I would now like to hand the conference over to the Beacon Lighting Executive Chairman, Ian Robinson. Please go ahead, Ian.
Thank you. Good morning, and thank you for joining us for the Beacon Lighting full year financial year 2026 results presentation. My name is Ian Robinson, Executive Chairman of Beacon Lighting, and I am joined today by our Chief Executive Officer, Glen Robinson, and our Chief Financial Officer, David Speirs. Financial year 2026 was another year of solid progress for Beacon Lighting as we continue to execute against our 2030 strategy. With our ambition to be even split between trade and retail and a leading provider of lighting, ceiling fans, and electrical accessories, the Australian home with sales firmly on track. Trade delivered another strong year reflecting the strength of our customer partnership and value proposition. While complementary business made a positive contribution to the group's earnings. In retail, conditions were mixed across the year.
We saw some softening in consumer sentiment in the first half, driven by shifts in interest rate expectations, which led to a more cautious spending and some trading down within categories. Trading conditions improved through the second half, with comparative sales strengthening to 7.1% increase in the fourth quarter. These results are underpinned by the dedication of our team and the continued support of our customers and trade partners. Turning to today's agenda, Glen will begin with an overview of our operating performance, followed by David, who will take us through the financial results in detail. Glen then will turn to the outline of our growth priorities and the outlook for financial year 2027 before we open for questions. With that, I am going to hand over to Glen to take you through the results.
Thank you, Ian, and good morning, everyone. Thank you for your interest in the Beacon Lighting Group. We are proud of what we have been able to build throughout the FY 2026 year with our valued team members, our retail customers, and our trade partners. As always, the full presentation that I will run through is available on the ASX and our corporate website. Turning to page four, which sets out our statutory result for the full year FY 2026. At a statutory level, sales increased by 3.4% to a record AUD 340 million, with gross profit up 2.7% to AUD 233.3 million. Gross margin was 68.6%, down slightly from 69.1% last year. Operating expenses increased by 4.7% to AUD 149.7 million, representing 44% of sales. This resulted in EBITDA of AUD 87 million, broadly flat on the prior year.
Statutory net profit after tax for the year was AUD 27 million, down 8.1% against the prior year. The statutory result includes a number of non-reoccurring items, in this case, restructuring costs related to Beacon Trade rebate, the closure of the installation department, redundancies made in Beacon Lighting America, and the group support center. To provide a clearer view of the underlying trading performance, we have adjusted for these items in the underlying result shown on page five, which is the basis for our discussion today. On an underlying basis, sales increased by 3.5% to AUD 340.3 million. Gross profit rose to AUD 233.6 million, with a gross profit margin of 68.6%, reflecting the growing contribution from trade sales and increased penetration into new core trade categories, particularly in the second half.
Despite this shift in sales mix, our vertically integrated supply chain and continued introduction of new product lines supported a strong margin outcome. Other income increased by 20.5% to AUD 3.4 million, reflecting an improved return from the large format property fund investment and continued interest income on our group's cash balance. Operating expenses increased 3.9%, representing 43.6% of sales. As a result, underlying EBITDA increased 1.6% to AUD 88.5 million, with an EBITDA margin of 26%. Underlying net profit after tax was AUD 28.1 million, down 4.5% on the prior year. Moving to page six, I will step through the key operational highlights for the year. We continue to invest in our store network, opening a new store in Auburn and purchasing the St Kilda franchise store into company ownership. Along with the new store in Millers Junction, we also relocated and expanded the Geelong store into a flagship for the market.
Which now also includes a 300 sq m trade specific showroom, and we expanded our McGraths Hill store in New South Wales, whilst closing our Springvale store here in Victoria. Together, these initiatives reflect both the network expansion and store optimization aligned to our 2030 store strategy. Company store comparative sales increased 1.8% for the full year, with the standout being a 7.1% comparative sales increase in the fourth quarter, driven by trade growth, promotional execution, traffic growth, and category growth. Beacon Trade remained a key highlight for the year. Trade sales through our stores increased by 14.5%, and total trade sales now represent 43.3% of relevant sales, up from 40% last year, keeping us firmly on track for our target of 50% of relevant sales by 2028. Innovation continues to be a core differentiator for Beacon.
