Burberry Group Plc · LSE:BRBY
Burberry — H1 2018 Earnings Presentation
99 slides from Burberry's earnings presentation, November 2017
Slide 1: Interim Results for the Six Months Ended 30 September 2017 and Strategic Update
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017 AND STRATEGIC UPDATE
Slide 2: Agenda
AGENDA INTRODUCTION I N T E R I M R E S U LT S E S TA B L I S H I N G P O S I T I O N F I R M LY I N L U X U R Y OUR FINANCIAL AMBITION CLOSING REMARKS
Slide 3: H1 2018 Financial Highlights
H1 2018 FINANCIAL HIGHLIGHTS REVENUE +4% ADJ. OPERATING PROFIT UNDERLYING +17% UNDERLYING £185m £ 1,263 m £ 1,159 m £144m H1 2017 H1 2018 H1 2017 H1 2018 ADJUSTED DILUTED INTERIM DIVIDEND EPS +32% PER SHARE +5% 32.3p 10.5p 10.5p 11.0p 10.9p 24.4p H1 2017 H1 2018 H12017 H1 2017 H1H1 2018 2018 Reporte
Slide 4: H1 2018 Financial Highlights
H1 2018 FINANCIAL HIGHLIGHTS ---------- Change --------- Six months to 30 September 2017 2016 Reported Underlying £m £m FX Revenue 1,263 1,159 9% 4% Adjusted operating profit 185 144 28% 17% Adjusted operating margin 14.6% 12.5% Operating profit 127 102 24% Adjusted diluted EPS 32.3p 24.4p 32% Dilut
Slide 5: Group Revenue by Channel
G R O U P R E V E N U E + 4 % , R E TA I L + 5 % GROUP REVENUE BY CHANNEL £1,263m UNDERLYING +9% SALES GROWTH EX BEAUTY +3% £63m £1,200m +5% +1% (30%) +5% +4% £1,159m Total H1 2017 Retail Wholesale ex Licensing Beauty Underlying sales Currency Total H1 2018 Beauty
Slide 6: Retail/Wholesale Revenue by Region
R E TA I L / W H O L E S A L E R E V E N U E B Y R E G I O N YOY YOY H1 2017 H1 2018 GROWTH GROWTH REPORTED UNDERLYING £1,254m +9% +4% ASIA PACIFIC £1,146m 1 • Mid-single digit comparable store sales growth • Mid-teens growth in Mainland China £461 m +12% +7% • Hong Kong returned to growth £410 m EM
Slide 7: Retail/Wholesale Revenue by Product
R E TA I L / W H O L E S A L E R E V E N U E B Y P R O D U C T * YOY YOY H1 2017 H1 2018 GROWTH GROWTH REPORTED UNDERLYING £1,254m +9% +4% ACCESSORIES £1,146m 1 • Strength in bags and SLGs £ 467 m +10% +4% WOMENS AND £ 426 m 2 MENS APPAREL • Newness and innovation outperformed 3 • Strength in Car Co
Slide 8: Adjusted Operating Profit
A D J U S T E D O P E R AT I N G P R O F I T U P 1 7 % U N D E R LY I N G A D J U S T E D O P E R AT I N G P R O F I T ( £ M ) +28% £15m +17% £185m £170m £144m H1 2017 Core pre cost Strategic Strategic Underlying Currency H1 2018 savings & cost savings investments investment
Slide 9: Income Statement
I N C O M E S TAT E M E N T ---------- Change --------- 2017 2016 Reported Underlying Six months to 30 September £m £m FX Revenue 1,263 1,159 9% 4% Cost of goods sold (389) (364) Gross profit 874 795 10% Gross margin 69.2% 68.6% +60bps Operating expenses (689) (651) 6% Operating expenses as % sales
Slide 10: Cost Saving Delivery by Major Lever
C O S T S AV I N G D E L I V E RY B Y M A J O R L E V E R SPLIT OF £120M COST SAVINGS BY CATEGORY (%) F Y 2 0 1 7 £ 2 0 M S AV I N G S Operating model & process H 1 2 0 1 8 £ 2 0 M S AV I N G S simplification Other ~45% ~30% Announced in May 2016 Committed to savings of at least £100m Simplification
Slide 11: Income Statement
I N C O M E S TAT E M E N T ---------- Change -------- Six months to 30 September 2017 2016 Reported £m £m FX Underlying Adjusted operating profit 185 144 28% 17% Adjusted operating margin 14.6% 12.5% Adjusting operating items (58) (42) Operating profit 127 102 24% Net finance credit 3 2 Adjusting f
