Action S.a. · GPW:ACT
Action — 3i Capital Markets Seminar 2016
42 slides from Action's conference presentation, Jun 8, 2016
Slide 1: 3i Capital Markets Seminar: Action
3i Capital Markets Seminar Action 8 June 2016
Slide 2: Agenda
Agenda 1 3i’s investment in Action 2 Action presentation • Sander van der Laan, CEO Action • Frederik Lotz, CFO Action 2
Slide 3: 3i acquired Action in September 2011
3i acquired Action in September 2011 • Acquired from founders in primary buyout for 8.3x EBITDA • Investment triggered by proactive approach from 3i • Six months exclusive off-market due diligence process 3
Slide 4: Strong value creation and continued potential
Strong value creation and continued potential Action – 3i carrying value Selected observations £m 1,000 • £902m carrying value 902 900 800 • 14x EBITDA multiple post-liquidity 712 700 discount 600 573 592 500 501 • Action reported EBITDA 2015 €226m 400 280 299 • 11.6x money multiple over cost(1) 300
Slide 5: Acceleration of international growth under 3i ownership
Acceleration of international growth under 3i ownership Milestones 2011-2016 655 • Transition from founders to professional management # Stores Buyout 514 • Strengthen the team, build 406 systems and processes 321 • Accelerate international 245 269 220 growth 170 190 149 127 105 • New CEO, CFO appoi
Slide 6: Action: 3i Capital Markets Seminar
Action 3i Capital Markets Seminar 8 June 2016, London 6
Slide 7: Today's speakers
Today’s speakers Sander van der Laan Frederik Lotz Chief Executive Chief Financial Officer Officer 7
Slide 8: Sander van der Laan, Chief Executive Officer
Joined October 2015 25 years Consumer & Retail experience Various positions at Ahold (1998 - 2015) • CEO Albert Heijn (2011 - 2015) • COO of Ahold Europe Sander van der Laan • General Manager Albert Heijn Chief Executive Officer • President & CEO Giant Food Stores (Ahold USA) Age 47 • General Manage
Slide 9: Action: Leading European non-food discount retailer
Action: Leading European non-food discount retailer 700+ stores (June 2016) # of stores (Dec 2015) All stores profitable 2015 Sales €2.0bn (+32% yoy) 341 2015 Like for Like Sales Growth 7.6% 76 2015 EBITDA €226m (+36% yoy) 116 >28,000 employees across six countries 1 >50% of sales outside the Nether
Slide 10: Action has a unique proposition
Action has a unique proposition Winning customer proposition & brand 1 2 3 4 Unique and Lowest Convenient Proud surprising prices shopping employees assortment environment 8 Loyal and growing customer base Simple, low risk and scalable business model 5 6 7 One Robust sourcing Centralised and standar
Slide 11: 13 distinct categories in a standardized floorplan
We have 13 distinct categories presented in a standardized floorplan General 1 DIY Typical Action store blueprint merchandise 2 Toys and Entertainment 3 Stationary and Hobby 4 Decoration 5 Multimedia 6 Household 7 Seasonal Fast Moving 8 Laundry and Cleaning Consumer Goods 9 Food and Drink 10 Persona
Slide 12: Balanced revenues across the categories
Balanced revenues across the 13 categories with majority of SKUs in-out Net sales by product category (FY15A) Net sales split by product type (FY15A) 7% 12% 10% 2% 4% 39% 11% 7% 5% 9% 61% 3% 7% 11% 12% Fixed SKUs In-Out SKUs Net sales split by product category(1) Balanced assortment Multiple price p
Slide 13: We continue to surprise our customers
We continue to surprise our customers Illustrative new articles introduced in a 6 week period Does Action have a surprising assortment?(1) Week 1 2 3 4 5 6 73% DIY NL Average Competitor 48% Toys and Entertainment Stationary and Hobby Decoration 59% BE Average Multimedia Competitor 44% Household Seas
Slide 14: Action offers unbeatable prices
Action offers unbeatable prices – main reason for shopping Strong low-price points(1) Main reasons for visiting Action(2) 100 1 For the lowest price Netherlands 171 2 Category variety 100 Belgium 207 3 Changing assortment 100 Germany 186 4 Shop is nearby 100 France 223 5 For specific products I alwa
Slide 15: Why our prices are so low
Why our prices are so low We buy big volumes Low overhead costs No fixed assortment Efficient logistics Simple business Stores at B/C Low marketing Standardised store model locations expenditure processes Cost benefit building blocks that enable us to provide our customers the lowest prices Lowest P
