Earnings Call: H2 2021

Aug 31, 2021

Ladies and gentlemen, welcome to Shaver Shoppe's Results Presentation and Investor Conference Call for the Financial Year Ended 30 June 2021. Please note that today's call is being recorded. There will be a presentation followed by a question and answer session. Presenting today will be Cameron Fox, Shavershop's CEO and Managing Director and Larry Hampson, Shavershop's CFO and Company Secretary. If you wish to follow along with the slides, Shaver Shop's presentation has been lodged with the ASX and is also available from Shaver Shop's Investor Center website. I will now hand you over to Mr. Cameron Fox. Please go ahead. Thanks, Dan. Good morning, everyone, and thanks for joining us today. We are pleased to present our results presentation for the 2021 financial year, a defining year for Shaver Shop on a number of levels. First, as we'll take you through shortly, we posted another year of record financial results, this time smashing our impact record up 68.3 percent to 17,500,000 dollars which is at the top end of our guidance range. Secondly, we've now transformed into a fully owned corporate store network with the buyback of the last 6 remaining franchised stores in February 2021. 3rd, our New Zealand vehicles performed exceptionally well with profitability up 5 fold. We've now proven our business model works in markets outside of Australia. And lastly, we achieved this in a year which was extremely uncertain and difficult to predict. Our business model has once again proven its resilience with a trend towards DIY hair removal and personal care solutions accelerating strongly. So with that overview, let's get into some of the highlights of last financial year. Shavishoft's total sales equips the $200,000,000 mark for the first time, up 9.6 percent to $213,700,000 The key contributor to these sales uplift was growth in online sales, up 41.1 percent to $61,200,000 We see that Shady Shop is a true omnichannel retailer before, but with 28.6% of our sales now having been generated online, this fact cannot be disputed. The sales growth was complemented by strong gross profit margins, up 240 basis points to 44.3%. With Cross World Control, this list of NPAT increasing 68.3% to $17,500,000 and earnings per share up 66.2 percent to $0.1402 per share. Importantly, this result was achieved without any form of JobKeeper support. Shaver Shop's history of generating strong cash flow conversion continued with operating cash flow of $36,000,000 Our stock position remains extremely clean, probably the cleanest position I've seen since joining the business 15 or so years ago. This helped at end 2021 with $7,400,000 of cash on the balance sheet and no debt. While this is a lower net cash position than we had at June 30, 2020, You may recall there was around $7,000,000 in phasing issues that benefited last year's ending cash position, and that unwound over the course of FY 2021. We also acquired the last 6 franchise stores with cash on hand So to achieve a $7,400,000 of net cash at 30th June 2021 is actually a very strong result, all things considered. Finally, in terms of capital, we remain focused on increasing shareholder returns by returning $9,900,000 to shareholders by way of dividends in the 2020 financial year. Scabyshop's Board also today announced a $0.050 fully franked final dividend, up 85%. This brings total fully franked dividends for FY 2021 up to $0.082 per share, up 71% on last year's 4.8 percent payout. We also continued our omni retail investments through further improving the online customer experience, upgrading the look and feel at 6 of our key doors and further investing in our CRM to drive actionable insights that will further enhance customer experience. The one slide focused on our financial results. The next one looks at our underlying operational achievements or effectively the inputs which drove Shady Shoppe's outstanding financial performance. 1st and foremost, the safety and well-being of our team members was our number one priority throughout the pandemic, and that will continue in the future. We have probably taken a more conservative approach than some other retailers when there's a risk to staff or customers, but we believe this is in the best long term interest of our business and indeed the wider community. Product knowledge and customer service excellence have always been the hallmarks of Shabershop's value proposition, and I'm incredibly proud of the way our store teams represented our brand values over the last 18 months. Our NPS and customer experience scores are at all time high, reflecting the passion and dedication of our SOAR teams. It was also reflected in sales conversion, which was up 9% in the year to 43.25%. We also increased our customer service team in the support office to handle the increased number of inquiries we received, particularly around online deliveries and are implementing automated features like live chat on the website to accelerate response time for commonly asked questions. Our in store fulfillment model for online orders continues to perform exceptionally well with 97% of online orders being picked and packed within 24 hours from the time the customer order is received. This has helped us significantly improve customer satisfaction ratings over the last 12 months, but has also enabled our store team to remain as engaged as possible during the lockdown periods. These and other omni retail investments have continued to deliver returns with active customers up 122 percent to almost 500,000 over the last 12 months, and our email marketing database is now reaching 800,000 members. The omnichannel foundations we have in place will stand us in good stead when trading conditions return to some form of normality, whether in the near future or in the months to come. Let's move on to Slide 5 and look at our revenue drivers in greater detail. Despite the lockdowns over the last 12 months, our stores remain a critical part of Shaver Shops' offering and have been quick to rebound when trading restrictions are lifted. Unsurprisingly, we've concerned over the pandemic and significant number of stores being closed temporarily last financial year. We saw our like for like in store sales declined by $2,500,000 However, this decline was more than offset by the contribution from the online channel, up $17,300,000 to $61,200,000 as well as the 5 month contribution from the 6 franchise that were bought back in February 2021, leading to total sales being up 9.6 percent to $213,700,000 Now from a category perspective, we saw strong sales growth across hair cutting, hair styling, massage, hair oral care and long term hair removal solutions. This was partially offset by declines across men's manual shaving and to a lesser extent by men's electric shavers, given the trend we've seen that men tend to shave less during lockdown periods. We expect these categories to return to positive category growth for lockdown restrictions ease and our customers more regularly go back into an office environmental setting. Importantly, 26 of our top 