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Edited Transcript of BLX.AX earnings conference call or presentation 20-Feb-20 12:01am GMT

Mulgrave Mar 19, 2020 (Thomson StreetEvents) — Edited Transcript of Beacon Lighting Group Ltd earnings conference call or presentation Thursday, February 20, 2020 at 12:01:00am GMT

Avoca Investment Management Pty Ltd. – CIO and Portfolio Manager

Good morning, everyone, and welcome to the Beacon Lighting Group Financial Year 2020 Results Presentation for the 26 weeks ended December 2019. (Operator Instructions) For opening remarks, I would like to turn the conference over to the Beacon Lighting Group Chairman, Mr. Ian Robinson. Please go ahead, Ian.

Thank you very much, Claire. Good morning all. As the Executive Chairman of the company, I’d like to welcome you to the Beacon Lighting Group results presentation. Today, the teleconference now is with our Chief Executive Officer, Glen Robinson; and our Chief Financial Officer, David Speirs.

This morning, we’ll be discussing the results for the first half of the financial year 2020 ending the 29th of December 2019. The results presentation was filed this morning on the ASX and on our corporate website. The presentation will take approximately 30 minutes, followed by time for questions.

Last year saw the business grow modestly in a relatively difficult trading conditions, and as we came into the year, retail trading conditions improved slightly yet are still inconsistent week to week. Whilst the current trading conditions are not exciting, it might suggest that the start to the recovery in housing, which, in time, should benefit the business. With more positivity in the market around house prices, credit availability, we expect the retail side of the business to continue to grow its market share.

The emerging businesses throughout the half were not as much [consistent] in growing profitability, which is occasionally the nature of small and immature businesses. We’d expect that they would be more supportive to the profit in the second half.

During the half, it was — we made the difficult decision to shut down the Beacon Energy Solutions business. The division had a focus on commercial-size solar systems and energy efficiency. Beacon Energy Solutions helped us become a leader in energy efficiency, and therein, installations will deliver continued benefits into the future. The division was developed in 2009 and operated in exciting and in a rewarding industry. Unfortunately, due to margin compression, the business is no longer viable.

During the year, the group also started to sell the distribution center in Parkinson in Queensland. After holding the property for only a short period of time, the offer fo7r a sale and a leaseback of the property presented a good opportunity for the business to reduce its net debt from $32 million to $7.7 million and recognize a cash profit of $13.5 million.

Page 2 of the presentation outlines what we’ll be discussing today with Glen, our CEO, and taking us through the results over the year; followed by David, our CFO, presenting the financial results, cash flow, balance sheet. We’ll pass back to Glen for growth strategy and outlook. After, I will direct any questions you may have.

I’ll now hand you over to Glen to discuss the results overview.

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [3]

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Thank you, Ian, and welcome, shareholders. I’d like to start on Page 4 and review the key results for the first half financial year 2020. The group was able to achieve a statutory net profit after tax result of $12.7 million, an increase over the corresponding period of 8.7%. The statutory profit result was assisted by the sale of the Queensland distribution center for a cash flow profit before tax of $13.5 million and an accounting net profit after tax of $5.44 million. The statutory profit was reduced by the closure of Beacon Energy Solutions to the value of $2.3 million and a slight gain on the new lease accounting standards of $496,000.

The underlying results for the half when excluding the sale of the distribution center, the closure of Beacon Energy Solutions and the changes to the lease accounting standards resulted in a net profit after tax of $9 million compared with a net profit after tax of $11.5 million for the first half of financial year ’19. This was a decrease on the corresponding half of 21.6%.

Group underlying sales results were only marginally up on last year, reflecting the conservative store expansion during relatively difficult retail conditions over the past 18 months, with slower growth than we would expect at our emerging businesses. It was pleasing to see that Beacon Lighting retail stores were able to achieve modest increase in sales along with e-commerce sales, roadway lighting business and Beacon International.

During the half, the group acquired the franchise-operated store in Myaree in WA. The group also acquired the Custom Lighting store in Malvern, Victoria, which services the premium end of the residential market.

As Ian mentioned, we announced the closure of Beacon Energy Solutions business with most of the costs associated with the closure hitting the expenses in the first half. It was a decision the group was disappointed to make. However, the margins associated in that business could no longer sustainably support the operation.