During the year, we designed and developed 692 new products, reinforcing the strength of our vertically integrated pipeline across lighting, ceiling fans, and electrical accessories. Expertise is critical in our category, and with 347 lighting designers across our store networks, we are well-placed to provide expert customer advice for both retail and trade customers. With that, I will now hand you over to David to take you through financials in a little more detail.
Thank you, Glen. I am now going to move to sales on page eight. The Beacon Lighting Group had an underlying sales increase of 3.5% to AUD 340.3 million. Company store sales increased by 1.8%. The highlight result for the year was the comparative store sales increase of 7.1% for Q4 financial year 2026. The best performed states from a comparative sales perspective were Queensland, Tasmania, and Western Australia. Beacon Lighting has continued to partner with our trade customers throughout financial year 2026. Trade sales through stores, which include both direct trade sales and referral sales, have increased by 14.5%, with a stronger momentum in half two compared to half one. Total trade sales as a percentage of total relevant sales, which includes sales from stores, Commercial, Masson For Light , and Custom Lighting, has increased to 43.3%.
Beacon Lighting remains on track to achieve our goal of total trade sales being 50% of total relevant sales by 2028. It is important to recognize that Beacon Lighting stores, Beacon Commercial, Connected Lighting Solutions, and Custom Lighting all had sales increases in financial year 2026. Gross profit on page nine. Beacon Lighting achieved an underlying gross profit dollar result of AUD 233.6 million or 68.6% of sales. The change in the sales mix towards trade is reflected in strong sales increases in product categories like cables and switches. This change in the mix towards trade is beginning to be reflected in the gross profit margin with a small decline in financial year 2026. Despite the change in the mix, it is important to note that the vertically integrated supply chain has continued to support the gross profit margin.
Beacon Lighting continues to design and develop new products in Australia, which will continue to be well-received by our retail and trade customers and support our overall margins as a result. Other income and operating expenses on page 10. Beacon Lighting achieved a significant 20.5% increase in other income. Other income will increasingly become more important to Beacon Lighting as the group can expect to receive an improved return from the large format property fund in the future. Inflation is being reflected in some expense items to the Beacon Lighting Group. However, with a continued focus on the management of operating expenses, underlying expenses increased by 3.9% to AUD 148.5 million, or 43.6% of sales. Of all the operating expenses, the management of the marketing expense was a highlight, with an increase of 1.5% to AUD 16.4 million.
With the opening of new stores, new leases, and options exercised, depreciation increased by 8.3% and finance cost increased by 6.8%. Cash flow on page 11. Beacon Lighting has continued to maintain a strong cash position with a net operating cash flow of AUD 60.8 million. Using this strong cash position, Beacon Lighting has been able to reinvest in the future of the business with CapEx of AUD 12.2 million. Major CapEx projects of the year included the opening of new stores, store relocation refurbishments, the re-platforming of the group's websites, product development, and various productivity projects. With the suspension of the dividend reinvestment program, dividends to shareholders paid have increased to AUD 16.3 million in financial year 2026. Balance sheet on page 12. Inclusive of the AUD 10 million term deposit, which is presented as other financial assets, Beacon Lighting has a cash balance of AUD 54.2 million at the end of June 2026.
With an inventory investment of AUD 101 million, Beacon Lighting has been able to maintain a good in-stock position and strong service levels to our customers throughout the year. With the acquisition of two new development projects in Coffs Harbour in New South Wales and Noosa in Queensland, Beacon Lighting has increased the investment in associates, which is the large format property fund, to AUD 29.5 million. Right-of-use assets and lease liabilities have increased with the opening of new stores, exercising options, and the signing of new property leases. Beacon Lighting has continued to maintain a strong net cash position and net assets have increased to AUD 192.4 million. Dividends on page 13. It is important to note the Beacon Lighting dividend reinvestment plan remains suspended. Reflecting upon the financial year 2026 result, the directors have declared a fully franked dividend of AUD 0.034 per share for half two financial year 2026.
