nemo2014\presentations\analyst Presentation Jan14\ Nemo Analyst Presentation Master-22nd Jan FINAL.pptx

Transcription

1 Interim Results FY17 24 th November 2016

2 Forward looking statements Forward-Looking Statements INCLUDED IN THIS PRESENTATION ARE FORWARD-LOOKING MANAGEMENT COMMENTS AND OTHER STATEMENTS THAT REFLECT MANAGEMENT S CURRENT OUTLOOK FOR FUTURE PERIODS These expectations are based on currently available competitive, financial, and economic data along with our current operating plans and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forwardlooking statements. The forward-looking statements in this presentation should be read in conjunction with the risks and uncertainties discussed in the Pets At Home Annual Report and Accounts. 2

3 Highlights Ian Kellett, CEO 3 3

4 Cashflows remain strong & seamless shopping omnichannel investment delivering results Total Group revenue growth 9.1% & LFL 2.5% Services LFL 8.7% & revenue growth 47.6% Fee income from JV vet practices up 23.6% Advanced Nutrition revenues up 6.5% EBITDA growth 7.3% & margin 14.8% Further improvement in seamless shopping KPIs & first subscription service launched 4

5 Financials Mike Iddon, CFO 5 5

6 Strong sales performance in both Merchandise & Services Revenue m H1 FY16 H1 FY17 Change Group Total % Like-for-like 2 1.8% 2.5% Food % Merchandise Accessories % Total % Like-for-like 1.0% 1.9% Fee income from JV vet practices % Services Other % Total % Like-for-like 10.5% 8.7% 1 Includes revenue from wholly owned Group Venture vet practices & other veterinary income, including specialist referrals, grooming salons, live pet sales & insurance commission 2 Comprises total sales/fee revenue in a financial period compared to revenue achieved in a prior period, for stores, online operations grooming salons and vets that have been trading for 52 weeks 6

7 Gross margin progression in Merchandise & primary opinion vets offset by the mix of new specialist referral centres Group gross margin bridge 68 bps (83) bps Merchandise Services 54.1% 53.9% H1 FY16 H1 FY17 Merchandise H1 FY16 H1 FY17 Accessories growth Advanced Nutrition Pricing Services H1 FY16 H1 FY17 First opinion vets Specialist referrals New grooming salons 56.6% 57.5% FX 32.2% 32.0% 7

8 Consistent EBITDA performance helping mitigate cost headwinds EBITDA margin bridge 0.14% bps 15.0% 0.64% bps Operational Seamless shopping 0.12% bps Colleague investment 0.17% bps Referral Centres 15.2% 0.23% bps National Living Wage 0.23% bps FX 14.8% 14.8% H1 FY16 H1 FY m 65.2m 7.3% Refers to pre-exceptional EBITDA margin & excludes 1.0m of exceptional cost in H1 FY17 related to the disposal of Farm Away Limited 8

9 Profit & dividend growth continues Group income statement m H1 FY16 H1 FY17 Change Pre-exceptional EBITDA % margin (%) 15.0% 14.8% (25) bps Depreciation & amortisation (12.5) (15.4) 23.1% Net interest (3.0) (2.7) (8.3)% Pre exceptional profit before tax % Exceptional items (4.3) 2 (1.0) 1 NM Statutory profit before tax % Pre-exceptional basic EPS (pence) % DPS (pence) % 1 Excludes 1.0m of exceptional costs associated with the disposal of Farm Away Limited 2 Pre exceptional interest charge of 4.3m, associated with amortisation of fees from previous financing facility 9

10 Capital investment closely aligned to key strategic initiatives Capital Investment, m H1 FY16 H1 FY17 New stores / Groomers Services retrofit & refurb retrofits this H1 vs 7 in prior year Other refurbishment Systems Other Energy savings project 3.6 One off project Total 5m FY17 Further 3m in FY18 Total Returns on capital H1 FY16 H1 FY17 CROIC % 21.3% 1 Definition contained within the appendix 10

11 Strong free cashflow generation continues Cashflow, m H1 FY16 H1 FY17 Change Cash EBITDA % Working capital 3 (8.3) 2.6 Tax (5.3) (8.6) 63.0% Interest cost (3.6) (2.5) (32.8)% Capex (14.7) (24.0) 63.8% Other Free cashflow % Conversion 49.5% 51.4% 193 bps 1 Defined as pre-exceptional EBITDA plus IFRS2 share based payment charges 2 Excludes 1.0m of exceptional costs associated with the disposal of Farm Away Limited 3 Includes provisions movement 4 Free Cashflow is defined as net cash from operating activities, after tax, less net cash used in investing activities (excluding acquisitions), less interest paid & debt issue costs, and is stated before cash flows for exceptional costs 11

12 Leverage in line with FY16 year end after two acquisitions & growing the dividend Net Debt, m Full year FY16 1 H1 FY17 Opening net debt (192.0) (162.0) Free cashflow Ordinary dividends (27.9) (27.4) Acquisitions (8.1) (15.0) Other (5.6) (0.8) Closing net debt (162.0) (170.8) Leverage 1.3x 1.3x 2 1 Audited 53 weeks to 31 March Represents last twelve months pre exceptional EBITDA 12

13 Good progress across key financial measures Revenue & Like-For-Like Growth EBITDA & Margin 1.8% 2.5% 441.3m 15.0% 14.8% 65.2m 404.5m 60.7m H1 HY16 H1 FY17 H1 HY16 H1 FY17 EPS & Dividend Payout Ratio FCF & Conversion 28% 34% 49.5% 51.4% 7.4p 34.4m 7.2p 30.8m H1 HY16 H1 FY17 H1 HY16 H1 FY17 13