Slide 16: Good quality can come at a low price
Good quality can come at a low price Implementing Action quality system Strengthen quality & sustainability function Action Ethical Sourcing Policy 100% factory audits of all direct import Formulate & communicate our objectives and efforts Lowest Prices 1 2 3 4 5 6 7 8 16
Slide 17: Convenient shopping experience for our customers
Convenient shopping experience for our customers Proximity continues to improve due to network expansion Unique combination of 13 distinct categories Standardized floorplan and routing Mainly EDLP (Every Day Low Pricing) Easy in – Easy out Many locations offer good parking facilities Convenient Shop
Slide 18: Our company culture is fundamental to our success
Our company culture is fundamental to our success Company culture 1 Customer focused 2 Cost conscious 3 Teamwork 4 Discipline 5 Simplicity 6 Respect Proud Employees 1 2 3 4 5 6 7 8 18
Slide 19: Engaged and proud employees
Engaged and proud employees committed to the journey ahead 2015 employee perception Total favourable score(1) Compared to international retail norm Leadership 78 +8 Supervision 86 +8 Operating Efficiency 85 +12 Career Development 73 +7 Client & Image 89 +6 Working Relationships 90 +10 Empowerment 80
Slide 20: One standardised format which is easily scalable
One standardised format which is easily scalable European single format retailers (# of countries) One brand 61 One store format 37 Majority of stores 700m 2 – 1,100m2 26 One store operating model 6 ~95% of the 6,000 SKUs are the same across Action Ikea H&M Lidl all stores and countries One Standard
Slide 21: Action builds 3 tier strategic sourcing approach
Action builds 3 tier strategic sourcing approach 15% DC Top 3 Wholesale Zwaagdijk 12% Top 4-10 73% 400 Suppliers – Other majority Dutch DC Echt-Susteren 140 DC $m Direct Imports 57 Moissy-Cramayel Partnership: 1 Li & Fung 2014 2015 2016 YTD DC D FMCG Supplying national brands DC Increasing number of
Slide 22: Proven DC expansion with 3 DCs operational and 2 more in pipeline
Proven DC expansion with 3 DC operational and 2 more in pipeline Prime area of current Action stores Headquarters and DC-A (Zwaagdijk-Oost, NL) Capacity: 120 Stores Capacity: 300 Stores DC-C 2 new DCs to be realised in DC-B (Moissy-Cramayel, FR) Toulouse and Mannheim areas (Echt-Susteren, NL) Centra
Slide 23: Efficient logistical platform in place
Efficient logistical platform in place We have a ‘supermarket like’ Supply Chain servicing our non-food stores. Warehousing Transport State of the art facilities European network management European Blueprint >300 cost efficient double-deck trucks 2 shifts 5x times/ week delivery. Each store. Full a
Slide 24: Action's loyal customer base spreading the word
Action’s loyal customer base spreading the word 4 - 5 million customers per week 71% penetration in the Netherlands Retailer of the year Europe 2014 and 2015 Happy employees = Happy customers 23 years of like-for-like growth Loyal and Growing Customer Base Source: Company information 1 2 3 4 5 6 7 8
Slide 25: Proposition travels across borders
Proposition travels across borders – allowing fast roll-out in several countries simultaneously We have developed a highly professional expansion team with: > 20 acquisition managers Country specific construction teams 705 Multiple store opening teams 655 Very disciplined IP approval process 514 406
Slide 26: Huge further roll out potential
Huge further roll out potential # Stores Retail Roll-Out Population Dec 2015 Market Potential Netherlands 341 16.9m €94bn Belgium 116 11.3m €72bn France 120 66.4m €420bn Germany 76 81.2m €453bn Austria 1 8.6m €59bn All stores across 6 countries are profitable Source: Company Informat
Slide 27: Multinational, experienced management team in place
Multinational, experienced management team in place that has delivered and continues to deliver profitable growth Executive Board CEO Sander van der Laan HR Director Legal Director Simon Reitsma Rob Wesseling Communication CFO IT Director Director Frederik Lotz Jens Burgers Yvette Moll(1) Real Estat
