Best Buy Co., Inc. · NYSE:BBY
Best Buy — H1 2008/09 Earnings Presentation
37 slides from Best Buy's earnings presentation, Nov 18, 2008
Slide 1: The Carphone Warehouse Group PLC Interim Results 2008
The Carphone Warehouse Group PLC Interim Results 2008 18 November 2008
Slide 2: Agenda
Agenda • Introduction, structural review and outlook • Financials
Slide 3: Introduction, structural review and outlook
Introduction, structural review and outlook
Slide 4: H1 highlights
H1 highlights • Transaction with Best Buy to create Best Buy Europe • Best Buy Europe revenues up 12% to £1.6bn • Subscriptions connections up 15% to 2.3m • 82,000 broadband net adds in a slowing market • Interim dividend up 8% to 1.35p • Strong balance sheet
Slide 5: Chapter of the company's history
Chapter 2 of the company’s history • 2,400 stores, 9 European markets • £3bn+ revenue • Significant and growing share • Evolution of CPW/TPH format • Introduction of Best Buy format • Investment phase • 2.7m broadband customers • 2m customers on-net • £1.4bn revenue • Clear value proposition • Cash
Slide 6: Opportunity to build businesses that look like this
Opportunity to build businesses that look like this: • Non-commissioned salesforce • Advice and service based • Leading market share in all wireless and data products • Investment in interactivity • Underpinned by Geek Squad • On-shore call centres • Pull, not push, marketing • Industry-leading chur
Slide 7: TalkTalk Group outlook
TalkTalk Group outlook • Market growth slowing • TalkTalk churn low and falling • AOL migration complete • Base review resulting in 93,000 inactive customers now excluded • New propositions launched today • Focus on simplicity, value and choice
Slide 8: UK Broadband market
UK Broadband market • Market growth slowing • Customer lifetime values increasing 0 200 400 600 800 1000 1200 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 (000s) 0 2 4 6 8 10 12 14 16 18 (million) Net additions broadband market Source: Enders Analysis
Slide 9: Broadband pricing trends
Broadband pricing trends 0 5 10 15 20 25 30 35 40 45 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 (£) TalkTalk 8Mbps Broadband, line and calls BT 8Mbps Broadband, line and calls Sky 2Mbps Broadband, line and calls, TV Virgin Media 2Mbps Broadband, line and calls, TV Orange 8Mbps Broadband, line
Slide 10: myTalkTalk - Boosters
myTalkTalk - Boosters The Base Package: £6.49 per month Broadband: • Up to 8 Mbps Broadband •40 GB monthly usage limit and Inclusive calls to: • UK landlines in the evening and weekends •36 international destinations anytime •other Talk Talk customers, whenever you like £16.99 per month (including l
Slide 11: myTalkTalk
myTalkTalk “Pay for what you want, not what you don’t want” 85% if Brits told us that they felt calls to mobiles are expensive. 82% of Britons told us it would be great not to have to worry about the time of day when they use their home phone. 55% of Brits told us it would be great not to have to wo
Slide 12: Best Buy Europe outlook
Best Buy Europe outlook • Exclusives and “recession-busters” for Christmas...
Slide 13: Pre-pay sales trends
Pre-pay sales trends • ...but consumer environment very uncertain -20% -10% 0% 10% 20% 30% 40% 50% W1 W3 W5 W7 W9 W11 W13 W15 W17 W19 W21 W23 W25 W27 W29 W31 YoY prepay growth
Slide 14: Summary outlook
Summary outlook • Met targets for H1, poor cash performance • Main focus for H2 is cash • Significant short term challenges • Building for better times
Slide 15: Summary headline income statement
Summary headline income statement Group (20) (19) Interest and tax 39 3 10 (67) 112 697 H1 08/09 Wholly-owned Distribution operations, net of tax 39 Discontinued operations Q2 share of Best Buy Europe, less Virgin Mobile (4) Share of associates 44 PAT TalkTalk Group TalkTalk Group/PLC TalkTalk Group
Slide 16: Best Buy Europe quarterly split
Best Buy Europe quarterly split Share of associates (50%) 26 888 Q2 08/09 29 3 Net income Discontinued operations 729 Q1 08/09 Disclosed in 1,617 Revenue H1 08/09 £m • H1 EBIT down from £46m to £37m year-on-year – impacted by MVNO, Geek Squad, big box and Best Buy Mobile
Slide 17: Subscription connections growth
Subscription connections growth • Growth driven by smartphones and mobile broadband 5% 15% 0% 2% 4% 6% 8% 10% 12% 14% 16% ex-mobile broadband total YoY subscription growth %
Slide 18: Geographical analysis
Geographical analysis 1617 251 193 285 109 779 H1 08/09 19% 210 Other 16% 167 Spain 12% 1443 Total 20% 5% 8% YoY% 238 Germany 103 France 725 UK H1 07/08 £m • LFL revenue growth 5.1%
