Burberry Group Plc · LSE:BRBY
Burberry — FY2012 Earnings Presentation
39 slides from Burberry's earnings presentation, May 23, 2012
Slide 1: Preliminary Results for the Year Ended 31 March 2012
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2012 1 1
Slide 2: Further Progress in FY 2012
FURTHER PROGRESS IN FY 2012 • STRONG FINANCIAL RESULTS – Revenue up 24% – Adjusted PBT up 26% • STRONG FOUNDATION – Retail 68% of revenue – Balanced by region – Balanced by product division – Solid operational infrastructure • INVESTING IN GROWTH OPPORTUNITIES – Shifting to front end 3 FINANCIAL REV
Slide 3: Financial Highlights
STACEY CARTWRIGHT — EVP, CHIEF FINANCIAL OFFICER 5 Financial Highlights 12 MONTHS TO 31 MARCH 2012 2011 GROWTH £M £M REVENUE 1,857 1,501 24% ADJUSTED PBT 376.2 297.9 26% ADJUSTED DILUTED EPS 61.6p 48.9p 26% DIVIDEND PER SHARE 25.0p 20.0p 25% NET CASH 338.3 297.9 14% 6 3
Slide 4: Revenue Up 24%
REVENUE UP 24% REVENUE 7 REVENUE UP 24% • REVENUE UP 23% UNDERLYING • RETAIL – 68% of revenue – 31% underlying growth • WHOLESALE – 26% of revenue – 8% underlying growth • LICENSING – 6% of revenue – 5% underlying growth 8 4
Slide 5: Retail Revenue Up 31%
RETAIL REVENUE UP 31%* REVENUE * UNDERLYING 9 RETAIL REVENUE UP 31% • RETAIL REVENUE UP 31% UNDERLYING – 14% comparable store sales growth – 6% from China acquisition – 11% from new space • COMPARABLE STORE SALES UP 14% – H1: +16%; H2: +12% • DOUBLE-DIGIT MAINLINE GROWTH IN ALL PRODUCT DIVISIONS – C
Slide 6: Wholesale Revenue Up 8%
WHOLESALE REVENUE UP 8%* REVENUE * UNDERLYING 11 WHOLESALE REVENUE UP 8% • UP OVER 20% EXCLUDING – Impact of conversion to retail of China, Saudi Arabia and Spanish menswear – Accelerated rationalisation of distribution in US and Europe, especially in H2 • GROWTH DRIVERS – Asia Travel Retail, Emergi
Slide 7: Licensing Revenue Up 5%
LICENSING REVENUE UP 5%* REVENUE * UNDERLYING 13 LICENSING REVENUE UP 5% • UP 10% AT REPORTED FX • ADDRESSING LEGACY ISSUES COST £9M – Additional Japanese non-apparel non-renewals – Impact from terminated menswear licences • GLOBAL PRODUCT LICENCES UP 20% – Successful launch of Burberry Body fragran
Slide 8: Adjusted Operating Profit Up 25%
ADJUSTED OPERATING PROFIT UP 25% ADJUSTED OPERATING PROFIT 15 8
Slide 9: Retail/Wholesale Margin at 16.4%
RETAIL/WHOLESALE MARGIN AT 16.4% RETAIL AS % OF 49% 52% 60% 64% 68% TOTAL SALES RETAIL/WHOLESALE OPERATING PROFIT MARGIN 17 RETAIL/WHOLESALE PROFIT UP 31% 12 MONTHS TO 31 MARCH 2012 2011 CHANGE £M £M RETAIL/WHOLESALE REVENUE 1,748.6 1,402.9 25% GROSS MARGIN 1,190.3 911.3 AS % OF REVENUE 68.1% 64.9%
Slide 10: Retail/Wholesale Gross Margin Up 320bps
RETAIL/WHOLESALE GROSS MARGIN UP 320bps RETAIL AS % OF 49% 52% 60% 64% 68% TOTAL SALES RETAIL/WHOLESALE GROSS MARGIN 19 RETAIL/WHOLESALE GROSS MARGIN UP 320bps • GROSS MARGIN AT 68.1% – Up 320 basis points • DRIVEN BY – China conversion and outperformance – Pricing and sourcing – Channel shift to re
