Burberry Group plc · LSE:BRBY
Burberry — FY2013 Earnings Presentation
46 slides from Burberry's earnings presentation, May 2013
Slide 1: Preliminary results for the year ended 31 March 2013
Preliminary results for the year ended 31 march 2013 11 FURTHER YEAR OF PROGRESS • STRONG FINANCIAL RESULTS – Revenue up 8% to £2bn – Adjusted PBT up 14% to £428m – Full year dividend up 16% to 29.0p • CONSISTENT EXECUTION OF FIVE KEY STRATEGIES – Beauty integration – Mens accessories up over 30% –
Slide 2: Financial review, Beauty, Questions
Financial review – BEAUTY Seizing the opportunity – Questions 33 44
Slide 3: Revenue grew 8%
REVENUE GREW 8% £153m £6m (£1m) £1,999m £1,857m (£16m) FY 2012 EXCHANGE RETAIL WHOLESALE LICENSING FY 2013 RATES REVENUE 55 REVENUE GREW 8% • REVENUE GREW 8% TO £2BN – Doubled since 2008 • RETAIL – 71% of revenue (H2: 75%) – 12% underlying growth • WHOLESALE – 24% of revenue – 1% underlying growth •
Slide 4: Brand momentum strong
BRAND MOMENTUM STRONG 15M FACEBOOK FANS LONDON HEATHROW T5 BEAUTY BOOTH ART OF THE TRENCH, BRAZIL 77 BURBERRY WORLD LIVE DEDICATED SPACE FOR BESPOKE RFID–ENABLED SCREENS KAISER CHIEFS LIVE LIVESTREAM OF AW13 RUNWAY SHOW 88
Slide 5: Retail revenue grew 12%
RETAIL REVENUE GREW 12% REVENUE 99 RETAIL REVENUE GREW 12% • COMPARABLE STORE SALES UP 5% – Double-digit comparable store growth throughout FY 2012 – Uneven trading pattern in FY 2013 – Footfall soft offline; grew online • CONSISTENT DRIVERS OF RETAIL GROWTH – Optimise conversion – Higher average tr
Slide 6: Investing in flagship markets
INVESTING IN FLAGSHIP MARKETS PACIFIC PLACE, HONG KONG BURBERRY.COM MICHIGAN AVENUE, CHICAGO REGENT STREET, LONDON 1111 NO CHANGE IN REAL ESTATE STRATEGY NUMBER OF MAINLINE STORES * FIVE STORES TRANSFERRED FROM SAUDI ARABIA FRANCHISEE 1212
Slide 7: Wholesale revenue grew 1%
WHOLESALE REVENUE GREW 1%* REVENUE * UNDERLYING 1313 WHOLESALE REVENUE GREW 1% • IN LINE WITH GUIDANCE • GROWTH FROM NORTH AMERICA, ASIA TRAVEL RETAIL AND EMERGING MARKETS – Weak domestic demand in Europe – Own actions to rationalise products and accounts • H1 2013 PLANNED DOWN ABOUT 10% UNDERLYING
Slide 8: Evolution of wholesale; licensing revenue down 1%
EVOLUTION OF WHOLESALE REST OF WORLD DISCONTINUED AND ACQUIRED OPERATIONS* ASIA PACIFIC EUROPE EUROPE REST OF WORLD ASIA PACIFIC AMERICAS AMERICAS FY 2009 FY 2013 REVENUE £489M REVENUE £473M * SPAIN CLOSURE, CHINA, INDIA AND MIDDLE EAST TO RETAIL 1515 LICENSING REVENUE DOWN 1%* REVENUE * UNDERLYING
Slide 9: Innovation in licensing; transforming Japan
INNOVATION IN LICENSING BODY TENDER AVIATOR THE BRITAIN SPLASH 1717 TRANSFORMING JAPAN OTHER WATCHES/ EYEWEAR FRAGRANCE & BEAUTY JAPAN FY 2013 KOBE, JAPAN LICENSING REVENUE £109m 1818
Slide 10: Balanced by region; Mainland China grew about 20%
BALANCED BY REGION REST OF WORLD: 6% 11% GROWTH ASIA PACIFIC: 39% AMERICAS: 25% 13% GROWTH 6% GROWTH EUROPE: 30% 6% GROWTH FY 2013 RETAIL/WHOLESALE REVENUE % GROWTH ON UNDERLYING BASIS 1919 MAINLAND CHINA GREW ABOUT 20% • EVOLVE STORE PORTFOLIO • OPTIMISE DIGITAL • REFINEMENT BASED ON RESEARCH – Evo
