AX1 - Accent Group

[Klogg]

In regards to profit per $ of revenue, I did notice that in the half-year. That being said, I would imagine the 25c is still healthy, especially in a retail climate such as this one.

I did re-visit their cash flow statement too. I remember there were two things that I noticed were the catalyst for the overall deduction in cash holdings, and these were:
- Payments to suppliers/employees: From what I can tell, they've had to increase their inventories because their range of brands/products has increased. I do want to check this out further though...
- Dividends paid: The payout ratio is huge and results in a net loss of cash. However, I remember reading that this is management's intention (they don't want to hold too much cash and have no interest in acquisitions, so they would rather return it to shareholders). If I can find this piece of info again, I'll link it to you.

One thing to look out for though is their mention of closing a few stores due to increased rents. From memory, I believe it was 3 stores that are closing. The impression I got though was that this would be offset with growth in other companies (SSS/RCG Brands).

As for DJS/MYR/JBH - I don't particularly believe management are on par with what I'd expect and their prospects for growth aren't so great, so I stay away.

 

[RogueTrader273]

RCG - Poised to break out!

RCG looks poised to breakout with recent extreme volume and a very bullish-looking ascending triangle formation. Fundamentals are also excellent with rising profits and rising ROE, and pays a 7.8@ dividend to boot!

 

[tinhat]

I just had a quick look back over this discussion. One thing that I like about RCG is The Athlete's Foot business. One of the things analysts have been lamenting about with retail is that the bricks and mortar retailers, especially the department stores have failed to offer the one thing they have that on-line can't compete with and that is in store customer service. Mark McInnes cut costs at David Jones by cutting costs including front of store staff. All the department stores have shockingly bad customer service. The staff at JB Hi Fi have amazingly decorated fingernails but can't tell you a damned thing about the digital cameras they sell.

The one thing The Athletes Foot does is that it value adds just like good old fashioned retail use to do. If shoes were just commodities we would all be walking around in Dunlop Volleys. By giving proper customer service, supposedly finding the correctly fitting shoe for the customers needs they make price less relevant and guide the customer towards making the purchase decision. The Athlete's foot is a good brand and a good business model.

 

[Boggo]

Re: RCG - Poised to break out!

RCG looks poised to breakout with recent extreme volume and a very bullish-looking ascending triangle formation. Fundamentals are also excellent with rising profits and rising ROE, and pays a 7.8@ dividend to boot!

A break and hold above 40 should see new territory...

(click to expand)

 

[tinhat]

Liftoff. Up 3c today. Still a good dividend yield too at 7%

 

[tinhat]

Since my last post I topped up on RCG as it is the only discretionary-consumer/fashion related retail stock in the SMSF.

Anyway, I decided to check out the Athletes Foot website on the weekend. It is now running the Magento e-commerce CMS as implemented by Netstarter.

http://www.theathletesfoot.com.au

I certainly was surprised at the quality of the design, the degree of technical problems in the site and just the overall implementation, quality of the copy and the architecture/structure of the site.

The site is slow to load and sometimes requests even time out. I did a traceroute and found that the site is located within Rackspace in the USA. The load times for me are sluggish this morning. Even though I notice that they use Akami for serving images (a service which supposedly speeds up worldwide performance of your website by caching content globally across their servers). If the site audience is primarily Australian then the best solution is to host it in an Australian data centre IMHO.

I wrote a long email to RCG's investor relations outlining my concerns about the website. I am really quite disappointed and concerned quite frankly that either inadequate resources have been allocated to their web presence or the process is being poorly managed.

I would encourage any other shareholders to take a look at the website and report any feedback you have to investor relations at RCG.

 

[tinhat]

I always find it interesting how companies handle their investor relations. I telephoned GZL a few weeks ago and the company secretary returned my call and we had a chat about - well, investor related stuff - the share buy-back scheme, the dividend, about the Gazal family's majority ownership. Very informative and pleasant.

RCG on the other hand - absolutely no response to my email. Not even a form reply - thanks for contacting us. I can't believe how bad the Athelete's Foot website is but apparently the management care as little about their investor relations as they do about the website.

 

[Klogg]

I always find it interesting how companies handle their investor relations. I telephoned GZL a few weeks ago and the company secretary returned my call and we had a chat about - well, investor related stuff - the share buy-back scheme, the dividend, about the Gazal family's majority ownership. Very informative and pleasant.

RCG on the other hand - absolutely no response to my email. Not even a form reply - thanks for contacting us. I can't believe how bad the Athelete's Foot website is but apparently the management care as little about their investor relations as they do about the website.

I've contacted RCG 3 times as a shareholder - twice they responded on the day, the third time took them about a week...

As for TAF website, can't say I've ever had any issues, and I'm there a fair bit. The design isn't anything special, standard retail website with a lack of proper AJAX implementation for good UX, but still at the average level.
(The filtering on the left hand side did perform slowly for me though)

Nevertheless, the performs relatively well.

 

[Klogg]

From today's profit announcement:

- Consolidated Earnings Before Interest Tax and Depreciation (EBITDA) from continuing operations of $15.1m for the year ended 30 June 2013, an increase of 12.6% on the prior year
- Net Profit After Tax (NPAT) from continuing operations of $10.5m, an increase of 10.4% on the prior year
- Diluted Earnings Per Share (EPS) from continuing operations of 4.31 cents, an increase of 10% on the prior year

I can't believe they manage to increase profits by 10% (and aiming for that again this year) while maintaining a 90% payout ratio...
I guess that's why they have such a large cash balance.

