Industria De Diseno Textil, S.a. · BME:ITX
Industria De Diseno Textil — Inditex — FY2004 Earnings Presentation
55 slides from Industria De Diseno Textil's earnings presentation, Mar 31, 2005
Slide 1: FY2004 Results Presentation
FY2004 Results Presentation 31 March 2005
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 FY2004 Results: • Overview • Financial summary • Concepts Outlook: • Strategic overview • FY2005 3
Slide 4: José María Castellano
José María Castellano Deputy Chairman & CEO
Slide 5: FY2004: Highlights
FY2004: Highlights • Satisfactory sales growth • Gross margin improvement • Consistent performance in all concepts • Back to historical returns • Strong cash generation and reinvestment in the business 5
Slide 6: FY2004: Summary
FY2004: Summary: • Sales growth +23% • LFL sales growth +9% and 322 net store openings • Gross margin 53.5% • Net income growth +41%, EPS of 101 cents • RoCE 40% 6
Slide 7: FY2004: Overview
FY2004: Overview Like-for-like sales growth 9% 1% FY2004 FY2003 • Recovery after weak 2H03 • 2 year CAGR in line with long term targets 7
Slide 8: Performance per concept
Performance per concept 784% % Growth 04/03 633% Sales EBIT 198% 169% 279% 48% 44% 36% 21% 25% 59% 49% 35% 32% 31% 19% 24% 23% Zara KC P&B MD BSK STV OYS ZH ITX • Satisfactory performance in all concepts • Turnaround in P&B and Stradivarius 8
Slide 9: Geographic breakdown of store sales
Geographic breakdown of store sales FY2004 FY2003 Asia & RoW Americas 6.7% Asia & RoW 10.5% 6.7% Americas Spain 11.7% 45.5% Spain 46.1% Rest of Rest of Europe Europe 35.5% 37.3% (1) Store sales: Includes sales in OMS and franchises 9
Slide 10: Borja De La Cierva, CFO
INDITEX Borja De La Cierva CFO
Slide 11: Financial summary
INDITEX Financial summary
Slide 12: Highlights
Highlights 2004 2003 % 04/03 million Net Sales 5,670 4,599 23% 3,034 2,306 32% Gross Margin 53.5% 50.1% % margin 1,240 874 EBITDA 21.9% 19.0% 42% EBITDA margin 925 627 48% EBIT 16.3% 13.6% EBIT margin Net income 628 447 41% EPS ( cents) 101 72 12
Slide 13: CAGR
CAGR 2 Year CAGR Net Sales +19% In line with long LFL +5% term targets EBIT +18% Net income +20% 13
Slide 14: Sales growth
Sales growth H1 H2 FY2004 Space contribution +15% +16% +16% LFL +8% +10% +9% Currency impact (2%) (2%) (2%) Sales growth +22% +25% +23% 14
Slide 15: Selling area
Selling area FYE2004 yoy Total space (m2) 1,175,070 +19% Average new store size (Zara) (m2) 1,289 +18% Space contribution +16% •Bigger size of new stores •Ramp-up of new openings Initial lower sales density, as expected 15
Slide 16: Like-for-like growth
Like-for-like growth 10% 9% 8% 7% 1% (2%) 1H04 1H03 2H04 2H03 FY04 FY03 16
Slide 17: Gross margin
Gross margin (basis points) H1 H2 FY04 Currency impact 90 120 110 Inventory mgmt . 115 314 227 & product mix 205 433 337 • Price increases in some Latin American countries • Lower currency impact • Higher mark-ups • Better inventory management • Lower weight of sales period in both seasons 17
Slide 18: Operating expenses
Operating expenses Operating expenses on sales 31,65% 31,15% FY2004 FY2003 Cost of new and immature space 18
Slide 19: Non-cash expenses
Non-cash expenses ( million) FY04 yoy Fixed assets depreciation 276.4 +25% Goodwill amortisation 12.9 +37% Provisions 25.2 +58% Extraordinary loss 16.5 +189% Minorities 10.1 +363% Total non-cash expenses 341.1 19
Slide 20: Financial results
