Best Buy Co., Inc. · NYSE:BBY
Best Buy — H1 2012-13 Earnings Presentation
39 slides from Best Buy's earnings presentation, Nov 14, 2012
Slide 1: Interim Results Six months ended 30 September 2012
Interim Results Six months ended 30 September 2012 14 November 2012
Slide 2: Agenda
Agenda Overview Sir Charles Dunstone, Chairman Interim Results 2012-13 Roger Taylor, Chief Executive Officer Financial Update H1 2012-13 Nigel Langstaff, Chief Financial Officer Outlook Roger Taylor, Chief Executive Officer
Slide 3: Overview
Overview Sir Charles Dunstone, Chairman
Slide 4: Interim Results 2012-13
Interim Results 2012-13 Roger Taylor, Chief Executive Officer
Slide 5: Group structure
Group structure CPW Europe 50% Virgin Mobile France 46% Property, cash, loans receivable Global Connect • 2,393 stores across 8 European countries • 457 Wireless World stores • Online channels • Largest MVNO in France • 1.9m subscribers • 75% of base is postpay • Four freehold properties in UK value
Slide 6: Strong H1 with encouraging trends, reiterating full year guidance
Interim Results 2012-13 Strong H1 with encouraging trends, reiterating full year guidance CPW Europe • H1 LFL revenue up 1.6% (Q2 Group LFL up 5.0%, Q2 UK LFL up 10%) • Headline EBIT of £12.5m (2011: £20.0m) slightly ahead of guidance, year-on-year affected by weak prepay market as previously highli
Slide 7: 2012 Plan
2012 Plan… • Prioritising smartphones • Smart deals • Manufacturer relationships • Direct product supply • Exclusives • Customer experience • Grow market share & relevance • Store transformation programme • Network terms • Corporate restructuring • Developing European opportunities • ARPU pressure/H
Slide 8: CPW Europe: Key drivers
CPW Europe: Key drivers PRODUCT IN-STORE CAPABILITY HEALTH OF NETWORKS
Slide 9: Stimulating Postpay Market
Stimulating Postpay Market Product pipeline continues to excite customers • Iconic launches • New handsets = higher ARPU • Networks citing c.75% of postpay base are smartphone owners Samsung Galaxy SIII Apple iPhone 5 Samsung Galaxy Note II Nokia 820 Windows Phone 8S HTC
Slide 10: Postpay – 'Smart Deals'
Postpay – ‘Smart Deals’ • Market share gains through weekly ‘Smart Deals’ • ‘Traditionals’ buying smartphones for the first time: converting non-existent prepay sales into low-end postpay • LTV 2X prepay
Slide 11: Prepay line-up improving
Prepay line-up improving Good reason to be optimistic Samsung Galaxy Ace 2 £89.95 Blackberry 9320 £99.95 • Product pipeline provides reason to be optimistic following very weak prepay market • Broader range of sub-£100 smartphones • Weekly promotions through to Christmas Nokia 610 £99.95 Samsung Gal
Slide 12: Tablets – best value on the high street this Christmas
Tablets – best value on the high street this Christmas • Key non-cellular opportunity • Improved quality & focused range • Compelling offers for Christmas £359 £269
Slide 13: More focused Christmas line-up
More focused Christmas line-up • Wide range of exciting prepay/postpay handsets and tablets • Destination for connected bundles • Christmas gifts – exclusives, accessories, app-cessories, free gifts Apptoyz appblaster Scosche myTrek wireless pulse monitor Elgato Eye TV for iPad Piano Apprentice Keyb
Slide 14: Store transformation programme
Store transformation programme • Align all stores across the estate with our smartphone strategy • c.280 Wireless World stores in UK by Christmas • Key elements of Wireless World in remaining 500 traditional stores by Christmas with capital light format • Harnessing the Connected World with the smar
Slide 15: Carphone Warehouse - No.1 for NPS
Carphone Warehouse - No.1 for NPS • For the first time ever CPW holds top position for NPS in the industry • Significant market share gains Q: How likely would a consumer recommend retailer/retailers to friends or colleagues? Answers on a scale of 0 to 10, where 0=“Not at all likely”, 5=neutral and
Slide 16: Industry dynamics
Industry dynamics Gross margin impact of lower tariffs on high-end smartphones iPhone ARPU (pre-iPhone 5 launch) iPhone COGS Jan Feb Mar Apr May Jun Jul Aug However • Recent iconic launches driving improved ARPU trends • Price inflation • 2% to 5% price inflation by networks to compensate for cost i
Slide 17: 5G
5G Preparations are already under way to launch the next generation 5G service…. 4G/LTE Opportunity • Superior network service • “Data centric” tariffs = higher ARPU (4G EE 500MB £36; 1GB £41; 3GB £46; 5GB £51; 8GB £56) • Stimulating replacement cycle Oct 2012 EE 4G network launched 1,800MHz band EE
Slide 18: Corporate restructuring for CPW Europe JV
Before After Exec Group UK Group Operations Corporate restructuring for CPW Europe JV • Autonomous structure • Appropriate cost base • ‘Focus on core’ heritage Rest of Europe Global Connect £20m - £25m cost savings Global Connect Exec Group UK & Ireland Rest of Europe Global Connect (China) Global C
Slide 19: Mainland Europe
Mainland Europe • Partnership growth strategy • Trials continue • Key principles being discussed • Spanish market back to subsidisation • German business developing • Growth in dealer business • Netherlands – very positive LFL • France challenging, but taking action Working on scale in Europe
