preliminary results for the year ended 31 march 2011...– opened fourth store in canada, two stores...
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PRELIMINARY results FOR THE YEAR ENDED
31 MARCH 2011
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FINANCIAL REVIEW
—
Technology CREATING COMPETITIVE ADVANTAGE
—
STRATEGIC UPDATERetail-led growth
UNDER-PENETRATED MARKETS
—
QUESTIONS
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A record year for Burberry
• STRONG FINANCIAL POSITION– Revenue of £1.5bn
– Adjusted PBT of £298m
– Adjusted retail/wholesale EBIT margin of 15.6%
– Full year dividend of 20.0p
• FURTHER STRATEGIC PROGRESS– Extensive store opening programme
– Chinese operations acquired
– Spain restructuring completed
– Monthly flow of products introduced
– Burberry World launched
• CONTINUE TO INVEST IN FY 2012 TO DRIVE GROWTH
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REVENUE UP 27%
£1,501m
£1,185m
(£4m)£84m£140m
£66m£30m
FY 2010 EXCHANGE
RATES
CHINA RETAIL WHOLESALE LICENSING FY 2011
REVENUE
EXCLUDING DISCONTINUED SPANISH OPERATIONS
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REVENUE UP 27%
• REVENUE UP 24% UNDERLYING– 19% underlying growth excluding China
– Double-digit growth in retail and wholesale, all regions and all product categories
• RETAIL– 64% of sales
– 32% underlying growth including China
– 20% underlying growth excluding China
• WHOLESALE– 29% of sales
– 16% underlying growth including China
– 25% underlying growth excluding China
• LICENSING– 7% of sales
– 4% underlying decline
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RETAIL REVENUE UP 32%*
£710m
£962m£78m
£62m£90m
£22m
FY 2010 EXCHANGE
RATES
CHINA NEW
SPACE
COMP
STORE
GROWTH
FY 2011
REVENUE
* UNDERLYING
EXCLUDING DISCONTINUED SPANISH OPERATIONS
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RETAIL REVENUE UP 32%*
• COMPARABLE STORE SALES UP 11%– Innovative digital marketing
– Monthly flow
– Replenishment
– Average selling price up; largely mix
– Mainline stores outperformed
• EXTENSIVE STORE OPENING PROGRAMME– Opened net 26 mainline stores
– Opened net 34 concessions (20 in Spain)
– Now one million square feet of retail selling space
• RENOVATIONS– Boston
– Las Vegas
• OUTLOOK FOR FY 2012– 12-13% increase in average selling space
– Plus 12% in H1 from acquired China stores
* UNDERLYING
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£441m
£377m
£84m
(£24m)£4m
FY 2010 EXCHANGE
RATES
CHINA UNDERLYING
GROWTH
FY 2011
REVENUE
WHOLESALE REVENUE UP 16%*
* UNDERLYING
EXCLUDING DISCONTINUED SPANISH OPERATIONS
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• UP 25% EXCLUDING CHINA
• STRONG CONSUMER DEMAND– Menswear
– Label segmentation
• FACILITATED BY SUPPLY CHAIN IMPROVEMENTS– Higher fulfilment rates
– In-season orders
• OUTLOOK FOR H1 2011/12– Up mid teens % underlying, excluding China
WHOLESALE REVENUE UP 16%*
* UNDERLYING
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REVENUE
£98m £98m£2m(£6m)£4m
FY 2010 EXCHANGE
RATES
NON -
RENEWALS
UNDERLYING
GROWTH
FY 2011
LICENSING REVENUE DOWN 4%*
* UNDERLYING
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• UP 1% AT REPORTED FX
• CLEANING UP LEGACY ISSUES COSTS £6M– Final regional menswear licences
– Japanese leather goods licence
• OTHER JAPANESE ROYALTY INCOME BROADLY FLAT
• DOUBLE-DIGIT GROWTH FROM GLOBAL PRODUCT LICENCES– Strengthened team
– Greater integration with brand
• OUTLOOK FOR FY 2012– Mid single-digit % underlying increase
– Assumes all Japanese apparel and non-apparel royalty income at contractual minimum levels
LICENSING REVENUE DOWN 4%*
* UNDERLYING
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REVENUE GREW DOUBLE-DIGITIN ALL REGIONS
EUROPE: 34%
15% GROWTHAMERICAS: 27%
16% GROWTH
ASIA PACIFIC: 33%
53% GROWTH
REST OF WORLD: 6%43% GROWTH
