BEACON LIGHTING GROUP LIMITED — Annual Report 2016

Aug 17, 2016

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Results Announcement

18[th] August 2016

Beacon Lighting Group - FY2016 Sales and Profit Result

Result Summary

• Sales up 7.7% to $193.2m

• Statutory gross profit dollars increased by 7.0%

  • Underlying gross profit dollars increased by 6.4%

• Operating expenses reduced as a percentage of sales by 0.9%

• Statutory EBITDA up 9.1% to $29.9m

  • Underlying EBITDA up 6.5% to $29.2m

• Statutory NPAT up 8.0% to $18.3m

  • Underlying NPAT up 5.1% to $17.8m

• Annual fully franked dividend up 11.9% to 4.7 cents per share

$'000	StatutoryFY2015	StatutoryFY2016	UnderlyingFY2016(1)	$ Inc / Decon FY2015(2)	% Inc / Decon FY2015(2)
SalesGross ProfitOther IncomeOperating Expenses (3)EBITDAEBITNet Profit After Tax	179,386116,0413,949(92,595)27,39525,04216,939	193,179124,1943,647(97,965)29,87627,33018,298	193,179123,4833,647(97,965)29,16526,61917,800	13,7937,442(302)(5,370)1,7701,577861	7.7%6.4%(7.6%)5.8%6.5%6.3%5.1%

(1) Refer to Appendix One for a reconciliation of the FY2016 statutory and FY2016 underlying profits

(2) Increase or decrease $ and % by comparing underlying FY2016 result to the statutory FY2015 result

(3) Operating expenses excludes interest, depreciation and amortisation

Result Commentary

Beacon Lighting Group Limited (the “Group”) (ASX:BLX) is pleased to release the sales and profit result for the 52 weeks ending 26[th] June 2016. The Group was again able to achieve record sales and profits for the year, with growth in sales of 7.7% and underlying Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) of 6.5%.

FY2016 saw sales increase by $13.8 million to $193.2 million, with Company store comparative sales increasing by 2.7% over FY2015. The strongest result coming from New South Wales, along with solid sales growth coming from the Commercial, Beacon International and Online businesses.

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The underlying gross profit dollars increased by 6.4% over FY2015 with a gross profit margin of 63.9%. The strong gross profit margin was achieved as a result of new product releases, price management, stock management and favourable foreign exchange position at the start of FY2016. Through effective management of expenses, Beacon Lighting was able to deliver productivity gains and reduce operating expenses by 0.9% of sales when compared to FY2015.

Through a combination of sales and gross profit dollar growth, along with expense productivity gains, Beacon Lighting has been able to increase the underlying Net Profit After Tax (NPAT) result by 5.1% to $17.8 million.

Beacon Lighting has continued to reinvest in the business through new stores, the purchase of franchised stores and the introduction of the new Light Source Solutions GE globe distribution business. The Group has invested in additional stock and debtors to support business growth, which is partially funded by borrowings, whilst still maintaining a conservative Balance Sheet. A fully franked dividend of 2.3 cents per share was paid for H1 FY2016 with the Directors now also declaring a fully franked dividend of 2.4 cents per share for H2 FY2016. This brings the annual fully franked dividend for FY2016 to 4.7 cents per share, an increase of 11.9% on FY2015.

Business Growth

During FY2016, Beacon Lighting opened five new company stores at Bundall (QLD), Maribyrnong (VIC), Gungahlin (ACT), Fairfield Waters (QLD) and Preston (VIC). In H1 FY2016, Beacon Lighting also purchased the Essendon (VIC) and Watergardens (VIC) franchised stores. By the end of FY2016, Beacon Lighting had a total of 96 stores, including 85 company stores and 11 franchised stores. Beacon Lighting also established Light Source Solutions, the GE globe distribution business, in both Australia and New Zealand in H1 FY2016.

Outlook

Beacon Lighting will remain focused on its store rollout strategy, targeting the opening of approximately six new company stores for the year. Work will continue on improving the performance of the existing store network and commercial divisions. The business aims to be the first to market with the design and development of the latest fashion and technologically advanced products for our customers. To complement the drive for innovative products, Beacon Lighting plans to introduce a new lighting design software program which will provide our customers with professional lighting design plans for their home.

The Group will continue to grow and enhance its online sales and social media presence in Australia and internationally. Beacon Lighting also looks forward to achieving good growth through its emerging businesses in new sales channels.

With the key growth strategies in place, the Beacon Lighting team looks forward to delivering another record sales and profit year in FY2017.

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Appendix One: FY2016 Statutory and Underlying Profit Reconciliation

During FY2016, the Beacon Lighting Group implemented a new inventory valuation system and conducted a review of the supply chain costs to be capitalised into inventory. Effective 26[th] June 2016, the effect of this change in estimate was to increase inventory and gross profit by $711,249.

$'000	StatutoryProfitFY2016	UnderlyingProfitAdjustments	UnderlyingProfitFY2016
SalesGross ProfitGross Profit %EBITDAEBITDA %Net Profit After TaxNPAT %	193,179124,19464.3%29,87615.5%18,2989.5%	(711)(711)(498)	193,179123,48363.9%29,16515.1%17,8009.2%

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