Slide 12: Adjusting Operating Items
A D J U S T I N G O P E R AT I N G I T E M S Six months to 30 September 2017 2016 £m £m - (26) Beauty licence intangible charges (28)* Costs relating to the transfer of Beauty operations - Restructuring costs (33) (13) BME deferred consideration income/(charge) 3 (3) Adjusting Items (58) (42) *Note
Slide 13: Free Cash Flow
FREE CASH FLOW Six months to 30 September 2017 2016 £m £m Adjusted operating profit 185 144 Depreciation and amortisation* 66 69 Employee share scheme costs 9 5 Decrease/(Increase) in inventories 13 (61) Decrease in receivables 1 25 Increase/(Decrease) in payables 3 (11) Other (7) 11 Cash inflow fro
Slide 14: Movement in Net Cash
MOVEMENT IN NET CASH £224m (£53m) (£123m) (£191m) £809m £0 (£12m) £654m Mar 2017 FCF pre capex Capex Dividend Strategic Buyback Other inc Sep 2017 investment currency on cash * Lease adjusted net debt (£0.6bn at 30 September 2017) is defined as five times minimum lease payments, adjusted for charges
Slide 15: FY 2018 Outlook
FY 2018 OUTLOOK RETAIL Focus on existing store productivity, no net contribution from new space S A L E S WHOLESALE H2 underlying expected to decline by a mid-single digit % (H2 2017: £226m) LICENSING +20% underlying including new Beauty licence from H2 ADJUSTED OPERATING PROFIT Marginal upgrade to
Slide 16: Marco Gobbetti, Chief Executive Officer
MARCO GOBBETTI CHIEF EXECUTIVE OFFICER
Slide 17: Burberry: An Extraordinary Journey
B U R B E R RY: AN EXTRAORDINARY JOURNEY ONE OF THE WORLD’S MOST VALUABLE LUXURY BRANDS, UNDER ONE LABEL 2017 EVOLVING TO LUXURY, FROM LICENSE TO RETAIL & DIGITAL 2000s A GLOBAL LICENSE BRAND ROYAL 1960s-1990s WARRANT FOR CLOTHING OUTERWEAR EXPLORERS & 1955 INVENTION OF ADVENTURERS GABARDINE 1900s-1
Slide 18: One of the Most Valuable Luxury Brands in the World
T O D AY, W E A R E O N E O F T H E M O S T VA L U A B L E LUXURY BRANDS IN THE WORLD BRAND VALUE Luxury player 1 Luxury player 2 Luxury player 3 Luxury player 4 Luxury player 5 Source: Interbrand Best Global Brands 2017 Rankings
Slide 19: We Have Strength Across Multiple Categories
W E H AV E S T R E N G T H A C R O S S M U LT I P L E C AT E G O R I E S Source: Burberry
Slide 20: We Have an Extensive, Luxury Distribution Footprint
W E H AV E A N E X T E N S I V E , LUXURY DISTRIBUTION FOOTPRINT Mainline Concessions Outlets AMERICAS 461 102 DIRECTLY Mainline Concessions Outlets OPERATED STORES* EMEIA 147 Mainline Concessions Outlets ASIA PACIFIC 212 * Burberry also has 48 franchise stores Note: Asia Pacific concessions include
Slide 21: We Are the Digital Innovator in the Industry
W E A R E T H E D I G I TA L I N N O VAT O R IN THE INDUSTRY Apple Music streaming launched Instagram launches Twitter launches video service “Buy Now” button Periscope launched 2004 2009 2010 2011 2013 2014 2015 2016 2017 First website Burberry First to live streams Burberry launch Burberry launche
Slide 22: Burberry Occupies a Middle Position in Brand
IN TERMS OF BRAND, BURBERRY OCCUPIES A MIDDLE POSITION High price LUXURY H E R I TA G E FASHI ON LUXURY CONTEMPORARY LUXURY ACCESSIBLE LUXURY Low price Fashion forward Heritage Source: Burberry
Slide 23: We Have Elements of Both Heritage and Fashion
W E H AV E E L E M E N T S O F B O T H H E R I TA G E A N D FA S H I O N … H E R I TA G E FASHION Source: Burberry
Slide 24: Our Offer Is a Combination of Different Price Points
