Myer Holdings Limited · ASX:MYR
Myer — FY2007 Earnings Presentation
30 slides from Myer's earnings presentation, September 2007
Slide 1: Building for the Future
1 Presentation after 16 months of ownership in Myer’s 50 month Turnaround programme BUILDING FOR THE FUTURE ‘Our Vision is to be an International Class Retail Business providing Inspiration to Everyone’ Myer Full Year Results to 28 July 2007
Slide 2: Index
2 INDEX Overview Major building blocks for permanent & positive change now in place after 16 months (pg 3) Next 12 Months to Complete Major Permanent Change Process (pg 4) EBIT grew from 2 ⅓ cents to 5 ½ cents in the dollar (pg 5) All round strong contribution (pg 6) Efficiency, Growth & Momentum 10
Slide 3: Major building blocks for permanent & positive change now in place after 16 months
3 Major building blocks for permanent & positive change now in place after 16 months ¾ 101 Business Improvement Projects 65% complete ¾ World Class Supply Chain – All four Australian Warehouses now open – Perth (May), Brisbane (June), Melbourne (July), Sydney (September) with 4 Asian Hubs in Shenzhe
Slide 4: Next 12 Months to Complete Major Permanent Change Process
4 Next 12 Months to Complete Major Permanent Change Process ¾ Capital expenditure doubled to accelerate growing the chain from 60 towards 80 stores ¾ New Point-of-Sale System to be installed ¾ Customer service enhancements recognised from research to be adopted ¾ 101 Business Improvement Projects to
Slide 5: EBIT grew from 2⅓ cents to 5½ cents in the dollar
5 EBIT grew from 2⅓ cents to 5 ½ cents in the dollar FY06 FY07 $ mil Includes History Guidance at Half Change vs Making Clearance Proforma* Prospectus Year Actual Proforma $3245 mil $3174 mil Sales (total system) $2996 mil $3300 mil $3289 mil +3.6% ($93 mil) $73 mil EBIT $93 mil $150 - 170 mil $180
Slide 6: All round strong contribution
6 All round strong contribution ($mil) FY 06/07 FY 05/06 * $107m EBIT Growth Contribution Sales - total system 3289 3174 +3.6% - excluding Concessions 3002 2947 +1.9% Operating Gross Profit 1325 1256 +5.5% 40.3% 39.6% Margin Cost of Doing Business 1145 1183 -3.2% $23m 34.8% 37.3% Sales Earnings Befo
Slide 7: 101 Business Improvement Projects Making Good Progress
7 101 Business Improvement Projects Making Good Progress ¾ Overall 65% complete ¾ The 51 Major and Minor Projects completed include: Asian Buying Hubs established Perth regional distribution centre opened Graduate Programme launched Myer Store Card launched Jennifer Hawkins signed for 4 years Brisba
Slide 8: Virtual Completion of 101 Improvement Projects by September 2008
8 Virtual Completion of 101 Improvement Projects by September 2008 ¾ Over 90% will be complete by September 2008 ¾ Full benefits will not be received until FY10 ¾ Projects to complete in next year include: - Migration of IT from Coles - Launch of Myer Visa Card - Closed circuit TV security - New Poi
Slide 9: Completed World Class Supply Chain to increase speed to market and reduce cost
9 Completed World Class Supply Chain to increase speed to market and reduce cost ¾ High importance and profile of Supply Chain within the business – ‘Supply Chain is Sexy’ ¾ Customer driven focus – Suppliers were consulted and our Supply Chain decision was consistent with their views – a network con
Slide 10: Continuously Building IT
10 Continuously Building IT ¾ Myer IT Management function set up independent from Coles ¾ SAP financial reporting system (general ledger) out from Coles March 2007 ¾ Myer / IBM IT Help desk commenced March 2007 ¾ New freight forwarding solution live April 2007 ¾ Mymerch integrated merchandising syst
Slide 11: Growing Collaboration with Suppliers
11 Growing Collaboration with Suppliers ¾ Principle of Procurement is that all items are tendered. This has produced very significant savings with more in the pipeline ¾ All buying terms with suppliers being reviewed but project will not be complete until 2008 ¾ Buying Offices reorganised and buying
Slide 12: Upgraded Store Presentation, Refurbishment & New Stores for our Customers
12 Upgraded Store Presentation, Refurbishment & New Stores for our Customers ¾ History Making Clearance tidied up stores and back of house storage, freshened merchandise, and made stores more shoppable ¾ Thereafter “Face Lift” to all stores improved the visual merchandising and attractiveness to cus
Slide 13: Building a Consumer-led Business
13 Building a Consumer-led Business ¾ New Mystery Shopping programme instituted and upgraded with greater individual feedback and reward ¾ Staff rostering and flexibility improved to align staff hours to better match customer traffic ¾ Customer research programme upgraded to ensure ‘consumer-led’ de
Slide 14: Building Customer Loyalty
14 Building Customer Loyalty ¾ Significantly increased benefits to all Myer One customers 1.6 mil customers increasing by over 30,000 (2%) per month Lowered threshold to $1,000 spend to receive $20 gift card, removed tiering making programme simpler Increased benefit to those ‘gold’ members who spen
Slide 15: Strengthening Marketing, Communication and Local Community Engagement
15 Strengthening Marketing, Communication and Local Community Engagement ¾ All marketing expenditure tendered and refocused ¾ Jennifer Hawkins signed for 4 years as “Face of Myer” ¾ Increased marketing events for Myer One Customers ¾ “emporium” 148 page magazine launched ¾ Staff communication improv