This means the directors declared a fully franked dividend of AUD 0.075 per share for financial year 2026. The directors will continue to target an annual dividend payout ratio of 50%-60% of net profit after tax. The dividend payout ratio for financial year 2026 has exceeded this target, with a payout of 63.7% of net profit after tax. Thank you, and I will now pass you back to Glen.
Thanks, David. Let's move on to the strategic pillars of growth, starting on page 14. Many of you will be familiar with our four strategic pillars. These have remained consistent for many years as we focus on the long-term growth across stores, trade, e-commerce, and complementary businesses. Page 15 outlines our vision for the Beacon store network through to 2030. Our ambition is to evolve from being a lighting retailer to becoming Australia's leading provider of quality lighting, ceiling fans, and electrical accessories for both homeowners and trade professionals. The strategy brings retail and trade together in a way that is natural and mutually reinforcing. For homeowners, Beacon is the destination for inspiration, expertise, and design guidance. For trade professionals, Beacon is a trusted partner, recognizing their influence, rewarding loyalty, and supporting the growth of their business by referring Beacon customers to use our preferred trade partners.
At the intersection of these two customer groups sits Beacon, becoming the homeowner's first choice and the electrician's most valuable partnership. The partner that can bring both the trade and the homeowner together to complete the job. Turning to page 16, an update on our store growth pillar. It's been a transformative year for the store network, with greater role clarity, alignment across the teams, value and promotional activity, and expansion into key product categories, which showed in the strong positive comparative performance in Q4 of the year. We finished FY 2026 with 130 stores, comprising 120 company-owned stores and one franchise store. We opened new stores in Auburn, Millers Junction, purchased the St Kilda franchise store, relocated Geelong, and expanded the McGraths Hill store. Our product and service offer remains central to the strategy.
With 692 new products designed and developed during the year to support our core range of more than 3,500 products. Our accredited lighting designers, design consultants, grew to 347 associates, with our 59 design studios across the stores completing more than 4,360 lighting design consultations across the network. Finally, updated store network research confirms the opportunity to grow to around 217 stores nationally, providing a clear and disciplined runway to support our long-term growth ambitions. Page 17 highlights the continued progress in trade and its critical role in our long-term strategy. Again, consistency was the key message for the teams this year. Working with our large number of trade customers, finding solutions, and expanding into lower penetrated categories positions us well to grow once again in the trade channel.
Beacon Trade members continue to benefit from a 2% Beacon cash rebate, trade essential pricing, plus special pricing across the entire range, monthly trade perks, and branded workwear in collaboration with Nena and Pasadena, the fashion brand. Total trade sales have now reached AUD 139.5 million for the year, with trade sales through our stores increasing by 14.5%. Total trade sales now represent 43.3% of relevant sales, and we remain firmly on track to achieve our goal of 50% of relevant sales by 2028. E-commerce continues to grow as an important channel, with customers increasingly researching our products online before visiting our stores to seek expert advice and confidently finalizing their choice. E-commerce sales represent 13.1% of total store sales. Trade remains a key driver online, with online trade sales up 16.5% and online visitation up 20.2%.
Online trade sales now account for 14.9% of direct trade sales, reflecting the increased digital adoption of our trade customer base. During the year, the team have worked tirelessly to build all new websites for the group on a new platform. This investment will strengthen our position as the leading lighting, ceiling fan, and electrical accessories online seller for homeowners and trade professionals in the years ahead. Turning to page 19, our complementary businesses delivered a mixed but overall positive contribution during the year. Beacon International had a year of restructuring and consolidation. While sales declined modestly, improved margin and disciplined cost management delivered a significant improvement in profit. Hong Kong remained the financial cornerstone of the business. Europe delivered improved sales, margin, and profitability, and in the United States, restructuring established a leaner cost base and a stronger platform for future growth.