Still, great performance by competent management.

 

[Ves]

Klogg, this has been a good pick since we discussed it twelve months ago. It is pleasing to see that any of my concerns on their profitability / cash flow do not seem to be a problem (and hopefully for your sake it won't turn out that way!) if the current set of numbers are anything to go on.

I have do not hold and do not / did not have any intention of doing so, but nice to see others do well.

 

[Ves]

Updated figures

Return on Revenue ratios - (based on PBT / Rev)

%
2013 29.18
2012 31.79
2011 30.76
2010 32.78
2009 34.57
2008 24.07
2007 10.78
2006 17.03

Also Return on invested capital (ex-intangibles) for last two years:

2013 - 52%
2012 - 46%

I have not adjusted for excess cash - so you could make an argument that these are even higher.

Pretty nifty set of accounts for this part of the cycle - biggest question as always is will there be a ROIC fade (which unfortunately a lot of retail chains face when they near the end their expansion) in the next few years? Not much evidence of it yet, I will admit. so perhaps they still have more expansion up their sleeves

 

[Klogg]

Pretty nifty set of accounts for this part of the cycle - biggest question as always is will there be a ROIC fade (which unfortunately a lot of retail chains face when they near the end their expansion) in the next few years? Not much evidence of it yet, I will admit. so perhaps they still have more expansion up their sleeves

I have been watching their Return on Capital Employed and Return on Revenue quite closely (have the figures at home, not with me) and to be honest, I don't see any problems yet (I hope it continues that way). It seems that while TAF business is getting squeezed (like for like sales up 3%, EBITDA up 1.5% - although this could be from renovating stores), the RCG Brands business has a larger profit margin within it, which allows the company to maintain their RoCE/RoR.

If this is the case, it also explains their new agreement for Sperry Top‐Sider (agreement with Wolverine Worldwide, who also own Merrell).

And thanks for your input Ves. Always good to have another view, incase I've overlooked something.

 

[Klogg]

Updated figures



Also Return on invested capital (ex-intangibles) for last two years:

2013 - 52%
2012 - 46%

I have not adjusted for excess cash - so you could make an argument that these are even higher.

Just to add to this - I've not included prior to 2008 in the mix, as this is when they sold off King of Knives, which was a real drainer on the business. Since then the company has changed substantially, so their RoR at this point was of little relevance IMO.

 

[tinhat]

I can't believe I sold out of this good little income earner not long ago. What was I thinking? Will definitely get back in if an opportunity presents itself at some stage.

 

[piggybank]

Up six days in a row, or just over 20%..

 

[Klogg]

Up six days in a row, or just over 20%..

Not sure if you're interested, but RCG just purchased Podium sports (9 stores) + the distribution rights to Saucony for Australia and NZ. They bought this for about $2.9mil in cash and 8.9m shares (@ 68.5c each).

In the same announcement, they revised their earnings upwards from +10% to +15%, after taking into consideration any transaction fees.

Given how conservative RCG management usually are, I'm very confident in their forecast.
Furthermore, as a shareholder, I couldn't be happier that they were buying back shares in the 34-40c range, and now issuing shares given they are close to or at their 'full' value by my calculations.

My only mistake on this one was not buying more (140% capital gain since May + 15% in dividends [gross]), given how much cash I had at the time.

 

[tinhat]

So it's official. Joe Hockey has crashed the economy. Joe, I enjoyed having you as corporal of our section when I was an army cadet recruit but you are not up to running the economy.

Bought back in at $0.60. Will buy some more if the price drops further.

 

[galumay]

Acquisition and Capital Raising announced today, Accent Group who have the exclusive distribution of Skechers, Vans, Dr Martens, Timberland1, K Swiss, Palladium and Stance in Australia and New Zealand. Ownership and operation of the Platypus Shoes retail chain as well as a number of mono‐branded Skechers, Vans and Timberland stores in both Australia and New Zealand.

Details here, http://www.asx.com.au/asxpdf/20150319/pdf/42xcy9wb48f0yb.pdf

Looks like a good move on initial scan.

I hold RCG in my SMSF

 

[Klogg]

Looks like a good move on initial scan.

I've held this for some years now and management have only one black mark against them in my books (relating to "sophisticated investor" capital raising for Podium sports).

That said, I don't have enough confidence in them for an acquisition of this size. As you say, it looks like a good move, but if all acquisitions didn't look like a good move, why would they happen?

It just seems like they're using the increase in multiple (6*EBITDA to current market multiple) to justify the purchase. Furthermore, they haven't bothered to quantify any potential distribution benefits - and there must be a few.

Nevertheless, Hammerschlag owns a fair bit of RCG - and he's done very well to date as Chairman. Really needs more scrutiny before I can be happy with it.


On another note, I wonder if they'll structure the CR as a renouncable rights issue, rather than an opt in CR. It doesn't sound like it, but I'd very much prefer it. Gives me the option to sell off my rights, and optionality is king.

 

[galumay]

I've held this for some years now .....

All good points Klogg, like you I hold and I guess that just makes me more positive towards the annoucement than I might be if I didnt hold! I will top up on the CR and watch what happens. Seems like it will be a straight SPP rather than rights.