Ao World Plc · LSE:AO.
Ao World — Investor Day (October 2018)
145 slides from Ao World's investor day presentation, Oct 2, 2018
Slide 1: AO World plc Capital Markets Day UK
AO World plc Capital Markets Day UK October 2nd 2018 © 2018 AO World All Rights Reserved
Slide 2: Forward-looking statements disclaimer
Forward-looking statements disclaimer This presentation contains oral and written statements that are, or may be, “forward-looking statements” with respect to certain of AO World plc’s (“AO”) plans and its current goals and expectations relating to its future financial condition, performance and res
Slide 3: Welcome
ao wd Welcome Steve Caunce CEO
Slide 4: Agenda
Agenda 1. Welcome and purpose of the day Steve Caunce – Chief Executive Officer 2. Strategy Steve Caunce 3. UK Market Update Mark Higgins - Chief Financial Officer 4. Brand Update Michael Bates - Chief Brand & People Officer 5. UK Operations Danny Emmett - UK Chief Operating Officer 6. Break 7. Logi
Slide 5: Today's Hosts
Todays Hosts Steve Caunce Mark Higgins Chief Executive Officer Chief Financial Officer Michael Bates Danny Emmett Chief Brand & People Officer Chief Operating Officer, UK Dave Ashwell Rob Sant MD, AO Logistics MD, AO Recycling 5
Slide 6: Strategy
ao wd Strategy Steve Caunce CEO
Slide 7: AO is 18 years old
AO is 18 years old 18th Birthday don «© ad O° OGue ( Launched N LZ fo) Launched > 2018 ciate] ED, x a Expert 0 The Recycling £800+ Million Revenue Logistics © Group AO now operates in three territories; UK, — , NL, Germany and the Netherlands. We started a . with white goods and now sell a full rang
Slide 8: Our purpose
Our purpose To have the happiest customers by relentlessly striving for a better way
Slide 9: AO today…
AO today… * * A customer is defined as an individual who has purchased from us 9
Slide 10: AO has evolved
AO has evolved From a one country To a multi-national/ one category e-tailer multi-category, vertically integrated ecosystem 10
Slide 11: Our strategy positions us for growth
Our strategy positions us for growth 11
Slide 12: Focus of today is…
Focus of today is... Competencies Leveraging our expertise 12
Slide 13: Leveraging our core competencies into our supply / value chain
Leveraging our core competencies into our supply / value chain 13
Slide 14: UK Market Update
UK Market Update Mark Higgins CFO
Slide 15: MDA Market Growth, 2014 - 2018
MDA Market Growth, 2014 - 2018 MDA YoY Growth by Quarter 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 -2.0% 2014 2015 2016 2017 2018 -4.0% -6.0% Source: GfK, MDA Market Value 15
Slide 16: MDA Online Penetration, 2014 - 2018
MDA Online Penetration, 2014 - 2018 MDA online penetration % 45% 40% 35% 30% 25% 20% Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Source: Gfk 16
Slide 17: AO's UK total addressable market has grown significantly since IPO
AO’s UK total addressable market has grown significantly since IPO Source: Gfk, 12 months to March, all figures include VAT 17
Slide 18: Delivering Tomorrow
Delivering Tomorrow Michael Bates Chief Brand & People Officer
Slide 19: We have a big ambition
We have a big ambition Create a brand platform to Make AO more memorable to fuel our next phase of electricals shoppers of Britain growth by increasing awareness & consideration So more people not only trust among non-customers but feel compelled to try and buy from AO 19
Slide 20: People are familiar with AO but have little understanding of the brand
The challenge: people are familiar with AO but have little understanding of the brand T S Awareness Consideration TRU 20
Slide 21: Non-users don't trust us as much as our competitors
Non-users don’t trust us as much as our competitors Is a brand I can trust when buying large kitchen appliances 66% 53% 44% 33% Source: AO Tracking research November 2017 21
Slide 22: But to try AO is to trust AO
But to try AO is to trust AO ao.comM Reviews (107,836) * Excellent 100,000 reviews 22
Slide 23: When we explain what we do, AO is more impressive than people realise
When we explain what we do and how we do it, AO is more impressive than people realise I’ve always thought of them as just an online company but actually they’re coming across this evening as all one company. They’re not outsourcing anything. You feel more reassured it’s all within the company. Non-
Slide 24: We have lots of great stories to tell
We have lots of great stories to tell Delivery Service Recycling Our own fleet Accredited engineers We own and operate our own recycling facility Next day delivery Disconnect and recycle old appliances We dispose of everything we Real time tracking collect responsibly 100 Day Returns Direct line to
Slide 25: What really sets AO apart?
