Burberry Group Plc · LSE:BRBY
Burberry — FY2005/06 Earnings Presentation
48 slides from Burberry's earnings presentation, 2006
Slide 1: Burberry Established 1856
Slide 2: John Peace, Chairman
John Peace Chairman
Slide 3: 2005/06 Highlights
2005/06 Highlights Positioning for next phase of growth Leadership transition Major infrastructure investment Key retail initiatives Completed evolution to fully public company
Slide 4: Rose Marie Bravo, Chief Executive
Rose Marie Bravo Chief Executive
Slide 5: Revenue
Revenue Year Financial Highlights (millions) £742.9 £715.5 £675.8 £593.6 £499.2 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 Retail Wholesale Licensing
Slide 6: EBIT
EBIT Year Financial Highlights (millions) £161.3 £165.6 Pre-Atlas £142.6 £154.5 £116.7 £90.3 2001/2002(1) 2002/2003(1) 2003/2004(1) 2004/2005(2) 2005/2006(3) Margin 18.1% 19.7% 21.1% 22.5% 22.3% (1) Under UK GAAP, excluding goodwill amortisation and exceptional items (2) Under IFRS (3) Pre-Atlas cos
Slide 7: Diluted EPS
Diluted EPS Year Financial Highlights 24.1p 22.2p Pre-Atlas 19.1p 22.3p 14.6p 12.1p 2001/2002(1) 2002/2003(1) 2003/2004(1) 2004/2005(2) 2005/2006(2) (1) Under UK GAAP, excluding goodwill amortisation and exceptional items (2) Under IFRS
Slide 8: Products, Channels, Regions, Atlas
Products Channels Regions Atlas
Slide 9: Revenue by Product Category
Revenue by Product Category 2005/06 Other* 2% Licensing Underlying Growth 11% 1H 2H Y Womenswear 34% Womenswear 1% 6% 3% Accessories 25% Menswear 4% 3% 4% Accessories 2% (2)% 0% Menswear 28% * Includes childrenswear
Slide 10: Prorsum Runway
Prorsum Runway Strong editorial response Attracting new client Strong sell-throughs New marketing thrust Voted top 10 women’s collection (WWD Fall 06) SS06 Campaign
Slide 11: Outerwear
Outerwear Merchandising cornerstone Reinvigorating the classics Strong Spring season for coats, trenches, quilts Spring/Summer 06
Slide 12: Womenswear
Womenswear Second half strength Reflects product adjustments Improved product flow Spring/Summer 06
Slide 13: Menswear
Menswear Consistent performance Ongoing product efforts Customisation Spring/Summer 06
Slide 14: Accessories
Accessories New merchandise direction Continued investment Handbag reorientation Spring/Summer 06
Slide 15: Fragrance
Fragrance _ BURBERRY i LONDON
Slide 16: Licensing
Licensing Strength in product licenses Eyewear in transition Watches on track Kate Moss
Slide 17: Channels
Channels 2005/06 Licensing 11% Underlying Growth 1H 2H Y Retail 9% 13% 11% Wholesale 46% Retail Wholesale (1)% (7)% (4)% 43% Licensing 3% 8% 6%
Slide 18: 2005/06 Retail Activity
2005/06 Activity Retail New stores/ Refurbishments/ Concessions Expansions 20% total revenue growth US San Antonio, TX Philadelphia, PA – 25% second half San Diego, CA Boston, MA Naples, FL Denver, CO 8% underlying space Palm Beach Garden, FL Washington, DC growth Outlets (3) Westchester, NY – e
Slide 19: 2006/07 Retail Plans
2006/07 Plans Retail 14 new stores and New stores/ Major Refurbishments/ concessions Concessions Expansions US Atlantic City, NJ Minimum 10% underlying Kansas City, MO space expansion Northbrook, IL Riverside, NJ Outlets (2) EU Madrid Regent Street, London Concessions (3) Asia Sydney Ocean Centr
Slide 20: Spain Concessions
Spain Concessions Retail ECI Diagonal, Barcelona
Slide 21: International Wholesale
International Wholesale SAK S FILET El HARVEY NICHOLS SELFRIDGES :\"° cee Lafesehe ASETAN BARNEYS oe /PRINTEMPS| cies RAH blapmingdale's DAVID JONES
Slide 22: Emerging Markets
Emerging Markets Wholesale Outstanding gains in 2005/06 Opened 9 stores Five stores planned for 2006/07 Warsaw, Poland
Slide 23: Japan Licensing
Japan Licensing Brand enhancement ongoing Initiatives showing positive results Black Label Osaka Takashimaya
Slide 24: Japan Imports
Japan Imports AW06 import initiatives – key categories – leathergoods test Prorsum concessions Work in progress Tokyo Subway Station
Slide 25: Stacey Cartwright, Chief Financial Officer
Stacey Cartwright Chief Financial Officer
Slide 26: Financial Highlights
Financial Highlights(1) Year to 31 March 2004/05 2005/06 % Growth £m £m Reported Underlying (2) Turnover 715.5 742.9 4% 3% Operating Profit before 161.3 165.6 3% 5% Atlas Atlas cost - 11.1 - - Diluted EPS before Atlas 22.2p 24.1p 9% - Dividend per share 6.5p 8.0p 23% - Dividend payout ratio 29% 33%
