Ao World Plc · LSE:AO.
Ao World — H1 FY2019 Earnings Presentation
35 slides from Ao World's earnings presentation, Nov 20, 2018
Slide 1: AO World PLC FY19 Interim Results
AO WORLD PLC FY19 Interim Results 20th November 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: Agenda
Agenda Welcome Geoff Cooper, Chairman UK Market & Financial Performance Mark Higgins, Group CFO Strategic Progress Steve Caunce, Group CEO Q&A 3
Slide 4: HY19 highlights
HY19 highlights • Continued revenue growth and strategic progress against a challenging backdrop • Europe remains on-track with long-term plan • Proposed acquisition of Mobile Phones Direct further develops the Group’s strategic objectives 4
Slide 5: UK Market & Financial Performance
UK Market & Financial Performance Mark Higgins Group Chief Financial Officer
Slide 6: HY19 financial highlights
HY19 financial highlights • Group revenue up 9.9% • UK AO website sales up 4.2% (total UK revenue up 5.7%) • Europe revenue up 35.0% (on a constant currency basis) • Adjusted EBITDA: – UK profit reduced to £6.9m – Europe losses improved to €13.8m – Group losses improved to £5.4m 6
Slide 7: UK MDA Market Volume Growth, 2014 – 2018
UK MDA Market Volume Growth, 2014 – 2018 UK MDA Market Volumes - YoY Growth by Quarter 20% 15% 10% 5% 0% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2015 2016 2017 2018 -5% -10% -15% GfK Mgmt estimates Source: GfK and management estimates of MDA market volumes from third party data so
Slide 8: AO's UK total addressable market has grown significantly since IPO
AO’s UK total addressable market has grown significantly since IPO £bn 25.0 £21.0bn 20.0 15.0 £13.3bn £9.3bn £9.8bn 10.0 £5.3bn 5.0 0.0 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 MDA SDA AV Computing Gaming Mobile † Source: GfK 12 months to March, all figures include VAT † Source: Management estimate based
Slide 9: Revenue growth despite market challenges
Revenue growth despite market challenges UK Revenue (GBPm) Europe Revenue (EURm) Group Revenue (GBPm) 400 90 450 78 404 350 335 80 400 368 317 ↑ 295 ↑ 70 ↑ 350 325 300 ↑ 6% 58 35% ↑ 10% 7% 60 300 13% 250 50 ↑ 250 200 36 60% 40 200 150 30 150 100 20 100 50 10 50 0 0 0 HY17 HY18 HY19 HY17 HY18 HY19 HY
Slide 10: Continued progression in gross margin
Continued progression in gross margin UK Gross Margin % • Strong performance from newer categories has a dilutive 0.4 H1 19 impact on gross margin percentage 21.2 (1.1) H2 18 • Supplier partnerships remain strong 20.4 (4.2) H1 18 22.2 (5.6) Europe H2 17 19.9 (5.7) • Positive gross margin achieved du
Slide 11: UK SG&A cost analysis
UK SG&A cost analysis UK 25% UK SG&A Expenses as a % of revenue* 20.8% • Advertising & marketing costs increased to 3.7% from 3.0% in 20.1% 20% FY18/H2 following launch of new ‘Delivering Tomorrow’ brand 16.9% 17.3% campaign 10.8% 15% • Warehousing costs reflecting revenue leverage and further 11.6%
Slide 12: Europe SG&A cost analysis
Europe SG&A cost analysis Europe Europe SG&A Expenses as a % of revenue* 35% 31.6% • Marketing costs as a % of sales broadly consistent with prior year 30% period 24.5% • Our continued growth benefits our cost base leverage in both: 25% 17.9% 20.0% • Warehousing 20% 19.3% • Other admin (4.5ppt reduc
Slide 13: EBITDA progression
EBITDA progression UK adj. EBITDA (GBPm) Europe adj. EBITDA (EURm) Group adj. EBITDA (GPBm) 14.0 13.1 2.0 1.5 (12.5) 1.0 12.0 (13.0) 0.0 10.0 (13.5) (1.0) 8.0 7.4 (14.0) (2.0) 6.9 (13.8) 6.0 (3.0) (14.5) (14.3) (4.0) 4.0 (15.0) (5.0) 2.0 (15.5) (6.0) (5.4) 0.0 (15.6) (7.0) (6.3) (16.0) HY17 HY18 HY1
Slide 14: Operating cash flow
Operating cash flow As at 30 September (£m) HY19 HY18 • Continue to have significant liquidity headroom: Adjusted EBITDA (5.4) (6.3) £94.3m Europe set-up costs - (0.2) • Increased accrued income on warranties as well Non-cash movements (0.7) 0.6 as rebates is not matched by an increase in Net change
Slide 15: H2 Financial outlook
H2 Financial outlook UK • MDA market conditions expected to remain tough • New category and competency dynamics • ‘Delivering tomorrow’ campaign provides opportunity to drive market penetration as we focus on driving long-term brand awareness and revenues Europe • Europe working through the driver m
Slide 16: Strategic Progress
Strategic Progress Steve Caunce Group Chief Executive Officer
Slide 17: AO today…
AO today… * * A customer is defined as an individual who has purchased from ao.com, ao.de or ao.nl 17
