Adidas Ag · XETR:ADS
Adidas — 9M 2005 Earnings Presentation
40 slides from Adidas's earnings presentation, Nov 3, 2005
Slide 1: Nine Months 2005 Financial Results Presentation
adidas Group NINE MONTHS 2005 FINANCIAL RESULTS PRESENTATION November 3, 2005
Slide 2: Operational Highlights
adidas Group Financial Results Presentation NINE MONTHS 2005 RESULTS OPERATIONAL HIGHLIGHTS HERBERT HAINER, CEO 2
Slide 3: 2005 The Most Important Year Yet
adidas Group Financial Results Presentation 2005 The Most Important Year Yet 3
Slide 4: Excellent Year-To-Date Financial Performance
adidas Group Financial Results Presentation Excellent Year-To-Date Financial Performance 9 Currency-neutral sales +10% 9 Gross margin +0.4pp to 48.5% 9 Operating margin +1.1pp to 13.1% 9 Highest backlogs in almost 3 years FULL YEAR SALES AND EARNINGS GUIDANCE INCREASED 4
Slide 5: Important Progress On Three Operational Fronts
adidas Group Financial Results Presentation Important Progress On Three Operational Fronts Product Innovation Major Initiatives World Cup Own-Retail Marketing Roll-Out Presence 5
Slide 6: Focus On Innovation
adidas Group Financial Results Presentation Focus On Innovation 6
Slide 7: New Strategic Partnership With Polar
adidas Group Financial Results Presentation New Strategic Partnership With Polar • Launched at World Track & Field Championships in Helsinki • First completely integrated training system • Products available April 2006 7
Slide 8: Innovation On The Basketball Court
adidas Group Financial Results Presentation Innovation On The Basketball Court • T-MAC launched October 28 • Strong initial sell-throughs • T-MAC product sales expected to exceed 1 million pieces in the next 12 months 8
Slide 9: Own Retail Success Story Continues
adidas Group Financial Results Presentation Own Retail Success Story Continues • 714 stores • YTD revenues up 36% to € 545m • 11% of Group revenues 9
Slide 10: Europe's Largest Sport Performance Center Opens In Berlin
adidas Group Financial Results Presentation Europe’s Largest Sport Performance Center Opens In Berlin 10
Slide 11: Football Fever Is Building
adidas Group Financial Results Presentation Football Fever Is Building 11
Slide 12: Advertising Campaign Launched
adidas Group Financial Results Presentation Advertising Campaign Launched 12
Slide 13: National Jerseys Launch November/December
adidas Group Financial Results Presentation National Jerseys Launch November/December 2005 13
Slide 14: Match Ball Launch December 2005
adidas Group Financial Results Presentation Match Ball Launch December 2005 14
Slide 15: North America: Ahead Of Plan
adidas Group Financial Results Presentation North America: Ahead Of Plan • YTD currency-neutral sales increase 17% • Strong back-to-school performance • 8th quarter of sequential backlog improvement for brand adidas 2005 SALES FORECAST INCREASED 15
Slide 16: Europe: Momentum Growing
adidas Group Financial Results Presentation Europe: Momentum Growing • YTD Sales stable in a tough environment • Currency-neutral backlogs increase 8% • On track to deliver mid- single-digit growth in 2005 WORLD CUP MOMENTUM GROWING 16
Slide 17: Asia Keeps Growing
adidas Group Financial Results Presentation Asia Keeps Growing • adidas takes market-leading position in Japan • Fastest growing major brand in China • YTD currency-neutral sales grow 26% ASIA DELIVERS SPECTACULAR RESULTS 17
Slide 18: Latin America Delivers Big
adidas Group Financial Results Presentation Latin America Delivers Big • Fastest growing region • YTD currency-neutral sales up 35% • Strong profitability HIGHEST 2005 SALES GROWTH 18
Slide 19: Strong Performance In The First Nine Months of 2005
adidas Group Financial Results Presentation Strong Performance In The First Nine Months of 2005 • 2005 a tremendous step forward in focus • Exciting initiatives in the pipeline • Strong own retail • FIFA World Cup 2006™: roll out in full swing ADIDAS GOING FROM STRENGTH TO STRENGTH 19
Slide 20: Financial Highlights
adidas Group Financial Results Presentation NINE MONTHS 2005 RESULTS FINANCIAL HIGHLIGHTS ROBIN STALKER, CFO 20
Slide 21: North America, Asia and Latin America Drive Q3 Sales Growth
adidas Group Financial Results Presentation North America, Asia and Latin America Drive Q3 Sales Growth 8% 2,000 (9%) 1,800 13% (11%) 10% 1,600 (8%) 1,400 -36% 1,200 1,000 € in millions 2004 2005 2004 2005 2004 2005 2004 (Figures in euro terms) Q1 Q2 Q3 Q4 21
Slide 22: Nine Months Sales Grow Strongly
adidas Group Financial Results Presentation Nine Months Sales Grow Strongly % of Total 10% (9%) 89 12% (11%) 11 10% Group (10%) Total: 100 (Continuing Operations) € 5.115bn 0% 5% 10% 15% (Figures in euro terms) 22
Slide 23: adidas YTD Currency-Neutral Sales Up 10%
adidas Group Financial Results Presentation adidas YTD Currency-Neutral Sales Up 10% • Growth in most major Sport Performance categories • Double-digit growth in all regions for Sport Heritage • Sport Style increases 14% in Q3 23
Slide 24: YTD Gross Margin Expansion Led by adidas