Slide 20: Global Connect – China potential
Global Connect – China potential • Trials showing encouraging signs • Encouraging customer experience • Good attachment rates • 12 SWAS stores • Considering SAS stores However • Long-term play, in need of scale INNOVATIO
Slide 21: Virgin Mobile France
Virgin Mobile France Roger Taylor, Chief Executive Officer
Slide 22: Virgin Mobile France: Continued momentum despite tough backdrop
Virgin Mobile France Continued momentum despite tough backdrop • Intense competition in H1 • Good revenue growth • Continued postpay progress French market fully bundled tariffs (EUR) Postpay as % of total base and postpay base (‘000s) Revenue growth EUR(m) 0 50 100 150 200 250 300 H1 FY10 H1 FY11 H
Slide 23: Virgin Mobile France – Delivering profits and cash
Virgin Mobile France – Delivering profits and cash On track to hit 50% of customers on Full MVNO by March 2013 Full MVNO • c.300,000 on the base • Flexibility, cost, value Quad-play • Modest investment in H1 Cost management • Own branded franchise stores • Lean management structure • Outsourcing/Off
Slide 24: Financial Update H1 2012-13
Financial Update H1 2012-13 Nigel Langstaff, Chief Financial Officer
Slide 25: CPW Europe
: CARPHONE WAREHOUSE ? GROUP PLC CPW Europe a [nobite} EEE EEE
Slide 26: CPW Europe Headline earnings H1 2012-13
CPW Europe Headline earnings H1 2012-13 • Earnings slightly ahead of expectations • 1.6% LFL, and significant growth in dealer revenues • GM% down 180bp on core business, reflecting lower GM% on high-end smartphones CPW Europe earnings £'m 2012-13 2011-12 YoY Revenue 1,660 1,538 8% Gross margin 418
Slide 27: CPW Europe cash flow H1 2012-13
CPW Europe cash flow H1 2012-13 • Improved working capital performance • Working capital inflow for full-year 2012-13 > £100m • Expected cash costs of Best Buy UK closure CPW Europe cash flow £'m 2012-13 2011-12 EBITDA 53 63 Working capital (91) (135) Capex (37) (44) OFCF (75) (116) Best Buy UK clos
Slide 28: CPW Europe - H1 performance in line with guidance
CPW Europe - H1 performance in line with guidance Performance drivers Effect in H1 q Prepay subsidies Negative impact of c.£10m q ARPU / GM Continuing effect in H1 as in H2 FY12 p Network terms Offsetting ARPU / GM pressure p Wireless World Proposition delivering incremental postpay -18% -6% Q1 Q2 C
Slide 29: CPW Europe - update on full year guidance
CPW Europe - update on full year guidance H2 guidance Update Connections YoY Flat to up 10% As June LFL Up single digit As June Full year guidance Update EBIT YoY £130m-£150m As June Interest / tax Net flat As June Operating cash flow W- cap inflow > £100m As June 2012-13 restructuring costs - cash
Slide 30: Virgin Mobile France
: CARPHONE WAREHOUSE ? GROUP PLC Virgin Mobile France a [nobite} EEE EEE
Slide 31: Virgin Mobile France Headline earnings H1 2012-13
Virgin Mobile France Headline earnings H1 2012-13 • Revenue growth at constant currency 9% • Pressure on outbound ARPUs offset by inbound revenue • Migration to Full MVNO provides opportunities for revenue enhancement and cost reduction Virgin Mobile France earnings £'m 2012-13 2011-12 YoY Revenue 1
Slide 32: Virgin Mobile France cash flow H1 2012-13
Virgin Mobile France cash flow H1 2012-13 • Further cash generation, despite Full MVNO capex deferred from last year Virgin Mobile France cash flow £'m 2012-13 2011-12 YoY EBITDA 11 10 Working capital 9 7 Capex (12) (6) OFCF 8 11 -28% Other (2) 0 Net cash flow 6 11 Closing debt (34) (52)
Slide 33: Virgin Mobile France update on full year guidance
Virgin Mobile France update on full year guidance Virgin Mobile France June guidance H1 actuals Comments Revenue Up 5-10% Up 9% Higher impact of termination revenues in H1 Net adds Postpay 50,000 to 100,000 Up 80,000 Primary focus on postpay Overall Flat Down 39,000 EBIT Broadly flat in €'m Up c.€3m
Slide 34: Group
: CARPHONE WAREHOUSE ? GROUP PLC Group
Slide 35: Group Headline EPS H1 2012-13
Group Headline EPS H1 2012-13 • Group earnings reflect consultancy income from Best Buy Mobile Group EPS £'m 2012-13 2011-12 YoY Revenue 5 3 Opex (3) (3) CPW Europe 3 3 Virgin Mobile France 2 2 Net interest and tax - 1 Profit after tax 7 6 25% EPS Basic 1.6p 1.3p 20% Diluted 1.5p 1.2p 26%
Slide 36: Group cash flow H1 2012-13
Group cash flow H1 2012-13 • Distributions of £48m, offset by settlement of receivables • Interim dividend maintained at 1.75p Group funds £'m 2012-13 2011-12 YoY Net funds b/f 103 121 VMF loan repayments 2 7 Distributions / own shares (48) (30) Other 24 (1) Net funds c/f 81 97 VMF loans receivable
Slide 37: Outlook
Outlook Roger Taylor, Chief Executive Officer
Slide 38: 'Core' business still at the heart of an exciting market
‘Core’ business still at the heart of an exciting market Mobile market dominated by smartphones • c.500m smartphones sold globally last year (2010: c.300m) • 50%-60% of Europe’s population yet to experience a smartphone Consumer behaviour is also changing • Mobile accounts for 10% of all web traffic
Slide 39: Q&A
: CARPHONE WAREHOUSE ? GROUP PLC Q&A