The group has declared a fully franked dividend of $0.026 per share, which is up on the first half financial year ’19 dividend of $0.0255. While the conditions were inconsistent during the half, we’ve had a focus on cost control, gross profit margins in readjusting to the new lower Australian dollar to the U.S. dollar. We continue to strengthen our marketing presence with further investment in advertising and release of many new and innovative products. We said that the hard work that we have done throughout the first half will position the business well as we see an improvement in housing conditions.

The statutory results for the group are — for the first half financial year ’20 on Page 5 are as follows. There is also further information in the appendix of the presentation for the reconciliation between the statutory results and the underlying results. Sales for the year decreased from $128.3 million to $123.6 million, a decrease of $4.6 million or 3.7%, reflecting the closure of Beacon Energy Solutions and modest growth in other areas of the business.

Gross profit dollars were down on last year from $83.2 million to $77.5 million, a $5.7 million reduction with margin reducing from 64.9% to 62.7%. GP margin was considerably affected by the closure of Beacon Energy Solutions with the completion of jobs with very little or no GP margin. And in addition, the devaluation of the Australian dollar to the U.S. dollar and subsequent rising cost of goods in the retail supply chain.

Other income increased substantially, which is against previous year’s record — trends, greatly impacted by the sale and leaseback of the Parkinson DC of $7.78 million with total other income coming in at $8.4 million. Operating expenses, EBITDA and EBIT have been impacted by the new lease accounting standards and are therefore not comparable to prior corresponding periods.

The group was able to achieve a net profit after tax of $12.6 million, an improvement of $1 million over the corresponding half or 8.7% increase. Net profit after-tax margin came in at 10.2% of sales versus 9.1% for the corresponding half last year.

On Page 6, we will discuss the underlying result, which is a more meaningful comparison to last year from a trading perspective. This compares the first half in financial year ’19 and the first half of ’20 results, excluding sale and leaseback of the Parkinson DC, the close of Beacon Energy Solutions and the new accounting lease standards. For the purpose of the remainder of this presentation, we will refer to the underlying results.

Underlying sales had a modest improvement over last year of 0.3% to $123.1 million for the half. Gross profit, albeit down on last year, was still strong for retail and wholesale business at 64.7%. This was a reduction from last year’s margin of $66.7 million, which were significantly benefited by the Aussie dollar to U.S. dollar compared to where the Aussie dollar is now. Other income was down on last year at $581,000 versus $816 million.

Operating expenses were well managed despite the modest growth in sales coming in at only a 0.9% increase on last year and as a percentage of sales, at 51.8% versus last year at 51.4%. EBITDA reduced in the half from $19.5 million to $16.5 million, a 15.8% reduction. Net profit after tax reduced from $11.5 million to $9 million, a 21.6% reduction, which is reflective of the modest sales growth and tighter gross profit margins compared with the previous half.

I will now hand you over to David Speirs, our CFO, to take you through further details on the financial results.

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David Speirs, Beacon Lighting Group Limited – CFO [4]

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Thank you, Glen. Sales on Page 8. The Beacon Lighting Group achieved an underlying sales result of $123.1 million, which was an increase of 0.3% compared to half 1 financial year 2019. Sales continued to be inconsistent on a week-to-week and month-to-month basis. There was a modest increase in total company store sales, while company store comparative sales decreased by 1.9%. After years of subdued sales, a recovery in market conditions has seen Western Australia become the best performed state for the Beacon Lighting Group. New South Wales stores also achieved a solid sales result.

Sales declined for the emerging businesses overall, but encouragingly, record sales were achieved for Light Source Solutions Roadway and Beacon International. Sales across all online sales channels continue to grow strongly.

Gross profit. The Beacon Lighting gross profit achieved an underlying gross profit margin of 64.7% of sales or $79.6 million gross profit dollars. Gross profit margin remained strong but has declined in half 1 financial year 2020 due to movements in the Australian dollar. With the vertical integration from factory to customer, continued innovation and product development provide opportunities to manage margins going forward.

Operating expenses on Page 10. The Beacon Lighting Group’s underlying other sales of $0.6 million decreased from $28.8 million as a result of franchise stores being purchased and converted into company stores. The Beacon Lighting Group underlying operating expenses continued to be well managed across all expense types and increased by only 0.9%. Operating expenses as a percentage of sales increased by 0.4% to 51.8% in half 1 2020 from 51.4% in half 1 2019.

