Beacon Lighting Group Limited (BLX) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Beacon Lighting Group results presentation for the 52 weeks ended June 28, 2020. [Operator Instructions] For opening remarks, I would like to turn the conference over to Beacon Lighting Group Chairman, Mr. Ian Robinson. Go ahead, please, Ian.

Thank you, Lisa. Good morning, shareholders. As the Executive Chairman of the company, I would like to welcome you to the Beacon Lighting Group results presentation for the financial year 2020. With me today on the teleconference is our Chief Executive Officer, Glen Robinson; and our Chief Financial Officer, David Speirs. This morning, we'll be discussing the results of the 2020 year. The results were filed this morning on the ASX and on our corporate website. The presentation will take approximately 30 minutes, followed by time for questions. In what was a very turbulent year for many retailers and businesses around the world, I would like to express our appreciation to our team and our customers for their support during these challenging times. As you know, the business went through the first half with somewhat disappointing results. As we moved into the second half, we did start to see some improvement in trade. However, with the potential issues of COVID-19 coming through to the market in March, the business had to reposition itself for what may lie ahead. Fortunately, and similar to what we've seen in other disruptive times, the Beacon business showed great resilience through those uncertain times, and we're very fortunate that the home became an important place for our customers and spending continued strongly through the last quarter to help deliver some very solid results for the group. The new year has started out with a similar trading pattern. So what we saw in the final quarter of financial year 2020, albeit with Victoria now in a tougher Stage 4 lockdown, which will affect the current trading in that state, but we believe that the strong national trading will continue for some time for Beacon Lighting. There will be still a lot of people working from home and, in some cases, working from home will be a permanent shift for some businesses. Interstate and particularly international travel won't be a reality for some time, which means again the home continues to be more important place for our customers. So while uncertainty still persists, the business is in a strong financial position. We remain focused on our key growth areas in the core business. We are a dominant player in the lighting market, and we should expect sustainable growth in the financial year 2021. Page 2 of the presentation outlines what we're discussing today with Glen, our CEO, taking you through the results overview, followed by David, our CFO, presenting the financial results, cash flow and balance sheet, and we'll pass back to Glen for growth strategy and the outlook. After that, I will direct any questions that you may have. I'll now hand you over to Glen to discuss the results overview.