% growth on underlying basis
FY 2011 RETAIL/WHOLESALE REVENUE
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REVENUE GREW DOUBLE-DIGITIN ALL REGIONS
• ASIA PACIFIC LARGEST REGION IN H2– 35% of sales in H2
– China acquisition
– Strong performance in Hong Kong, with five stores opened
• EUROPE UP 15%– Double-digit comp growth
– Opened first European Brit trial store in Milan
– Retail about two-thirds of Europe revenue
• AMERICAS UP 16%– Opened four further Brit trial stores in US
– Opened fourth store in Canada, two stores in Brazil and one in Mexico
– Wholesale about one-third of Americas revenue
• REST OF WORLD UP 43%– Opened one store in the Middle East and three in India
– Net nine franchise stores opened
– Roughly half retail
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Revenue grew DOUBLE-DIGITin all products
WOMENSWEAR: 33%
21% GROWTH
MENSWEAR: 23%
29% GROWTH
NON-APPAREL: 40%
32% GROWTH
CHILDRENS: 4%
23% GROWTH
% growth on underlying basis
FY 2011 RETAIL/WHOLESALE REVENUE
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Revenue grew DOUBLE-DIGITin all products
• NON-APPAREL NOW 40% OF REVENUE– Underpinned by large leather goods
– Mens accessories under-penetrated
• MENSWEAR APPAREL GROWTH ACCELERATED TO 31%– Outerwear designs
– Replenishment
– Tailoring
• BURBERRY PRORSUM AND LONDON OUTPERFORMING– Extensive runway coverage of Prorsum
– Luxury quotient increased in London
• CHILDRENSWEAR EVOLVING– Team now based in London
– Replenishment and flow strategies initiated
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STACEY CARTWRIGHT
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EVP, CHIEF FINANCIAL OFFICER
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FINANCIAL HIGHLIGHTS
14%
43%
39%
39%
27%
GROWTH
262.0297.9NET CASH
14.0p20.0pDIVIDEND PER SHARE
35.1p48.9pADJUSTED DILUTED EPS
214.8297.9ADJUSTED PBT
1,1851,501REVENUE
2010£M
2011£M
12 MONTHS TO 31 MARCH
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ADJUSTED OPERATING PROFIT UP 37%
£219.9m
£301.1m
£6.3m
£80.1m (£5.2m)
FY 2010 EXCHANGE
RATES
RETAIL/
WHOLESALE
LICENSING FY 2011
ADJUSTED OPERATING PROFIT
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RETAIL/WHOLESALE PROFIT UP 59%
290bp
(100bp)
390bp
29%
CHANGE
12.7%15.6%AS % OF REVENUE
137.7219.5ADJUSTED OPERATING PROFIT
(48.3%)(49.3%)AS % OF REVENUE
(526.0)(691.8)OPERATING EXPENSES
61.0%64.9%AS % OF REVENUE
663.7911.3GROSS MARGIN
1,087.61,402.9RETAIL/WHOLESALE REVENUE
2010£M
2011£M12 MONTHS TO 31 MARCH
GOAL IS TO MANAGE GROSS MARGIN AND OPERATING EXPENSES DYNAMICALLY TO DELIVER FURTHER MODEST OPERATING MARGIN IMPROVEMENT IN FY 2012
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RETAIL/WHOLESALE GROSS MARGIN UP 390BP
56.9%58.5%
52.1%
59.7% 61.0%
64.9%
2007 2008 2009 2010 2011
INC SPAIN EXC SPAIN
YEAR TO MARCH
GROSS MARGIN
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RETAIL/WHOLESALE GROSS MARGIN UP 390BP
• H1 UP 670BP– Improved full price sell-through
• H2 UP 170BP– Wholesale to retail shift
– More replenishment
– Mainline outperformance
– Burberry Prorsum and London outperformed
– Raw material cost inflation
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RETAIL/WHOLESALEOPERATING EXPENSES/REVENUE AT 49.3%
ADJUSTED OPERATING EXPENSES/REVENUE
42.3%43.6%
42.3%
48.1% 48.3% 49.3%
2007 2008 2009 2010 2011
INC SPAIN EXC SPAIN
YEAR TO MARCH
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RETAIL/WHOLESALEOPERATING EXPENSES/REVENUE AT 49.3%
• REGIONAL COST LEVERAGE DESPITE– Wholesale to retail shift
– Investment in new ventures
• INVESTMENT IN CORPORATE INITIATIVES IN FY 2011– Creative media
– Burberry World
– Client services
• OUTLOOK FOR FY 2012– Further strengthen corporate functions
– Transitional flagship costs reduce profit by c.£10m
– Investment first half weighted