Slide 27: Turnover
Turnover 6 Months to 31 March Growth £8.2 (£2.3) £384.3m – 5% reported £10.9 £367.5m – 3% underlying 2004/05 Underlying Exchange Conversions 2005/06 growth rates
Slide 28: Retail Revenue
Retail Revenue 6 Months to 31 March £11.5 £192.2m Growth £6.6 £19.6 – 24% reported £154.5m – 13% underlying 9% space increase 2004/05 Underlying Exchange Conversions 2005/06 growth rates
Slide 29: Wholesale Revenue
Wholesale Revenue 6 Months to 31 March Decline £173.9m (£11.8) – 13% reported £2.3 (£13.8) £150.6m – 7% underlying Key markets – Spain – US 2004/05 Underlying Exchange Conversions 2005/06 growth rates
Slide 30: Licensing Revenue
Licensing Revenue 6 Months to 31 March Growth £3.1 (£0.7) £41.5m £39.1m – 6% reported – 8% underlying Japan up high single digits – royalty rate increase Global licenses – generally solid gains 2004/05 Underlying Exchange 2005/06 growth rates
Slide 31: Gross Profit Margin
Gross Profit Margin 6 Months to 31 March 220bps gross margin 62.1% 59.9% expansion Stronger collections – AW05: lower mark downs – SS06: good early response Channel mix Second half Second half 2004/05 2005/06
Slide 32: Operating Expenses before Atlas Costs
Operating Expenses before Atlas Costs 6 Months to 31 March Expanded retail network – conversions 39.7% 37.1% Investing in infrastructure 150th anniversary marketing Exit GUS pension scheme Second half Second half 2004/05 2005/06
Slide 33: EBIT before Atlas Costs
EBIT before Atlas Costs 6 Months to 31 March Underlying growth £3.8 £1.0 (£2.4) £86.1m £83.7m – H1 6% – H2 5% – FY 5% 2004/05 Underlying Exchange Conversions 2005/06 growth rates
Slide 34: EBIT Margin
EBIT Margin Year to 31 March 2005/06 2004/05 First Half Year Pre Atlas costs Retail and wholesale 14.8% 14.3% 14.5% Licence 85.5% 85.4% 85.6% Total 22.5% 22.2% 22.3% Post Atlas costs Total 22.5% 21.4% 20.8%
Slide 35: Cash Flow from Operations
Cash Flow from Operations £ millions 2004/05 2005/06 EBIT (1) 161.3 165.6 Atlas costs – (11.1) Depreciation and similar charges 24.4 24.9 Increase in stocks (12.9) (17.8) (Increase)/Decrease in debtors (7.3) 2.2 Increase/(Decrease) in creditors 1.5 (21.2) Other 8.4 5.8 Cash flow from operations 175.
Slide 36: Cash Flow
Cash Flow Year to 31 March £ millions 2004/05 2005/06 Cash flow from operations 175.4 148.4 Net interest 4.7 1.6 Capex (37.2) (30.7) Property sales proceeds 3.1 3.6 Net acquisition related - (23.6) Tax paid (49.5) (43.6) Cash inflow before financing 96.5 55.7
Slide 37: Capital Management
Capital Management Cash neutral balance sheet Completed £250 million repurchase programme – £192 million repurchased in 2005/06 – £12.5 million net cash position at March 2006 Ongoing plans – share repurchases consistent with capitalisation strategy
Slide 38: Atlas: 2005/06 Activity
2005/06 Activity Atlas £50m programme over 3 years P/L benefits in excess of £20m pa by 2007/08 Strong foundation Moving from design to implementation Firmly embedded in business Atlas Expensed £11 million in 05/06
Slide 39: Atlas: 2006/07 Plans
2006/07 Plans Atlas 2006 2007 Treasury Global Sales & Stock Analytics UK/Europe & Phase I Phase II Phase III Corporate US, Korea, HK & Taiwan Post Implementation Support & other regions
Slide 40: 2006/07 Outlook
2006/07 Outlook Retail – minimum 10% space expansion – 14 new stores and concessions Wholesale: H1 up low single digit underlying Licensing: broadly flat underlying relative to 2005/06, with yen negative impact Capital expenditures approximately £50 million Atlas P/L benefits approximately
Slide 41: Angela Ahrendts, Chief Executive Designate
Angela Ahrendts Chief Executive Designate
Slide 42: Operational Excellence
Operational Excellence Back end of the business Front end of the business
Slide 43: Product: Multi-category Cross-Generational Appeal
Product: Multi-category Cross-Generational Appeal
Slide 44: Retail Led Growth
Retail Led Growth
Slide 45: Invest in High Potential Growth Markets
Invest in High Potential Growth Markets
Slide 46: Leveraging the Franchise
Leveraging the Franchise New York, 57th Street
Slide 47: Slide 47
Slide 48: Disclaimer
Disclaimer Certain statements made in this announcement are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future results in forward looking st