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Sustainable Growth and Value Creation enabled by focused transformationAmer Sports CMD 2018
Heikki Takala, President & CEO, and Jussi Siitonen, CFO
• We continue to grow and create value
• Our strategy is working and organic growth drivers remain largely
unchanged
• We continue our transformation towards areas of faster growth,
higher profitability, and asset efficiency, with increasing weight of
Softgoods, D2C, and China
• As part of the transformation, we will broaden our toolbox to include
strategic portfolio choices – a more focused company
Amer Sports CMD 20182
Topics today
We continue to drive sustainable profitable growth and value creation
Our Glidepath: Sustainable Profitable Growth
Amer Sports CMD 2018
0%
2%
4%
6%
8%
10%
1,200m
1,400m
1,600m
1,800m
2,000m
2,200m
2,400m
2,600m
2,800m
3,000m
Net Sales EBIT Margin
Net sales (EUR) and EBIT margin, 2006 – 2018 • Growth and
profitability
improvement
largely driven by
Softgoods, D2C
and China
*L12M’18 = July 2017 – June 2018, Peak Performance included4
*
2018 outlook: profitable growth continues
2018 outlook* unchanged:
• Net sales in local currencies as well as EBIT excl. IAC are expected
to increase from 2017
• Due to ongoing wholesale market uncertainties, the quarterly growth
and improvement are expected to be uneven
Amer Sports CMD 2018
*Outlook given in Q2/2018
5
0
50
100
150
200
250
300
350
400
450
Our performance has driven long-term value creation
Amer Sports CMD 2018
*Data as of 3th September 2018
+311%
2010 2011 2012 2013 2014 2015 2016 2017 2018
+81%
Amer Sports
OMXHCap
Since 2010
• Share: +311%
• TSR: +363%
Since 2015
• Share: +79%
• TSR: +90%
Share price development, 2010 – 9/2018 *
6
The performance has been based on our strategic choices
• Sustainable Growth Model
• Clear portfolio role for each Business Unit
• Group scale and synergy
• Transformation: Strategic acceleration in Softgoods, D2C, China,
USA and Digital
Amer Sports CMD 2018
1.
2.
3.
4.
7
1) Sustainable Growth Model
1. Annual topline growth
2. Annual profit and cash flow improvement
3. Investing for the future
4. Continuous renewal and productivity improvement
5. Long-term view: 3-5 year commitment cycle to businesses
Amer Sports CMD 20188
2) Clear portfolio role for each Business Unit
Amer Sports CMD 2018
Apparel
WSE
Fitness
Cycling
Business Unit Role Role fulfilled?
Footwear
Ball Sports
Sports Instruments
• Full acceleration
• Sustainable, profitable growth
• Sustainable profitability in all conditions
• Cash and profit first
• Sustainable, profitable growth
• Disproportionate growth for scale
• Profitable growth
Growth accelerated,
profitability improvement next
Profit & cash in line, but growth
challenging
In line overall, growth slowdown in
2018 due to distribution clean-up
In line
In line
Growth step-changed,
profitability improvement next
Growth & profitability below
expectations
9
3) Group scale and synergy
1. Go to Market Growth
2. Operations GM%
3. Digital business platform OPEX efficiency
4. Long-term investment capacity Funding for growth
Amer Sports CMD 201810
4) Transformation: Strategic acceleration
Amer Sports CMD 2018
Softgoods
D2C
China
USA
Connected Devices
& Digital Services
Acceleration area 2017 Conclusion
EUR ~1,000 m
EUR ~250 m
EUR ~120 m
USD 1,000+ m
EUR ~250 m
Target CAGR
9-10%
20+%
20+%
3-5%
20%
11
4) Transformation outcome: Portfolio shift towards faster growth, higher profitability and better asset efficiency
Amer Sports CMD 2018
SOFTGOODS
D2C*
CHINA
Share of business
2010Share of business
2018
~20% ~40%
~2% ~10%
~1% ~6%
*Of total Group sales, including non-D2C relevant businesses such as Fitness12
Growth and transformation continue, but recent slowdown calls for expanded toolbox