… A N D O U R O F F E R I S A C O M B I N AT I O N OF DIFFERENT PRICE POINTS BASICS PRICED C E R TA I N I T E M S P R I C E D B E L O W L U X U R Y P L AY E R S A L O N G S I D E L U X U R Y P L AY E R S 100 vs. luxury players 100 vs. luxury players at 150-200 at 100-110 Source: Burberry, company we
Slide 25: Recently, Burberry's Growth Has Slowed
R E C E N T LY, B U R B E R R Y ’ S GROWTH HAS SLOWED Revenue CAGR ('13-'16) Luxury player 1 Luxury player 2 Luxury player 3 Luxury player 4 Luxury player 5 Source: Company annual reports
Slide 26: Now Our Sector Is Changing
NOW OUR SECTOR IS CHANGING Luxury Financial Globalisation of luxury brands The "new luxury norm" discovery Crisis Chinese luxury goods boom Slower industry growth Evolving consumer base Digitalisation Revenue Luxury industry growth is expected growth 13% to be 4-5% in the medium-term 12% 11% 10% 8%
Slide 27: Luxury Customers Are Also Changing
LUXURY CUSTOMERS ARE ALSO CHANGING F R O M … T O … TRADITIONAL CASUALISATION, LUXURY FASHION AND FUN EXCLUSIVE CREATIVITY ACROSS PRICE POINTS ALL CATEGORIES LISTENING TO LIVING BRAND STORY BRAND STORIES AND EXPERIENCES BEING PART INDIVIDUAL OF THE ELITE SELF-EXPRESSION STATUS SHARED VALUES BRAND SWI
Slide 28: Today's Consumers Want Fashion and Newness
T O D AY ' S C O N S U M E R S WA N T FASHION AND NEWNESS "People are not easily impressed anymore. Now, even in China, consumers look at their wardrobe and they have everything, so they say: 'Okay, if I get anything new, it must be for a good reason.” - Angelica Cheung1 1. Editor of Vogue, China So
Slide 29: Consumers Polarising Between Luxury and Mass Brands
THEY ARE ALSO POLARISING BETWEEN LUXURY AND MASS BRANDS… F R O M … T O … MID-MARKET BRANDS TODAY’S CONSUMER MIXES FUNCTIONAL DOMINATING IN 1980S OUTFITS FROM MASS BRANDS … … WITH LUXURY HANDBAGS & SHOES Source: Elle, theblondesalad.com
Slide 30: Prices Are Moving Accordingly
… A N D P R I C E S A R E M O V I N G A C C O R D I N G LY Relative average price increase (%) 200 Luxury Over time, luxury players have been able to create a substantial price premium… 100 MASS … while mass-market prices have dropped 0 2005 06 07 08 09 10 11 12 13 14 Source: Euromonitor; Economist
Slide 31: Sharpen Our Brand Positioning
I N T H I S E N V I R O N M E N T, W E M U S T SHARPEN OUR BRAND POSITIONING High price LUXURY H E R I TA G E FASHI ON LUXURY CONTEMPORARY LUXURY ACCESSIBLE LUXURY Low price Fashion forward Heritage Source: Burberry
Slide 32: Our Vision
OUR VISION F I R M LY E S TA B L I S H O U R P O S I T I O N I N L U X U RY FA S H I O N , INSPIRING CUSTOMERS WITH O U R U N I Q U E B R I T I S H AT T I T U D E Source: Burberry
Slide 33: Brand Spirit
BRAND SPIRIT W E A R E C R E AT I V E , I N N O VAT I V E AND OUTWARD LOOKING W E H AV E A H I S T O R Y O F E X P L O R AT I O N A N D A D V E N T U R E W E A R E D I G I TA L P I O N E E R S W E C E L E B R AT E D I V E R S I T Y A N D CHALLENGE RECEIVED WISDOMS WE ARE 161 YEARS OLD, B U T H AV E
Slide 34: The Path to Achieve Our Vision
T H E PAT H T O A C H I E V E O U R V I S I O N R E N E W E V O L V E T H E T R A N S F O R M T H E P R O D U C T C O M M U N I C A T I O N T H E E X P E R I E N C E Source: Burberry
Slide 35: Our Product Strategy
O U R P R O D U C T S T R AT E G Y INCREASE TRANSFORM CONTINUOUS REBALANCE WARDROBE FASHI ON L E AT H E R ENGAGEMENT OUR PRICE THE CUSTOMER CONTENT GOODS ARCHITECTURE Re-invigorate our Signal significant Multiple curated Shift from items to Maintain competitive products with a constant change in des