What really sets AO apart? High Tech Low High Touch Touch Low Tech 25
Slide 26: What really sets AO apart?
What really sets AO apart? High Tech Low High Touch Touch Low Tech 26
Slide 27: What really sets AO apart?
What really sets AO apart? High Tech Low High Touch Touch Low Tech 27
Slide 28: AO's unique mix of humanity & efficiency
AO’s unique mix of humanity & efficiency High Tech Modern & progressive Brilliant staff Flawless efficiency Low High Touch Touch Low Tech 28
Slide 29: Modern & Progressive, Brilliant staff, Flawless efficiency
Modern & Progressive Brilliant staff Flawless efficiency 29
Slide 30: Super. Human. Endeavour.
SUPER. I CARE ABOUT GETTING THE THING IHUMAN. WANT WHEN I WANT IT ENDEAVOUR. 30 30
Slide 31: This became our brief
This became our brief The brief DELIVERING TOMORROW 31
Slide 32: This became our brief
This became our brief The brief The new brand platform DELIVERING TOMORROW 32
Slide 33: Delivering Tomorrow
It works on 2 levels Delivering Tomorrow 1. Whatever it takes to get you whatever you need • Reliability when you need it most • Delivery fleet sets us apart • We get the job done • No job too big 33
Slide 34: Delivering Tomorrow
It works on 2 levels Delivering Tomorrow 1. Whatever it takes to get you 2. Vision, spirit and ambition for whatever you need a better future • Reliability when you need it most • An implicit and explicit benefit for customers • Delivery fleet sets us apart • Innovation • We get the job done • Renew
Slide 35: Delivering Tomorrow
Delivering Tomorrow Whatever it takes for a better tomorrow Core idea 35
Slide 36: Delivering Tomorrow: Our Manifesto
Delivering Tomorrow: Our Manifesto We are AO. We’re experts in electricals. And we get them to you tomorrow. We understand the importance our products play in our customers’ lives. They make tomorrow a better place. But we don’t stop there. We want a better tomorrow for our colleagues, for our indus
Slide 37: Delivering an integrated communications platform
Delivering an integrated communications platform Website Getting the detail right: Brand Advertising copy, content, Out-bound comms Whatever it takes for a customer journey Emails, customer delivery better tomorrow communications Supplier supported Creative which Delivering Tomorrow Social Media, PR
Slide 38: The Campaign
The Campaign
Slide 39: Show ad
Proudly Presents iw 2
Slide 40: 3 x 10 sec
3 x 10 sec
Slide 41: Opt-in and purchase required, delivery charges, driver availability, conditions, geographical exclusions & cut off
Opt-in and purchase required, delivery charges, driver availability, conditions, geographical exclusions & cut off times apply.
Slide 42: Slide 42
Slide 43: Delivering Tomorrow: DRTV
Delivering Tomorrow: DRTV 43
Slide 44: Homepage carousel change
Homepage carousel change 44
Slide 45: TVA Enterainment Computing Phones & Smart Tech Leundry «Dishwashers “Fries &Freezers Cooking SmailApplances Floorcare.
TVA Enterainment Computing Phones & Smart Tech Leundry «Dishwashers “Fries &Freezers Cooking SmailApplances Floorcare. Help Advice Sale Price match promise Froe 30 day returns Rated Excellent Next day delivery, 7 days a week Pay monthly APR 19.9% Find your perfect product Tumble Dryers v Dyer type.