Cash flow. Beacon Lighting Group cash flow has been supported by the sale of the Parkinson distribution center in Queensland. Throughout half 1 financial year 2020, Beacon Lighting has continued to invest in inventory, which has only in part been funded by an increase in borrowings. Beacon Lighting has made some important acquisitions with the purchase of the Myaree franchise Beacon Lighting store in Western Australia and the purchase of the premium lighting design store called Custom Lighting in Malvern in Victoria.

The group also purchased a new factory facility for Masson Manufacturing at Epping in Victoria. The dividend payment of $3.3 million continues to be supported by the dividend reinvestment program.

Balance sheet on Page 12. At the end of December 2019, the Beacon Lighting Group maintained a very strong cash position of $32.8 million. Net debt has reduced to $7.7 million as a result of this strong cash position. Receivables have declined due to the process of closing down Beacon Energy Solutions. Inventories have increased due to flat sales and currency-driven inflation in inventory. Current borrowings have increased in part to fund the increase in inventory.

AASB 16 lease accounting balances for right-of-use asset and lease liabilities have been included in the balance sheet for the first time.

Thank you. I will now pass you back to Glen.

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [5]

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Thanks, David. If we move on to Page 14, we’ll review our core growth strategies starting with brand and customer. The group has a dominant position in the retail residential lighting category with a focus on further growing our position by offering our customers the largest range of fashionable and technically advanced lighting and fan products, offering not only the latest, but also the best-value lighting coupled with expert lighting design and advice.

Our VIP customer base continues to grow, now exceeding 500,000 members and 32,000 Trade Club members. We offer convenience to our customers with 111 stores, 28 design studios, 5 commercial offices and online shopping, so our customers can shop Beacon Lighting products however they like, whenever they like.

Online and social media continues to be a very important growth opportunity for the group. During the half, online sales grew by 22% and made up 6.5% of retail sales versus 5.4% of sales for the corresponding half. The group also expanded our sales of product ranges through online platforms in the U.S., Europe and other international markets. In Australia, we launched Emarsys, a new digital tool to help the business communicate more personally to our customers online.

New product ranges on Page 15. Beacon Lighting will continue to inspire our customers within Australia and in new markets internationally with the most progressive and innovative range of lighting anywhere in the world. The group designed and developed 267 new and exclusive items during the half. The group launched the new Mammoth Fan range, which is targeted to commercial and industrial space cooling solutions. We also launched our new Masson for Light LED strip lighting, which allows our customers to get LED strip lighting manufactured to the exact length required for their specific application.

The group also released new models in our patented Fanaway ceiling fan, which has had a good response from our customers. The year ahead, we’ll see a continued push into more smart lighting, including voice-controlled lighting.

New store rollout. The group has opened new stores in Warrnambool, McKay, Moore Park, Modbury and Craigieburn in the past 18 months. Market research still suggests there are further sites for expansion, and the business will cautiously evaluate those opportunities when the sites become available.

Store optimization. With a great network of stores and commercial outlets, we are always looking for ways to improve sales and profitability of the network. The group had a relatively long maturity cycle in stores, so the current immature stores should grow in sales and profit — productivity over the coming years.

During the half, the group shut the Mandurah, WA store and Sunshine store in Victoria. The group continues to invest in refurbishments of its stores to ensure an exciting bricks-and-mortar shopping experience for our customers. And some of the notable additions have been our design studios in 28 stores, smart lighting displays, Masson for Light strip lighting displays, new innovative downlight displays and LCD screens for advertising of promotions and new products.

Now on Page 16, we’ll discuss our 5 emerging businesses. We see these as key growth opportunities for the years ahead, and they help diversify the group into other sales channels and markets. The results were mixed in the first half with record sales being set in Light Source Solutions Roadway and Beacon International, and poor results in Light Source Solutions Globes and Masson for Light, which is against their previous trends. Custom Lighting is the newest business to be added to the group.

We believe Beacon International and Light Source Solutions Roadway both have good prospects to be bigger businesses in the medium term. And we have supported their growth with further investment into stock and product development along with the opening of a new wholesale showroom in Dallas, U.S.A. for Beacon International. The group also purchased a new property in Epping, Victoria [and fitted it out with] (inaudible) for Light branded products, cementing our commitment to bespoke architectural lighting design and manufacturing in Australia.

New business opportunities. The Parkinson distribution center was sold and leased back for an initial term of 8 years with an attractive profit to the group. The group purchased the Myaree franchise store and converted it to a company store, leaving only 3 franchise stores now in the network.

