Burberry Group Plc · LSE:BRBY
Burberry — FY2009 Earnings Presentation
41 slides from Burberry's earnings presentation, May 19, 2009
Slide 1: Burberry
SPs = A wey oe BURBERRY ESTABLISHED 1856
Slide 2: Preliminary Results for the Year Ended 31 March 2009
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2009
Slide 3: Introduction: Rapid Actions in Challenging Markets
INTRODUCTION RAPID ACTIONS IN CHALLENGING MARKETS • ROBUST PERFORMANCE IN CHALLENGING MARKETS – Sales up 7% underlying (21% reported) – Adjusted PBT of £175m • STRONG FINANCIAL PROGRESS – Inventory down 19% underlying – £8m cash at year end – Renewed banking facilities – Maintained dividend – Well a
Slide 4: Agenda
AGENDA FINANCIAL REVIEW STRATEGIC AND OPERATING REVIEW QUESTIONS PICTURE 4
Slide 5: Revenue Up 7%
REVENUE UP 7%* • RETAIL £69m £7m (£7m) £1,202m – 52% of sales £138m – 14% underlying growth £995m • WHOLESALE – 41% of sales – 2% underlying growth • LICENSING – 7% of sales – 9% underlying decline FY 2008 EXCHANGE RETAIL WHOLESALE LICENSING FY 2009 RATES REVENUE * UNDERLYING 5
Slide 6: Retail Revenue Up 14%
RETAIL REVENUE UP 14%* • GROWTH IN ALL REGIONS £54m £7m (£2m) £630m EXCLUDING SPAIN £76m £11m • COMPARABLE STORE SALES UP £484m 1.1% (H1 UP 3.4%; H2 DOWN 0.5%) – Strong growth in Europe and Asia – US flagship markets more resilient – Lower proportion of full price sales • OPENED NET – 16 mainline st
Slide 7: Wholesale Revenue Up 2%
WHOLESALE REVENUE UP 2%* • GROWTH IN ALL REGIONS EXCLUDING SPAIN £31m (£20m) – Revenue up 11%* excluding Spain £56m (£4m) £489m £426m • BETTER FLOW OF DELIVERIES • OUTLOOK H1 2009/10 – Down 15% at constant currency excluding • Cost efficiency programme actions • Rationalisation of European specialty
Slide 8: Licensing Revenue Down 9%
LICENSING REVENUE DOWN 9%* • SLOWDOWN IN JAPAN £5.1m (£2.2m) – Weak department store sales £84.8m (£5.1m) £82.6m • MENSWEAR – Further non-renewals • GLOBAL LICENCES – Entry to brand – More resilient • OUTLOOK FY 2009/10 – Reported revenue up due to c.£17m favourable Yen impact – Underlying decline 1
Slide 9: By Region
BY REGION REST OF WORLD +40% • GROWTH IN ALL REGIONS EXCLUDING SPAIN – Europe: +17% – Asia Pacific: +17% – Americas: +9% EUROPE ASIA PACIFIC +17% +17% • SPAIN IS 13% OF SALES – Revenue down 24% – Difficult economic environment – More rapid contraction of multi-brand accounts – All goodwill written o
Slide 10: By Product Category
BY PRODUCT CATEGORY CHILDRENS +55% • GROWTH IN ALL PRODUCT CATEGORIES – Womens: +6% – Mens: +5% – Non-apparel: +12% WOMENSWEAR – Childrens: +55% NON-APPAREL +6% +12% MENSWEAR +5% FY 2008/09 RETAIL/WHOLESALE REVENUE % growth on an underlying basis 10
Slide 11: Stacey Cartwright, EVP, Chief Financial Officer
STACEY CARTWRIGHT EVP, CHIEF FINANCIAL OFFICER
Slide 12: Financial Highlights
