ACQUISITION OF BEVILLES
19 APRIL 2023
MICHAEL HILL ASPIRATIONAL BRAND JOURNEY
ASPIRATIONAL BRAND JOURNEY | STRATEGIC PILLARS |
LUXURY
PREMIUM
MID-MARKET
VALUE
2
MICHAEL HILL INVESTMENT DRIVING GROWTH
CAPITAL MANAGEMENT FRAMEWORK
- Refreshed Policy aligned to strong business performance
- Current dividend yield ~8%1
- Circular economy offering re:new:
- Digitally-enabledgold recycling platform
- Launching a diamond upgrade program
- Reimagining of jewellery repair business
- Development of a new digitally-led bespoke diamond jewellery brand
- Introducing third-party jewellery insurance and replacement solutions for customers
Dividend Policy
50% - 75% adjusted NPAT
Continue to deliver at the higher
end of the range
Organic+
Investment
New markets & channels via
digital platforms
Launch of new revenue streams
Organic Growth
~$25m to $30m annual spend
Capital Investment
Opportunities
Share buy-back
Continue to pursue acquisition opportunities across the jewellery sector in our existing countries
- Brand elevation - driving higher ATV
- Increasing retail productivity
- Product evolution through newness and elevation
- Digital-firstand marketplace expansion
- International digital channels
- Data and loyalty driving growth
- Share buy-back successfully executed
- Opportunity to acquire complementary business
1 | Based on last two distributions and current share price. | 3 |
EXECUTING THE ACQUISITION STRATEGY
ACQUISITION OF BEVILLES BRAND, DELIVERS INCREMENTAL STORE ROLLOUT GROWTH STRATEGY
LUXURY
PREMIUM
MID-MARKET
VALUE
- 281 physical stores across Australia (148), New Zealand (47) and Canada (86)
- Brand elevation strategy underway, moving further into the premium segment
- Product elevation with diamonds at our core
- Omni-first,digital-led and channel agnostic
- Catering to the 'value' market segment through selling quality products at a more affordable price point
- Strong strategic fit and complements MHJ strategy to elevate own brand and products
- Minimal cannibalisation and ability to capture a broader, full-spectrum, customer base
- Highly profitable including omni-channel distribution capabilities, successful loyalty program and open frontage / accessible stores
- Under-penetratednetwork (26 stores) with a differentiated product mix
Complementary market positioning servicing two distinct segments of the market
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TRANSACTION OVERVIEW
TRANSACTION EXPECTED TO BE IMMEDIATELY EPS ACCRETIVE
| Acquire the business and Selected Assets1 of Bevilles for a Net Enterprise Value (EV) of ~$45m | |
TRANSACTION | | ̶ Includes upfront consideration, net of working capital adjustments, and minimum $1m earn-out payment |
Earn-out payment, payable over two years, linked to MHJ share price performance | ||
TERMS | ||
| Separate Ambassadorial Fees payable to Michelle Beville over two years for ongoing contribution to the business | |
| Attractive deal terms and asset acquisition structure carves out potential legacy liabilities | |
ACQUISITION | | Net Enterprise Value of ~$45m, implying an EV/EBITDA multiple of ~5.6x based on expected adjusted FY23E underlying |
EBITDA (pre-AASB16) of ~$8m2 | ||
METRICS AND | | Acquisition expected to be immediately EPS accretive |
FINANCIAL | | Expected to complete in Q2 CY2023 subject to satisfaction of certain conditions precedent (regulatory approvals from |
IMPACT | ACCC and Fair Work Commission, transfer of leases, people and contracts, and release of guarantee/security | |
arrangements) | ||
FUNDING & | | Up-front cash consideration and transaction costs will be funded from MHJ's cash reserves and undrawn debt facility |
| Any future earn-out payments and Ambassadorial Fees expected to be funded from MHJ's cash reserves/debt facility | |
CAPITAL | ||
| No change to MHJ's existing dividend policy (50%-75% of adjusted net profit after tax), with share buy-back program | |
MANAGEMENT | ||
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Notes:
- Selected Assets includes underlying business, inventory, fixtures and fittings, intellectual property, contracts, brand and other non-current assets and liabilities
- Based on unaudited, pre-AASB16,pre-IFRICSaaS-related adjustments, and with normalisations, EBITDA mid-point for $7.5m - $8.5m
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Disclaimer
Michael Hill International Limited published this content on 20 April 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 April 2023 05:46:04 UTC.