Kmd Brands Limited · NZX:KMD
Kmd Brands — Kathmandu Holdings — FY2019 Earnings Presentation
32 slides from Kmd Brands's earnings presentation, Sep 18, 2019
Slide 1: FY19 Results Presentation
FY19 For personal use only Results Presentation September 2019 Xavier Simonet, CEO Reuben Casey, COO Chris Kinraid, CFO
Slide 2: Contents
Contents For personal use only 1. Financial highlights 2. Operational highlights 3. Financial review 4. Key line items 5. Operating performance 6. Strategy and outlook 7. Questions Appendices All dollar amounts in NZ$ unless otherwise stated 2
Slide 3: Financial highlights
Trading Sales up 9.7% to $545.6m Financial highlights » » Same Store Sales growth +0.6% (Australia +2.7%, New Zealand -3.9%) For personal use only » Operating expenses reduced by 2.5% as a percentage of sales Earnings » Another year of record profit » EBIT up 12.7% to $84.3m » NPAT up 13.6% to $57.6
Slide 4: Operational highlights
Operational highlights Brand » Launched our first global brand campaign ‘World Ready’ » 12% YOY increase in social media and digital reach For personal use only Customers » 81% of customers are ‘fans’ (TruRating). Fans spend at least 10% more than other customers » Summit Club members spend 29% more
Slide 5: Financial review
Financial review For personal use only Chris Kinraid, CFO 5
Slide 6: A record year with earnings growing faster than revenue
A record year with earnings growing faster than revenue For personal use only NZD $m*1 FY19 FY18 Var $ Var % Sales growth accelerated with inclusion of Oboz » North American contribution of $47.9m SALES 545.6 497.4 48.2 9.7% » Excluding North America, sales increased +2.1% at constant exchange rates
Slide 7: Improving balance sheet
Improving balance sheet For personal use only Net Debt (NZD $m) Balance Sheet (NZD $m) as at 31 July FY19 FY18 Inventories 122.8 111.9 69.3 Property, plant and equipment 60.3 63.5 Intangible assets 386.1 386.9 36.8 31.4 Other assets 19.2 40.8 6.9 19.3 Total assets (excl. cash) 588.4 603.1 FY15 FY16
Slide 8: Strong operating cash flows
Strong operating cash flows For personal use only Operating cash flow $61.7m Cash flow (NZD $m) FY19 FY18 » $77.9m operating cash flow generated in 2H FY19 NPAT 57.6 50.7 » $14.0m net debt re-paid Change in working capital (13.0) 8.7 » Working capital movement primarily inventory related Change in n
Slide 9: Investing in store optimisation and growth enablers
Investing in store optimisation and growth enablers For personal use only FY19 capital expenditure $15.7m Total Capex NZD $m » Store optimisation investment $10.3m: Store Investment Growth enabler investment » 4 new stores 23.2 » 12 refurbishments 20.0 » Growth enabler investments $5.4m: 16.7 15.7 »
Slide 10: Over $100m in shareholder dividends in the last years
Over $100m in shareholder dividends in the last 4 years For personal use only » Final dividend NZ 12.0 cents per share (FY18 NZ 11.0 cps) » Record high full year payout NZ 16.0 cps (FY18 NZ 15.0 cps) Dividends (NZ cents per share) Interim Final » Dividend will be fully imputed for New Zealand shareh
Slide 11: Key line items
Key line items For personal use only Chris Kinraid, CFO 11
Slide 12: Sales growth underpinned by Australia and North America wholesale
Sales growth underpinned by Australia and North America wholesale For personal use only Sales reflect successful diversification strategy Sales +9.7% to NZ$545.6m » Sales growth by market (at constant exch. rates): 4yr CAGR 7.4% » AU +4.5% 545.6 » NZ -3.1% 497.4 445.3 » North America (pro forma) +28
Slide 13: Same store sales growth underpinned by Australia and Online
Same store sales growth underpinned by Australia and Online For personal use only Same Store Sales +0.6% Australia New Zealand 6.9% 7.5% 2.7% 3.6% 2.6% -0.1% -1.1% -2.7% -2.4% -3.9% FY15 FY16 FY17 FY18 FY19 GROUP - Constant Rates GROUP - Actual Rates 6.4% 5.5% 4.4% 4.4% 1.6% 0.6% 0.4% Newmarket flag
Slide 14: Gross margin maintained above long term target range
Gross margin maintained above long term target range For personal use only Group » Kathmandu only gross margin 63.6%, maintained above long-term target range 61% to 63% 62.6% 62.0% 63.4% » North America gross margin 40.8% 61.5% 60.9% » Group gross margin reflects increased North America wholesale co
Slide 15: Foreign currency hedging
Foreign currency hedging For personal use only FORWARD HEDGING FY17 FY18 FY19 FY20 AUD/USD Effective Rate 0.728 0.759 0.764 0.721 NZD/USD Effective Rate 0.659 0.709 0.710 0.679 » FY20 USD hedging rates c. 6% below FY19, comparable to FY17 » Forward hedging position: » Longest dated hedges July 2020
Slide 16: Cost of doing business reducing as a % of sales
Cost of doing business reducing as a % of sales For personal use only Cost of doing business down from 48.4% to 45.7% of sales NZD $m FY19 FY18 Var $ Var % » Channel diversification into wholesale continues to deliver Rent 69.2 67.4 1.8 2.7% improvement in operating cost structure % of Sales 12.7% 1