Slide 11: Retail/Wholesale Operating Expenses/Revenue at 51.7%
RETAIL/WHOLESALE OPERATING EXPENSES/REVENUE AT 51.7% RETAIL AS % OF 49% 52% 60% 64% 68% TOTAL SALES ADJUSTED OPERATING EXPENSES/REVENUE 21 RETAIL/WHOLESALE OPERATING EXPENSES/REVENUE AT 51.7% • INCREASE REFLECTS SHIFT TO RETAIL – Retail 68% of revenue (2011: 64%) • THREE KEY AREAS OF INCREASED INVES
Slide 12: Licensing Profit
LICENSING PROFIT 12 MONTHS TO 31 MARCH 2012 2011 £M £M REVENUE 108.6 98.4 GROSS MARGIN AT 100% 108.6 98.4 OPERATING EXPENSES (18.6) (16.8) OPERATING PROFIT 90.0 81.6 OPERATING MARGIN 82.9% 82.9% YEN RATE 133 144 2012 INCLUDES FX BENEFIT OF £5.4M IN REVENUE AND £0.1M IN OPEX 23 12
Slide 13: Income Statement
INCOME STATEMENT 12 MONTHS TO 31 MARCH 2012 2011 £M £M ADJUSTED OPERATING PROFIT 376.9 301.1 NET FINANCE CHARGE (0.7) (3.2) ADJUSTED PROFIT BEFORE TAX 376.2 297.9 EXCEPTIONAL ITEMS (10.2) (2.2) PROFIT BEFORE TAX 366.0 295.7 TAX (100.6) (83.2) DISCONTINUED OPERATIONS (0.3) (6.2) NON-CONTROLLING INTER
Slide 14: Cash Position Strengthened After Funding Investment
CASH POSITION STRENGTHENED AFTER FUNDING INVESTMENT INVESTMENT* NET CASH/(DEBT) * CAPEX PLUS ACQUISITION SPEND 27 CASH INFLOW FROM OPERATIONS 12 MONTHS TO 31 MARCH 2012 2011 £M £M ADJUSTED OPERATING PROFIT 376.9 301.1 SPAIN OPERATING PROFIT/(LOSS) 2.5 (2.1) RESTRUCTURING SPEND (8.6) (20.3) DEPRECIAT
Slide 15: Movement in Net Cash
Movement in net cash 29 TOTAL CASH FLOW 12 MONTHS TO 31 MARCH 2012 2011 £M £M CASH INFLOW FROM OPERATIONS 482.5 366.4 CAPITAL EXPENDITURE (153.1) (108.4) CAPITAL CONTRIBUTIONS FROM JV PARTNERS 4.9 7.0 ACQUISITIONS (23.5) (51.9) NET INTEREST (0.6) (3.2) TAX PAID (108.2) (98.1) FREE CASH FLOW 202.0 11
Slide 16: Capital Expenditure Focused on Retail
CAPITAL EXPENDITURE FOCUSED ON RETAIL £180 – 200m • CAPITAL EXPENDITURE PLANNED AT £180-200M IN FY 2013 £153m – Increase in flagship markets • New stores and refurbishments • Larger format, mainline stores and concessions • 12-14% SPACE GROWTH IN FY 2013 – Increasingly biased to larger format stores
Slide 17: Outlook
Drive OUTPERFORMANCE IN revenue growth and modest improvement in retail/wholesale operating margin 33 OUTLOOK FY 2013 Further modest retail/wholesale operating margin improvement in full year - H1 margin lower RETAIL 12-14% increase in average selling space in FY 2013 - Higher proportion of larger f
Slide 18: The Journey to Date
ANGELA AHRENDTS — CHIEF EXECUTIVE OFFICER 35 THE JOURNEY TO DATE • SIGNIFICANT INVESTMENT 150% • DIGITAL INNOVATION • BRAND ELEVATION • CULTURE • GREAT BRAND, GREAT COMPANY REVENUE 124% ADJUSTED PBT 36 18
Slide 19: Significant Shift to Retail; Increased Exposure to Growth Markets
SIGNIFICANT SHIFT TO RETAIL LICENSING: 6% 34% GROWTH LICENSING: 11% WHOLESALE: 26% 39% GROWTH RETAIL: 43% WHOLESALE: RETAIL: 68% 46% 300% GROWTH FY 2006 REVENUE £743M FY 2012 REVENUE £1,857M GROWTH 2006 TO 2012 37 INCREASED EXPOSURE TO GROWTH MARKETS ROW: 6% 696% GROWTH ROW: 2% EUROPE: 32% ASIA PACI