FINANCIAL HIGHLIGHTS 2009 2008 12 MONTHS TO 31 MARCH £M £M CHANGE REVENUE 1,202 995 21% ADJUSTED PBT* 174.6 200.2 (13%) REPORTED PBT (16.1) 195.7 - ADJUSTED DILUTED EPS* 30.2p 31.6p (4%) DIVIDEND PER SHARE 12.0p 12.0p nc * SEE APPENDIX FOR DEFINITION OF ADJUSTED 12
Slide 13: Adjusted Operating Profit £181M
ADJUSTED OPERATING PROFIT £181M* • CURRENCY IMPACT – £11m positive 2008/09 £10.6m (£31.0m) £206.2m • £5m negative 2007/08 • £8m negative 2006/07 (£5.0m) £180.8m FY 2008 EXCHANGE RETAIL/ LICENSING FY 2009 RATES WHOLESALE ADJUSTED OPERATING PROFIT * SEE APPENDIX FOR DEFINITION OF ADJUSTED 13
Slide 14: Licensing Profit
LICENSING PROFIT CHANGE AT CONSTANT 2009 2008 CURRENCY 12 MONTHS TO 31 MARCH £M £M £M REVENUE 82.6 84.8 (7.3) GROSS MARGIN AT 100% 82.6 84.8 (7.3) OPERATING EXPENSES (11.9) (14.2) 2.3 OPERATING PROFIT 70.7 70.6 (5.0) OPERATING MARGIN 85.6% 83.3% 14
Slide 15: Retail/Wholesale Profit
RETAIL/WHOLESALE PROFIT 2009 2008 12 MONTHS TO 31 MARCH £M £M CHANGE REVENUE 1,118.9 910.6 + 23% GROSS MARGIN 583.2 532.9 AS % OF REVENUE 52.1% 58.5% (640bp) HORSEFERRY/SAP COSTS (10.0) - OTHER OPERATING EXPENSES (463.1) (397.3) AS % OF REVENUE (41.4%) (43.6%) 220bp ADJUSTED OPERATING PROFIT 110.1 1
Slide 16: Retail/Wholesale – Gross Margin Down 640bp
RETAIL/WHOLESALE – GROSS MARGIN DOWN 640BP • H1 DOWN 340BP; H2 DOWN 880BP • POSITIVE FACTORS – Sourcing benefits – Favourable product mix (non-apparel) 58.5% • FULL PRICE SALES BEHIND PLAN 55.2% 56.9% 52.1% • OUTLOOK FY 2009/10 – Increase in gross margin, H2 weighted • Conservative procurement • Imp
Slide 17: Retail/Wholesale – Operating Expenses/Sales 220bp Better
RETAIL/WHOLESALE – OPERATING EXPENSES/SALES 220BP BETTER • 2008/09 IMPACTED BY – Continued investment – Tight management of discretionary expenses – Lower bonus/share scheme costs 43.6% • OUTLOOK FY 2009/10 42.3% 41.4% * 40.6% – Increase in opex/sales ratio • Cost efficiency programme delivers c.£35
Slide 18: Cost Efficiency Programme
COST EFFICIENCY PROGRAMME • ABOUT £50M GLOBAL COST EFFICIENCY PROGRAMME EXPECTED TO UNDERPIN PROFITABILITY IN 2009/10 AND BEYOND • ACCELERATING BENEFITS FROM INVESTMENTS MADE IN SUPPLY CHAIN, IT AND INFRASTRUCTURE – Supply chain – Corporate processes • COST REDUCTION INITIATIVES – Restructured Spani
Slide 19: Income Statement
INCOME STATEMENT 2009 2008 12 MONTHS TO 31 MARCH £M £M ADJUSTED OPERATING PROFIT 180.8 206.2 NET FINANCE CHARGE (6.2) (6.0) ADJUSTED PBT 174.6 200.2 OTHER ITEMS (190.7) (4.5) TAXATION 11.0 (60.5) MINORITY INTERESTS (0.9) - ATTRIBUTABLE (LOSS)/PROFIT (6.0) 135.2 19
Slide 20: Other Items
OTHER ITEMS 2009 2008 12 MONTHS TO 31 MARCH £M £M RESTRUCTURING COSTS (54.9) - GOODWILL IMPAIRMENT (116.2) - STORE IMPAIRMENTS/ONEROUS LEASES (13.4) - NEGATIVE GOODWILL 1.7 - RELOCATION OF HEADQUARTERS (7.9) 15.1 ATLAS COSTS - (19.6) TOTAL (190.7) (4.5) 20