30 selling lines were exclusive to Shaver Shop last year. This reflects the influential position we have in this category as well as the strong relationships we continue to forge with our suppliers. Our multichannel model has proven its value as our customers and we have adapted to meet their needs. And as we have previously noted, contribution margins from our in store and online channels are both very strong. So we remain somewhat ambivalent with regarding how our customers choose to shop with us, which is ultimately the essence of being a true omnichannel retailer that is purely focused on the customer and their needs. Moving to Slide 6. Slide 6 shows our quarterly sales contributions over the last 3 financial years. You can see that in comparison to FY 2020, quarterly sales grew strongly across each of the 1st three quarters. And as expected, it was more difficult to comp quarter 4 given the extremely strong performance in the prior comparative period. The Q1 in FY 2021 had the highest growth rate compared to any other quarter in FY 2021 at 36.4%. Now we're comping these figures right now, so please keep this point in mind when we get to our trading update. July 2020, in particular, was an incredibly strong period for us where exceptional sales growth was compounded by gross profit margins being well above our long term averages. And as you can see by the sales table to the right, quarterly growth rates in comparison to FY 'twenty then moderated as salons, barber shops and retail in general reopened and government stimulus packages dissipated in the second half of the financial year. That said, when you look at Shaver Shoppe's total sales performance against 2 years ago, there is less volatility in growth rates, as you can see in the right column of the table. Total sales were consistently up more than 20% on a 2 year basis with the second half also benefiting from the franchise buybacks completed in early February 2021, as we previously mentioned. Moving to Slide 7. Slide 7 shows how the omni retail investments that we called out in early FY 2019 has underpinned the exponential growth in online sales over the last few years and led to online channel now representing close to 29% of total Shader Shop sales. Our focus has been on improving the full customer experience through the simplicity of the product and navigate our websites, offering multiple payment options, including various buy now, pay later schemes, streamlining the checkout process as well as accelerating the whole fulfillment and logistics operations. At the same time, we focus on increasing the number of active customers we deal with annually as well as growing our email marketing membership. As I mentioned previously, active customers now stand at almost 500,000, up 122 percent on FY 'twenty. And our e mail membership is now 800,000 strong and counting, almost doubling in the last 12 months. I am pleased with the strides we have taken in the last 12 to 24 months to improve how we communicate with our customers. However, there is still so much more we can do, particularly in the areas of social media, data analytics and creative content that not only drive sales and conversion results, but further entrenches our brand as the leader in grooming and personal care. To this end, we'll be implementing additional capabilities like artificial intelligence to assist with the personalization process and help us deliver more targeted and engaging marketing communication to our membership base. Now moving on to Slide 8, which is one of my favorite slides because it goes to the heart of who we are as a business. These measures are store controllables that ultimately define our brand and are key contributors to what will drive repeat consumer purchase, higher referrals and greater customer lifetime value. Our stores and our store team remain one of our key actors and differentiates Shaver Shoppe and other retailers that seek to compete with us in this sector. Net Promoter Score, a measure of customer satisfaction with their shopping experience, was consistently around 89 out of a maximum of 100, reflecting our store team's focus on customer service excellence. The same is true for our customer experience scores, which measure things like store layout, shop person friendliness, product range and product knowledge. Like our Net Promoter Score, customer experience was consistently at exceptional levels, ending the year at 9.8 out of 10 in the June quarter. The trend in our customer service metrics has been positive for the last 3 years and reflects our store team's passion for delighting customers each and every time they enter one of our stores. Our focus is to at least maintain these high levels as we look towards the future. Now that brings me to Slide 9, which tries to explain how customer behaviors have changed and how Shaver Shoppe has adapted accordingly. Over the last 18 months, there has been a dramatic change in shopper buying habits and trends following the onset of the pandemic. Our customers still need to look and feel at the best, whether it's for a Zoom call or for their later Insta, TikTok posts, they are making choices that reflect their changed circumstances. Men are increasingly wearing beautiful stubble, albeit it's groomed beets and groomed stubble. Parents are getting used to cutting their kids' hair, sometimes badly in all fairness, but they're getting used to it worse. With salons closed, women are willing to consider DIY longer term hair removal solutions such as IPL products as well. Dentists is another great example. With dentists, massage and physio clinics closed, except the critical procedures, our customers are looking to home based massage tools like percussion guns, and high quality electric toothbrushes that most closely replicate the benefits they would receive from these services. Shaver Shop sells the tools that help our customers maintain their health and beauty regimes at home. When stores are open, our customers want an efficient sales experience with special advice so they can limit their time in public surroundings. They are increasingly willing to buy online and with spending being diverted away from travel and other leisure options will transact where they see value for money. Demand and supply in some cases can change rapidly, which means having strong relationships with suppliers is more important than ever. This has always been a competitive advantage for Shaver Shoppe given our dominance in our chosen market segments. Now one of Shaver Shoppe's core values is adaptability, and it's something that has held us in good stead over many years. To accommodate the constantly shifting retail dynamic, we've been editing our range, looking even more closely with suppliers, adjusting our stores to operate as dark stores when they're required to be closed and continually refining our offer and our depth of range to meet these new and changed customer needs. I'll now hand you over to Larry, who will take you through the financials in a bit more detail. Thanks very much, Cameron. I'm on Slide 11, our