Slide 20: Balanced Product Mix; Five Strategic Priorities
BALANCED PRODUCT MIX CHILDRENS: 4% 287% GROWTH CHILDRENS: 3% MENS: 24% 99% GROWTH NON-APPAREL: 39% MENS: NON-APPAREL: 264% GROWTH 31% 28% WOMENS: 38% WOMENS: 33% 134% GROWTH FY 2006 RETAIL/WHOLESALE REVENUE £662M FY 2012 RETAIL/WHOLESALE REVENUE £1,748M GROWTH 2006 TO 2012 39 LEVERAGE THE FRANCHISE
Slide 21: Leverage the Franchise
LEVERAGE THE FRANCHISE BRAND ELEVATION 5% 1% PRORSUM 40% 26% LONDON 73% 55% BRIT FY 2006 FY 2012 41 synchronisation 42 21
Slide 22: Innovative Marketing
Innovative marketing 43 LEVERAGE THE FRANCHISE • FOCUS – Menswear • 24% of revenue • 26% underlying growth • Optimise outerwear • Tailoring initiatives • OPPORTUNITIES – Unlocking the potential in our licences • Japan • Global products 44 22
Slide 23: Intensify Non-Apparel
INTENSIFY NON-APPAREL 264% REVENUE 45 INTENSIFY NON-APPAREL • FOCUS – Soft accessories – Shoes • OPPORTUNITIES – Men’s accessories 46 23
Slide 24: Accelerate Retail-led Growth
ACCELERATE RETAIL-led GROWTH * Mainline Concessions COMPARABLE STORE SALES GROWTH NUMBER OF STORES * EXCLUDES DISCONTINUED STORES IN SPAIN 47 ACCELERATE RETAIL-led GROWTH • FOCUS – Productivity improvements driven by customer service and insight – Leverage investment in burberry.com • OPPORTUNITIES
Slide 25: Invest in Under-Penetrated Markets
INVEST IN UNDER-PENETRATED MARKETS 9.5x REVENUE IN EMERGING MARKETS NUMBER OF STORES IN EMERGING MARKETS EMERGING MARKETS INCLUDE CHINA, MIDDLE EAST, TURKEY, LATIN AMERICA, INDIA, RUSSIA AND EASTERN EUROPE 49 INVEST IN UNDER-PENETRATED MARKETS • FOCUS – Further align Chinese operations – Engage with
Slide 26: Pursue Operational Excellence
PURSUE OPERATIONAL EXCELLENCE • ACHIEVEMENTS – Reduced the number of vendors – Rationalised DCs from 24 to 3 – Reduced carriers from 30 to 3 1,300bps – Implemented SAP across all major markets – Established global planning function RETAIL/WHOLESALE GROSS MARGIN 51 PURSUE OPERATIONAL EXCELLENCE • FOC
Slide 27: Continuing the Journey
CONTINUING THE JOURNEY LEVERAGE THE FRANCHISE INTENSIFY NON-APPAREL ACCELERATE RETAIL-LED GROWTH INVEST IN UNDER-PENETRATED MARKETS PURSUE OPERATIONAL EXCELLENCE 53 27
Slide 28: Nothing Without Great Service
REG SINDALL — EVP, CORPORATE RESOURCES 55 NOTHING WITHOUT GREAT SERVICE 56 28
Slide 29: Customer Resources Today
CUSTOMER RESOURCES TODAY SERVICE & PRODUCTIVITY GLOBAL SALES AND SERVICE CLIENT SERVICES GLOBAL VIC PROGRAMME GLOBAL CUSTOMER CUSTOMER SERVICES ENGAGEMENT GLOBAL CUSTOMER DATA CUSTOMER INSIGHT AND ANALYTICS 57 SERVICE AND PRODUCTIVITY TO DELIVER AN INNOVATIVE, NUMBER ONE CUSTOMER EXPERIENCE, POSITIO
Slide 30: Service and Productivity
SERVICE AND PRODUCTIVITY • BURBERRY EXPERIENCE FROM 2008 – All 4,000+ sales associates – Global consistency • BURBERRY EXPERIENCE 2.0 FROM 2011 – 2,500 sales associates to date – Build customer loyalty 59 SERVICE AND PRODUCTIVITY • INNOVATION TO DIFFERENTIATE SERVICE – “Chinese customer in your stor
