Byggmax Group Ab · OMXSTO:BMAX
Byggmax Group Ab — Investor Day (June 2017)
75 slides from Byggmax Group Ab's investor day presentation, Jun 7, 2017
Slide 1: Strengths-Based Growth
STRENGTHS-BASED GROWTH Capital Markets Event, June 7, 2017
Slide 2: Agenda
AGENDA Byggmax Group today Our challenge Updated strategic plan • Our plan • Summary • Execution Financial implications Conclusions and Q&A 2
Slide 3: Agenda
AGENDA Byggmax Group today Our challenge Updated strategic plan • Our plan • Summary • Execution Financial implications Conclusions and Q&A 3
Slide 4: Byggmax Group
BYGGMAX GROUP 5.2 140 4 SEK bn revenue stores countries 1000+ >20% -19% employees e-commerce share CO2 emissions since 2009 4
Slide 5: Byggmax has grown steadily
BYGGMAX HAS GROWN STEADILY Revenue, MSEK 6 000 5219 5 000 900 4221 10 Total growth: 4 000 11.1% CAGR 3 000 Acquisitions Organic Organic growth: 2 000 4 121 4 319 7.7% CAGR 3 216 3 548 2 987 3 090 2 773 1 000 0 2010 2011 2012 2013 2014 2015 2016 5
Slide 6: ...with good profitability
…WITH GOOD PROFITABILITY Average EBIT margin, 2014-2016* Percent 9,0 8,0 7.6 7,0 6.2 6,0 5.6 4.9 5,0 4.4 4.3 4,0 3,0 2,0 1,0 0,0 Byggmax Bauhaus Jem & Fix W. N.*** Kingfisher Hornbach (Beijer, Stark, Silvan, etc.) Nordics Europe * Data for 2014-2016, or 2013-2015 where 2016 not available 6 ** Data f
Slide 7: Our segments
OUR SEGMENTS ‒ Hard discount DIY ‒ Garden buildings and ‒ E-commerce in DIY, home ‒ Founded in 1993 refined building materials and garden ‒ 4.3bn sales ‒ Acquired Jan 2016 ‒ Started 2013, acquired ‒ 0.8bn sales Dec 2015 ‒ EBITDA 9.6% ‒ EBITDA 6.8% ‒ 0.1bn sales All brands target consumers and are fo
Slide 8: Three complementary businesses in low-price DIY
THREE COMPLEMENTARY BUSINESSES IN LOW-PRICE DIY Share of >80% 15% 2% Group sales Business idea Good quality building materials at Affordable refined quality building Home and garden at lowest possible price materials, delivered to your home lowest price – online Core customer Do-it-yourself enthusia
Slide 9: Byggmax business idea and concept
Business idea: Sell building materials of good quality at lowest possible price – in a customer friendly way The concept: ─ Price leadership ─ Fast and easy to shop ─ Stores close to customers ─ Focused assortment in store ─ Broad range online ─ Entrepreneurial and cost conscious culture Presence: ─
Slide 10: Store format and customer journey
3 Both in- and outdoor space accessed by car 2 Easy access and 4 loading Products scanned by Byggmax personnel at exit 1 5 Drive-thru set-up Trailer borrowed free of charge 6 Direct access to store with parking in front
Slide 11: Byggmax Group is operating in a good market
BYGGMAX GROUP IS OPERATING IN A GOOD MARKET DIY MARKET, SEK bn ‒ DIY market growing around GDP, faster in Sweden 140 +2.3% p.a. 120 ‒ 70% driven by renovation and maintenance needs, historically stable share of GPD* 100 38 36 35 37 32 31 34 35 29 30 80 28 ‒ 30% driven by new construction, historical
Slide 12: We are exposed to favorable trends
WE ARE EXPOSED TO FAVORABLE TRENDS HARD DISCOUNT CAPTURING SHARE ACROSS RETAIL RAPID ONLINE GROWTH, FROM A LOW BASE* Online penetration, % Online growth, % Electronics 3 26 3 11 Apparel & 2 14 2 8 shoes DIY 1 9 1 29 * Sweden, 2016 Source: e-handelsbarometern, 2016 12
Slide 13: We have unique strengths