Connected Lighting Solutions was a particular highlight, with sales up over 50% for the year, and the business secured a significant state-based contract to replace existing streetlights with new energy-efficient LED infrastructure spanning several years. Commercial and Custom Lighting also recorded sales growth for the year, while Masson For Light and Light Source Solutions in New Zealand were softer. We also continue to benefit from the 50% interest in the large format property fund, which owns nine retail properties, including recent acquisitions in Coffs Harbour and Noosa. The portfolio comprises of five fully tenanted properties, one partially tenanted property, and three development projects. The highlight for the year was the completion of the Auburn development, which now includes a new Beacon Lighting store, our New South Wales commercial office, and also a state office. Together, these businesses continue to diversify the earnings and broaden the group's growth platform.
Briefly on page 20, we remain committed to our sustainability goals across people, product, and planet. For our team, safety, respect, and wellbeing is at the center of everything we do at Beacon, creating a safe and supportive work environment, one with career advancement opportunities. On product, our LED globe range has now replaced fluorescent, incandescent, and halogen globes as standard, cutting energy use by up to 80%, with a lifespan up to 6x longer. With ceiling fans, including the super energy efficient direct current ceiling fans, being a great alternative to energy-intensive air conditioning systems. On planet, we now have 72 solar systems operating across the group sites, continuing to reduce our reliance on grid-sourced electricity, along with huge advancements in our product packaging, eliminating polystyrene and most plastics from our products. Moving to page 22, our outlook for the FY 2027 year.
Our focus across the business remains on delivering the projects, capability, and range to successfully meet our 2030 vision for the stores. Positive momentum in company store sales from Q4 FY 2026 has continued into the first eight weeks of FY 2027. Beacon Trade offering continues to be increasingly supported by our trade customers underpinning store sales. We have a strong store opening pipeline during the year. We'll plan to open new stores in Caloundra, which we've actually just opened, Angle Vale, Rockingham, Everton Park, and Mornington, along with refurbishments at Gepps Cross and Osborne Park, and an expansion at Castle Hill and a relocation of the Hervey Bay store. We'll continue category expansion and market share growth for key trade product ranges. Connected Lighting Solutions will continue rolling out new energy-efficient LED streetlights under the state-based contract they secured last year.
In the first half of FY 2027, we'll launch our new retail and trade websites on the new platform, further improving the customer experience. With the foundational work completed during FY 2026, including identifying new Beacon Lighting store locations, securing a major street lighting tender, advancing our 2030 initiatives, and developing new websites, together with our continued focus on customer obsession and category expansion, we're well-positioned to realize the benefits of these investments in FY 2027 and beyond. Thank you for your time. I'll now hand you back to Ian Robinson to take any questions.
Thank you, Glen and David, for your presentations. We're now open for questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. The first question today comes from Forres Salekian with Barrenjoey. Please go ahead.
Good morning, guys, and well done on the result. Just on like for likes, it looks like the strengthening in momentum was on the back of trade improving. Can you just give us an update on how the momentum in retail has evolved, maybe over Q4 and into the new year? I guess what happened in Q4 to get comps accelerating so hard?
Yeah. Thanks, Forres, and good question. You are right. Trade has definitely improved throughout the second half, and particularly into Q4. A lot of that was through success of some of the new products that were brought to market. Things like some of the switch ranges. We are getting better penetration in categories that we have had previously low market share in. Things like cable. That has continued to go particularly well for us. You did also mention retail, and I think that is what was pleasing to see, that retail was not the drag that it has been in the last couple of years in some of the states. We have definitely seen some improved activity across retail, and I think we can put that down to a few different things.
Obviously, the economic situation across Australia and the global political issues overseas play heavily on consumer confidence, and you would probably expect that to be a negative for retail, and we certainly would have expected that as well. I think what we started to see was maybe more people staying at home, potentially investing in their primary place of residence, so investing in their home, and doing renovation activity there. At the same time, we really did have a strong focus on promotional execution across stores, so making sure that marketing is aligned to value and promotion. That does not necessarily mean heavier discounting, but really just very clear on our promotional execution. I think that helped with the retail spending.