Whilst long-term performance is solid, growth and profitability improvement slowed down in 2016-17
Amer Sports CMD 2018
0%
2%
4%
6%
8%
10%
1,200m
1,400m
1,600m
1,800m
2,000m
2,200m
2,400m
2,600m
2,800m
3,000m
Net Sales EBIT Margin
Net sales (EUR) and EBIT margin, 2006 – 2018 2016-17
• US market
slowdown
• Investments into
Digital / Fitness /
Sports Instruments
started to yield
with a delay
14 *L12M’18 = July 2017 – June 2018, Peak Performance included
*
The slowdown resulted into lower value creation
Amer Sports CMD 2018
• Value creation lagging since
2016
– Amer Sports share +10%
– Total Shareholder Return +16%
• Sharper choices and
expanded toolbox needed
Share price development, 2016 – 9/2018 *
0
20
40
60
80
100
120
140
04.01.2016 04.01.2017 04.01.2018
+10%
+30%Amer Sports
OMXHCap
2016 2017 2018
15
*Data as of 3th September 2018
We capitalize on the proven building blocks, and broaden our toolbox
1) Capitalize on the proven building blocks
• Continue Sustainable Growth Model
• Drive Business Units according to their portfolio roles
• Pursue Group scale & synergy
• Continue strategic acceleration
– Softgoods (accelerated by Peak Performance)
– D2C
– China
– USA
– Connected Devices & Services = Company digitalisation
Amer Sports CMD 201817
2) Expand toolbox: Further accelerate transformationthrough strategic portfolio choices
Amer Sports CMD 2018
”Better owner” logic:
current performance
Limited
Strong
“Better owner” logic:
scale & synergy potential
Low High
Footwear
• Softgoods: Accelerate
• WSE: Sustainable profitability
• Ball Sports: Cash & profit first
• Confirm role & commitment
for the next cycle
• Strategic review
Apparel
Ball
Sports
WSE
Fitness
Sports
Inst.
Cycling
= relative size
18
Our strategy continues to transform the company towards faster growth, higher profitability and better asset efficiency
Amer Sports CMD 2018
SOFTGOODS
D2C*
CHINA
Share of business
FUTURE
~40% ~50%
~10% ~20%
~6% ~10%
Share of business
TODAY
Share of business
TOMORROW
Main transformational
drivers
19 *Of total Group sales, including non-D2C relevant businesses such as Fitness
Our sustainable profitable growth and transformation create valueJussi Siitonen, CFO
Our strategy creates value through several drivers
Amer Sports CMD 201821 6.9.2018
1. Our Sustainable Growth Model and scale and synergy drive
profitable growth
2. Our acceleration in Softgoods, D2C, China, USA, and Digital shift
the company to increasingly attractive areas
3. The accelerated transformation through strategic portfolio choices
changes the company profile
4. The strategy will further drive cash generation
Our mid-term targets remain intact
6.9.2018 Amer Sports CMD 201822
Financial KPI Target L12M* L5yrs*
Net Sales
growth
Mid-single digit organic, currency-neutral annual
growth4.0% 4.7%
Profit
growth
Annual EBIT growth (excl. IAC) ahead of net
sales growth+8.2% +9.8%
Cash flow
conversionFree cash flow / net profit at least 80% 58% 68%
Net Debt /
EBITDAYear-end net debt / EBITDA ratio max 3.0x 2.70X 2.18X
*) Peak Performance excluded
6.9.2018 CMD 201823
Net Sales: acceleration in Softgoods, D2C, China, and USA has delivered the majority of the growth, and will continue to do so
Category 1.3% 3.4%
SoftgoodsHardgoods
0.5% 0.6% 0.7%2.9%Channel
E-comRetailFitnessB2B
ROW
2.1% 0.9%1.7%Country
USA China
Contribution to Group, L5yrs CAGR of 4.7%
*) L12M Jun’18 vs. L12M Jun’13, (Peak Performance excluded)
CAGR, L5yrs*
Softgoods 11%
D2C 22%
China
USA
29%
6+%
Net Sales: Transformation into modern channels drives disproportionate portion of growth
• Capability investment in
transformation to modern channels
is driving disproportionate growth
• Modern channel growth is closely
