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boohoo Plc

boohoo.com plc Multi-branded Outperformance – Zeus Capital

boohoo.com (LON:BOO) has announced results for the year ended February 2018, with Group performance coming in ahead of Zeus Capital estimates. Revenue of £579.8m is up 97% YoY (92% CER) and 3.4% ahead of estimates with growth across all geographies and contribution from new brands PrettyLittleThing and Nasty Gal. Gross margin is down 180bps as a result of increased promotional activity that has helped to deliver top line growth. Adj. EBITDA of £56.9m, +60% YoY, a 7.0% beat on forecasts with adj. PBT also +60% to £51.0m. This results in adj. EPS of 3.23p, +47% YoY. The Group finished the year with a very strong net cash position of £133.0m, boosted by proceeds from June’s share placing and robust cash flow generation.

Growth across all geographies & brands: In the UK, the Group’s largest market representing 65% of FY18 revenue, sales rose 95% YoY to £355.6m. International revenues gathered momentum, up 99.0% YoY to £224.2m with the Rest of Europe +90.8% to £66.3m and Rest of the World +102.7% to £157.9m, including an impressive 129.2% growth in USA revenue which at £92.7m now represents 16% of Group revenue.

Robust balance sheet and cash generation: The Group had a net cash position of £133.0m at year end, up from £58.4m in FY17 benefitting from proceeds raised from the £50m share placing in June 2017 and strong cash generation of £76.2m, representing a conversion rate of 134% of adjusted EBITDA.

Upgrades to FY19: We have upgraded our FY19 numbers this morning to reflect progress made in FY18 and revised guidance. Our FY19E sales increases by 15.6% YoY to £785.6m (£679.6m), adj. EBITDA by 12.2% to £72.8m (£64.9m) and adj. EPS by 12.0% to 3.68p (3.29p). The company’s medium-term guidance of c.25% sales growth per annum and c.10% adjusted EBITDA margin is unchanged today, reflecting ongoing confidence in the Group’s proposition and further opportunities for growth. We introduce FY20 forecasts for the first time today, with 24.8% top line growth expected to £981m and EBITDA margin of 9.5% or £92.8m.

Operational progress: During the year the Group has completed the extension of the distribution centre, providing an additional 166k square feet of space giving the business sufficient capacity for over £1bn sales. Investment In infrastructure to support the rapid rate of growth in the business is a key priority of the Group, with management investing ahead of the curve and targeting a distribution network capable of managing up to £3bn of sales.

Valuation: Based on revised forecasts boohoo is trading on an FY19 EV/EBITDA of 22.5x falling to 17.7x in FY20. Boohoo’s strong track record of delivering on its forecasts has driven multiple expansion. Management remain committed to growing the Group into a £3bn revenue company, with a solid, cash backed balance sheet to support its ambitious growth targets.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.