Ao World Plc · LSE:AO.
Ao World — FY2017 Earnings Presentation
38 slides from Ao World's earnings presentation, Jun 6, 2017
Slide 1: Full year results, year ended 31st March 2017
Full year results Year ended 31st March 2017 6th June 2017 1
Slide 2: Forward-looking statements disclaimer
Forward–looking statements disclaimer This presentation contains oral and written statements that are, or may be, “forward-looking statements” with respect to certain of AO World plc’s (“AO”) plans and its current goals and expectations relating to its future financial condition, performance and res
Slide 3: Agenda
Agenda Welcome Geoff Cooper, Chairman Strategic & Operational Progress Steve Caunce, CEO Financial Review Mark Higgins, CFO Summary Steve Caunce, CEO Q&A 3
Slide 4: FY17 Highlights
FY17 Highlights • Continued strong financial progress • 4C’s strategy on-track • Gaining market share in all categories and countries • Strengthened our balance sheet through a placing to raise £50m 4
Slide 5: Welcome
Welcome
Slide 6: Our strategy
Our strategy
Slide 7: Our mission
Our mission ' . 3 . ' : To Be The Best Electrical Retailer in Europe 4 Pow wy : Making things easy tt Because we CARE more :
Slide 8: 4C's model
4C's model CULTURE & BRAND Be exceptional in the moments that matter and simply care more 8
Slide 9: The AO Way
The AO Way ND Py ‘4 EMS AND PROGR. 5S es OUR ‘CUSTOMERS, LOVE US
Slide 10: Strategic and operational progress
Strategic and operational progress
Slide 11: Building for growth
Building for growth BUILDING OUR BUILDING OUR BUILDING OUR BUILDING OUR INFRASTRUCTURE BRAND OFFERING SKILL SET 11
Slide 12: Continued growth and operational development
Continued growth and operational development • Operational highlights • Continued to gain market share across countries & categories • European operations on-track • Launched Computing in UK & AV in Germany • Built state of the art recycling facility in Telford • Financial highlights • Total Group r
Slide 13: Customers continue to love The AO Way
Customers continue to love The AO Way • Group customer base over 4 million* UK Customer Base (000s)* • Exceptional NPS levels: 4,500 4,000 • UK: >80 3,500 3,000 • Germany and Netherlands: >85 2,500 2,000 • Continue to enhance customer journey 1,500 1,000 • Use of CustomerLabs 500 - • Launch of “MyAO
Slide 14: More customers are returning
More customers are returning UK Customers vs Repeat Customer % 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Aug-08 Feb-10 Jun-10 Feb-11 Jun-11 Feb-12 Jun-12 Feb-13 Jun-13 Feb-14 Jun-14 Feb-15 Jun-15 Feb-16 Jun-16 Feb-17 Jun-08 Oct-08 Dec-08 Apr-09 Aug-09 Feb-09 Jun-09 Oct-09 Dec-09 Apr-10 Aug-10 Apr-11
Slide 15: Customers continue to return quickly
0 20 40 60 80 100 120 140 160 180 200 220 240 * Source: based on internal sales data 260 280 300 320 340 360 2010 Year 1 380 400 420 440 460 480 2011 500 520 540 560 580 600 2012 620 640 660 680 700 720 2013 Year 2 740 760 780 800 820 840 2014 860 880 900 920 940 960 2015 980 1000 1020 1040 1060 UK
Slide 16: Customers are buying across categories
Customers are buying across categories Category unit mix by year and order type MDA First Order SDA First Order AV First Order 100% 100% 100% 90% 90% 90% 80% 80% 80% 70% 70% 70% 60% 60% 60% 50% 50% 50% 40% 40% 40% 30% 30% 30% 20% 20% 20% 10% 10% 10% 0% 0% 0% First Second First Second First Second Fi
Slide 17: Strong Group-wide reduction in customer acquisition costs
Strong Group-wide reduction in customer acquisition costs • Progress driven by: UK Direct Traffic Mix • Refined online advertising strategy • Improved brand awareness (direct traffic) GRAPHIC: • Increased customer recommendations TBC • Improved SEO rankings 2017 2013 • Repeat business 17
Slide 18: Continuing our category roll-out strategy
Continuing our category roll-out strategy 18 *Categories currently being explored for launch in 2017
Slide 19: The AO Way has transformed the Computing category
The AO Way has transformed the Computing category • Superior product information & customer support • Category performance has exceeded initial expectations • Able to leverage assets and learnings across Group • Happy customers & manufacturers • Looking forward we will: • Continually improve service
Slide 20: European business poised for growth
European business poised for growth • Physical consolidation phase complete • UK learnings applied to replicate category roll-out • Product margin improvement • Cost-to-deliver reducing • Brand progression • Acquisition cost reducing • Culture developing The AO Way 20
Slide 21: Responsible retailing: AO Recycling
Responsible retailing: AO Recycling • State of the art recycling facility built in Telford • Satisfies our WEEE recycling obligations • Vertical integration • Capacity to process all of AO’s WEEE • Provides further opportunities / revenue streams 21
