Ao World Plc · LSE:AO.
Ao World — FY2016 Earnings Presentation
38 slides from Ao World's earnings presentation, Jun 8, 2016
Slide 1: AO World plc Full year results
AO World pic Full year results year ended 31*t March 2016 8th June 2016
Slide 2: Agenda
Agenda Introduction John Roberts Operations Steve Caunce Financials Mark Higgins Strategy John Roberts Q8A
Slide 3: Our mission
Our mission . I a ! | Exceptional i in the moments that matter | i J
Slide 4: What is our difference
What is our difference Not beaten Largest Innovative Best-in-class* on price available range online content delivery model Amazing customer 6 fA ao market leading proposition YJ a Supported by i ighout the supply chain Bespoke IT systems A culture where ‘we care more’ Our brand is 2% years old with
Slide 5: Our 4C's & Customers
Our 4C’s &@ Customers UK Customer base (000s)* =| | FY 2013 MDA (1 category) FY 2014 | MDA | SDA & Brand (8 Countries %g exceptional (2 categories) sal ethernet ve “9; a2 MDA| SDA | AV 2014 2015 owe ae ap . 1country 2 countries 3 countries Gs al (3 categories) Se “a customer is defined as an individ
Slide 6: Operational review
Operational review
Slide 7: Our customers love us
Our customers love us z Rating distribution ao.com reviews Excellent 9.6 trom o-10 ESESESESES nBoog ° Top notch delivery ‘The guys who delvered my machine were briliant. They were here betore the alloted time. They were very eficient and helptul ‘and they installed my washer and took away all the pa
Slide 8: UK
Slide 9: The UK brand in numbers
The UK brand in numbers Driving greater brand awareness is AO.com’s biggest opportunity 50% =@— = Spontaneous Brand Awareness =@= Prompted Brand Awareness 40% 30% 20% 10% Jul-13, Sep/Oct-13. Dec-13_ Mar-14. Apr/May-14 Sep-14 Dec-14. Jan/Feb-15 Jul-15. Sep-15. Dec-15 = Mar -16 Awareness has trebled s
Slide 10: Customers are coming back more quickly
Customers are coming back more quickly Customer Repeat Lag After First Purchase 60% 50% 40% 30% 20% 10% 0% ——2010 — 2011 —2012 —2013 —2014 — 2015 ‘Source: Based on internal sales data
Slide 11: Customers are buying more often
Customers are buying more often Cumulative Orders per Customer 2.20 2.00 1.80 1.60 1.40 1.20 1.00 1 2 3 4 5 Year during repeat purchase made 2010 2011 2012 2013 2014 2015 ‘Source: Based on internal sales data
Slide 12: More customers are returning
More customers are returning Customers vs Repeat Customers % 500,000 50.0% 450,000 45.0% 400,000 40.0% 350,000 35.0% 300,000 30.0% 250,000 25.0% 200,000 20.0% 150,000 15.0% 100,000 10.0% 50,000 | | | | | 5.0% 0 caenntoalll 0.0% PON OR ORI PARR OR First Order Time mmmNew Customers mmm Repeat Customer
Slide 13: Computing
Computing . Proposed UK launch during FY17 | . Offering hardware, software and accessories Jahn ° Represents a significant category at £4.0bn* . Opportunity to improve the market through offering customers: * AO'ssuperior journey and service * — Enriched content lo) (ay) * — Innovative multimedia aa
Slide 14: Europe
Slide 15: Europe proposition
Europe proposition Germany . Nearly 2 years old . MDA growing - almost 2,000 SKUs . Commenced selling Floorcare Netherlands . Launched AO.nl on 1 March 2016 . Leveraging our infrastructure, teams and learnings . Encouraging start
Slide 16: Rationalisation
Rationalisation Cost base * Improving product margin * Logistics efficiencies * Employed drivers * Leased fleet * — Optimising traffic acquisition * Driving efficiencies though overheads Operation * Move warehousing to Bergheim . Integrate Netherlands
Slide 17: European distribution map
ss is &S Netherlands _@ Hamburg fo: a Berlin BOae Ww @ Utrecht Germany Elsdorf/ \Bergheim @ Frankfurt risa eG AO.de outbase Distribution Centre Outbase
Slide 18: Leveraging Bergheim
Leveraging Bergheim European regional office and distribution centre 35,000 square metres Combines operations Enables us to grow German business while serving launch of neighbouring countries Increases current capacity by a multiple of 5 Promotes brand presence Expect to be fully operational in autu
Slide 19: Culture and awards
All achieved through a culture underpinned by strong core values dedicated to driving customer excellence ‘EST COMPANIES Jumped 58 places to PayPal Best Large 4 place Customer Service Paypal Overall Award for Excellence sit Pure-Play Etailer of Initiative of the Year Best Customer Experience Best Us
Slide 20: Financial review
Slide 21: Revenue growth
Revenue growth Group Revenue 599.2 ° Group revenue increased by 25.7% UK Revenue 558.5 fm 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 - European Revenue 40.7 ° UK revenue growth supported by repeat customers and brand ° Europe rationalisation plan will slow revenue growth in short term Note: Cer
Slide 22: Adjusted EBITDA
Adjusted EBITDA Group adj. EBITDA UK adj. EBITDA European adj. EBITDA £m ém £m 10.0 14 00 - 85 172 8.0 172 (5.0) 60 170 “° 168 10.0) (8.0) 2.0 16.6 0.0 + 16.5 (15.0) FYIS (20) 164 (20.0) (4.0) 162 (3.9) (21.1) (6.0) 16.0 = (25.0) FYIS Fyié * Group adj. EBITDA includes investment in Europe ° UK adj.