Slide 31: Service and Productivity: Client Services
SERVICE AND PRODUCTIVITY • FOCUS – Help drive retail comp growth – Mystery shopping scores improving • OPPORTUNITIES – Roll out programme beyond own retail • Franchisees • Wholesale • Customer and client services GLOBAL MYSTERY SHOPPING SCORE – Support innovative technology in store – Improve analyt
Slide 32: Driving Loyalty and Sales from VICs
DRIVING LOYALTY AND SALES FROM VICS UNITS PER TRANSACTION AVERAGE TRANSACTION VALUE AVERAGE UNIT REALISATION DATA FOR FY 2011/12 63 CLIENT SERVICES – OPPORTUNITIES • DOUBLE NUMBER OF VIC CONSULTANTS – Focus on flagship markets • INVEST IN INFRASTRUCTURE – In store – Work with third parties – Custome
Slide 33: Customer Services
CUSTOMER SERVICES To inspire and empower every customer with every contact through every channel 65 AN INDUSTRY LEADING SERVICE Luxury Luxury Online Technology Burberry Peer 1 Peer 2 retailer company Telephone Store only Email Click to Call Click to Chat 24/7 se
Slide 34: Customer Services and Customer Insight
CUSTOMER SERVICES • FOCUS – Growing volumes – Direct sales • OPPORTUNITIES – Explore new digital technology to connect with customers • Social media • Mobile • Video chat – Drive retail productivity by taking store calls • Early trials encouraging 67 CUSTOMER INSIGHT Turning data into intelligence,
Slide 35: Customer Insight
CUSTOMER INSIGHT One to one marketing Strategic clientelling Decision making Customer Tailored web marketing insight experience Store merchandising staffing planning 69 CUSTOMER INSIGHT • FOCUS – Data cleansing/capture – Invest in analytics • Collective behaviour • Personalisation • OPPORTUNITIES –
Slide 36: Customer Resources
CUSTOMER RESOURCES • BUILT THE FOUNDATION – Service and productivity – Client services – Customer services – Customer insight • OPPORTUNITIES – Identify individual customers – Create connection with the brand – Communicate using innovative digital technology – Make better decisions – DRIVING LOYALTY
Slide 37: Great Brand, Great Company, Great Growth
Great brand, great company, great growth — Built STRONG FOUNDATION for Sustained profitable growth — Great AMBITIONS 73 . AS BURBERRY PREPARES FOR TOMORROW’S CHALLENGES, ONE KEY MEASURE OF SUCCESS WILL BE HOW MANY LIVES AROUND THE WORLD CAN BE TOUCHED AND TRANSFORMED THROUGH THE POWER OF ITS PERFORM
Slide 38: Disclaimer
75 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 forward-looking
Slide 39: Adjusted Measures and IR Contacts
ADJUSTED MEASURES Adjusted measures exclude • Restructuring costs of nil in 2012 (2011: £1.0m credit relating to the Group’s cost efficiency programme announced in January 2009) • The put option liability finance charge relating to the third party 15% economic interest in the Chinese business in 201