Slide 36: Judy Collinson, Chief Merchandising Officer
JUDY COLLINSON CHIEF MERCHANDISING OFFICER
Slide 37: A Luxury Fashion Brand
A LUXURY FASHION BRAND A N AT U R A L E V O L U T I O N DESIGN AND MERCHANDISE TO THE NEW LUXURY CLIENT CONSIDER OUR CURRENT CLIENT
Slide 38: The New Luxury Consumer
THE NEW LUXURY CONSUMER CONTINUE TO E X C I T E , C H A L L E N G E , E N T E R TA I N C E L E B R AT E O U R A E S T H E T I C E A C H C O L L E C T I O N W I L L B E FA S H I O N
Slide 39: Our Current Clients
OUR CURRENT CLIENTS REFRESH STRONG BUSINESS DRIVERS A D D N O V E LT Y T O C O R E C AT E G O R I E S R E I N V I G O R AT E B A S I C S ENTICE WITH NEWNESS 28
Slide 40: Product Direction
PRODUCT DIRECTION RTW AS THE PRIMARY SIGNAL OF EVOLUTION C O N T I N U E A N D U P D AT E OUTERWEAR STRENGTH I N C R E A S E I M P O R TA N C E O F R U N W AY D E L I V E R I E S E L E VAT E L E AT H E R G O O D S 28
Slide 41: Transform Leather Goods
TRANSFORM L E AT H E R G O O D S L E AT H E R G O O D S T O RENEW BRAND PERCEPTION A SOLID ARCHITECTURE OF HANDBAGS 29
Slide 42: How Do We Take Leather Goods Market Share
H O W D O W E TA K E L E AT H E R GOODS MARKET SHARE I N D U S T R Y- L E A D I N G D E S I G N T E A M E V O LV E T H E C H A R A C T E R OF THE BURBERRY HANDBAG INCREASE PROMINENCE A N D S PA C E D E D I C AT E D T O L E AT H E R G O O D S I N S T O R E S 30
Slide 43: Fully Wardrobe the Customer
F U L LY WA R D R O B E THE CUSTOMER OUTFIT THE WHOLE CLIENT EMPHASISE CROSS-SELLING D I S P L AY B Y L O O K
Slide 44: Balance Our Price Architecture
BALANCE OUR PRICE ARCHITECTURE COMPETITIVE PRICES C O N V E Y P E R C E P T I B L E VA L U E OFFER A BREADTH OF PRICE POINTS 36
Slide 45: Excite with Customer Converters
EXCITE WITH CUSTOMER CONVERTERS
Slide 46: Continuously Engage Our Customers with Newness
C O N T I N U O U S LY E N G A G E OUR CUSTOMERS WITH NEWNESS KNOWN FOR OUR DIRECT TO CONSUMER APPROACH C O N S TA N T E N G A G E M E N T THROUGH FRESH PRODUCT R E G U L A R , C U R AT E D D E L I V E R I E S EXCITE WITH CAPSULES A N D C O L L A B O R AT I O N S UNCONSTRAINED BY TRADITIONAL CALENDA
Slide 47: Our Evolution Has Begun
OUR EVOLUTION HAS BEGUN V I N TA G E C H E C K TA R TA N T R E N D LAUNCH OF THE GIANT TOTE EXCITEMENT IN KNITS FUTURISTIC RAINWEAR 39
Slide 48: Marco Gobbetti, Chief Executive Officer
MARCO GOBBETTI CHIEF EXECUTIVE OFFICER
Slide 49: The Path to Achieve Our Vision
T H E PAT H T O A C H I E V E O U R V I S I O N R E N E W E V O L V E T H E T R A N S F O R M T H E P R O D U C T C O M M U N I C A T I O N T H E E X P E R I E N C E Source: Burberry
Slide 50: Our Communication Strategy
O U R C O M M U N I C AT I O N S T R AT E G Y PRODUCT CONTENT FOCUS ON FIRST REVOLUTION EXPERIENCES Product at the heart of Reimagine our content, taking Invest in fewer, more meaningful our communications a curated, edited approach experiences including collaborations Source: Burberry
Slide 51: Product First
PRODUCT FIRST Ensure product is at the heart of all our communications Source: Burberry
Slide 52: Content Revolution
CONTENT REVOLUTION Revolutionise our content across touchpoints including taking an editorial approach to inspire our customers Source: Burberry, Instagram
Slide 53: Focus on Experiences
