Release Date: February 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Beacon Lighting Group Ltd (ASX:BLX, Financial) achieved record sales for the first half of FY 2024, totaling $164.9 million, a slight increase of 0.1% over the previous year.
- Gross profit margin improved to 69.4%, up from 68% last year, despite increases in trade sales and foreign currency exchange rate movements.
- The company opened new stores in four locations and relocated one store, expanding its footprint and market reach.
- Trade sales in stores increased by 25.9%, demonstrating strong momentum and effective relationship-building with trade customers.
- Online sales recovered and increased by 17.6%, now representing 11.6% of store sales, with trade website sales increasing by 51%.
Negative Points
- EBITDA decreased by 3.7% to $46.4 million, and net profit after tax declined by 14.3% to $18.1 million compared to the previous year.
- Operating expenses grew by 6.2%, representing 41.5% of sales compared to 39.1% last year, driven by inflationary pressures and increased costs.
- Retail consumer sales were down, reflecting challenging market conditions and softening consumer confidence.
- Beacon Lighting International experienced flat sales for the first half, indicating slower growth in international markets.
- The company faced increased property outgoings, power costs, IT costs, and other government expenses, impacting overall profitability.
Q & A Highlights
Q: Congratulations on the results and congratulations, Ian, on the Order of Australia. First question, just around the Slide 16. I just wanted a clarification on the comment, the fourth bullet point, the total trade sales increased to 35% of all relevant trade sales. I didn't quite understand what that meant. Could you explain it for me, please?
A: Yes. Total trade sales review includes store sales through our stores, trade sales through our stores, our commercial business, Masson for Light and custom lighting who both businesses specialize in servicing interior designers and architects. So it's trade sales as a percentage of all those sales together. (David Speirs, CFO)
Q: And so in terms of the percentage of group sales that's generated by trade, what approximately is that ratio?
A: A bit less than the 35% we've got there. So the parts that aren't classed in those sales are Beacon International, connected light solutions, so they're not in there. (Glen Robinson, CEO)
Q: Okay. So somewhere between 30% and 35% is a fair estimate?
A: Yes. (Glen Robinson, CEO)
Q: Another clarification point with regard to the comparable store growth of 0.1%. And congratulations for achieving a positive result. But I'm just trying to work out what the offset is if you've had a slight increase in like-for-likes and positive online growth and new stores opening, what's the offset that group sales are flat?
A: The offset is we've had good trade growth. Is that what you're talking about, Alex, that you've got a 0.1% comp growth? You've had all these other divisions, they're growing quite well like trade and online, and they're all fit the store sales. That to us obviously means that there is one category within the stores that is down. And it's not hard to probably figure out that the retail consumer sales would be down compared to those other ones. (Glen Robinson, CEO)
Q: On the gross margin, really strong outcome in the gross margin. I just -- assume that given that there's been a shift in the sales mix with more trade as a proportion of group sales that the trade is lower margin. So that works against the gross margin. Yet, we still have 140 basis points improvement. So I'm just wondering, is that freight at lower factory costs? And to what extent can we consider this to be a sustainable margin for the second half and beyond?
A: Yes. We definitely had a freight benefit coming through compared to where we had freight costs in the previous year. So that has definitely helped. That's probably unlikely to continue to provide that benefit to remain low as a percentage of our imports. There might be a few little fluctuations here and there, but freight costs don't look like they're heading back to where they were during those COVID times. So that was a benefit. And then on the other side is the supply side. So yes, there are a lot of factories that we work with that have increased capacity, and therefore, they're reducing their prices as well. So I still see that the prices out of Asia are probably going to continue to be either flat or reducing for the year ahead. I think there's still a fair bit of pressure there, and they're looking to be able to boost their volumes by reducing prices. So I think we'll still continue to get that benefit. But you're right, as we continue to sell more and more trade products, we would expect that to put a little bit of pressure on the gross profit margins. (Glen Robinson, CEO)
Q: Good job on the results. I would like to ask if you can please talk on trade momentum trends. Double-digit marketing was market driven or you had some strong project pipeline going on and did it support momentum going forward for freight?
A: Yes. Good question. Thank you. So look, the trade momentum was fairly consistent throughout the first half. And I think when we have a look at our average sale price for trade customers, they're not massive projects that we're talking about. We're talking about mostly working with the smaller electrician that does work in domestic houses. So it doesn't get quite as skewed as some other businesses or industries where you see big projects coming through. There are just a lot of small projects going through, which is quite confident for us to work in that market. I think the progression that we've seen in trade has been multifactor. Obviously, marketing helps, but that's just one element. We've got to get the right product. We've got to work closely with our trade customers to build those relationships, help them understand the trade program, the trade loyalty program that we have and the benefits that we provide to them. And as we get more and more of that understanding and awareness across the business, we expect that to continue to grow because we asked to have a relatively small player in the trade market. It's becoming obviously quite an important part of Beacon Lighting being 35% of our relevant trade sales, relevant sales are now trade. So it is a very important part to us, but we are still a relatively small player and still plenty of opportunity for us to grow. (Glen Robinson, CEO)
Q: And also on your gross margin. Can you explain how was your Black Friday event? Did you promote less this year? Or also I just want to understand the driver of the margin. Was it the new product releases, you promoted less or it's the supply chain that you described because also on the freight side, it seems like it's increasing? I'm not sure if it will be negative input for you because of Red Sea issues. So if you can just describe more drivers of gross margin, that will help.
A: We are starting to see some slight increases in freight costs because of the issues in freight at the moment. But that's not -- no near as significant as what we have previously seen. So -- and then from a gross profit margin point of view, we are -- as I mentioned, we are still seeing price reductions coming out of Asia, which is beneficial. Yes, so I think there will be a balance of margin. We seem to be able to balance that margin reasonably well throughout the year, and we'll continue to try to do that. (Glen Robinson, CEO)
Q: First one for me. On the retail sales, just backing up like your Australian sales, excluding trade, that fell about 8% year-on-year. And if I look at that sort of dollar sales number, it's only up like 10% in the last 4 years. So there hasn't been a lot of total growth in trade. Should I read that as a positive in that once the macro recovers that segment of the business will be higher? Or is there something else that's driven at lower like cannibalization for example, from trade retailers -- like how do I think about
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
