Industria De Diseno Textil, S.a. · BME:ITX
Industria De Diseno Textil — Inditex — FY2005 Earnings Presentation
52 slides from Industria De Diseno Textil's earnings presentation, Mar 29, 2006
Slide 1: FY2005 Results Presentation
FY2005 Results Presentation 29 March 2006
Slide 2: Disclaimer
DISCLAIMER This document is of a purely informative nature and does not constitute an offer to sell, exchange or buy, or the solicitation of an offer to buy, securities issued by any of the companies mentioned herein. This document contains forward-looking statements. All statements other than state
Slide 3: Index
INDEX FY2005 Results: • Overview • Financial summary • Concepts Outlook: • Strategic overview • FY2006 3
Slide 4: Pablo Isla
Pablo Isla Deputy Chairman & CEO
Slide 5: FY2005: Overview Highlights
FY2005: Overview Highlights • Satisfactory sales growth • Consistent financial performance • Strong cash flow and reinvestment in the business 5
Slide 6: FY2005: Overview Summary
FY2005: Overview Summary: • Sales growth +21% • LFL sales growth +5% and 448 net store openings • Net income growth +26%, EPS of 1.29 • Funds from operations +21% to 1.24 billion • RoCE 41% 6
Slide 7: Like-for-like Sales growth
FY2005: Overview Like-for-like Sales growth 9% 5% Satisfactory performance FY05 FY04 7
Slide 8: FY2005: Performance per concept
FY2005: Performance per concept STV Oysho KC Z Home BSK P&B Group Zara average MD 8
Slide 9: Geographic breakdown of store sales
Geographic breakdown of store sales 2004 2005 Asia & Asia & RoW Americas 6.7% RoW 10.5% 7.5% Spain Americas 45.5% 10.7% Europe ex- Spain Spain 43.1% 37.2% Europe ex- Spain 38.8% (1) Store sales: Includes sales in OMS and franchises 9
Slide 10: Financial summary
Financial summary Antonio Rubio CFO
Slide 11: Highlights
Highlights FY05 FY04 % 05/04 million NET SALES 6,741 5,567 21% GROSS MARGIN 3,788 3,085 23% % margin 56.2% 55.4% EBIT 1,094 922 19% EBIT margin 16.2% 16.6% NET INCOME 803 638 26% EPS ( cents) 129.3 102.8 FY2005: First audited financial results under IFRS-EU 11
Slide 12: Sales growth breakdown
Sales growth breakdown H1 H2 FY2005 Space contribution +15% +16% +16% LFL +4.5% +5% +5% Currency impact +0% +1% +1% Sales growth +20% +22% +21% 12
Slide 13: Selling area
Selling area FYE2005 %05/04 Total space (m2) 1,434,752 +22% Space contribution +16% • Openings biased to year end • Ramp-up of new openings • 31% of space less than 2 years old 13
Slide 14: Like-for-like sales growth
Like-for-like sales growth 10% 9% 8% 4.5% 5% 5% 1H05 1H04 2H05 2H04 FY05 FY04 14
Slide 15: Gross margin
Gross margin (basis points) H1 H2 FY05 Inventory mgmt . 112 86 88 & product mix Currency impact 90 (97) (9) 202 (11) 79 • FY Gross margin at 56.2% due to tight inventory management • Best estimate for FY2006 Gross margin remain at FY2005 levels • Should currencies remain at current levels, negative
Slide 16: Operating expenses
Operating expenses ( million) FY05 %05/04 Personnel expenses 1,037 +23% Rental expenses 577 +23% Other operating expenses 683 +26% Total 2,297 +24% • Target to reduce the spread between Operating expenses growth and Sales growth 16
Slide 17: Other net operating income (losses)
Other net operating income (losses) ( million) FY05 FY04 Other net operating income (losses) (32) (9) • Updated valuation of minority stakes in JV’s • Acquisition of 9.95% in Stradivarius • Acquisition of 15% in Zara Japan • Acquisition of 28% in Zara Deutschland 17
Slide 18: EBIT
EBIT ( million) FY05 %05/04 Operating expenses (2,297) Other net operating income (losses) (32) EBIT 1,094 +19% EBIT margin 16.2% (33 bp) EBIT ex-Other net operating income (losses) 1,125 +21% EBIT ex-Other net operating income (losses) margin 16.7% (2 bp) 18