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252011 INCLUDES FX BENEFIT OF £4.4M IN REVENUE AND £0.2M IN OPEX
LICENSING PROFIT
84.3%82.9%OPERATING MARGIN
154144YEN RATE
82.281.6OPERATING PROFIT
(15.3)(16.8)OPERATING EXPENSES
97.598.4GROSS MARGIN AT 100%
97.598.4REVENUE
2010£M
2011£M
12 MONTHS TO 31 MARCH
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INCOME STATEMENT
(70.4)(6.2)DISCONTINUED OPERATIONS
81.4208.4ATTRIBUTABLE PROFIT
(0.8)2.1NON-CONTROLLING INTEREST
(58.8)(83.2)TAX
211.4295.7PROFIT BEFORE TAX
(3.4)(2.2)EXCEPTIONAL ITEMS
214.8297.9ADJUSTED PROFIT BEFORE TAX
(5.1)(3.2)NET FINANCE CHARGE
219.9301.1ADJUSTED OPERATING PROFIT
2010£M
2011£M
12 MONTHS TO 31 MARCH
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Discontinued Spanish operations
(45.4)(4.1)RESTRUCTURING COSTS
(25.0)-TAX
-(2.1)OPERATING RESULT
(70.4)(6.2)TOTAL
2010£M
2011£M
12 MONTHS TO 31 MARCH
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CASH FLOW FROM OPERATIONS
-(2.1)SPAIN OPERATING LOSS
427.2367.8CASH INFLOW FROM OPERATIONS
33.964.3INCREASE IN PAYABLES
49.4(8.1)(INCREASE)/DECREASE IN RECEIVABLES
80.3(58.0)(INCREASE)/DECREASE IN INVENTORIES
18.128.3EMPLOYEE SHARE SCHEME COSTS
52.362.6DEPRECIATION AND AMORTISATION
(26.7)(20.3)RESTRUCTURING SPEND
219.9301.1ADJUSTED OPERATING PROFIT
2010£M
2011£M
12 MONTHS TO 31 MARCH
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FREE CASH FLOW
7.47.0CAPITAL CONTRIBUTIONS FROM JV PARTNERS
304.8111.8FREE CASH FLOW
(1.6)(1.4)OTHER NON-CASH ITEMS
(51.3)(98.1)TAX PAID
(5.0)(3.2)NET INTEREST
(2.0)(51.9)ACQUISITIONS
(69.9)(108.4)CAPITAL EXPENDITURE
427.2367.8CASH INFLOW FROM OPERATIONS
2010£M
2011£M
12 MONTHS TO 31 MARCH
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TOTAL CASH FLOW
254.435.9TOTAL CASH FLOW
262.0297.9NET CASH AT 31 MARCH
5.4(1.6)EXCHANGE DIFFERENCE
(3.3)(5.6)OTHER CASH ITEMS
(52.5)(68.7)DIVIDENDS
304.8111.8FREE CASH FLOW
2010£M
2011£M
12 MONTHS TO 31 MARCH
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OUTLOOK
RETAIL FY 2012 average selling space up 12-13%
- Plus 12% in H1 from acquired China stores
WHOLESALE H1 underlying growth of mid teens % excluding China
- Up mid single-digit % including China
LICENSING FY 2012 underlying growth of mid single-digit %
- Assumes all Japanese royalty income at contractual minimums
- Small FX benefit
UNDERLYING TAX RATE c.27%
DIVIDEND POLICY Full year 40% payout based on adjusted diluted EPS
CAPITAL EXPENDITURE £180-200m
FY 2012 Modest operating margin improvement
Investment H1 weighted
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JOHN DOUGLAS
—
CHIEF TECHNOLOGY OFFICER
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IT yesterday
10 REGIONAL IT DEPARTMENTS
11 EMAIL SYSTEMS
10 ERP SYSTEMS
10 TELEPHONE PROVIDERS
10 NETWORKS
MANY POS SOLUTIONS
LIMITED INTERNET ACCESS
GLOBAL IT
ONE GLOBAL EMAIL SYSTEM
ONE ERP SYSTEM (SAP)
ONE TELEPHONE PROVIDER
ONE GLOBAL NETWORK
COMMON POS SOLUTION
DESKTOP INTERNET ACCESS
IT today
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WORKING WITH KEY PARTNERS
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FY 2007/8
Finance/NSP
Manufacturing
Order book
Europe
FY 2008/9
Hong Kong
Australia
FY 2009/10
USA
Canada
Malaysia
Singapore
FY 2010/11
Korea
Brazil
Mexico
Taiwan
FY 2011/12
China
Middle East
SAP – ROLLOUT NEARLY COMPLETE
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BURBERRY.COM SUPPORTING CREATIVE
IT TODAY
RETAIL THEATRE
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Retail theatre connecting brand toucHpoints
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Retail theatre connecting brand toucHpoints
• HIGH DEFINITION EXTERNAL SCREENS– Showcasing multi-media content
• PLASMA TILE VIDEO WALLS IN-STORE – Livestreaming events
• TOUCH SCREEN TECHNOLOGY– Bringing product to life