Slide 11: Balanced by product division; strong growth in Mens
BALANCED BY PRODUCT DIVISION CHILDRENS: 4% 9% GROWTH MENS: 24% 14% GROWTH ACCESSORIES: 39% 8% GROWTH WOMENS: 33% 7% GROWTH FY 2013 RETAIL/WHOLESALE REVENUE % GROWTH ON UNDERLYING BASIS 2121 STRONG GROWTH IN MENS MENS KNIGHTSBRIDGE STORE TAILORING MENS ACCESSORIES KNIGHTSBRIDGE MENS, LONDON 2222
Slide 12: Continuing the journey
INNOVATION IN LADIES LARGE LEATHER ORCHARD BLAZE 2323 CONTINUING THE JOURNEY LEVERAGE THE FRANCHISE INTENSIFY ACCESSORIES ACCELERATE RETAIL-LED GROWTH INVEST IN UNDER-PENETRATED MARKETS PURSUE OPERATIONAL EXCELLENCE 2424
Slide 13: Financial highlights
Carol fairweather — CHIEF FINANCIAL OFFICER Designate 2525 FINANCIAL HIGHLIGHTS 12 MONTHS TO 31 MARCH 2013 2012 £M £M GROWTH REVENUE 1,999 1,857 8% ADJUSTED PBT 428 376 14% ADJUSTED DILUTED EPS 70.0p 61.6p 14% CASH INFLOW FROM OPERATIONS 523 483 8% DIVIDEND PER SHARE 29.0p 25.0p 16% 2626
Slide 14: Operating profit up 14%; margin at 17.8%
OPERATING PROFIT UP 14% ADJUSTED OPERATING PROFIT 2727 RETAIL/WHOLESALE MARGIN AT 17.8% RETAIL/WHOLESALE ADJUSTED OPERATING PROFIT MARGIN 2828
Slide 15: Retail/wholesale gross margin up 250bps
RETAIL/WHOLESALE GROSS MARGIN UP 250BPS RETAIL AS % OF TOTAL 52% 60% 64% 68% 71% REVENUE RETAIL/WHOLESALE GROSS MARGIN 2929 RETAIL/WHOLESALE GROSS MARGIN UP 250BPS • GROSS MARGIN AT 70.6% – Up 250 basis points • DRIVEN BY – Higher average selling prices – FX on sourcing – Channel shift to retail – H
Slide 16: Operating expenses/revenue at 52.8%
RETAIL/WHOLESALE OPERATING EXPENSES/REVENUE AT 52.8% RETAIL AS % OF TOTAL 52% 60% 64% 68% 71% REVENUE ADJUSTED OPERATING EXPENSES/REVENUE * 53.5% EXCLUDING BENEFIT FROM LOWER PERFORMANCE-RELATED PAY CHARGE 3131 RETAIL/WHOLESALE OPERATING EXPENSES/REVENUE AT 52.8% • OPERATING EXPENSES/REVENUE AT 52.8
Slide 17: Licensing profit
LICENSING PROFIT 12 MONTHS TO 31 MARCH 2013 2012 £M £M REVENUE 109.4 108.6 GROSS MARGIN AT 100% 109.4 108.6 OPERATING EXPENSES (16.9) (18.6) OPERATING PROFIT 92.5 90.0 OPERATING MARGIN 84.6% 82.9% YEN RATE 127 133 3333 2013 INCLUDES FX BENEFIT OF £1.7M IN REVENUE AND OPEX LICENSING PROFIT • £109M RE
Slide 18: Income statement
INCOME STATEMENT 12 MONTHS TO 31 MARCH 2013 2012 £M £M ADJUSTED OPERATING PROFIT 428.1 376.9 NET FINANCE CHARGE (0.3) (0.7) ADJUSTED PROFIT BEFORE TAX 427.8 376.2 EXCEPTIONAL ITEMS (77.1) (10.2) PROFIT BEFORE TAX 350.7 366.0 TAX (91.5) (100.6) DISCONTINUED OPERATIONS - (0.3) NON-CONTROLLING INTEREST
Slide 19: Strong cash generation
Strong cash generation CASH INFLOW FROM OPERATIONS USES OF CASH * INVESTMENT IS CAPITAL EXPENDITURE PLUS ACQUISITION SPEND 3737 CASH INFLOW FROM OPERATIONS 12 MONTHS TO 31 MARCH 2013 2012 £M £M ADJUSTED OPERATING PROFIT 428.1 376.9 SPAIN OPERATING PROFIT - 2.5 RESTRUCTURING SPEND (1.0) (8.6) DEPRECI
Slide 20: Movement in net cash
