B&m European Value Retail Plc · LSE:BME
B&m European Value Retail — FY2017 Earnings Presentation
31 slides from B&m European Value Retail's earnings presentation, May 25, 2017
Slide 1: Preliminary Results Presentation, 52 weeks to 25th March 2017
B&M European Value Retail SA Preliminary Results Presentation 52 weeks to 25th March 2017
Slide 2: FY17 Group Highlights
FY17 Group Highlights • Group revenues increased by 19.4% to £2,430.7m Full Year UK LFL revenues +3.1% and underlying LFL +4.5% For H2, UK LFL revenues +5.4% 53 gross new store openings in the UK and 19 new store openings in Germany • Improvement in gross margin of 26bps • Group adjusted Profi
Slide 3: Paul McDonald, Chief Financial Officer
Paul McDonald Chief Financial Officer Ref: 750493 3
Slide 4: Summary Profit and Loss
Summary Profit and Loss £ millions, March year end 2016A 2017A % £ millions, Group Stores 555 612 10.3% Revenues 2,035.3 2,430.7 19.4% Gross Profit 703.0 845.8 20.3% % 34.5% 34.8% 26bps Operating Costs (510.5) (610.9) 19.7% Adjusted EBITDA 192.5 234.9 22.0% % 9.5% 9.7% 21bps Depreciation and Amortis
Slide 5: Group Revenue Bridge
Group Revenue Bridge £ millions, REVENUE 2016A-2017A Net New Stores £293m • +19.4% revenue growth 46 2,431 57 • UK growth + 18.4% 15 128 (14) • Annualisation of FY2016 new store openings • 53 new stores opened in the UK including 9 164 relocations • 6 closed stores 2,035 • UK LFL +3.1%, underlying 4
Slide 6: Continued EBITDA Growth
Continued EBITDA Growth £ millions, ADJUSTED EBITDA BRIDGE 2016A-2017A Margin % 9.5% 9.7% Net New Stores 15 0 235 (4) 16 2 (3) (2) 18 193 2016A FY16 New FY17 New Net Closed LFL Advertising Central Costs Germany 2017A Relocations Note: 1. Central costs include UK new store pre opening costs Ref: 7504
Slide 7: UK LFL Sales
UK LFL Sales FY2017 COMMENTARY H2 • Full year LFL growth of +3.1% with H2 LFL of +5.4% +5.4% • The trend in Q4 was similar to Q3 after taking account of the timing differences 8.0% • Cannibalisation has become less of a drag upon LFL’s as 7.2 the year has progressed 7.0% (1.1) 6.0% 5.0% 4.9 • The st
Slide 8: Store Relocation Financial Strategy
Store Relocation Financial Strategy CASE STUDY – ELLESMERE PORT, WIRRAL • Existing town centre Bargain store annual revenues £2.0m dating back to a Dec-06 opening • New Out Of Town Homestore opened 0.6 miles away in May 2016 • New store revenue set to take £6.5m p.a. • Therefore, Incremental revenue
Slide 9: Gross Margin Outturn
Gross Margin Outturn GROSS MARGIN (%) KEY HIGHLIGHTS • 26 bps improvement in group gross margin to 34.8% • UK margins have improved by 29 bps, demonstrating that 34.8% impact of adverse US$ rates mitigated by a variety of 34.5% initiatives from the buying teams • Pre-Brexit FX hedges expired 31/12/1
Slide 10: Operating Costs
Operating Costs £ millions, KEY HIGHLIGHTS 2016A 2017A • Overall UK costs as a % of sales were in line with last year Store Costs 354.3 424.2 • Store costs as a % of sales were 21bps higher than last year, of Transport and Distribution 75.5 86.4 which 18bps related to the £4.0m invested in TV advert
Slide 11: Interest Expenses
Interest Expenses £ millions, KEY HIGHLIGHTS 2016A 2017A • Interest and amortised fees relating to the bank debt Interest 19.3 17.3 • We refinanced in the year, increasing the gross debt to Amortised Fees 1.4 1.4 £550m from £440m in line with maximum leverage policy Total 20.7 18.7 • Extended the te
Slide 12: Strong Cash Flow Conversion
Strong Cash Flow Conversion £ millions, OPERATING CASH FLOW CASH FLOW STATEMENT 90% Conversion £m 2016A 2017A 68% Adjusted EBITDA 192.5 234.9 211 Conversion Change in Working Capital (22.4) (23.9) 170 160 New Store Capex (38.2) (32.5) 114 Infrastructure Capex (4.8) (3.5) Maintenance Capex (13.1) (14
Slide 13: Martin Roberts, UK Operations Director
Martin Roberts UK Operations Director Ref: 750493 13
Slide 14: Delivering Sharper Retail for Customers
Delivering Sharper Retail for Customers 1 • Developing home grown talent PEOPLE: • Improving team communications ALIGNING OUR TEAMS BEHIND OUR • Store Manager empowerment PRIORITIES • Recognition & Reward 2 • Comprehensive events planning PRODUCT: • Aligning Supply Chain to demand MAXIMISING THE IMP
Slide 15: Case Study: Becoming a Destination for Seasonal
Case Study: Becoming a Destination for Seasonal B&M’S BEST EVER CHRISTMAS • Detailed, integrated end-to-end operations plan • More consistent store standards for customers • Strong Christmas ranges & pricing • Supported by media advertising campaign • Strong LFL in December despite tough prior year
Slide 16: Simon Arora, Chief Executive Officer
Simon Arora Chief Executive Officer Ref: 750493 16
