Burberry Group Plc · LSE:BRBY
Burberry — H1 2019 Earnings Presentation
26 slides from Burberry's earnings presentation, Nov 8, 2018
Slide 1: Interim Results 8 November 2018
INTERIM RESULTS 8 NOVEMBER 2018 AGENDA INTRODUCTION FINANCIAL RESULTS GUIDANCE STRATEGY UPDATE Q&A 1
Slide 2: Introduction
INTRODUCTION Brand transformation underway Encouraging leading indicators Confirming our outlook JULIE BROWN CHIEF OPERATING & FINANCIAL OFFICER 2
Slide 3: Two-phased transformation journey and H1 2019 summary financials
TWO‐PHASED TRANSFORMATION JOURNEY FY 2019 AND FY 2020 FY 2021 ONWARDS BUILD THE FOUNDATION ACCELERATE AND GROW • Commence programme to re‐energise the brand • Complete full brand transformation, including alignment of distribution • Rationalise and invest to align distribution • Accelerate growth •
Slide 4: Group revenue +4% (ex Beauty wholesale)
GROUP REVENUE +4% (EX BEAUTY WHOLESALE) REVENUE GROWTH EX BEAUTY WHOLESALE +4% +142% +10% +2% £1,263m £1,237m (£17m) £1,220m Comparable store sales +3% Revenue H1 Retail Wholesale ex Licensing Beauty Total CER Currency Revenue H1 2018 Beauty wholesale 2019 REGIONAL RETAIL COMPARABLE STORE SALES +3%
Slide 5: Retail & wholesale revenue by product; income statement
RETAIL & WHOLESALE REVENUE BY PRODUCT (EX BEAUTY WHOLESALE) YOY GROWTH YOY CER H1 2018 H1 2019 REPORTED GROWTH £1,177m £1,198m ACCESSORIES £469m 0% +2% £467m WOMENS APPAREL +2% +3% £353m £360m MENS APPAREL +4% +6% £297m £309m CHILDREN AND OTHER £60m £60m (2%) (1%) INCOME STATEMENT ‐‐‐‐‐‐‐‐‐‐ CHANGE
Slide 6: Adjusted operating margin +150bps CER
ADJUSTED OPERATING MARGIN +150BPS CER ADJUSTED OPERATING MARGIN MOVEMENTS H1 2019 OPERATING MARGIN DRIVERS COST SAVING PROGRAMME +150bps CER 16.1% at CER OPEX PHASING No change at reported BEAUTY CHANNEL SHIFT 14.6% at 14.6% reported STRATEGIC INVESTMENTS INFLATION H1 2018 H1 2019 OPERATIONAL EXCELL
Slide 7: Free cash flow; movement in net cash
FREE CASH FLOW FREE CASH FLOW (£M) £25m (£34m) (£83m) £56m (£92m) Inventory Receivables Payables (£51m) £178m (£40m) (£5m) £46m Adjusted Depreciation and Working capital Capex Tax Other Free cash flow operating profit amortisation Cash conversion is defined as free cash flow pre tax/ adjusted profit
Slide 8: FY 2019 Outlook
FY 2019 OUTLOOK ALL GUIDANCE AT CER BROADLY STABLE REVENUE AND ADJUSTED OPERATING MARGIN GUIDANCE UPDATES (for detailed outlook see Appendix) • Wholesale (ex Beauty) mid single digit percentage growth • Capital expenditure £150m‐£160m, driven by store investments and IT • FX £25m headwind on profits
Slide 9: Two-phased transformation journey: build the foundation
TWO‐PHASED TRANSFORMATION JOURNEY FY 2019 AND FY 2020 FY 2021 ONWARDS BUILD THE FOUNDATION ACCELERATE AND GROW • Commence programme to re‐energise the brand • Complete full brand transformation, including alignment of distribution • Rationalise and invest to align our distribution • Accelerate growt
Slide 10: Building the foundation for our strategy
BUILDING THE FOUNDATION FOR OUR STRATEGY Appointed a new Chief Creative Officer Re‐imagined our product and created a new centre of excellence for leather goods Developed a new go‐to‐market approach Expanded Burberry Business Services Established a new leadership team 19 10
Slide 11: Burberry
BURBERRY New York, New York yma318 11
Slide 12: Showcased Riccardo's first runway collection
SHOWCASED RICCARDO’S FIRST RUNWAY COLLECTION… 12
Slide 13: Started to reimagine our stores
STARTED TO REIMAGINE OUR STORES 13
Slide 14: Influencer heat: global press coverage
INFLUENCER HEAT GLOBAL PRESS COVERAGE ‘Tisci understands how a young generation of fashion fans ‘The brand is selling the first drop… via Instagram and want to dress – and more importantly, shop.’ WeChat, and the designer himself is playing a louder, more pivotal role on social media.’ 14