Financial results ( million) FY04 Q4 04 Interest charges (1.2) 1.3 Inflationary countries Fin Exp restatement (3.9) (2.6) Net financial expenses (5.1) (1.3) Venezuela (6.5) - Other ( /USD) (10.6) (4.3) FX losses (17.1) (4.3) Other (equity method) (0.4) (0.4) Net financial results (22.5) (6.0) 20
Slide 21: Tax charge
Tax charge FY04 FY03 Corporate income tax 248 165 Tax rate 28% 27% 21
Slide 22: Working capital
Working capital ( million) FY04 FY03 yoy Inventory 514 486 6% Receivables 283 329 (14%) Payables (1,208) (1,011) 20% Accruals 12 9 Operating working capital (399) (187) 22
Slide 23: Operating working capital financing
Operating working capital financing ( million) 450 399 300 238 171 187 150 0 FY2001 FY2002 FY2003 FY2004 23
Slide 24: Cash Flow
Cash Flow ( million) FY04 FY03 yoy Funds from operations 1,015 722 41% Cash from operations 1,228 726 69% CAPEX 742 628 18% Free Cash Flow 487 98 404% FY2004 CAPEX includes non-recurrent items • Increasing stakes in Zara Japan and Zara Italy, and acquisition of Massimo Dutti franchised operations in
Slide 25: Financial position
Financial position NET FINANCIAL POSITION 600 500 508,1 400 MILLION EURO 300 245,6 268,3 200 198,8 100 70,8 143,1 130,3 73,5 0 Q4 02 Q103 Q2 03 Q3 03 Q4 03 Q104 Q2 04 Q3 04 Q4 04 (8,6) (100) 25
Slide 26: ROE and ROCE
ROE and ROCE ROE ROCE 41% 40% 39% 34% 32% 25% 26% 27% 23% 27% 000 001 002 003 004 000 001 002 003 004 2 2 2 2 2 2 2 2 2 2 26
Slide 27: IFRS Transition
IFRS Transition • Expected impact in P&L account and balance sheet limited • Cash flow neutral • IFRS Briefing May 12 • Release of FY04 Results under IFRS and a detailed conciliation of the differences with Spanish GAAP 27
Slide 28: Marcos López
Marcos López Capital Markets Director
Slide 29: Inditex concepts
INDITEX Inditex concepts
Slide 30: Zara
Zara million FY04 % 04/03 Sales 3,819.6 19% •66% International sales EBIT (1) 647.8 35% •Currency impact •Ramp-up of new stores EBIT margin 17.0% +217 bp Stores 723 +97 ROCE 38% +5% (1) Before goodwill amortisation 30
Slide 31: Kiddy's Class
Kiddy’s Class million FY04 % 04/03 Sales 120.6 35% •Higher expansion rate EBIT 21.7 21% •Normalized returns EBIT margin 18.0% (204 bp) Stores 129 +26 ROCE 61% (19%) 31
Slide 32: Pull & Bear
Pull & Bear million FY04 % 04/03 Sales 378.9 32% •Turnaround after 2003 EBIT 56.2 198% •Sourcing changes in 2004: flexibility EBIT margin 14.8% +829 bp •Lower expansion rate in FY04 Stores 371 +21 ROCE 44% +28% 32
Slide 33: Massimo Dutti
Massimo Dutti million FY04 % 04/03 Sales 481.3 24% •Outperformed EBIT 75.1 32% •Entering in larger European markets EBIT margin 15.6% +14 bp Stores 326 +29 ROCE 50% (6%) 33
Slide 34: Bershka
Bershka million FY04 % 04/03 Sales 516.0 31% •Outperformed EBIT 82.5 44% •Entering in larger European markets EBIT margin 16.0% +149 pb Stores 302 +49 ROCE 52% +6% 34
Slide 35: Stradivarius
Stradivarius million FY04 % 04/03 Sales 241.9 49% •Turnaround after 2003 EBIT (1) 38.9 784% •Changes in business model EBIT margin 16.1% 1,336 bp •Further improvements expected for FY05 Stores 227 +36 ROCE 43% +38% (1) Before goodwill amortisation 35
Slide 36: Oysho
Oysho million FY04 % 04/03 Sales 71.7 59% •Outperformed EBIT 15.6 633% •Focussed on target EBIT margin 21.8% 1,709 bp market Stores 104 +28 ROCE 52% +45% 36
Slide 37: Zara Home
Zara Home million FY04 % 04/03 Sales 40.4 305% •Break-even •In-line with expectations EBIT 0.3 n.a. •Still in launch phase EBIT margin 0.8% 531 pb Stores 62 +36 ROCE 2% n.a. 37
Slide 38: Breakdown of store sales by concept
