Burberry Group plc · LSE:BRBY
Burberry — FY2016 Earnings Presentation
33 slides from Burberry's earnings presentation, May 18, 2016
Slide 1: Preliminary Results for the Twelve Months Ended 31 March 2016
PRELIMINARY RESULTS FOR THE TWELVE MONTHS ENDED 31 March 2016 Christopher bailey
Slide 2: FY 2016 Review and Highlights
FY 2016 REVIEW — Future ambition — PRODUCT — Retail productivity — Growing e-commerce — Financial ambition — QUESTIONS FY 2016 HIGHLIGHTS CHALLENGING EXTERNAL ENVIRONMENT REFLECTED IN FINANCIAL PERFORMANCE – Revenue down 1% underlying to £2.5bn – Adjusted PBT down 10% underlying to £421m – Strong ca
Slide 3: Brand first
Brand first FULL LAUNCH IN JAPAN MOVE TO ONE LABEL DIGITAL COLLABORATIONS SHINJUKU, TOKYO FAMOUS FOR PRODUCT SCARF BAR RUNWAY RUCKSACK LAUNCH OF MR BURBERRY FRAGRANCE NEW MANUFACTURING FACILITY IN LEEDS
Slide 4: Customer-centric, productive and responsible
Customer-centric MORE PERSONALISED EXPERIENCES MERGING PHYSICAL AND DIGITAL EVOLVING THE RUNWAY SHOW PRODUCTIVE AND RESPONSIBLE ROLLED OUT FIRST PHASE OF IT UPGRADE SAVED OVER £25M OF DISCRETIONARY COSTS IN FY 2016 FIRST TIME INCLUSION IN DOW JONES SUSTAINABILTY INDICES FIRST APPRENTICESHIP SCHEME
Slide 5: Financial Highlights
CAROL FAIRWEATHER FINANCIAL HIGHLIGHTS CHANGE 12 MONTHS TO 31 MARCH 2016 2015 REPORTED UNDERLYING £M £M FX REVENUE 2,515 2,523 - (1%) ADJUSTED PBT 421 456 (8%) (10%) ADJUSTED DILUTED EPS 69.9p 76.9p (9%) NET CASH 660 552 20% DIVIDEND PER SHARE 37.0p 35.2p 5%
Slide 6: Revenue
REVENUE Down 1% UNDERLYING £21m (£13m) (£23m) £2,523m £7m £2,515m FY 2015 RETAIL WHOLESALE LICENSING EXCHANGE FY 2016 RATES REVENUE REVENUE down 1% UNDERLYING RETAIL – 73% of revenue – Up 1% underlying, up 2% at reported FX • Comparable sales down 1% (H1: up 1%; H2: down 2%) – Opened 18 mainline sto
Slide 7: Adjusted Operating Profit
ADJUSTED OPERATING PROFIT down 11% UNDERLYING £455m (£32m) (£16m) £11m £418m FY 2015 RETAIL/WHOLESALE LICENSING EXCHANGE FY 2016 RATES ADJUSTED OPERATING PROFIT RETAIL/WHOLESALE PROFIT 12 MONTHS TO 31 MARCH 2016 2015 £M £M CHANGE RETAIL/WHOLESALE REVENUE 2,472.3 2,455.5 1% GROSS MARGIN 1,720.3 1,697
Slide 8: Operating expenses and Licensing Profit
Operating expenses £60m £1,359m (£65m) £10m £1,339m £35m £1,299m FY 2015 UNDERLYING PRP STORE EXCHANGE FY 2016 COST INCREASE IMPAIRMENTS RATES ADJUSTED RETAIL/WHOLESALE OPERATING EXPENSES LICENSING PROFIT 12 MONTHS TO 31 MARCH 2016 2015 £M £M REVENUE 42.4 67.7 GROSS MARGIN AT 100% 42.4 67.7 OPERATIN
Slide 9: Income Statement
INCOME STATEMENT 12 MONTHS TO 31 MARCH 2016 2015 £M £M ADJUSTED OPERATING PROFIT 417.8 455.2 NET FINANCE CREDIT 2.8 0.6 ADJUSTED PROFIT BEFORE TAX 420.6 455.8 ADJUSTING ITEMS (5.0) (11.2) PROFIT BEFORE TAX 415.6 444.6 TAX (101.0) (103.5) NON-CONTROLLING INTEREST (5.1) (4.8) ATTRIBUTABLE PROFIT 309.5
Slide 10: Cash Inflow from Operations and Capital Expenditure
CASH INFLOW FROM OPERATIONS 12 MONTHS TO 31 MARCH 2016 2015 £M £M ADJUSTED OPERATING PROFIT 417.8 455.2 DEPRECIATION AND AMORTISATION 132.2 123.7 EMPLOYEE SHARE SCHEME COSTS (0.3) 21.0 INCREASE IN INVENTORIES (49.3) (15.1) INCREASE IN RECEIVABLES (33.3) (44.0) INCREASE IN PAYABLES 9.1 19.7 OTHER 26.
