One Stock Possessing Decent Growth Prospects

Source: Halfpoint, Shutterstock

As the market players are aware, the global economy was impacted by the outbreak of COVID-19. The impact was felt in several sectors and lockdowns were also imposed. However, some companies are expected to perform well moving forward. This company is possessing decent balance sheet which could help it in navigating challenges. The stock of this company has increased by ~12.34% in one month. However, in 3 months, the stock rose by ~34.9%.

The Warehouse Group Ltd

Business Overview

  • WHS had a decent cash position of $183.6 million at the end of H1FY21 as against a net debt position of $68.6 million during the period H1FY20.
  • The board has declared a fully imputed interim dividend of 13 cents per share for H1FY21.
  • The company is expecting FY 2021 capex to be in the range of $80 million and $100 million.

The Warehouse Group Ltd (NZX: WHS) is currently one of the leading retailing groups in New Zealand with over 260 retail stores, online stores as well as distribution centres spread across the country. WHS has six prominent retail brands including: The Warehouse, Warehouse Stationery, Noel Leeming, Torpedo7, 1-day and TheMarket.

Over the years, WHS has transformed itself from a single The Warehouse store. Besides, the company has a robust workforce with more than 12,000 team employees spread across its locations.

Resilient Financial Performance in H1FY21

Notwithstanding the disrupted trading conditions put across due to Covid-19, WHS has delivered a decent performance in H1FY21, and total group sales registered a growth of 7.4% YoY to $1,808.3 million. The company witnessed traction in its online sales during the period, making the contribution of 11.9% of the overall group sales.

The company stated that increased customer demand in H1 FY 2021, along with the continued execution of Every Day Low Price (or EDLP) in The Warehouse as well as less discounting across the other brands, supported significant increase in margin. Notably, operating profit stood at $153.0 million in H1 FY 2021, reflecting a significant rise of 125.4% on the prior period. Resultantly, the operating profit margin witnessed a rise from 4.0% to 8.5%.

With respect to The Warehouse, sales for the H1 FY 2021 rose by 3.0% against H1 FY 2020. This was witnessed despite the Auckland Region experienced 18.5 days of COVID-19 lockdown in the month of August when stores were not able to trade.

Warehouse Stationery sustained to build on the momentum which was established in FY 2020, and it managed to deliver a robust H1 FY 2021 performance. Notably, sales rose by 2.1% on the prior period.

Additionally, Torpedo7 recorded strong sales growth of 29.0% YoY during the period under consideration.

Noel Leeming managed to continue the robust momentum which was witnessed in H2 FY 2020 and its H1 FY 2021 sales witnessed a growth of 15.7% on H1 FY 2020.

Key Data (Source: Company Reports)

Balance Sheet Strength

The balance sheet position of the company remains healthy which is reflected in the improvement of cash position. At the end of H1 FY 2021, the company’s cash position stood at $183.6 million. This was supported by robust trading performance along with benefit of enhanced working capital position.

Healthy Dividend Payout

Due to the decent performance registered by the company, the board declared a fully imputed interim dividend of 13 cents per ordinary share. Notably, the payment date of the same is 22nd April 2021. The Board of the company has also declared a special dividend of 5.0 cps in the month of February.

The company stated that its operating cash flow has witnessed an improvement of 8.9%, because of growth in profitability as well as tight inventory management.

Digital Spend

The company has incurred capex of $39.4 million in H1FY21. It was mentioned that capital expenditure increased as compared to the prior period, with particular increased spend towards customer digital as well as core system initiatives including the Group ecommerce platform and ERP finance and inventory systems.

The company is now expecting FY 2021 capex to be in the range of $80 million- $100 million, which is lower than initially budgeted, but higher than the average last 3 years of $65 Mn as the company strives to make deployments towards future growth of the business.

Key Data (Source: Company Reports)

Outlook

The company highlighted that the group witnessed sales growth of 2.3% YoY in the first four weeks of H2.

WHS has approved a new dividend policy in the month of March 2021 which aims at distributing minimum 70% of the Group's full year adjusted net profit at the discretion of the Board and considering other factors like trading performance along with market conditions as well as liquidity position.

The company stated that this dividend policy would be providing the group flexibility to maintain the stable capital structure, allowing for the capital expenditure to deploy towards future growth, as well as progressive and sustainable dividends.

Meanwhile, because of the continued uncertainty in the trading environment, the Board is of the view that it won’t be appropriate at this time to give any guidance for the full year FY 2021 result.

On March 26, 2021, the stock ended the session at NZ$3.640 per share, down by 3.70% on March 26, 2021.


Disclaimer
The website https://kalkinemedia.com/nz is a service of Kalkine Media New Zealand Limited (Kalkine Media), Company Number: 8107196. The principal purpose of the content on this website is to provide factual information only and does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) or engage in any investment activity under discussion. We are neither licensed nor qualified to provide investment advice through this platform. In providing you with the content on this website, we have not considered your objectives, financial situation or needs. You should make your own enquiries and obtain your own independent advice prior to making any financial decisions.
Some of the images that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed on this website unless stated otherwise. The images that may be used on this website are taken from various sources on the web and are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it below the image. The information provided on the website is in good faith, however Kalkine Media does not make any representation or warranty regarding the content, accuracy, or use of the content on the website.
   
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK