FULL YEAR RESULTS
27TH APRIL 2017
OVERVIEW
• No longer in transition
• Systems project complete by Summer 2018
• Benefitting from improved trading agility
• Strong ladieswear performance and market share gains
• Financial Services performance driven by quality of the loan book
• Macro environment remains challenging
• Current trading encouraging
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AGENDA
FINANCIALS
FINANCIAL SERVICES UPDATE
PERFORMANCE AND STRATEGIC UPDATE
SUMMARY
ANY QUESTIONS?
2
CRAIG LOVELACE, CFO
FINANCIALS
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FINANCIAL SUMMARY
* Defined as continuing PBT excluding exceptionals and unrealised FX movement
• All P&L items are on a 52 week basis unless stated
• Revenue £887.7m, +2.5%
• Product revenue +3.4%; gross margin -150bps to 54.7%
• Financial Services revenue +0.4%; gross margin +110bps to 55.7%
• Trading profit* £80.6m, -8.7% yoy
• Adjusted EPS 22.18p
• Net debt £290.9m
• Final dividend held flat at 8.56p
4
REVENUE
£m FY17 FY16 Change
Product 627.2 606.6 +3.4%
Financial Services 260.5 259.6 +0.4%
Group Revenue 887.7 866.2 +2.5%
% yoy growth Q1 (13wks) Q2 (13wks) Q3 (18wks) Q4 (8wks)
Product -1.6% +2.7% +5.9% +6.9%
Financial Services +3.4% +0.7% -0.5% -2.3%
Group Revenue -0.2% +2.1% +4.1% +3.6%
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REVENUE BY BRAND
£m FY17 FY16 Change
JD Williams 158.3 151.2 +4.7%
Simply Be 114.2 103.9 +9.9%
Jacamo 65.3 62.8 +4.0%
Power Brands 337.8 317.9 +6.3%
Secondary Brands 155.2 152.7 +1.6%
Traditional Segment 134.2 136.0 -1.3%
Product total 627.2 606.6 +3.4%
Financial Services 260.5 259.6 +0.4%
Group Revenue 887.7 866.2 +2.5%
JD Williams Brand +12%,
Fifty Plus title - 9%
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REVENUE BY CATEGORY
£m FY17 FY16 Change
Ladieswear 256.5 246.1 +4.2%
Menswear 85.8 82.0 +4.6%
Footwear & Accessories 69.0 68.5 +0.7%
Home & Gift 215.9 210.0 +2.8%
Product total 627.2 606.6 +3.4%
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GROSS MARGIN PERFORMANCE
• Group gross margin 55.0%, -70bps
• Product gross margin 54.7%, -150bps
– Buying in margin +40bps
– Promotions -80ps
– Mix +10bps
– FX -70bps
– Inventory clearance -50bps
• Financial Services gross margin 55.7%, +110bps
8
FX EXPOSURE AND SENSITIVITY
• FX breakdown (net annual purchases):
• $125m - hedging strategy in place
• €0.6m – natural hedge with Irish business
• £130m – indirect FX cost pressures
$ exposure; pre mitigating actions FY18 FY19
% Hedged 90% 25%
Hedging rate 1.27 1.27
PBT headwind yoy at $/£1.25 c.£10m c.£1m
5 cents movement sensitivity (on
unhedged position)
c.£0.4m c.£3.2m
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OPERATING EXPENSES
£m FY17 FY16 Change
Product gross profit 343.1 340.9 +0.6%
Financial Services gross profit 145.2 141.7 +2.5%
Gross profit 488.3 482.6 +1.2%
Warehouse & fulfilment (79.6) (76.7) +3.8%
Marketing & production (162.5) (161.7) +0.5%
Admin & payroll (130.3) (122.6) +6.3%
EBITDA 115.9 121.6 -4.7%
EBITDA margin 13.1% 14.0% -90bps
Depreciation & amortisation (27.6) (25.2) +9.5%
Operating Profit* 88.3 96.4 -8.4%
Operating margin 9.9% 11.1% -100bps
10
GROUP PROFIT & LOSS
£m FY17 FY16 Change
Operating Profit* 88.3 96.4 -8.4%
Net Finance Costs (7.7) (8.1) -4.9%
Trading Profit 80.6 88.3 -8.7%
Impact of 53rd week 2.0 -
Exceptional Costs (25.2) (17.2)
Unrealised FX movement 0.2 1.1
Profit Before Tax 57.6 72.2 -20.2%
Taxation (13.3) (17.3) -23.1%
Loss from discontinued ops - (0.6)
Net Income 44.3 54.3 -18.4%
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NET ASSETS
£m 4 March
2017
27 Feb
2016
Change
Non Current Assets 217.8 205.5 +6.0%
Inventories 105.5 101.5 +3.9%
Receivables/Prepayments 577.9 560.9 +3.0%
Creditors/Accruals (120.5) (113.0) +6.6%
Provisions (19.9) 0.0
Retirement Benefit Surplus 8.3 10.8 -23.1%
Net Debt (exc. customer loan book) 290.9 289.7 +0.4%
Net Assets 478.2 476.0 +0.5%
Gearing 61% 61%
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LEVERAGE
£m 4 March
2017
27 Feb
2016
EBITDA (53 weeks) 117.9 121.6
Net Debt 290.9 289.7
Net Debt/EBITDA 2.47x 2.38x