Slide 23: SG&A cost analysis - Group
SG&A cost analysis - Group O0* | Group SG&A Expenses as a % of revenue * Increased marketing expenditure on 20.0% | 174% 19.0% brand awareness in UK and Europe 15.0% - ° Increase in UK warehousing space 10.0% | ° Investment in overheads for new som | 3.8% Be categories and countries Fy15 FY16 @ Adve
Slide 24: SG&A cost analysis - UK & Europe
SG&A cost analysis - UK & Europe 20.0% » UK SG&A Expenses as a % of revenue 120.0% Europe SG&A Expenses as a % of revenue 18.0% 17.1% %6 7.5% 103.9% r60% | 16.3: 100.0% 14.0% ~ 80.0% 12.0% ~ 10.0% ~ 60.0% 3.0% — 2m] = 0.0% 0.0% FY14 Fy1s FY16 Fy15. FY16 Advertising and Marketing Warehousing m Other
Slide 25: Operating cash flow
Operating cash flow As at 31 March (£m) FY16 FY15 Adjusted EBITDA (3.9) 85 Europe set-up costs (2.3) (4.3) Non-cash movements 0.6 (1.5) Net change working capital: Movement in trade & other receivables and accrued (15.8) (12.4) income Movement in inventories (2.4) (15.7) Movement in trade and other
Slide 26: FY17 Guidance
FY17 Guidance For the year ended 31 March 2017: UK • Revenue £630m - £650m • Adjusted EBITDA £21m - £25m Europe (Germany & Netherlands) • Revenue €90m - €110m • Adjusted EBITDA losses €26m - €30m
Slide 27: Strategy for growth and profitability
Strategy for growth and profitability
Slide 28: Strategy progress
Strategy progress Feb 14 June 16 Continue to gain market share year on year We have continued to gain market share and significantly expanded the range All underpinned by strong culture 475 Products across TVs, Home Cinema, Audio, and strong brand Blu-Ray & DVD players, digital set top boxes and acc
Slide 29: Realising the opportunity
Realising the opportunity Current and future potential markets 1.UK MDA, SDA, AV: £9.2bn Broader electricals: £14.4bn 2. Germany MDA, SDA, AV: £12.Sbn_ Broader electricals: £16.6bn. 3. Netherlands MDA. SDA, AV: £2.2bn. Broader electricals: £3bn 4. Ireland MDA, SDA, AV: £0.4bn Broader electricals: £0
Slide 30: The strategy for growth
The strategy for growth | internal control - Brand (customer & culture) J! ee 3 | ! I I I I New I ; Category I I | I I Traffic/ Delivery People/ Customers | Proposition Learn | External negotiations - Brand | I (revenue & offering) I retailer in Fr I I ! > | Best electrical | I I I I
Slide 31: The strategy for growth
The strategy for growth rnal control - Brand (customer & culture) I Europe Q ° = s o = < Traffic/ reece | Customers r= — — — — ———-—, l I i l I I l I ’ i l New "Best electrical i I I retailer in I l I 1 | I i | I i ! I I External negotiations - Brand I I (revenue & offering) I
Slide 32: Brand strategy
Brand strategy We need more consumers to be of us Making all customers aware of the breadth of our offering - journey from We are the message and creating across all customer touch points Drive revenue through by increasing spontaneous brand awareness Continue to , driving new customers to our J ce
Slide 33: We know where we are going
We know where we are going * Huge market opportunity * Innovative & disruptive model that has been proven to work in the UK * We think differently. By obsessing about our culture and the customer we have created a brand that customers love Mission: To be the best electrical retailer in Europe All ac
Slide 34: Q&A
Q8A
Slide 35: Appendix: Definitions
Appendix D jons Adjusted EBITDA Loss/profit before tax, depreciation, amortisation, net finance costs, Adjustments and exceptional items. Adjustments Set-up costs relating to overseas expansion and share based payment charges / credits attributable to exceptional LTIP Awards UK Defined by the Group
Slide 36: Income statement
Income statement As at 31 March (£ 2016 2015} Revenue 599.2 476.7 Cost of sales (493.3) (389.1) Gross profit 105.9 87.6 Administrative expenses (116.5) (89.8) Operating loss (10.6) (2.2) Finance income 42 03 Finance costs (0.3) (1.0) Loss before tax (6.7) (2.9) Tax 0.6 0.4 Loss for the year (6.1) (2
Slide 37: Balance sheet
Balance sheet As at 31 March (£m) 2016 201 Non-current assets Goodwill 135 12.2 Other intangible assets 21 21 Property, plant and equipment 18.0 13.5 Trade and other receivables 29.5 171 Deferred tax asset 15 0.8 Derivative Financial asset 0.8 - 65.4 45.7 Current assets Inventories 34.0 315 Trade an
Slide 38: Disclaimer
Disclaimer This presentation includes statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believe”, “estimates”, “plans”, “projects”, ‘anticipates’, “expects”, “i