It helped consumers see that there was great value across Beacon Lighting, so that when they are looking at doing some renovation or updates, we were a great alternative to others that might be out there. It was across the board, across categories, new category expansion, and trade sales growth.
Operation performance was certainly improved in the-
Yeah.
-in the stores.
Yeah. That's right. Yeah.
That is super helpful. I guess just maybe as you think about the next 12 months on likes for likes, how are you thinking about that as housing turnover starts to slow, just on the back of higher interest rates and changes to housing policies after the budget? It looks like comps get a bit easier to cycle through the first half as well. Just wondering, against this backdrop, do you think you will be able to hold the current run rate or should it soften from here?
Yeah. Look, I think we have got some really exciting opportunities ahead of us. We have just completed conferences across all our states with all our store managers, and I think the alignment across the business is a lot stronger than it is probably ever been, and there is some real genuine excitement out there about what we can control, rather than focusing too much on the externals. Things like promotional tie-up, box stacks, value pricing, and category expansion are really the areas that we are mostly focused on, and that is what I believe will put us in a good position to be able to continue to grow the business throughout the year.
Got it. If I could just squeeze in one more. It looks like the marketing as a percent of sales came down to about 4.5% of sales in second half, and the dollar amount invested went backwards year-on-year. Just wondering, how you are able to balance this while growing top line and how you are thinking about marketing investment over FY 2027.
Yeah. Look, I think total investment in marketing spend still went up, but as a percentage of sales, it did come back a bit. I think that is the beauty of our brand, is that we have been consistently spending over 5% of sales for near on 60 years. Next year, it will be our 60th year in the market, and we have got a very strong brand awareness across the Australian market. Therefore, we do not need to do as much heavy lifting to build awareness as what some other brands out there need to do. So we can concentrate a bit more deeper on the consideration phase of purchasing rather than the awareness phase.
I think that is where we can get some particularly good value from our marketing to drive store traffic, which is what we were able to do in the second half, despite not spending a huge amount on marketing. It is still a big investment for the business. We still absolutely believe in the benefits of marketing and driving sales. I do not think we need to. We have got to spend cautiously because costs across the business and costs across Australia are challenging to keep under control. Where we can save some and still achieve good sales growth, we should be looking at that.
That is excellent. Thanks, guys.
Cheers. Thanks, Forres.
The next question comes from Leo Armati with Bell Potter Securities. Please go ahead.
Yeah, good morning, Ian, Glen, and David. Congrats on a great result. Just first from me on trade sales. Obviously now increasing towards that 50% target, around 43%. I am just wondering what the cadence is to sort of close that remaining 7% into 2028. Is it a similar growth that we have seen from 40% to 43% this year?
I think that is what we have been consistently getting is a similar growth over the recent years. We have been able to achieve that. We have got some leading stores, and we have also got some stores that have really got some runway to make up. That is where we think we will continue to have a similar cadence in trade sales growth going forward.
Yeah, great. Thanks, David. Then just on gross margin, obviously that is declining just given that trade mix. Should we just expect, I suppose, going forward, more margin dilution? Or does the sort of vertical, I guess, supply chain that you guys have sort of offset that as you scale a bit more?
Yeah, I think there is a lot of moving parts to the gross profit margin at the moment. I think as you continue to sell more and more cable and switches, that is going to put a bit more pressure on the gross profit margin. We have probably still got some U.S. dollar currency improvements or the Aussie dollar against the U.S. improvements to be realized over the next six months or so. So that will help a little bit. But some of that will be also offset by rising costs coming out of our factories. As I said, there is a lot of moving parts. We will be doing what we can to try to manage the gross profit margin around where we probably finished this year.
Yeah, great. Thanks, Glen. Just on that state contract, I know it's at the end of the result, but I'm just wondering if you could size that revenue contribution or margin profile from that contract, because you noted when you were speaking that it is quite significant.