Securisation facility on loan book 270.0 250.0
Loan book adjusted Net Debt 20.9 39.7
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RECEIVABLES & PROVISIONING
£m 4 March
2017
27 Feb
2016
Change
Gross Trade Receivables 599.5 624.7 -4.0%
Opening Bad Debt Provision 97.6 100.9 -3.3%
Gross Bad Debt Charge 113.5 110.3 +2.9%
Debtors Written Off (146.4) (113.6) +28.9%
Closing Bad Debt Provision 64.7 97.6 -33.7%
Provision Ratio 10.8% 15.6% -480bps
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CASH FLOW
15
(1.2)
117.9 (25.2)
(42.3)
1.9 (7.8)
(40.2) 20.3
(25.8)
-40
-20
0
20
40
60
80
100
120117.9 (25.2)
(25.8)
(42.3)
1.9 (7.8)
(40.2) 20.3
(1.2)
FY18 GUIDANCE
• Gross margin:
– Product margin -120bps to -20bps
– Financial Services margin flat to +100bps
• Group operating costs (excluding D&A) +3.5% to +5.5%
• Depreciation & Amortisation £29m to £30m
• Net interest costs £8m to £9m
16
FY18 GUIDANCE
• Capex c.£40m
• Net debt £300m to £320m
• Tax rate c.20%
• Exceptional costs c.£3m
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AGENDA
FINANCIALS
FINANCIAL SERVICES UPDATE
PERFORMANCE AND STRATEGIC UPDATE
SUMMARY
ANY QUESTIONS?
18
FINANCIAL SERVICES KPI’S
TY LY Change
Customer account arrears rate (> 28 days) 9.9% 10.9% -100bps
Provisions rate 10.8% 15.6% -480bps
New credit recruits (rollers) 129k 136k -5%
• Quality of the customer loan book continues to improve
• Trial offering lower APR to new recruits encouraging
19
FINANCIAL SERVICES EXCEPTIONAL COST
• Deadline for complaints announced as August 2019; not mid-2018
as previously indicated
• Marketing of deadline has led to greater than anticipated volume of
complaints
• Individual pay-outs higher than initially assumed as older age
profile of complaints and therefore increased by compounding
interest
• Exceptional cost £22.9m, with cash cost spread FY17-20
20
BREAKDOWN OF CUSTOMER LOAN BOOK
FY10 FY16 FY17
Core Payment arrangements
+4%
-44%
Overall -5.6%
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AGENDA
FINANCIALS
FINANCIAL SERVICES UPDATE
PERFORMANCE AND STRATEGIC UPDATE
SUMMARY
ANY QUESTIONS?
22
OUR STRATEGY
4623
OUR TRANSFORMATION
PEOPLE
Head office re-
organisation
New talent – design,
merchandising, digital
marketing, IT
New operating Board
Outsourced non-core
competencies
BRAND CONSOLIDATION
From 44 brands to 11 brands
PROCESS
Stock flexibility
Shorter lead times
Supply chain
Digital-first marketing
Improved delivery offer
Unconditional FCA
authorisation
SYSTEMS
Warehouse extension
Merchandising system
Foundation releases for
new credit system
USA website
Finance system
Completion of
systems project
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NOW AN ONLINE RETAILER
0
100
200
300
400
500
600
700
FY12 FY13 FY14 FY15 FY16 FY17
Online penetration Non-online penetration Unlikely to move online
FY12-17 online revenue +50%
25
ONLINE KPI’S
• FY17 online revenue +10%; Power Brand online revenue +14%
• Smartphone sessions +49%
TY LY Change
Online penetration 69% 65% +4ppts
Online penetration of new customers 77% 72% +5ppts
Conversion rate 5.6% 5.8% -20bps
% of traffic from mobile devices 71% 66% +5ppts
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TY LY Change
Ladieswear share, size 16+ 4.2% 3.4% +80bps
Menswear share, chest size 44”+ 1.5% 1.5% -
Group returns rate 26.8% 27.4% -70bps
• Further improvements in Open to Buy
• Average lead times down 20% year on year
PRODUCT KPI’S
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MOMENTUM IN LADIESWEAR
• Ladieswear +10.4% in H2
• Strong performance a result of
the changes made:
– Design team
– Stock flexibility
– Price re-calibration
– Brand consolidation
• Lingerie up 7% in FY17
PRODUCT PARTNERSHIPS
• Over 100 new third-party brands added since the start of FY17
• Partnerships to increase access to our brands:
– Jacamo on ASOS now live
– Announced partnership with Tesco
– Several other partnerships in the pipeline
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JD WILLIAMS
• JD Williams brand +12%
– Online revenue +19%
– ‘The Cut’ exceeding expectations
– Age agnostic proposition
resonating well
– New Bridal range launched
