Frasers Group Plc · LSE:FRAS
Frasers — Sports Direct International — H1 FY16 Earnings Presentation
32 slides from Frasers's earnings presentation, Dec 10, 2015
Slide 1: Everything Is Changing: Interim Results Presentation
EVERYTHING IS CHANGING Interim Results Presentation For the 26 weeks ended 25 October 2015 10 December 2015 1
Slide 2: Dave Forsey, Chief Executive
DAVE FORSEY CHIEF EXECUTIVE 2
Slide 3: FY16 H1: Group Highlights
Sports Direct, Leeds FY16 H1: GROUP HIGHLIGHTS • Sports Retail revenue increased by 2.5% on a currency neutral basis • Sports Retail gross margin increased by 110 bps to 45.6% • Sports Retail gross profit increased by 5.2% on a currency neutral basis • Group underlying EBITDA increased by 7.6% to £2
Slide 4: Matt Pearson: Financial Review
MATT PEARSON ACTING CHIEF FINANCIAL OFFICER FINANCIAL REVIEW 4
Slide 5: Group Revenue Bridge
FY16 H1: GROUP REVENUE BRIDGE £1,450m £1,445m £1,440m +0.2% (12.2%) £1,435m +10.2% £1,434m £1,433m REVENUE (£M) £1,430m +£2.6m £1,425m (£12.2m) +£10.4m £1,420m £1,415m £1,410m £1,405m £1,400m FY15 H1 Sports Retail Premium Lifestyle Brands FY16 H1 • Group revenue growth of 2.0%* * On a currency neutr
Slide 6: Sports Retail Overview
FY16 H1: SPORTS RETAIL OVERVIEW SPORTS RETAIL REVENUE SPORTS RETAIL GROSS MARGIN 47.0 £1,300m 46.0 45.6 £1,231m £1,234m GROSS MARGIN (%) £1,250m 45.0 44.5 44.0 44.6 £1,200m 43.2 REVENUE (£M) 43.0 £1,150m 42.9 42.0 40.9 £1,100m 41.0 40.0 £1,050m 40.3 39.0 £1,000m 38.0 H1 13 FY 13 H1 14 FY 14 H1 15 FY
Slide 7: Sports Retail Operating Costs
FY16 H1: SPORTS RETAIL OPERATING COSTS FY16 H1 FY15 H1 Change (£m) (£m) (%) Store Wages 122.7 120.4 + 1.9 Premises Costs 110.6 106.8 + 3.5 Other Retail Costs 124.0 126.7 (2.1) Sports Retail Operating Costs 357.3 353.9 +1.0 Sports Retail Underlying EBITDA pre associates 205.0 194.2 +5.6 Associates (H
Slide 8: Premium Lifestyle
FY16 H1: PREMIUM LIFESTYLE FY16 H1 • Revenue lower due to store closures in prior year £120m • Gross margin improving due to reduced stock clearance and improving buying disciplines £99.9m • Cost savings from operating efficiencies £100m £87.7m FY16 H1 FY15 H1 Change (£m) (£m) (%) Premium £80m REVEN
Slide 9: Brands Division
FY16 H1: BRANDS DIVISION REVENUE: UP 10.2% Licensing Wholesale • Licensing: Up 4.6% £120m • Wholesale: Up 11.2% £112.5m £102.1m £16.0m WHOLESALE MARGIN: 30.1% £100m £15.3m • Down 260 bps REVENUE (£M) £80m LICENSING • H1 FY16: 23 deals completed / Contractual minimum royalties of $10m over the life o
Slide 10: Brands Operating Costs
FY16 H1: BRANDS OPERATING COSTS FY16 H1 FY15 H1 Change (£m) (£m) (%) Wages 9.1 9.7 (6.2) Advertising and Promotion 7.1 7.6 (6.6) Other Brands Costs 11.7 11.4 +2.6 Total Brands Operating Costs 27.9 28.7 (2.8) Brands Underlying EBITDA 17.1 15.1 +13.2 10
Slide 11: FY16 H1: Underlying EBITDA Bridge
F Y 1 6 H 1 : U N D E R LY I N G E B I T D A B R I D G E £230m £225m £220m +13.2% +7.6% (80.3%) UNDERLYING EBITDA (£M) +34.6% £215m +5.5% £2.0m £2.7m £210m + 5.3% £205m (£11.0m) £10.7m £200m £218.5m £195m £207.5m £203.1m £190m £185m £180m FY15 H1 Sports Retail Premium Lifestyle Brands FY16 H1 Share
Slide 12: PBT / PAT / EPS