Slide 46: Homepage carousel: Mobile versions
Homepage carousel: Mobile versions 46
Slide 47: Display advertising and merchandising pods
Display advertising and merchandising pods 47
Slide 48: Email CRM
Email CRM Bank holiday preppin’ Whether you're geting out and about or ching indoors, we've got a fantastic range of tech and appliances to help make the most of the bank holiday wookond. Entertaining? wor youre hanng demo at ho eians oF gto-cashng ‘De neighbours BBO, wal help yeu get he party stare
Slide 49: Social media
Social media Presents 49
Slide 50: Packaging
Packaging There’s something ao brilliant wd inside. The online electricals store AOcom Ww 50
Slide 51: Results
Results
Slide 52: Results
Results • Creative response to Delivering Tomorrow is extremely positive • The creative is extremely well-liked, memorable and different • Call to action after viewing is strong • Delivering Tomorrow captures the audience’s attention and delivers core brand messages - delivery and range • The ad ver
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53
Slide 54: UK - Danny Emmett
ao wd UK Danny Emmett COO UK
Slide 55: Today
Today • Five UK business units structure • Retail • B2B • Financial Services 5 55 55 5
Slide 56: We are now a big complex business
We are now a big complex business 56
Slide 57: We have a new structure, scalable for growth
We have a new structure, scalable for growth 57
Slide 58: Five UK business units, all with huge potential
Five UK business units, all with huge potential • Market leading • Leveraging AO • Partnership with • Leading UK home • Largest and most customer satisfaction capability into new D&G for insurance delivery specialists efficient fridge • Product focus & markets • Outbound sales • Nationwide Gas/ recy
Slide 59: Retail
Retail The online electricals store
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60
Slide 61: Win in white goods
Win in white goods
Slide 62: Category mix of our business
Category mix of our business Source: Company data 62
Slide 63: Multi Category Retailer
Multi Category Retailer • Attach / Cross sell is a significant revenue and profit opportunity • Connected world / connected families of products a driver for broader ranges • Customers want a broader range of product categories from AO.com • Range growth continues • Improved Repeat rates, New custom
Slide 64: Repeat and cross category repeat rates remain strong
Repeat and cross category repeat rates remain strong Category unit mix by year and order type Source: Company data 64
Slide 65: New customer drive through ATL campaign
New customer drive through ATL campaign 65
Slide 66: How do we think about AO.com?
How do we think about AO.com? 66
Slide 67: Easy to find the right product by bringing products to life
Easy to find the right product by bringing products to life
Slide 68: Market leading content across all categories
Market leading content across all categories 68
Slide 69: Social media a huge opportunity to bring products to life
Social media a huge opportunity to bring products to life 69
Slide 70: Quickest and most convenient customer journey
Quickest and most convenient customer journey
Slide 71: Our plan is to create the best journey for our customers
Our plan is to create the best journey for our customers 71
Slide 72: Checkout and mobile UX focus
Checkout and mobile UX focus 72
Slide 73: Amazing customer service
ao wd Amazing customer service
Slide 74: The happiest customers…
The happiest customers... Rated Excellent with over 100,000 reviews from happy customers 74
Slide 75: …by relentlessly striving for a better way
…by relentlessly striving for a better way Source: Company data 75
Slide 76: Winning value proposition
ao wd Winning value proposition
Slide 77: Strong core proposition
Strong core proposition 77
Slide 78: Free 100 day returns
Free 100 day returns FREE 100 Day Ef Returns
Slide 79: Further developing our services offering
Further developing our services offering 79
Slide 80: 80
80
Slide 81: B2B: Leveraging our competencies to create a new vertical
B2B Leveraging our competencies to create a new vertical
Slide 82: B2B to be a growth engine for AO
B2B to be a growth engine for AO Leverage of Vertical Capabilities into new markets Provide Client Management and Service Common theme of fragmented & regional market with low levels of customer service and satisfaction 82
Slide 83: First steps for this new business
First steps for this new business Customer Build the Kick off our demand team strategy There is a clear demand for a To meet this demand we have We are looking to win business better business experience created a dedicated division. Our proactively. We are not looking to when purchasing. A need for
Slide 84: Winning clients the AO way
Winning clients the AO way AO-QUALITY SERVICE FOR BUSINESSES CLIENTS NOT CUSTOMERS CORE PRINCIPLES GETTING LEVERAGING AHEAD OF EXISTING THE TENDER RELATIONSHIPS
Slide 85: Leveraging our competencies to develop a Rental proposition
Leveraging our competencies to develop a Rental proposition • Simple and affordable for customers • Working with FCA & High Cost Credit Alliance • Partnership with housing associations • B2B2C • Launch & learn 85
Slide 86: B2B Summary: Early days but promising results
B2B Summary: Early days but promising results • Early progress with clients • New business pipeline encouraging • Development of strategy / proposition by segment underway • Supplier engagement is high, recognition of the value AO can add 86
Slide 87: Financial Services
Financial Services Solutions for the happiest customers
Slide 88: What do we mean by Financial Services?