Yes. Thank you, Ian, and welcome, shareholders, to today's presentation. I'd like to start on Page 4 and review the key highlights for the financial year 2020. The group, during a disruptive and turbulent time, was pleased to be able to achieve a record statutory sales result of $252.2 million, an increase of 2.6% over the financial year '19 results and an underlying result of $250.9 million, an 8% increase over the previous year. The group saw strong sales in the core of the business being the retail stores with company store comparative sales increasing by 7.2% for the full year. Online sales continued to be a very important shopping choice for our customers, made only more important during times of social distancing measures. Online sales increased by 50.6% to $16.2 million or 7.6% of total retail sales for the year. The group was able to achieve a record statutory net profit after tax result of $22.2 million, an increase over the corresponding period, up 38.5%. The group achieved an underlying net profit after tax result, which excludes the DC sale, Beacon Energy Solutions closure and lease accounting changes at $19.1 million, an increase of 16.8% over the FY '19 results. The group completed the sale and leaseback of its Queensland Distribution Center in December, which paid down debt and increased cash flow in what was a curious timing given the onset of COVID-19 in Australia from March. During the year, the group acquired the franchise operator store at Myaree, WA. The group also acquired the Custom Lighting store in Malvern, Victoria, which services the premium end of the residential lighting market. Also, during the year, the group decided to exit the solar industry with the closure of the Beacon Energy Solutions business due to tightening margins and the complexity of these larger projects making it difficult to grow a sustainable business. The group has now completed the majority of outstanding commitments and is pleased to realign our focus in the lighting categories. Thanks to the sale of the Queensland Distribution Center, the strong retail trading plus improved cost control, the group is pleased to have finished the year out with a strong net cash position. We move on to Page 19 (sic) [ Page 5 ]. We can review an update about COVID-19. The group, like many other businesses around Australia and the world, had to navigate its way through the global pandemic of COVID-19, and we still have some way to go. As a business, our first priority is to provide our team and customers with a safe environment and to provide certainty to our team during very uncertain times. Fortunately, and thanks to our team and customers, we were able to continue to trade throughout March, April, May, June and July. So while we had plans for the worst and delayed any discretionary spending, the group, in fact, saw improved sales throughout the final quarter as customers were spending more time working and schooling from home. The group, through the COVID period, has not required or been eligible for JobKeeper or any other significant government support. The group will see a reduction in sales during the 6-week Stage 4 lockdown in Melbourne. However, we believe the business is in a strong position to get through that period. Steps have, again, already been taken to provide our team with certainty, and we have found online sales, trade, and click & collect sales have picked up substantially in those stores, which are currently closed to our retail customers. The future effects of COVID-19 are obviously unclear. However, the business has seen what happens when discretionary spend is pulled away from other areas and customers focus on improving their home as a more important place to spend their time. We believe this shift in spending will continue for some time yet. We move on to Page 6. We can review the statutory results for the group for financial year 2020. The statutory sales for the FY '20 year came in a record $252 million, a $6.4 million increase or 2.6% ahead of the previous year. The gross profit margin was pretty well in line with last year at 63.9%. Other income increased primarily due to the Queensland Distribution Center sale. Operating expenses are noncomparable as they include the changes in lease accounting standards. The statutory net profit after tax came in at a record $22.2 million versus $16 million last year, a $6.2 million increase or 38.5% improvement. The statutory profit result was assisted by the sale of the Queensland Distribution Center for a net profit after tax increase of $5.4 million. The statutory profit was reduced by the closure of Beacon Energy Solutions business to the value of $3.6 million and a gain on the new lease accounting standards of $1.2 million. The underlying results on Page 7 show a more meaningful comparison to last year from a group trading perspective. This compares the full year financial year '19 result and the full year '20 result, excluding the sale and leaseback at the Parkinson DC, the closure of the Beacon Energy Solutions business and the new lease accounting standards. For the purpose of the remainder of this presentation, we will refer to the underlying results. Underlying sales had a good improvement over last year, increasing from $232 million to $250.9 million, an 8% increase. Gross profit margin continued to be strong, particularly given the movement in the currency, coming in at 65.5% versus 65.4% last year, and gross profit dollars increased to $164.4 million, up 8.1%. Other income was down on last year at $1 million or 35.3% reduction, reflecting lower royalties received from franchise stores with only [ 20 ] franchise stores remaining in the network of our 112 stores. Operating expenses were cautiously managed throughout the year and, in particular, during the last quarter, when COVID-19 created greater uncertainty. Operating expenses increased by 6.1% to $131 million. Good productivity gains reduced expenses as a percentage of sales from 53.2% in financial year '19 to 52.3% in financial year '20. EBITDA saw a strong improvement in the second half, and the group was able to achieve an EBITDA result for the full year of $34.2 million, up from last year's $30 million, representing a 14.1% increase or an additional $4.23 million. EBITDA margin also increased from 12.9% in FY '19 to 13.7% in FY '20. Net profit after tax increased from $16.4 to $19.1 million, a 16.8% increase. Net profit after tax margin increased from 7.1% of sales to 7.6% of sales. I'd like to thank all our teams across the business for their resilience throughout financial year '20. It certainly was a challenging year, which has seen the business adapt and be successful through their efforts and the support of our customers. I'll now hand you over to David Speirs, our CFO, to take you through further details on our financial results.