Slide 21: Taxation
TAXATION TAX (CHARGE)/ PBT CREDIT TAX RATE 12 MONTHS TO 31 MARCH 2009 £M £M % ADJUSTED 174.6 (41.6) 23.8% OTHER ITEMS* (190.7) 20.0 ONE-OFF TAX CREDITS - 32.6 REPORTED (16.1) 11.0 ONE-OFF TAX CREDITS WILL REDUCE CASH TAX PAYABLE IN FY 2009/10 BY C.£23M *SOME ITEMS NOT TAX DEDUCTIBLE 21
Slide 22: Cash Flow from Operations
CASH FLOW FROM OPERATIONS 2009 2008 12 MONTHS TO 31 MARCH £M £M ADJUSTED OPERATING PROFIT 180.8 206.2 OTHER ITEMS (15.8) (19.6) DEPRECIATION AND AMORTISATION 45.1 32.7 EMPLOYEE SHARE SCHEME COSTS 4.5 14.3 DECREASE/(INCREASE) IN INVENTORIES 48.8 (122.6) DECREASE/(INCREASE) IN RECEIVABLES 2.1 (29.1) (
Slide 23: Free Cash Flow
FREE CASH FLOW 2009 2008 12 MONTHS TO 31 MARCH £M £M CASH INFLOW FROM OPERATIONS 229.5 110.7 CAPITAL EXPENDITURE (89.9) (48.5) ACQUISITION-RELATED PAYMENTS (0.3) (10.0) NET INTEREST (5.9) (7.0) TAX PAID (26.3) (53.3) PROCEEDS FROM FIXED ASSET SALES 0.1 28.3 OTHER NON-CASH ITEMS 12.5 (5.0) FREE CASH
Slide 24: Total Cash Flow
TOTAL CASH FLOW 2009 2008 12 MONTHS TO 31 MARCH £M £M FREE CASH FLOW 119.7 15.2 DIVIDENDS (51.7) (47.4) SHARE BUY BACK - (39.6) OTHER CASH 0.5 3.4 EXCHANGE DIFFERENCE 3.3 7.0 TOTAL CASH FLOW 71.8 (61.4) NET CASH/(DEBT) AT 31 MARCH 7.6 (64.2) 24
Slide 25: Outlook
OUTLOOK RETAIL 10-12% average space increase in FY 2009/10 (including stores operated by BME) WHOLESALE H1 2009/10 at constant currency – Down around 15% excluding Burberry actions – Down around 25% in total LICENSING Down 10-15% at constant currency in FY 2009/10 – More than offset by exchange rate
Slide 26: Burberry
SPs = A wey oe BURBERRY ESTABLISHED 1856
Slide 27: Angela Ahrendts, Chief Executive Officer
ANGELA AHRENDTS CHIEF EXECUTIVE OFFICER
Slide 28: Continued Progress on Strategic Initiatives
CONTINUED PROGRESS ON STRATEGIC INITIATIVES LEVERAGING THE FRANCHISE INTENSIFYING NON-APPAREL DEVELOPMENT SS09 CAMPAIGN ACCELERATING RETAIL-LED GROWTH INVESTING IN UNDER-PENETRATED MARKETS PURSUING OPERATIONAL EXCELLENCE 28
Slide 29: Leveraging the Franchise: One Company, One Brand
LEVERAGING THE FRANCHISE ONE COMPANY, ONE BRAND • OUTERWEAR – Reinforcing heritage and leadership – Accelerated innovation – Now c.60% of womens; c.40% of mens – Reduces fashion risk in apparel • FURTHER RESHAPING PRODUCT PYRAMID – Prorsum • Brand DNA – Collection • New iconic branding • Initiating
Slide 30: Leveraging the Franchise: Consistency Across Customer Touch Points
LEVERAGING THE FRANCHISE CONSISTENCY ACROSS CUSTOMER TOUCH POINTS HORSEFERRY HOUSE 444 MADISON AVENUE KNIGHTSBRIDGE PITTSBURGH 30
Slide 31: Leveraging the Franchise: Marketing
LEVERAGING THE FRANCHISE MARKETING HELD AS % OF SALES BEAT FOR MEN SS09 E-BROCHURE DANIEL CRAIG HUGH JACKMAN 31
Slide 32: Intensifying Non-Apparel: Innovation in Core Icons
