Burberry Group Plc · LSE:BRBY
Burberry — FY2010 Earnings Presentation
25 slides from Burberry's earnings presentation, May 26, 2010
Slide 1: Preliminary results for the year ended 31 March 2010
PRELIMINARY results FOR THE YEAR ENDED 31 MARCH 2010 FINANCIAL REVIEW — GROWING MENSWEAR — STRATEGIC update RETAIL-LED GROWTH UNDER-PENETRATED MARKETS — QUESTIONS
Slide 2: Introduction and revenue
INTRODUCTION • RECORD PROFITS – Adjusted PBT of £215m, up 23% – Inventory down 36% – £262m cash at year end – Dividend up 17% • CONSISTENT EXECUTION OF STRATEGIES IN 2009/10 – Digital initiatives – Runway show back to London – Burberry Brit relabelling – Purified brand – Cost efficiency programme •
Slide 3: Retail revenue up 15%
RETAIL REVENUE UP 15%* £40m £749m £45m £6m • COMPARABLE STORE SALES UP 7% £630m £28m (H1 UP 2%; H2 UP 10%) • INCREASED GROSS MARGIN AND AVERAGE SELLING PRICES • PROVEN INITIATIVES DROVE GROWTH • OPENED NET – 12 mainline stores – 9 concessions – 9% increase in average space FY 2009 EXCHANGE NEW SPACE
Slide 4: Wholesale down 15%; Licensing down 6%
WHOLESALE DOWN 15%* • IMPROVED PERFORMANCE IN H2 £18m (£58m) (H1 DOWN 23%; H2 DOWN 6%) £489m (£15m) £434m • IMPACTED BY OWN ACTIONS – Closing Thomas Burberry – Closing high margin European specialty accounts – Global collection up mid-single digits in H2 • INVESTMENT IN SUPPLY CHAIN FACILITATES OUTP
Slide 5: Revenue by region and product category
REVENUE BY REGION REST OF WORLD +27% • SPAIN 9% OF SALES – Restructuring underway EUROPE ASIA PACIFIC +3% +13% • ASIA PACIFIC 24% OF SALES – Hong Kong and Korea strong – China franchise performed well • EUROPE 35% OF SALES – UK retail strong – Reduced wholesale accounts by about one-third in last tw
Slide 6: Financial highlights
Stacey cartwright — Evp, chief financial officer 11 FINANCIAL HIGHLIGHTS 12 MONTHS TO 31 MARCH 2010 2009 £M £M CHANGE REVENUE 1,280 1,202 7% ADJUSTED PBT* 214.8 174.6 23% REPORTED PBT 166.0 (16.1) - ADJUSTED DILUTED EPS* 35.1p 30.2p 16% DIVIDEND PER SHARE 14.0p 12.0p 17% NET CASH 262.0 7.6 - * SEE A
Slide 7: Adjusted operating profit and licensing profit
ADJUSTED OPERATING PROFIT £220M £31.4m (£8.5m) £219.9m £16.2m £180.8m FY 2009 EXCHANGE RATES RETAIL/WHOLESALE LICENSING FY 2010 ADJUSTED OPERATING PROFIT* * SEE APPENDIX FOR DEFINITION OF ADJUSTED 13 LICENSING PROFIT CHANGE AT 12 MONTHS TO 31 MARCH 2010 2009 CONSTANT £M £M CURRENCY REVENUE 97.5 82.6
Slide 8: Retail/wholesale profit and gross margin
RETAIL/WHOLESALE PROFIT 12 MONTHS TO 31 MARCH 2010 2009 £M £M CHANGE REVENUE 1,182.4 1,118.9 GROSS MARGIN 706.5 583.2 AS % OF REVENUE 59.7% 52.1% 760bp OPERATING EXPENSES (568.8) (473.1) AS % OF REVENUE (48.1%) (42.3%) (580bp) ADJUSTED OPERATING PROFIT 137.7 110.1 AS % OF REVENUE 11.6% 9.8% 180bp EX