Slide 22: Financial review
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Slide 23: Revenue growth across all categories and countries
Revenue growth across all categories and countries Group Revenue (GBPm) UK Revenue (GBPm) European Revenue (EURm) 800 700 90 85 701 630 700 80 600 558 599 70 600 ↑ ↑ 500 471 13% 476 17% 60 56 500 ↑ ↑ 400 19% 50 ↑ 400 26% 52% 300 40 300 30 200 200 20 100 100 8 ↑ 10 619% 0 0 0 FY15 FY16 FY17 FY15 FY16
Slide 24: Overall gross margin continues to improve
Overall gross margin continues to improve Product margin continues to improve through demonstration of value we bring to suppliers and customers and Group Gross Margin % through European leverage (5.6) FY17 21.2 Continue with current strategy 18.4 • Build on partnerships with (12.1) manufacturers FY
Slide 25: SG&A cost analysis - Group
SG&A cost analysis - Group 25.0% • Total SGA expenses increased to 19.7% Group SG&A Expenses as a % of revenue* of revenue (2016: 19.2%)* 20.0% 19.2% 19.7% • Driven by increases in: 17.4% • Group warehousing costs 15.0% 10.2% 10.7% • Investment in category & IT teams 9.2% to support and drive growth
Slide 26: SG&A cost analysis – UK & Europe
SG&A cost analysis – UK & Europe UK SG&A Expenses as a % of revenue* Europe SG&A Expenses as a % of revenue* 20.0% 18.1% 45.0% 18.0% 17.5% 41.6% 16.3% 40.0% 16.0% 14.0% 35.0% 33.2% 9.4% 9.7% 20.8% 30.0% 12.0% 8.6% 10.0% 25.0% 19.0% 8.0% 20.0% 5.5% 6.0% 3.6% 3.8% 4.3% 15.0% 10.0% 5.6% 4.0% 15.3% 2.0%
Slide 27: Group adjusted EBITDA reflects strong growth in UK and investment in Europe
Group adjusted EBITDA reflects strong growth in UK and investment in Europe Group adj. EBITDA (GBPm) UK adj. EBITDA (GBPm) European adj. EBITDA (EURm) 10.0 30.0 0.0 8.5 FY15 FY16 FY17 8.0 24.4 (5.0) 25.0 6.0 (10.0) 20.0 4.0 16.5 17.2 (15.0) 15.0 (14.2) 2.0 (20.0) 0.0 10.0 FY15 FY16 FY17 (25.0) (2.0)
Slide 28: Operating cash flow
Operating cash flow As at 31 March (£m) FY 17 FY 16 Adjusted EBITDA (2.1) (3.9) Europe set-up costs (0.7) (2.3) Non-cash movements 1.2 0.6 Net change working capital: Movement in trade & other receivables and accrued (13.3) (15.8) income Movement in inventories (10.3) (2.4) Movement in trade and oth
Slide 29: Building for growth
Building for growth • FY17 Capex of £16.9m (2016: £8.7m) comprising: • Logistics division trailer refresh • AO Recycling plant • Bergheim distribution centre • Two new UK outbases • £10.9m financed via finance leases 29
Slide 30: FY18 Group Guidance
FY18 Group Guidance Revenue UK • Tough consumer trading conditions experienced in Q4 FY17 expected to continue • Evidenced particularly in Q1 FY18 due to tough prior year comparison Europe • Expectations set out at our Capital Markets Day: making progress against this objective EBITDA • Short term (
Slide 31: Our brand – the future
Our brand – the future
Slide 32: Building brand awareness remains our greatest opportunity
Building brand awareness remains our greatest opportunity 70% 60% UK Spontaneous Brand Awareness 50% UK Prompted Brand Awareness 40% 30% 20% 10% 0% • UK FY17 Performance • AO now a multi-category electrical retailer • Joint advertising campaigns with product manufacturers • Strong customer testimoni
Slide 33: Brand awareness: Our plan
Brand awareness: Our plan What? • Focus on own brand sales • Become the obvious destination for electricals & raise awareness • Make AO a household name, building on our customer sentiment • Capitalise on our growing brand awareness How? - By highlighting our difference • New TV creative • Branding
Slide 34: Summary
Summary • Infrastructure aligned for growth • Strengthened the UK brand foundations • Developed and innovated our offering • Broadened our skill set • Strong focus on further driving AO brand in the UK • Deliver the plan we have set out for Europe • Continue to execute our 4C’s strategy Strategy on
Slide 35: Q&A
Q&A
Slide 36: Appendix: Definitions
Appendix Definitions Adjusted EBITDA Profit/(loss) before tax, depreciation, amortisation, profit on disposal of fixed assets, net finance income, “adjustments” and exceptional items Adjustments Adjustments is defined by the Group as (i) set-up costs relating to overseas expansion namely strategic p
Slide 37: Income statement
Income statement As at 31 March (£m) 2017 2016 Revenue 701.2 599.2 Cost of sales (572.0) (493.3) Gross profit 129.2 105.9 Administrative expenses (142.4) (116.5) Other operating income 1.2 Operating loss (12.0) (10.6) Finance income 6.8 4.2 Finance costs (1.8) (0.3) Loss before tax (7.0) (6.7) Tax (
Slide 38: Balance sheet
Balance sheet As at 31 March (£m) 2017 2016 Non-current assets Goodwill 13.5 13.5 Other intangible assets 1.8 2.1 Property, plant and equipment 29.3 18.0 Trade and other receivables 39.8 29.5 Deferred tax asset 1.8 1.5 Derivative Financial asset 1.3 0.8 87.5 65.4 Current assets Inventories 44.8 34.0