Breakdown of store sales by concept FY04 FY03 OYSHO STRADIVARIUS 1,0% ZARA HOME 3,5% 0,2% STRADIVARIUS OYSHO ZARA HOME BERSHKA 4,3% 8,6% 1,3% 0,7% BERSHKA MASSIMO DUTTI 9,1% 8,5% PULL & BEAR MASSIMO DUTTI 6,3% 8,5% KIDDY'S CLASS 1,9% ZARA PULL & BEAR 70,0% 6,7% KIDDY'S CLASS 2,1% ZARA 67,4% 38
Slide 39: Incremental growth by new concepts
Incremental growth by new concepts 6.000 3.820 3.000 1.603,4 1.851 431,7 0 2004 1999 Non Zara concepts ZARA New concepts: Inditex size 5 years ago 39
Slide 40: EBIT margins by concept
EBIT(1) margins by concept 21.8% 18.0% 17.0% 16.5% 16.0% 16.1% 15.6% 14.8% 0.8% Zara KC P&B MD BSK STV OYS ZH Inditex (1) Before goodwill amortisation 40
Slide 41: ROCE by concept
ROCE by concept 61% 52% 52% 50% 44% 43% 40% 38% 2% (1) (1) ZARA KC P&B MD BSK STV OYS ZH Inditex (1) Before goodwill amortisation 41
Slide 42: International Expansion by concept
International Expansion (% new openings 04) International International Growth Zara 80% MD Reinforce Domestic 50% Market share BSK 50% P&B Oysho 25% 25% STV KC Z Home 10% 10% 5% Domestic 42
Slide 43: José María Castellano
José María Castellano Deputy Chairman & CEO
Slide 44: Outlook
INDITEX Outlook
Slide 45: Growth prospects
Growth prospects Organic Growth 2009: Current Stores x 1.7 Expansion focus: Europe ex–Spain, to remain an 80% European group Strengthening of the management team 45
Slide 46: Strategic priorities
Strategic priorities Focus international expansion in Europe Optimise performance in core markets Reinforce flexibility of the business model Resources to achieve the tasks 46
Slide 47: Core markets
Core markets Optimise performance: Ensure LFL sales growth meet cost growth in core markets Continue expansion of younger formats Selective in new malls 47
Slide 48: International expansion focused in Europe
International expansion focused in Europe Sales Breakdown % 2004 2009 (e) Other 21 24 France, Italy, UK and Germany 17 23 16 Portugal, Greece, Mexico 14 Spain 46 39 80% Europe 80% Europe 48
Slide 49: Priorities by concept 2005-2009
Priorities by concept 2005-2009 “Core” markets R. of Europe Rest of the World 49
Slide 50: Reinforce flexibility of the business model
Reinforce flexibility of the business model Sourcing by area in FY04 Rest of World 4% Asia 27% Proximity (Spain, Port, Mor, EU) 52% Rest of Europe 18% 50
Slide 51: Strengthening of the Management Team
Strengthening of the Management Team Reinforce management team to scale the business Mr. Ortega Chairman, Mr. Castellano Deputy Chairman Ensure smooth transition for the new CEO, to be appointed over 2005 Appointment of several managing director positions 51
Slide 52: FY2005: CAPEX
FY2005: CAPEX Expected CAPEX 700 - 800 MM Store opening plan: % Int’l Range openings ZARA 100 110 85% KIDDY’S CLASS 20 25 10% PULL & BEAR 35 45 40% MASSIMO DUTTI 30 40 55% BERSHKA 40 45 60% STRADIVARIUS 25 30 30% OYSHO 20 30 40% ZARA HOME 30 35 30% total net openings 300 360 52
Slide 53: FY2005: Outlook
FY2005: Outlook • 300 / 360 store openings • +15% / +20% space growth • Best estimate for Gross Margin in 2005 at 2004 levels (53.5%) • During the eight weeks since the beginning of the 2005 Spring-Summer season, sales growth is according to the Group’s expectations. 53
Slide 54: Dividend proposal
Dividend proposal • Dividend proposal to AGM • Ordinary 30 cents per share • Bonus 18 cents per share • Total 48 cents per share • 299 MM back to shareholders 37% increase in shareholder remuneration 54
Slide 55: Q & A
INDITEX Qéa&A 31 March 2005