• IPADS AND APPLICATIONS IN-STORE– Opening full collection to customers in store
• VIC FITTING ROOMS– Personalising shopping experience
• NETWORK AND INFRASTRUCTURE– Delivering the content
THE TECHNOLOGY
• CREATES POINT OF DIFFERENCE– Technology consistent globally– Content consistent globally
• TO IMPROVE RETAIL METRICS– To increase retail productivity– To increase units per transaction– To support VIC selling
• SOFT BENEFITS– One synchronised consumer message – Brand awareness– Brand loyalty
THE PAYBACK
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BURBERRY.comPUREST EXPRESSION OF THE BRAND
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• CONNECTING THE BURBERRY COMMUNITY– Art of the Trench
– YouTube
• COMPLETE PRODUCT OFFER– Innovative 3D displays
• BROAD GLOBAL REACH– 45 countries
– 23 currencies
– 6 languages
• PERSONALISED CUSTOMER SERVICE– Click to call
– Click to chat
– 24/7, 365 days a year
BURBERRY.comINNOVATION AND DIFFERENTIATION
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SUPPORTING CREATIVE
• TAILORED SYSTEMS– Design
– Creative media
• DIGITAL ADVANCES IN MARKETING– From stills to multi-media
• EXPANDED REACH OF FASHION SHOWS– From selected guests to one million viewers
globally
• MORE EVENTS– Beijing digital showcase
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LOOKING TO THE FUTURE
• COMMODITISATION OF IT
• CUSTOMER INSIGHT AND ANALYTICS
• CONNECTING WITH STAKEHOLDERS
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“MOST LUXURY COMPANIES SEE TECHNOLOGY AS A COST;
BURBERRY SEES IT AS A KEY DIFFERENTIATOR AND DRIVER”
—
VERIZON
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ANGELA AHRENDTS
—
CHIEF EXECUTIVE OFFICER
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LEVERAGING THE FRANCHISE
—
INTENSIFYING NON-APPAREL DEVELOPMENT
—
ACCELERATING RETAIL-LED GROWTH
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INVESTING IN UNDER-PENETRATED MARKETS
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PURSUING OPERATIONAL EXCELLENCE
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Increased CAPITAL EXPENDITURE
CAPITAL EXPENDITURE
YEAR TO MARCH
£108m
£180-200m
FY 2011 FY 2012
IT/OTHER OTHER RETAIL FLAGSHIPS
£108m
£180-200m
YEAR TO MARCH
CAPITAL EXPENDITURE
FY 2011 FY 2012
IT/OTHER NEW STORES RENOVATIONS
FOCUS ON RETAIL FOCUS ON flagships
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INCREASED CAPITAL EXPENDITURE
• FY 2012 CAPITAL EXPENDITURE PLANNED AT £180-200M– Catch up from FY 2011
– New space growth accelerates to 12-13%
– Net 20-25 mainline stores
– Net 10 or so concessions
– 15-20 major refurbishments
– Focus in flagship markets
• IMPROVED PRODUCTIVITY ENABLES MORE PROJECTS TO MEET HURDLE RATE
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ACCELERATING RETAIL-LED GROWTH
HONG KONG
SHANGHAI
SYDNEY
PARISMILAN
AMSTERDAM
SAN FRANCISCOCHICAGO NEW YORK ROME
LONDON
RIOSÃO PAULO
REFURBISH/RELOCATE
NEW
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COVENT GARDEN BRIT
BOND STREET
Investing in London
KNIGHTSBRIDGE
LONDON HEATHROW TERMINAL 5
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DIRECTLY OPERATED
RETAIL/WHOLESALE REVENUE
2008 2011
16%
6%
2008 2011
NUMBER OF STORES % OF RETAIL/WHOLESALE REVENUE
£58m
£221m
2008 2011YEAR TO MARCH AS AT MARCH YEAR TO MARCH
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136
Emerging markets
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Emerging Markets includes China, India, Russia, Eastern Europe, Latin America and the Middle East
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Emerging markets
• ENTER NEW MARKETS VIA FRANCHISE– Armenia, Egypt, Israel and Mongolia in FY 2011
• TAKE DIRECT CONTROL AT APPROPRIATE STAGE– China in FY 2011
– Saudi Arabia, subject to government approval, in FY 2012