Slide 19: Depreciation and amortization
Depreciation and amortization ( million) Q1 Q2 Q3 Q4 FY FY2005 (81) (92) (95) (98) (366) FY2004 (67) (73) (77) (89) (305) • Normal evolution of depreciation and amortization charge 19
Slide 20: Net financial results
Net financial results ( million) FY05 FY04 Financial expenses 3.8 (7.2) FX gains 4.2 (17.6) Net financial results 8.0 (24.8) • Financial expenses according to financial position • Mark-to-market valuation of FX financial instruments (IAS 39) 20
Slide 21: Tax charge
Tax charge ( million) FY05 FY04 Corporate income tax 291 251 Tax rate 26% 28% 21
Slide 22: Working capital
Working capital FY05 FY04 %05/04 ( million) Inventory 684 518 32% Receivables 358 254 41% Payables (1,642) (1,209) 36% Other 16 18 Operating working capital (583) (419) 22
Slide 23: Cash Flow
Cash Flow ( million) FY05 FY04 %05/04 Funds from operations 1,240 1,022 21% Cash from operations 1,421 1,240 15% CAPEX 812 696 17% Free Cash Flow 609 544 12% • Comparable base influenced by strong Working capital inflow in FY2004 23
Slide 24: Financial position
Financial position NET FINANCIAL POSITION 800 700 703 600 489 MILLION EURO 500 376 400 300 367 200 107 100 171 197 0 Q104 Q2 04 Q3 04 Q4 04 Q105 Q2 05 Q3 05 Q4 05 (100) (51) 24
Slide 25: ROE and RoCE
ROE and RoCE ROE RoCE 42% 41% 30% 29% 2004 2005 2004 2005 25
Slide 26: Inditex concepts
Inditex concepts Marcos López Capital Markets Director
Slide 27: Zara
Zara ( million) FY05 % 05/04 2 Year CAGR Sales 4,440.8 18% 19% EBIT 712.1 9%(1) 22% EBIT margin 16.0% (136 bp) Stores 852 +129 RoCE 41% (100 bp) (1) EBIT ex-Other net operating income (losses) increase by 12% Y-o-Y and decrease by 94 b.p. as a % on sales 27
Slide 28: Kiddy's Class
Kiddy’s Class ( million) FY05 % 05/04 2 Year CAGR Sales 155.4 29% 32% EBIT 28.8 39% 27% EBIT margin 18.5% 130 bp Stores 149 +20 RoCE 67% +800 bp 28
Slide 29: Pull & Bear
Pull & Bear ( million) FY05 % 05/04 2 Year CAGR Sales 445.1 21% 27% EBIT 75.3 44% 115% EBIT margin 16.9% 270 bp Stores 427 +56 RoCE 47% +600 bp 29
Slide 30: Massimo Dutti
Massimo Dutti ( million) FY05 % 05/04 2 Year CAGR Sales 533.8 16% 23% EBIT 68.8 2%(1) 14% EBIT margin 12.9% (186 bp) Stores 369 +43 RoCE 27% (1600 bp) (1) EBIT ex-Other net operating income (losses) increase by 6% Y-o-Y and decrease 130 b.p. as a % on sales 30
Slide 31: Bershka
Bershka ( million) FY05 % 05/04 2 Year CAGR 639.4 28% Sales 26% 98.9 36% EBIT 32% EBIT margin 15.5% 77 pb Stores 368 +66 RoCE 42% (500 bp) 31
Slide 32: Stradivarius
Stradivarius ( million) FY05 % 05/04 2 Year CAGR 45% Sales 341.1 41% 83.7 324% EBIT 128% EBIT margin 24.5% 937 bp Stores 263 +36 RoCE 82% +4100 bp 32
Slide 33: Oysho
Oysho ( million) FY05 % 05/04 2 Year CAGR Sales 107.0 49% 54% EBIT 24.5 58% 322% EBIT margin 22.9% 124 bp Stores 154 +50 RoCE 50% (100 bp) 33
Slide 34: Zara Home
Zara Home ( million) FY05 % 05/04 Sales 78.1 93% EBIT 1.4 652% EBIT margin 1.8% 135 bp Stores 110 +48 RoCE 3% +200 bp 34
Slide 35: Breakdown of store sales by concept
Breakdown of store sales by concept FY05 FY04 OYSHO STRADIVARIUS 1.3% ZARA HOME 4.3% 0.7% STRADIVARIUS OYSHO ZARA HOME BERSHKA 5,1% 9.1% 1,6% 1,2% BERSHKA MASSIMO DUTTI 9,5% 8.2% PULL & BEAR MASSIMO DUTTI 6.6% 7,9% KIDDY'S CLASS 2.2% ZARA PULL & BEAR 67.5% 6,6% KIDDY'S CLASS 2,3% ZARA 65,9% 35
Slide 36: EBIT margins and RoCE breakdown
EBIT margins and RoCE breakdown EBIT margin RoCE 41% 41% 41% 16.6% 16.2% 16.0% Zara Non-Zara Inditex Zara Non-Zara Inditex 36
Slide 37: Outlook
Outlook Pablo Isla Deputy Chairman & CEO
Slide 38: Growth prospects