WE HAVE UNIQUE STRENGTHS ‒ Strong Byggmax brand, capturing the low price position ‒ Unique store format – self-service and close to customers ‒ Strong e-commerce position ‒ Lowest OpEx in the industry ‒ Track record of steady growth ‒ Strong culture of cost consciousness and entrepreneurship 13
Slide 14: Strong brand capturing the low price position
STRONG BRAND CAPTURING THE LOW PRICE POSITION Top criteria Byggmax Brand awareness when chosing low price Ranking Trend DIY store perception No 1 Low price No 1 Top-3 Low price No 2 Top-3 Low price No 1 14
Slide 15: We have the lowest OpEx in the industry
WE HAVE THE LOWEST OPEX IN THE INDUSTRY Average OpEx as share of Sales, 2014-2016* Percent 32 33 31 ‒ Byggmax has the lowest 28 Opex in the Industry 23 ‒ Enables profitably operating at lowest prices ‒ Enables serving more of the markets profitably Byggmax Bauhaus Jem & Fix Kingfisher Hornbach Nordi
Slide 16: Agenda
AGENDA Byggmax Group today Our challenge Updated strategic plan • Our plan • Summary • Execution Financial implications Conclusions and Q&A 16
Slide 17: Our challenge
OUR CHALLENGE Historic growth Many new focus areas, driver approaching outside our historic full potential core Uncertain growth prospects Increased complexity Stretched organization Falling margins 17
Slide 18: Historic growth driver approaching full potential
HISTORIC GROWTH DRIVER APPROACHING FULL POTENTIAL Historic sales growth (2010-2015) LFL Store count Stores Stated 2010-2016 2016 potential 5 E-commerce 20 Sweden +29 82 95 Norway +17 33 60 75 New stores Finland +9 13 25 TOTAL +55 128 180 18
Slide 19: More focus areas and increased complexity
MORE FOCUS AREAS AND INCREASED COMPLEXITY DEVELOPMENTS 2014-2016 NEW BUSINESS FOCUS ON LONG-TERM CONCEPTS LAUNCHED ”INVESTMENTS” ACQUISITIONS ‒ ”Proffsbyggt” ‒ e-commerce growth ‒ Buildor ‒ Byggmax+ ‒ Finland expansion ‒ Skånska Byggvaror ‒ B2B sales channel ‒ New business concepts (qoute based offe
Slide 20: Margins have decreased over time
MARGINS HAVE DECREASED OVER TIME EBIT margin 12 2010-2016, % 9.9 10 9.3 8.2 8.4 8.0 8.3 7.7 7.5 8 6.2 Operating (EBIT) 6 margin, % ‒ Profit margins have decreased 4 over time Adjusted operating 2 (EBIT) margin % 0 ‒ Until 2014, margins developed 2010 2011 2012 2013 2014 2015 2016 in line with like-f
Slide 21: Profit margin decline last two years
PROFIT MARGIN DECLINE LAST TWO YEARS Drivers of negative EBIT margin development: ADJUSTED EBIT MARGIN % ‒ Acquisitions: -1.5%-points o EBITDA level: -0.7%-p. o Amortization: -0.8%-p. 8.4 8.3 6.2 ‒ Byggmax e-commerce (mix): -0.5%-points ‒ Weaker NOK: -0.5-%points Minor negative effects from: 2014 20
Slide 22: Agenda
AGENDA Byggmax Group today Our challenge Updated strategic plan • Our plan • Summary • Execution Financial implications Conclusions and Q&A 22
Slide 23: The opportunity is enormous
THE OPPORTUNITY IS ENORMOUS ‒ Hard discount will grow ‒ Our stores are well positioned for the future ‒ We are uniquely positioned to win in e-commerce ‒ Our succesful Byggmax-model can capture share in large adjacent categories 23
Slide 24: Our updated plan builds on our strengths
OUR UPDATED PLAN BUILDS ON OUR STRENGTHS ‒ Strong Byggmax brand, capturing the low price position ‒ Unique store format – self-service and close to customers ‒ Strong e-commerce position ‒ Lowest OpEx in the industry ‒ Track record of steady growth ‒ Strong culture of cost consciousness and entrepre
Slide 25: Our plan to capture the opportunity