During the half, the group purchased Custom Lighting, which has been operating in the affluent suburbs in the Inner East of Melbourne for over 45 years. The group will maintain the DNA of this business with stability from the existing Custom Lighting team and exciting new architecturally designed showroom due to open in June this year within close proximity to the current site. This new showroom will showcase exclusive lighting curated from suppliers in Italy, Spain, Germany, The Netherlands and the U.S. The Group will continue to review both business and property acquisition opportunities throughout the year.

On Page 18, we can review the current outlook for the Beacon Lighting Group. Company store comparative sales for the first 7 weeks have had a modest improvement compared with the first half of financial year 2020. The company store in Virginia, Queensland is currently under construction and will open towards the later part of the half. A heritage-listed site has been secured for the new concept showroom for Custom Lighting in Malvern. With the showroom design progressing well, this should open towards the later part of the half as well.

The group has significantly progressed in replatforming our e-commerce sites, which, once launched, will enhance the customer experience online. The coronavirus may affect product supply coming out of China, which may also drive price increases from factories as they struggle to get materials. However, the group is currently in a strong in-stock position compared to last year and is relatively well placed to work through the disruptions.

The closure of Beacon Energy Solutions business will allow management and capital resources to be deployed into more profitable areas of the business. The group continues to have a significant focus on product development to support the different businesses and excite our diverse customer base. There are many exciting new products, which will be hitting the stores, commercial and emerging businesses over the second half.

Thank you all for your time and interest in Beacon Lighting, and I’ll pass you back to Ian Robinson, our Executive Chairman, to direct any questions.

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Ian Robinson, Beacon Lighting Group Limited – Executive Chairman [6]

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Thank you, Glen, for the presentation, and we’ll now open for questions. Do we — ladies and gentlemen, do we have any questions, please?

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Questions and Answers

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Operator [1]

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(Operator Instructions) At this stage, we don’t have any questions, Ian.

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Ian Robinson, Beacon Lighting Group Limited – Executive Chairman [2]

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We might just wait.

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [3]

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A few seconds. Here we go.

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Ian Robinson, Beacon Lighting Group Limited – Executive Chairman [4]

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Sounds like a busy period for — locally.

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Operator [5]

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Okay. We do have a question. We have Robert Bruce from Acorn Capital.

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Robert Bruce, Acorn Capital Limited – Head of Research & Portfolio Manager [6]

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Just on the inventory availability in terms of what you have in stock on the water, et cetera, could you give me some sort of feel as to what sort of coverage levels you have and where — when and where you might see potential risk? Is it sort of May, June time or later in the year depending on the impact on the supply chain?

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [7]

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Yes. Thanks, Robert. We usually have around about 8 months’ worth of stock in the system at any time, and at the moment, we’ve probably got an extra sort of buffer, probably 2 months on top of that. Now that’s not to say that we won’t run out of some stock items throughout — over the next few months, but I guess the benefit of our business is that our sales associates are very aware of what stock we do have and what we don’t have. And 3,500 SKUs within the business, they’re able to cross-sell into other lines.

So that’s why I’ll probably say that — without knowing exactly who has what stock from our competitors, I’ll probably say we’re in probably a bit of in-stock position to ride through this issue at the moment. Of course, the biggest concern is we don’t know how long it’s going to go on for. So — right at the moment, we’re pretty comfortable we’ll be able to easily get through this financial year. There might be some pockets of out of stock, but it depends on how far it stretches on.

We’re in communication with the factories daily, and some of the factories are now back up and running. For instance, our ceiling fan factories are back up and operating, albeit at probably a lesser rate than what they usually would by this time of the year. So that’s sort of where we are at the moment. It changes every day.

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Ian Robinson, Beacon Lighting Group Limited – Executive Chairman [8]

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We’re currently — Ian Robinson talking here. We’re currently ordering for July, August deliveries. So that gives you an indication of where the fix will eventually be felt if we didn’t receive additional deliveries between now and then.

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [9]

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Yes. What usually happens as well — it’s something — it’s a terrible event that’s happening up in China, but we usually have to get all our stock in before Chinese New Year. So that’s why we typically have a big stock build in November, December and January because we have to land all the products before Chinese New Year even though, let’s say, for our winter catalog, which comes out in May, we actually bring that product in before Chinese New Year’s commences. So we’ve got all that stock sitting in the warehouse for a campaign for May all ready to go. So we’ve got all our stock in. It was still stock on the water. The deliveries, as we speak at the moment, will obviously start to slow down because that’s the normal Chinese New Year period. And as I said, some of the factories are starting to get back up and operating now.