Thank you, Glen. Sales on Page 9. The Beacon Lighting Group has reported an underlying sales result of $250.9 million. This represents an 8% increase over the underlying sales results of $232.3 million in financial year 2019. Company stores was a highlight in the financial year 2020 result with a comparative sales increase of 7.2%. All states and territories achieved a positive comparative sales increase with the best-performing states being Western Australia after a number of challenging years and New South Wales, which is now again our #1 state in terms of sales turnover. After a disappointing company store comparative store result in half 1 financial year 2020, Beacon Lighting achieved a positive comparative sales result in quarter 3. However, following the impact of the COVID-19 pandemic, and as the customers spent more time working and learning at home, company store comparative sales were very strong in quarter 4 financial year 2020. Online sales were also strong in quarter 4 and for the entire financial 2020 year. Online sales increased by 50.6% to $16.2 million. Online sales now represent 7.6% of company store sales, which have increased from 5.5% of company store sales in financial year 2019. Of the emerging businesses, Beacon International achieved the most encouraging sales result with $8.5 million, representing an increase of 22.9% compared to financial year 2019. Gross profit on Page 10. The Beacon Lighting Group achieved an underlying gross profit margin of 65.5% of sales and $164.4 million in gross profit dollars. The management of margin has at times been challenging with the constant fluctuations in the AUD-USD exchange rate. There was downward pressure on the gross margin at half 1 financial year 2020, but there was a good recovery in the gross margin at half 2 financial year 2020. This was achieved as a result of less discounting in the marketing program and less discounting in stores. New product ranges and price management have also contributed to the improved gross profit margins. The closure of Beacon Energy Solutions, which was a low-gross profit margin business, has also improved the underlying gross profit margin percentage. The introduction of new products and marketing innovations will provide for further opportunities for the Beacon Lighting Group to manage margins going forward. Operating expenses on Page 11. Following the removal of the profit on the sale of the Parkinson Distribution Center, the underlying result for other income continues to decline as franchise stores are purchased and converted into company stores. At the start of COVID-19 pandemic, Beacon Lighting made changes to carefully manage expenses and delay future investment plans. Some of the expense management initiatives included a reduction in marketing expenditure, a freeze on recruitment and the implementation of a 4-day week for all associates. Throughout the COVID-19 pandemic and with the support of our customers, Beacon Lighting achieved a very strong sales result in quarter 4 financial year 2020. This increase in sales has also resulted in an increase in expenses necessary to support their sales. Pleasingly and through prudent expense management, the operating expenses declined by 0.9% as a percentage of sales. The operating expenses declined as a percentage of sales retrieved across all expense categories, be it marketing, selling and distribution, and general and administration expenses. Cash flow on Page 12. Beacon Lighting generated strong operating cash flows in financial year 2020 as a result of strong sales, good margin and the appropriate management of expenses. Decline in the inventory and the closure of Beacon Energy Solutions has also improved the cash position of the group. The cash flow was also supported by the cash generated from the successful sale of the Parkinson Distribution Center. All debts associated with the Parkinson property were also paid back as part of this transaction. Beacon Lighting Group has continued to use cash for new investments, which has included the purchase of the Beacon Lighting franchise store at Myaree, the purchase of Custom Lighting premium lighting design store and the purchase of Masson Manufacturing factory. Beacon Lighting finished financial year 2020 with a cash balance of $44.9 million and a net cash position, net of debt, at $14.5 million. Balance sheet on Page 13. As just discussed, Beacon Lighting finished with a very strong cash position at the end of June 2020. The receivable balance declined, which was significantly associated with the closure of Beacon Energy Solutions. The inventory balance also declined, mainly associated with the strong sales result achieved in quarter 4 financial year 2020 and some supply delays to replenish the inventory that was sold. It was also helpful to have started with a strong inventory position to support sales through the latter part of the financial year 2020. Property, plant and equipment have declined as a result of the sale of the Parkinson Distribution Center. The right-of-use assets and lease liabilities associated with the implementation of AASB 16 lease accounting have appeared in the balance sheet for the first time. Dividends on Page 14. After careful consideration, the Beacon Lighting Group decided to pay the half 1 financial year 2020 fully franked dividend of $0.026 per share in March 2020. Beacon Lighting Group have declared a fully franked dividend of $0.024 per share for half 2 financial year 2020. Beacon Lighting Group has provided for a fully franked dividend of $0.05 per share in financial 2020 compared to $0.0455 per share in financial year 2019. Based on the June 30, 2020, share price, the $0.05 per share dividend represents a fully franked dividend yield of 4.74% per annum. The dividend reinvestment plan remains available to all shareholders at a discount of 5% to the market. Thank you. I will now pass you back to Glen.

