Coty Inc. · NYSE:COTY
Coty — Investor Presentation (July 2019)
22 slides from Coty's investor presentation, Jul 1, 2019
Slide 1: Turnaround Plan
COTY TURNAROUND PLAN COTY
Slide 2: Expected FY19 Landing
EXPECTED FY19 LANDING Business • Addressed supply chain issues, with limited impact in Q4 Stabilization • Set clear near-term priorities around profit and cash flow delivery • Q4 LFL net revenue trends consistent with Q3 No Change to • Constant currency adjusted operating income of $950-1,000M FY19
Slide 3: How We Got to This Point: A Difficult Merger
HOW WE GOT TO THIS POINT A DIFFICULT MERGER WHAT WENT WRONG WHAT’S DIFFERENT NOW P&G Beauty integration longer The integration is now complete, and more complex than with common IT systems and originally envisioned business operating on one order, Underestimation of the one shipment, one invoice neg
Slide 4: We Have Built a Strong Platform
WE HAVE BUILT A STRONG PLATFORM LEADING BRANDS UNIQUE OPERATOR OF LICENSES 3 out of Top 10 Luxury Fragrance Brands #1 Global fragrance maker 4 out of Top 10 Mass Cosmetics Brands 80% of our licenses have residual average life of 3 out of Top 10 Retail Hair Color Brands 9 Years KEY COUNTRIES STRONG P
Slide 5: ~60% of the Business on Strong Footing
~60% OF THE BUSINESS ON STRONG FOOTING LUXURY PROFESSIONAL BEAUTY • Portfolio of leading luxury brands has grown inline • Attractive industry structure with the category in the last 2 years • Opportunities to expand penetration through digital • Substantial opportunities ahead through scaled and e-c
Slide 6: Consumer Beauty: Mainly a Gap of Performance
CONSUMER BEAUTY* MAINLY A GAP OF PERFORMANCE FY17 FY18 YTD FY19 (March) 0.9% 0.5% • Mass beauty in our channels & geographies is declining -1-2% -0.7% • Weakness in the Consumer Beauty division is mainly driven -4.4% -4.7% by share losses -6.3% -6.9% -6.8% • Stabilizing share in Consumer Beauty will
Slide 7: Three Pillars of Our Turnaround Plan
THREE PILLARS OF OUR TURNAROUND PLAN BUILD REDISCOVER REGAIN A CULTURE OF REDISCOVER GROWTH OPERATIONAL PRIDE AND GROWTH LEADERSHIP PERFORMANCE These three pillars are focused on driving substantial improvement in Consumer Beauty while also further optimizing Luxury and Professional Beauty 7
Slide 8: Rediscover Growth: Prioritization of Brands & Markets
REDISCOVER GROWTH PRIORITIZATION OF BRANDS & MARKETS, SUPPORTED AT SCALE 20 PRIORITY BRANDS 6 BLUEPRINT COUNTRIES (Examples below) Priority brands account for ~25% of # of brands Priority brand-country combos U.S. U.K. account for ~60% of NR As the % of priority brand- country combos supported at Ge
Slide 9: Rediscover Growth: Improving Portfolio Structure and Optimizing Assortment
REDISCOVER GROWTH IMPROVING PORTFOLIO STRUCTURE AND OPTIMIZING ASSORTMENT Data-driven analysis shows clear Mass Cosmetics Trend by Price Tier opportunities for improved portfolio (2-Year CAGR*) structure and optimized product assortment, as findings show: 11% 11% 1. The premium tier of mass beauty c
Slide 10: Rediscover Growth: Innovation Targeting Category Coverage and Up-trading
REDISCOVER GROWTH INNOVATION TARGETING CATEGORY COVERAGE AND UP-TRADING • We are orienting our innovation efforts to support expansion of category coverage, up- trading and margin accretion • Our Turnaround Plan embeds a significant step-up in R&D investment and capabilities 10
Slide 11: Operational Leadership: More Opportunities in Supply Chain