MOVEMENT IN NET CASH 3939 MOVEMENT IN NET CASH 12 MONTHS TO 31 MARCH 2013 2012 £M £M CASH INFLOW FROM OPERATIONS 523.0 482.5 CAPITAL EXPENDITURE (175.9) (153.1) PAYMENT TO TERMINATE LICENCE RELATIONSHIP (144.1) - PROCEEDS FROM SALE OF ASSETS HELD FOR SALE 0.1 - CAPITAL CONTRIBUTIONS FROM JV PARTNERS
Slide 21: Capital expenditure focused on retail; Fragrance and Beauty impact
CAPITAL EXPENDITURE FOCUSED ON RETAIL • CAPITAL EXPENDITURE PLANNED AT C.£200M IN FY 2014 – Focus on retail c.£200m – Digital – Mobile £176m – Headquarters extension CAPITAL EXPENDITURE 4141 FRAGRANCE AND BEAUTY ESTIMATED FINANCIAL IMPACT FY 2013 FY 2014F £M £M WHOLESALE REVENUE - 140 RETAIL/WHOLESA
Slide 22: Outlook
DRIVE OUTPERFORMANCE IN REVENUE GROWTH AND MODEST IMPROVEMENT IN RETAIL/WHOLESALE OPERATING MARGIN FROM 17.1% BASE, with improvement in h2 4343 OUTLOOK FY 2014 Further modest retail/wholesale operating margin improvement from 17.1% base RETAIL Low to mid single-digit percentage growth in retail reve
Slide 23: Beauty - our fifth product division
BEAUTY - OUR fifth Product division 4545 45 4646
Slide 24: Under-penetrated in large markets
Alessandro fabrini — SVP licensing 4747 Under-penetrated in large markets 11% 11% 11% 11% 21% MARKET SHARE OF TOP BRAND 2% 1% 1% 1% 12% MARKET SHARE OF BURBERRY // US FRANCE UK ITALY CHINA PREMIUM FRAGRANCE MARKET SIZE (TOTAL €20BN) SOURCE: BURBERRY ESTIMATES 4848
Slide 25: Benefits of brand integration
BENEFITS OF BRAND INTEGRATION • MOST WIDELY ENCOUNTERED EXPRESSION OF BRAND – Opening price point – Millennial consumer – Brand media spend • FULL ALIGNMENT – Marketing and PR – Fashion – Distribution – Infrastructure 4949 Stepping into Interparfums’ shoes • REALLOCATION OF EXISTING BURBERRY THIRD P
Slide 26: Engaging with our distributors
Engaging with OUR distributors • CONTINUE TO OPERATE EXISTING DISTRIBUTION MODEL – Distributors in more than 100 markets – Top 15 distributors account for over 50% of sales • DISTRIBUTION AGREEMENT WITH BPI – Part of Shiseido – In US, France, Spain, travel retail • DEVELOP A STRONG PARTNERSHIP – Bea
Slide 27: Our ambition: worldwide top ten beauty brand
SIMONA CATTANEO — SVP Beauty 5353 Our ambition — to make burberry a Worldwide top ten beauty brand 5454
Slide 28: Leveraging the best of beauty and the best of Burberry
Leveraging The best of beauty and the best of burberry established position in fragrance — distinctive offer In make-up 5555 Burberry’s competitive advantage ONE COMPANY, ONE BRAND — BROAD CONSUMER APPEAL — AUTHENTIC BRITISH HERITAGE BRAND 5656
Slide 29: One company, one brand; broad consumer appeal
One company, one brand 5757 Broad consumer appeal Digital Leadership Target millennial consumer 5858
Slide 30: Authentic British heritage brand
authentic British heritage brand 5959 6060
Slide 31: Key beauty strategies: elevate the image
key beauty strategies Elevate the image — Prorsum: move forward — Focus and agility 6161 ELEVATE THE IMAGE 6262
Slide 32: Prorsum: move forward; focus and agility