profit and loss statement for FY 2021. Before I begin explaining the results in more detail, please note that this is a reported result reflecting the application of the new lease accounting standard in both years. Also note that with the recent IFRS interpretations committee decision released in March 2021, we have changed our accounting policy in relation to the capitalization of configuration and customization costs associated with cloud based software platforms. This resulted in a small reduction in the profitability of the 2020 financial year, but had an immaterial impact to 2021. A reconciliation reflecting the impacts of the change in accounting policy is reflected in the pendency to the presentation together with the reconciliation to the old lease accounting standard. So let's get into the results. As Cameron mentioned, sales were up 9.6 percent to $213,700,000 Compounding the strong result was an increase in gross profit margins by 240 basis points to 44.3%, also a record since Shaver Shop IPO ed in 2016. This led to gross profit in dollar terms growing 16%. While franchise royalties were flat year over year, royalties will no longer be recognized following the acquisition of the last 6 franchise stores in February 2021. Operating costs were also well controlled this year and benefited from around $800,000 in rent abatements from landlords, as well as reduced employment costs as rosters were cut back during lockdown periods, particularly in Q1 and early Q2 in Victoria. This will be an ongoing feature as we look towards FY 2022 with the bulk of our store teams being stood down as various regions have been in lockdown across the 1st couple of months for this financial year. These were contributing factors to cost of doing business as a percentage of sales declining 110 basis points to 25.8%. In terms of the $500,000 increase in depreciation and amortization, this was primarily due to the increase in the number of corporate owned stores during the year and the associated amortization of the right of use assets associated with these stores. Interest expense primarily reflects the value of interest recognized on the store lease portfolio given we drew no bank debt during the year. Lease interest decreased by $500,000 reflecting our decision to only renew leases for 2 or 3 years on renewal given the uncertain nature of tenancy mix at present. Finally, in terms of net profit, we reached the top end of our guidance at almost $17,500,000 up 68.3 percent on last year's $10,400,000 result. This led to basic earnings per share increasing 66.2 percent to $0.1402 per share. And after adjusting for the $1,700,000 tax deduction we will recognize on the franchise buybacks that have been completed over the last 5 years, our cash NPAT was $19,200,000 leading to cash EPS of $0.155 Slide 12 shows the key drivers of NPAT growth with our like for like store network driving almost all of those $7,100,000 increase in NPAT to $17,500,000 To be clear, for this analysis, we have defined a like for like store as one that Shaver Shop owned and operated for all of FY 2020 and FY 2021, regardless of whether the store was impacted by retail trading restrictions across the year. So if a store was closed for in store trading, but still fulfilled online orders, effectively an online distribution hub or a dark store, It was still included as a like for like store for this analysis. To be clear, this is different to how we've defined like for like sales growth for the purposes of our trading update given the huge impact the recent lockdowns across New South Wales and Victoria and the ACT in New Zealand for that matter are having on our in store trading at present. The other key positive contributor to NPAC growth were the 6 franchise buybacks that were completed in February that delivered almost $500,000 in incremental NPAT after taking into account the reduction in franchise royalties year over year. Pleasingly, this was in line with our expectations for those buybacks. Slide 13 shows our normalized basic earnings per share trends over the last 5 years since listing on the ASX. You can see that since that time, our EPS has grown strongly following the Daidu and Daphne supported results in FY 2017. 2021 was an exceptional result, and we believe reflects the underlying trends towards DIY Personal Care and the resilience and differentiated nature of our business model. Clearly, 2021 was an unusual year where Shaver Shop benefited when barbers and hair salons were closed due to COVID-nineteen trading restrictions and people still had personal care and grooming needs. However, the quantum of this benefit is very difficult to quantify. The upside from all this is that Shaver Shop became known to many new customers with many of those choosing to remain to receive, I should say, email marketing communication from Shaver Shop as evidenced by the increase in the database to 800,000 members. So our priority now is encouraging those customers, those new customers as well as the loyal customer base that we've had for many, many years to continue shopping regularly with us in the future. Moving on to our balance sheet on Slide 14. Shaver Shop remains in a very strong financial position. We ended the year with $7,400,000 in cash and did not need to draw down any amount from our $30,000,000 debt facility across the financial year. As foreshadowed this time last year, we did increase stock levels by $3,000,000 to $18,000,000 but fell slightly short of our prediction of a $5,000,000 increase year on year. We chose to maintain a relatively conservative stock position coming into the 30th June this year, given the uncertainties around the Delta variant spreading in New South Wales, as well as the snap lockdowns that occurred in Q4, particularly in Victoria. We don't believe this lower stock position had a material impact on sell through. And as Cameron highlighted earlier, our stock position is exceptionally clean. You can see that right of use assets and liabilities have been decreasing over the last 12 months. This reflects our decision to renew store leases for shorter lease turns, generally between 2 3 years. And finally, Shaver Shop has again generated strong returns on invested capital with net profit as a percentage of shareholders' equity increasing to 24.1 percent in 2021 from 16.7% in the prior financial year. Moving on to cash flow. Shaver Shop's operating cash flow was again very strong at $36,000,000 Whilst this is slightly lower than last year, you will recall that we had deferred around $2,700,000 in net payments in the Q4 of 2020, and we pushed stock to ultra low levels as we tried to generate liquidity while balancing the very high levels of demand we had at that time. So overall, it's an exceptional result once again. If you compare the cash balance to the $41,000,000 which existed at the 31st December 2020, the beginning of the second half, the decrease in cash is due to the following three factors. Firstly, our business models always involve getting extended trading terms from stock suppliers in the lead up to Christmas. This