Yeah. We won't go into the details for commercial reasons, obviously, about margin and size of it, but we'll look forward to giving you an update once we get through the half results and hopefully be able to put a bit more color on that. We've only just started supplying into that contract, so to be really clear on the margins is a little bit challenging for us at the moment until we see how they play out. But we'll definitely try to give some more information at the half result. But it is a contractual arrangement, so it's definitely not going to be anywhere near the margins that the group gets, but it will all be incremental sales and margins that the business hasn't had before.
Great. Thanks. Sorry.
It will be transformational for Connected Lighting Solutions. It'll make that business totally different to what it is today.
Yeah, great. Okay. No, thank you, guys. That's all from me.
Thanks, Leo.
The next question comes from Sam Teeger with Citi. Please go ahead.
Hi, Ian, Glen, and David. David, 23 years at one company is a great achievement, and all the best for the future.
Thank you, Sam.
I'm just wondering, if trade reaches 50% of sales by 2028, should investors expect structurally lower margins than the business has generated historically?
I think because the vast majority of the trade sales are going through the store network, Sam, we would expect the store network to be more efficient in the way that we transfer sales into profitability across the network. When we first used to size up a potential opportunity of a store, we'd look at it and go, "Oh, we might be able to get to AUD 1.2 million, AUD 1.4 million in sales for a new store." Now, obviously, having the trade base in there, it helps build the volume that's going through that business, which helps improve the returns out of that store a lot quicker, but also for the long term, it makes them a lot more profitable as well. So that's the way we look at it.
All the additional GP dollars that flow through help cover those fixed costs associated with that store, and therefore it should be a big benefit to the profitability of each one of the stores that we operate.
Okay, great. Can you talk about third quarter versus fourth quarter EBIT margins, just given how strong those fourth quarter comps were?
We haven't gone into the details on that, Sam. You can imagine with comps at 7.1% driving the top line and holding up your margin and your costs are relatively fixed through the business, that obviously that plays out positively for us.
All right, sure. Then for the past several years, Beacon has been very successful growing its trade business, its online sales, commercial lighting, property, yet group earnings have remained pretty consistent.
Yeah.
What's the missing piece that needs to occur here before investors see a lot of these strategic successes translate into sustainably higher EPS growth?
Yeah. I think we have been in the backdrop that the retail's discretionary spend has been relatively soft, Sam. We have been supplementing overall group sales with trade growth. But that has been dragged back by the retail sales and for us to be able to get both going through, which is what we have started to see more of, in the fourth quarter, that is where I think you start to see the benefit of the strategy. And that will hopefully play out throughout the FY 2027 year, where you get retail either being flat or slightly positive and your continued trade growth driving additional GP dollars through these relatively fixed costs. The last few years have been quite significant from an inflation point of view.
If we can start to get some more reasonable inflation indicators coming through, driving the retail sales to a flat or positive position, plus trade growth, driving GP, then it should be a good outcome for the profitability of the group.
Excellent. Thank you.
Thanks, Sam.
The next question comes from Benjamin Gilbert with Jarden. Please go ahead.
Morning, team. Just the first one, just on this Connected Lighting Solutions and the opportunity there. I appreciate we're not going to go into the details around the contract, but you talked as a bit of a game changer for that part of the business. One, is this going to fall into trade? Secondly, how many of these sorts of opportunities are there now you can lean into and go after? I'm just trying to understand-
Yeah.
-the potential materiality of this part of the business.
Yeah. The CLS business doesn't fall into trade. We have that as a separate business, so it's not part of that 43.3% of sales. It does obviously fall into all the other GP lines and sales lines and all the rest. It's a significant contract in that it's replacing a lot of street lighting across the state. You can imagine that's obviously quite a reasonable size tender, and it goes for five or six years. So it's extended into a number of years. The benefit of picking up one of these is that other states see you as a player in that area. There are really probably three or four major streetlight providers across Australia, and we've typically been the third or fourth placed, from those providers.