Slide 17: Operating performance
Operating performance For personal use only Reuben Casey, COO 17
Slide 18: Australia: continued store and online sales growth
Australia: continued store and online sales growth For personal use only » Sales +4.5% to A$321.4m AUD $m FY19 FY18 Var % » Online sales +10.4% » Summit Club active members continuing Sales 321.4 307.7 4.5% to grow +14.5% Same store sales growth 2.7% 7.5% » Gross margin decreased 50bps / 0.5% of sal
Slide 19: New Zealand
New Zealand For personal use only » Sales -3.1% to NZ$138.6m NZD $m FY19 FY18 Var % » Online +11.5% Sales 138.6 143.0 -3.1% » Late start to Winter, as evidenced by strong August 2019 sales Same store sales growth -3.9% -2.4% » Gross margin decreased 90bps / 0.9% of sales EBIT (trading result)*2 26.0
Slide 20: Increased effectiveness of online channel
Increased effectiveness of online channel For personal use only Online Traffic up 17.1% to 22.6m visits » Increased conversion of online traffic in FY19, with (millions) traffic up 17.1%, while conversion rate up 5.4% 22.6 19.3 15.7 13.2 12.1 FY15 FY16 FY17 FY18 FY19 Online Transactions up 23.2% to
Slide 21: North America: Oboz continues to deliver rapid sales growth
North America: Oboz continues to deliver rapid sales growth For personal use only OBOZ pro forma (USD $m) FY19 FY18 Var % NORTH AMERICA (NZD $m) FY19 FY18*4 Sales 44.6 34.3 30.0% Sales*1 64.0 16.1 1 Gross margin % 39.6% 40.6% Gross margin % 40.8% 41.8% 1 EBIT 7.9 5.7 38.6% EBIT (trading result)*2,3
Slide 22: Strategy and outlook
Strategy and outlook For personal use only Transformation from a leading Australasian retailer to a brand-led global multi-channel business Xavier Simonet, CEO 22
Slide 23: Sustainability Leadership: Best for the World
Sustainability Leadership: Best for the World For personal use only 23
Slide 24: Kathmandu's competitive advantages
Kathmandu’s competitive advantages For personal use only Performance and Growth Brand and Product In the last 4 years: Sustained sales and profit growth: Value generation for shareholders: » Kathmandu has the strongest » Oboz provides an opportunity » Sales 4 year CAGR +7.4% » Over $100m dividends b
Slide 25: Kathmandu's competitive advantages
Kathmandu’s competitive advantages For personal use only Customer Base Omni Channel » Customer experience rated » Summit Club members spend » Online over 10% of direct to » Infrastructure investments to close to 10% above industry 29% more per transaction consumer (“DTC”) sales deliver an enhanced c
Slide 26: Strategy: a clear plan to drive sustainable and profitable growth
Strategy: a clear plan to drive sustainable and profitable growth For personal use only Grow Core Markets: Win with Distinctive Product Enhance the Customer Become a Global Business Australia and New Zealand Experience through Digital » Supercharge Summit Club » Extend leadership in key » Make it ea
Slide 27: Key strategic priorities in FY20
Key strategic priorities in FY20 For personal use only Brand and Product Customers Omni-channel International Innovation platform Summit Club enhancement Online Oboz Investment in innovation to Re-launch enhanced Summit Leverage functionality enabled Continued growth through key deliver unique and d
Slide 28: Strong start to FY20
Strong start to FY20 For personal use only Trading update for the first 7 weeks ending Sunday 15 September 2019: » Same store sales growth at constant exchange rates (at lower gross margin): » Group +6.1% » Australia +4.0% » New Zealand +11.7% Summary » Successful integration of Oboz Strong financia
Slide 29: Questions
For personal use only Questions 29
Slide 30: Appendix 1: Earnings growth ramping up
Appendix 1: Earnings growth ramping up For personal use only Brand and customer-centric strategies delivering sustainable earnings growth EBITDA EBIT*1 NPAT $99.6m, +10.9% YOY $84.3m, +12.7% YOY $57.6m, +13.6% YOY 99.6 89.8 84.3 70.8 74.8 64.8 57.0 57.6 47.1 50.9 50.7 33.2 33.5 38.0 20.4 FY15 FY16 F
Slide 31: Appendix 2: Reconciliation of segment EBIT trading results
Appendix 2: Reconciliation of segment EBIT trading results For personal use only New North Rest of FY19 ($’000) Australia Other Total Zealand America World EBIT per financial statements (NZD) 50,530 28,132 9,606 (998) (2,977) 84,293 Abnormals*1 (NZD) - (1,115) - - - (1,115) Internal charges not trad
Slide 32: Important Notice and Disclosure
Important Notice and Disclosure This presentation prepared by Kathmandu Holdings Limited (the “Company” or “Kathmandu”) (ASX/NZX:KMD) dated 18 September 2019 For personal use only provides additional comment on the financial statements of the Company for the 12 months ended 31 July 2019, and accompa