Slide 19: White City store
White City store : iN TalkTalk
Slide 20: Now also open in Portsmouth and Romford
Now also open in Portsmouth and Romford
Slide 21: Best Buy Mobile is a big hit with customers
51% 54% 30.0% 40.0% 50.0% 60.0% Oct FY08 Nov FY08 Dec FY08 Jan FY08 Feb FY08 Mar FY09 Apr FY09 May FY09 Jun FY09 Jul FY09 Source: company internal data Best Buy Mobile is a big hit with customers • Market share doubled in last 12 months • Contribution of £5m to Best Buy Europe results Net Promoter S
Slide 22: Best Buy Mobile: SAS 2.0
Best Buy Mobile: SAS 2.0
Slide 23: Walk Out Working
Walk Out Working Walk Out Working” Our Walk Out Working™ service provides Geek Squad’ setup and personalization Windows on purchases of BlackBerry’, Mobile® and Palm® smart phones, andall GPS receivers. It's only *29.99 with 2-year activation (regularly *49.99) SAVE *20 TalkTalk geemermeery
Slide 24: TalkTalk Group income statement
TalkTalk Group income statement 85 47% 37 53 EBIT (55) 49% (45) (67) Depreciation & Amortisation 119 56% 64 100 Residential 21 8% 18 20 B2B 140 48% 82 120 EBITDA 556 (1%) 556 549 Residential 157 (5%) 155 148 B2B 713 (2%) 711 697 Revenue H2 07/08 YoY % H1 07/08 H1 08/09 (£m) • Still expecting EBITDA
Slide 25: Monthly ARPU
Monthly ARPU 15.00 17.00 19.00 21.00 23.00 25.00 27.00 29.00 31.00 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Blended ARPU (£) Talk Talk AOL Blended • ARPU gradually rising, now over £23 • Non-broadband ARPU now over £19, slightly ahead of plan
Slide 26: Monthly churn
Monthly churn TalkTalk churn 0.0% 1.0% 2.0% 3.0% Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Monthly churn (%) • Churn continues to fall, driven by improving service, value and retention activity
Slide 27: Customer migration
Customer migration • Over 70% of our broadband customer on our own network 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 % customers unbundled On CPW networks Off CPW networks
Slide 28: Best Buy Europe cash flow
Best Buy Europe cash flow (96) (217) Working capital/provisions (210) (4) (25) (50) (131) (13) 99 H1 08/09 (1) Other operating items 96 EBITDA (57) Capex 9 Other net investment (65) Divisional cash flow (1) Operating cash flow (16) SAC H1 07/08 £m
Slide 29: TalkTalk Group cash flow
TalkTalk Group cash flow 35 (35) Working capital/provisions (99) (72) (47) (52) 72 (13) 120 H1 08/09 (7) Other operating items 82 EBITDA (79) Capex (32) Final payment for AOL Broadband (41) Divisional cash flow 110 Operating cash flow (40) SAC H1 07/08 £m
Slide 30: Working capital
Working capital • Working capital outflow across Best Buy Europe and TalkTalk Group affected by: • timing of payment runs • Further early settlement discounts taken from handset vendors • Continuing to evolve terms of trade with operators • Increasingly based on contract line rental share • Impacts
Slide 31: TalkTalk Group capex analysis
TalkTalk Group capex analysis 79 18 61 H1 07/08 (39%) 37 Network 52 15 H1 08/09 (17%) IT and other (34%) Total YoY% £m • AOL migration and exchange build-out now substantially complete
Slide 32: Effective investment in retention
Effective investment in retention 108 40 0 20 40 60 80 100 120 SAC SRC Cost per customer (£)
Slide 33: Net debt and targets
Net debt and targets Best Buy Europe: 51 102 (104) 206* 80* September 2008 Gross debt (drawn on CPW Group PLC facilities**) 50-100 Underlying Group net debt 0-50 cash Cash equivalents CPW share 50% March 2009 target £m *Gross position on Group balance sheet at September 2008 **50% Guaranteed by Best
Slide 34: Exceptional items
Exceptional items (6) (10) (19) 613 100% Gain on sale of 50% of Distribution business 613 Profit on disposal Store closures and disposals; deranging of handsets (10) Other costs arising from the transaction (6) (10) Group share Final costs relating to migration of AOL customers AOL integration Costs
Slide 35: Financial summary
Financial summary • Strong balance sheet after Best Buy deal • >£900m of facilities in place • Working capital recovery in H2 with clear year end targets • TalkTalk Group cash generative going forward • Long term growth opportunities for Best Buy Europe
Slide 36: Appendix
Appendix TalkTalk roup
Slide 37: Group cash flow
Group cash flow (£m) (9) - F/X/ and non-cash (3) (4) PLC operating cash flow (286) (843) 557 938 (79) (8) (294) (290) H1 08/09 (109) (106) Divisional cash flow (763) Closing net debt (8) Dividends and shares (617) Opening net debt (137) Net cash flow (17) Tax and interest (3) Acquisitions and dispos