OUR PLAN TO CAPTURE THE OPPORTUNITY 4 Focused growth FOCUS FOR TODAY’S DISCUSSION Simple & efficient 3 operating model 2 Best customer experience 1 Best people and culture 25
Slide 26: Capturing the opportunity
CAPTURING THE OPPORTUNITY 1. Simplify Byggmax Focused growth ‒ Focus on core business ‒ New approach in Finland ‒ Shift e-commerce to profitable growth 2. Transform SKBV Simple & efficient 3. Capture group synergies operating model 4. Invest in efficiency 26
Slide 27: 1. Focus on core business
1. FOCUS ON CORE BUSINESS ‒ Design Your Living pilot store closed ‒ Close B2B sales channel for professional buyers CLOSE OR (maintain offer for small trade customers and small companies) PAUSE ‒ Pause expansion of Byggmax+ concept for trade customers EXPANSION ‒ Pause expansion of services business
Slide 28: 1. New approach in Finland
1. NEW APPROACH IN FINLAND Strong position with the Finnish customer ─ Challenging retail climate ─ No 1 low price position ─ Potential to improve ─ High brand awareness profitability ─ Award winning advertizing ─ Review of all areas for a new approach in 2018, ─ 2/3 of assortment “made in aimed at
Slide 29: 1. Shift e-commerce to profitable growth
1. SHIFT E-COMMERCE TO PROFITABLE GROWTH ─ Byggmax e-commerce operated at around break-even EBITDA margin (with negative working capital), according to previous plans ─ E-commerce has grown fast, generating negative margin mix effects ─ We have identified potential to improve profitability, and are
Slide 30: 2. Transform Skånska Byggvaror: today
2. TRANSFORM SKÅNSKA BYGGVAROR: TODAY Garden buildings and refined building materials, delivered to customers’ homes Assortment is focused on the home’s exterior and interior, e.g., ‒ Conservatories ‒ Green houses ‒ Doors & windows ‒ Indoor storage Vertically integrated, distance seller (mail order)
Slide 31: Complexity increased also in Skånska Byggvaror
COMPLEXITY INCREASED ALSO IN SKÅNSKA BYGGVAROR ACQUISITIONS 2012 2015 NEW SALES CHANNEL 14 1 2013 2016 2013 2016 Number of stores Share of revenue through stores PRODUCT DEVELOPMENT Product development focus expanded to more 2013 2016 categories and price points Share of revenue from new products 31
Slide 32: Actions taken to improve operational performance
ACTIONS TAKEN TO IMPROVE OPERATIONAL PERFORMANCE Done 2017 Assortment ‒ Rebuilt product teams ‒ Updated assortment strategy ‒ Launched key product development projects Sales & ‒ Increased store cost efficiency marketing model ‒ Increased marketing efficiency ‒ Further shifted towards digital media P
Slide 33: Transforming Skånska Byggvaror into a modern leader in garden living
TRANSFORMING SKÅNSKA BYGGVAROR INTO A MODERN LEADER IN GARDEN LIVING Goal Nordic no 1 in Conservatories and Green houses – with lowest prices Leader in selected additional categories 18-24 month transformation ‒ Strenghts in online sales and home ‒ Assortment delivery will create a winning offer ‒ S
Slide 34: Skånska Byggvaror good fit with Byggmax
SKÅNSKA BYGGVAROR GOOD FIT WITH BYGGMAX ‒ Own design and vertically integrated (higher gross margins) ‒ Selling projects, not products: inspiration, service, technical COMPLE- advice, installation service MENTARY ‒ Clear niche leader STRENGHTS ‒ Omni-channel model based on e-commerce and showrooms ‒
Slide 35: Capturing the opportunity
