Burberry Group Plc · LSE:BRBY
Burberry — H1 2006/07 Earnings Presentation
49 slides from Burberry's earnings presentation, Nov 14, 2006
Slide 1: 1
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Slide 2: Interim Results 14th November 2006
Interim Results 14th November 2006
Slide 3: John Peace, Chairman
John Peace Chairman
Slide 4: First Half Review - Stacey Cartwright, Chief Financial Officer
First Half Review Stacey Cartwright Chief Financial Officer
Slide 5: Financial Highlights
Financial Highlights First Half Review 2006/07 2005/06 £m £m Growth Turnover 392.0 354.9 11% Operating Profit before Atlas costs 84.2 78.8 7% Atlas costs 9.6 3.0 - Diluted EPS before Atlas costs 12.5 11.3 11% Dividend per share 2.875 2.50 15% 5
Slide 6: Turnover Growth
Turnover First Half Review Growth £6.1m £392.0m £33.0m (£2.0) – 11% reported £354.9m – 10% underlying 2005/06 Underlying Exchange Conversions 2006/07 growth rates 6
Slide 7: Revenue Channel Shift
Revenue Channel Shift First Half Review Licensing Licensing 10% 11% Retail Retail 43% 35% Wholesale Wholesale 47% 54% 2006/07 2005/06 7
Slide 8: Strong Existing Store Performance
Strong Existing Store Performance First Half Review Retail Revenue Growth Components Like for like growth Conversions/FX/Other 39% 35% Space additions 32% 8% 14% 6% 21% 2% 17% 10% 16% 10% 15% 9% 10% 10% Q3 Q4 Q1 Q2 2005/06 2006/07 8
Slide 9: First Half Store Activity
First Half Store Activity First Half Review First Half Second Half 13 new openings Atlantic City Topanga 4 renovations Hackensack Vienna Northbrook Seville 12% space growth Kansas City Madrid Channel shift Sydney – Taiwan – Spain concessions 2 outlets 2 outlets 5 concessions 5 concessions 9
Slide 10: Retail Revenue Growth
Retail Revenue First Half Review Growth £16.1 £169.1m – 36% reported £29.1m (£0.3m) – 23% underlying £124.2m 12% space increase 11% like for like 13% conversion 2005/06 Underlying Exchange Conversions 2006/07 growth rates 10
Slide 11: Wholesale Performance
Wholesale Performance First Half Review Growth constrained Performance varied by market March Market 2006 11
Slide 12: Spain
Spain First Half Review Channel challenge Concessions development New stores – Madrid 1st half – Seville 2nd half Seasonal channel shift Madrid 12
Slide 13: Wholesale Lagging Indicator
Wholesale Lagging Indicator First Half Review Underlying Wholesale Revenue Growth High single digit 1% H1 H2 H1 H2 (1%) outlook (7%) 2005/06 2006/07 13
Slide 14: Wholesale Revenue Growth
Wholesale Revenue First Half Review Growth £191.1m £1.9m (£0.9) (£10.0m) – down 5% reported £182.1m – up 1% underlying 2005/06 Underlying Exchange Conversions 2006/07 growth rates 14
Slide 15: Licensing Revenue
Licensing Revenue First Half Review Japan Japan – Ongoing gains offset by Apparel terminations Global Global Product Product – Strong performance ns – Fragrance launches at io Japan in rm Te Japan Non-Apparel First Half Licensing Revenue £40.8 million 15
Slide 16: Licensing Revenue Growth
Licensing Revenue First Half Review Growth £2.0m (£0.8m) £40.8m £39.6m – 3% reported – 5% underlying 2005/06 Underlying Exchange 2006/07 growth rates 16
Slide 17: Illustrative Impact of Channel Shift
Illustrative Impact of Channel Shift First Half Review Retail Wholesale Retail Cost sales of goods Gross Operating profit expenses Wholesale Cost sales of goods Net Gross Operating profit expenses profit Net profit 17
Slide 18: Gross Profit Margin
Gross Profit Margin First Half Review Retail mix 61.6% Reduced markdowns 57.8% 2005/06 2006/07 18
Slide 19: Operating Expenses before Atlas Costs
Operating Expenses before Atlas Costs First Half Review Channel mix Growth infrastructure 40.2% 35.6% 2005/06 2006/07 19
Slide 20: EBIT before Atlas Costs
EBIT before Atlas Costs First Half Review Growth: – 7% reported £7.8m (£0.9m) £84.2m £78.8m – 10% adjusted £1.5m Property sale gain 2004/05 Adjusted Exchange 2005/06 growth rates 20
Slide 21: EBIT Margin
EBIT Margin First Half Review First Half Year 2006/07 2005/06 2005/06 Pre-Atlas Costs Retail and Wholesale 14.0% 14.3% 14.5% Licence 85.8% 85.4% 85.6% Total 21.5% 22.2% 22.3% Post Atlas Costs Total 19.0% 21.4% 20.8% 21
Slide 22: Cash Flow from Operations
Cash Flow from Operations First Half Review 2006/07 2005/06 £m £m EBIT 84.2 78.8 Project Atlas costs (9.6) (3.0) Depreciation and similar charges 13.1 11.3 Increase in stocks (10.3) (9.1) Increase in debtors (44.3) (36.5) Decrease in creditors (3.3) (18.7) Other 4.8 2.9 Cash inflow from operations 3
Slide 23: Total Cash Flow
Total Cash Flow First Half Review 2006/07 2005/06 £m £m Cash inflow from operations 34.6 25.7 Net interest (0.7) 1.7 Capex (14.5) (15.0) Property sale proceeds - 3.0 Net acquisition related (1.5) (3.8) Tax paid (20.3) (18.1) Cash outflow before financing (2.4) (6.5) 23
Slide 24: Capital Management
Capital Management First Half Review Cash neutral target Repurchases – £38m during first half – £288m since January 2005 24