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Robert Bruce, Acorn Capital Limited – Head of Research & Portfolio Manager [10]

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Right. And the extra buffer, is that just because sales, unfortunately, were a bit slow in the back half of last year? Or was it coming around Chinese New Year that changed?

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [11]

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Yes. If you ask the buyers, they said, it was well planned. But no, you’re right. It was more about a lower number of sales. I think we probably anticipated sales starting to pick up a bit stronger than what they did, and we are back the stock.

It’s been a pretty unsettled period, particularly for some of our categories like ceiling fans and exteriors, where there has been disruptions in whether fire, smoke around, all that sort of stuff. Down here in Victoria it’s been — you’ve had very infrequent hot days. So you might get 1 or 2 hot days, and then it goes cold again like it is at the moment. So our ceiling fan sales in Victoria, South Australia haven’t been as exciting as what they have been in New South Wales and Queensland and WA.

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Robert Bruce, Acorn Capital Limited – Head of Research & Portfolio Manager [12]

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Right. Okay. Just on the — sorry to take it up, but there weren’t any other questions. But just on the performance in the half, it seems like it was very lumpy. I think you had a — some sort of timing issue that impacted like-for-like sales in July and then it sort of around the — before the AGM and the Morgans conference seems like things had turned positive. And then did you suffer again into the closing part of the year? Can you sort of run through that period and what sort of trends were evident, if any, or just lumpiness?

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [13]

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You’ve pretty much hit the nail on the head there. We started off poorly, and that was really around the timing of the month from the end of financial year last year versus how the year finished out on the previous year. So that was our worst month being July from a comparative point of view. August and September continued through pretty well, and that’s when we came up through to the AGM and probably gave us a fair bit of confidence through the AGM. October was reasonable. November was pretty good, and December was not so great. So the December result, not as bad as what July was, but you’re right. So the start of the half and the end of the half were not really what we were hoping for.

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Ian Robinson, Beacon Lighting Group Limited – Executive Chairman [14]

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Yes. I think the November results were certainly supported by the Black Friday events and Cyber Monday, and they kind of drew some of the sales in from December into November.

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Robert Bruce, Acorn Capital Limited – Head of Research & Portfolio Manager [15]

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Yes. Right. Okay. Okay. And so your comments on it, you sort of just, January, February, following on from December in terms of still reasonably tough but not as bad but — not having the July impact there? Or is it closer to flat like-for-like sales?

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [16]

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Yes. We’re closer to flat. So we’re saying it’s not as bad as what we had for the first half, which was negative 1.9. And for the first (inaudible), we’ve seen the improvement over that, not quite positive but getting closer to it.

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Operator [17]

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We now have another question from Andrew Perks from Accordius.

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Andrew Perks, [18]

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Just quickly, on Custom Lighting, is that — will that be rebranded as a Beacon Lighting store?

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [19]

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No, no, it won’t. No, we’ll be maintaining that brand DNA, Custom Lighting. That definitely services a different market to what Beacon Lighting does.

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Andrew Perks, [20]

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Okay. And is that the only store that you have that’s — a lighting store that’s not branded as Beacon Lighting?

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [21]

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No, we’ve also got Masson for Light in Richmond.

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Ian Robinson, Beacon Lighting Group Limited – Executive Chairman [22]

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And we run the GE brand through the street lighting business and the globe business. So we do cut across a lot of the lighting category through our brands because Beacon Lighting will have — only ever be able to achieve a certain percentage of the lighting category. But if we spread them through a number of different brands, we’ll get a bigger share of the lighting category.

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Andrew Perks, [23]

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Okay. And if that works within Sydney, Brisbane, does that become markets for bespoke brands as well?

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [24]

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That’s correct. That’s what the intention would be, yes.

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Operator [25]

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Now we have Jo Little from Morgan.

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Josephine Little, Morgans Financial Limited, Research Division – Senior Analyst [26]

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Just a question just on the price increases late last half. Can we get a bit of an idea of percentage terms, how big that was and just to get the difference — the delta in the comp improvement, if it was all price or more than that?

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [27]

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Yes. Well, as we sort of mentioned in the cost of goods, you’ve got some inflation coming through there because of the Aussie dollar. So we have had to push that onto higher prices and renegotiating in all the rest. You’re not talking about the complete difference that we had sort of between the Aussie dollar to the U.S. dollar, the reduction there. But it was still a high single-digit number in the average unit price increase.