linked to Softgoods growth
• Peak Performance acquisition
further accelerates growth in D2C
6.9.2018 Amer Sports CMD 201824
Modern channels = own retail, own e-comm, e-tail customers, click&mortar customers
100
120
80Modern Channels
30%
117
Fitness Channels
14%
106
Traditional Trade
56%
97
104
Net Sales growth by channel, L12M*Index
Share ofNet Sales
*) Peak Performance excluded
6.9.2018 Amer Sports CMD 201825
Gross Margin: Our proven building blocks are delivering …
Gross Margin improvement L5yrs*
SoftgoodsCategory growth and margin
improvement
Ball
Sports
Complexity reduction and acquisitions
for further scale
WSEContinuous production efficiency
improvements and complexity reduction
D2C Channel mix change
Over 300bps to ~50%
Over 300bps to 40+%
Over 300bps to 45+%
Over 300bps to ~60%
*) L12M Jun’18 vs. L12M Jun’13, (Peak Performance excluded)
Gross Margin driver
6.9.2018 Amer Sports CMD 201826
…and contributing significantly to the company’s profitability
43.2
45.5+2.0
+0.6
+0.5
40
41
42
43
44
45
46
47
Ball Sports WSEGM
L12M
Jun’13
Softgoods
-0.8
Other GM
L12M
Jun’18
+2.3%
Category contribution to
Group Gross Margin improvement*
43.2
45.5
+1.6
+1.1
40
41
42
43
44
45
46
47
B2BGM
L12M
Jun’13
-0.4
D2C Other GM
L12M
Jun’18
+2.3
Channel contribution to
Group Gross Margin improvement*
%
*) Peak Performance excluded
Gross Margin: We have largely mitigated the recent adverse FX impacts
6.9.2018 Amer Sports CMD 201827
1.000
1.050
1.100
1.150
1.200
1.250
1.300
1.350
1.400
Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
44.8% 45.8% 44.9% 45.5%*Gross Margin
USD/EUR Hedges
USD/EUR Spot
EUR/USD
*) 1.7.2017 – 30.6.2018 (Peak Performance excluded)
6.9.2018 Amer Sports CMD 201828
OPEX: Whilst we continue investing in transformation, we have “normalized” OPEX spend through fluidity
0
1
2
3
4
5
6
7
8
9
10
2015 L12M
Jun’17
2013 2014 L12M
Jun’18
2016 2017
OPEX
Net Sales
%Net Sales vs. OPEX Growth L5yrs*
• In accordance with our SGM, part of the
Gross Margin gains have been invested
back in the proven growth drivers
• Softgoods, D2C, Digital capabilities…
• OPEX efficiency actions, initiated in Feb
2017, are delivering targeted savings
together with continuous OPEX fluidity
• Sustainable mid-term OPEX level 36-37%
of Net Sales
*) L12M Jun’18 vs. L12M Jun’13, (Peak Performance excluded)
Asset efficiency: We have continued to deliver organic improvement
6.9.2018 Amer Sports CMD 201829
0
5
10
15
20
Q4’16Q4’14Q2’13 Q2’14Q4’13 Q2’15 Q2’16Q4’15 Q2’17 Q4’17 Q2’18
ROCE (L12M)
ROCE (excl PP)
WACC (pre-tax)
%
ROCE vs. WACC, L5yrs
482 493
211
137
377
501164
237
291
431
Net W/C
M&AJune’13
1,662
Organic
PPE
June’18
Goodwill
Other
Intangibles
1,148
+514
Capital Employed change, L5yrs
Shifting portfolio towards areas of faster growth, higher profitability and better asset efficiency
Faster Softgoods growth reshapes the P&L
6.9.2018 Amer Sports CMD 201831
60.6%
39.4%Softgoods
Net Sales
Hardgoods 56.3%
43.7%
Gross Profit
46.8%
53.2%
EBITDA
41.1%
58.9%
EBIT
67.0%
33.0%
Capital
Employed
Softgoods/Hardgoods split of KPIs, pro forma* L12M
*) Peak Performance consolidated on Pro Forma basis from 1.7.2017–30.6.2018
Group unallocated excluded from EBIT, EBITDA and Capital Employed
• Softgoods’ higher growth and better
profitability drive our P&L towards
directional mid-term profitability model:
– Gross Margin 46-47%; and
– OPEX 36-37%
• Softgoods’ share growth is also
lowering company’s risk profile &
earnings volatility (Balance sheet
solidity, 365 offering, D2C)
• Company multiples toward Softgoods
peers
Better asset efficiency drives higher ROCE
6.9.2018 Amer Sports CMD 201832
Softgoods
Group
Hardgoods
EBIT Margin Asset turn ROCE× =
% %
Softgoods/Hardgoods split of KPIs, pro forma* L12M