Thanks, David. If we move on to Page 16, we can review our core growth strategies. Starting with brand and customer. Beacon Lighting continues to invest in the brand and our customers with the largest range of lighting, ceiling fans and light globes in the largest retail stores in Australia, with a broad range catering from the budget-conscious to the high-end consumer. Combined with a team that is passionate about design and how lighting can affect their customers' homes, we are in a winning position to help our customers achieve a perfect lighting outcome, whether they are renovating or building, retail or trade. Online and social media continues to be a very important growth opportunity for the group, and we saw shifts in the use of online and click & collect like we've never seen in the history of Beacon Lighting. This year, the group grew online sales by 50.6% to $16.2 million, which represents a 7.6% of retail sales. During the COVID period of April, May and June, the group had an increase over last year of 142% in online sales as customers relied on the brands that they can trust during these disruptive periods. During the year, we onboarded a new web agency, and we will be looking forward to growing sales even further in FY '21 in Australia and internationally with an upgrade to our websites, which are almost set to launch. New product ranges. To ensure our customers' homes are lit in the best possible light, the group introduced 453 new and exclusive items to our range. Lighting continues to change quickly, whether that be through LED technology, smart lighting, wellness or interior design trends. Our team in Australia design and develop a huge amount of product to suit the changing requirements of our lighting designers and our retail and trade customers. Throughout the year, the business had its largest release of new bathroom lighting and smart lighting products. New store rollout. To offer our customers the best experience, no matter how they want to shop with us, we will continue to expand the store network to offer greater convenience. This year, we have identified new stores in Virginia, Queensland; Belmont, WA; Camperdown, New South Wales; and Tweed Heads in New South Wales. We will continue to target the opening of 5 stores per annum depending on market conditions and stock availability. Our research indicates a store network plan of 170 stores in Australia. Store optimization. The group is always looking to optimize the store and commercial networks through improvements in customer experience, process team and sites. The group invested in the new workforce management system to ensure we have the right team members to meet customer demand. We continue to invest in the Beacon Design Studios, which are now in 26 stores and contributed $5.2 million in sales with a very strong pipeline of future sales. A similar lighting design software system is also used in our commercial sites to service many of the volume residential builders within the Australian market. Emerging businesses. Like the core business, the emerging businesses had a disruptive year dealing with the effects of COVID-19. The Light Source Solutions Roadway and Light Source Solutions Globes business finished with sales marginally behind the previous year, whereas the Beacon International business had strong growth of 22.9% to $8.5 million in sales. During the year, the group also managed the closure of Beacon Energy Solutions business. We believe the opportunities, particularly in the online international business represents an exciting prospect, and we look forward to launching new websites in the U.S. and Europe this year. New business opportunities. The Parkinson Distribution Center was sold and leased back for an initial term of 8 years with an attractive profit to the group. The group purchased the Myaree franchise store and converted it to a company store, leaving only 3 franchise stores now in the network. During the year, the group also purchased Custom Lighting business, which has been operating in the affluent suburbs in the East of Melbourne for over 45 years. The group will maintain the DNA of that business with stability from the existing Custom Lighting team and an exciting new architecturally designed showroom due to open shortly. This new showroom showcase exclusive lighting curated from suppliers from Italy, Spain, Germany, the Netherlands and the U.S. The group will continue to review both business and property acquisition opportunities throughout the year. On Page 19, we can review the current outlook for Beacon Lighting Group. As we speak, all 27 Melbourne metro stores remain in Stage 4 lockdown but fortunately are still open to trade, online sales and click & collect being available at all stores except for Springvale. We've been pleased with their trading through Stage 4 lockdown and look forward to the restrictions easing so we can again open our Melbourne showrooms to our retail customers. The strong results that we saw in Q4 have continued into the New Year for all other states. The group has established a new trade strategy team, looking at improving the customer experience, product offering, and loyalty program for this very important trade customer group. The group is in the final stages of replatforming its new websites and online sales channels, which are designed to improve the customer user experience across both retail and trade customers and international websites. New company stores in Virginia, Belmont, Camperdown and Tweed Heads are expected to open in FY '21. A high-profile heritage-listed site has been leased for the new concept showroom for Custom Lighting in Malvern. This will be a high-end representation to cater to the architectural and design and lighting customers in Malvern opening very soon. We expect that the Beacon International business will continue to show good growth, particularly in online sales in the U.S. Those customers will also be spending more time at home like our customers are here in Australia. And as we broaden our range in that market, we should see continued growth. We believe that the current shift towards investing in the home as customers spend more time at home, working and learning, and the redirection of discretionary spending away from travel and dining should be positive for the business, along with the other growth strategies that the group has in place, and the focus on our retail and trade customers should position the business for a successful FY '21. Thank you all for your time and the interest in Beacon Lighting, and I'll pass you back to Ian Robinson, our Executive Chairman, to direct any questions.

