Dr. Martens Plc · LSE:DOCS
Dr. Martens — H1 FY22 Earnings Presentation
46 slides from Dr. Martens's earnings presentation, Dec 9, 2021
Slide 1: First Half Results FY22
FIRST HALF RESULTS FY22 9TH DECEMBER 2021
Slide 2: Agenda
AGENDA Introduction – Kenny Wilson, CEO Financials – Jon Mortimore, CFO First half review – Kenny Wilson, CEO 2
Slide 3: Strong first half delivering against DOCS strategy
STRONG FIRST HALF DELIVERING REVENUE UP 24% SUCCESSFUL AGAINST DOCS DRIVEN BY STRONG CONVERSION OF ITALY STRATEGY DTC PERFORMANCE AND IBERIA CONFIDENT IN ACHIEVING MARKET EXPECTATIONS 3 5
Slide 4: Continued long-term mindset
CONTINUED LONG-TERM MINDSET 4
Slide 5: DOCS strategy delivering results
DOCS STRATEGY DELIVERING RESULTS OUR PURPOSE IS TO EMPOWER REBELLIOUS SELF-EXPRESSION OUR RESPONSIBILITY IS TO ACT AS BRAND CUSTODIANS, ALWAYS FOCUSING ON LONG-TERM VALUE THIS IS WHERE DR. MARTENS IS HEADING. THIS IS WHAT WE’RE WORKING TOWARDS TOGETHER D O C S DTC OPERATIONAL CONSUMER SUSTAINABLE AC
Slide 6: Agenda
AGENDA Introduction – Kenny Wilson, CEO Financials – Jon Mortimore, CFO First half review – Kenny Wilson, CEO 6
Slide 7: Financial overview: first half FY22
FINANCIAL OVERVIEW: FIRST HALF FY22 Group revenue up Gross margin up Adj. Operating Confident in 24% CC 2.8pts to 61.3% Cash flow £53.7m achieving market expectations DTC Revenue mix Supply chain Payment of up 6pts to 40% disruption delayed inaugural dividend Medium-term c.£20m revenue of 1.22p, 25%
Slide 8: Good progress in first half
GOOD PROGRESS IN FIRST HALF % change Constant vs LY-1 • Volume-led growth (£m) H1 FY22 H1 FY21 Actual Currency Actual • Gross margin expansion due Pairs (m) 6.3 5.6 13% 13% 32% to increased DTC mix Revenue 369.9 318.2 16% 24% 38% • EBITDA up 17% CC Gross Margin 226.6 186.3 22% 31% 46% OPEX (137.8) (
Slide 9: Improving DTC mix
IMPROVING DTC MIX • Good growth in ecommerce, % change doubled on a two year basis Constant vs LY-1 (£m) H1 FY22 H1 FY21 Actual • Strengthening retail recovery Currency Actual as we progressed through the Ecommerce 82.6 75.3 10% 16% 117% half Retail 65.9 34.3 92% 101% 2% • Wholesale performance most
Slide 10: Full year EBITDA margin expectations unchanged
FULL YEAR EBITDA MARGIN EXPECTATIONS UNCHANGED EBITDA Margin Bridge + 2.8pts (1.7pts) (2.9pts) 27.1% (1.3pts) • H2 trading pattern typically 24.8% DTC mix Continues 24.0% results in stronger margins expected to into H2 Significantly H1 specific strengthen less in H2 due to higher DTC mix into H2 • P
Slide 11: Improving quarterly performance
IMPROVING QUARTERLY PERFORMANCE Revenue % change vs. LY-1 • Group performance strengthened through the half 155% • Ecommerce growth remains very strong 94% • Retail grew in Q2 as stores reopened and traffic began to recover 43% 44% 31% 23% 19% • Wholesale growth improved -6% 8% despite impact from s
Slide 12: Revenue driven by volume and increased DTC
REVENUE DRIVEN BY VOLUME AND INCREASED DTC • Volume the main driver of revenue growth £m 369.9 • DTC mix up 6pts to 40% in line with strategy • Full Price Mix: in FY21, 318.2 working with wholesale partners, we agreed not to Wholesale ship certain seasonal product 57% due to covid impacts. This resu
Slide 13: Gross margin driven by DTC mix increase
GROSS MARGIN DRIVEN BY DTC MIX INCREASE • Gross Margin up 2.8pts driven by DTC mix increase 1.3% 2.5% 0.0% 61.3% • Incremental freight costs (0.6%) (0.4%) and inflation mitigated by supply chain savings 58.5% • Positive full price mix- previously described 13
Slide 14: Mitigating global supply chain disruption
MITIGATING GLOBAL SUPPLY CHAIN DISRUPTION Entered the year with planned higher continuity product inventory levels as we maintained orders through the pandemic in FY21 Long-term supplier relationships and geographic spread reduced overall impact Unique nature of welted production methods and co-inve
Slide 15: 85% of revenue from Americas and EMEA
85% OF REVENUE FROM AMERICAS AND EMEA +57% CC +4% CC +12% CC • Americas the primary driver 44.9 (1.2) of revenue growth in H1 £m 8.0 APAC 15% mix 54.8 • EMEA growth impacted by APAC timing of re-opening of 56.0 retail; remains the biggest Americas 147.5 40% mix region Americas 102.6 • Smaller APAC r
Slide 16: EMEA performance driven by stores re-opening
EMEA PERFORMANCE DRIVEN BY STORES RE-OPENING % change Constant • Good ecommerce (£m) H1 FY22 H1 FY21 Actual performance Currency Revenue 167.6 159.6 5% 12% • UK stores re-opened through April; continental Europe in EBITDA 55.2 53.8 3% 15% May and June EBITDA Margin 32.9% 33.7% (0.8pts) +0.7pts • Con
Slide 17: Americas performance very strong
AMERICAS PERFORMANCE VERY STRONG % change • Very strong performance Constant across all channels (£m) H1 FY22 H1 FY21 Actual Currency Revenue 147.5 102.6 44% 57% • Retail stores open throughout the period and trading well EBITDA 40.0 28.9 38% 67% • Wholesale impacted by EBITDA Margin 27.1% 28.2% (1.