• Fifty Plus migration well on track
– Down 9% in FY17: H1 -18%; H2
+1%
– Migration complete by H2 FY18
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• Active customers +20%
• Simply Be Unique range
performing well
• App launched and well
received
• #WeAreCurves campaign
SIMPLY BE
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• Active customers +12%
• #RealManRunway
• Launch of Jacamo Unlimited – unlimited next day delivery for £9.95 a year
JACAMO
REAL MAN RUNWAY
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• Pleased with actions taken to improve performance:
– H1 -4.2%, H2 +1.6%
– Launch of new bespoke publications
– Improved product range
• Gained 50bps market share in Ladieswear age 65+
TRADITIONAL SEGMENT
CUSTOMER KPI’s
TY LY Change
Active customer accounts 4.30m 4.27m +0.7%
Power Brand active customer accounts 2.2m 2.1m +1.2%
Power Brand customers exc Fifty Plus 1.9m 1.7m +9.9%
% growth of most loyal* customers +3.6% -0.4% +400bps
Customer satisfaction rating 86.4% 84.6% +180bps
• Drag from Traditional and Fifty Plus significantly lessened
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RECORD CUSTOMER SATISFACTION SCORE
73.574.375.776.777.578.378.578.979.680.080.580.681.181.381.481.782.182.782.983.183.883.883.984.084.886.487.2
82.177.4
45 50 55 60 65 70 75 80 85 90 95 100
Sports DirectCurrys/PC World
TK MaxxLloyds Pharmacy
WH SmithPrimark
IkeaB&Q
ArgosMatalan
PoundlandBoots UK
HomebaseHolland & Barrett
SuperdrugDebenhams
New LookH&MEbay
M & SSpecsavers
NextJohn Lewis
AppleWilko
N BrownAmazon.co.uk
Retail (Non-food)UK all-sector average
Source: UK Institute of Customer Services
INTERNATIONAL
USA:
• Revenue £15.5m, +8.5% (-4.2% constant fx); loss £1.3m (FY16 £1.0m)
• As expected, performance through peak impacted by site go-live
Ireland:
• Revenue £15.9m, +18.8% (+3.8% constant fx); profit £3.3m (FY16 £0.8m)
Looking forward:
• Laid the foundations for international expansion
• Significant future growth potential
• New International Director Richard Clark
36
FIT 4 THE FUTURE
• Very pleased with progress so far
• Major milestone: High & Mighty go-live in May – web platform and
Financial Services system
• Agile project approach focused on risk minimisation
• Pace of development unchanged:
– New releases onto High & Mighty and USA sites monthly
– Other brands migrated after peak, by end Summer 2018
• Costs, benefits and timing of benefits unchanged
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38
FIT 4 THE FUTURE
USA website
Planning
TransformationPhase One
Forecasting Tool
Global
Multichannel
Transformation
Credit
TransformationPowercurve
Decisioning
SimplyBe –
Euro
20162015 2017
UK site
development
UK Credit Management
Monthly releases
Gone live
2018
Future go live
Monthly releases
High &
Mighty
Other sites
go live
SUMMARY
• Now an online retailer
• Customer led development strategy
• Macro environment remains challenging
• Current trading encouraging
39
AGENDA
FINANCIALS
FINANCIAL SERVICES UPDATE
PERFORMANCE AND STRATEGIC UPDATE
SUMMARY
ANY QUESTIONS?
40
APPENDIX
• Operating cash flow
• Group cash flow
• Financial Calendar
• Investor relations contacts
41
OPERATING CASH FLOW
£m FY17 FY16
Operating Profit 65.1 78.5
Depreciation, Amortisation & Share option charge 28.1 28.1
Decrease in Inventory (4.0) (6.7)
Decrease/(increase) in Receivables (21.6) 0.9
(Decrease)/increase in Payables (0.2) (12.2)
Increase in Provisions 19.9 -
Pension obligation (0.2) (1.7)
Cash generated from operations 87.1 86.9
42
GROUP CASH FLOW
£m FY17 FY16
Cash generated from operations 87.1 86.9
Taxation paid 1.9 (22.4)
Dividends paid (40.2) (40.2)
Capital expenditure (42.3) (58.2)
ESOT share issue net proceeds 0.1 0.4
Net finance costs (7.8) (9.6)
Net cash outflow (1.2) (43.1)
Opening Net Debt 289.7 246.6
Closing Net Debt 290.9 289.7
43
FINANCIAL CALENDAR
• Q1 trading statement 20th June 2017
• First half results XX October 2017
44
IR CONTACT DETAILS
Bethany Hocking
Director of Investor Relations and Corporate Communications
Email: [email protected]
Tel: 0161 238 1845
Mobile: 07887 536 153
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