For us to be able to get a major contract like this really puts you up in that greater consideration, for when other states are looking to upgrade their streetlights as well. It is a great one to get. They are not easy to get. We have been working at these for over five years. There are still a lot of streetlights that need to be updated across Australia into LED technology. We hope by having this one, it starts to build a bit more confidence across other councils and DNSPs to consider the CLS business and particularly the GE brand, which is what we represent for the street lighting area, as an alternative to others that are out there.
It is not a specific council, it is a full state-
That is right.
-contract.
Yeah.
Does this then open up, I do not know, I am just going off some sanctions, things like defense or other private side of things that there are larger scale contracts. Are you playing in that space but-
Look, anywhere where there's these particular type of lights, so we call them VCAT and PCAT lights, and also large area lighting. We can definitely participate in any of those tenders.
Thanks. I know, sorry, I know there's been a few questions on the comp, but obviously a cracker number you've had for Q4 and continued into Q1. Bunnings has sort of talked up the start to 2027 today as well. I'm just trying to understand within that number, how trade's obviously performing very strongly and you're taking share, but how much also is price and how much is NPD? Because it seems, I don't want to put words in your mouth, but it seems like you've got a bit of confidence around being able to maintain some decent momentum through 2027, notwithstanding all the negativity we're hearing out there on housing, et cetera, post the budget.
Yeah. I think the confidence that you might be hearing is that, coming out of the conferences that we've just had across our stores, the alignment and the execution is better than I've seen for a long time. Our net promoter score that we just had done in July was the highest I've ever seen. So the engagement's really high at Beacon. Our Google reviews of our stores is at 4.9 stars out of five. There's a lot of indicators to suggest that the team are really on board and executing well, and that's really encouraging. So it makes things a lot easier to execute on when we come up with new initiatives around trade or retail promotions, the team are fully backing it. I think that puts us in a more confident position than what we have been in the past, just that alignment.
Then you back that up against some stronger trade sales. The new product definitely always helps. We obviously had a lot of new product come to market throughout the year, and that will continue on in the year ahead. But also, we've got a real focus around category expansion in three or four very specific categories, which the store teams are very aligned on. In those three or four categories, we've got a really low market share, and we've explained that during our conferences and where the opportunity is to grow in that market share. If we keep a focus on category expansion, growing market share in those three or four categories, along with promotional execution across the business and offering great value to our customers, then that's our main focus and I think that will put us in a good position.
The replacement and the new category expansion across these three is going to be the bigger driver and I suppose sort of the new home side of things. If we've seen mortgage applications down 28% or whatever it is, it's obviously a focus and a concern, but you still see an opportunity to grow notwithstanding some pretty significant headwinds in housing near term.
You're absolutely right. There are definitely some headwinds there. I think, though, a lot of our customers are second homeowners and beyond that, and they're looking to invest in their home, their primary place of residence, and that's not a bad investment at the moment, considering other investments out there. So, we're making sure that when we're introducing new products, that they are exciting, but they also represent good value talking to those customers that want to invest in their home.
Fantastic. Appreciate it. Thanks.
Thanks, Ben.
The next question comes from Emily Porter with Morgans. Please go ahead.
Hey, guys, and congratulations on the result. I think you guys pointed out, and it's probably been the same story over the last little while, just the strength in Queensland and W.A., and I think you mentioned Tasmania as well. I guess, just interested in how you're seeing New South Wales and Victoria. Are there any sort of green shoots coming through?
Yeah, definitely. I think what we're seeing in Victoria, while the macro may not seem all that different when you're out there and you're walking the streets, I think our execution is a lot better. And I think that's indicated through a few numbers that we've got in the business. Victoria is our strongest trade business out of all the other states. I think our stores have had to go to trade because their retail discretionary spend has been soft for a number of years. So they're really focusing on what they can control, and that's focusing in on their trade sales better. And the momentum in that continues to build. We're not seeing Victoria and New South Wales being where they were even, say six or nine months ago, 12 months ago. So we're definitely seeing some improvement or some good improvement across those states as well.