adidas Group Financial Results Presentation YTD Gross Margin Expansion Led by adidas 45.8% Ï 1.3pp 45.7% Ð 1.9pp Group* 48.5% Ï 0.4pp (Continuing Operations) *Includes HQ/consolidation 24
Slide 25: Significantly Improved Operating Margin
adidas Group Financial Results Presentation Significantly Improved Operating Margin • Royalty and commission income up 8% to € 34 million • Operating expenses as a percentage of net sales decline 10 basis points • Operating profit increases 19% to € 672 million (+14% on a comparable basis) • Operati
Slide 26: Strong Earnings Growth Supported By Excellent Operating Performance
adidas Group Financial Results Presentation Strong Earnings Growth Supported By Excellent Operating Performance • Financial expenses reduced by 46% • IBT up 25% to € 648 million (+19% on a comparable basis) Net income from continuing operations up 33% to € 434 million (+23% on a comparable basis) 26
Slide 27: Strong Reported Earnings Increase
adidas Group Financial Results Presentation Strong Reported Earnings Increase • Loss from discontinued operations increases by 97% to € 37 million Net income attributable to shareholders from continuing and discontinued operations up 31% to € 386 million 27
Slide 28: Build-Up To FIFA World Cup 2006 Visible In Inventory
adidas Group Financial Results Presentation Build-Up To FIFA World Cup 2006™ Visible In Inventory • Inventories from continuing operations increase 10% on a currency-neutral basis (+13% in euros) • DSO significantly reduced • Receivables from continuing operations decline 1% currency-neutral (+2% in
Slide 29: Debt Reduction Driven By Strong Bottom-Line Profitability
adidas Group Financial Results Presentation Debt Reduction Driven By Strong Bottom-Line Profitability 2.000 • 36% reduction in net borrowings y-o-y 1.600 1.200 • Financial leverage at 28% at September 30, 2005 800 • Temporary character due to Reebok acquisition 400 Q3 2002 Q3 2005 (Net Total Borrowi
Slide 30: Backlog Growth Accelerates (YOY)
adidas Group Financial Results Presentation Backlog Growth Accelerates (YOY) euros currency • Highest currency- neutral neutral growth in almost three years Footwear + 12% + 10% Apparel + 14% + 12% • World Cup orders and Sport Heritage Total + 14% + 12% are main drivers 30
Slide 31: European Backlogs Gain Momentum (YOY)
adidas Group Financial Results Presentation European Backlogs Gain Momentum (YOY) euros currency • Strongest currency- neutral neutral backlog growth Footwear + 11% + 10% in seven quarters Apparel + 7% + 6% • Positive development in all product Total + 9% + 8% categories 31
Slide 32: Double-Digit Backlog Growth in North America (YOY)
adidas Group Financial Results Presentation Double-Digit Backlog Growth in North America (YOY) • 8th consecutive euros currency neutral quarter of sequential improvement Footwear + 17% + 13% • Growth drivers: Apparel + 19% + 15% running, football, Sport Heritage Total + 18% + 14% 32
Slide 33: Backlogs Continue To Grow Rapidly In Asia (YOY)
adidas Group Financial Results Presentation Backlogs Continue To Grow Rapidly In Asia (YOY) euros currency • 17th consecutive neutral quarter of double- digit growth Footwear + 10% + 7% Apparel + 26% + 22% • Increases from virtually all markets Total + 22% + 18% 33
Slide 34: Outlook
adidas Group Financial Results Presentation NINE MONTHS 2005 RESULTS OUTLOOK HERBERT HAINER, CEO 34
Slide 35: Expectations Increased For 2005 Full Year Outlook
adidas Group Financial Results Presentation Expectations Increased For 2005 Full Year Outlook Target Currency-neutral revenue growth High-single-digit Gross margin ca. 48% Operating margin ca. 11% Growth of net income attributable to shareholders from continuing and at least 20% discontinued operati
Slide 36: Reebok Deal To Drive Bottom-Line Value
adidas Group Financial Results Presentation Reebok Deal To Drive Bottom-Line Value • Global competitive platform • Well-defined, complementary brand identities • Stronger presence across teams, athletes, events and leagues • Earnings accretive from Day 1 36
Slide 37: Steps Toward Reebok Transaction Completion
adidas Group Financial Results Presentation Steps Toward Reebok Transaction Completion Formation of integration team 9 U.S. anti-trust approval 9 European anti-trust approval … Reebok shareholders’ approval … 37
Slide 38: Medium-Term Guidance
adidas Group Financial Results Presentation Medium-Term Guidance Target Currency-neutral revenue growth Mid- to high-single-digit Gross margin 46 - 48% Operating margin ca. 11% Growth of net income attributable to shareholders from continuing Double-digit operations 38
Slide 39: 2006 Set To Be Another Great Year
adidas Group Financial Results Presentation 2006 Set To Be Another Great Year • Increased guidance for 2005 • Strong metrics in all brands and regions • Unique opportunities ahead • Acquisition of Reebok provides great opportunities 2006 OUTLOOK: HIGH-SINGLE-DIGIT SALES GROWTH AND DOUBLE-DIGIT EARNI
Slide 40: Question & Answers
adidas Group Financial Results Presentation QUESTION & ANSWERS 40