Trilogy International outlines guidance for FY14
MEDIA STATEMENT – for immediate release, Tuesday 24 September
Trilogy International outlines guidance for the FY14 half and full year result at its AGM.
Trilogy International Ltd (NZX:TIL) is holding its Annual Meeting at the Northern Club in Auckland today.
At the meeting Trilogy will provide earnings and revenue guidance for the year ending 31 March 2014.
Full year revenue is forecast to be $30.0m – up from $26.6m, an increase of 13% on the year to 31 March 2013.
The company estimates that the second six months result will record positive earnings before interest, depreciation and tax of $2m meaning at this operating level the business is expected to achieve net profit after tax of close to $2m for the full year.
Revenue for the period to 30 September 2013 is estimated to be $13.6 m – an increase of 12% on the six months to 30 September 2012.
Detail of the 30 September guidance is provided in the table below:
|Six Months to 30/9/13 - Forecast||Six Months to 30/9/12 - Actual|
|Gain/Loss on Derivatives||124||(4)|
Chairman Geoff Ross, confirmed the business strategy of investing in profitable growth for Trilogy and moving the Ecoya brand into profitability whilst still achieving growth.
At the meeting the company will outline the strong performance of the Ecoya brand in the first six months of this year with revenue growth of 25% in Australia and 91% in New Zealand on the six months to 30 September 2012.
CEO, Stephen Sinclair, highlighted the opportunities for Trilogy in International markets with recent wins in the UK with listings in department stores Debenhams, Wholefoods and John Lewis.
Mr Ross said that both brands continue to perform very well and are being positioned to take advantage of growth opportunities in their respective markets.
The full AGM speech can be found on the NZX website under the Trilogy ticker code TIL or on the investor section of the Trilogy International website (also attached).
TRILOGY Annual Meeting - September 24th 2013
Good afternoon Ladies and Gentlemen. On behalf of the Trilogy International Board of Directors, I would like to welcome you to our annual meeting of shareholders. My name is Geoff Ross and I am the Chairman of Trilogy. I ampleased to declare this meeting open.
The past year has been another year of growth for both the Trilogy and Ecoya brands. Today we will report on this growth during 2013 and also review the plans for the current 2014 year.
Some key formalities first, to get the meeting underway:
Quorum - I am pleased to say we have a quorum of at least three shareholderss present.
Proxies - XX proxies have been appointed for the purposes of this meeting representing approximately XX.XXm shares. [This will be confirmed at the meeting]
I would like to introduce our board.
Myself - Geoff Ross, Executive Chairman. I am also CEO of Moa Group and previously CEO of 42 Below. Prior to that I held senior positions in the advertising industry.
Stephen Sinclair - Steve is the CEO of Trilogy International, appointed to the position in October last year. Steve has held CFO and COO roles with Ecoya. Steve was previously CFO of 42 Below and also energy retailer Empower and prior to this was with PricewaterhouseCoopers.
Grant Baker - Grant is currently Chairman of Dorchester Pacific and the Moa Group. Grant was Chairman of 42 Below. Grant has previously been Chairman of a number of growth companies.
Sarah Gibbs - Sarah was the founder and CEO of Trilogy. A great New Zealand success story. Sarah is a non Executive director and assisting with our key strategic projects.
Independent Director Rich Frank unfortunately could not be with us at the meeting today and has sent his apologies. Rich has television commitments in the USA which meant he could not travel to NZ for the meeting this year.
Recently we announced changes to our board with Rob Fyfe not standing for re-election. I would like to thank Rob for the contribution that he has made to the board since his appointment around the time of the company's NZX listing. Rob has been a great influence to the board, contributing across all areas of the business and being a strong supporter of our plans. We wish Rob all the best in his future endeavours.
Replacing Rob as an independent director is Many Sigaloff. I would like to introduce Mandy who is here with us today, Mandy is based in Sydney and has significant expertise in on line business, media and consumer marketing. Mandy is a woman who has had vast experience with our target market audience. A media background and particularly an online sales background which is a key growth opportunity for us, Mandy will be a very valuable addition.
We will hear from Mandy prior to putting of the resolution to elect her as director.