CAPTURING THE OPPORTUNITY 1. Simplify Byggmax Focused growth ‒ Focus on core business ‒ New approach in Finland ‒ Shift e-commerce to profitable growth 2. Transform SKBV Simple & efficient operating model 3. Capture group synergies 4. Invest in efficiency 35
Slide 36: Capturing the opportunity
CAPTURING THE OPPORTUNITY EBIT margin improve- ment potential (2019) 1. Simplify Byggmax Focused growth ‒ Focus on core business +1%-point ‒ New approach in Finland ‒ Shift e-commerce to profitable growth Identified potential 2. Transform SKBV sufficient to improve Simple & efficient margins and saf
Slide 37: Capturing the opportunity
CAPTURING THE OPPORTUNITY 1. New stores 2. E-commerce Focused growth 3. Assortment development Simple & efficient operating model 37
Slide 38: 1. Increased potential for Byggmax stores
1. INCREASED POTENTIAL FOR BYGGMAX STORES Earlier Updated Stores as of estimated estimated Dec 31, 2016 potential potential Sweden 82 95 110 Norway 33 60 75 Finland 13 25 25 TOTAL 128 180 210 +17% +64% 38
Slide 39: 1. Additional market potential in smaller towns
1. ADDITIONAL MARKET POTENTIAL IN SMALLER TOWNS Municipalities (Sweden) Share of market Byggmax penetration Inhabitants (estimate) today > 100 000 35% High 25 – 100 000 45% Very high < 25 000 20% Low 39
Slide 40: New format to profitably reach smaller towns
NEW FORMAT TO PROFITABLY REACH SMALLER TOWNS Same Byggmax experience, same Byggmax brand Extra cost efficient Byggmax store ‒ Less genereous opening hours ‒ More narrow assortment – core categories intact ‒ Sites can be smaller ‒ Optimized routines and staffing Lowest prices Target good profitabilit
Slide 41: First two test stores open this summer
FIRST TWO TEST STORES OPEN THIS SUMMER Kalix – August 2017 Mariannelund – July 2017 41
Slide 42: Our stores are well positioned for the future
OUR STORES ARE WELL POSITIONED FOR THE FUTURE DIY market in Sweden, Norway, Finland Online share Shipping cost/ (estimate) 2017 (est.) product value Building 2% 25% $$$ materials Online penetration will vary by category, as Tools & 10% $ economics vary 18% machines Bathroom 10% $ Stores will continu
Slide 43: Capturing the opportunity
CAPTURING THE OPPORTUNITY 1. New stores ‒ Increased potential for existing format ‒ New format to reach smaller towns Focused growth 2. E-commerce ‒ Byggmax ‒ Buildor 3. Assortment development Simple & efficient operating model 43
Slide 44: Byggmax early leader in e-commerce
2. BYGGMAX EARLY LEADER IN E-COMMERCE EARLY LAUNCH OF EARLY DESTINATION FOR STRONG MARKET ONLINE SHOPPING INSPIRATION AND TOOLS POSITION TODAY Price and stock 2008 Top-3 levels online Online sales with 2008 2015 Top-3 home delivery Web only 2011 2010 N/a assortment 44
Slide 45: Byggmax uniquely positioned to win
BYGGMAX UNIQUELY POSITIONED TO WIN Leverage ‒ Decentralized logistics and lower freight costs Byggmax stores ‒ Omni channel features, e.g. click & collect ‒ Cross-channel customer acquisition Leverage ‒ Organic and direct traffic (destination) Byggmax brand – ‒ Position of inspirational and digital
Slide 46: Strong synergies with Buildor
STRONG SYNERGIES WITH BUILDOR 1. Synergies in back-end operations ‒ Buying ‒ Site management ‒ Operations & analytics ‒ Tech 2. Best practice execution and sharing ‒ Internal benchmark of online pure-play ‒ Strengths shared across 3. Leverage Buildor’s wider range to identify assortment opportunitie
Slide 47: Delivering fast profitable e-commerce growth
