Best Buy Co., Inc. · NYSE:BBY
Best Buy — H1 2011-12 Earnings Presentation
32 slides from Best Buy's earnings presentation, Nov 7, 2011
Slide 1: Interim Results & Strategy Update
Carphone Warehouse Group plc Interim Results & Strategy Update 7th November 2011 Interim Results for the 6 months ended 30 September 2011 1.
Slide 2: Agenda
Agenda • Strategic Highlights Charles Dunstone - Chairman • Interim Results 2011-12 & Strategy Update Roger Taylor - CEO • Financial Update Nigel Langstaff - CFO
Slide 3: Strategic Highlights
Strategic Highlights Charles Dunstone Chairman
Slide 4: Strategic Highlights
Strategic Highlights • Sale of interest in Best Buy Mobile (US & Canada) • Closure of Best Buy UK ‘Big Box’ • Launch of Global Connect • Focus on CPW’s connectivity strategy
Slide 5: Interim Results 2011-12 & Strategy Update
Interim Results 2011-12 & Strategy Update Roger Taylor CEO
Slide 6: Interim Results 2011-12
Continuing • CPW Europe Headline EBIT £24.4m, pre £4.4m reorganisation charge (2010: £44.2m) • 18 to 24mth contracts (LFL -3.9%, connections -8.8%) • Slower prepay market • Product launch timing • Virgin Mobile France Headline EBIT £8.0m (2010: £19.9m) • Strong revenue growth of 22.1% • Net adds of
Slide 7: Christmas 2011 prepay smartphones
Christmas 2011 iPhone 4 (8gb) Blackberry Curve 8520 Samsung Galaxy Mini £419.00 £129.95 £69.95 New Prepay smartphones CPW exclusives* Blackberry 9300 Samsung Galaxy Europa HTC Wildfire S £159.95 £49.95 £129.95 Nokia C2-02 Nokia C3-00 £69.95 £69.95 Samsung Tocco Lite Alcatel OT810 £49.95 £49.95 *Excl
Slide 8: Postpay propositions
Postpay propositions HTC Sensation XL Nokia Lumia 800 iPhone4S 16GB Blackberry Bold 9900 Free from £31/mth Free from £31/mth Free from £41/mth Free from £31/mth Choose your FREE gift and FREE phone
Slide 9: Closure of Best Buy UK Big Box
Closure of Best Buy UK „Big Box‟ Focus on „Connected World‟ with one brand • Connectivity strategy prioritised: higher and proven rate of return • Store closure expected by end of calendar year 2011 (losses through to closure £25m-£30m) • Redeployment of Best Buy UK talent • Exceptional cash costs o
Slide 10: Connected World - the next step
„Connected World‟ - the next step ‘To INSPIRE & GUIDE in this connected world, making people’s lives better through technology’ Extended “connected” product range Higher profit pool categories Further Geek Squad & services roll out Multi-channel „click & connect‟ Extended customer touch points Acces
Slide 11: CPW Connected World
CPW Connected World WIRELESS WORLD ++ CONNECTED WORLD Advice on smartphones, tablets, laptops & all other technology that connects your world Your connected retailer • Faster store conversion • Increase in total sq ft: 15%-20% over next 3 to 5 years • Expanding online proposition • Compelling return
Slide 12: Global Connect
• Launch of new JV with Best Buy Co., Inc. • Driving Connected World into new markets • Partnerships with major retailers in target markets • Capital-light • Sharing expertise, vendor relationships and best retail practice • Effective operational governance Global Connect Replicating partnership suc
Slide 13: Global Connect - China
Global Connect - China • 1.3bn with 50% urban population • 68% mobile penetration nationally • Over 350m handset sales in 2011 • Best Buy - Five Star • National Chinese CE retailer • Revenue US$1.7bn FY11 • Jiangsu based • 210 stores in 6 regions by end FY12 • Ambitious 5 year roll-out plan • Mobile
Slide 14: Sale of interest in Best Buy Mobile (US & Canada)
Sale of interest in Best Buy Mobile (US & Canada) • Enable our US partners to pursue ‘Connect’ strategy & market a wider range of products • Consideration £838m for Best Buy Mobile (US & Canada) • Upfront cash payment of £813m ($1,303m) • Ongoing consultancy fee of £5m pa for five years • Intention
Slide 15: Best Buy Europe long-term ownership
Best Buy Europe FMV CPW Put & BBY Call (2 years: BBY Call China/Mexico only) FMV FMV less 10% CPW Put & China/Mexico FMV Formalisation of long-term ownership FMV - fair market value Global Connect Global Connect Delivering shareholder value 3 Years then 4 Years later
Slide 16: Other deal issues
Other deal issues • Up to 170p per share to be distributed to shareholders • Global Connect agreement • Governance • Best Buy Europe dividend policy
Slide 17: Proposed transactions with Best Buy Co., Inc.