FY16 H1: PBT / PAT / EPS FY16 H1 FY15 H1 Change (£m) (£m) (%) Underlying EBITDA (Pre Share Scheme) 218.5 203.1 + 7.6 Share Scheme Charge (11.0) (6.1) + 80.3 Depreciation (excl. Impairment) (41.0) (33.0) + 24.2 Impairment 0.3 - - Interest (1.7) (4.7) (63.8) Investment Income 1.3 1.3 - Underlying PBT
Slide 13: Depreciation & Amortisation
FY16 H1: DEPRECIATION & AMORTISATION FY16 H1 FY15 H1 Change (£m) (£m) (%) Sports Retail - Stores, Warehouse and Amortisation of Goodwill 33.6 25.1 +33.9 Sports Retail - Change in Estimated Useful Life – Fixtures & Fittings 2.3 2.5 (8.0) Sports Retail - Re-allocation of Freehold Land and Buildings Sp
Slide 14: Taxation
FY16 H1: TAXATION FY16 H1 FY16 H1 FY15 H1 FY15 H1 Reported Underlying Reported Underlying (£m) (£m) (£m) (£m) PBT 187.3 166.4 149.7 160.6 Standard Rate of Corporation Tax (1) 37.5 33.3 31.4 33.7 Non-qualifying depreciation 2.5 2.5 1.9 1.9 Other differences (0.1) 0.8 1.1 1.1 Effective Tax 39.9 36.6 3
Slide 15: Cash Flow
FY16 H1: CASH FLOW FY16 H1 FY15 H1 (£m) (£m) EBITDA (Pre Scheme Costs) 218.5 203.1 Realised loss on fx contracts (9.7) (7.7) Taxes paid (33.7) (33.9) Underlying Free Cash Flow 175.1 161.5 Working Capital Inventory (116.0) (89.6) Debtors/creditors, other 17.7 (2.2) Acquisitions (including debt) (9.2)
Slide 16: Capital Expenditure
FY16 H1: CAPITAL EXPENDITURE FY16 H1 FY15 H1 (£m) (£m) Freehold acquisitions 39.7 0.7 Warehouse and Shirebrook store expansion 26.4 3.4 New stores (leasehold)* 15.5 9.5 Maintenance capex 4.4 5.2 Other 4.5 4.2 Sports Retail 90.5 23.0 Premium Lifestyle 0.5 1.6 Brands 1.3 2.1 92.3 26.7 Proceeds on disp
Slide 17: Net Debt Bridge
FY16 H1: NET DEBT BRIDGE - £250m - £200m 208.8 - £150m £2.7m NET DEBT (£M) - £100m 19.4 - £50m (105.4) 44.0 £0m (1.4) 20.3 59.7 £50m (92.3) (33.7) £100m £150m £200m Net Debt EBITDA & FX Working Income from Capital Sale of Freehold Interest Tax Net Debt 26/04/2015 Capital & Other Investments Expendit
Slide 18: Dave Forsey: Operational Review
DAVE FORSEY CHIEF EXECUTIVE OPERATIONAL REVIEW 18
Slide 19: Sports Retail: Property Portfolio UK
SPORTS RETAIL: PROPERTY PORTFOLIO UK • Square footage increased to c. 5.0m sq. ft.(1) FY16 H1 FY15 H2 FY15 H1 • 28 new stores opened in the period UK Stores(2) 455 440 434 • 9 out of the 13 closures in FY16 H1 have been relocations into larger and better configured space Openings 28 16 23 • Target 3
Slide 20: Sports Retail: Leeds City Centre
SPORTS RETAIL: LEEDS CITY CENTRE • Relocation to former Primark store - c. 50,000 sq.ft. over four floors • Elevated presentation working with key 3rd party brands adidas, Nike, Under Armour and Puma • Over 300 brands represented within the store • Key categories enhanced including Running, Fitness,
Slide 21: Sports Retail: Property Portfolio EU
SPORTS RETAIL: PROPERTY PORTFOLIO EU Territory Stores FY16 H1 Stores FY15 H1 Heatons: Republic of Ireland (4) Stores Austria 44 48 Combination - Sports Direct / Heatons 27 Belgium 42 44 Standalone Heatons 17 Estonia (1) 25 24 Total 44 Latvia (1) 14 13 Lithuania (1) 14 12 • Square footage remained at
Slide 22: Sports Retail: Shirebrook Campus Expansion
SPORTS RETAIL: SHIREBROOK Campus Expansion • Latest phase of our ongoing Shirebrook campus development now complete • Additional c. 700,000 sq. ft. warehouse and office facility • Enhanced online capacity and improved office and training environment for staff • Additional office space for 3rd party
