New Zealand Professional Investment Services Firm

Forsyth Barr

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Briscoe Group (BGP)</h2>
1H20 Initial Impressions — Flat result amid difficult conditions
Briscoe Group (BGP) 1H20 provided few surprises with nothing to change our near-term earnings expectations. 1H20 normalised profit of NZ$29.4m was in line with our expectations and flat on the prior year period. BGP highlighted a number of headwinds as drivers of the weaker than trend growth rate including (1) late start to winter impacting sales of seasonal product, (2) ongoing competitiveness of the retail environment; and (3) continuing wage and other cost pressures. Gross margin compression was a function of cost pressure and increased clearance activity through the Winter months which were warmer than average. A cold snap in August has provided some respite into 2H20 with commentary highlighting “strong increases over the previous year” in August across the portfolio. Online sales&nbsp;made up 11% of Group sales (in line with NZ average), helped by a lift in the number of stores offering fulfilment, increasing capacity.
BGP declared an interim dividend of 8.5cps, ahead of the prior year (8.0cps) and our expectations.
Outlook and our view&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BGP has not provided any formal guidance at this stage, however outlook commentary appears cautious noting the uncertain economic environment in the second half, in particular subdued consumer and business confidence as well as ongoing cost headwinds. This is in line with our expectations for a challenging macro backdrop and margin pressure led by higher wages and a lower NZ dollar.
Profit and loss summary (NZ$m)&nbsp;*
<table class="table table-striped"><colgroup> </colgroup>
<tbody>
<tr>
<td>Result summary (NZ$m)</td>
<td>1H19</td>
<td>1H20</td>
<td>% chg</td>
<td>Forbar</td>
</tr>
<tr>
<td>Sales Revenue</td>
<td>293.2</td>
<td>303.0</td>
<td>+3.3%</td>
<td>303.0</td>
</tr>
<tr>
<td>Gross Profit</td>
<td>120.0</td>
<td>122.9</td>
<td>+2.4%</td>
<td>121.8</td>
</tr>
<tr>
<td>Gross Margin</td>
<td>40.9%</td>
<td>40.6%</td>
<td>-0.4ppts</td>
<td>40.2%</td>
</tr>
<tr>
<td>Normalised EBIT</td>
<td>40.6</td>
<td>40.6</td>
<td>-0.0%</td>
<td>40.1</td>
</tr>
<tr>
<td>Normalised Profit</td>
<td>29.3</td>
<td>29.4</td>
<td>+0.2%</td>
<td>29.5</td>
</tr>
<tr>
<td>Reported Profit</td>
<td>29.3</td>
<td>29.4</td>
<td>+0.2%</td>
<td>29.5</td>
</tr>
<tr>
<td>Underlying EPS</td>
<td>13.3c</td>
<td>13.2c</td>
<td>-0.2%</td>
<td>13.4c</td>
</tr>
<tr>
<td>Interim DPS</td>
<td>8.0c</td>
<td>8.5c</td>
<td>+6.3%</td>
<td>8.0c</td>
</tr>
</tbody>
</table>
Source: Company reports, Forsyth Barr analysis * all numbers are pre-IFRS 16&nbsp;
Guy Hooper
Analyst, Equities&nbsp;
<table class="table table-striped">
<tbody>
<tr>
<td>
T:
</td>
<td>
+64 4 495 5255
</td>
</tr>
<tr>
<td>
TF:
</td>
<td>
0800 367 227
</td>
</tr>
<tr>
<td>
F:
</td>
<td>
+64 4 495 8193
</td>
</tr>
<tr>
<td>
P:
</td>
<td>
PO Box: 5266, Wellington 6145
</td>
</tr>
<tr>
<td></td>
<td></td>
</tr>
<tr>
<td>
W:
</td>
<td>
<a href="http://www.forsythbarr.co.nz/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://www.forsythbarr.co.nz&amp;source=gmail&amp;ust=1568766518668000&amp;usg=AFQjCNECNwrrbU1DxpfSddRJVICYjtWNUw" rel="noopener">www.forsythbarr.co.nz</a>
</td>
</tr>
<tr>
<td>Twitter:</td>
<td>
<a href="http://twitter.com/forsythbarr" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://twitter.com/forsythbarr&amp;source=gmail&amp;ust=1568766518668000&amp;usg=AFQjCNH12_5_Cj9JKcTWBrZwGAyOZeIcoQ" rel="noopener">@forsythbarr</a>
</td>
</tr>
</tbody>
</table>

Briscoe Group (BGP)
1H20 Initial Impressions — Flat result amid difficult conditions
Briscoe Group (BGP) 1H20 provided few surprises with nothing to change our near-term earnings expectations. 1H20 normalised profit of NZ$29.4m was in line with our expectations and flat on the prior year period. BGP highlighted a number of headwinds as drivers of the weaker than trend growth rate including (1) late start to winter impacting sales of seasonal product, (2) ongoing competitiveness of the retail environment; and (3) continuing wage and other cost pressures. Gross margin compression was a function of cost pressure and increased clearance activity through the Winter months which were warmer than average. A cold snap in August has provided some respite into 2H20 with commentary highlighting “strong increases over the previous year” in August across the portfolio. Online sales&nbsp;made up 11% of Group sales (in line with NZ average), helped by a lift in the number of stores offering fulfilment, increasing capacity.
BGP declared an interim dividend of 8.5cps, ahead of the prior year (8.0cps) and our expectations.
Outlook and our view&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BGP has not provided any formal guidance at this stage, however outlook commentary appears cautious noting the uncertain economic environment in the second half, in particular subdued consumer and business confidence as well as ongoing cost headwinds. This is in line with our expectations for a challenging macro backdrop and margin pressure led by higher wages and a lower NZ dollar.
Profit and loss summary (NZ$m)&nbsp;*
 


Result summary (NZ$m)
1H19
1H20
% chg
Forbar


Sales Revenue
293.2
303.0
+3.3%
303.0


Gross Profit
120.0
122.9
+2.4%
121.8


Gross Margin
40.9%
40.6%
-0.4ppts
40.2%


Normalised EBIT
40.6
40.6
-0.0%
40.1


Normalised Profit
29.3
29.4
+0.2%
29.5


Reported Profit
29.3
29.4
+0.2%
29.5


Underlying EPS
13.3c
13.2c
-0.2%
13.4c


Interim DPS
8.0c
8.5c
+6.3%
8.0c



Source: Company reports, Forsyth Barr analysis * all numbers are pre-IFRS 16&nbsp;
Guy Hooper
Analyst, Equities&nbsp;




T:


+64 4 495 5255




TF:


0800 367 227




F:


+64 4 495 8193




P:


PO Box: 5266, Wellington 6145








W:


www.forsythbarr.co.nz



Twitter:

@forsythbarr





Briscoe Group (BGP): 1H20 Initial Impressions — Flat Result Amid Difficult Conditions