What do we mean by Financial Services? Our Products • Insurance and service plans: AO Care Long term partnership with D&G (AO as Agent) • Consumer credit/ finance products V12, PayPal, (AO as broker) Our Capabilities • Outbound sales & service specialists • Highly developed best in class operational
Slide 89: Our Products: AO Care
Our Products: AO Care AO Care • Demonstrates our values and excels in service delivery and care • Digitisation of product • Delivering not only a strong financial contribution but also an on-going, in-life point of contact with our customers • Continues to build our relationship and generates repeat
Slide 90: AO Care: Move to Insurance from Service Plans
AO Care: Move to Insurance from Service Plans • Product form becomes Insurance • The customer base will be included in these product updates 90
Slide 91: Our Products: Customer Finance
Our Products: Customer Finance Customer Finance proposition under development 91
Slide 92: Our Capabilities
Our Capabilities • Outbound sales & service specialists, contacting customers to: • Confirm delivery details • Offer applicable attach & cross sell products • Offer recycling • Offer our ao care insurance, service and support product • A highly developed operational capability • Recognised as best i
Slide 93: Summary
Summary • Market leading • Leveraging AO • Partnership with • Leading UK home • Largest and most customer satisfaction capability into new D&G for insurance delivery specialists efficient fridge • Product focus & markets • Outbound sales • Nationwide Gas/ recycling plant in UK supplier • Strategic f
Slide 94: The evolution of logistics
The evolution of logistics Dave Ashwell MD AO Logistics
Slide 95: The UK's best home delivery provider
The UK’s best home delivery provider 96
Slide 96: The evolution of logistics
The evolution of logistics • Current industry environment • How have we adapted • How we are serving our customers • How we are evolving our proposition • How we are leveraging our assets 97
Slide 97: The changing face of UK logistics since 2014
The changing face of UK logistics since 2014 98
Slide 98: The driver environment
The driver environment • Reduction in 7.5t drivers • Speed of erosion has accelerated • 3.5t drivers becoming the norm • Vehicle payload reduction • Vans rather than trucks 99
Slide 99: How have we adapted
How have we adapted • Drivers • Grown more 7.5t drivers • Academy • 3.5t vehicle evolution • More, smaller outbases • Low cost operations • More ponds, fewer drivers needed per pond 100
Slide 100: Vehicle development
AO 3.5t vehicle AO 3.5t high cube Vehicle development 101
Slide 101: Green van deliveries
Green van deliveries 102
Slide 102: Our infrastructure
Our infrastructure © Opened since 2014 © Planned for 2018/19 2014 - 9 outbases 2018/19 - 19 outbases
Slide 103: Opened Alpha warehouse in 2012
Opened Alpha warehouse in 2012 104
Slide 104: Opened Omega in 2016
Opened Omega in 2016 105
Slide 105: Opened Omega in 2016
Opened Omega in 2016 Omega Alpha 106
Slide 106: Reduction in 3PL for white goods
Reduction in 3PL for white goods • Growth in AO.com diminishes client volumes 3PL • Competition issues when delivering core categories • Removal of Argos Wet installs • Loss of smaller clients AO 78% 92% 2014 2018 107
Slide 107: Our 3PL strategy
Our 3PL strategy • Exploit current market demand for AO’s 2-man delivery expertise through: • Leveraging capabilities into new categories • Upskilling premium engineering fleet • Utilising warehousing capacity 108
Slide 108: How we served our customers in 2014
How we served our customers in 2014 109
Slide 109: How we serve our customers in 2018
How we serve our customers in 2018 110
Slide 110: How are we doing?