Slide 9: Operating expenses and Spain restructuring
RETAIL/WHOLESALE OPERATING EXPENSES/SALES UP 580BP • OPEX/SALES AT 48.1% AS GUIDED 48.1%* 42.3% 43.6% 42.3% • ABOUT £30M BENEFITS FROM COST 40.6% EFFICIENCY PROGRAMME • OFFSET BY – Reinstatement of bonus/share scheme costs – Negative FX – Shift to retail – Continued investment • OUTLOOK FY 2010/11 2
Slide 10: Income statement and taxation
INCOME STATEMENT 12 MONTHS TO 31 MARCH 2010 2009 £M £M ADJUSTED OPERATING PROFIT 219.9 180.8 NET FINANCE CHARGE (5.1) (6.2) ADJUSTED PBT 214.8 174.6 EXCEPTIONAL ITEMS (48.8) (190.7) TAXATION (83.8) 11.0 MINORITY INTERESTS (0.8) (0.9) ATTRIBUTABLE PROFIT/(LOSS) 81.4 (6.0) 19 TAXATION TAX (CHARGE)/ PB
Slide 11: Cash flow from operations and free cash flow
CASH FLOW FROM OPERATIONS 12 MONTHS TO 31 MARCH 2010 2009 £M £M ADJUSTED OPERATING PROFIT 219.9 180.8 RESTRUCTURING SPEND (26.7) (15.8) DEPRECIATION AND AMORTISATION 52.3 45.1 EMPLOYEE SHARE SCHEME COSTS 18.1 4.5 DECREASE IN INVENTORIES 80.3 48.8 DECREASE IN RECEIVABLES 49.4 2.1 INCREASE/(DECREASE)
Slide 12: Capital expenditure and total cash flow
CAPITAL EXPENDITURE £130m £90m £70m £49m 2008 2009 2010 2011F YEAR TO MARCH REFURBISHMENT NEW STORES DIGITAL/IT HFH CAPITAL EXPENDITURE 23 TOTAL CASH FLOW 12 MONTHS TO 31 MARCH 2010 2009 £M £M FREE CASH FLOW 304.8 119.7 DIVIDENDS (52.5) (51.7) OTHER CASH (3.3) 0.5 EXCHANGE DIFFERENCE 5.4 3.3 TOTAL C
Slide 13: Outlook
OUTLOOK RETAIL FY 2010/11 average space growth – Up around 10% WHOLESALE H1 2010/11 at constant currency – Up high teens percentage excluding Spain – Up around 10% including Spain LICENSING FY 2010/11 at constant currency – Down between 5-10% – Marginal benefit from Yen hedge rate CAPITAL EXPENDITUR
Slide 14: Menswear introduction
Andrew maag 27 INTRODUCTION • FROM LICENSED BUSINESS TO FULLY INTEGRATED TEAM • BUILDING ON OUR MENSWEAR HERITAGE • DRIVEN BY EXECUTION OF PROVEN GROUP WIDE STRATEGIES AND INITIATIVES 28
Slide 15: Menswear a key growth initiative
MENSWEAR A KEY GROWTH INITIATIVE Wholesale Retail £298m £289m £248m £227m £206m BY CHANNEL Rest of World Asia 2006 2007 2008 2009 2010 Europe YEAR TO MARCH Americas SPAIN GLOBAL COLLECTION Spain MENSWEAR REVENUE BY REGION 29 MENSWEAR PRODUCT MIX PRORSUM BURBERRY LONDON BURBERRY BRIT OUTERWEAR JERSEY
Slide 16: Exiting menswear licences
EXITING MENSWEAR LICENCES 11 Exited Europe shirts Various tailoring • HISTORICALLY Global socks – 11 licences 8 – Outerwear, tailoring and casual Exited – Global and country specific Germany outerwear US shirts – Confusing mix US underwear Global ties – Conflicting pricing Exited – Inconsistent qual
Slide 17: Growing outerwear and tailoring