Thank you, Glen and David. Ladies and gentlemen, do we have any questions?

[Operator Instructions] First one is from Sam Teeger from Citibank.

First question. Is there anything going on in the cost base in the current half which would mean that you would not -- or you would generate substantial operating leverage from the strong comps you're printing at the moment? Is there any -- initially, the Aussie dollar is obviously strengthening at the moment, which I think can only be good for the sort of the cost of sales base in business.

Yes. I think from operating cost, there's no real significant change of where we've been in the past. We're running things reasonably tight, as you would expect, but with the increase in customer demand, we need to make sure that we've got the right teams and the right stores to service that demand. So I don't see any real major shifts for this half, Sam.

Right. So you're putting double-digit comps at the moment, with dollars going in your favor, not a lot of increased cost of doing business, so you should be getting pretty good operating leverage right now.

We would assume so, yes.

Sure. And do you think you can get growth in second half '21 on second half '20, given what you'll be cycling? And if so, how can you achieve that?

I think a lot of that's going to come down to how the economy is faring come the second half and what stimulus is put in to support the economy through that second half. Yes, there's still a lot of things that are uncertain, and to try to sort of forecast out for the second half would be difficult. Clearly, the second half of financial year 2020 was outstanding. Therefore, it is going to make it hard to cycle, but there are so many other variables that would make it hard to forecast at this moment, Sam.

Sure. And how many superstores did you have at the end of FY '20? And how many conversions of regular stores to superstores are you planning in FY '21?

Yes. A similar number for the superstores is what we conducted throughout the year. So it wasn't that we pushed a lot more into the superstores. The superstores are a key focus area for us that we keep on refining the operations of those businesses. And there's little tweaks that we do to those stores every month, but the base of growing those stores, you can't obviously convert a huge amount of stores into superstores.

Yes. I think the superstores are a key driver of the success that we saw in the fourth quarter. They do really contribute to the very strong results for us.

Got it. And I just wanted to clarify, when you say similar number, similar number to what?

I think about 26 or something is the number of superstores we've identified?

Yes, to the previous year, I mean.

Got it. All right. And last question. It feels like you're opening a few more normal stores in FY '21 than FY '20. Just wanting to understand what's driving this. Are you getting better rental deals now where new store metrics stack up better than they have compared to in the past? And...

I think there is a lot of uncertainty for the future and the quality of the sites coming through. What we're talking about superstores is that these are potential new stores that can, over time, produce very good results. And when you see those sites come up, you think, well, what a wonderful opportunity, we certainly need to take it on. And there's no high expectations on crazy rents that we've seen before. They are reasonable rents.

Yes. There's a few things helping out there, Sam. And also, we have said in the past that, yes, we will be conservative with opening up stores when comparative sales are relatively flat. So that's what has really happened over the last 12 months, 18 months. Comp sales haven't been great, so we haven't been willing to really push too high into the new stores. But you're getting a better balance now. You've got reasonably good comp sales, and you've got less-demanding landlords. Therefore, yes, the equations do look a lot more advertising to sort of go into.

I don't think the model having a fairly even distribution of a large number of stores with a national profile is a really good model to be able to trade through these times we're having at the moment and to be able to get the stock out to the customers reasonably quickly if they decide to order online.

Got it. The 4 stores you're opening, are they superstores?

They wouldn't be, to start off with, but they need to be able to build over time because it is a relationship with our trade customers. But they have the potential of moving into that role quicker than majority of the stores. They are certainly not the small stores that we have put up probably in the last 3 to 5 years. They are certainly more substantial than what we have done in the past.