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Josephine Little, Morgans Financial Limited, Research Division – Senior Analyst [28]

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Okay. And just as a team, just keen to understand, just getting the housing market backdrop, and it feels like the whole category, including furniture and everything, is — you’re not losing share at all, in decline at the moment. But looking forward, just (inaudible) for the key drivers of — from a market perspective in terms of renovation debt for [older] versus new build versus churn, just order of importance maybe and how you’re seeing that.

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [29]

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Yes. I think we can reflect back on, say, the 2015 year where we had our best sales period with double-digit comp gains, and that’s where the environment was very much about high auction clearance rates that helps, but high retail price — sorry, residential prices on homes and also good churn rate. And that gives people a lot of confidence to go and invest in their house, and that’s definitely what we saw during that period. And what we’re starting to see now is the recovery in WA. That sort of gives us a fair bit of confidence.

You see WA now with good comp numbers for the first half of this year, and they are definitely feeling a bit more upbeat about housing over there, and we’ve had a good recovery. So New South Wales is starting to see a bit of recovery, we believe, we can see from our numbers but unfortunately, still Victoria and South Australia are a bit softer in Queensland coming through reasonably well and has been relatively consistent. So it’s really around just housing. Most of our customers are — probably 65% are in the renovation market, but they’re not going to renovate if they feel like their house prices are reducing. So that’s the issue we probably had over the last 18 months, and we hope, over the coming 6 to 12 months, we’ll start to see a better recovery there.

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Josephine Little, Morgans Financial Limited, Research Division – Senior Analyst [30]

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Okay. And just lastly just on the international business, maybe just a little bit more color on what occurred in the first half, just a little bit of lumpiness there, which I imagine just part and parcel with this business. And how do you expect to return to growth from here?

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [31]

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Well, the international business did have sales growth. So they were doing okay from a sales perspective, but they have been expanding. We’ve been investing in people, product development and the new showroom in Dallas for the international business plus setting up companies in China. So you’ve got legal costs and all the other things associated with building a small business, at the same time, when our royalty income on our patents coming out of China were reducing in that international business. So the top line sales continue to improve, but our costs were expanding at a greater rate, and we weren’t getting that additional royalty income to the same extent as what we had last year.

So that’s really where that business is at. I think the underlying performance of that business is still exciting for us. It wasn’t growing as quickly as what it had in the previous year, but we’re coming into the summer season deliveries now for the Northern Hemisphere. And just being cautious a little bit about what happens with the coronavirus and getting the stock out to our customers, they should still have a relatively good second half.

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Josephine Little, Morgans Financial Limited, Research Division – Senior Analyst [32]

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Okay. Wonderful. I might just sneak one last one in if that’s okay. Just looking into the second half, we’re obviously cycling a pretty weak base. Just assuming maybe volume recovery doesn’t occur, though, and you do get price improving comps, if volume’s not [there], how do you think you’re going to play the promotional campaign this year? Will you hold off and run it more for GP dollars? Or just given what happened last half, how should we think about that?

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [33]

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Look, I mean the promotional campaign’s already fairly well thought out for the second half. We do have our typical Click Frenzy promotion coming up, and we have our Easter promotion, which is a big, big period for home renovators over the Easter school holidays. So we’ll be hitting the promotions pretty hard during that time, but there won’t be anything additional added in there compared to what we had last year. So it’s a fairly consistent advertising campaign to what we had last year.

I don’t think we’re going to need to have to pull that promotional lever any harder. We’re in a pretty dominant position from a business point of view in the category, so I think we can probably hold our prices reasonably well. And that would be the ideal outcome, is that we hold our prices, keep the margin up and start to recover some of that — those GP dollars that we lost from the first half.

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Operator [34]

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We now have Jeremy Bendeich from Avoca Investment Management.

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Jeremy Bendeich, Avoca Investment Management Pty Ltd. – CIO and Portfolio Manager [35]

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Just on the emerging businesses, can you give us an idea of how much capital is invested in those businesses, maybe how much you intend to invest further in them and what sort of levels of profitability they’re at?

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [36]

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Certainly have a — the biggest investment we’ve got in those businesses relates to stock, and I think probably going forward, I think they’re relatively well positioned for stock holdings. So I don’t think we’d be expecting to have a greater investment in inventory in those businesses.