DELIVERING FAST PROFITABLE E-COMMERCE GROWTH Growth Profitability Best customer experience Best practice e-commerce operations − Digital tools, inspiration and instructions − Low OpEx − Strong value proposition − Data-driven execution − Omni-channel features − High degree of automation − Easy to sho
Slide 48: Capturing the opportunity
CAPTURING THE OPPORTUNITY 1. New stores ‒ Increased potential for existing format ‒ New format to reach smaller towns Focused growth 2. E-commerce ‒ Byggmax ‒ Buildor 3. Assortment development Simple & efficient ‒ Upgrade existing assortment operating model ‒ Adress adjacent categories 48
Slide 49: 3. Upgrade existing assortment
3. UPGRADE EXISTING ASSORTMENT New assortment 2017 – examples 49
Slide 50: 3. Address relevant adjacent categories
3. ADDRESS RELEVANT ADJACENT CATEGORIES DIY market in Sweden, Norway, Finland Online share (estimate) today (estimate) Building Current yggmax stronghold 25% 2% materials Tools & 18% 10% machines Bathroom 15% 10% Garden 15% 3% Opportunity based on our strengths Doors & 9% 10% windows Floors 8% 8% El
Slide 51: Garden concept the Byggmax way
GARDEN CONCEPT THE BYGGMAX WAY Drive in = easy to shop Discount = cheapest on all products Focused assortment = ca 700 SKUs 51
Slide 52: Concept based on proven Byggmax store format
CONCEPT BASED ON PROVEN BYGGMAX STORE FORMAT 52
Slide 53: Assortment overview
ASSORTMENT OVERVIEW Soil & fertilizers Plants Seeds & leeks Gears & wheelbarrows Pest & weed control Pots Irrigation & machinery Delimiters & fencing Wooden products 53
Slide 54: First two test stores open this summer
FIRST TWO TEST STORES OPEN THIS SUMMER Borlänge – June 2017 Vellinge – July 2017 54
Slide 55: Capturing the opportunity
CAPTURING THE OPPORTUNITY 1. New stores ‒ Increased potential for existing format ‒ New format to reach smaller towns Focused growth 2. E-commerce ‒ Byggmax ‒ Buildor 3. Assortment development Simple & efficient ‒ Upgrade existing assortment operating model ‒ Adress adjacent categories 55
Slide 56: M&A as a complement, not a strategic priority for growth
M&A AS A COMPLEMENT, NOT A STRATEGIC PRIORITY FOR GROWTH ‒ M&A not a strategic priority ‒ In the light of our growth strategy – complement ‒ Be opportunistic 56
Slide 57: Capturing the opportunity
CAPTURING THE OPPORTUNITY Annual growth target (additive) 1. New stores ‒ Increased potential for existing format 6-8% ‒ New format to reach smaller towns Focused growth 2. E-commerce ‒ Byggmax 2-4% ‒ Buildor ‒ Skånska Byggvaror Simple & efficient 3. Assortment development operating model ‒ Upgrade
Slide 58: Agenda
AGENDA Byggmax Group today Our challenge Updated strategic plan • Our plan • Summary • Execution Financial implications Conclusions and Q&A 58
Slide 59: Byggmax Group – who we are
BYGGMAX GROUP – WHO WE ARE Byggmax Group is a growth focused, hard discount consumer retailer of home improvement, who ‒ Build on the successful and unique low-cost self-service Byggmax format ‒ Operate two additional, complementary concepts focused on lowest price and easiest shopping experience ‒
Slide 60: Our strategic plan
OUR STRATEGIC PLAN Focused growth ‒ Based on our strengths ‒ Achieve scale effects for profitable growth Simple & efficient operating model 60
Slide 61: Updated version of the original Byggmax concept
UPDATED VERSION OF THE ORIGINAL BYGGMAX CONCEPT 61
Slide 62: Agenda
AGENDA Byggmax Group today Our challenge Updated strategic plan • Our plan • Summary • Execution Financial implications Conclusions and Q&A 62