FOCUS ON EXPERIENCES Invest in meaningful experiences and collaborations to help shift the perception of influencers and attract new customers Source: Burberry
Slide 54: We Will Leverage Our Digital Reach
W E W I L L L E V E R A G E O U R D I G I TA L R E A C H T O CONVEY OUR NEW BRAND ENERGY Facebook Instagram Twitter Google plus Line Sina Weibo Kakao Linkedin 50+M 17.3M 10.3M 10.3M 5.3M 4.1M 1.2M 331k 342k FANS GLOBALLY 15 Platforms 11 Languages Facebook YouTube WeChat Pinterest Tumblr Snapchat The
Slide 55: The Path to Achieve Our Vision
T H E PAT H T O A C H I E V E O U R V I S I O N R E N E W E V O L V E T H E T R A N S F O R M T H E P R O D U C T C O M M U N I C A T I O N T H E E X P E R I E N C E Source: Burberry
Slide 56: Our Customer Experience Strategy
O U R C U S T O M E R E X P E R I E N C E S T R AT E G Y M A I N L I N E D I G I T A L W H O L E S A L E O U T L E T S
Slide 57: Focus on the Stores That Drive Brand Perception
MAINLINE F I R S T, W E W I L L F O C U S O N T H E S T O R E S T H AT D R I V E B R A N D P E R C E P T I O N Priority for 17/18 Priority for next 2 years Beijing Seoul Chicago London Osaka Paris San Francisco Tokyo Los Angeles Milan New York Shanghai Hong Kong Dubai Miami Singapore Source: Burberr
Slide 58: Upgrading Them with a Refreshed Store Concept
MAINLINE … UPGRADING THEM WITH A REFRESHED STORE CONCEPT We have also planned to refurbish the majority of our direct stores network in the medium-term Source: Burberry
Slide 59: Transform Our In-Store Experience
MAINLINE WE WILL CONTINUE OUR JOURNEY TO TRANSFORM OUR IN-STORE EXPERIENCE Accelerate existing initiatives … … and add new initiatives to reinforce our luxury fashion positioning PEOPLE • Elevated recruitment standards • Re-defined role descriptions • Re-defined store manager and associate hiring cr
Slide 60: These Efforts Will Improve Our Retail Productivity
MAINLINE THESE EFFORTS WILL IMPROVE O U R R E TA I L P R O D U C T I V I T Y SALES DENSITY £ per sq metre Burberry Burberry Luxury Leather Goods FY 2017 Opportunity average 2017 NOTE: NOT TO SCALE Source: Burberry
Slide 61: In Digital, We Will Continue to Lead Innovation and Drive Growth
D I G I TA L I N D I G I TA L , W E W I L L C O N T I N U E T O L E A D I N N O VAT I O N A N D D R I V E G R O W T H C U R AT I O N CONTENT P E R S O N A L I S AT I O N OMNICHANNEL 3 RD PA R T I E S Source: Burberry
Slide 62: Burberry.com Will Be the Ultimate Content and Shopping Destination
D I G I TA L B U R B E R R Y. C O M W I L L B E T H E U LT I M AT E C O N T E N T A N D S H O P P I N G D E S T I N AT I O N POWERFUL BRAND PRODUCT VIEWS C U R AT I O N STORYTELLING E L E VAT I O N We will bring the digital shopping experience to life, expressing the brand POV through an editorialis
Slide 63: We Will Innovate in Personalisation
D I G I TA L W E W I L L I N N O VAT E I N P E R S O N A L I S AT I O N STORIES RECOMMENDED RESERVED FOR YOU FOR YOU FOR YOU We will engage our customer through customised, relevant and dynamic customer journeys, underpinned by our data and analytics capability Source: Burberry
Slide 64: A Seamless Omnichannel Experience
D I G I TA L WE WILL OFFER A SEAMLESS OMNICHANNEL EXPERIENCE ONLINE FLEXIBLE CONVENIENT/SLOTTED APPOINTMENT PAY M E N T DELIVERY BOOKING ? We will bring a moment of luxury to the buyer's doorstep, supported by seamless, flexible transaction Source: Burberry
Slide 65: We Will Strengthen Our Digital Partnerships