How are we doing? - One NPS scores Sm 99.5% oreron OO UK trustpilot score eecr as P i! | | KKKK K oe BB m 29
Slide 111: Service innovation
Service innovation 112
Slide 112: Inflight updates
Inflight updates x Leave with a neighbour x Leave at safe place Leave at safe place © Preterred neighbour Choose where a Garage Neighbour's address © Ary neighbour ’ Additional info (optional) 39 Alexandra Road ANireahe Br Please leave it behind the garage in Front Porch the small wooden box. Additi
Slide 113: Expand & improve our installation services
Expand & improve our installation services 114
Slide 114: Install smart products
Install smart products ‘Smart Thermostat Can detect wen your house Is too cold, and automatically kicks: Into prevent pipes ‘Video Door Bell See who Is calling at your door through ‘your smart phone ‘Smart Lights Set your lights to come fon automatically when you're out of the house Get real time ‘a
Slide 115: AO Academy
AO Academy • City & Guilds qualified centre • New services • Grow our own • Satellite training • Development opportunities • Feeding from internal candidates • Development for existing employees 116
Slide 116: Every postcode everyday
Every postcode everyday Current proposition – Bournemouth example New proposition – Bournemouth example PREM PREM PREM PREM PREM PREM PREM 117
Slide 117: Leveraging our assets
Leveraging our assets • Capability • Other categories • Efficiency • Fleet Intelligence System • Routing (new vehicles, double deckers) • Dynamic timeslots • Continuous improvement 118
Slide 118: AO Recycling
AO Recycling Rob Sant Managing Director AO Recycling
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120
Slide 120: Why?
Why? Why?
Slide 121: The need to invest
The need to invest il Customer & Customers expect collections i ill old appliances to i growing OO be taken away Important they ene Greener se trusted us Service customer © Trustpilot 122
Slide 122: Our partner commitments
Our partner commitments [Vi AO Core SO, Environmental Values Performance j -ervice | jms Long Term Contracts 123
Slide 123: Guaranteed Volume
Guaranteed Volume Guaranteed Volume The Best Machinery and Equipment - Giving highest quality and quantity of out stream materials 124
Slide 124: Plastics Opportunity
Plastics Opportunity 125
Slide 125: Plastic Recycling Investment
Plastic Recycling Investment 126
Slide 126: Short term
ao wd Short term
Slide 127: AO Recycling
AO RECYCLING
Slide 128: Refurbish & repair
Refurbish & repair • Refurbish and repair • AO Outlet 129
Slide 129: The plant
The plant • The Most Advanced • Recycling all categories • Growth to 700k per annum • 100+ fridges per hour • Optimal reuse of materials 130
Slide 130: Plastic Recycling Facility FY20
Plastic Recycling Facility FY20 • Opening FY20 • Great for customers and environment • Adds value for shareholders • Most advanced and efficient • High Quality = High Value • Spare capacity for growth 131
Slide 131: Coming Soon
Coming Soon • 2nd MDA recycling facility • More capacity needed • Strategically located • Best of Telford • Due FY20 132
Slide 132: Working with government
“Congratulations to AO on what is the biggest fridge recycling facility in Europe.” hérése Coffey MP Parliamentary Under Secretary of State for the Environment for Evironment Food & Pura Atsies #GreenFuture
Slide 133: FY20 Summary
FY20 Summary Telford Recycling Telford Plastic South East Recycling 134
Slide 134: Long term
ao wd Long term
Slide 135: Future Opportunities
Future Opportunities Guaranteed Volume The Best Machinery and Equipment - Giving highest quality and quantity of out stream materials Plastic Recycling 136
Slide 136: Slide 136
Slide 137: Site Tour
ao wd Site Tour
Slide 138: Financial dynamics
Financial dynamics Mark Higgins CFO
Slide 139: UK Retail
UK Retail • MDA market • Delivering Tomorrow • New category dynamics 143 143
Slide 140: Logistics
Logistics • Outbase model • Changes in vehicles 144 144
Slide 141: Recycling
Recycling • Plastics Plant • 2nd Recycling plant • Other opportunities 145 145
Slide 142: Summary
ao wd Summary Steve Caunce CEO
Slide 143: Summary
Summary • Business evolution • Competency opportunity • Trust and legacy
Slide 144: Q&A
Q&A Steve Caunce CEO Mark Higgins CFO
Slide 145: Online Electrical Store
Online Electrical Store Slide 149