Brait Plc · JSE:BAT
Brait — Iceland Topco — FY2018 Earnings Presentation
54 slides from Brait's earnings presentation, Jun 15, 2018
Slide 1: Fiscal Year 2018 Audited Results
FISCAL YEAR 2018 AUDITED RESULTS 53 WEEKS ENDED 30 MARCH ’18 ICELAND TOPCO LTD CONSOLIDATED ACCOUNTS 15 JUNE 2018 1
Slide 2: Agenda
Agenda Performance Snapshot Richard Ewen Trading Review Tarsem Dhaliwal Financial Review Richard Ewen Outlook Tarsem Dhaliwal Q&A Presenters: Tarsem Dhaliwal (Group Managing Director) & Richard Ewen (Finance Director) First quarter: 12 weeks ending 16 June 2017 Second quarter: 12 weeks end
Slide 3: Performance Snapshot
Performance Snapshot Richard Ewen
Slide 4: Performance Snapshot
Performance Snapshot • Full Year Turnover up 8.0%*. • Full Year LFL Sales of 2.3%. • The group opened 36 new stores and closed (6) stores in the year. • Full Year EBITDA of £157.1m, (£2.9m) down on last year. • Full Year Group EBITDA % of Turnover at 5.2%, down (0.5%) on last year. • Cash generation
Slide 5: Trading Review
Trading Review Tarsem Dhaliwal • Core Estate • Online • The Food Warehouse • International • Sustainability • Sales Performance • Current Trading
Slide 6: Core Estate
Core Estate Iceland
Slide 7: Products
Products • Over 1,000 new products launched during the year • More than 100 product awards won generating positive PR • Innovation remains important, alongside a renewed focus on our key core range 7
Slide 8: Awards
Awards • 31 gold, silver and bronze awards. • 7 British Frozen Food Awards. • 10 commendations during the year. • Numerous wins at the British Cheese Awards, The Grocer Food & Drink Own Sea Bream fillets Label Awards and Olive magazine Awards. “Better than Waitrose for taste, texture, freshness • To
Slide 9: Marketing
HEALTHY, DEL BALAN AND UNTIL A FEMA Po save vor go } THE POWER } OF FROZEN?
Slide 10: Marketing
10 IN MINUTES . FROZEN TO LOCK IN THE FRESHNESS FROZEN TO LOCK iN THE Iceland FRESHNESS _ Shop Now — JCDecaux RESPONSIBLY SOURCED
Slide 11: Marketing: October – a change of focus towards Value
Marketing October – a change of focus towards Value 125 Iceland Price versus Competitors 115 105 Iceland Asda Index % 95 Tesco Sainsbury's Aldi 85 Lidl Farmfoods 75 Morrisons 65 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 41 42 43 44 45 46 47 48 49 50 52
Slide 12: Marketing
. -s. ‘e Keland 12 ACHIO © RED J
Slide 13: Marketing
Marketing Valentines Day – 22nd Jan – 14th Feb Jan-Mar Chinese New Year – 22nd Jan - 16th Feb Easter 13
Slide 14: Refits Update
Refits Update • Continuing to drive significant LFL improvement • Carried out 48 refits in FY18, total of 64 stores refit as at 15th June 14
Slide 15: Enfield Store
Enfield Store • First entirely new Iceland store in the UK in over 2 years 15
Slide 16: Operations
Operations Distribution • Additional Depot at Deeside made operational • Phased approach – Chilled (Oct FY18), Grocery (Apr FY19), Frozen (Sep FY19) • Expected 11% capacity increase in overall distribution network • Leadership change made in January following Supply Chain issues over Christmas perio
Slide 17: Online
Online Iceland
Slide 18: Online
Online • Significant growth continues • New and improved supplier relationships • Continued investment in Voted UK’s best online store for the third infrastructure and team consecutive year in annual Which? Survey of customer satisfaction • Focus on Online exclusives Online Supermarket of the Year,
Slide 19: Online
Online • Database of over 3.0m customers • New customer registrations of 10k+ per week • Highest ever sales week over Christmas 2017 • 4.4 star Feefo rating including a Gold star award 19
Slide 20: The Food Warehouse
the food WAREHOUSE Iceland
Slide 21: The Food Warehouse