D I G I TA L WE WILL STRENGTHEN O U R D I G I TA L PA R T N E R S H I P S SALES T O D AY NEXT 5 YEARS LEVERAGE IMPROVE GROWTH OF BRAND M A J O R 3 rd CONSISTENCY PARTY PLAYERS Source: Burberry
Slide 66: Grow Our Business with Image-Driving Wholesale Doors
WHOLESALE WE WILL GROW OUR BUSINESS WITH IMAGE-DRIVING WHOLESALE DOORS… Source: Burberry
Slide 67: Upgrade and Reduce Exposure to Non-Luxury Accounts
WHOLESALE … UPGRADE AND REDUCE OUR EXPOSURE TO NON-LUXURY ACCOUNTS US LUXURY VS. NON-LUXURY WHOLESALE (SHARE OF WHOLESALE DOORS) 2017/18 2022/23 To strengthen the brand experience and ensure consistency, we will: - Upgrade some doors to drive image - Reduce exposure where necessary to reflect the ne
Slide 68: Right-Size Our Network in Line with Our Positioning
WHOLESALE WE WILL RIGHT-SIZE OUR NETWORK, IN LINE WITH OUR POSITIONING Outlet vs. mainline stores proportion Outlet Mainline Hermès Louis Vuitton Chanel Dior Prada Gucci Hugo Boss Michael Kors Coach Luxury players Accessible luxury Source: Burberry
Slide 69: Build a Luxury Network in Line with Our Brand
A S A R E S U LT, W E W I L L B U I L D A L U X U R Y NETWORK IN LINE WITH OUR BRAND T O TA L G R O U P S A L E S B Y C H A N N E L ( %) Non-luxury Luxury Source: Burberry
Slide 70: Recap: The Path to Achieve Our Vision
R E C A P : T H E PAT H T O A C H I E V E O U R V I S I O N R E N E W E V O L V E T H E T R A N S F O R M T H E P R O D U C T C O M M U N I C A T I O N T H E E X P E R I E N C E Source: Burberry
Slide 71: A Two-Phased Transformation Journey
THIS WILL BE A TWO-PHASED T R A N S F O R M AT I O N J O U R N E Y BUILD THE FOUNDATION ACCELERATE AND GROW • Commence programme to re-energise the brand and establish our position in luxury, building on our productivity and • Complete full brand transformation, efficiency agenda with a new creative
Slide 72: Exercise Financial Discipline During the Transitionary Years
WE WILL EXERCISE FINANCIAL DISCIPLINE, E S P E C I A L LY D U R I N G T H E T R A N S I T I O N A R Y Y E A R S COST Tight control of underlying costs S AV I N G S Drive cost savings, simplification and efficiency CAPEX Clear priorities and expectation of return PROFITS Broadly stable operating prof
Slide 73: Julie Brown, Chief Operating & Financial Officer
JULIE BROWN C H I E F O P E R AT I N G & F I N A N C I A L O F F I C E R
Slide 74: Our Financial Plan
FINANCIAL AMBITION: GUIDANCE OUR FINANCIAL PLAN* (AT CONSTANT EXCHANGE RATES) FY 2019 & 2020 AMBITION • Sales broadly stable year-on-year R E V E N U E • High-single digit top-line growth • Rationalise non-luxury distribution • Adjusted operating margin broadly stable YoY, even during O P E R A T I
Slide 75: Our Framework for Value Creation
FINANCIAL AMBITION: OVERVIEW O U R F R A M E W O R K F O R VA L U E C R E AT I O N V A L U E C R E A T I O N R E V E N U E O P E R A T I N G C A P I T A L G R O W T H M A R G I N E F F I C I E N C Y
Slide 76: Revenue Growth
FINANCIAL AMBITION: REVENUE GROWTH REVENUE GROWTH R E N E W E V O L V E T H E T R A N S F O R M T H E P R O D U C T C O M M U N I C A T I O N T H E E X P E R I E N C E
Slide 77: Group Operating Margin Potential
F I N A N C I A L A M B I T I O N : O P E R AT I N G M A R G I N GROUP OPERATING MARGIN POTENTIAL ~26% 17% ~14% Luxury apparel companies Burberry FY 2017 Luxury leather goods companies Source: Burberry, Company data at last financial year end.
