Frasers Group Plc · LSE:FRAS
Frasers — Sports Direct International — FY2016 Earnings Presentation
33 slides from Frasers's earnings presentation, Jul 7, 2016
Slide 1: Investing for the Future: Preliminary Results Presentation
INVESTING FOR THE FUTURE Preliminary Results Presentation For the 52 weeks ended 24 April 2016 Thursday 07 July 2016
Slide 2: Dave Forsey, Chief Executive
DAV E FO R S E Y CHIEF EXECUTIVE 2
Slide 3: FY16: Group Highlights
FY16: GROUP HIGHLIGHTS • Sports Retail revenue increased by 0.6% (excluding Heatons) • Sports Retail gross margin maintained at 44.6% • Group underlying EBITDA decreased by 0.5% to £381.4m • Underlying profit before tax down 8.4% to £275.2m • Underlying free cash generation of £309.1m • Sports Retai
Slide 4: Matt Pearson, Acting CFO: Financial Review
M AT T P E A R S O N ACTING CHIEF FINANCIAL OFFICER FINANCIAL REVIEW 4
Slide 5: Group Revenue Bridge
FY16: GROUP REVENUE BRIDGE 2,950 +3.9% -12.7% +2.3% +2.5% -£26.4m 2,900 +£93.1m +£5.1m 2,850 REVENUE (£M) 2,800 2,750 £2,904m £2,833m 2,700 2,650 2,600 FY15 Sports Retail Premium Lifestyle Brands FY16 • Group revenue growth of 2.5% • Sports Retail revenue growth including Heatons of 3.9% 5
Slide 6: Sports Retail Overview
FY16: SPORTS RETAIL OVERVIEW Sports Retail Revenue Sports Retail Gross Margin 46.0 45.6 GROSS MARGIN (%) 2,600 £2,492m 44.6 44.6 45.0 44.5 £2,399m 2,400 44.0 43.2 42.9 43.0 2,200 42.0 41.0 40.3 2,000 REVENUE (£M) 40.0 1,800 FY 13 HY 14 FY 14 H1 15 FY15 H1 16 FY16 Like-for-like Sports Retail Gross Co
Slide 7: Sports Retail Operating Costs & Underlying EBITDA
FY16: SPORTS RETAIL OPERATING COSTS & UNDERLYING EBITDA FY16 FY15 Change (£m) (£m) (%) Store Wages 250 232 7.8 Premises Costs 234 207 13.0 Other Retail Costs 276 277 (0.4) Currency impact* 4 - - Sports Retail Operating Costs 764 715 6.9 Sports Retail Underlying EBITDA pre associates 346 354 (2.2) As
Slide 8: Premium Lifestyle Overview
FY16: PREMIUM LIFESTYLE OVERVIEW • Revenue lower due to store closures in prior year 250 • Gross margin improving due to reduced stock clearance and improving buying disciplines £207.6m • Cost savings from operating efficiencies 200 £181.2m FY16 FY15 Change (£m) (£m) (%) Revenue 181.2 207.6 (12.7) 1
Slide 9: Brands Division Overview
FY16: BRANDS DIVISION OVERVIEW Revenue: up 2.3% Licensing Wholesale • Licensing: Up 5.1% 250 • Wholesale: Up 1.8% £231.5m £226.4m Wholesale Margin: 31.9% 33.1 34.8 200 • Up 180 bps REVENUE (£M) Licensing: 150 • FY16: 35 deals completed / contractual minimum royalties of $15.5m over the life of the c
Slide 10: Brands Operating Costs & Underlying EBITDA
FY16: BRANDS OPERATING COSTS & UNDERLYING EBITDA FY16 FY15 Change (£m) (£m) (%) Wages 21.5 21.2 1.4 Advertising and Promotion 11.4 12.7 (10.2) Other Brands Costs 27.1 23.1 17.3 Total Brands Operating Costs 60.0 57.0 5.3 Brands Underlying EBITDA 37.5 34.1 10.0 10
Slide 11: Group Underlying EBITDA Bridge
FY16: GROUP UNDERLYING EBITDA BRIDGE -2.2% +10.0% +29.7% 380 +33.8% (£7.1m) £3.4m (£7.8m) £2.6m U N D E R LY I N G E B I T D A ( £ M ) 360 340 £383.2m £381.4m £374.3m 320 300 280 FY15 pre Share Sports Retail Premium Lifestyle Brands FY16 pre Share Share Scheme FY16 Scheme non-cash Scheme non-cash no
Slide 12: PBT / PAT / EPS
FY16: PBT / PAT / EPS FY16 FY15 Change (£m) (£m) (%) Underlying EBITDA (pre share scheme) 381.4 383.2 (0.5) Share scheme charge (7.1) (10.1) (29.7) Depreciation and amortisation (95.6) (67.8) 41.0 Interest (5.2) (6.5) (20.0) Investment Income 1.7 1.5 13.3 Underlying PBT 275.2 300.3 (8.4) Underlying
Slide 13: Depreciation & Amortisation
FY16: DEPRECIATION & AMORTISATION FY16 FY15 Change (£m) (£m) (%) Sports Retail - Stores and Warehouse 81.6 50.5 61.6 Sports Retail - Change in Estimated Useful Life – Fixtures & Fittings 2.8 7.9 (64.6) Sports Retail - Re-allocation of Freehold Land and Buildings Split 1.4 - - Total Sports Retail 85.