Slide 28: Our strategy will remain simple and clear
Our strategy will remain simple and clear Secure our unique (International) 1 customer value 2 geographic proposition expansion A cost-effective, simple and scalable business 3 model that delivers our strategy 4 Build on the unique Action culture & values 28
Slide 29: Financial Section
ACTION Financial Section
Slide 30: Frederik Lotz, Chief Financial Officer
Joined September 2015 >14 years of CFO experience Previous CFO roles: • CFO Arla Foods 2010 – 2015 • CFO Danfoss 2007 – 2009 Frederik Lotz • CFO Ferrosan 2002 - 2006 Chief Financial Officer Age 47 Held various financial positions at Maersk Professional international experience (France, China) 30
Slide 31: Consistent high growth track record
Consistent high growth track record Rapid net sales growth (€m) Robust EBITDA performance with stable margins (€m) (1) 1,995 (1) 226 1,506 166 1,155 128 873 99 718 86 607 71 515 426 49 39 11.6% 12.0% 11.3% 11.1% 10.9% 11.3% 9.6% 9.3% 2008 2009 2010 2011 2012 2013 2014 2015 2008 2009 2010 2011 2012 2
Slide 32: Consistent yearly growth and lack of major seasonality
Consistent yearly growth and lack of major seasonality Net sales by trading period EBITDA by trading period 700 80 600 70 60 500 50 400 40 300 30 200 20 100 10 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 50 0 2012 2013 2014 2015 P1 P2 P3 P4 P5 P6 P7 P8 P9 P10 P11 P12 P13 Source: Company information Note: Q1 compris
Slide 33: Consistent and strong LfL sales growth
Consistent and strong LfL sales growth 9.6% 8.0% 7.6% 7.5% 7.2% 2011 2012 2013 2014 2015 Source: Company Information 33
Slide 34: New store payback metrics enables rapid store roll-out
New store payback metrics enables rapid store roll-out New store openings Payback metrics for new stores Average Upfront Capex(1) ~ € 0.5m 141 Revenue per store(2) ~ € 3.3m Store EBITDA(3) ~ € 0.6m 108 Payback period ~ 1 year 85 52 50 30 25 21 20 24 22 2006 2007 2008 2009 2010 2011 2012 2013 2014 20
Slide 35: Highly consistent margin across all categories
Highly consistent margin across all 13 categories 80% 70% 60% % Gross margin(1) 50% 40% 30% 20% 10% 0% Category 1 Category 2 Category 3 Category 4 Category 5 Category 6 Category 7 Category 8 Category 9 Category 10 Category 11 Category 12 Category 13 Source: Company Information (1) (Net sales - Cost
Slide 36: All LfL stores are consistently profitable across all countries
All LfL stores(1) are consistently profitable across all countries 2,000 30.0% 1,800 25.0% 1,600 Store contribution margin % Store Contribution (’000) 1,400 20.0% 1,200 1,000 15.0% 800 10.0% 600 400 5.0% 200 0 0.0% Store contribution per store Store contribution margin (%) per store Source: Company
Slide 37: Already more than 50% of sales outside home market
Already more than 50% of sales outside home market Sales per country over time 1% 1% 2% 100% 3% 6% 11% 15% 5% 14% 17% 80% 19% 8% 20% 60% 40% 88% 84% 78% 69% 57% 20% 0% 2011 2012 2013 2014 2015 2016 E Netherlands Belgium Germany France Austria Luxembourg Source: Company information 37
Slide 38: Strong cash performance
Strong cash performance Cash conversion and operating cash flow Key drivers (2) €225m Low capital intensity 96.8% 85.4% Fast payback 78.5% 78.2% (1) 65.5% €153m Negative working capital €98m €94m €72m 2011A 2012A 2013A 2014A 2015A Operating Cash Flow Cash Conversion Source: Company Information Note:
Slide 39: Scalable business model with rigorous management attention
Scalable business model with rigorous management attention Strong central management of key processes including • Supply chain • IT • Finance • Buying Rigorous and uniform process for opening, approving and monitoring new stores Tight financial governance 39
Slide 40: 2015 trading update
2015 trading update 2015 2014 2015 vs 2014 (52 Weeks)(1) (52 Weeks) (52 weeks) Sales (€m) 1,995 1,506 +32% LfL Sales 7.6% 7.2% +0.4pp Operating EBITDA (€m) 226 166 +36% Cash flow from operations (€m) 225 153 +47% Number of stores 655 514 +27% Number of employees 29,056 22,077 +32% Number of employee
Slide 41: Conclusions
Conclusions Action is unique Significant growth We are able opportunities to deliver 41
Slide 42: We are proud
We are proud 42