INTENSIFYING NON-APPAREL INNOVATION IN CORE ICONS • 12% UNDERLYING GROWTH – 33% of revenue (2006: 29%) • HANDBAGS/LEATHER GOODS OVER 60% OF RETAIL SALES • FURTHER PRODUCT INNOVATION – Continued development of pyramid in shoes, soft leather goods – Build mens accessories, luggage • JAPANESE NON-APPAR
Slide 33: Retail-Led Growth: Shift to More Dynamic Retail Model
RETAIL-LED GROWTH SHIFT TO MORE DYNAMIC RETAIL MODEL • RETAIL REVENUE UP 14% UNDERLYING – Now 52% of sales (2006: 43%) • CONTINUE TO INVEST IN PROFITABLE NEW SPACE – Plan to open net 10-15 mainline stores in 2009/10 – Cluster strategy in high demographic flagship markets – Continue to test childrens
Slide 34: Retail-Led Growth: Burberry Experience
RETAIL-LED GROWTH BURBERRY EXPERIENCE • PILOTED TRAINING PROGRAMME TO IMPROVE SALES AND CUSTOMER SERVICE – Sales productivity below peers • H2 2008/09 PILOT – Product and service focus – Sales staff responsive – Pilot stores outperformance • GLOBAL ROLLOUT IN 2009/10 – H1: Europe, Americas, Asia – H
Slide 35: Under-Penetrated Markets Gaining Share
UNDER-PENETRATED MARKETS GAINING SHARE • US WHOLESALE ONLY 7% OF GROUP REVENUE – Inventory to be more in line with sales from AW09 – Continue to gain share – Pursue initiatives to drive productivity of existing space and gain space in selected doors • EMERGING MARKETS 9% OF REVENUE (2008: 6%) – Good
Slide 36: Pursuing Operational Excellence: Reducing Complexity
PURSUING OPERATIONAL EXCELLENCE REDUCING COMPLEXITY • SAP ROLL-OUT OVER 80% COMPLETE – US retail went live April 2009 – Major markets now on SAP – 80% of mainline stores now on SAP • BENEFITS OF SAP IN EUROPE RETAIL – Improved planning – Margin by SKU – Profitability by channel, product and location
Slide 37: Summary
SUMMARY • GREAT BRAND/GREAT COMPANY – Corporate responsibility: align with Burberry values – Sustainability: energy efficient headquarters – Burberry Foundation: empowers young people • STRONG BRAND MOMENTUM • FIVE KEY STRATEGIES EFFECTIVE IMAGE • CHALLENGING ECONOMIC ENVIRONMENT INTO 2009/10 • DYNA
Slide 38: Burberry
SPs = A wey oe BURBERRY ESTABLISHED 1856
Slide 39: Appendix
APPENDIX BURBERRY
Slide 40: Adjusted Profit
ADJUSTED PROFIT * “Adjusted” refers to profitability measures (pre and post tax) calculated excluding: 1. Restructuring costs of £54.9m (2008: nil) relating to the Group’s cost efficiency programme. 2. Impairment charges of £129.6m (2008: nil) relating to Spanish goodwill (£116.2m) and stores (£13.4
Slide 41: IR Contacts
IR CONTACTS Fay Dodds Horseferry House Director of Investor Relations Horseferry Road fay.dodds@burberry.com London SW1P 2AW Charlotte Cowley Tel: +44 (0)20 3367 3524 Investor Relations Manager charlotte.cowley@burberry.com Kim Warren Investor Relations Associate kim.warren@burberry.com 41