means we sell through the stock for Christmas before we need to pay our suppliers and is a key strength of our model. The change in our trade payables balance between 31 December 2020 30th June 2021 has always reflected this and resulted in a $22,000,000 outflow in this most recent financial year and half. Shareholders should expect a similar type of cash outflow in the second half of twenty twenty two and in the years to come as we expect to continue using this key strength of our business to drive strong operating cash flow during that key Christmas trading period. Secondly, we acquired the last 6 franchise stores for around $14,800,000 in cash and what will be a very accretive deal for Shaver Shop. And finally, in the second half, we paid a $0.032 interim dividend that amounted to around $4,000,000 returned to shareholders. So in total, this resulted in an outflow of around $40,000,000 in the second half of twenty twenty two. So when you look at the $7,400,000 cash that we had at 30 June, it's actually an outstanding result that reflects the company's ability to retain a strong cash position whilst returning significant dividends to shareholders and reinvesting capital back into the growth of the business, both through accretive acquisitions of franchises and reinvesting in our organic business, which takes us on to Slide 16 and the trend in our dividend payments. Shaver Shop Score today announced a $0.05 per share fully franked final dividend, which represents an increase of 85% over the $0.027 fully franked dividend announced this time last year. This brings our total FY 2021 dividends to $0.082 per share, up 71% on last year's dividends, which were only partially franked. If you recall, the special dividend that was paid in lieu of the interim dividend was 80% franked. Today's dividend announcement reflects the Board's decision to balance the desire to continue increasing dividend payments with the need to retain fiscal conservatism due to the ongoing trading uncertainties caused by COVID-nineteen. The payout importantly also enables Shaver Shop to have the flexibility to invest for future growth in Shaver Shop's business. I'll now hand you back to Cameron. Thanks, Larry. Before we get on to the trading update and outlook, I thought we should visit some of the underlying trends driving our business and the steps we are taking to increase our market share further. In terms of the underlying trends that continue to drive Shaver Shoppe's growth, the influence of social media is undeniable, particularly in the younger demographic with the desire to look and feel good day in and day out at constant consideration. Global suppliers like Procter and Gamble, Philips, Panasonic and GHD are also investing $1,000,000 every year to bring new products and innovation to the market that deliver salon or professional quality results in the comfort of people's homes. This is expected to drive the trend towards DIY beauty and personal care category even further, potentially taking market share away from salons, laser and skincare clinics. Men are increasingly becoming like women in terms of their beauty regimes, leading to a higher number of tools that they use on a daily or weekly basis for their beauty regime. And finally, with the investments we've made over the last 3 years, we are well placed to benefit from the growth in online shopping, particularly after the impact of COVID-nineteen. We aren't just satisfied with market growth rates ever. We intend to continue securing exclusive access towards many of those new and innovative products as possible. I mentioned earlier in the presentation, 26 of our top 30 selling product lines are sold or found only at Shader Shop last financial year. We have an even stronger competitive position in some categories like body bringers. So why would suppliers you can provide exclusivity to Shaver Shoppe? Our specialty retail model has proven that with the brand recognition we now have that launching these products through our stores and websites will give us very strong returns to suppliers as well as Shaver Shoppe. This in particular is because we train our team to be the experts in grooming and personal care, and we invest heavily in marketing and advertising to promote these product launches. We are able to educate customers about the features and benefits of each product at the right price points and make sure they walk away very confident that the Shaver Shop purchase will give them the right look or the look that they're aspiring for. We will expand into new categories with new supplies and increase the number of own brand products as well. This includes expanding into female categories where we play at a very small part today and in the future where it can be a meaningful incremental contributor to our product or category range as well as our financial results. We will continue to leverage our database to further engage, inspire and delight our customers and look to selectively expand our store network where the commercial returns are compelling. This is particularly the case in New Zealand, where we hope to open 5 to 6 stores over the next 24 months, but we'll be very selective with our expansion strategy in Australia. To this end, we'll be opening new locations at Bunbury in WA and Hervey Bay, Queensland in quarter 2 of this financial year. So in summary, there are significant number of initiatives as well as category fundamentals that we feel will underpin Shaver Shoppe's long term growth strategy, which takes me to our trading update and outlook on Slide 19. As with all retailers, we've experienced an extremely volatile trading environment over the last 8 weeks as newer states have entered short or longer term lockdowns. To provide some context, we have lost around 41% for a total of more than 2,800 in store trading days since 1st July 2021. This compares to only the loss around 10% of the available trading days for lockdowns over the equivalent period last year. And as we look through earlier and talk through earlier in the presentation, quarter 1 was our strongest comparative quarter in sales growth terms with July and Absolute standout. So with that in mind, total year to date sales have declined 7.3% compared to the government stimulus supported period last year. But compared to 2 years ago when COVID didn't exist, our total sales are up 15.8%. And if you look at our modified like for like sales, the stores are excluded if they were not open for in store trading. Sales were up 0.5% on a 1 year basis and up 28.9% compared to 2 years ago. To be clear, this number also excludes the buybacks we completed in February and the 2 stores we permanently closed in FY 2021. So it is a true like for like measure. As our stores have closed, customers have transitioned to Shabyshop's online channel with sales up 52.8% on the elevated levels we experienced last financial year and 368.1% on a 2 year basis. I'll repeat that sales up 3 68% on a 2 year basis. The other important point to note is that as lockdown has extended, we have seen demand patterns emerge