GROWING OUTERWEAR • OUTERWEAR OUR CORE • UNDER-PENETRATED RELATIVE TO WOMENSWEAR – Outerwear is 40% of mens retail sales – Outerwear is 60% of womens retail sales • DRIVE PENETRATION – Strong branding platforms – Broadened offer – Product innovation – Marketing • ORDERS UP 20%* * SS10 PLUS AW10 OVER
Slide 18: Repositioning Burberry Brit; operational excellence
REPOSITIONING BURBERRY BRIT • TO BE TOP OF MIND FOR YOUNG LUXURY CUSTOMER – Outerwear – Denim – Sport • APPLIED PROVEN STRATEGIES – Elevated iconic check • DENIM IS KEY INITIATIVE – Invested in infrastructure – Currently c.5% of Burberry Brit sales – Goal is 15% • BURBERRY SPORT GROWING STRONGLY – L
Slide 19: Build on menswear heritage
Build on menswear heritage — Purified menswear offer — Growth opportunities Outerwear, tailoring, denim, SPORT — Scope to double sales over time 37 38
Slide 20: Strategic priorities
Angela ahrendts — chief executive officer 39 LEVERAGING THE FRANCHISE — INTENSIFYING NON-APPAREL DEVELOPMENT — ACCELERATING RETAIL-LED GROWTH — INVESTING IN UNDER-PENETRATED MARKETS — PURSUING OPERATIONAL EXCELLENCE 40
Slide 21: Accelerating retail-led growth; adding new space
ACCELERATING RETAIL-LED GROWTH £749m 440 58% 131 43% 260 65 £319m 2006 2010 2006 2010 2006 2010 YEAR TO MARCH AS AT MARCH YEAR TO MARCH OF WHICH, MAINLINE RETAIL REVENUE NUMBER OF DIRECTLY RETAIL AS % OF REVENUE OPERATED STORES 41 ADDING NEW SPACE 30 • NEW STORE CAPEX PLANNED UP OVER 50% IN 2010/11
Slide 22: Adding new space; improving sales productivity
ADDING NEW SPACE ION ORCHARD, SINGAPORE BURBERRY BRIT, 444 MADISON AVENUE OMOTESANDO, TOKYO CHILDRENSWEAR, DUBAI 43 IMPROVING SALES PRODUCTIVITY • BURBERRY EXPERIENCE – Near 10% improvement in customer experience – Developing client services team to look after VIP customers globally • INCREASED FREQ
Slide 23: Investing in under-penetrated markets
INVESTING IN UNDER-PENETRATED MARKETS • SOUTH AND CENTRAL AMERICA – Six people in HQ – First store opened in Brasilia – About four more planned in 2010/11 • INDIA – Nine people in HQ – Three stores currently – Mumbai opening shortly – Increase investment in marketing across all media BRASILIA • JAPA
Slide 24: Appendix: adjusted profit
APPENDIX ADJUSTED PROFIT “Adjusted” refers to profitability measures (pre and post tax) calculated excluding: 1. Restructuring costs of £48.8m in 2010 (2009: £54.9m) relating to the Spanish restructuring and the Group’s cost efficiency programme. 2. Impairment charges of £129.6m in 2009 relating to
Slide 25: Restatement of 2009/10 to exclude Spain; IR contacts
RESTATEMENT OF 2009/10 TO EXCLUDE SPAIN AS EXCLUDING FULL YEAR TO 31 MARCH 2010 REPORTED SPAIN* SPAIN £M £M £M RETAIL/WHOLESALE REVENUE 1,182.4 94.8 1,087.6 COST OF SALES (475.9) (52.0) (423.9) GROSS MARGIN 706.5 42.8 663.7 AS % OF REVENUE 59.7% 45.1% 61.0% OPERATING EXPENSES (568.8) (42.8) (526.0)