Summary of FY09

 

Financial Results

• Total Revenue $1.16 billion – down 9.3%
• NPAT $57.2 million after tax – down 6.9%
• Earnings per share (basic) 34.0 cents – down 7.1%
• Operating cash flow strong at $81.6 million
• Balance sheet remains strong
• Dividend declared 12.5 cents per share, fully franked

 

 

 

According to their Managing Director Paul Hitchcock, “obviously this has been an exceptionally challenging period both for us and our customers. What we’re seeing in our business is a continuation of the difficult trading conditions we saw in the first nine months. But the good news is, we anticipated it and we took action early on to address the downturn. Our strategy in the short term has been to focus more closely on good customer service, keeping a tight rein on expenses and continuing to deliver on our major projects to position the business for growth in the mid to longer term.”

As far as the FY09 financials go, their total revenue for the period was down 9.3% at $1.16b, EBITDA of $108.2m was down 5.2% and NPAT was $57.2m. Basic earnings per share were 34.0 cents compared with 36.6 cents per share, down 7.1%. The Board declared a dividend of 12.5 cents per share bringing the total dividend for the year to 22.5 cents per share.

Sales of discretionary products, that is, their IT, print and promo and furniture took the brunt of the downturn and were down 21%. Their consumable products were down marginally at 2%.
They achieved a small increase in exclusive brand sales versus like sales and are now generating almost 80% of their order lines electronically.

As in previous years, they have maintained a strong balance sheet and this year they had a strong cash flow number. They are now into the fifth year of a major six year project to restructure Corporate Express as a fully integrated national business.
Paul Hitchcock reports, “All the major projects that were in progress are now complete. Our major sales team restructure, that is, Project Velocity is now complete and we have specialist customer focus teams operating across all the key business segments. What this means is we’re now a truly customer focused sales capability with specialists working in all key customer segments.
Project Oxford designed to optimise our fast slow inventory management is almost complete achieving reductions in inventory in the order of $10m across our state network and achieving cost savings of $4m per annum.
Now FAP implementation, that is, Project Next Gen is progressing well. Another project, Project Proteus, our end to end supply chain project is also developing well.”

In terms of the 2010 Strategy, Mr. Hitchcock gave some perspectives on the current year and their plans for the business going forward.

As well as the sales restructure, they have begun to leverage the Staples group experience and to share best practice learnings across teams in key areas including purchasing, supply chain, human resources development, information technology, customer relationships and sustainable product development. They are also increasing their focus on developing and capitalising on strong supplier alliances.

They have delivered on their major projects and the roll out of the new FAP system is continuing in line with their planning and under Project Proteus, they expect to see improvements in their supply chain.
Corporate Express continues to focus on building the strongest team in the market and strengthening their corporate social responsibility positioning.

The other area that they talked about is their mid market and they have set up a team of hunters and farmers as they call them and they have a new business team which are the hunters and they’re charged with securing new business and they see the mid market as a real growth opportunity and so consequently they have set up a focus sales team or dedicated sales team focusing on new business as well as making sure for the mid market they’re continuing to grow their share of wallet with the customers they have.

In terms of sustainability, for many years now they have taken a whole of company approach to their business. Sustainability is a key business driver. Corporate Express now offers more than 2000 environmentally preferable products accounting for over 20% of catalogue sales and they continue to grow as a percentage.

This year they issued their first detailed sustainability report and Corporate Express’ sustainability leadership was again widely recognised including their CIO Gary Watley being awarded MIS Magazine’s Green CIO of the Year.

Balance Sheet & Future Acquisitions

Working capital remains within their targets and the balance sheet remains strong. In September 2009, they successfully refinanced their existing debt facility and now have in place a new $250 million 3 year facility.  No acquisitions were completed during the period under review. However the intention is to refocus on acquisitions, in their core business area. They have got a very strong balance sheet and the focus will be on bolt-on acquisitions, the closer to the core business the better.

Paul Hitchcock says, “We’ll run our ruler over a few things over the next twelve months. But we’ve got a strong balance sheet and good cash flows and we tend to reinvest in the core business of office supplies. Also, we completed our debt refinancing at the back end of last year so we’re locked down for the next three years, that’s done and dusted.”

In terms of the outlook for 2010, Corporate Express single source model remains the principal driver of shareholder value. A real challenge going forward to is to grow the business. While the outlook remains subdued, their focus is on growth. With a well structured and efficient business, an experienced and incentivised sales team and the capacity to make acquisitions where they add value particularly in office products,  Paul Hitchcock believe they are well placed to do that.

By having Staples as a major shareholder, the synergies they have achieved are in two areas in purchasing – they have been leveraging their global purchasing power through the product purchases but they have also been leveraging learnings and capabilities that Staples can bring to them.

This is what Paul Hitchcock has to say about their outlook for the near future: “We are not yet seeing any real signs of a sustained upturn in demand, either from major corporate clients or in the middle market. We don’t expect that to change significantly in the near term.

Our Single Source business model remains the principal driver of shareholder value, and we are confident that Corporate Express is in good shape to benefit when the market recovers.”