Half Year Results announcement

BRISCOE GROUP LIMITED Results for announcement to the market Reporting Period: Half-Year 1 February 2021 to 1 August 2021 Previous Reporting Period: Half-Year 27 January 2020 to 26 July 2020 Currency: New Zealand Dollars Amount (000s); Percentage change Total revenue $358,421 +22.6% Net profit $47,461 +69.6% Interim Dividend Amount per share: $0.11500000 Imputed amount per share: $0.04472222 Record date: 21 September 2021 Payment date: 14 October 2021 Net tangible assets per share Current period: $1.2610 Prior comparable period: $1.0715 Half Year Review Briscoe Group Limited (NZX/ASX code: BGP) Highlights for the 26-week period - 1 February 2021 to 1 August 2021: o Total sales $358.4 million, +22.58% o Online sales as mix of total Group sales, 16.16% o Gross profit $166.66 million, +35.20% o Gross profit % 46.50% vs 42.16% last year o Net profit after tax (NPAT) $47.46 million, +69.63% o Benefits from strategic initiatives being realised o Interim Dividend 11.50 cps increased from 9.00 cps last year The directors of Briscoe Group Limited (NZX/ASX code: BGP) announce a net profit after tax (NPAT) of $47.46 million for the half-year ended 1 August 2021 compared to $27.98 million achieved for last year's first half. The half-year results are unaudited. Dame Rosanne Meo, Briscoe Group Chair said, "The results the team have produced for this first six-month period are very impressive. The way in which the leadership team continues to grow the relevancy of the underlying business model, but also challenge itself to progress strategic initiatives to improve and drive future growth, is a real credit to them." The directors have resolved to pay an interim dividend of 11.50 cents per share (cps). This compares to last year's interim dividend of 9.00 cps. Books will close to determine entitlements at 5pm on 21 September 2021 and payment will be made on 14 October 2021. The company's dividend policy is to pay out at least 60% of NPAT when calculated on a full year basis. Rod Duke, Group Managing Director, said, "$47.46 million of NPAT sets a new benchmark for the Group and we're delighted to have produced such a strong first half result. After the strong post-lockdown recovery experienced during the second half of last year, it's very pleasing to have been able to complement that recovery with the inclusion of other initiatives which we have introduced in relation to our three key strategic areas; enhancing the shopping experience, improving our supply chain and developing new revenue streams. The earnings were generated on sales revenue of $358.4 million, an increase of 22.58% on the same period last year. Rod Duke said, "Clearly, the impact of COVID-19 caused unprecedented and volatile sales patterns across the first half of last year, but even using a more normalised comparison with the first half sales produced 2 years ago, the Group's sales increased significantly by 18.30%, with the first quarter increasing by 14.94% and then strengthening to an increase of 21.61% for the second quarter. Gross margin dollars increased by 35.20% for the period from $123.28 million to $166.66 million, with gross margin percentage increasing from 42.16% to 46.50%. Rod Duke said, "The enhanced analysis and management of promotional activity has contributed to a step-change in gross margin and we continue to work very hard to consolidate these gains. We are also seeing the benefits emerging from the work we are doing with KPMG to improve inventory in relation to optimising our ordering, allocation, flow in to store and overall stock levels. "The team right across-the-board continues to do a fantastic job for us day-in, day-out and we were pleased to be able to increase the wage rates for our in-store hourly-paid team by 6.4% from May 2021. The employment market remains extremely competitive and we expect it to remain so for some time." The Group received a dividend of $0.96 million from its investment in Kathmandu Holdings Limited (Kathmandu) during the six months. There was no dividend received last year as a result of Kathmandu's response to the COVID-19 situation. Homeware sales increased by 20.77% from $184.35 million to $222.63 million and sporting goods sales by 25.66% from $108.06 million to $135.79 million. The Group's online business continues to perform exceedingly well, representing 16.16% of Group sales for the half-year. Rod Duke said, "System developments in relation to the way in which online orders are picked in-store have resulted in significant productivity and efficiency gains. In addition to these back-end process improvements we have also enhanced the front-end online experience with the introduction of functionality allowing customers to easily find matching and recommended products, as well as receiving relevant communications via our new personalised email system. In addition, new search functionality and the introduction of our 'Find-In-Store' stock availability feature will significantly improve the online customer experience." Inventory levels as at 1 August 2021 were $101.09 million, up from $86.67 million at the same time last year. Rod Duke said, "Whilst this includes an additional store opened by the Group during the period, the majority of the increase reflects significant work undertaken by our merchandise team to secure inventory in advance of traditional timings, to minimise potential international supply chain disruptions as a result of ongoing impacts of Covid-19. These include factory delays, lack of shipping availability, port disruptions and increased costs. Although inventories have closed higher