Slide 16: Human Resources – building a capable motivated Team
16 Human Resources – building a capable motivated Team ¾ Own Human Resources function set up within Myer and fully operational after phased Service Level Agreement transition from Coles ¾ Recruitment, Training, Payroll and Superannuation services established for 20,000 staff ¾ Buying Office reorgani
Slide 17: Building a Safety Culture
17 Building a Safety Culture ¾ Lost time injury duration reduced 45% in first 16 months ¾ Major focus on improved safety training ¾ Application for Workers Compensation Self Insurance licences: Queensland – awarded, tail claims liability transferred, operational August 2007 New South Wales – awarded
Slide 18: Our Ultimate Market Position is to Inspire Everyone
18 Our Ultimate Market Position is to Inspire Everyone Vision Our vision is to be an international class retail business providing inspiration to everyone It’s not a matter of being up or down market, but the primary destination for every occasion Brand Proposition To excite, inspire and reward our
Slide 19: Brand Architecture to Appeal to Every Consumer
19 Brand Architecture to Appeal to Every Consumer Clearer hierarchy of brands covering full range from luxury to entry price points Fashion Examples Homeware Examples Designer Brands: Donna Karan Nicola Finetti DKNY Narciso Rodriguez Jayson Brunsdon Missoni Cacharel Karen Walker Kenzo Hugo Boss Wayn
Slide 20: Funds Employed, Balance Sheet and Return on Funds Employed – Net Debt Reduced
20 Funds Employed, Balance Sheet and Return on Funds Employed – Net Debt Reduced $ mil Year End Proforma Preliminary on 29/07/06 Half Year Full Year Post Melbourne Acquisition 27/01/07 As Financed 28/07/07 Sale Fixed Assets 213 214 203 238 238 Properties 378 376 373 372 29 Inventory 535 343 367 367
Slide 21: Capital Expenditure to Accelerate Growth of Business
21 Capital Expenditure to Accelerate Growth of Business FY08 FY07 $ mil FY09 FY10 Actual Previous Revised New stores 9 0 18 30 60 Store Refurbishment 18 30 38 46 30 IT 36 30 36 32 20 Supply Chain 15 6 2 2 2 Brand Presentation 4 4 21 21 23 Other 8 2 35 19 15 Total Capital Expenditure 90 72 150 150 15
Slide 22: Conservative Financial Ratios allow Growth
22 Conservative Financial Ratios allow Growth Prospectus FY 07 July 07 Covenants Old New Forecast Actual Senior Leverage Ratio: less than 4.9x less than 4.0x 3.5x 2.1x Senior Interest Cover Ratio: more than 2.15x more than 2.45x 3.0x 6.5x Debt Service Coverage Ratio: more than 1.00x more than 1.00x
Slide 23: Myer Listed Convertible Notes - Prospectus comfortably exceeded
23 Myer Listed Convertible Notes - Prospectus comfortably exceeded ¾ Issued in September 2006 – $225 mil issue over-subscribed at $255 mil (before $10 Mil borrowing costs) ¾ Distribution of issue by Goldman Sachs JBWere, Macquarie Bank and Bell Potter ¾ Coupon 10.19% per annum payable half yearly ¾
Slide 24: Myer FY07 Result in Context
24 Myer FY07 Result in Context ¾ Over the last 10 years, Myer has not made more than 4.9 cents EBIT in the dollar. This year’s 5.5 cents needs to be cemented by achieving at least 6.0 cents FY08 guidance ¾ In comparison with the other Department Store Chain in Australia (David Jones), Myer still tra
Slide 25: Opening New Stores drives Growth
25 Opening New Stores drives Growth ¾ The chain of 61 stores is expected to grow to 80 stores (previously announced target of 75) over coming years FY07 FY08 FY09 FY10 Thereafter 60 - 61 61 - 65 65 - 69 69 - 75 75 - 80 (Strathpine QLD closed) Elizabeth SA Townsville Qld 1 signed NSW 1 signed NSW (Bu
Slide 26: Building a World Class CBD Department Store
26 Building a World Class CBD Department Store ¾ During the year, Myer sold the Bourke Street Melbourne Store and leased it back long term for $18.75 mil per annum. The Buyer (Colonial / GIC / The Myer Family Company) will refurbish the Store to a flag- ship international standard by November 2009.
Slide 27: Outlook
27 Outlook ¾ Hobart fire – some sales impact but limited EBIT impact ¾ Sales split in FY08 weighted to H2 ¾ Continue focus on profitable growth ¾ Continuous improvement on costs ¾ Conscious of impact of election and potential interest rate rises Guidance FY08 ¾ Sales*: ¾ H1 up 1% to 4% on last year;
Slide 28: Building for the Future
28 Building for the Future Building Efficiency ¾ Better focused and value accretive capital expenditure ¾ World class supply chain ¾ Supplier partnerships deliver win-win savings ¾ Cost saving culture delivers permanent improvement ¾ Asian sourcing to deliver better quality fashionable products fast
Slide 29: Executive Quotes
29 Executive Quotes Bill Wavish – Executive Chairman “The changes we’ve made over the past 16 months have been about getting the financial metrics right, and building a strong foundation for the future. The next 12 months will see the completion of that base. Looking beyond FY08, we will accelerate
Slide 30: Management Team
30 Management Team LEADERSHIP TEAM Bill Wavish Executive Chairman Bernie Brookes Managing Director Howard McDonald Director with fashion responsibilities Tom Flood Director with operations responsibilities MANAGEMENT BOARD OF DIRECTORS Paul Banks Property Director Paul Bonnici Marketing and Creative