Slide 23: Sports Retail: Fitness Division Update
SPORTS RETAIL: FITNESS DIVISION UPDATE Combined Gym/Retail Spaces: • Additional combined c. 15,000 sq. ft. gym/retail space in St Helens opened in August 2015 • A further c. 10,000 sq. ft. site in Newport will open in mid December • Membership of our Aintree & other newly opened gyms continues to gr
Slide 24: Sports Retail: Marketing - USA Pro
SPORTS RETAIL: MARKETING - USA PRO SS16 range: • New apparel ranges for SS16 include; prints/vibrant colours in core along with seamless yoga, baselayer, and new slogan fashion capsule collections • New footwear range has been developed for SS16 across the following categories: leisure, training, ru
Slide 25: Sports Retail: Marketing - adidas
SPORTS RETAIL: MARKETING - ADIDAS adidas Ace & X adidas relaunched their entire range of football boot silos in summer 2015 utilising Sports Direct and Soccer Scene to showcase the new range adidas Boost Throughout 2015 Sweatshop and adidas have partnered to market the Boost range of running footwea
Slide 26: Sports Retail: Marketing - Under Armour
SPORTS RETAIL: MARKETING - UNDER ARMOUR • In 2015 Under Armour cemented their position as the fastest growing sportswear brand in the world by opening their first shop in shop in the UK in our Glasgow Argyle Street mega store. Large branded apparel areas have also been rolled out to our stores in Ox
Slide 27: Sports Retail: Online Overview
SPORTS RETAIL: ONLINE OVERVIEW • Improved search capabilities • Investment into the number of SKU’s giving a bigger range • Optimising the speed of the platform • Additional investment into security and data protection • Enhancing the platform for mobile and tablet devices • Online remains profitabl
Slide 28: Sports Retail: Premium Lifestyle
Flannels.com, Spinningfields, Manchester SPORTS RETAIL: PREMIUM LIFESTYLE • Group approach to operational improvements driving margin growth through shared buying and improved stock control and replenishment processes • Websites benefit from ongoing investment into core Group platform Strategy: • En
Slide 29: Brands: Wholesale
BRANDS: WHOLESALE • Sales growth across Europe, partly due to brand acquisitions in prior year • US trading in line with expectations with growth on prior year • Expansion of product categories in the US driving growth • Wholesale sales in the Asia Pacific region trading well • Investment in key Gro
Slide 30: Brands: Licensing
BRANDS: LICENSING • Sports Direct Retail licensing continues to grow with 16 stores open in Malaysia and 15 open in the Middle East under various fascia • Everlast, Dunlop & Slazenger continue to be main growth drivers • Dunlop has expanded into new categories and remains a key focus area • Licensin
Slide 31: Outlook Statement
FY16: OUTLOOK STATEMENT Trading since the period end has been in line with management’s expectations, underpinning the revised FY16 target of £420m for the 2015 Share Scheme. Performance continues to be driven by: • Investment in product range and availability • Optimisation of in-store and web offe
Slide 32: Questions?
SPORTS .COM QUESTIONS?
Sports Direct International — H1 FY16 Earnings Presentation on 6ix