23 Nov

Annual General Meeting - Chair and CEO Addresses

Page 1 of 1 Best & Less Group Holdings Ltd ( A.B.N 76 642 843 221 ) PO BOX 85 Westgate NSW 2048 Australia 657-673 Parramatta Rd, Leichhardt NSW 2040 Australia ASX Announcement 23 November 2021 Annual General Meeting – Chair and CEO Addresses Best & Less Group Holdings Limited (BLG or the Company) (ASX:BST) attaches the Chair and CEO Addresses to be given at BLG’s Annual General Meeting today which will be held online commencing at 3:00pm. ENDS This announcement was authorised for release by the Board of Best & Less Group Holdings Limited. For further information: Ryan Thompson +61 423 151 378 investor@bestandlessgroup.com.au About Best & Less Group: Best & Less Group (BLG) is a leading value apparel specialty retailer with an omnichannel sales network comprising 245 physical stores and a fast-growing online platform. BLG’s aim is to be the number one choice for mums and families buying baby and kids’ value apparel in Australia and New Zealand through its two trusted brands: Best & Less (in Australia) and Postie (in New Zealand). For more information, visit BLG’s investor website at www.bestandlessgroup.com.au Best & Less Group Holdings Limited 20 21 AGM Chair’s address BLGH is a leading value apparel speciality retailer. Our ambition is to be the number one choice for families buying baby and kids’ apparel at a value price point, and we plan to do this by leveraging our value proposition of delivering ‘twice the quality at half the price’. We operate a vertical retail model, with 86% of sales generated from our proprietary brands which are designed in-house, sourced directly from manufacturers, distributed via our supply chain, and sold exclusively across our network of 245 profitable stores and our fast-growing online channel. We pride ourselves on having a deep knowledge of, and close relationship with our target customers – value conscious families. By combining this with our large sales volumes and deep retail sector experience, we can provide an extensive range of high quality, attractively priced products to meet the needs of a growing family. We believe that nobody in the Australia and New Zealand market does this better than us. As well as being closer to our customer, we believe that a number of structural market growth drivers will deliver significant benefits to BLGH over the long-term. These include the growth of the value apparel segment, the rising number of households with children, increased online adoption and a general shift to value and trusted brands accelerated by COVID-19. The Australian and New Zealand clothing and footwear market is forecast to grow from $27 billion in 2020 to $32 billion by 2024 1 , with the growth of the value segment – already worth $6.3 billion – outpacing the wider market. We believe that our unique value proposition and volume capability positions us well to take share from both value retailers and speciality retailers in this large and growing market. Every one of the circa 350,000 babies born in Australia and New Zealand each year is a potential new customer for BLGH’s product, contributing to the strong growth in our baby category. This category also underpins our customer acquisition engine, creating a halo effect on sales in our other categories. As babies grow into kids, we can continue to provide them with clothes, extending customer lifetime value and opening opportunities to sell womenswear, menswear and accessories to their broader families. The shift to online purchasing will also benefit us as customer preferences change and we continue to enhance our omnichannel offer and fulfilment capabilities to take more than our share of the significant online opportunity. Additionally, we are well positioned to benefit from the general migration to value that has been accelerated by COVID-19, as economic uncertainty drives consumers to look for value. 1 Frost & Sullivan: Australian and New Zealand Clothing and Footwear Market 2021 We also expect to see a continued shift in consumer preferences towards trusted retail brands, such as Best & Less, which has been around since 1965, and Postie, which was established in 1909. We have served generations of families across Australia and New Zealand and the deep and longstanding relationship we have with our customer is hard to replicate. In summary, we have a small share of a very large and growing market, a relatively non - discretionary offer, a loyal customer base and the business model, strategy and team to be successful. Our strong balance sheet gives us the financial flexibility to execute our growth plans and deliver value for our shareholders, our customers, and our communities. Despite a challenging year for the Australian and New Zealand economies and retail sectors, with the impacts of COVID - 19 continuing to be felt, these attributes have allowed BLGH to deliver a strong financial and operational performance in FY21. This result is the product