OPERATIONAL LEADERSHIP MORE OPPORTUNITIES IN SUPPLY CHAIN • On a comparable basis, we estimate we have over 10% gross margin gap vs. competition • While we have been optimizing our supply chain footprint, still substantial room for further COGS savings Supply chain productivity 2/3 of savings Captur
Slide 12: Operational Leadership: Leaner Organization
OPERATIONAL LEADERSHIP ADDRESSING MARKETS’ SCALE AND BUILDING A LEANER ORGANIZATION 1. Simpler organization 2. Leaner structure 3. Co-located top team • Mutualised support functions • More efficient, lean team • New management HQ in • Markets managed in 3 regions • Executive Committee and Amsterdam
Slide 13: Build a Culture of Pride and Performance
BUILD A CULTURE OF PRIDE AND PERFORMANCE A BLEND OF BEAUTY, FMCG & TURNAROUND EXPERTISE Pierre Pierre-André Daniel Edgar Laubies Terisse Ramos Huber CEO CFO Chief Scientific Officer current Pres. Luxury/ future Pres. of Americas + APAC Gianni Sylvie Fiona Simona Pieraccioni Moreau Hughes Cattaneo cu
Slide 14: Revenues: Deep Changes for Better and Stronger Dynamics
REVENUES DEEP CHANGES FOR BETTER AND STRONGER DYNAMICS LFL FY19 YTD FY23 (March) Luxury +4% +3% to +4% Keep investing & growing Professional Beauty -1% 0% to +2% Leverage Wella & OPI Consumer Beauty -10% -1% to -2% Stabilize market share TOTAL -3% 0% to +2% Asia Pacific <10% ~13-15% Priority ~70% Br
Slide 15: Profits: Building Sustainable Income Growth
PROFITS BUILDING SUSTAINABLE INCOME GROWTH Assortment Mix / Value Promotion Innovation Productivity Net Revenues COGS SKU Reduction Gross Margin Advertising Fixed Cost Working Media Organization delayering Digital & Traditional Mutualizing support functions Operating Income FCF Net Debt EPS 15
Slide 16: Cash Flow and Net Debt Trajectory
CASH FLOW AND NET DEBT TRAJECTORY Key Building Blocks • One-time costs: ~$160M cash outflow from $7.3-7.4B previous programs (largely FY20), plus ~$600M from newly announced program ~$5.7B spread over FY20-FY23. 2-3 year payback objective on all projects. • Working Capital: Gradual progress, with a
Slide 17: Our Goal: FY23 Targets
OUR GOAL FY23 TARGETS Net revenues growth 0 to 2% (constant FX & scope) (stable FY23 vs FY19) Adjusted Operating margin 14% to 16% Free Cash Flow ~$1 billion Net Debt to EBITDA Less than 4x 17
Slide 18: Our New Path Starts Now: Fiscal 2020 Outlook
OUR NEW PATH STARTS NOW FISCAL 2020 OUTLOOK Net revenues growth Moderating decline (constant FX & scope) Adjusted Operating margin 5 to 10% growth (constant FX & scope) Free Cash Flow Moderate improvement 18
Slide 19: Appendix
APPENDIX COTY
Slide 20: New Organizational Structure
NEW ORGANIZATIONAL STRUCTURE President, Americas & APAC President, EMEA President, Professional Beauty (Full P&L Ownership) (Full P&L Ownership) (Full P&L Ownership) GM GM GM GM GM GM Country 1 Country 2 Country 3 Country 4 Country 1 Country 2 President, Consumer Beauty Brands President, Luxury Bran
Slide 21: Current Organizational Structure
CURRENT ORGANIZATIONAL STRUCTURE President, Luxury President/COO, Consumer Beauty President, Professional Beauty (Full P&L Ownership) (Full P&L Ownership) (Full P&L Ownership) Regional CFO Regional CFO Regional CFO SVP 1 SVP 1 SVP 1 Regional Luxury Regional CB Regional PB SVP 2 CMO SVP 2 CMO SVP 2 C
Slide 22: Disclaimer
DISCLAIMER Forward-Looking Statements Certain statements in this presentation are forward-looking statements. These forward-looking statements reflect Coty Inc.’s (“Coty’s”) current views with respect to, among other things, Coty’s Turnaround Plan, strategic planning, targets, segment reporting and