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Super Retail's annual earnings boosted by Macpac acquisition, online sales

Tuesday 21st August 2018

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ASX-listed Super Retail Group, which bought outlook equipment chain Macpac Holdings in March, says the acquisition boosted annual earnings as it lifted group profit on a surge in online sales.

In the three months it owned Macpac in the last financial year, the stores delivered A$7.8 million in earnings before interest and tax on A$31.4 million in sales, the company said today in its annual earnings result. The group today reported net profit of A$128.3 million in the year to June 30, from A$101.8 million in 2017, on a 4.2 percent lift in sales to A$2.57 billion. Its auto, sports and outdoor divisions all delivered like-for-like sales and ebit growth.

Super Retail, which operates the BCF, Rays, Rebel and Super Cheap Auto retail brands, bought Macpac in March for $144 million, more than twice the $68.7 million paid by Australia's Champ Private Equity in 2015. The deal added 54 stores across Australia and New Zealand to Queensland-based Super Retail's suite, and was funded from existing debt. Super Retail is consolidating its remaining nine Rays outdoor equipment brand under the Macpac badge, having closed six which weren't suitable for the future business model. 

The acquisition was expected to generate mid-single digit earnings per share gains for the ASX-listed firm in 2019. Today's results show that basic earnings per share for 2018 was 65 Australian cents, from 51.6 cents in the prior comparable period. Sales grew 3 percent excluding Macpac, it said. 

When it announced the planned acquisition in February, Super Retail said Macpac was expected to generate sales of $95 million and pro-forma earnings before interest, tax, depreciation and amortisation (ebitda) of $16 million in the year ending March 31. When it confirmed the deal at the end of March, it said the business had delivered $97.3 million in sales and $17 million in ebitda that year. Today it said that on a pro forma basis for the year to June 30, Macpac had sales of A$94.7 million and ebit of A$15 million. Macpac sales have risen 8 percent in the year on a like-for-like basis, it said. 

Over the next five years, Super Retail plans to increase the number of Macpac stores to 95, comprising 75 "core stores" and 20 megastores, which will be rolled out from 2022. It wants to lift sales to about $250 million and have digital sales make up 20 percent of total sales, from the current 8 percent. It foresees its ebitda margin will drop to about 13 percent from the current 16 percent.

Super Retail's auto retailing segment is its largest, delivering more than A$1 billion in sales in the year with growth in all product categories and all locations. Online sales jumped 85 percent in the year, driven by click-and-collect services, and ebit grew 4.9 percent to A$116.4 million in the year, it said. 

Its sports retailing segment lifted sales 3.2 percent to A$979.2 million and ebit increased 0.2 percent to A$91.5 million, while outdoor retailing, the segment Macpac falls under, lifted sales 4.9 percent to A$579.8 million as ebit rose 16.5 percent to A$29.6 million. Online sales also surged in both these segments due to click-and-collect.

In the next three years, Super Retail is targeting revenue growth for Macpac of 14-to-18 percent per year, ebit margin at 11 percent, and capital spending of A$5 million per year. For its Super Cheap Auto, Rebel sport stores and BCF, it's targeting revenue growth between 4-and-6 percent per year, ebit margin rising between 10 and 30 basis points each year and capital expenditure of between A$80-and-A$90 million a year, alongside cutting working capital by A$10-to-A$15 million. 

Super Retail declared a 27.5 Australian cent final dividend, bringing the annual dividend to 49 Australian cents, up 2.5 cents on 2017, payable on Oct. 2.


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