• INVEST IN EMERGING MARKETS– About 20 new stores in FY 2012
– Global initiatives in infrastructure, retail disciplines, marketing and social media
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China – smooth integration
• TEAM PROVEN IN EXECUTION
• GOOD PROGRESS IN BUILDING LOCAL ORGANISATION
• DRIVING RETAIL PRODUCTIVITY
• EVOLVING THE STORE NETWORK
• SERVING THE TRAVELLING CHINESE CUSTOMER
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CHINA – DEVELOPING SOCIAL MEDIA
TWITTER EQUIVALENT
FACEBOOK EQUIVALENT FACEBOOK EQUIVALENT
YOUTUBE EQUIVALENT
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GREAT BRAND/GREAT COMPANY
—
DELIVERED ON CORE STRATEGIES
—
BROAD PORTFOLIODRIVES 27% SALES GROWTH
—
39% PROFIT GROWTH
—
invest for growth IN FY 2012
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APPENDIX
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DISCLAIMER
Certain statements made in this presentation 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 statements.
Burberry Group plc undertakes no obligation to update these forward-looking statements and will not publicly release any revisions it may make to these forward-looking statements that may result from events or circumstances arising after the date of this document.
All persons, wherever located, should consult any additional disclosures that Burberry Group plc may make in any regulatory announcements or documents which it publishes. All persons, wherever located, should take note of these disclosures.
This presentation does not constitute an invitation to underwrite, subscribe for or otherwise acquire or dispose of any Burberry Group plc shares, in the UK, or in the US, or under the US Securities Act 1933 or in any other jurisdiction.
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ADJUSTED MEASURES
“Adjusted” excludes:1. Restructuring credit of £1.0m in 2011 (2010: £3.4m charge) relating to the Group’s cost efficiency
programme announced in January 2009.2. Put option liability finance charge relating to the 15% economic interest in the Chinese business of
£3.2m (2010: nil).
Underlying change is calculated at constant exchange rates.Certain financial data within this presentation have been rounded.
FY 2010 has been re-presented to show the results of the discontinued Spanish operations separately.Discontinued operations in FY 2011 include an operating loss of £2.1m (2010: nil), restructuring costs of £4.1m (2010: £45.4m) and a nil tax charge (2010: £25.0m).
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GLOBAL
PRODUCTS
Licensing revenue
• JAPAN IS C. TWO-THIRDS OF LICENCE REVENUE– Brand sales around £1bn
– Premium positioning
• APPAREL LICENCE– Held by Sanyo Shokai and Mitsui
– Licence now ends 2015
– Roughly half is their “London” range and childrenswear
– Roughly half is more contemporary Black/Blue labels
• Two trial stores in Hong Kong
• NON-APPAREL LICENCES– Different licensees; short contracts
– Terminated leather goods and other licences
• NON-APPAREL JV REPORTS IN RETAIL /WHOLESALE– Testing imported global non-apparel collection
– Two shops in Ginza and Omotesando, Tokyo
– 14 concessions on luxury floors in department stores
– Less than 2% of group retail/ wholesale revenue
JAPAN
APPAREL
JAPAN
NON-APPAREL
FY 2011 LICENSING REVENUE
MENS/
OTHER
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IR CONTACTS
Kim Warren
Investor Relations Associate
kim.warren@burberry.com
Fay Dodds
Director of Investor Relations
fay.dodds@burberry.com
Charlotte Cowley
Investor Relations Manager
charlotte.cowley@burberry.com
Horseferry House
Horseferry Road
London
SW1P 2AW
Tel: +44 (0)20 3367 3524
www.burberryplc.com
www.burberry.com
www.artofthetrench.com
www.facebook.com/burberry
www.twitter.com/burberry
www.youtube.com/burberry
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