The Food Warehouse • 59 stores at FY18 year end. • Majority of stores range between 7,000 Sq. ft. and 15,000 Sq. ft. • During FY18, increased focus on ‘Big Pack, Better Value’ proposition. • Drove efficiencies throughout the year as the operating model was refined. • Very little cannibalisation of t
Slide 22: The Food Warehouse - Concept Evolution
The Food Warehouse - Concept Evolution Wolverhampton • Store size: 23,500 sq. ft • Standalone site • Range: 4,000 SKU’s. • Higher weekly Sales than a typical Food Warehouse store. • Higher Average Basket spend than a typical Food Warehouse store. • 500 exclusive products offering a specific range to
Slide 23: The Food Warehouse estate - 64 stores
The Food Warehouse estate - 64 stores* 23 *as at 15th June 2018
Slide 24: International
International Iceland
Slide 25: International
International Franchise & Wholesale • Continue to export Iceland brand products to more than 40 countries around the world • 11 additional “Franchise \ stockist” outlets opened during the year taking total estate to over 50 stores • Launch of Iceland India and selling partnership in China with JD.co
Slide 26: Sustainability
Sustainability Iceland
Slide 27: Plastics Pledge
Plastics Pledge • On the 16th January 2018, we pledged to become the world’s first leading supermarket to remove all plastics from their own label products by 2023. 782 Pieces of coverage achieved 2.8bn opportunities to see Iceland’s highest brand buzz in a decade 27
Slide 28: Palm Oil Pledge
Palm Oil Pledge • On the 10th April 2018, we pledged to become the UK’s first supermarket to stop using palm oil as an ingredient in the production of all our own brand food by the end of 2018. • We are now replacing palm oil with a range of ingredients that do not harm the rainforest, including sun
Slide 29: Deposit Return Scheme
Deposit Return Scheme • Another first, on the 18th May 2018, we became the first UK supermarket to install a reverse vending machine in support of the Government’s proposed Deposit Return Scheme (DRS). • Reverse vending machines currently trialling in 4 stores: Fulham Wolverhampton Food Warehous
Slide 30: Sales Performance
Sales Performance Iceland
Slide 31: Total Sales Growth by Quarter
Total Sales Growth by Quarter Total Sales % 20% 15.5% 15% 9.3% 10% 7.0% 6.9% 5.3% 5% 3.2% 3.7% * 0% (0.6%) (5%) FY17 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY18 Q1 FY18 Q2 FY18 Q3 FY18 Q4 *Growth excluding 53rd week at 5.7% 31
Slide 32: Like for Like Sales by Quarter
Like for Like Sales by Quarter LFL Sales % 8% 6.4% 6% 4.9% 3.8% 4% 2.2% 1.8% 2% 0.8% 0.3% 0% (2%) (4%) (2.4%) FY17 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY18 Q1 FY18 Q2 FY18 Q3 FY18 Q4 32
Slide 33: Against the IGD Market
Against the IGD(1) Market Q1 Q2 Q3 Q4 Iceland LFL beat the Iceland LFL behind Iceland LFL behind Iceland LFL behind Market by the Market by the Market by the Market by 0.7% (0.8%) (2.8%) (2.3%) (1) IGD refers to the Institute of Grocery Distribution 33
Slide 34: Current Trading
Current Trading Iceland
Slide 35: Current Retail Market outlook
Current Retail Market outlook 35
Slide 36: Refit Rollout Programme
Refit Rollout Programme • 13 refits completed so far this year • A further c.20 stores to be completed in FY19. • Majority continue to be in London and the South East. • Each one a transformation, rather than a spruce up. Hounslow West Paignton Ruislip Musselburgh
Slide 37: Refit Rollout Programme: Wavertree Trial
Refit Rollout Programme Wavertree Trial – Low cost refit 37
Slide 38: Food Warehouse: Looking ahead
Food Warehouse: Looking ahead • 5 new stores opened so far this year • A further 25 stores planned by the end of FY19, bringing the total to 89 • More “Wolverhampton style” 20,000+ sq ft stores to be sourced • Continue to refine and develop the product range through bigger packs and product innovati
Slide 39: Products
39 SUMMER HUNTERS :N BFFF RETAIL PRODUCT OF THE YEAR
Slide 40: Marketing