Slide 14: Taxation
FY16: TAXATION FY16 FY15 (£m) (£m) Reported PBT 361.8 313.4 Standard Rate of Corporation Tax (1) 72.4 65.8 Non-qualifying depreciation 10.6 3.5 Other differences (0.2) 2.8 Effective Tax 82.8 72.1 Actual effective tax rate 22.9% 23.0% (1) The standard rate of corporation tax was 20% in FY16 (FY15: 21
Slide 15: Cash Flow
FY16: CASH FLOW FY16 FY15 (£m) (£m) EBITDA (Pre Scheme Costs) 381.4 383.2 Realised (loss)/profit on fx contracts (2.3) (3.7) Taxes paid (69.9) (77.7) Underlying free cash flow 309.2 301.8 Working capital Inventory (155.4) 57.0 Debtors/creditors, other (88.1) (121.8) Acquisitions (including debt) (1)
Slide 16: Capital Expenditure
FY16: CAPITAL EXPENDITURE FY16 FY15 (£m) (£m) Freehold acquisitions 111.0 5.3 Warehouse and Shirebrook store expansion 39.7 37.4 New stores (leasehold) 31.5 25.1 Refurbishment capex 14.0 15.2 Other 9.1 10.3 Sports Retail 205.3 93.3 Premium Lifestyle 1.3 2.3 Brands 0.5 4.4 Gross Capital Expenditure 2
Slide 17: Net Debt Bridge
FY16: NET DEBT BRIDGE -350 -300 -250 -200 (243.5) £2.7m NET DEBT (£M) -150 379.0 92.1 -100 (207.1) -50 (1.6) 0 44.0 (33.1) 59.7 50 99.6 (69.9) 100 150 Net Debt EBITDA & FX Working Income from Capital Sale of Interest Acquisitions Tax Net Debt FY15 Capital & Investments Expenditure Freehold FY16 Othe
Slide 18: Dave Forsey, Chief Executive: Operational Review
DAV E FO R S E Y CHIEF EXECUTIVE O P E R AT I O N A L R E V I E W 18
Slide 19: Sports Retail: Property Portfolio UK
SPORTS RETAIL: PROPERTY PORTFOLIO UK • Square footage increased to c.5.00m sq. ft. (1) FY16 FY15 • 37 new stores opened in the period • 14 out of the 19 closures in FY16 have been relocations into UK Stores (2) 458 440 larger and better configured space Openings 37 39 • Accelerated elevation program
Slide 20: Sports Retail: Property Portfolio Non-UK
SPORTS RETAIL: PROPERTY PORTFOLIO NON-UK • Square footage increased to c. 3.25m sq. ft (1) (excluding Heatons) Territory Stores FY16 Stores FY15 Austria 42 46 • 23 new stores opened in 11 different countries in FY16 Belgium 41 43 • 10 closures in five countries in FY16 Estonia (5) 25 24 Latvia (5) 1
Slide 21: Investing for the Future
INVESTING FOR THE FUTURE
Slide 22: Sports Retail: Key Location Doors
SPORTS RETAIL: KEY LOCATION DOORS • New generation concept: • TO WIN - Multi-brand and category performance sports areas • TO TRAIN - 20,000 sq. ft. gym and fitness centre • TO LIVE - Multi-brand, premium lifestyle space • Elevated presentation working with key 3rd party brands adidas, Nike, Under A
Slide 23: Sports Retail: Shirebrook Development
SPORTS RETAIL: SHIREBROOK DEVELOPMENT • Latest phase of our ongoing Shirebrook campus development now complete • Additional c. 700,000 sq. ft. warehouse and office facility • Enhanced online capacity and improved office and training environment for staff • Additional office space for 3rd party brand
Slide 24: Sports Retail: Fitness Division Update
SPORTS RETAIL: FITNESS DIVISION UPDATE Acquired sites • Investment in new equipment and re-modelling of the club layouts has contributed to a significant growth in member numbers in the former LA Fitness Sites • Combined membership numbers in the acquired sites and Gym / Retail Space is now over 100
Slide 25: Sports Retail: Marketing
DIRECT. oan LICENSED PRODUCT SPORTS RETAIL: MARKETING
Slide 26: Sports Retail: Marketing - 3rd Party Brands
SPORTS RETAIL: MARKETING - 3RD PARTY BRANDS 26
Slide 27: Sports Retail: Marketing - GB & Ireland 2016 Replica
SPORTS RETAIL: MARKETING - GB & IRELAND 2016 REPLICA JD Exclusive Partner JD Exclusive Partner JD Exclusive Partner 27
Slide 28: Sports Retail: Online Overview
SPORTS RETAIL: ONLINE OVERVIEW • Our website has been elevated and enhanced to further support better and best product distribution • Platform allows for full integration between our website and social channels to execute partner marketing initiatives • Further emphasis on key brand and category ‘st
Slide 29: Premium Lifestyle
PREMIUM LIFESTYLE • Group approach to operational improvements driving margin growth through shared buying and improved stock control and replenishment processes • Websites benefit from ongoing investment into core Group platform Strategy: • Enhancing existing space and investing in new flagship loc
Slide 30: Brands: Wholesale
BRANDS: WHOLESALE • Sales growth across Europe, partly due to brand acquisitions in prior year • US trading in line with expectations with growth on prior year • Expansion of product categories in the US driving growth • Wholesale sales in the Asia Pacific region trading well • Expected A & P spend
Slide 31: Brands: Licensing
BRANDS: LICENSING • Everlast, Dunlop and Slazenger continue to be main growth drivers • Firetrap has expanded into new categories and remains a key focus area • Licensing model still regarded as a key driver of Brands division growth and profitability 31
Slide 32: Outlook Statement
FY16: OUTLOOK STATEMENT • Trading since the start of May and leading up to the EU referendum was broadly in line with management expectations • Post the EU vote, we expect the current political uncertainty and potential weakness in the UK’s short to medium term economic outlook is likely to act as a
Slide 33: Questions?
SPORTS -COM QUESTIONS?
Sports Direct International — FY2016 Earnings Presentation on 6ix