) Rated Excellent with the maximum score of 5 stars The only national 5 STAR rated sofa & carpet retailer Source: Trustpilot, March

20 Strategy for growth (2) Maximise the opportunity with House of Fraser customers m 12.8m 10.4m 14.2% decrease in gross sales Strong Winter sale Challenges across House of Fraser s own business, including their website relaunch Challenging end to prior year and through Q1 Different customer demographic CEO appointment and ongoing transformation programme 20

21 Strategy for growth (3) Optimise online presence m 5.4m 4.3m 11.3% increase in gross sales Two year increase of 39.5% Fastest growing area of the business Strengthened online team High proportion of customers carry out research online Improves quality of footfall to stores leading to higher conversion Fully responsive multi-platform 21

22 Strategy for growth (4) Achieve strong financial returns from new stores Chelmsford opened Boxing Day new stores opened FY17 Site selection based on key criteria Prime location Near to target demographic - using Experian research Close to competitors Meets minimum return requirements 22

23 Marketing Creating urgency and driving in store traffic m 16.6m 12.9m Broad mix of media Very targeted campaigns Push urgency ends soon In-year review of media mix 23

24 ScS The Sofa Carpet Specialist Current trading and outlook Continued increase in conversion and average order values Demographic differences provide opportunity at House of Fraser concessions. Online continues to be fastest growing area of the business Opened our 101 st store Dividend increase underpinned by profit growth and balance sheet strength Our focus on providing excellent choice, value and quality for our customers has proven successful. The Board is pleased with the Group s year to date trading, which continues to be in line with its expectations 24

25 Appendices 25

26 Network 101 ScS stores Ave. store retail space 14,700 sq ft 27 House of Fraser concessions 9 distribution centres 26

27 Customer demographic Mosaic ScS Core Customers HoF Customers City Prosperity Prestige Positions Country Living Rural Reality Senior Security Suburban Stability Domestic Success Aspiring Homemakers Family Basics Transient Renters Municipal Challenge Vintage Value Modest Traditions Urban Cohesion Rental Hubs Note: Based on 2017 Experian Mosaic profiling of a range of ScS customers and comparison with the UK households 27

28 Who shops at ScS? Suburban Stability Mature suburban owners living settled lives in mid-range housing Who We Are Age Household Income 40k- 49k Household Composition Family + other adults Number of Children 1 Child Tenure Owned Property Type Semidetached Key Features: - Older families - Some adult children at home - 3 bedrooms - Suburban mid-range homes - Research on internet - Have lived at same address some years Also HoF customer 28

29 Who shops at ScS? Aspiring Homemakers Younger households settling down in housing priced within their means Who We Are Age Household Income 40k- 49k Household Composition Pseudo Family Number of Children 2 Children Tenure Owned Property Type Semidetached Key Features: - Younger households - Affordable housing costs - Full-time employment - Starter salaries - Private suburbs - Buy and sell on ebay 29

30 Who shops at ScS? Family Basics Families with limited resources who have a budget to make ends meet Who We Are Age Household Income < 15k Household Composition Family + other adults Number of Children 3 Children Tenure Council/HA Property Type Terraced Key Features: - Aged 25 to 40 - Families with children - Limited resources - Some own low cost homes - Some rent from social landlords - Squeezed budgets 30

31 Who shops at ScS? Transient Renters Single people privately renting low cost homes for the short term Who We Are Age Household Income 20k- 29k Household Composition Housesharers + others Number of Children No Children Tenure Rented Property Type Terraced Key Features: - Private renters - Low length of residence - Low cost housing - Singles and sharers - Older terraces - Few landline telephones 31

32 Who shops at ScS? Modest Traditions Mature homeowners of value homes enjoying stable lifestyles Who We Are Age Household Income 20k- 29k Household Composition Family + other adults Number of Children No Children Tenure Owned Property Type Terraced Key Features: - Mature age - Homeowners - Affordable housing - Kids are grown up - Suburban locations - Modest income 32

33 Who shops at ScS? Senior Security Elderly people with assets who are enjoying a comfortable retirement Who We Are Age 66+ Household Income < 15k Household Composition Single Number of Children No Children Tenure Owned Property Type Bungalow Key Features: - Elderly singles and couples - Homeowners - Comfortable homes - Additional pensions, > state - Don't like new technology - Low mileage drivers Also a HoF customer 33

34 Who shops at ScS? Vintage Value Elderly people reliant on support to meet financial or practical needs Who We Are Age 66+ Household Income < 15k Household Composition Single Number of Children No Children Tenure Council / HA Property Type Purpose built flats Key Features: - Elderly - Living alone - Low income - Small houses and flats - Need support - Low technology use 34

35 Who shops at HoF? Prestige Positions Affluent married couples with financial security and spacious home Who We Are Age % have two or more vehicles Household Composition Married Supporting older children Tenure Owned Property Type Detached Key Features: - High value detached homes - Married couples - Managerial & senior roles - Support students & older kids - High assets and investments - Online shopping and banking 35

36 Who shops at HoF? Country Living Well-off homeowners living in the countryside Who We Are Living in rural areas 38% use central heating oil 18% self - employed 68% own a pet Tenure Owned Property Type Detached Key Features: - Rural locations - Well-off homeowners - Attractive detached homes - Higher self-employment - High car ownership - High use of Internet 36

37 Who shops at HoF? Domestic Success High- earning families who live affluent lifestyles Who We Are Most likely to be married 35% Work part time or as a housewife Most likely to have opened up a child trust fund Number of Children 2+ Children Tenure Owned (w. Mortgage) Property Type Detached Key Features: - Families with children - Upmarket suburban homes - Owned with a mortgage - 3 or 4 bedrooms - High Internet use - Own new technology 37

38 Who shops at HoF? Modest Traditions Older people living in inexpensive homes that they own Who We Are Age Mid 50s Household Income 20k - 30k Likely to get a lift or bus to work Older children that live elsewhere Tenure Owned Property Type Terraced Key Features: - Mature age - Homeowners - Affordable housing - Kids are grown up - Suburban locations - Modest income 38