in New South Wales and Victoria from mid to late August that is similar to the accelerating demand we experienced in parameatal categories at the start of the pandemic in early April 2020. This is not only driving our top line sales, but keeping gross profit margin very healthy, well above the levels of 2 years ago, but not at the abnormally high levels we saw this time last year. And where we've seen our shops reopen following government restrictions being lifted, the strength of our omni channel approach has been evident with pleasing results so far. So in summary, we've experienced an incredibly volatile couple of months with total sales down on a 1 year basis, but well and truly up versus 2 years ago, with an increasingly positive trend as the lockdown continues in New South Wales and Victoria. Shaver Shoppe's annual performance remained highly reliant on Black Friday, Christmas and Boxing Day trading period, which are yet to come. And so in light of all these factors, Shavishoft does not believe it is prudent to provide sales or profit guidance at this point in time. That concludes the formal part of today's presentation. Larry and I will now be happy to take your questions. Thank Your first question comes from Rodney Van Rooyen from Life. Please go ahead. Hi. Firstly, outstanding results, gentlemen. Congratulations to you both and to the entire team. Thank you. Thanks, Ravi. And there's so much to like about the return on invested capital, the 2630 top products being exclusive to Shaver Shop. But I guess the first question, I would like to ask 2 questions, if I may. The first thing, I guess, on the customer service side of it, what's most impressed you? I mean, that's like it's great to see the NPS scores up. But is there any sort of personal stories or any anecdotes you'd like to share about customer service or customer happiness during this period? Yes. Look, it's probably I could walk a bit here, so you might have to pull me up on me. There's hundreds of stories. I mean, behind the NPS scores are actually customer comments, which I read every day. And that's customer feedback from what they're experiencing in the stores that remain open or even online. And I think the key thing that's really impressed me, Robbie, is the store manager's resilience at store level. The undertakes, Victoria has gone through 6 lockdowns. Some of those individuals have been scoped down multiple times. And what has just impressed me so much is when they come back, fully engaged, they just appreciate to be back on board. They have certain customers or shipping online orders from the stores that we do in the current circumstance where our bricks and mortar stores aren't open. So from my point of view, honestly, without doubt, it's a doubt, it's a passion and resilience of the store teams. It's been absolutely incredible. Great. Yes, thank you for saying that. I know you could expand upon it, but you have your time for other questions. I ask that and just tie that to basically the second part, which is that your successes, although in the share price, I know we don't talk about it much, but it did the share price hasn't performed as well this year as you have. The business is outstanding. That's brilliant. And I know that sometimes the share price is a bit delayed, whatever. But I'm sure your success is attracting a lot of competitors or imitators. Have you taken thought to that? Or do you just keep applying your winning formula as if you guys were, I guess, not alone, but you've always had competitors? But I guess, yes, sorry, the question is more, are you seeing new and different competitors because of COVID lockdowns and because of your outstanding success, particularly online? Yes. It's an easy one. I think from my point of view, having been here last 15 years and sort of 10 years I was with Gillette, Procter and Gamble is the mix of competitors has changed, but I wouldn't necessarily say it's any more competitive today than it was 20 years ago. And that makes it some surprise some people. But 20 years ago, department stores, Myra and David Jones were very, very strong in this category. Whereas today, the mix is changing a little bit, a few more online retailers. But generally, I think and you can see throughout our number of exclusive product lines without wanting to appear complacent or arrogant in any form, I think we have a very differentiated model. And we've been able to maintain our strong relationships with suppliers, investment in staff training. And the biggest differential, I think, is our omnichannel model because the reality is when we're in a long lockdown period, we benefit through the online business proposition. But the greatest period is actually, to be honest, when the lockdown ceases and then we see everybody come back to bricks and mortar, we've also experienced very positive trends when states finally reopened. So I just think our model is very well positioned to benefit no matter how the pendulum swings, whether it's a long term lockdown or, hopefully, the lockdown ceases and everyone comes back to the shopping centers. Brilliant. Thank you. And again, well done to you and the entire team. Thank you. Your next question comes from Michael Francis. Please go ahead. I just got a question about the focus on the female category growth segment. How big an opportunity do you see that as? Sorry, I lost you there. What was the category? Apologies. The female category. I just wanted wondering how big an opportunity do you see that is becoming? Yes. Look, I think we're a relatively small player in that space, obviously. When we talk about the skincare, skin rejuvenation products, we are very strong in hairstylists. And I think the opportunity for Shaver Shop is because over 50% of our clientele are actually female, who are often buying for demand. It's sort of a natural opportunity for Shaver Shoppe to expand our categories and really appeal to that female who is actually shopping in the store. But to give context, our core business is men's grooming. That's where we're very, very dominant in. And I still see an awful lot of low hanging fruit opportunities within that segment. So female grooming, I think, is a nice opportunity for us to expand. But the core part of our business and the core focus, without doubt, is still our DNA, still men's grooming. Okay. That's good. Okay. Thanks, Ted. Pleasure. Your next question comes from Shue Yang from Micro Equities. Please go ahead. Good morning. Well, I'm on the great set of results. Just on the like for like trend in the new financial year in some of the states less affected by lockdowns in, say, WA, Tasmania and Northern Territory. Can you just give us an idea of what that sort of looks like just to give us a picture of what it looks like when there's less disruptions to store to the store? Yes, sure. I might jump in on that one, Shaul. Thanks for and congratulations on the results. It does vary by state. But that being said, we're still seeing reasonable growth across most of the states. Some of them are in slight decline. The measures that we use