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

Good Morning. My name is John Whittington, and I am a volunteer company monitor for the Australian Shareholders' Association.

Mr. Chairman, congratulations on a strong performance in difficult times. How has the company performed relative to the Australian lighting market in this time? In other words, has the company's market share increased, decreased or stayed the same?

We'll cover that later.

Yes. I think we'll cover that - John, was it?

Yes, John.

John, we'll cover that later on in Glen's presentation. And I think we can advance and have those questions later on. Are there any further questions, Tracey?

Mr. Chairman, John has another question. COVID has been a great example of a black swan event and provides an opportunity for all companies to learn about how they manage unexpected events. What would you say has personally being the biggest lesson you have learned regarding risk management during this crisis?

Well, again, John, there's so many things that we really can't cover here and now, but surprising how adaptable a business can be when it has to be adaptable, and our team has certainly done a wonderful job in that respect.

I can cover it later.

Okay. So any further questions?

One final question from John Whittington. I have a single question, which we ask many companies. When was the current audit company first appointed to Beacon Lighting or its predecessor [indiscernible] Investments? When was the current lead audit partner appointed? And when was the last competitive audit tender held?

Well, it was quite some time ago, John. So I couldn't give you the exact date because it is quite some time ago.

I think [ Jason ], do you want to go back there?

So [ Jason ], do you have any comment there?

You're just on mute, [ Jason ].

Sorry, that was my fault.

Should be -- can you hear me, Chairman?

Yes, we can.

John. Yes. So to answer your question, PwC have been the auditors of the group from not long before the listing in about 2014. And consistent with the Corporations' Act, we do rotate our partners every 5 years. And I have completed -- I just completed my third year on the audit of the group.

John, I hope that answers the question. Look, Beacon Lighting has been audited for most of its history. And we're very proud that, that process has been a part of the cornerstone of the business. Tracey, you have any further questions?

No further questions.

Okay. As there are no question or comments -- further questions or comments, I'll take the financial statements, directors' report, auditors' report the year-end year the 28th of June 2020 as reviewed and considered. Now we'll come to the formal resolutions. Details and proxy votes received on resolutions are displayed on the screen. I will now hand you over to Eric Barr to take us through the first resolution. Thank you, Eric.

Good morning. Resolution relates to the reelection of Ian, Ian Robinson, as a Director. I move that Ian Robinson is reelected as a Director as set out in Resolution 1 on the notice of meeting. Okay. And the company Secretary, Tracey Hutchinson, please advise if there are any questions in this regard.

No questions, Eric.

Okay. So unless any further questions come through quickly, then I put Resolution 1 to the meeting. Voting is open and can occur online. I'll now hand you back to Ian for the remainder of the resolutions and reminding you that the voting is still open on Resolution 1. Thank you.

Thank you, Eric. Resolution 2 relates to the adoption of the remuneration report for the year ending the 28th of June, 2020. I move that the remuneration report is adopted as set out in the notice of meeting. Can the company Secretary, Tracey Hutchison, please advise on any questions that have been received in this regard.

No questions, Ian.

As there are no questions or comments, I now put Resolution 2 to the meeting. Voting is open and can occur online. Resolution 3 relates to the issuing of performance rights to Glen Robinson as set out in the notice of meeting. Can the company Secretary, Tracey Hutchison, please advise of any questions being received on this matter.

No question.

There are no questions or comments. As there are no further questions or comments, I'll put Resolution 3 to the meeting. Voting is open and can occur online. Shareholders should vote now if they haven't done so. As mentioned, please follow the voting instructions and reach out if you have any difficulties in doing so. While shareholders are voting, our CEO, Glen Robinson, will provide you a presentation -- we'll be giving -- please submit any questions in relation to it, and that will be responded to at the conclusion of the meeting or the presentation. Glen, I now invite you to give us an idea of how exciting the year has been and where the business is currently at?