Slide 63: Delivering top-10 initiatives will take +18 months
DELIVERING TOP-10 INITIATIVES WILL TAKE +18 MONTHS ◊ Milestone Prepare/evaluate Implement 2017 2018 Simple & efficient operating model Q2 Q3 Q4 Q1 Q2 Q3 Q4 * Close/pause non-core initiatives ◊ * New approach in Finland ◊ ◊ * Increase e-commerce profitability * Transform Skånska Byggvaror * Capture G
Slide 64: Execution followed up with KPIs and milestones
EXECUTION FOLLOWED UP WITH KPIS AND MILESTONES Top-level KPIs Major milestones ‒ Sales growth from new stores % ‒ 1st evaluation small format: Q3 2017 ‒ LFL % ‒ Full evaluation small format: Q3 2018 Focused growth Target: ‒ Sales growth from e-commerce % ‒ 1st evaluation Garden: Q3 2017 10-15% growt
Slide 65: Agenda
AGENDA Byggmax Group today Our challenge Updated strategic plan • Our plan • Summary • Execution Financial implications Conclusions and Q&A 65
Slide 66: Our financial profile
OUR FINANCIAL PROFILE Steady growth Good margins, but declining Strong cash flow ‒ Total Growth 11.1% CAGR ‒ EBITDA margin 9.0% in 2016 ‒ SEK 487m in cash flow from ‒ Organic Growth 7.7% CAGR operations (2016) ‒ Over SEK 2bn in cash flow 2010-2016 Note:EBITDA earnings are cleared of “extra ordinary
Slide 67: Seasonal business by nature
SEASONAL BUSINESS BY NATURE ‒ About 2/3 of sales are generated during Q2 and Q3 ‒ Variations may occur due to o Weather o Timing of new store openings last 24 months ‒ Rapid sales increase in the spring when the weather improves ‒ July is by far the strongest sales month, driven by building and repa
Slide 68: Implications of our new strategy
IMPLICATIONS OF OUR NEW STRATEGY Step up organic growth Improve and stabilize Continue strong cash to 10-15% EBITDA margin at 9-10% flow generation 68
Slide 69: Timing of financial effects
TIMING OF FINANCIAL EFFECTS ‒ Identified potential for 1%-point EBITDA (and EBIT) margin improvement and organic net sales growth of 10-15% ‒ Ramp up to 10-15% organic growth by 2018 or 2019 o Timing connected to shaping of Byggmax small format and Garden concepts o We will communicate first evaluat
Slide 70: Straightforward plan for use of capital
STRAIGHTFORWARD PLAN FOR USE OF CAPITAL 2010 – 2016 Going forward ‒ Generated SEK 2 billion in cash ‒ Continue strong cash generation ‒ Capital mainly used for ‒ Use capital primarily for o Dividends o Dividends o Acquisitions o Investments in strategic priorities: o Investments in stores new stores
Slide 71: More ambitious financial targets set, in line with new strategy
MORE AMBITIOUS FINANCIAL TARGETS SET, IN LINE WITH NEW STRATEGY Sales EBITDA Dividend CURRENT Net sales to grow 15 percent Maintain an EBITDA margin of Dividend at least 50 percent per year over time, not less than 9 percent of net profit inclusive of acquisitions GOING Organic net sales growth of E
Slide 72: Agenda
AGENDA Byggmax Group today Our challenge Updated strategic plan • Our plan • Summary • Execution Financial implications Conclusions and Q&A 72
Slide 73: Conclusions
CONCLUSIONS We have an attractive position in a good market, unique strengths, and a strong track record of delivering growth However, profitability has decreased over the last two years as focus has shifted away from the core Our new focused strategy builds on our advantages and strengths, and will
Slide 74: Thank you!
THANK YOU! 74
Slide 75: Q&A
Q&A 75