of the disciplined delivery of our strategy by our team under the leadership of our CEO Rodney Orrock. On behalf of the board and all shareholders, I would like to thank Rod and our more than 4,000 team members across the business for their efforts this year. Without your commitment to providing excellent service to our customers, our strong FY21 result would not have been possible. Thanks also to you, our shareholders, for your support. I will now hand over to Rod to provide a more detailed update on BLGH’s financial and operational performance this year, and to also provide some colour on recent trading and the outlook for FY22. Jason Murray Non-Executive Chair CEO’s address Rodney Orrock Record profit in a milestone year I am delighted to report a strong performance for BLGH in FY21, having delivered record profits and exceeded our Prospectus forecasts in all key metrics. This performance was the result of disciplined execution of our strategy and the diligence and commitment of our excellent team, who continue to showcase their ability to execute and be agile in uncertain trading conditions. The financial result was driven by a strong performance from our core non- discretionary categories, which highlights the defensive characteristics of our business and will continue to drive our growth moving forward. I am also very pleased that we were able to make progress on key strategic initiatives that will set us up for long-term success as a specialty value apparel retailer. We have a strong balance sheet, stock and inventory position, and are well positioned for the bounce back in trading we are already seeing across Australia and New Zealand ahead of a Christmas trading period that is poised to be our biggest ever. FY21 overview In FY21 our business delivered record revenue, profit and margin outcomes. We grew revenue by 6.1% to $663.2 million, with like-for-like sales growth of 10.8% reflecting the success of our differentiated customer value proposition of ‘twice the quality at half the price’. The strong growth was driven by our core non-discretionary categories, including baby which grew by over 15%, as well as underwear and sleepwear. Our record profit, with pro forma EBITDA of $71.6 million and NPAT of $47.0 million, were up significantly on the prior year and materially ahead of the respective Prospectus forecasts. Our record margin outcomes, with gross profit margin of 48.9% up 430bps on the prior year and EBITDA margin of 10.8% up 650bps on the prior year, were achieved despite continued disruption from COVID-19. They were the result of effectively managing the things we can control, including our inventory and costs, which is built into our DNA. Delivering against our g rowth strategy During the year, we made good progress on delivering our growth strategy, which is based around increasing our share in the baby, kids’ and womenswear segments, achieving above-market online channel sales growth, continuing to increase our gross margin percentage, alongside a targeted store network expansion and cost reduction initiatives. We have continued to conduct detailed research into our customer base and have introduced new and innovative products, as well as expanding our range of sizes and increasing the availability of volume lines to improve our service proposition. Our gross margin percentage benefited from improved product mix and increased average sale price, as well as agile inventory management, and our ‘Everyday Low Cost (EDLC) culture continues to drive improvements in our cost of doing business (CODB). In FY21 we opened two new stores and relocated six stores, including two stores with expanded floor space, and our store optimisation program is now largely complete. Online investment delivering results Our strong online sales growth of 33.5% benefited from improvements we have made to our online offer, including an enhanced customer experience, the introduction of ‘click and collect’, additional store-based fulfilment options and our new Best&Less mobile app. We know that a well-connected customer is a happy customer, and that the more we know about our customer, the more we can tailor our offer to their specific needs. Our loyalty program members shop with us more frequently, spend more per transaction and are incredibly loyal to us. During the year, the relaunch of our Friends Club loyalty program helped us grow by over 400,0000 members, or 31%, to ~1.7 million members across Best and Less and Postie at the end of FY21. The introduction of our ‘Baby Land’ online hub has enhanced our connection with mum and significantly increased the time she spends with us online and how much she buys. Values - led approach to ESG One of our core values is doing the right thing, so operating in a sustainable way is important to us. Our Environmental, Social and Governance (ESG) committee is one of the most active in the Company. To further our efforts on sustainability, we have made a commitment that all