Right. Thank you, Ian, and I welcome shareholders. Just take you through the presentation. Covering Beacon Lighting's 4 pillars of growth, our quarter 1 trading update and the financial year '21 outlook. There will also be an opportunity for questions at the end of the presentation, if you've got any. So it certainly has been a surprising and challenging period. Leading into the global pandemic, we, like many businesses, were unsure of what the future may look like. We were fortunate that the group had just completed the sale of the Parkinson Distribution Center in Queensland, which meant the business had a record cash position. And on top of that, we had record inventory levels, which were going to help us through in case we had a slowdown in supply out of China. What we experienced initially was shock from our customers in March, with subdued sales that come early April with more people working and educating from home. Sales started to build and continue to build with very healthy levels for the rest of April and all the way through till today. We've seen online shopping increase to a level that we thought might take some years to get to, providing a convenient and safe way to buy lights and ceiling fans. And with the launch of our new website after significant investment, we not only have the best lighting stores around Australia, but also the best website to support our customers if they prefer to shop online. Our team has adapted to these changing circumstances and need to be recognized for their efforts. What has been achieved is nothing short of amazing. Thanks to the team work of everyone in Beacon Lighting and the continued support of our customers. At the AGM is, I guess, it's always a great opportunity to be able to review and update our shareholders on what we at Beacon Lighting concentrate so much around. Being a customer-driven business, a business that has hundreds of thousands of interactions with customers each week, has helped to build a business to listen to the changing needs of our customers. Through this pandemic period, it has made us reevaluate what we do and how we do it. This has helped us focus our mind on 4 key areas of growth for the future. And I'll start with retail, as you see on the screen. We strive to deliver a positive, meaningful experience through product expertise and exceptional service across all customer touch points. We offer the ultimate in innovation, staff, technology and energy efficiency, constantly driving change in our product offering. We design and developed almost 100% of the products that we sell right here in Australia. We have large stores averaging 750 square meters, which are designed to enhance our customer shopping experience through great design and layout, enticing product displays and interactive experiences, including our leading -- our category-leading lighting design service completed by professional lighting designers in-store or online. And for our most important customers, we have the very exciting VIP program, which currently has over 600,000 members who receive member-only benefits. The retail business is core to our operation, and we continue to invest heavily in the marketing of this channel. The next item is trade in our 4 pillars of growth. Throughout the past 6 months, as we look for options to grow the business internally in Australia due to COVID restrictions on travel, the business has put significant effort into understanding more about our trade customers. Trade is already a very important part of our business and as a sales channel, makes up 25% of total sales. However, the business has significant ambitions to grow this channel. Firstly, by building on our already strong trade cloud membership, offering them more of what they need, growing meaningful partnerships and introducing broader trade-related product ranges. This can drive overall business growth substantially for the years ahead and may be providing a serious trade supplier for the residential home. E-commerce. As mentioned, Beacon Lighting has just successfully launched a great new website, which has improved user experience. And over this period of COVID-19, we have seen the ease of shopping and researching online go to a new level. We aim to have a seamless customer experience across all the retail stores and online. And for this reason, we offer national pricing. Our trade customers can access their special pricing online. We offer fast and free delivery, and we offer design consultation services, both in-store and online. The last pillar that we're referring to today is the new business pillar. This year, we see the business will invest more into direct-to-consumer sales in the U.S., Europe and Asia. And we will establish a new retail website in the USA. The U.S. is the largest ceiling fan market in the world, and we believe our unique modern designs that we designed here in Australia have great potential in that market. Just recently, we finished the relocation of the upmarket custom lighting showroom in Melbourne, which will be ready to be able to show our customers once the lockdown restrictions are eased. We continue to grow our Masson for Light business and our Light Source Solutions business. The group has also recently been looking to invest in retail properties. Currently, all Beacon Lighting sites are leased. But the group believes that in circumstances -- in certain circumstances, the sites will be better off being owned rather than leased, if the opportunities arise. Trading update. Last week, the group had the fortunate situation where we had to update the ASX on some very exciting sales and trading performance. The group sales, as reported last week, have increased by 24.3%. Company store comparative sales, including Melbourne stores, have increased by 26.6%. Company's total comparative sales, excluding Melbourne stores, have increased by 37.6%. Online sales for the first quarter have increased by a massive 156%. Beacon International sales has also performed very well, increasing by 42%. Underlying group profit has increased to $8.4 million for the first quarter versus $2.2 million for the same quarter last year, a terrific result. We currently still have 28 Melbourne stores -- Melbourne metro stores closed under Stage 4 restrictions. These stores have been closed to the public since August 6. The only -- they are only permitted for sales for online sales and trade sales. 