14 Our priorities for cash and shareholder returns Organic investment Ongoing programme currently focused on rollout & seamless strategies Progressive dividend Ordinary dividend policy around 50% of earnings Invest for growth Disciplined bolt-ons or investment in-line with strategy & returns criteria Further shareholder returns Surplus FCF returned as special dividend Strong balance sheet Maintain leverage up to 1.5x ND:EBITDA, extending up to c1.75x for appropriate acquisitions 14

15 Strategic update Ian Kellett, CEO 15

16 More specialist & most loved Friendly expert colleagues Private brands & exclusives One stop shop for retail & services In-house innovation & sourcing 16

17 Strategy recap Drivers of Core Growth Key Growth Drivers Product and Innovation VIP Club LFL Omnichannel Services (Vets & Groomers) Space Optimised Store & Pet Services Roll Out Product Mix & Own Brand Margin Services Maturity 17

18 Advanced Nutrition & premium foods remain a core driver of LFL performance LFL driver Advanced Nutrition revenues New launches in private label & branded 88.7m 94.5m 25.1m 25.0m 26.9m 63.7m 67.6m H1 FY16 Wainwright's H1 FY17 Other AN 18

19 Becoming more personalised & targeted in our VIP communications LFL driver Targeting dog owners to help them feed a more nutritious diet Royal Canin (Free sample in post) Trading Grocery Wet customers into Science Wet. Wainwrights (Postal Mail) Trading grocery customers up into Naturals Beyond Launch (Postal Mail) Trading Grocery customers into Bridging brand Step Up to Naturals ( ) Free wet tin offer to recruit Grocery and Economy customers into Bridging Number of active customers appropriate to target 3k 55k 15k 189k 391k 67k 195k 71k Home prepared Fresh & Frozen High meat Science Natural Bridging Grocery Economy

20 Accessories ranges benefitting from innovation & change LFL driver

21 Our first exclusive VIP subscription service LFL driver 21

22 Seamless shopping investments are delivering results New look & feel website, KPIs moving forward LFL driver Visitors / Visits to website Average transaction value Repeat buyers Conversion Easier to use & faster website Improved merchandising imagery & content More relevant content through VIP Better delivery & collection options Orders Sales VIP voucher spend Proportion of orders delivered to store 22

23 Themes of growth in our Services division LFL driver Using our vet brand to drive local & national marketing campaigns Extended opening hours at the same price as routine appointments demonstrate our focus on client service 23

24 Themes of growth in our Services division LFL driver Care plans in our vet practices create loyalty & are driving new client registrations Growing our own talent is enabling us to rollout our grooming salons in volume 24

25 Referral centres next steps: integration as part of the larger Group, expanding through acquisition & greenfield New space driver Integrate Optimise Grow Reach centres across the UK 25

26 Our long term space opportunity gives us a long runway for further growth & maturity benefits New space driver Current Portfolio (excludes Barkers & new formats) Total Potential UK Estate Stores c500 In-store Vet c450 1 Standalone Vet c250 1 Groom Room c350 Existing Potential Retrofits Potential New 26

27 Services support to EBITDA margin diluted by near term immaturity & cost challenges, but can deliver long term leverage Square footage of mature store + services combinations Margin driver EBITDA/sq ft from mature store + services 24% higher than a mature store alone Our runway to deliver mature stores with services is long, with significant leverage to come 100% of the potential estate mature Only 2% of our potential estate has mature store & services combinations FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 27

28 Focus on margins: simplicity initiatives will mitigate cost challenges & give our colleagues more time with customers Margin driver Reduce overall cost to serve Give time back to our store colleagues Support office simplicity Coordinate activities from distribution to point of sale Optimise store delivery frequency Review & optimise product range Simplify store tasks & delivery process Eliminate low value colleague activities Reinvest time into customer service Efficient support from the centre Automation & process improvement Reallocation of resource behind areas of focus 28

29 Focused on delivering our plan: more specialist & most loved Pet services are growing significantly & seamless shopping investment delivering results Cashflows remain strong priority to invest for growth Whilst recent trading softer, full year financial outlook in-line with market expectations as we maintain a focus on margins & costs UK economic outlook may be uncertain, with cost challenges ahead, but our strategy remains unchanged Pet market & specialist approach gives our business resilience Leverage pet services as part of a one stop shop for pet owners Rollout & invest for further growth Cost simplicity initiatives 29

30 Appendix 30 5

31 Financial definitions Like-for-like Like-for-Like sales growth comprises total sales/fee revenue in a financial period compared to revenue achieved in a prior period, for stores, online operations, grooming salons, vet practices and referral centres that have been trading for 52 weeks. Free cashflow Free Cashflow is defined as net cash from operating activities, after tax, less net cash used in investing activities (excluding acquisitions), less interest paid & debt issue costs, and is stated before cash flows for exceptional costs CROIC Represents cash returns divided by the average of gross capital (GCI) invested for the last twelve months. Cash returns represent preexceptional operating profit before property rentals and share based payments subject to tax then adjusted for depreciation and amortisation. GCI represents Gross Property, Plant and Equipment plus Software and other intangibles excluding the goodwill created on the acquisition of the group by KKR ( 906,445,000) plus net working capital plus capitalised rent being property rentals multiplied by a factor of 8x. A multiple of 8 is the industry standard methodology. (Last twelve month definition uses the second half of the 53 week FY16 ended 31st March 2016.) 31

32 Reminder: FY17 guidance unchanged Store and services rollout superstores vet practices Groom Rooms Cost impact of National Living Wage c 2m Cost impact FX movement c 2m Depreciation and amortisation 29-30m Net interest cost 4-5m Effective tax rate 21% Capital investment c 45m exceptional investment of 5m as part of an 8m two year energy saving project Ordinary dividend policy at 50% of earnings 32