[Slide 3] - Group Business Strategy
As outlined at the AGM last year and again during our market update in May our strategy is to continue to invest in profitable growth for Trilogy and move Ecoya to profitability whilst still achieving growth.
Both brands continue to perform very well and are being positioned to take advantage of growth opportunities in their respective markets.
The Trilogy business has performed well since acquisition with revenue growth of 41% from March 2011 to March 2013.
Further growth will come from home markets of Australia and New Zealand for both the Ecoya and Trilogy brands whilst Trilogy is positioned to take advantage of International Skin Care opportunities.
[Slide 4] - Name Change to Trilogy International
The global skincare market is USD 66bn growing at 4.6%pa. There is mounting focus on naturally derived products in the industry and within the large multinational companies. Industry concentration has increased over the past five years in line with acquisitions whereby large multinational corporations acquire smaller companies. Companies in this category also achieve high multiples when being valued. We continue to position Trilogy to take advantage of the growing global category.
[Slide 5] - Acquisitions
Over the past year a number of business opportunities have been presented to us. At the current time we are under confidentiality in respect to three potential acquisition opportunities. These opportunities are early stage. However it reflects the interest and approach we receive from the M&A market in respect to businesses for sale. Our strategy around acquisitions remains the same in that the particular acquisition needs to add strategic value and compliment our current operations. We will continue to review opportunities as they are presented.
[Slide 6] - Strategy and Share Price
Like you i am a shareholder in this company. Over the past year the share price has tracked below the expectations of the board. The underlying business however is performing very well and the business itself is in a stronger position than when the share price was at much higher levels.
As a board we have discussed a number of strategies which include raising additional capital to further invest in our brands and growth. Our conclusion however is that greater shareholder value will be created from the existing business strategy. As the business continues to perform we believe that the share price will recover to represent fair value.
[Slide 7] - Revenue, Margin and Operating expenses
At our business update in May we provided this table highlighting revenue, margin and operating expenses. Both our brands provide strong margins and as revenue grows so do margin dollars. We are currently investing in growth and brand in the Trilogy business and this table shows operating expenses continuing to grow as revenue grows.
This trend will not continue at the same rate and as is seen with Ecoya operating expenses will flatten.
[Slide 8] - Revenue, Margin and Operating expenses
To illustrate this trend graphically we have extended the graph out to FY16. We expect the gap between margin dollars and operating expenses to continue to widen as revenue grows delivering earnings growth at the same time as revenue growth.
This underpins our strategy to continue to grow the business in a profitable manner delivering medium term shareholder value.
I would now like to hand over to our CEO Stephen Sinclair who will discuss in some more detail what we achieved in 2013 and our plans for 2014.
[Slide 9] - Ecoya
Starting with Ecoya.
At this meeting last year and market update in May we confirmed the strategy for the Ecoya brand. This strategy is continuing to grow the Australian and NZ markets whilst maintaining International beachheads. We also said that we wanted to continue to develop the product offering and focus on Online.
The Ecoya brand has had a great start to the 2014 financial year. The changes we made to our team and products in August last year are working really well with all aspects of the business performing better than in 2013.
New Product Development has remained a focus with great success from the introduction of the Madison and Mini Metro.
We have a strong product development program and are excited about the Christmas Season. We have brought all product design in house and the team are doing a fantastic job keeping our product and design leading edge. Our Christmas pre sales have been strong which underpins the results that our development team has achieved this year.
Some examples of our Christmas and new Products are shown on this slide.
[Slide 11] - Ecoya Australia and NZ
The Ecoya brand and product are performing exceptionally well in the Australian and NZ markets. In the first six months of the current financial year Australian sales are expected to be up 25% on the September 2012 six month period. In NZ sales are expected to grow 91% on the same period.
Our distribution in Australia is strong in the eastern seaboard states with growth coming in these states from same store sales. Sales continue to increase in our major customers of David Jones, Freedom Furniture and Bed Bath and Table. We believe there is opportunity for continued growth in same store sales as well as in other states of the Australia.
[Slide 12] - Ecoya International
International markets are an important part of the growth strategy for the Ecoya brand. Our approach is to grow international markets in a measurable way where actual sales revenue provides funding for growth. The markets that currently provide opportunity are UK, Scandinavia and Asia. We have distribution partnerships in each of these regions and continue to build the brand with these partners.
