Myer Holdings Ltd (ASX: MYR)

MYR Details

Profit slip but improvement in cost of doing business margin: Myer, Australia’s largest full line department store group, initially ran-up about 3.8% in stock price on September 14, 2017 before finally settling with a 1.4% rise while the group reported its FY17 result (52 weeks to 29 July 2017). Myer’s statutory net profit plunged about 80% to $11.9 million and this has been said to be the weakest result since its initial public offer. Challenging retail conditions and closure of stores led the net profit after tax (NPAT) to be $67.9 million (pre-implementation costs and individually significant items) on total sales that were 1.4% lower than the previous year, and down 0.2% on a comparable store basis. The group thus was unable to exceed the last year’s NPAT of $69.4 million. On the other hand, sales / m2 were up 3.7% compared to the FY2015 base year.Operating gross profit (OGP) was of the order of $1,220.4 million, with OGP margin 58 basis points below last year, owing to the higher concession mix. However, MYR’s cost of doing business (CODB) was down $31.4 million to $1,019.8 million with CODB margin improved by 54 basis points to 31.85%, owing to simplification brought into the operating model both within stores and the support office. Further, operating cash flow improved by $1 million to $187 million. 

Cost of Doing Business (Source: Company Reports)

Despite the shortcomings in the result, the group stated to bank on a lean structure, while being more productive and efficient. Further initiatives are also to be rolled out with regards to the omni-channel business to cater to the anticipated wave of change in consumer and competitor behaviour. Particularly, the omni-channel business has been profitable for the group and the performance of MYR’s online business was a standout of the result with sales growth of 41.1%. The Click & Collect has also grown strongly to represent 15% of orders in July 2017. Moreover, the group has refreshed its merchandise range and rolled out new or upgraded brand destinations and the introduction of a number of new wanted brands (such as Forever New, Roxy, Quicksilver, Darren Palmer Home and 2XU). 72 upgraded Myer Exclusive Brand (MEB) master brand installations and dedicated service models for Basque, Piper and BLAQ have also been rolled out. While sales in the first six weeks of FY2018 have been below expectations, MYR expects to pick up during significant trading periods of Spring Racing and Christmas. The consensus for underlying NPAT in FY2018 of $66 million is said to have accounted for this subdued start to the year.

MYR will pay final dividend of 2.0 cents per share, fully franked, on 9 November 2017 (with record date of 28 September 2017). In the last three months (as at September 13, 2017), the stock has fallen about 16.7%. It might be interesting to wait and watch out for more improvements from the New Myer Strategy while we give a “Hold” on the stock at the current price of $ 0.73


MYR Daily Chart (Source: Thomson Reuters)

Vita Group Ltd (ASX: VTG)

VTG Details

Traded ex-dividend:Vita Group’s stock plummeted 5.9% on September 14, 2017 while the group traded ex-dividend; and this is after rising about 81.2% in last three months (as at September 13, 2017). The group has also announced its updated dividend/ distribution to include DRP discount rate and to amend period to which dividend applies to 6 months (rather than 12 months). VTG had reported a record result for FY17 entailing a 5% increase in revenues from continuing operations to $674.6 million and a 5% rise in earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations to $65.0 million. Particularly, revenues from small-to-medium business (SMB) and enterprise channels jumped up 20% while retail information and communication technology (ICT) channel delivered a 2% rise. The group now intends to consolidate the SMB and enterprise channels into one business ICT division to leverage on the growing importance of ICT across all customer segments. The accessories brand, Sprout’s revenues were up 30%. The group’s net profit after tax (NPAT) from continuing operations was up 11% to $39.0 million over underlying NPAT in the prior year.

At the back of the strong performance, the group’s full year dividend was raised to 19% to 16.6 cents per share fully franked, and this indicated a payout ratio of 65%. VTG’s operating cash flows after tax of $52.5 million were up 7% owing to strong earnings and tight management of working capital. Vita has also extended its agreement with Telstra, and accordingly, the number of stores Vita is able to own and operate expand to 110 in FY18 and 115 in FY20. However, FY18 earnings might be impacted by the recent remunerations’ changes with Telstra, while Vita aims to continue to work with Telstra on the go-to-market approach for business customers. We maintain a “Hold” on the stock at the current price of $ 1.58


VTG Daily Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.