to analyze our like for like sales internally are slightly different than what was presented, just given the complexity of actually excluding the stores that aren't open for retail trade. That does require a lot of calculation. But if you would apply that and apply that analysis, you'd see that the like for like stores where the states have been open, we see a strong rebound, as Cameron said, in like for like sales. So in the order of sort of mid to high single digit like for like sales growth when the stores reopen. That's what we've seen historically. Okay. So those stays less affected by lockdowns, they're delivering positive like for likes? Yes, that's right. That's why for the I guess, the periods ending the 27th August, were up 0.5% on like for like terms. Now that does include some stores like in Regional Victoria and those types of things where they are open, but there's still restrictions. So there have been periods when those stores have been able to trade. But obviously, with some of the concerns around COVID, for example, here in Victoria, despite the stores being open, foot traffic is well down, and that's having an impact on those overall like for like results. So it's positive. In those states where there isn't the same sort of concerns, Queensland, WA, Tasmania, we're not we're seeing better like for like growth rates versus the overall number than that's 0.5% year to date. Yes. I'm Mr. Rakesh, too. Just a second question on the marketing spend. How are you sort of looking to manage that going forward as stores go in and out of lockdowns? I guess second half was quite low as a percentage of revenues. Yes, just wanted to some hardening some of that if possible. I might jump in there and then Cameron, if you want to add in on the end. So for marketing spend going forward, we don't see any meaningful incremental spend that's required year on year even if the stores reopen. A lot of our spend in marketing transitioned away from your more traditional catalog and print spend into the digital area. We still have a reasonable amount of TV advertising as well. And so as we look forward, I don't expect that mix to change much more, and I don't expect the level of overall marketing spend across the business to need to increase materially either. We've been pretty successful in the transition towards digital over the last 24 months or so, certainly since COVID hit. And I think that we'll continue with that strong trend that we've had over the last 18 months or so going forward. Do you want to add anything on to that, Cameron? No. I think we're pretty accurate, Larry. Probably the only thing maybe to mention is, within the TBC mix, we have moved a fair bit of our spend towards free to air towards ESPN. We think that's just a natural synergy for the brand and particularly tapping into the young millennial men, having associations with sports like UFC, NBA as well. They've proved a pretty successful for us over the last sort of 9 months, so we're extending that partnership with ESPN. Okay. Understood. Last question for me. Just on the gross margins year to date, you mentioned it's slightly down FY '21, but higher than the year prior. Can you just give us the pluses and minuses on gross margin expectations? I guess, knowing your stock level still, I think, remain below your optimal levels and then there's also coming in out of lockdown. Sure. So over the long term, the shaver shop gross margins have averaged in the order of 42% to 43%, so right in the middle there, around 42.5%. Over the long term, we probably expect it to revert to that. But certainly, what we're seeing today is with the category mix that's coming through, particularly in the areas, like we mentioned, like haircutting, which has been very strong for us again over the 1st 8 weeks, that there's probably a little bit of an upside risk to that long term historical average gross profit margin. Obviously, the only caveat that we need to put on that is Christmas and Boxing Day and Black Friday trading obviously still remains absolutely crucial to our annual results. So until we get through that, it's difficult to predict exactly where gross profit margins are going to end for the half and for the full year. But certainly, what we're seeing today is a trend towards the upside versus the long term historical average gross profit margins. Has there been any change to the length and depth of discounting this year versus previous year? Sorry, go ahead, Cameron. No, not really. I mean, it's pretty consistent sort of promotional program. But what you did see in July last year, which I think we called out, was we had an exceptional sales month and also gross profit margin month. And that was partly due to product mix over that period of time. So from the terms of generally that our promotional program, our sort of go to market strategy is no more or less aggressive than what we've historically done. Okay. Well done on the great results again. Thank you. Thanks, Joel. Thanks, Joel. Your next question comes from Damian Hector. Please go ahead. Hi, guys. Congrats once again on the assets for the last year. Really good job. My question is on your customer base. You've spoken about the 800 or 1000 customers that you have in your database. Is there any view on what the average spend is per active customer, depending on how you turn an active customer? And what the growth would have been pre COVID and post COVID? Yes. So I'll jump in there. So in terms of an active customer, they're a customer that transacted with Shaver Shop online within the last 12 months. So at the moment, we're still in the process of trying to gather the in store details so that we can track in store demand and customer details as well as that online. So our active customer base and the numbers that we're quoting are primarily online customers. In terms of the spend between pre COVID and post COVID, between those active customers, unfortunately, the CRM, I think, launched just in September 2019, there or thereabouts. And so we didn't really have a fully accurate trend, given there's only sort of 6 months, 5 to 6 months before COVID hit to get a real trend on the spend per active customer before COVID. What we can say is the spend per active customer does appear to be higher than the spend for a customer that's not necessarily on our database. And that's, I guess, a positive trend over the last 12 months. Okay. And second question is around, you mentioned you didn't as being an area that you're looking to us in most schools. Is there a view on how much of profit you would regain for expansion assets over the, I guess, foreseeable future versus the payoffs in dividends? Yes. I guess what we tried to strike the balance on there is having the ability to actually continue to invest for growth. So in New Zealand, for example, we still expect to open 5 or 6 new stores. So that in quantum of investment is really only about between $1,500,000 to $2,000,000 all up. So the fact that we have $7,400,000 in cash and we have a very strong balance sheet, clean stock position means we