Slide 15: Consumer engagement
CONSUMER ENGAGEMENT SOCIAL MEDIA MENTIONS SOCIAL MEDIA ENGAGEMENT No. of mentions Q2 vs Q1 2018 SEP 2017 SEP 2018 Source: Linkfluence; Instagram Analytics, WeChat; Twitter Analytics CONSUMER ENGAGEMENT TOP 10 MOST VIEWED COLLECTIONS SS19 Vogue.com page views, Million 6.8 5.9 5.8 5.5 4.8 4.8 4.4 3.6
Slide 16: #TheBSeries
#THEBSERIES 13TH SEP ‐ DROP ZERO 17TH SEP 17TH OCT #THEBSERIES NEW MILLENNIALS % of customers % of customers FEB SEP FEB SEP CAPSULE B SERIES CAPSULE B SERIES Source: Burberry 16
Slide 17: Consumer sentiment; wholesale transformation underway
CONSUMER SENTIMENT Negative Positive SENTIMENT ON INSTAGRAM SENTIMENT ON WECHAT Percentage of comments Percentage of comments PRE SHOW POST SHOW PRE SHOW POST SHOW Source: CRISP Monitoring; WeChat WHOLESALE TRANSFORMATION UNDERWAY Negotiations for all non‐luxury closures complete Elevated presence w
Slide 18: Progress in EMEIA; US wholesale doors
PROGRESS IN EMEIA LUXURY CUSTOMERS Number of luxury customers buying in Showroom SS 2018 SS 2019 US WHOLESALE DOORS TOTAL US WHOLESALE DOORS Number of doors Non-Luxury Luxury FY 2018 FY 2020F 18
Slide 19: Continuous engagement; leather goods
CONTINUOUS ENGAGEMENT Delivering monthly drops of the #TheBSeries Exciting luxury customers with collaborations: IN AN AGE WHEN COLLABORATIONS ARE A DIME A DOZEN, THIS ONE MIGHT BE ONE OF THE MOST UNEXPECTED AND EXCITING’ VOGUE.COM LEATHER GOODS Continue to build our leather goods architecture Enhan
Slide 20: Significant progress across our responsibility agenda
SIGNIFICANT PROGRESS ACROSS OUR RESPONSIBILITY AGENDA DISPOSAL PLEDGE FUR BAN NEW PLASTICS ECONOMY BURBERRY INSPIRE COMMITMENT MAINTAIN MOMENTUM Continue to excite influencers and key opinion leaders Engage consumers with continuous, surprising new content and product Grow our community of active fo
Slide 21: Delivering Riccardo's product; retail
DELIVERING RICCARDO’S PRODUCT AVAILABLE PRODUCT % of total I N D I C AT I V E 100% Riccardo product FEB-APR ‘19 MAY-AUG ‘19 SEP ‘19 Note: mainline and digital only RETAIL Embed new brand vision across retail Reposition the network in line with brand positioning Continue our service transformation 21
Slide 22: Appendix: Disclaimer
APPENDIX DISCLAIMER • The financial information contained in this presentation is unaudited. • 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
Slide 23: Alternative performance measures; retail & wholesale revenue by region
ALTERNATIVE PERFORMANCE MEASURES • All metrics and commentary in this presentation are at reported FX and exclude adjusting items unless stated otherwise. • Constant exchange rates (CER) removes the effect of changes in exchange rates compared to the prior period. This takes into account both the im
Slide 24: Free cash flow; foreign exchange rates
FREE CASH FLOW H1 2018 H1 2019 £M £M Adjusted operating profit 185 178 Depreciation and amortisation* 66 56 Working capital* 17 (92) Other 2 (8) Cash inflow from operations 270 134 Capex (53) (51) Interest 3 3 Tax (49) (40) Free cash flow 171 46 *Excludes impact of adjusting items FOREIGN EXCHANGE R
Slide 25: Adjusting items; store portfolio
ADJUSTING ITEMS H1 2018 H1 2019 £M £M Disposal of Beauty business (28) 6 Restructuring costs (33) (10) BME deferred consideration income/(charge) 3 (1) Adjusting operating Items (58) (5) Adjusting financing items (2) (1) STORE PORTFOLIO Directly‐operated stores Franchise stores Stores Concessions Ou
Slide 26: FY 2019 Outlook; IR contacts
FY 2019 OUTLOOK BROADLY STABLE REVENUE AND OPERATING MARGIN (@ CER) Retail Net space impact ‐1% REVENUE Wholesale (ex. Beauty) Mid single digit % increase Licensing + £15m Cumulative cost savings £100m (incremental £36m) PROFIT Restructuring charges £35m Effective tax rate c.24%, moving towards the