Ao World Plc · LSE:AO.
Ao World — H1 FY2018 Earnings Presentation
29 slides from Ao World's earnings presentation, Nov 21, 2017
Slide 1: AO World plc Interim Results FY18
AO WORLD PLC Interim Results FY18 21st November 2017
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: Agenda
Agenda Highlights & Strategy Steve Caunce, CEO Financial Performance Mark Higgins, CFO Strategy, Operations & Outlook Steve Caunce, CEO Q&A 3
Slide 4: HY18 Highlights
HY18 Highlights Financial • UK AO website sales up 9.9% to £282.5m (total UK revenue up 7.4%) • Improved momentum in Q2 - AO UK website sales growth of 13.2% (Q1: 6.2%) • Europe revenue up 60.5% to €58.1m (2016: €36.2m) • Group adjusted EBITDA Operational losses of £6.3m (HY17: £1.5m profit) reflect
Slide 5: Continuing to deliver our long-term strategy – HY18
Continuing to deliver our long-term strategy – HY18 Continue to delight customers UK growth European in a tough investment market on-track Introduction New of new categories vertical rolled-out 5
Slide 6: Our objectives – FY21
Our objectives – FY21 Very loyal customer base AO a 3 year plan UK household for Europe name delivered & famous for ready for difference next stage New verticals New providing territories increased being profitability launched Leveraging the AO brand to further categories 6
Slide 7: Financial Performance
Financial Performance Mark Higgins Chief Financial Officer 7
Slide 8: Continued revenue growth
Continued revenue growth Group Revenue (GBPm) UK AO Website Revenue Europe Revenue (EURm) (GBPm) 70 400 368 300 282 259 58 350 325 60 250 ↑ ↑ 215 300 9% 50 264 13% 200 ↑ 250 ↑ 21% 23% 40 36 200 150 ↑ 30 61% 150 22 100 20 ↑ 100 67% 50 10 50 0 0 0 HY16 HY17 HY18 HY16 HY17 HY18 HY16 HY17 HY18 • Group r
Slide 9: Improved momentum in Q2
Improved momentum in Q2 Own brand sales Third party sales Other sales* 20.0% 15.0% 13.2% 9.9% 10.8% 10.0% 6.2% 5.0% - (5.0)% (4.5)% (10.0)% (9.9)% (10.0)% (15.0)% (20.0)% (16.3)% Q1 YoY Growth (25.0)% Q2 YoY Growth (30.0)% (27.2)% HY18 HY18 Revenue £282m £21m £13m • Q1 performance hampered by challe
Slide 10: Gross margin remains on plan
Gross margin remains on plan UK Gross Margin % • Competitive pricing environment in (4.2) mature categories H1 18 22.2 18.6 • Dilutive margin impact of newer (5.6) categories as we build scale H2 17 19.9 17.1 • Supplier support remains strong (5.6) H1 17 22.5 20.0 Europe (12.1) H2 16 20.3 • Further
Slide 11: UK SG&A cost analysis
UK SG&A cost analysis UK UK SG&A Expenses as a % of revenue* • Total UK SG&A costs increased to 21.0% 25.0% (HY17: 18.9%)* 21.0% 18.9% 20.0% • Advertising and marketing expenses remain 18.0% broadly consistent with prior year at c.4.0% excluding Britain’s Got Talent (BGT) 10.8% 15.0% sponsorship cos
Slide 12: Europe SG&A cost analysis
Europe SG&A cost analysis Europe Europe SG&A Expenses as a % of revenue 60.0% • Total SG&A costs reduced to 24.5% of 49.2% revenue (HY17: 35.2%) as we increase 50.0% volume 40.0% • Advertising & marketing cash costs held in 24.2% 35.2% line with strategy at £2.4m (HY17: £2.5m) 30.0% 24.5% 20.3% • Wa
Slide 13: Group adjusted EBITDA impacted by increased UK marketing expenditure
Group adjusted EBITDA impacted by increased UK marketing expenditure Group adj. EBITDA (GBPm) UK adj. EBITDA (GBPm) European adj. EBITDA (EURm) £m 2.0 1.5 14.0 13.1 0.0 1.0 (2.0) 12.0 0.0 (4.0) (1.0) 10.0 (6.0) (2.0) 8.0 7.4 (8.0) (3.0) 6.0 5.1 (10.0) (4.0) (12.0) (5.0) 4.0 (4.5) (14.0) (6.0) 2.0 (1
Slide 14: Operating cash flow
Operating cash flow As at 30 September (£m) HY18 HY17 • Minimal Capex during the period • Positive working capital Adjusted EBITDA (6.3) 1.5 Europe set-up costs (0.2) (0.4) • £48m (net) equity placing in April ’17 Non-cash movements 0.6 0.4 Net change working capital: RCF extended to support future
Slide 15: Financial outlook broadly unchanged