Slide 78: Adjusted EPS Growth Ahead of Revenue Growth
F I N A N C I A L A M B I T I O N : O P E R AT I N G M A R G I N ADJUSTED EPS GROWTH AHEAD OF REVENUE GROWTH C O S T S A V I N G S O P E R A T I N G L E V E R A G E • Operating cost savings support profitability • Focused resource re-allocation from back to front office • Leverage the fixed and semi
Slide 79: Cost Savings by Major Lever
F I N A N C I A L A M B I T I O N : O P E R AT I N G M A R G I N COST SAVINGS BY MAJOR LEVER OPERATING BURBERRY INFORMATION INVENTORY PROCUREMENT PROCESS MODEL BUSINESS AND MANAGEMENT SAVINGS SIMPLIFICATION SIMPLIFICATION SERVICES TECHNOLOGY EFFICIENCIES Opened October 2017 FY 2017 FY 2018 FY 2019 F
Slide 80: Our Framework for Value Creation
F I N A N C I A L A M B I T I O N : C A P I TA L E F F I C I E N C Y OUR FRAMEWORK FOR VALUE CREATION V A L U E C R E A T I O N R E V E N U E O P E R A T I N G C A P I T A L G R O W T H M A R G I N E F F I C I E N C Y
Slide 81: History of Strong Cash Conversion
F I N A N C I A L A M B I T I O N : C A P I TA L E F F I C I E N C Y HISTORY OF STRONG CASH CONVERSION Free cash conversion* 129% 91% 88% 81% 84% Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 *Free cash conversion is defined as free cash flow pre tax/ adjusted profit before tax *Free cash flow is defined as ne
Slide 82: Capex Investment into Stores
F I N A N C I A L A M B I T I O N : C A P I TA L E F F I C I E N C Y CAPEX INVESTMENT INTO STORES Retail capex analysis (£m) TOTAL CAPEX (£M) Historical average* FY 2019 & 2020 Medium term £150m £150m-£160m £190m-£210m New store investment reduces as focus on 1 driving existing store productivity 2
Slide 83: Capital Allocation Framework
F I N A N C I A L A M B I T I O N : C A P I TA L E F F I C I E N C Y CAPITAL ALLOCATION FRAMEWORK PROGRESSIVE RETURN REINVEST FOR S T R AT E G I C DIVIDEND EXCESS TO ORGANIC GROWTH INVESTMENTS POLICY SHAREHOLDERS M A I N TA I N S T R O N G B A L A N C E S H E E T W I T H S O L I D INVESTMENT GRADE C
Slide 84: >£1bn Returned to Shareholders Over the Past Five Years
F I N A N C I A L A M B I T I O N : C A P I TA L E F F I C I E N C Y >£1BN RETURNED TO SHAREHOLDERS OVER THE PAST FIVE YEARS Movement in net cash £2.5bn (£0.8bn) (£0.8bn) (£0.2bn) (£0.3bn) (£0.1bn) £0.7bn £0.3bn Reinvest for Progressive Strategic organic growth dividend policy investments Return exc
Slide 85: Delivering Sustainable Long-Term Value
FINANCIAL AMBITION: OVERVIEW DELIVERING SUSTAINABLE LONG-TERM VALUE C A S H SIGNIFICANT CASH GENERATION OVER THE PLAN PROGRESSIVE POLICY WITH THE DIVIDEND D I V I D E N D AT LEAST IN LINE WITH THE PRIOR YEAR R O I C ROIC SIGNIFICANTLY AHEAD OF WACC
Slide 86: Marco Gobbetti, Chief Executive Officer
MARCO GOBBETTI CHIEF EXECUTIVE OFFICER
Slide 87: Our Strategy