our packaging will be re-usable, recyclable or compostable by 2025. This year we were again recognised by the Australian Packaging Covenant Organisation as a finalist in their awards in recognition of our efforts . We have also integrated the United Nations Sustainable Development Goals and voluntarily conducted a carbon audit to better understand our carbon footprint and take steps towards Net Zero in line with the Paris Agreement. We are committed to safeguarding human rights, ethical sourcing and paying living wages across our operations and supply chain, and this year we published our first Modern Slavery Statement and made good progress on our commitments outlined in our Living Wage Statement. In line with our Ethical Sourcing Code, we conducted 217 factory audits across our supplier base, and more recently we have become members of Sedex, one of the world’s leading ethical trade membership organisations, to help us go further in our commitment to ethical sourcing. We were also awarded Bronze membership to the NSW Sustainability Advantage program for our leadership and commitment to sustainability. FY22 t rading update As we disclosed to the market last Tuesday 16 November, we have lost 9,272 trading days so far in FY22, equivalent to 27.5% of total trading days, due to government-mandated COVID-19 related retail store closures. While COVID-19 restrictions have largely been lifted in most areas, customer shopping behaviour has continued to be cautious. However, all stores have reopened across Australia and New Zealand and we have started to see the bounce back in trading activity we expected ahead of the peak Black Friday and Christmas holiday trading periods. Encouragingly, for the 12 weeks from 23 August 2021 to 14 November 2021, we have seen a strong like-for-like (LFL) sales performance, up +5.6% on FY21 and +23.8% on FY20. Online sales were up +34.9% on FY21 and +147.2% on FY20 for the same period. For FY22 year-to date, like-for-like sales are down -1.3% on FY21, although up +13.8% on FY20. Gross profit margin percentage remains ahead of our Prospectus forecast and we continue to closely manage inventory, operating costs and cash flow. With six trading weeks remaining in H1 FY22, we have reaffirmed our Prospectus forecasts for CY21 for pro forma EBITDA and NPAT of $62.4 million and $41.3 million respectively, subject to there being no further unanticipated events impacting customer shopping behaviour for the remainder of the calendar year. We have a healthy stock position heading into the peak trading period and a robust balance sheet, and the Board remains committed to paying 60-80% of statutory NPAT in line with our dividend policy. Looking ahead FY21 was a milestone year for BLGH, where we demonstrated the strength of our customer proposition, growth strategy and ability to execute in challenging times. In FY22, as we emerge from the impact of COVID-19, we are currently focused on delivering the critical Black Friday and Christmas trading period. To help us achieve this, we have welcomed more than 450 new team members in the past four weeks, many of them recent school leavers. We remain committed to providing employment opportunities for people at all stages of their careers and being an employer of choice in the retail industry. Over the longer-term, we will continue delivering our growth strategy to build on our leadership position and achieve our ambition to be mum’s first choice when it comes to clothing her family. We will do this by increasing the attractiveness of our offer, growing our share of the baby, kids and womenswear market segments, and continuing to invest in developing outstanding people, process and capability. We will also continue to enhance our online offer and customer engagement through the effective use of our data and grow our store network in areas where we are underrepresented. We understand that customer behaviours have changed as a consequence of COVID-19 and that we must continue to adapt to meet their needs. We will continue to keep the customer at the heart of everything we do in order to provide the most attractive shopping experience possible. I would like to thank our more than 4,000 team members for their efforts this year, as well as our senior leadership team for their support and diligence in delivering our strategy. We aim to create a culture where our team members are valued, empowered and accountable. Our values, including sustainability and community, are core to our everything we do. To that end, I was especially proud to see so many of our team members take up shares in the employee offer during the IPO to become fellow owners of the business, and look forward to sharing in BLGH’s success with them over the long-term. Thanks also to you, our fellow shareholders, for your support. I look forward to updating you on our progress as we move further into FY22. Rodney Orrock Chief Executive Officer
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