Full Year Results Announcement

BRISCOE GROUP LIMITED Results for announcement to the market Reporting Period: Full-Year 28 January 2019 to 26 January 2020 Previous Reporting Period: Full-Year 29 January 2018 to 27 January 2019 Currency: New Zealand Dollars Amount (000s); Percentage change Total revenue $653,017 +3.3% Net profit $62,583 -1.3% Final Dividend Amount per share: $0.12500000 Imputed amount per share: $0.04861111 Record date: 23 March 2020 Payment date: 31 March 2020 Net tangible assets per share Current period: $1.3892 Prior comparable period: $1.2230 Full Year Review Briscoe Group Limited (NZX/ASX code: BGP) Highlights for the full year ended 26 January 2020: o Total sales $653.0 million, +3.34% o Same store sales growth, +2.04% o Gross profit $257.5 million, +1.64% o Gross profit margin 39.43% vs 40.09% last year o Online sales growth, +16.20% o Full year NPAT (before NZ IFRS 16 adjustment) $65.0 million, +2.54% o Final Dividend 12.5cps, increase from 12.00cps last year, +4.17% o Total Dividend 21.0cps, increase from 20.0cps last year, +5.00% Rod Duke, Group Managing Director, said: "We are pleased to announce record sales, an increased final dividend payment and, what would have been, another record profit for Briscoe Group except for the accounting adjustment the company was required to make in relation to the new leases accounting standard (see below). To achieve such results despite the ongoing competitiveness and widely reported difficulties faced by many retailers, is a commendable result." The earnings were generated on sales revenue of $653.0 million, an increase of 3.34% on the $631.9 million generated for the previous year. Gross Margin dollars increased 1.64% for the period with gross margin percentage decreasing from 40.09% to 39.43%. The decreased gross margin percentage reflects the continued intensity of competition across the retailing environment. Rod Duke, said: "As we commented in February, the concentration of sales around Black Friday promotions is increasingly influencing the traditional steady build through to Christmas. New behaviours in customers continue to emerge and we are excited by the strategic initiatives the team is developing in response. We operate in highly competitive markets, and while major event-based campaigns are critical, customers are also constantly looking for more resourceful and new ways to shop with us. This is a demanding time for retailers but we also see it as an exciting next phase of our ongoing development." In addition to the competitive trading environment, the full-year reported bottom line, as was the case for the half-year, will be impacted by the introduction of the new international accounting standard in relation to the treatment of leases (NZ IFRS 16). The effect on the Group's income statement will be to lower the NPAT in comparison to the NPAT which would have been reported under the previous accounting treatment. The impact of this change will be $2.4 million and result in a reported NPAT of $62.58 million for the year (52 weeks) ending 26 January 2020. It is important to note that the impact of NZ IFRS 16 has no cash effect to the Group and is for financial reporting purposes only (see tables below for more detail in relation to the impacts of the new standard). The 2019/20 NPAT includes dividends received of $6.8 million from the Group's shareholding in Kathmandu Holdings Limited. In addition, $2.7 million was received for rights entitlements not exercised as a result of the Group's decision to take up only half of its entitlement in relation to Kathmandu's capital raising process associated with their acquisition of the Rip Curl business. Mr Duke said, "Including the $13.6 million additional investment made this year, the total cost of our investment in Kathmandu is now $87.9 million and represents a 16.3% shareholding. The Board considers the level of investment to be at an appropriate level and as the largest single shareholder we continue to maintain a close interest in the company." In addition to the additional investment in Kathmandu, $19.2 million of capital investment was made by the Group during the year of which $10.1 million represents predominantly development of property owned by the Group. The balance of capital investment was for the fit-out of new and relocated stores, online platform improvements, security system upgrades and enhancements to system software and hardware. Inventories totalled $87.4 million at year-end, $6.4 million higher than the $81.0 million reported for last year, predominantly reflecting the impact of the three new stores opened by the Group during the year, the increased demand for online shopping as well as a higher mix of imported inventory this year compared to last year's year-end position. The store development programme progressed well throughout the year. During the first half, following earthquake strengthening works, both the Briscoes Homeware and Rebel Sport stores in New Plymouth underwent full refurbishments. Projects continued at pace during the second half of the year lead by the completion of the Group's new Support Office at 1 Taylors Road, Auckland with the full support team relocated by the end of August. Rod Duke said, "It's a brilliant space and wonderful to have the full support team together in one location." In September the existing Briscoes Homeware store at 36 Taylors Road was relocated to retail space on the ground floor of the new Support Office building. This now allows for a complete rebuild on the existing site for which siteworks have recently commenced. September also saw the opening of a new Rebel Sport store in Newmarket, Auckland as part of the exciting new Westfield retail redevelopment. This store reflects a contemporary fit-out and design, parts of which will be replicated in future new and refurbished Rebel Sport stores. The opening of new Briscoes Homeware and Rebel Sport stores - including online fulfilment centres, in Mt Roskill during October were welcome additions to the Group's Auckland network. In addition to these new stores, the existing Briscoes Homeware store at Riccarton, in Christchurch was relocated to a new site on Riccarton Road and an extension and full refurbishment of the Tauranga Briscoes Homeware store was completed. The Group's online channels continued to experience strong growth finishing the year 16% up on the previous year and now represents just over 11% of total Group sales. Rod Duke said, "We will continue to focus on our online offering while maintaining our proven strategy of adding stores to our network as and when we identify opportunities. The rollout of our 'Click and Collect' offering will continue in the current year enhancing the way we engage with customers across both the online and physical store channels. "New Zealand retailing remains highly competitive and sensitive to continued cost and margin pressures, an unpredictable New Zealand dollar, subdued consumer and business confidence as well as the increasing significance of the COVID-19 (coronavirus) issue - all of which will make it difficult for retailers to maintain margins. However, notwithstanding these headwinds, we are confident that we have the right programmes and initiatives in place to leverage opportunities to grow the business and deliver the experience and value to our customers to ensure that we continue to be the first choice for homeware and sporting goods in New Zealand." Group Chair Dame Rosanne Meo said, "This year's results emphasise the Group's ability to perform and deliver improved performance in difficult trading conditions. On behalf of the Board, I would like to acknowledge the great work done by all staff to maintain Briscoe Group's status as New Zealand's top homeware and sporting goods retailer. In relation to the economic and social impact of the Government's border control announcements in the last two days and with the broader economic package still outstanding, we are not underestimating the challenges we will face as an employer and as a business. It is a complex outlook, but we feel that we are as well placed as any retailer to respond to our customers' ongoing and changing needs." Rod Duke this morning announced that in response to the growing economic uncertainty surrounding COVID-19 (coronavirus) that he will be taking no salary at all through until at least the end of July. He said, "I'm particularly proud of how the team is facing the challenge ahead. I met this morning with the senior management team who unanimously agreed to a freeze on their salary increases for the same period. We continue to monitor the situation closely, taking steps to help protect our team and customers and to mitigate interruption to our business." Dame Rosanne announced that the directors have resolved to pay a final dividend of 12.5 cents per share (cps). The dividend is fully imputed and, when added to the interim dividend of 8.5cps, brings the total dividend for the year to 21.0cps, an increase of 5.00% over last year's total dividend of 20.00cps. The final dividend will be paid on 31 March 2020. The share register will close to determine entitlements to the dividend at 5pm on 23 March 2020. Monday 16 March 2020 Contact for enquiries: Rod Duke Group Managing Director Tel: + 64 9 815 3737 End CA:00350004 For:BGP Type:FLLYR Time:2020-03-16 13:37:17