Growth prospects Organic growth Space to grow by 15% CAGR Expansion focus: Europe ex–Spain Decision to grow in Asia 38
Slide 39: Growth prospects: Europe
Growth prospects: Europe Europe to become Inditex domestic market Expansion area for the concepts Strong potential: Italy, France, UK, Germany 39
Slide 40: Growth prospects: Asia
Growth prospects: Asia Strategic component – Strong consumer growth – Good reception for our retail proposition – Fast ramp-up of store sales – Potential for Zara and other concepts Priorities in the area: – China: 1st Store in Shanghai last February to be followed by 2 other in Shanghai and Beijing
Slide 41: Reinforce flexibility of the business model
Reinforce flexibility of the business model Sourcing by area in FY2005 Rest of World 3% Asia 33% Proximity 50% Rest of Europe 13% 41
Slide 42: FY2006: CAPEX
FY2006: CAPEX Expected CAPEX 850 - 950 MM Store opening plan: % Int’l Range openings ZARA 130 140 80% KIDDY’S CLASS 30 40 10% PULL & BEAR 45 55 65% MASSIMO DUTTI 30 40 55% BERSHKA 65 75 70% STRADIVARIUS 35 45 45% OYSHO 40 50 50% ZARA HOME 35 45 60% total net openings 410 490 42
Slide 43: Priorities in the use of cash
Priorities in the use of cash • Profitable investment in the expansion of our business • Sustain RoCE levels • Predictable attractive shareholder remuneration 43
Slide 44: Shareholder Remuneration Policy
Shareholder Remuneration Policy 2003 2005 • Double Ordinary • 40% ordinary payout payout to 40% through target for 2008 brought 2008 forward to 2005 • Possibility of bonus • Proposal of bonus dividends dividend 44
Slide 45: Dividend proposal 2005 (67 cents)
Dividend proposal 2005 (67 cents) • Ordinary 52 cents per share • Bonus 15 cents per share • Total 67 cents per share • 418 MM to be distributed to shareholders 40% increase in shareholder remuneration 45
Slide 46: Shareholder Remuneration Policy 2006 onwards
Shareholder Remuneration Policy 2006 onwards • Priorities: • Long term growth strategy • Financial discipline • Policy: • c50% Ordinary payout • The Board may propose to distribute bonus dividends 46
Slide 47: PLAN REDUCE 3: Targets
PLAN REDUCE 3: Targets Wide range of initiatives to improve operational efficiency, not only higher cost control. Reduce the spread between Operating expenses growth and Sales growth – How much? 3 percentage points (300 b.p.) – When? Over 3 fiscal years – Where? In the 3 areas of Operating expenses
Slide 48: PLAN REDUCE 3: Development
PLAN REDUCE 3: Development Full commitment of the Group to targets Responsible within the Planning and Control Department Monitored by the Management Committee every 3 months Development of 3 specific actions every 3 months. No quarter without 3 actions 48
Slide 49: PLAN REDUCE 3: Initiatives
PLAN REDUCE 3: Initiatives Personnel 1. Higher efficiencies at store level by adapting staff hours to customers’ flow 2. Eliminate non-commercial activities from stores 3. Strict control on corporate headcount Rental expenses 1. Minimise start-up costs by adjusting calendar of openings and refurbish
Slide 50: Share plan
Share plan Inditex Board of Directors will propose a Share Plan to the AGM A maximum of 2,348,383 Shares c200 Beneficiaries Linked to the average increase in annual share price over 2006 and 2007 The plan has no cash impact, as it is based on shares subscribed in Fiscal 2000 and remaining from a pre
Slide 51: FY2006: Outlook
FY2006: Outlook • +15% / +20% space growth • Best estimate for Gross Margin in 2006 at 2005 levels (56.2%) • During the eight weeks since the beginning of the 2006 Spring-Summer season sales growth is according to the Group’s expectations. 51
Slide 52: Q & A
INDITEX Qéa&A 29 March 2006