Prorsum: move forward Innovative Breakthrough products Disruptive communication digital unique selling experience 6363 Focus and AGILITY pillar strategy reduce time to market Adopt fashion calendar 6464
Slide 33: Key fragrance strategies
KEY Fragrance strategies Unique british positioning — Elevate image — OPTIMISE PRODUCT PORTFOLIO 6565 Unique positioning as British fragrance house 6666
Slide 34: British perfumery has a story
British perfumery has a story That has never been told before 6767 FRENCH perfumery Opulence Classicism Paris French Art de vivre Indoor Floral Oriental 6868
Slide 35: British perfumery heritage
British perfumery heritage eccentricity London Natural outdoor freshness herbal scents 6969 ELEVATE IMAGE Scent expertise raw materials LUXURY POS STAGE 7070
Slide 36: Optimise product portfolio
OPTIMISE PRODUCT portfolio 7171 Establish icons 7272
Slide 37: Number one line in portfolio
7373 Number one line in portfolio Intimate connection with Iconic trench coat 7474
Slide 38: Burberry Body
BURBERRY itt JU BODY
Slide 39: Complex supply chain
Roberto canevari — Chief supply chain officer 7777 Long lead time complex component-based PRODUCT development sourcing model Complex supply chain regulatory Intricate legal GLOBAL synchronised LAUNCH and •regulatory 40,000 REGULATORY DOCUMENTS landscape TO thousands of POINTS OF SALE • 9 MONTHS FOR
Slide 40: Organisation infrastructure
Organisation — infrastructure 7979 Organisation • ABOUT 30 TEAM MEMBERS • PARTNERING INDUSTRY EXPERTISE WITH BURBERRY EXPERIENCE • 10 NATIONALITIES • 11 LANGUAGES • DEDICATED REGULATORY AND QUALITY RESOURCES 8080
Slide 41: Infrastructure
Infrastructure • SUPPLIER BASE ENGAGED AND PRODUCTIVE • SAP LIVE AND INTEGRATED • GLOBAL HUB FULLY OPERATIONAL • NEW PRODUCTS IN PROGRESS TO ENSURE NEWNESS IN THE MARKET 8181 More than 20M units of product ordered covering over 6 months of forecast demand — C. 2M UNITS live IN Distribution network —
Slide 42: Scalable model
SCALABLE MODEL — Drive agility & speed — Elevate product execution — fulfilment 8383 8484
Slide 43: Strong performance in FY 2013
Strong PERFORMANCE IN FY 2013 — UNLOCK GROWTH POTENTIAL IN BEAUTY, MENS AND DIGITAL — Macro ENVIRONMENT uncertain — Strong BRAND MOMENTUM, PROVEN STRATEGIES 8585 8686
Slide 44: Appendix; Disclaimer
APPENDIX 8787 DISCLAIMER Certain statements made in this presentation 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 forw
Slide 45: Adjusted measures; exchange rates
ADJUSTED MEASURES All metrics and commentary in the this presentation exclude the results of the discontinued business in Spain and exceptional items, unless stated otherwise. Exceptional items are: A charge of £82.9m relating to the termination of the fragrance and beauty licence relationship (20
Slide 46: IR contacts
IR CONTACTS Fay Dodds Horseferry House Director of Investor Relations Horseferry Road fay.dodds@burberry.com London SW1P 2AW Charlotte Cowley Tel: +44 (0)20 3367 3524 Investor Relations Manager charlotte.cowley@burberry.com www.burberryplc.com www.burberry.com Adam Wright www.artofthetrench.com Inve