than in recent years, we're in great shape for the second half to avoid being hindered by shortages we have already seen occurring across the wider retail market. Having sufficient inventory in the current retail environment is a distinct competitive advantage." The Group's balance sheet remains strong with cash balances of $93.93 million at the close of the period, compared to $98.56 million held at the same time last year. Work also continued on a number of projects in relation to Group owned properties during this first half. Significantly, the construction of a new concept Briscoes Homeware store at 36 Taylors Road, Auckland was completed and the store opened in early March. Rod Duke said, "We're extremely pleased with this store and it's trading above expectations. The feedback has been exceptional with customers enjoying the bigger, brighter and more contemporary fit-out. Furthermore, it allowed us to introduce a brand-new Rebel Sport store in the retail space on the ground floor of the Support Office building at 1 Taylors Road. Again, we're pleased with this new concept store which opened towards the end of April and services a wide catchment that we have been keen to be a part of for some time. The success of these new stores across both our major brands gives us confidence for further network growth opportunities in relation to the refurbishment and/or establishment of new stores." The Group's development at Silverdale is continuing well, with completion estimated for November 2021. This will see the opening of new generation Briscoes Homeware and Rebel Sport stores to service the significant catchment of Silverdale, Hibiscus Coast, Orewa and surrounding areas. Rod Duke said, "While we continue to enjoy the benefits of a buoyant retail environment, we are also very focused on progressing our strategic initiatives, which we see as critical to ensuring the business is strong and sustainable moving forward. The first year's benefits are on track to meet expectations and provide a solid complement to the continued strength of the retail environment. "Having established improved data and analytics capability we are now beginning to see the benefits from the programme of work with KPMG in relation to supply chain improvements. Examples of this include the redirection of imported product between North and South Island ports as well as the identification and reallocation of slow-moving product across the wider store network. Both of these are part of a wider work stream in relation to optimising the levels, availability and flow of inventory across the Group's retail network. "Other initiatives we are seeing benefits from, in addition to the online developments outlined earlier, include the establishment of easy-to-use in-store kiosks enabling customers to purchase products online that may be out of stock in-store, as well as the introduction of new product lines online which are shipped direct from suppliers. We see the latter initiative as particularly promising creating the opportunity for us to offer many additional products that we may not have traditionally held in-store." Level 4 Lockdown New Zealand's extended period of near-normality came to a sudden conclusion with the announcement of a return to national Level 4 lockdown from 18 August 2021. The Group's first priority is to ensure the health and wellbeing of our employees and customers - protecting them from the virus itself and, in the case of employees, from the resulting threats to job and income security. As we had done in the previous Level 4 lockdown, we have again committed to continue paying our people in full. The financial impact of nationwide store closures, as we know from the previous national lockdown, is immediate and severe. However, we also know from the same experience that pent-up demand during lockdown drove strong consumer demand post-lockdown. The impact of the latest lockdown has again proved immediate for the Group with the final 2 weeks of August sales negatively impacted by around $17 million. Whilst the continued lockdown in Auckland will continue to have an impact on sales we are encouraged by the rest of the country moving down alert levels. Level 3 enables us to extend our product range from essential items only to our full range via online trading, and also to offer Click-and-Collect service. Level 2 enables our stores to re-open responsibly, ensuring we follow prescribed protocols in relation to social distancing and PPE. Our modelling assumes Auckland to be at Level 4 or 3 for the remainder of September, with the rest of the country at level 2 or 1. Under these assumptions we estimate September sales could be negatively impacted by around the same level as August. Clearly, the level of uncertainty around economic conditions has greatly increased since 18 August, and the degree to which consumer demand will rebound as different parts of the country move down alert levels is also not certain; however, from last year's experience we do expect pent-up demand to drive strong Group sales levels from October through to the end of the Group's financial year on 30 January 2022. If that is the case and New Zealand continues to progress without any further lockdowns or outbreaks, we currently expect to be able to produce a NPAT above last year's record of $73.2 million and up to $85 million. The Group's next planned market release will be shortly after its 3rd quarter which closes on 31 October 2021. Tuesday 14 September 2021 Contact for enquiries: Rod Duke Group Managing Director Tel: + 64 9 815 3737 End CA:00379098 For:BGP Type:HALFYR Time:2021-09-14 11:11:13