can still pay out healthy dividends going forward while looking forward to future investments and being able to invest in the future. And I guess the payout of $0.082 per share is a very strong payout. It ends up being more than $10,500,000 I think for a full year. So the ability of our business to generate cash will still pay dividends and reinvest future growth. I think we're still in an incredibly strong position. And as we referenced in the presentation, the Board's intent and desire is to continue to increase dividends going forward. Okay. Thanks for your answers. Congrats again and good luck. Thank you. Thanks, Damian. Your next question comes from Zack MacLean from Roth Diamond Blue. Please go ahead. Good morning. It's very pleasant results. Management should be congratulated. I have one question on the expansion of the store network. So can you just outline your thesis behind new store openings given that Cheuvreuxop already have quite an extensive store network. I recall reading something along the lines of over the next 3 years, you expect to have the store numbers go to 130 to 135. Given the performance of the online channel and what's shocking behind adding to this network and what specific metrics do you specifically for to make sure that any new shops that are to that will actually do at Bawi? Thanks, Ross. Yes, in terms of probably what we've said with respect to greenfield sites over the last probably 18 months, particularly since the COVID scenario has played out and the volatility associated with that is we are very, very cautious about any greenfield site for Australia. So the commercial would have to be extremely compelling for us to consider a greenfield site in Australia. And I think that reflects a more recent trend where you've really only seen 1 to 2 sort of new greenfields on average over the whole financial year, and we have had 1 or 2 store closures. So it's really important that where we're at with Australia is we are open to looking at Greenfield sites if we feel it's generally going to drive incremental sales and happen to an incremental customer. However, we're extremely conscious with the growth that's occurring across our online channel and the volatility associated with lockdowns, etcetera, due to COVID-nineteen that we are also quite open to if we feel a store is not actually driving incremental sales, the bricks and mortar store upon lease renewal. We're also open to walking away from that store as well. New Zealand is a slightly different scenario. As we said, we've got lower brand awareness in New Zealand. We only have several stores in New Zealand, and we're getting significant growth. And we feel stable is an issue in New Zealand. Hence, we'd love to have 5 or 6 stores in New Zealand at the right price, obviously, as quickly as possible. Westwood, Albany is a great example of the nodding. And we think that would be an absolute no brainer or a center for shaver shop in that market. So bottom line is we are open to greenfield sites, but absolutely, the investment continues to go in the digital channel and very cautious about opening Australian Greenfield sites in particular. But the dialogue is still there for landlords to be Thank you very much, guys. Your next question comes from James Casey from Ord Minit. Please go ahead. Well, good morning, gentlemen. May I just confirm your store network changes for this year? Kevin, I think you said 2 new stores for this year. Is that correct? Yes. We're opening up 2 new stores this year this half at least. So there may be an opportunity for maybe another one or so in the next half, but that's obviously subject to timing of right side terms, etcetera. And are they in Australia or New Zealand? No, they're Australia. So they're Bunbury WA in Hervey Bay in Queensland. So good stores, regional stores, pretty manageable occupancy costs, tapping into an incremental customer, low risk strategy, happy to do those stores. The focus has been on New Zealand for greenfield sites. But due to travel restrictions, etcetera, it's been a little tricky to really push that strategy over recent times. But there's no doubt with respect to greenfield sites, Our priority is actually the New Zealand market. Yes. Okay. Just with regards to the current lockdowns, I'm interested how you're managing that business. With the rentals and your discussions with landlords at the moment, do you think there'll be rental abatement? Will it be rental deferrals? Or how is this going to play out in particularly in New South Wales and Victoria? I think it's a combination of both. But we've played we've sort of called out the whole period through the pandemic that we're not a retailer that's going to hold a gun to the head of the landlord. We honestly do believe in achieving a fair and equal outcome. We appreciate it's up to the landlords as well. And you have to have consideration for how shaver shop is performing. And ultimately, at the moment, we're holding up in a pretty good position. So you have to take that in consideration when you're dealing with landlords. Having said that, there are site locations in New South Wales where absolutely we feel that Kennedy mix has been impacted. Customer traffic is going to be impacted for a long, long time. So you can see the area, etcetera. And absolutely, we look for the landlord for appropriate support. What we're actually seeing at the moment, though, it's being completely transparent, is I think there will be a period where the landlords are obviously getting a lot of requests. And it will take some time to work out exactly the type of rent abatements that will flow through the retails with time because obviously, it's a pretty significant issue in each of those in particular. Okay. My final question is perhaps a longer term question. Someone commented earlier on the return on invested capital of the business currently, which is very strong cash flow generation and minimal CapEx requirements will further cement your financial position. You've obviously got significant Board expertise, significant management expertise. I just wonder what's next for the business. What are you thinking about over the next sort of 3 to 5 years? Yes. I think I'll answer that first and I'll try to Larry as well. Partly, it's doing what we're continuing to do. I mean, there's a lot worse things than being the market leader in men's grooming. I constantly refer to the point that men are becoming more like females in terms of their beauty regime. And I know that, that may seem a bit of a funny comment in some respects, but it's actually part of what's driving this category growth. Men are buying more and more personal care tools because they worry about things like beard care, beard grooming, hair clipping, men's body grooming, IPL treatments, skin care, skin rejuvenation. Men are getting more and more exposed towards these other categories that are typically being symbolic of female beauty regime. So because there's a natural growth in this area, personal care tools and devices are increasing, which we're the natural beneficiary