Slide 11: Movement in Net Cash
MOVEMENT IN NET CASH £503m (£138m) (£95m) (£158m) (£4m) £660m £552m FY 2015 OPERATING CAPITAL TAX DIVIDENDS OTHER FY 2016 CASHFLOW EXPENDITURE NET CASH MOVEMENT IN NET CASH 12 MONTHS TO 31 MARCH 2016 2015 £M £M CASH INFLOW FROM OPERATIONS 503.0 568.1 CAPITAL EXPENDITURE (138.0) (155.7) ACQUISITIONS
Slide 12: Changing luxury environment
Christopher bailey changing LUXURY environment STRONG HISTORICAL GROWTH – 7% average annual growth since 2010 GROWTH NOW TEMPERING – Low single-digit % growth on average over next five years LUXURY MARKET £200BN AND GROWING KEY CHANGES – Digital innovation – Customer behaviour – Demographic shifts
Slide 13: How we will change
How we will change TRACK RECORD OF CHANGE STEP CHANGE IN PRODUCTIVITY AGENDA SIGNIFICANT GROWTH POTENTIAL ACROSS EXISTING BUSINESS – Product – Retail – E-commerce ENABLED BY CHANGING OUR WAYS OF WORKING From product breadth To product focus
Slide 14: From new space to productive space; e-commerce leadership
From New space To productive space From digital prowess To e-commerce leadership
Slide 15: Changing our ways of working
Changing our ways of working CRUCIAL TO UNLOCK GROWTH POTENTIAL IN-DEPTH REVIEW OF ORGANISATION FOR THE FUTURE – Right size – Right shape – Right capabilities PROGRAMME TO DELIVER ANNUALISED COST SAVINGS OF AT LEAST £100M BY FY 2019 Build on existing strength in product
Slide 16: What we are doing differently
from product breadth to product focus WHAT WE ARE DOING DIFFERENTLY – Reduce assortment and amplify newness and excitement – Tailor assortment to local customer – Rebalance marketing activity – Leverage offer at opening and higher price points – Prioritise key categories ENABLED BY CHANGING OUR WAYS
Slide 17: Retail excellence
Donald kohler — Retail excellence shift to retail creates opportunities REGENT STREET, LONDON FY 2006 FY 2011 FY 2016 RETAIL WHOLESALE LICENSING REVENUE % SEOUL, KOREA
Slide 18: Sizing the opportunity
Sizing the opportunity DIFFERENT PRODUCT MIX TO PEERS OPPORTUNITIES TO IMPROVE – Conversion – Customer retention – Sales density LUXURY BURBERRY LUXURY PEERS APPAREL PEERS CONVERSION % LUXURY BURBERRY LUXURY PEERS APPAREL PEERS SALES PER SQUARE FOOT SOURCE: COMPANY AND INDUSTRY ESTIMATES ELEVATE OUR
Slide 19: Service and Cultivation
SERVICE GOAL: DELIVERING TRUE LUXURY SERVICE WITH A BURBERRY DIFFERENCE OPPORTUNITIES – New assessment and hiring criteria for stores – Enhanced training – Introducing Net Promoter Score Cultivation GOAL: PUTTING CULTIVATION AND RETENTION AT THE HEART OF EVERYTHING WE DO OPPORTUNITIES – Grow Burberr
Slide 20: Four pillars of retail excellence
Product GOAL: OFFER THE RIGHT PRODUCT IN THE RIGHT PLACE OPPORTUNITIES – Simplification of visual merchandising standards – Showroom set as a retail store – Further assortment reduction – New assortment/buying model implemented, including store profiling Four pillars of retail excellence — initiativ
Slide 21: Growing e-commerce
John smith — Growing e-commerce DIGITAL AS A DIFFERENTIATOR 40% CAGR FY 2012 FY 2016 DIGITAL REVENUE
Slide 22: Four elements to digital strategy