OUR STRATEGY Firmly establish our position in luxury fashion, inspiring customers with our unique British attitude REVENUE DRIVERS TO REIGNITE THE BRAND STRATEGY ENABLERS OPERATIONAL INSPIRED PRODUCT COMMUNICATION DISTRIBUTION DIGITAL EXCELLENCE PEOPLE Source: Burberry
Slide 88: This Strategy Will Be Underpinned by Our People
THIS STRATEGY WILL BE UNDERPINNED BY OUR PEOPLE … ENGAGEMENT C A PA B I L I T I E S LEADERSHIP W AY S O F W O R K I N G C U LT U R E RESPONSIBILITY
Slide 89: And Led by an Exceptional Team
… AND LED BY AN EXCEPTIONAL TEAM Team has a balance of in-depth experience from Burberry, the luxury industry and FTSE100/multinational companies OPERATIONAL INSPIRED PRODUCT COMMUNICATION DIGITAL DISTRIBUTION EXCELLENCE PEOPLE Leading Leadership with substantial experience Deep regional Significant
Slide 90: What We Will Achieve
WHAT WE WILL ACHIEVE One of the world’s most valuable and desirable luxury brands OPERATIONAL INSPIRED PRODUCT COMMUNICATION DISTRIBUTION DIGITAL EXCELLENCE PEOPLE A luxury fashion An inspiration for A luxury network Unrivalled in digital An agile company A highly engaged house luxury consumers inno
Slide 91: Appendix
APPENDIX
Slide 92: Disclaimer
DISCLAIMER The financial information contained in this presentation is unaudited. 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 d
Slide 93: Alternative Performance Measures
A LT E R N AT I V E P E R F O R M A N C E M E A S U R E S All metrics and commentary in this presentation are at reported FX and exclude adjusting items unless stated otherwise. The definition of adjusting items is included in note 4 of the Condensed Consolidated Interim Financial Statements. H1 201
Slide 94: Foreign Exchange Rates
F O R E I G N E X C H A N G E R AT E S Forecast effective rates for FY 2018 ---------- Actual Average exchange rates ------- 31 October 30 June H1 2018 H1 2017 FY 2017 £1= 2017 2017 Euro 1.14 1.15 1.14 1.22 1.19 US Dollar 1.31 1.30 1.29 1.37 1.30 Chinese Yuan Renminbi 8.77 8.80 8.75 9.08 8.73 Hong K
Slide 95: Operating Profit by Segment
O P E R AT I N G P R O F I T B Y S E G M E N T Six months to 30 September Retail/wholesale Licensing Group £ million 2017 2016 2017 2016 2017 2016 Revenue 1,254 1,146 9 13 1,263 1,159 Cost of sales (389) (364) - - (389) (364) Gross profit 865 782 9 13 874 795 Gross margin (%) 69.0% 68.3% 100% 100% 6
Slide 96: Reported Financial Measures
REPORTED FINANCIAL MEASURES Adj. operating profit +17% underlying Reported operating profit +24% £185m £127m £144m £102m H1 2017 H1 2018 H1 2017 H1 2018 Adjusted diluted EPS +32% Diluted EPS +32% 21.4p 32.3p 24.4p 16.2p H1 2017 H1 2018 H1 2017 H1 2018
Slide 97: IR Contacts
I R C O N TA C T S Horseferry House Charlotte Cowley Horseferry Road VP, Investor Relations London charlotte.cowley@burberry.com SW1P 2AW Annabel Gleeson Tel: +44 (0)20 3367 3524 Senior Investor Relations Manager investor.relations@burberry.com annabel.gleeson@burberry.com www.burberryplc.com Bryony
Slide 98: Burberry
BURBERRY
Slide 99: Slide 99