*) Peak Performance consolidated on Pro Forma basis from 1.7.2017 – 30.6.2018
Group unallocated excluded from EBIT, EBITDA and Capital Employed
• Softgoods business model is “Asset light”
driving company’s ROCE toward ≥ 20%
– Relatively higher Working Capital is offset by
low/no manufacturing assets
• Whilst Softgoods is structurally more
attractive, Hardgoods is still in our core
(60% of Net Sales), and continues to
improve
• Importantly, whilst each business has
future potential, we continuously reconfirm
our “better owner” logic to ensure they
contribute to our value creation model
X
Softgoods
Group
Hardgoods
Hardgoods
Softgoods
Group
Fund allocation follows the portfolio logic
• We prioritize main transformational drivers: Softgoods, D2C, China, modern
channel logistics,…
• We continue investing in those Hardgoods units where business is in line with
portfolio role (WSE, Ball Sports), and/or where our current investment program
is delivering largely in line with expectations (Sports Instruments, Fitness)
• Before we continue long-term commitment to Cycling, where business is not in
line with portfolio role and scale & synergy benefits are insufficient, we will put
Mavic under strategic review to assess whether Amer Sports is the best owner
– We have engaged investment bank Centerview to assist in the process
6.9.2018 Amer Sports CMD 201833
The strategy will further drive cash generation
6.9.2018 Amer Sports CMD 201835
Cash flow has supported organic growth and payouts but we have a gap to close vs. our financial target
901
361
Sources
Net Debt
change
Operating
Cash Flow
1,261
360
136
389
377
Payouts/
Buy-backs
Uses
M&A
CAPEX
W/C
1,261
-20
0
20
40
60
80
100
120
140
Q2
14
Q4
13
Q2
13
Q3
13
Q1
14
Q3
14
Q1
15
Q4
14
Q2
15
Q3
15
Q4
15
Q1
16
Q2
16
Q3
16
Q2
17
Q4
16
Q1
17
Q3
17
Q4
17
Q1
18
Q2
18
80
68
Cash flow L5yrs, June’18
Free Cash Flow / Net ProfitL5yrs, June’18%
Financial target
5yrs average
Strategy drives improved cash generation through faster growth,
higher profitability and better asset efficiency, closing the gap
Balance Sheet: whilst we remain within our targets, we now focus on deleveraging
6.9.2018 Amer Sports CMD 201836
1.0
2.0
3.0
4.0
30.6.1730.6.1631.12.1531.12.13 30.6.14 31.12.1731.12.1631.12.14 30.6.15 30.6.18
3.0
2.2
X
Financial target
5yrs average
• Net Debt / EBITDA up due to the acquisition
of Peak Performance
• In line with our sustainable funding
strategy for M&A’s
• Current focus on deleveraging the balance
sheet post the acquisition
• Fund allocation priorities remain unchanged
1. Secure organic growth
2. Ensure sustainable, steadily increasing
cash payouts as per dividend policy
3. M&As and share buybacks currently
deprioritized
Net Debt / L12M EBITDA, L5yrs
6.9.2018 Amer Sports CMD 201837
• Cash EUR 152.9m and unused
committed facilities EUR 200m (June
30, 2018)
• Commercial paper program EUR 500m,
out of which EUR 30m utilized
• Scheduled H2/2018 repayments of
long-term loans EUR 197.5m
• Average interest rate of loan portfolio
2.1% (June 30, 2017 2.5%)
0
50
100
150
200
250
300
350
400
2018 2019 2020 2021 2022 2023=>
Bonds Bank loans Other
EURmRepayment schedule of long-term loans
Long-term loans: refinancing plans in place
Summary
• We continue to grow and create value
• Our strategy is working and organic growth drivers remain largely unchanged
• We continue our transformation towards areas of faster sustainable growth,
higher profitability, and asset efficiency, with increasing weight of Softgoods,
D2C, and China
• As part of the transformation, we will broaden our toolbox to include strategic
portfolio choices – a more focused company with increasingly attractive
business model
6.9.2018 Amer Sports CMD 201838