Slide 18: APAC performance impacted by Covid
APAC PERFORMANCE IMPACTED BY COVID % change Constant • Japan remains our largest (£m) H1 FY22 H1 FY21 Actual market with continued covid Currency restrictions impacting Revenue 54.8 56.0 (2%) 4% performance EBITDA 10.7 13.5 (21%) (20%) • Australia and China also EBITDA Margin 19.5% 24.1% (4.6pts) (6
Slide 19: Adjusted earnings per share up 45%
ADJUSTED EARNINGS PER SHARE UP 45% % change Constant • PBT up 46% (£m) H1 FY22 H1 FY21 Actual Currency • Adjusted PBT up 37% EBITDA3 88.8 86.3 3% 17% Depreciation & amortisation1 (18.0) (18.4) 2% • Tax expense 20.7% FX gains/ (losses) (2.1) (0.1) n/a Finance expense – Prefs - (17.2) n/a • Payment of
Slide 20: Good operating cash generation
GOOD OPERATING CASH GENERATION (£m) H1 FY22 H1 FY21 • Partnership approach to supplier relationships EBITDA1 88.8 86.3 Change in working capital (38.6) (8.9) • In FY21, in exchange for not Share-based payments 1.8 - cancelling orders, payment terms were temporarily Capex (10.1) (8.2) extended by 30
Slide 21: Cash flow bridge
CASH FLOW BRIDGE • Working capital outflow due to investment in inventory • Exceptional items relate to IPO charges booked in FY21 £m £M • Expected cash swing did not materialise due to timing of inbound inventory. Guidance of typical c.£100m cash swing Wholesale in H1 going forwards remains 57% unc
Slide 22: Outlook
OUTLOOK CURRENT TRADING FY22 FY23 ONWARDS Retail momentum Confident in achieving Overall guidance given at continuing to strengthen market expectations IPO remains unchanged Ecommerce positive, in Technical guidance on EMEA and Americas line with H1 page 42 AW22 price increase to broadly offset COGS
Slide 23: Agenda
AGENDA Introduction – Kenny Wilson, CEO Financials – Jon Mortimore, CFO First half review – Kenny Wilson, CEO 23
Slide 24: First half review
FIRST HALF REVIEW DTC first approach Product strategy of Focused DOCS underpinned by “Icons and strategy delivering quality wholesale Innovation” building results driving margin brand equity expansion 24
Slide 25: DOCS strategy: focus areas
DOCS STRATEGY DELIVERING RESULTS OUR PURPOSE IS TO EMPOWER REBELLIOUS SELF-EXPRESSION GOALS OUR RESPONSIBILITY IS TO ACT AS BRAND CUSTODIANS, ALWAYS FOCUSING ON LONG-TERM VALUE THIS IS WHERE DR. MARTENS IS HEADING. THIS IS WHAT WE’RE WORKING TOWARDS TOGETHER D O C S DTC OPERATIONAL CONSUMER SUSTAINA
Slide 26: Right team to drive the strategy
RIGHT TEAM TO DRIVE THE STRATEGY Kenny Wilson Jon Mortimore Emily Reichwald Geert Peeters Adam Meek CEO CFO General Counsel C00 CPO 2018 2016 2015 2018 2021 Ronald Garricks Sue Gannon Erik Zambon Lorenzo Moretti Derek Chan Jennifer Somer CTO CHRO Strategy Director EMEA President APAC President Ameri
Slide 27: Seven priority markets
S SEVEN PRIORITY MARKETS AMERICAS EMEA APAC Growth across all channels, UK & France: driving growth Japan: starting to recover with DTC acceleration through DTC acceleration with good DTC growth supported by strong and quality wholesale opportunity wholesale Germany & Italy: multi-year China: buildi
Slide 28: Celebrating sixty years of the 1461
C CELEBRATING SIXTY YEARS OF THE 1461 28
Slide 29: Product innovation driving newness and growth
C PRODUCT INNOVATION DRIVING NEWNESS AND GROWTH 29
Slide 30: Sandal revenues up 45%
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Slide 31: Tough as you: empowering and providing opportunities
C TOUGH AS YOU: EMPOWERING AND PROVIDING OPPORTUNITIES 31
Slide 32: Highly engaged social community
C HIGHLY ENGAGED SOCIAL COMMUNITY 32
Slide 33: Sustainability embedded in DOCS