of. And we're seeing a whole lot of subcategories grow that we're owning such as beard oils, beard shampoos and then being body cream that I mentioned. On top of that, Phil, I think what we're doing is quite smartly is we're expanding into new categories, not in a really aggressive manner. But given 50% of our female client base is females, what we're actually doing is introducing categories like female fragrances, female skincare products, female hairstyling products, hairdryers, introducing new suppliers. So some of those peripheral categories that we're actually introducing are also helping us drive repeat purchase and giving a great opportunity to target those customers through that ever increasing database we have as well because they're not actually or they like seeing these new products and new categories that we're introducing to the Shaver Shop model. Yes. And if I just add on to that, obviously, I think your question is also referring to the fact that the strong balance sheet and the fact that potentially we could look to do non organic activity going forward. And that is something that with the right opportunity at the right price, given the experience that we do have on the Board, we're very prudent. It was an opportunity that we were interested in, and we could see that it was compelling and complementary to the shaver shop business and our strengths. We'd have a look at it, given our balance sheet strength. It's a very fortunate position we find ourselves in today. So yes, the right opportunity, we'd be keen to look at it, but we're not going to be too aggressive in that search sort of process. Just wait and see what comes along. Okay. Thanks, Harry. Thanks, Kevin. Appreciate your time. Thanks, James. Your next question comes from Shane Week. Please go ahead. Congratulations on the results. Thank you. Thanks. Just wondering into the future, do you guys have a target payout ratio for your business as part of the net profit? Yes. So we do have a dividend policy of 60% to 80% payout of cash net profit after tax. So that's after taking into account the benefit that we get from the tax buybacks and basically being able to deduct the cost of the franchise license from those buybacks over 5 years. So that this year results in a $1,700,000 benefit between cash NPAT and normal NPAT. Now we're slightly below that this year, we're at about 55 percent payout ratio on cash NPAT. That simply reflects the fact that we're in this very uncertain dynamic period of trading and the fact that we want to maintain a little bit more fiscal conservatism so that we can navigate our way through this in the next 12 months and also maintain that strong balance sheet strength that we mentioned. So I hope that answers your question. It does. Thank you very much. No worries. Thank you. Your next question is a follow-up from Sherry Yang from Microequities. Please go ahead. Larry, just on the number of refix you've committed to for FY 'twenty two, is there a number you guys have committed to? I believe it's between 46 again this year, Shaul. Don't take that as a hard number though because what we found last year is it ended up being quite difficult to schedule in the refits given the lockdowns and the restrictions on construction and those types of things and our ability to access some of the centers. So we've been consistent around 4 to 6 over the last few years. Hopefully, we can do the same again this current financial year, but I do expect some of those to be impacted by just the restrictions around access to the centers and construction, etcetera. Okay. And across the current store network, what portion of the store networks you believe are in you could move to superior locations within their respective centers? Yes, that's a tough one. In terms of the superior location, probably 30%. But that comes at a commercial premium where the occupancy cost the risk is your occupancy cost blows out because if you move a cycle, say, a B grade site to an A plus, your rental per square meter could actually put pressure on the overall profitability. So overall, I would say in terms of practically, there's probably about 10% of store locations that we could move or improve on within what we would deem as acceptable commercial terms. Yes. Okay. And are you achieving those at time of that renewals? Is that something long or the happy to entertain? Yes. That's the ideal scenario, Shay, where you would try to negotiate back. And then obviously, those shows pending if they're actually the site available often at least renewal time. You may have a zone within a center that you've identified as Abras, but it may be fully permanent. So a lot of it is a patience game, right site, right time and then being able to do a deal with the landlord. Understood. Just last question. On Slide 7, the online sales, active customers, dollars 4 189,000 at year end. What's the split between first time customer in the past 12 months versus returning customers? Sorry, Shaul. I don't have those numbers off the top of my head. So I'm not going to be able to give you an answer on the call. Apologies for that. But I'll try and come back to you separately on that if you can. No problem. Thank you. There are no further questions at this time. I'll now hand back to Mr. Fox for closing remarks. Thank you. As far as we wrap up, let's just go through our investment summary just one more time. Shaver Shop operates in a large and growing market driven by changing consumer preferences and new product innovation, which we've spoken a fair bit about over the last hour. COVID-nineteen supercharged growth in our sector and introduced a large group of new customers to Shady Shop as people were forced to continue our DIY personal care and grooming solutions. We still have significant potential to further increase our market share. And over the last 35 years or so, we've developed an incredibly strong and trusted brand in Australia and are well on our way to doing the same in New Zealand. Our specialty retail business model is agile, differentiated and very resilient, and is based around customer service excellence and unparalleled product knowledge at store level, product exclusivity and competitive pricing. The investments we've made in building our online capabilities in the last 2 to 3 years means we are the leading omni retailer in our core categories with strong online sales growth. We also feel we have significant further opportunities to grow. A reminder, we acquired the last 6 franchise stores with cash in February 2021, which should deliver around $1,500,000 to $1,600,000 in annualized incremental impact in FY 'twenty two. We have a very strong balance sheet with no debt and have strong cash conversion. Also, we have an experienced management team that has executed extremely well over difficult times. And finally, our Board and leadership team is focused on investing for growth and improving total returns to shareholders as evidenced by the continued growth in our dividend over time. Thank you all for your time today. That does conclude the investor briefing.