Slide 25: Second Half Outlook
Second Half Outlook First Half Review Retail: 14% space growth – 13% for financial year Wholesale: high single digit increase underlying Licensing broadly flat underlying Capex: approximately £40-45 million for 2006/07 Currency impact 25
Slide 26: Atlas Update
Atlas Update First Half Review On plan – 2 deployments completed – UK to be fully converted Spring/Summer 2007 – Tactical Global Sales and Stock Analytics No change to financials – £50m programme – £20m pa P/L benefits for 2007/08 onwards 26
Slide 27: Strategy Update - Angela Ahrendts, Chief Executive Officer
Strategy Update Angela Ahrendts Chief Executive Officer
Slide 28: Key Strategies
Key Strategies Leverage the franchise Non-apparel development Retail-led growth Invest in underpenetrated markets Operational excellence 28
Slide 29: Excellent Foundation
Excellent Foundation Among world’s most recognised brands Reference point for British luxury Brand Runway provides outstanding fashion credentials Appeal across gender and generations Modern classic aesthetic Positioning Strong casual orientation Leading opening price point luxury bran
Slide 30: Leverage the Franchise Overview
Overview Leverage the Franchise Front-end Back-end Organisation Align brand values Rationalise Globally integrate key across categories assortments functions Synchronise brand Consolidate and Consolidate regional message integrate supply chain operating structure Capitalise on product
Slide 31: Fully Capitalise on Positioning
Fully Capitalise on Positioning Leverage the Franchise High Hermes Giorgio Armani Gucci RL Purple Zegna Dolce Prada Collezioni Burberry RL Price Black positioning Boss Coach Fashion Moderate Classic Fashion Style positioning 31
Slide 32: Capture Opportunity at Centre and Top
Capture Opportunity at Centre and Top Leverage the Franchise Product Portfolio Today Objective Prorsum/ Runway London/Tailored Lifestyle/Casual 32
Slide 33: Outerwear
Outerwear Leverage the Franchise The core of Burberry heritage – Functionality – Iconic, authentic Multi-generational, dual-gender appeal Destination category – With complementary products Mufflers Shoes/ boots Strength at all levels of the pyramid – Casual to formal – Classic to fashion
Slide 34: Organisation and Functional Components
Organisation and Functional Components Leverage the Franchise Design Product development Functional integration Regional realignment Cross-category cohesion: Quilting 34
Slide 35: Current Product Mix
Current Product Mix Non-Apparel Development Other 2% Licensing 10% Womenswear 35% Accessories 25% Menswear 28% First Half 2006/07 35
Slide 36: Luxury Handbag Product Evolution
Luxury Handbag Product Evolution Non-Apparel Development Category of concentration AW06 development merger Icons Collection test Icons Collection 36
Slide 37: Luxury Handbags Marketing Evolution
Luxury Handbags Marketing Evolution Non-Apparel Development Runway PR Editorial Advertising Direct Mail/ Online Retail 37
Slide 38: Non-Apparel Agenda
Non-Apparel Agenda Non-Apparel Development - Concentrate on handbags, SLG, shoes Product - Drive innovation and icon development - Build capabilities in categories and functions People - Reallocate resources - Strengthen supply chain Processes - Reallocate marketing, PR, selling resources - Increase
Slide 39: Productivity
Productivity Retail-led Growth Key opportunity Drivers – Product synergies – Cross merchandising – Replenishment – Marketing synchronisation UPT Drivers 39
Slide 40: New Store Formats
New Store Formats Retail-led Growth 40
Slide 41: Store Expansion
Store Expansion Retail-led Growth Store locations at September 2006* * Includes franchise stores 41
Slide 42: Regional Emphasis
Regional Emphasis Underpenetrated Markets Emerging Markets 4% Asia 10% Japan US 36% 15% Europe 35% 2005/06 Brand Sales at Retail 42
Slide 43: Wholesale and Franchise Opportunities
Wholesale and Franchise Opportunities Underpenetrated Markets Continuing importance of Wholesale Greater sophistication required to manage Franchise stores in emerging markets Istanbul 43
Slide 44: UK Reinvestment
UK Reinvestment Underpenetrated Markets Renovations Expansions Concession conversion eCommerce New stores Harrods 44
Slide 45: Atlas and Beyond
Atlas and Beyond Operational Excellence Design and merchandising – SKU reduction – Calendar Supply chain – Replenishment – Sourcing September Market 2006 45
Slide 46: Spain and Japan
Spain and Japan Phase II Spain – Integrating retail – Testing international product – Integrating selected menswear – Opened Madrid Japan – Testing imported non-apparel – Studying accessories for long- term 46
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Slide 49: Disclaimer
Disclaimer Certain statements made in this announcement are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future results in forward looking st