Financial outlook broadly unchanged • Europe on track against the plan set out at February ’17 Capital Markets Day (FY21 run rate revenue €250m, EBITDA > €0m) • Impact of translating Europe results increases revenue slightly but will result in larger GBP EBITDA losses • UK broadly on track against t
Slide 16: Strategy, Operations & Outlook
Strategy, Operations & Outlook Steve Caunce Chief Executive Officer 16
Slide 17: Continuing to execute against our plan
Continuing to execute against our plan Operational summary • Continued to develop customer offering • New categories rolled-out in UK and Europe • European operations progressing to plan • Recycling facilities fully operational • Modest increase in brand awareness - currently reshaping our brand str
Slide 18: Making things easy for our customers
Making things easy for our customers • Continue to enhance the customer journey • Transactional Mobile App successfully launched across all territories • Introduction of better value timed delivery slots (UK) • New outbase opened in Bridgend September ’17 to improve delivery ability and services • I
Slide 19: Category development
Category development oO APPLIANCES. ONLINE LAUNCHED ao Ww APPLIANCES ONLINE BECOMES AO.COM AIR TREATMENT HEATING FLOORCARE GAMES CONSOLES CAMERAS
Slide 20: Easy addition of new categories
Easy addition of new categories Addition of complementary categories and expanded ranges UK – Mobile Phones, Gaming Consoles, Smart Home and Cameras – Addition of second computer distributor to broaden range - Europe – Germany: SDA – Netherlands: AV • Broadens customer base & provides cross-selling
Slide 21: Europe operations progressing to plan
Europe operations progressing to plan • All key metrics improving • New categories rolled out • Further enhancements to customer journey • Leveraging Bergheim • Culture & management structure well embedded • Supplier support continues to build • Growing with minimal ATL marketing investment • On-tra
Slide 22: AO Recycling completing the retail circle
AO Recycling completing the retail circle • New AO Recycling facility fully operational • Largest and most efficient plant in the UK • Capacity to recycle significantly more than the AO requirement • Capability to refurbish products to put back into use – ‘reuse is the ultimate in recycling’ • Reduc
Slide 23: Building brand awareness remains our greatest opportunity
Building brand awareness remains our greatest opportunity HY18 UK Performance 70% • Modest increases in spontaneous and 60% prompted brand awareness • BGT sponsorship 50% • Designed to primarily build brand 40% awareness rather than drive short-term sales 30% • Not the right vehicle for AO but valua
Slide 24: UK brand strategy update
UK brand strategy update What we know • Our brand is our greatest asset and biggest opportunity • Low brand awareness provides enormous potential • “Ease and care” strategy resonates with customers and non-customers alike • Customers are loyal and committed once they have experienced AO’s offer and
Slide 25: Our market opportunity remains substantial
Our market opportunity remains substantial 25 Source: GfK 12 months to 30 September 2017, all figures include VAT
Slide 26: AO remains well positioned
AO remains well positioned • AO Way flexible model gives significant competitive advantage • Maintained UK MDA market share / margin and grown share in other categories, despite overall market decline • Customers are loyal • MDA distressed purchase market provides level of insulation • Supplier supp
Slide 27: Summary & Outlook
Summary & Outlook • Continued to deliver our 4C strategy • European operations progressing to plan • Our mission remains the same • Uncertain UK economic environment • Will continue to execute operationally • Remain excited about the opportunities available to us 27
Slide 28: Q&A
Q&A 28
Slide 29: AO World plc Interim Results FY18
AO WORLD PLC Interim Results FY18 21st November 2017 th 6 June 2017