Got it. And just the store opening profile of those 4 stores, between first and second half?

Yes. Most of them will be open and trading within the first half.

And Sam, they are the 4 stores we have actually signed leases with. And obviously, we're looking at other opportunities on a constant basis.

Our next question is from Jo Little from Morgans.

Just first question on -- just comparing to the fourth quarter sales rate, if you do a bit of a back-solve, kind of looks like 30% to 40% in that fourth quarter. I'm not sure if you're willing to comment on that, but is that in the ballpark of what you're trying to say it has been experienced into early FY '21?

Yes. I think you're in the right park there, Jo.

Yes, it was hard to believe that after the years of battling to get small single-digit ups and downs that you finally get into substantial increases in comp sales. So evolving numbers really to understand what actually happens in retail from time to time.

Yes. Understand. And just when did you put through a majority of that price increase? Or was it over time? And I guess, every retailer would be struggling with how much is the pull-forward demand from -- in a year or 2 time. Is there anything -- have you got any thoughts on that maybe how many new customers are coming into the business, et cetera?

Yes. So in regards to pricing, we've been making price changes for really over 18 months as we saw the decline in the Aussie dollar to the U.S. dollar. So we have been managing prices for a longer period of time. But with the drastic movement that we saw around that March period, we did put through -- or we did manage our prices probably a little bit heavier during that period, March and April. So I think that has certainly helped us. I think what we've seen throughout this period also is that customers are reassured by going to the brands that they feel comfortable with. And by flipping over to spending -- our online sales, as I said, went up 140%, 150% during that period. That gives you confidence that our customers feel very confident in our brand. They are happy to shop with us in that regard. So I think that's what happens in these relatively difficult periods that they do rely on the brands. So -- what was the other question?

I think we did -- and we did see all our categories of our customers increase, store traffic increase, online traffic increase, trade sales increase. So we were getting great support from all our sort of customer segments in that quarter and also into the start of this financial year.

Yes. Okay. That's helpful. And just from a working cap perspective, I mean, inventory wasn't down too much, down a little bit. Just -- is there any kind of quantum of build required into FY '21, probably a bit in inventory payable to fall a bit? Just is it like maybe a $10 million investment in that or something?

I think we're really fortunate, Jo, heading into this whole COVID period that we did have record stock levels. And I think we were looking at the stock levels around that sort of December, January period, thinking, jeez, we're a little bit high here. But then the first sort of fear from COVID-19 was that we weren't going to be able to get stock out of China. So that gave us a bit more confidence having that stock in the stores. And then, of course, from March/April period, we started to see the sales really start to lift. And therefore, yes, we were in a very strong position. I don't think we could have hoped for a better inventory position than what we had heading into this. We are a little bit low at the moment, but we're still servicing the vast majority of our customers very well, and we will have to build a bit, but I think $10 million probably might be a little bit high. I think it might be somewhere between maybe $5 million and maybe a little bit more than $5 million. But we will have to build up the inventory a bit more. And the stock is flowing through, which is encouraging. So we are starting to rebuild the stock and make sure we're able to service the demand at the moment.

Perfect. And just one of those OpEx savings in the second half -- I mean you pulled back as there was cash preservation made and then obviously demand lifted significantly and you kind of don't have to market as much as some of them, but structurally reduce in the future. Or are we just in a bit of a halo of demand at the moment and all that investment needs to come back?

Yes. Look, I mean, we've always typically spent the same percentage on marketing and that, obviously, as the business grows, continues to increase every year. I think there is some structural change there that we can potentially pull back a bit on that. We're still quite reliant on TV, but we are seeing the effects of digital really actually driving sales now. And whether that's been because of people more staying at home and online and watching more stuff on their computers, whether that's helping the digital channels work better, but you can actually attribute your spend to sales quite easily through digital channels rather than TV commercials. So I think there will be a bit of a shift there with our spend. And we're also -- yes, we will be redirecting some of our spend in marketing, in particular, to our trade customers. We haven't really promoted to our trade customers heavily in the past, but that is a big focus of the business to really have a much greater focus on trade over the coming years. It's a long-term plan for us, but we will start that this year.

