Reporting Season Road Map: 27 August 2019

About the author:

Andrew Tang
Author name:
By Andrew Tang
Job title:
Analyst - Equity Strategy
Date posted:
27 August 2019, 11:27 AM
Sectors Covered:
Equity Strategy and Quant

Adairs (ADH) – Dividend cushioning the supply chain costs

ADH's result was in line with our forecast following recent guidance/downgrade.

Despite EPS falling c3% due to a lower GM and impacts from high supply chain costs, ADH increased its FY dividend by 7% (strong BS/cash generation permitting). LFL sales growth was +4.8% in first 7 weeks of FY20, bouncing back as quickly as it flat-lined in the last 4 weeks of FY19.

There is no escaping the fact that elevated supply chain costs will persist across FY20/FY21 until the new DC is operational - although not at the same level seen in FY19.

Until this time, we think ADH will compensate shareholders via a higher dividend payout (as it did in FY19).

ADH's solid top-line growth reflect share gains, strong product execution and the general health of the brand/business.

Trading on 9.6x FY20F PE/8.3% yield;

We maintain an Add recommendation. Morgans clients can view our share price target and detailed research note.

More information

Morgans clients can access further analysis in our latest reports on Adairs. Alternatively, please contact your nearest Morgans office for access.

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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