Proposed transactions with Best Buy Co., Inc. Conditions CPW shareholder approval Anticipated timetable 7th November 2011 Announcement of sale of interest in Best Buy Mobile (US & Canada) November/December Production of circular January 2012 1st week 3rd week Circular distributed to CPW shareholders
Slide 18: Revised Group Structure
v CPW Europe 50% Virgin Mobile France 47% Property 100% MV of £70m-£80m Cash & loans receivable c.£125m Mexico & China 20% profit share New territories 50% profit share Best Buy Mobile Consultancy fee £25m over 5 years Revised Group Structure CPW Europe potential upside Post distribution of up to £8
Slide 19: Financial Update
Financial Update Nigel Langstaff CFO
Slide 20: Summary H1 financials
Summary H1 financials • CPW Europe affected as anticipated by 24 month contracts in the UK and SP transition in Germany, including £4m reorganisation charge • Best Buy Mobile US reflects strong prior year comparatives • Unsustainable level of losses within Best Buy UK, resulting in decision to close
Slide 21: Best Buy Europe financials - EBIT
Best Buy Europe financials - EBIT • Revenue in line with expectations, with LFL down 3.9% and c.£60m negative impact from Germany • CPW Europe GM% held up well, but overall GM% suppressed by Best Buy UK • Opex savings despite Best Buy UK and German reorganisation costs Best Buy Europe Headline EBIT
Slide 22: Virgin Mobile France financials - PAT
Virgin Mobile France financials - PAT • Strong revenue growth, with last year’s customer base growth weighted to H2 • Net adds of 88,000 (net reduction of 33,000 last year) resulting in high SAC • Underlying EBIT before increased net adds showing good progress Virgin Mobile France Headline PAT £'m H
Slide 23: Best Buy Europe financials - cash flow
Best Buy Europe financials - cash flow • EBITDA down YoY (24m contracts, Germany) • YoY increase in H1 working capital outflow reflects higher stock levels and other short-term timing issues • Full year working capital expectation in line with guidance • Capex investment in Wireless World roll-out a
Slide 24: Update on full year guidance
Update on full year guidance Continuing June guidance Update CPW Europe EBIT flat to +10% As June; likely to be lower end given (£135m - £150m) subdued prepay market Interest flat (£15m) Tax 23-24% Virgin Mobile France EBIT up 20-25% As June Basic EPS Pending Best Buy UK 11.5p - 12.0p Regular divide
Slide 25: Estimated costs of Best Buy UK closure
Estimated costs of Best Buy UK closure • All closure plans subject to employee consultation • Significant investment in redeployment of people where possible • Average lease length c.10 years Cash costs £'m Property c.40 Average annual rent c.£860k per store People 10-15 Redeployment / redundancy Ot
Slide 26: Q&A
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Slide 27: Appendices
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Slide 28: Best Buy Europe guidance update
Best Buy Europe guidance update CPW Europe FY guidance H1 actual Comments Space Up 2-3% Up 1% H1 weighting to franchise stores LFL revenue + / - 2% Down 3.9% H1 in line with expectations, with flat to low single digit positive LFLs expected in H2 Connections Down 0 to 5% Down 8.8% Now expecting down
Slide 29: Virgin Mobile France financials - cash flow
Virgin Mobile France financials - cash flow • Strong cash generation despite investment in growth • Capex investment in full MVNO development • Other in prior year included Tele2 purchase price adjustment Virgin Mobile France cash flow £'m H1 2011-12 H1 2010-11 YoY EBITDA 10 22 Working capital 7 11
Slide 30: Virgin Mobile France guidance update
Virgin Mobile France guidance update Virgin Mobile FY guidance H1 actual Comments Net adds 100,000 to 150,000 88,000 FY guidance unchanged Revenue Up 10-15% Up 22% FY guidance unchanged EBIT margin ~7% 4.1% Increased customer acquisition in H1; FY guidance unchanged OFCF Similar Down YoY Increased c
Slide 31: Group financials - EPS
Group financials - EPS Headline Group EPS £'m H1 2011-12 H1 2010-11 YoY Revenue 3 3 Opex (3) (4) Best Buy Europe 3 19 -84% Virgin Mobile France 2 6 -68% Net interest and tax 1 1 Profit after tax 6 25 -78% Basic EPS 1.2p 5.5p -78% • Expected seasonality in CPW Europe and increased losses in Best Buy
Slide 32: Group financials - cash and dividends
Group financials - cash and dividends • Planned dividend of c.5p, with 1.75p interim • No short-term plan for additional returns out of existing cash resources • Other in prior year includes FX gains on hedges Group funds £'m H1 2011-12 H1 2010-11 Net funds b/f 121 100 Dividends / own shares (30) (3