Slide 17: Growth in Market Context
Growth in Market Context +£350m in the UK Last Reported % Revenue Increase Source : Latest annual accounts, or full year announcements (up to May 2017). Revenues exclude fuel, financial services and VAT. Poundland includes the effect of their acquired & converted 99p stores. Ref: 750493 17
Slide 18: Our Progress since IPO in June 2014
Our Progress since IPO in June 2014 +91% 2,431 £m KEY OPERATIONAL HIGHLIGHTS • Group Revenue 1,272 • Opened 180 new stores in the UK 2014 2017 • Increased UK DC capacity by 810,000 sq. ft £m +86% 235 • Adjusted EBITDA • Successfully integrated German acquisition 127 • Investment in new software and
Slide 19: Continue to Successfully Roll Out New Stores
Continue to Successfully Roll Out New Stores YTD FY2017 OPENINGS 537 STORES AS AT MARCH 2017 • 53 gross openings (net 38 stores due to 9 relocations and 6 store closures) • Consistent high store returns • Six store closures were equivalent of two average new store contribution • Many counties still
Slide 20: UK Store Estate – Target Upgrade
UK Store Estate – Target Upgrade 4,379 RETAIL CATCHMENTS SCREENED Proximity to Existing B&M Store Eliminate Transport/Factory Outlet Locations Population BACK IN 2014 OC&C ELIMINATED THE CATCHMENTS WITH LESS THAN 45% Density C2DE POPULATION AND LESS THAN 25,000 INHABITANTS Population Affluence • At
Slide 21: Case studies of more affluent catchments
Case studies of more affluent catchments ABINGDON WATFORD UK National Average is 46% C2DE Demographic: 35% C2DE Demographic: 41% C2DE Location: Out of Town Retail Park Location: Town Centre, High Street Opening Date: Sept 2014 Opening date: Nov 2013 Payback before WC: 8 months Payback before WC: 11
Slide 22: Advertising Update
Advertising Update Q3 • T.V. Advertising helped deliver best ever Christmas • Regions without T.V. also performed very well Q4 • Modest trial campaigns to support Furniture, Spring Clean and Pet events • Regions without T.V. also performed strongly, as did months with no activity • Delivered an incr
Slide 23: Digital Marketing Update
Digital Marketing Update WEBSITE NEWSLETTER • Features c. 2,000 products and updated daily with new arrivals • Mobile version is 65% of traffic • April 2017 saw 4.9m visits, +46% on April 2016 • Most popular pages are Seasonal and Home/Furniture listings SOCIAL MEDIA • Active, content-rich and engag
Slide 24: International Expansion - Germany
International Expansion - Germany SUMMARY CURRENT FOOTPRINT – GERMANY • Delivered € revenue growth of 17.1%, 12 1 • 19 new stores opened in the year including small store format 22+7 • 15 organic new store openings planned for FY2018 3 5+2 2 1 • Continued expansion of direct product sourcing and lea
Slide 25: Capital Structure
Capital Structure DE-LEVERAGING PROFILE CAPITAL ALLOCATION FRAMEWORK 3.10 STORE ROLLOUT 2.19 1.84 1.71 ORDINARY DIVIDEND 1.29 M&A OPTIONALITY 1 2014A 2015A 2016A 2017A 2017 Pro Forma 2 RETURN SURPLUS CASH TO SHAREHOLDERS Ref: 750493 Note 1: The 3.1x in 2014A is a pro-forma figure reflecting the post
Slide 26: Outlook for 2018
Outlook for 2018 • UK market remains competitive but relatively stable, with discount retail formats winning • UK LFL for the first 7 weeks of FY18 is materially ahead of H2 LFL, but too early to predict Summer season • Continued strong cash generation and capacity to carry out modest M+A or return
Slide 27: Appendix
Appendix Ref: 750493 27
Slide 28: Unique, Disruptive Business Model
Unique, Disruptive Business Model Compelling Targeted grocery higher ticket offering non-grocery offer Cost Disruptive efficiency sourcing process Format 6,000 SKU flexibility discipline Seasonal flex Ref: 750493 28
Slide 29: Disruptive Sourcing Process
Disruptive Sourcing Process GUANGZHOU / HKG FACTORY UK DISTRIBUTOR RETAILER EXPORTER ILLUSTRATIVE SCENARIO A 100 112 150 360 10% 25% 50% GM GM GM SCENARIO 100 200 B 40% GM SCENARIO B is 44% cheaper to consumer Note: Represents illustrative sourcing scenarios based on illustrative gross margins (“Non
Slide 30: B&M and Jawoll are similarly positioned
B&M and Jawoll are similarly positioned SPECIALIST RETAILERS SPECIALIST RETAILERS £130bn¹ €215bn1 £164bn¹ £7bn¹ €199bn1 €2bn1 GROCERY RETAILERS GENERAL MERCHANDISE DISCOUNTERS GROCERY RETAILERS GENERAL MERCHANDISE DISCOUNTERS Source: Euromonitor International – Estimated 2016 Sales as at December 20
Slide 31: Resilience of Gross Margin vs. Currency
Resilience of Gross Margin vs. Currency Gross Margin % GBP/USD – Annual average Note 1: The margins are the UK only gross margin %’s Ref: 750493 Note 2: Average BGP/USD exchange rates 31
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