Okay, that's great. And maybe just on cost, pretty well managed during the year, and I think you talked a bit about the marketing spend. Maybe just how you're sort of thinking about cost inflation into next year, how you kind of expect it to grow and I guess strategies to manage it.
Yeah. Well, we have done a number of restructuring processes throughout this year, which will set us up well for the year ahead. Cost is something you need to always keep a close eye on. I think freight will continue to be a major item for the business. Consumers want their product quick, and when you are in that area, freight does cost a lot of money across the group. So we will have a big focus across all the different expense lines. We have got to keep things as tight as we can. Hopefully, when we are driving stronger gross profit dollars and stronger sales, the expenses will start to get a little more leverage out of the expenses. We have still got some challenges with government charges. Rates and taxes continue to be a challenge. Workers' comp continues to be a challenge.
We have had some success in appealing some of our, for example, land tax assessments and rolling them back. So we will continue to focus on those in detail and seeing what we can do to improve the situation.
That is great, guys. Thanks. That is all from me.
Thanks, Emily.
The next question comes from James Casey with Ord Minnett. Please go ahead.
Good morning, gentlemen. I just had a question with regards to kind of the commercial segment or the volume builders, just what you're seeing in terms of forward orders there.
Yeah. So in the commercial volume residential area, our pipeline is still very strong. In fact, we finished out the year with a very good pipeline of sales. We are hearing from some of our volume residential builders that sales have been a little bit more challenging since the budget announcement. How long that pipeline stays up at the higher levels that it is at the moment is still a little bit to be seen as we get through a few more months. But right at the moment, the pipeline's healthy.
Okay. A good pipeline of new stores. What's the timing on those new stores? How many of those will land in the first half?
Yeah. We were fortunate enough to pick up a couple of the Barbeques Galore stores. So out of their unfortunate circumstances, we have been able to grab a couple there. So that is Rockingham and Everton Park, and they will be turned over pretty quickly for us because they are all set to go. Then we just opened Caloundra up in Queensland. So you will have three in the first half and the other couple will fall into the next half.
Okay. Thanks very much.
Thanks, James.
As a reminder, if you would like to ask a question, please press star then one to join the question queue. The next question comes from Sam Teeger with Citi. Please go ahead.
Hi, guys. Just to follow up on the property. If the property assets were independently valued today, would their market value be different materially to their carrying value?
Yeah. Sam, we have a cycle of revaluing about one-third of them every year, or alternatively, where there's a significant event, for example, such as the opening of the Auburn property. We would expect they would generally increase. Obviously, the rents increase each year. Yes, but that would be the-
The current valuations are relatively-
Yeah.
-representative.
Certainly had three revalued in this cycle, of three of nine, is it?
Nine.
Yeah, three of nine.
Okay. Just wondering, given the strong growth we are seeing in property earnings, can you share what are your long-term objectives around retail property ownership?
Yeah, I think where we have got sites for Beacon Lighting and we can own those sites, I think it is a good position to be able to put the business in. We know that we generally do not move our stores very often. So rather than paying a landlord for the next 20 or 30 years, we can be paying off that asset and enjoying that for the business and the group. So the returns out of those nine sites will continue to improve as we get them optimized. And I think it is a good strategy to have whilst also being mindful that we will not be throwing huge amounts of money behind it.
Yeah. We like the stability of being in a site for a while, and sometimes the landlord will take advantage of you if they know that you are a long-term tenant and they will not negotiate quite as strongly as you would like them to be. Then the other part, Sam, is a lot of the very successful retailers have a property side. It is not the dominant side, of course, but it is part of the war chest you need to have.
Okay. Thank you.
Thanks.
There are no further questions at this time. I will hand the call back to Mr. Robinson for closing remarks.
Thank you, ladies and gentlemen, for your interest in Beacon Lighting. We look forward to the next half and talking to you again. Bye.
Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.