Slide 18: AO has evolved
AO has evolved From a one country one category e-tailer… …to a multi-national and multi-category, vertically integrated ecosystem 18
Slide 19: Five UK units, all with huge potential
Five UK units, all with huge potential • Market leading • Leveraging AO • Partnership with • Leading UK home • Largest and most customer capability into new D&G for insurance delivery specialists efficient fridge satisfaction markets recycling plant in • Outbound sales • Nationwide Gas/ UK • Product
Slide 20: Acquisition of Mobile Phones Direct (MPD)
Acquisition of Mobile Phones Direct (MPD) • Proposed acquisition of MPD – leading online-only UK retailer of mobile phones: • Mobile Phones Direct (www.mobilephonesdirect.co.uk) • Smart Phone Company (www.smartphonecompany.co.uk) • Website visits of 13.6m in twelve months to 31 December 2017 • For y
Slide 21: Benefits of the acquisition
Benefits of the acquisition • Further develops our Customer Strategic objective • Further diversifies product offering, provides entry into substantial market with key business drivers of: • Move to online • Lower cost to serve • Leading ecommerce infrastructure • Premium smart phones • Complimentar
Slide 22: Strategic objectives: Competencies
Strategic objectives: Competencies Competencies Leveraging our expertise 22
Slide 23: Leveraging our core competencies into our supply / value chain
Leveraging our core competencies into our supply / value chain 23
Slide 24: Competency developments
Competency developments B2B • B2B division formalised to capitalise on a fragmented & regionally served market with low levels of customer service • Grown customer and client base across multiple industries • Agreement in principle for trial with major home builder • Achieved preferred supplier stat
Slide 25: Competency developments
Competency developments Logistics • Exploiting market demand for AO’s 2-man delivery expertise - commenced trial to deliver for third party furniture retailer with others in the pipeline • Upskilling premium engineering fleet Financial Services • Developing offering for all categories and territorie
Slide 26: Strategic objectives: Customers
Strategic objectives: Customers Customers Consolidate leading position in core markets in UK 26
Slide 27: Strong UK customer proposition
Strong UK customer proposition 27
Slide 28: Multi-category retailer
Multi-category retailer • Attach / cross sell is a significant revenue and profit opportunity encouraging customers to purchase multiple items • Customers want a broader range of product categories from AO.com • Range growth continues supported by suppliers and distributors • Cross category repeat t
Slide 29: UK customer developments
UK customer developments • NPS score maintained at a consistently high level of over 80 • Continue to enhance the customer journey • New outbase opened at Telford, two new outbases opened in Luton and Coventry post period end • Continued growth and development of UK premium service • Improved routin
Slide 30: UK brand progress
UK brand progress • Awareness / trust / consideration challenge • To try AO is to trust AO: Unique mix of humanity and efficiency • Launched new brand platform, ‘Delivering tomorrow’ DELIVERING TOMORROW • Delivering an integrated communications platform • Results encouraging†: − Spontaneous awarenes
Slide 31: UK new and repeat customers
Source: Internal Data 0 100,000 200,000 300,000 400,000 500,000 600,000 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 New Customers 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 First Order Time 2014 Q1 2014
Slide 32: Strategic objectives: Countries
Strategic objectives: Countries Countries Establish profitable business in DE/NL 32
Slide 33: Countries
Countries • Significant revenue growth • NPS score maintained at high level of c.80 • Growth achieved with minimal traditional marketing activity and sales growth from AO branded Amazon shop and PAYBACK customer loyalty scheme • Working through changes to German driver operating model – no material
Slide 34: Summary & outlook
Summary & outlook • Continued strengthening of position as a multi- category, multi-country, vertically integrated retailer • At least maintained UK MDA market share against a challenging market and gained market share across all other categories and all countries1 • Competency objective progressing
Slide 35: Q&A
Q&A 35