Marketing • ‘Winning at summer’ campaign launches via National TV & Press and Social Media • Continued Focus on Value • Bonus card incentive • Campaigns: World Cup Fathers Day 40
Slide 41: Financial Review
Financial Review Richard Ewen
Slide 42: Key Financial Highlights
Key Financial Highlights The Market • The UK Retail market has become even more competitive, with only small volume growth as consumers try to manage inflation. Based on the latest Kantar data (12 weeks ending 20th May‘18), the grocery market grew 2.7%, with food inflation at 2.1%. There is also a r
Slide 43: Fourth quarter results versus Third quarter outlook
Fourth quarter results versus Third quarter outlook • Current trading: Positive LFL sales to continue for the remainder of FY18, despite trading over some tough comparatives (FY17 Q4: 4.9% LFL). • 7 net new stores will open in FY18 Quarter 4 (5 Food Warehouse, 2 Iceland, 2 Ireland, (2) Iceland closu
Slide 44: Fourth Quarter Sales Performance (£m)
Fourth Quarter Sales Performance (£m) FY18 Q4 FY17 Q4 Var Var% Base Estate 715.1 641.2 73.9 11.3% FY17 & FY18 New Stores 24.7 6.7 18.0 2.7% Other Group Co’s 16.7 7.1 9.6 1.5% Turnover 756.5 655.0 101.5 15.5%* *Excluding 53rd week, 5.7% 44
Slide 45: Full Year Sales Performance (£m)
Full Year Sales Performance (£m) FY18 FY17 Var Var% Base Estate 2,861.5 2,734.7 126.8 4.5% FY17 & FY18 New Stores 111.3 35.8 75.5 2.7% Other Group Co’s 44.1 21.7 22.4 0.8% Turnover 3,016.9 2,792.2 224.9 8.0%* *Excluding 53rd week, 5.8% 45
Slide 46: Fourth Quarter Profit and Loss (£m)
Fourth Quarter Profit and Loss (£m) FY18 Q4 FY17 Q4* Var • Gross profit has increased by £14.2m year on year, predominantly as a result of the increase in sales. Group Turnover 756.5 655.0 101.5 Cost of Sales (682.7) (595.4) (87.3) • The Gross Profit % increase of 0.7% reflects the timing of income
Slide 47: Full Year Profit and Loss (£m)
Full Year Profit and Loss (£m) • Gross profit is £5.5m favourable to FY17, although as a % of turnover FY18 FY17* Var this is down (0.4%) year on year. Group Turnover 3,016.9 2,792.2 224.7 • This Gross Profit % dilution comprises of four elements: Cost of Sales (2,802.6) (2,583.4) (219.2) – Sales mi
Slide 48: Fourth Quarter Cash Flow (£m)
Fourth Quarter Cash Flow (£m) FY18 Q4 FY17 Q4 Var • Adverse Q4 movement in working capital of (£7.2m) predominantly driven by the timing of trade payments. Group EBITDA 59.2 46.6 12.6 Movement in Working Capital (7.2) (25.4) 18.2 • Net Capital Expenditure of (£24.5m) as we continued our new store an
Slide 49: Full Year Cash Flow (£m)
Full Year Cash Flow (£m) FY18 FY17 Var • Positive full year movement in working capital of £30.7m, aided by our sales growth. Group EBITDA 157.1 160.0 (2.9) Movement in Working Capital 30.7 35.1 (4.4) • Capital expenditure of (£81.3m) is (£16.1m) higher than last year as a result of new stores and t
Slide 50: Net Debt (£m)
Net Debt (£m) FY18 FY17 Var Cash at Bank and in hand 140.7 193.2 (52.5) Debt (771.8) (847.8) 76.0 Finance Leases (38.4) (20.5) (17.9) Net Debt (669.5) (675.1) 5.6 Net Leverage 4.3x 4.2x (0.1x) *Leverage calculations based on rolling 12 month EBITDA 50
Slide 51: FY18 Refinance & Q4 Bond Buy Backs
FY18 Refinance & Q4 Bond Buy Backs (Company and related parties) Refinance (September ‘17) • On the 14th September ‘17, Iceland successfully completed a refinancing to issue £550m of Senior Secured Notes due 2025 at 4.625% to partially reduce the Floating Rate Notes at 4.25% plus LIBOR due 2020 from
Slide 52: Outlook
Outlook Tarsem Dhaliwal Iceland
Slide 53: Outlook
Outlook • Current trading: Overall Group sales continue to grow, but LFL % for the year to date is negative (impacted by the timing of Easter). Underlying LFL sales remain slightly positive year on year. • We have opened 7 net new stores opened in FY19 Quarter 1 to date (5 Food Warehouse, 1 Iceland,
Slide 54: Q&A
Q&A Iceland