[Slide 13] - Ecoya Manufacturing
The increase in Ecoya volume is being supported well by our manufacturing facility in Taren Point in Sydney. Over the past year we have produced more than 700,000 units through our factory. We have capacity to continue to build sales without any need for expansion or investment in plant and equipment. As volume increases so does margin due to the positive recovery of labour and factory overhead costs.
[Slide 14] - Trilogy
And now on to Trilogy.
FY13 was a big year for Trilogy with a number of firsts and changes to the brand.
The first being completely upgrading the Trilogy packaging. Products in the Natural Skin care category not only have to deliver strong performance, the product needs to make sure it has the look of a prestige Skincare brand. This major project to update our packaging is almost complete. The new product is now on shelf throughout our distribution networks.
To complement our new packaging we moved to Natural Certification. The Natrue certification is now complete with 39 products being certified under the Internationally recognised Standard.
[Slide 15] - Advertising Campaign
We also launched a new Trilogy above the line advertising campaign. Every face tells a story. This campaign was published in NZ and Australian newspapers and magazines. As a result of great feedback we extended the campaign Online with fantastic results. We will continue to invest in the brand both in store and in the media to continue to raise brand profile.
[Slide 16] - PR
PR remains important for both brands and we continue to invest in PR activity. We have strong agency relationships in all our markets and continue to leverage PR opportunities.
Examples in the first half of 2014 include the Trilogy UK Celebrity Ambassador Anna Friel. Anna is known in the UK for her roles in Brookside and Pushing Daises. We have received great beauty media pick up for Trilogy in the UK from this association.
[Slide 17] - Trilogy Product
Like Ecoya product development is important to the Trilogy brand. During 2013 we had great success with our Rosehip Oil product extension, Rosehip Antioxidant +. Sales of this new product continue to develop through 2014.
We develop and design new product in house at Trilogy in association with our contract manufacturer. New additions to the Trilogy family this year are Rosapene Night Cream and Line Smoothing Day Cream. To launch later in the year is our Botanical Lightening treatment.
[Slide 18] - Trilogy Australia and NZ
The platform for growth in Australia and New Zealand where Trilogy is at its strongest continues to build. In New Zealand the brand continues to grow within pharmacy and we are gaining great traction with our partnership with Farmers department stores. Technical training and knowledge is an important part of our strategy to connect with consumers which has seen success with the expansion of our training team of “Trilogists” in New Zealand.
In Australia we had great success in securing additional distribution through 2013. We believe our distribution in Australia is now at an optimal level and we are focusing on growing same store sales. Our business is strong within national pharmacy chains and banner groups. We have a great relationship with the Priceline Pharmacy Group and in February this year announced a new association with the Sigma Group which manages the Amcal and Guardian brands in Australia. In total we have around 2,500 retail stores within the Australian market.
[Slide 19] - Trilogy International Markets
International Markets continue to be a major focus for the Trilogy brand. The markets internationally being developed are the UK & Ireland and Asia with particular focus on Japan.
In the UK recent wins have included ranging in department stores Debenhams, Whole foods and John Lewis.
In Japan we are advertising for a marketing and business development manager to support our local distributor and hope to have this position appointed by the end of November.
In addition there are many other opportunities being developed in other parts of the world.
Examples of these opportunities include; Whole foods Mid-West USA - 40 stores. Manning Group - Hong Kong - 200 Stores, Watsons Group Singapore - 200 Stores and we have an opportunity with our Ecoya distributor in Sweden who are interested in also distributing the Trilogy range.
[Slide 20] - Retail
In respect to our own retail stores we do not plan on further permanent store additions in FY14 as we have chosen to invest more in our retail partners. We are in discussions with Westfield in Australia around temporary retail pop up offerings during the busy Christmas gifting season for Ecoya.
[Slide 21] - Online
Our Online business continues to build. We have launched new websites for each brand and continue to invest in growing our Online Sales. This slide shows some of our social media stats. We have made a lot of progress and the growth of our Online business is exciting. We however want to challenge ourselves to make a real step change in the Online space. We are looking forward to working with our new director Mandy to help us implement this step change.