I think the overall [indiscernible] won't expand very much. I don't think the rents will expand all that much, we're in a better position in regard to rents. So the costs are under control and probably have been for quite some time.

Okay. And just lastly, you've articulated that international sales for the first time, which is great. I imagine you've done that for a reason. Can you just give us a bit more color? You talked a little bit about it, Glen, but what you're doing at the moment, I imagine other countries around the world are seeing very similar trends to what we are in Australia and just your ability to capitalize in big markets.

Yes. You're exactly right, Jo. So what we're seeing here in Australia is obviously a renewed love for customers' homes and, therefore, the customers are choosing to invest more into their homes. And that goes for -- we've got very similar market over in the U.S. and even in Europe. And we're mainly focusing on ceiling fan sales in both of those markets, but the U.S. is the largest ceiling fan market in the world. And I think Beacon Lighting developed some amazing ceiling fan ranges, and we can sell those into the U.S. market, yes, without a lot of barriers to getting there, mostly on online channels. We're diversified across marketplaces, and we will, within time, have our own direct-to-consumer website in the U.S. as well. So it is the focus of the business. We've got the range. We've broadened our range already in the U.S. We've got the stock there, and we're starting to see some good sales increases. So I think the opportunity is great, and we're just at the beginning of that. And if you look at other businesses that have been successful going to the U.S. that have a heavy focus on product design and development and have been incredibly successful doing it, that's where Beacon Lighting [ thinks ] that we can get. At the moment, $8.5 million, it's a relatively small business, but it's growing well, and I think there's going to be momentum in the U.S. market for home-related products, which, hopefully, we can make the most of.

I think the other thing, Jo, is that international had a reasonable year with 20-odd percent increase in sales. Number of their sales were deferred in Europe. They weren't canceled, but they were deferred by 6 months due to the issues of COVID-19 going through the European economy, which will pick up in the first and second half of this year.

Well done on the great second half.

Cheers.

We actually have a further question from Sam from Citibank.

Just one more, guys. Can you just make some comments around online profitability and how that is comparing to store profitability? And I guess, what costs do you have and don't you have in your online P&L?

Well, Sam, we leverage all our retail stores for the online distribution of product because like -- well, there's probably a few categories that are similar to ours, but the purchase is quite a complex one. So a lot of the customers that do buy online actually need some assistance for that purchase decision to be completed or, in some cases, corrected for our customers when they don't quite order the right stuff that they require. So we do leverage the store network and, therefore, we generally look at the sale as being a part of the retail store sales. We're trying to drive more down into those retail stores. Those sales associates are responsible for communicating with the customer and dispatching the goods through either courier or sometimes they deliver it themselves as well. If you think through the process, though, the consultation of an online sale is less extensive than what it is with the customer walking into the store. So yes, if we are to drive more online sales to the retail stores, the requirement for greater resources in those stores is probably less than what it would be if we're driving greater traffic, actual foot traffic to the stores. So that's where there probably is a slight benefit in the less resources required to fulfill those online sales. I hope that sort of makes sense.

Yes. And the advantage of the model, too, is we had a huge increase in online sales, but we're able to leverage a store network and with that sort of increasing any of the cost to service that increased volume. And also, we're able to maintain the same service levels that we did, whereas if we had to come out of one central location, it might have been a challenge to meet the increase in demand.

And you're leveraging just all the existing marketing spend or you're spending a lot of -- spending on marketing specific to drive traffic to your online website?

I think that's been a shift. I mean that's what I was sort of talking about before that over probably the last 3 to 5 years, there has been a shift more to digital marketing. And you can directly see that attribution of that digital marketing to your digital sales or online sales. So I think that will continue to occur, but that is -- that's sharing of the same pie. I mean we keep on taking the same percentage for marketing, and we're just dividing it up differently, whether it be TV commercials or online channels that we're dividing it up between.

We don't have any further questions in the queue.

Okay. Well, thank you, ladies and gentlemen, for your interest in the Beacon Lighting results, and we look forward to another successful year for the year 2021. Thank you.

Thanks, guys.