FOUR elements to digital STRATEGY ACQUISITION & RETENTION E-COMMERCE DIGITAL IN STORE OMNI-CHANNEL LEADERSHIP Capitalise on THE MOBILE OPPORTUNITY 50% 40% + c.40% 30% + c.25% 20% 10% 0% FY 2013 FY 2014 FY 2015 FY 2016 MOBILE DESKTOP MOBILE MIX OF TRAFFIC IMPROVEMENT IN CONVERSION VS FY 2015
Slide 23: Grow digital in Asia; partnership model
GROW DIGITAL IN ASIA CANADA US AUSTRALIA UK EUROPE GLOBAL JAPAN KOREA UAE HONG KONG CHINA DIGITAL AS % OF RETAIL SALES* * MAINLINE STORES AND DIGITAL Grow with third parties PARTNERSHIP MODEL – Reputation – Reach – Revenue THIRD PARTY DIGITAL PLAYERS – To drive two-thirds of sector e-commerce growth
Slide 24: Create industry leading omni-channel experiences
Create industry leading Omni-channel experiences BLURRING PHYSICAL AND DIGITAL ROLL OUT SINGLE POOL OF INVENTORY ENABLE TRUE OMNI-CHANNEL CUSTOMER JOURNEY – Currently across our retail and digital – In future, extend to third parties INVESTMENT IN PEOPLE AND CAPEX
Slide 25: Change, innovate, grow, invest
change — innovate — GROW — Invest
Slide 26: Financial ambition: outperforming luxury sector growth
CAROL FAIRWEATHER — Financial ambition Outperforming luxury sector growth FY 2016 RETAIL E-COMMERCE OTHER FY 2019 GOAL PRODUCTIVITY REVENUE £M NOT TO SCALE
Slide 27: Financial ambition
OPERATING EXPENSES OTHER IT EMPLOYEE COSTS MARKETING PROPERTY-RELATED COSTS DEPRECIATION FY 2016 ADJUSTED OPERATING EXPENSES* * EXCLUDING AMORTISATION OF FRAGRANCE AND BEAUTY LICENCE INTANGIBLE OF £15M AND STORE IMPAIRMENTS/ONEROUS LEASE PROVISIONS OF £45M FINANCIAL AMBITION REVENUE – Outperform lux
Slide 28: Capital structure
Capital structure PRIORITISE INVESTMENT IN BUSINESS £660m 0.5x 0.5x £552m MOVE TO PROGRESSIVE DIVIDEND BEYOND THIS, REVIEW – Cash generation – Relevant financial parameters FY 2015 FY 2016 FY 2015 FY 2016 COMMENCING SHARE BUYBACK NET CASH NET DEBT RATIO – Up to £150m starting in FY 2017 – Future ret
Slide 29: Building on existing strengths
Christopher bailey Building on existing strengths — Confidence in strategies for the future — Relentless focus on growth and productivity — Unlocked through changing OUR ways of working — Driving outperformance
Slide 30: Appendix: Disclaimer
APPENDIX 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-l
Slide 31: Adjusted Measures
ADJUSTED MEASURES All metrics and commentary in this presentation are at reported FX and exclude adjusting items unless stated otherwise. Adjusting items are: A charge of £14.9m in reported operating expenses being the amortisation of the fragrance and beauty licence intangible asset (2015: £14.9m
Slide 32: FY 2017 Outlook
FY 2017 OUTLOOK RETAIL Low single-digit % growth in retail revenue from net new space WHOLESALE Down around 10% at constant FX in H1 LICENSING Down by about £20m at constant exchange rates RETAIL/WHOLESALE PROFIT If exchange rates remain at current levels* reported profit will be about £50m higher t
Slide 33: Exchange rates and IR contacts
Exchange rates FORECAST FULL YEAR EFFECTIVE AVERAGE EXCHANGE RATES FOR FY 2017 RATES FOR 30 April 31 March FY 2016 FY 2015 £1= 2016 2016 EURO 1.29 1.26 1.36 1.28 US DOLLAR 1.46 1.44 1.50 1.60 CHINESE YUAN RENMINBI 9.44 9.29 9.57 9.94 HONG KONG DOLLAR 11.33 11.16 11.67 12.42 KOREAN WON 1,661 1,640 1,