[Slide 22] - REVENUE & EBITDA
Now moving to the financials.
This graph shows revenue and EBITDA earnings since 2010.
Our revenue for 2013 was $26.7m up 18% from the 2012 year. We expect this to continue to build and we expect group revenue to be $30m for the 2014 year.
Earnings at the EBITDA level for 2013 were $1.3m and we expect positive EBITDA earnings in 2014 of $2.0 million.
[Slide 23] - FY14 REVENUE GROWTH BY MARKET
Looking at estimated revenue by market in the 12 month period to March 2014 compared to the 12 months last year.
Australia is our biggest market with estimated revenue of $13.8.m, an increase of 10% on 2013.
NZ is second with estimated revenue of $9.1m, an increase of 18%.
ROW markets have estimated revenue of $5.4m, an increase of 10%.
Online Sales for both brands are expected to be $700k for the 12 months which is an increase of 24% over the 12 months to 31 March 2013.
Retail Sales are estimated to be $900k an increase of 21%. Retail stores opened during 2013 so the comparison is not to a full twelve month trading period.
[Slide 24] - REVENUE FOR SIX MONTHS ENDED SEPT 13
To now look at our forecast revenue for the six months to 30 September 2013.
We estimate our revenue for six months ended 30 September 2013 to be $13.6m so an increase of 11.5% over the same six months last year.
[Slide 25] - EBITDA 30 SEPT 13
Like in 2013 the result for the year is skewed to the second half. We anticipate an EBITDA loss of around $100k for this six month period. Deducting depreciation and interest our estimated operating loss for the period will be around $500,000. The first half sales are also seasonally slower, especially for our Ecoya brand.
The second six months result will record positive earnings before interest, depreciation and tax of around $2m meaning at this operating level the business will record positive earnings of $2m for the full year.
[Slide 26] - NET DEBT
The graph on this table shows our net debt position at previous half year ends. At 31 March 2014 we expect net debt to be $4m giving headroom of $5.5m on our existing facility with BNZ. Our current business plan does not anticipate the need for any extra capital with business growth achievable within existing funding lines.
I am excited about the year ahead. We have a great team of people in our business and I would like to thank both the Ecoya and Trilogy and staff for their continued efforts in growing our great brands.
I will now hand back to Geoff to facilitate any shareholder discussion and move on to the formal business of the meeting.
Thank you. Ladies and Gentlemen, I now invite any questions, comments or discussion from shareholders.
Any shareholders wishing to speak should move to the microphone nearest to them and direct any questions through the chair.
We now move on to the formal business, which is detailed in the notice of the meeting. I will move each resolution, invite discussion on that resolution, and then put the resolution on to a vote. I propose that all resolutions be voted on by a show of hands.
Appointment of directors
First, we will deal with election of directors. Mandy Sigaloff and myself Geoff Ross.
Mandy, being appointed to the board during the year offers herself for election.
Before formally putting to vote I would like to ask Mandy to say a few words, in regards to her election.
I move that Mandy Sigaloff be elected as Director.
Is there any discussion?
(When all who wish to speak have done so)
All those in favour raise your hand.
I declare that Mandy Sigaloff is elected as a Director of the Company.
I would now like to hand the Chair to Stephen Sinclair.
[Steve] Geoff Ross retires by rotation today and being eligible, stands for re-election.
Before formally putting to vote I would like to ask Geoff to say a few words, in regards to his re-election.
I move that Geoff Ross be re-elected as Director.
Is there any discussion?
(When all who wish to speak have done so)
All those in favour raise your hand.
I declare that Geoff Ross is re-elected as a Director of the Company.
[Hand the Chair back to Geoff]
The final matter is to confirm the appointment of PriceWaterhouse Coopers as auditor, and to authorise the Directors to fix the auditor’s remuneration.
I move that PriceWaterhouse Coopers be re-appointed as the auditor of Ecoya and that the directors be authorised to fix auditor’s remuneration for the coming year.
Is there any discussion?
(When all who wish to speak have done so)
All those in favour please indicate by raising your hand.
All those against?
I declare the motion carried.
That completes the business of the meeting.
Thank you for your attendance and I declare the meeting closed.