74 days of closure has not been easy on the Melbourne stores and our customers, and it looks like we have another 13 days to wait. We are eagerly hoping to open doors and allow our customers to have a safe and rewarding shopping experience as they prepare for their homes for the Christmas festivities. And the last slide, before we get to questions, is just on the outlook for the financial year 2021. Throughout this period, we have -- all have to adapt very quickly and think of new ways of operating the business. I think it's a credit to our team, our customers and our partners for the success that we've been able to achieve so far. The business has opened a new store in Virginia, Queensland, and has 3 more very exciting stores yet to open, but will open within this first half. We've made a shift in the business to start opening the stores at 7:30 a.m. rather than the usual 9:00 a.m. that we used to trade at. And this is really tailored to better suit the requirements of our trade customer. As mentioned, we have launched our new websites, which are up and performing well, which was a huge investment in both time and money over the last year. We will, within the year, launch the new direct-to-consumer websites in the USA with a focus on ceiling fan sales. Supply chain out of Asia has been challenging in the past 2 months with ship and container availability and also industrial action in the Australian works, causing delays in shipping. We are looking forward to launching our premier design and lighting showroom in Malvern, the custom lighting store. It would be great -- we put a lot of effort into redesigning that store and relocating our store. It'd be great to get the doors open once restrictions ease. And the group will continue to support our customers during this time when they're spending more time at home or using their home for their study more so than they used to. We will continue to offer exceptional products with expert advice. Thank you for your participation in today's AGM. I'm happy to take any questions that you may have. Before we get any questions from Tracey, I might just try to cover some of John Whittington's question to prior, which was around market share. The first part with market share, I think, is that we have been gaining market share over probably, well, the last decade. Independent lighting stores have been finding it incredibly difficult. I'm sure during this time of COVID-19, they would have had a bit of a sales increase as well. But I think what we have seen during this time is that a lot of our customers have been going back to the big brands, the brands that they've known and trusted for years and years and been relying on those brands. And you can see the huge uptick that we had in online sales. A lot of our independent lighting store competitors don't have online sales, e-commerce sales ability. So I think we did pick up some extra market share there. And I know that other suppliers, whether it be through electrical wholesalers or DIY stores, have had some supply issues. We were very fortunate, as I mentioned at the start of the presentation, to have a really strong in-stock position at the start of COVID-19 way back in March. And we've been able to carry that stock through and get replenished out of our factories in Asia. And I think a lot of our competitors haven't been in such a fortunate position. And I think we have picked up some market share potentially out of the DIY stores and also the independent lighting stores and electrical wholesalers. I think your other question, John, around this sort of being a black swan event. You're right. I mean, we had no idea, just like every other retailer, how COVID-19 was going to affect the business. And it has affected businesses terribly, obviously, across Australia and across the world. And you didn't know which camp you were going to be in and I know everyone in the executive management team all the way through to the stores were looking at the sales daily to see what was happening out in the stores. In fact, hourly, to figure out how people are going to shop or not. And as I said in March, it was, quite shocking, but that didn't last very long, which was great to see. What we did see, obviously, is probably a redirection of money not being spent in cafés and restaurants. Obviously, we service the middle to middle upper customer. And a lot of those customers do travel overseas on holidays, taking the family overseas. Obviously, that hasn't been able to occur. So for those people that have a secure job that have been able to spend in our category, improving their home as they're spending more time at home. Yes. We foresee that this won't come to an abrupt end. People will be using their home differently in the future. Whether that be -- either they're working 1 or 2 or 3 or possibly even 5 days from home rather than going into the office. So I think there's still some great opportunity ahead of us in regards to how people are using their home and therefore, wanting to invest in the home. So I think that's the couple of questions that John had initially. Are there any further questions, Tracey?

No, no further questions from anybody else?

No? Okay. Well, if there's no further questions on the presentation. I'll hand you back to Ian Robinson to conclude the meeting. Thank you.

Well, thank you, Glen. I hope that gives a bit of a flavor to what's been happening in Beacon Lighting last year and what we're expecting for the future. As we're in a virtual meeting, please note that we're shortly going to close our online voting. As far as I'm aware, there's no outstanding queries regarding the voting?

Correct.

Does anyone need any further time to finalize the voting? No requests?

No requests.

Please advise that if there are any requests for further time, and which it doesn't appear to be. Since no further time requests have been received, I now close the online voting. Results of voting will be announced to the market on the ASX, once available. And that concludes the formal business of the meeting, and I warmly thank you for your attendance and declare the meeting closed. Thank you.

Thank you.