1H’2020 ResultsKey PointsJoyce Corporation Ltd (“JYC”) Reported 1H’20 results as follows:y $0.98m Reported NPAT;y $1.48m Normalised NPATo $0.5m one-off expenses relating to resignation of former NED in late 2019;y $52.4m revenue (+4.5% pcp);y KWB group – strong 1H, with new strategic showrooms delivering to date $5.60m consolidated segment earnings (+8.8% pcp);o Preparing to enter northern Sydney suburbs as part of next growth phase;o 3 showrooms are planned to be opened during the middle of CY’20;y Bedshed – Robust 1H result $1.27m consolidated segment earnings (+21% pcp);o Delivered strong earnings growth, defying retail sector conditions andfurther cementing Bedshed as a leading brand;o Bedshed have experienced unprecedented levels of enquiries frompotential franchisees demonstrating the growth potential of the business;y Lloyds Online Auctions – disappointing 1H result, challenging operatingenvironment continues -$1.29m consolidated segment loss (vs -$0.17m loss in pcp);o Auctioning industry remains difficult with industry over-capacity andcontinued weakness in core liquidation business;o JYC have now successfully restructured the business, in the processreducing its cost base and creating new revenue streams, it’s now wellplaced to capitalise on improved market conditions in the future;y 5.0c Interim dividend declared (implies standalone 3.4% div. yield at current price);y Cash balance at end of H was $1.9m, lower HoH as a result of moving debt toa “Business loan as needed” basis, thereby significantly reducing debt for themajority of the period;o This should lead to a significant reduction in interest and bank chargesgoing forwardy AASB 16 adopted during half, $13.9m in lease liabilities recognised as a result;y New Non-Executive Director appointed to board in Jan’20 bringing furthervaluable experienceInvestment ThesisJYC have delivered 1H result, reporting ~$1m in NPAT to equity holders. On face valuethis is a weaker result, however, this includes ~$0.5m in one-off expenses which whennormalised bring the result back broadly in line to our $1.6m 1H NPAT forecast. KWBand Beshed have delivered a strong 1H, broadly in line with our expectations, particularlywith Bedshed which delivered a robust result. Lloyds continues to lag the pack andunderperform well below our expectations; although this in theory should only pose aminimal impact to our SOTP valuation it may change our view of group earnings in theshort term. As a whole we remain focused on KWB and Bedshed, which we continue toview as the main drivers of valuation and hence the investment case. We believe if Joycecan meet our forecast on its current portfolio of companies that the stock can re-rateJoyce Corporation Ltd (JYC)Share Price 1.49 A$/shPrice Target 2.20 A$/shValuation 2.20 A$/shShares on issue 28.1 m(dil)Market Capitalisation 41.9 A$mEnterprise Value (inc. AASB16 adj.) 60.9 A$/mDebt(inc. AASB16 adj.) 20.9 A$/mCash (1H’20) 1.9 A$/mLargest Shareholder Dan Smetana 42.0
JYC Price at posting:
$1.47 Sentiment: None Disclosure: Held
$5.60m consolidated segment earnings (+8.8% pcp);o Preparing to enter northern Sydney suburbs as part of next growth phase;o 3 showrooms are planned to be opened during the middle of CY’20;y Bedshed – Robust 1H result
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