C SUSTAINABILITY EMBEDDED IN DOCS Building detailed Committed to 1.5°C Innovative sustainability trajectory with Science development work roadmaps, metrics and Based Targets initiative underway assessing KPIs sustainable materials 33 5
Slide 34: Pricing plans for AW22
C PRICING PLANS FOR AW22 AW22 America and EMEA pricing increases - Detailed study 1460 example + $20 / undertaken across all 7 Consumer testing and + £10 / + €10 priority markets to assess validation of proposed brand strength and pricing changes to Expect no impact on consumer pricing calculate ela
Slide 35: Continuously improving ecommerce experience
D CONTINUOUSLY IMPROVING ECOMMERCE EXPERIENCE Accelerated testing Investment in Continually investing and sprints to improve upgrading platforms in digital team and site experience and capabilities conversion 35
Slide 36: New stores – profitable brand beacons
D NEW STORES – PROFITABLE BRAND BEACONS Hamburg Starfield Goyang Korea Munich Texas North Park Liverpool relocation Woodfield Chicago 36
Slide 37: Successful conversion of Italy and Iberia
D SUCCESSFUL CONVERSION OF ITALY AND IBERIA Wholesale account base reset leading to fewer doors but significantly improved brand presentation in market New store investments and increased marketing activity to drive brand awareness Immediate focus on driving Italy Conversion unlocks multi-year growt
Slide 38: Quality wholesale further elevating the brand
S QUALITY WHOLESALE FURTHER ELEVATING THE BRAND Journeys, Nashville Bodega L.A. Nordstrom NYC 38
Slide 39: Confidence in the future delivering against DOCS
CONFIDENCE IN THE FUTURE DELIVERING REVENUE UP 24% SUCCESSFUL AGAINST DOCS DRIVEN BY STRONG CONVERSION OF ITALY STRATEGY DTC PERFORMANCE AND IBERIA CONFIDENT IN ACHIEVING MARKET EXPECTATIONS 39 5
Slide 40: Appendix
APPENDIX • IR CONTACT DETAILS • FY22 TECHNICAL GUIDANCE • FX TRANSLATION • BALANCE SHEET • PRODUCT ARCHITECTURE • PRIORITY MARKETS HEADROOM FOR GROWTH 40
Slide 41: Investor relations contact details
INVESTOR RELATIONS CONTACT DETAILS Bethany Barnes Director of Investor Relations Bethany.Barnes@drmartens.com Mobile: +44 7825 187465 Sunena Dhuna Investor Relations Manager Sunena.Dhuna@drmartens.com Mobile: +44 7570 802697 41
Slide 42: FY22 guidance
FY22 GUIDANCE • New own store openings of 20 to 25 stores • Depreciation and amortisation of £42m to £44m, including the impact of IFRS16 • Net finance costs of £15m to £17m • Underlying tax rate of c.21% • Capital expenditure around 3.5% of revenue • Year-end leverage of around 1x, including IFSR16
Slide 43: FX translation
FX TRANSLATION £/$ £/EUR • We are naturally hedged on £/$ from a cash perspective FY22 FY21 % FY22 FY21 % as US revenues broadly equal COGS, which are H1 1.39 1.26 10% 1.17 1.12 4% invoiced in USD H2 1.35 1.13 • From a translation perspective, if current FY 1.31 1.12 exchange rates continue, the Who
Slide 44: Balance sheet
BALANCE SHEET (£m) 30 SEPTEMBER 2021 31 MARCH 2021 Freeholds 6.1 6.1 Right-of-use assets 92.7 77.4 Other fixed assets 47.4 46.6 Working capital 78.9 25.5 Deferred tax 8.7 7.2 Operating net assets 233.8 162.8 Goodwill 240.7 240.7 Cash 113.2 113.6 Bank debt1 (285.3) (281.6) Lease liabilities (98.8) (8
Slide 45: Product strategy: Originals at the epicentre
PRODUCT STRATEGY: ORIGINALS AT THE EPICENTRE ORIGINALS COLLABORATIONS2 57% 1% 1460 Curated projects to connect SANDALS1 6% The core of the product strategy, with informed consumers Expanding our offering with 43% informing the aesthetics of a sandal collection that stays all other categories true to
Slide 46: Vast global opportunity: 7 priority markets
VAST GLOBAL OPPORTUNITY: 7 PRIORITY MARKETS 46 Note data figures are from FY21