In terms of the profitability, emerging businesses, they can have some really good half results, and they can have some slightly disappointing half results. So it’s a little bit mixed. Certainly, it’s not been as strong in the first half this year as we would have expected, but we’re hoping for an improved performance in the second half.

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Jeremy Bendeich, Avoca Investment Management Pty Ltd. – CIO and Portfolio Manager [37]

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And on that — those comp store sales in the first 7 weeks, did you see any discernible difference once the bushfires had settled down around about the end of January?

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [38]

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Yes. Well, they were…

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Ian Robinson, Beacon Lighting Group Limited – Executive Chairman [39]

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I think you can answer that part. But we’ll — we probably had a lot of rain through Victoria, which hasn’t helped our cooling product lines.

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [40]

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And New South Wales had a lot of rain and flooding.

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Ian Robinson, Beacon Lighting Group Limited – Executive Chairman [41]

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(inaudible) but overall, you would say that some of those things being out of the way, I think we performed pretty well in the current condition considering we’ve all had floods and rains and the coronavirus. So the business has performed. We think we’ve done a pretty good job.

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [42]

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If we look at the sales of ceiling fans for January, just as one category, we were down on last year. It wasn’t as exciting as what we were hoping for, and that’s probably, well, no doubt because of the weather. We had a couple of hot days, but very, very wet conditions, particularly to the later part of January. So ceiling fans were down, but the other categories actually picked up. So unfortunately, they didn’t all come together at the same time, and if they did, then I think we would have had a much better result for the 7 weeks. But that’s sort of the category that we’re in. If it’s not really that hot, you’re not going to sell that many ceiling fans. And we saw that in (inaudible).

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Ian Robinson, Beacon Lighting Group Limited – Executive Chairman [43]

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And considering all the events that happened, we think it was a good result that we got for January and the early part of February. So…

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [44]

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It’s definitely disrupted.

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Ian Robinson, Beacon Lighting Group Limited – Executive Chairman [45]

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There is a little bit more positive momentum there [that were affecting the sales].

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Operator [46]

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We have a question now from Ross Cochrane from [Dimension Express]. Okay, Ross may have dropped off. Are you there, Ross?

Okay. Well, we’ve got our last question from [Victor Babo]. He’s a private investor.

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Unidentified Participant, [47]

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Just looking to the future. Given that you’ve got a national footprint of stores, the stores have car parks and you have energy expertise. Have you looked at or is there a possible opportunity in offering charging services for electric cars?

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [48]

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We have looked at it, and we do have one Tesla charging system actually at our distribution center. We would have to evaluate whether that’s going to bring in additional benefit to the business by having that service. I think in time, it’s probably going to be given that there’s going to be more EV cars out on the road, and customers will probably expect that they’re able to charge their car as they’re shopping at a Beacon Lighting Store. We’ve got solar systems on 55 of our retail sites now, which generate a good amount of solar. We couldn’t get it on the entire 111 sites, which we wanted to, because we don’t own the sites, and some of the landlords are a bit protective about their roof space and letting us put solar on top of it.

So we’ve gone a fair way down the efficiency path, and I think it’s probably just a matter of time before we’re able to offer that other solution for EV in our car parks in the future. We also — yes, we work with our landlords being some of the larger ones like Aventus and Primewest. And I’m sure that is — I know that is actually on their radar as well for the future to be able to provide those services.

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Unidentified Participant, [49]

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Okay. That sounds promising. What I’m thinking of is, of course, Tesla gets the publicity, but there’s a developing gray market in secondhand, I understand, LEAFs and other international cars being imported. And I’ve just bought one myself, so I’m looking at possible charging stations. So that may be another area of potential growth. Well, it will be.

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [50]

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Yes. It will be, I’m sure.

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Ian Robinson, Beacon Lighting Group Limited – Executive Chairman [51]

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Definitely agree.

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Operator [52]

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That was our final question for you, Ian.

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Ian Robinson, Beacon Lighting Group Limited – Executive Chairman [53]

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Okay. Thank you, everyone. Appreciate your interest in Beacon Lighting.

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Glen Robinson, Beacon Lighting Group Limited – CEO & Director [54]

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Yes. Thanks all.

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Ian Robinson, Beacon Lighting Group Limited – Executive Chairman [55]

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Goodbye.

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Operator [56]

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Thank you, and on behalf of Beacon Lighting, we would like you to hang up the phone now and have a lovely day. Thank you. Bye.

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