Matas Q2 2014/15 results

Transcription

1 Matas Q2 2014/15 results

2 Forward Looking Statements This presentation contains statements relating to the future, including statements regarding Matas A/S future operating results, financial position, cash flows, business strategy and plans for the future. The statements can be identified by the use of words such as believes, expects, estimates, projects, plans, anticipates, continues and intends or any variations of such words or other words with similar meaning. The statements are based on management s reasonable expectations and forecasts at the time of the disclosure of the interim report. Any such statements are subject to risks and uncertainties and a number of different factors, of which many are beyond Matas A/S control, can mean that the actual development and the actual result will differ significantly from the expectations contained in the interim report. Without being exhaustive, such factors include general economics and commercial factors, including market and competitive matters, supplier issues and financial issues. 2

3 Business Update No improvement in the Danish retail market in Q2 and no material improvement expected in the remainder of 2014/15 Market shares maintained in the most important product categories Limited impact from new competition on overall numbers The development and implementation of Club Matas initiatives follows the plan Integration of the acquired associated stores in 2013/14 is on track +30% growth in the online business StyleBox shows progress with positive year-on-year growth rates The proposed change to the pharmacy legislation is likely to be passed in the parliament within the next couple of months 3

4 Financial Highlights Q2 2014/15 Total revenue growth of 1,7% in Q2 with like-for-like growth of 0.5% Extraordinary large product recall reduced like-for-like growth by approx. 1%-point EBITA up 8% due to a higher gross margin Unchanged Adjusted net profit with higher net financials and taxes offsetting the increase in EBITA Disappointing cash flow from operations of DKK -1m in Q2 compared to DKK 96m in the same period the year before due to an adverse net working capital impact Free cash flow fell to DKK -34m after total investments of DKK 21m NIBD of DKK 1,426m 30 September, corresponding to 2.7x LTM EBITDA before exceptional items 4

5 0.5% Like-for-Like Growth in Q2 2014/15 Total revenue growth of 1.7% in Q2 was below expectations 4.6% increase in revenue from own retail with like-for-like growth of 0.5% Unusual big product recall had a negative effect on like-for-like growth of 1%-point in Q2 Online sales up +30% y/y in Q2 Beauty grew 4.5% negatively affected by the product recall Material grew 6.2% of which 2.1% was organic and 4.1% acquisitions Vital posted 7.5% growth with an organic increase of 2.9% MediCare had an organic increase of 2.0% 2014/ /14 DKK million Q2 Q2 Growth Beauty % Vital % Material % MediCare % Other including Sweden % Total revenue from own retail stores % Sales of goods to associated stores % Total revenue % 5

6 Strong Gross Margin in Q2 2014/15 7% Y/Y increase in gross profit driven by sales growth and gross margin Gross margin up to 47.0% (44.7%) No impact from the product recall H1 gross margin improvement to 46.8% (45.6%) reflects the consolidation of acquired associated stores 12m trailing gross margin increased to 46.7% 6

7 EBITA Margin Up in Q2 2014/15 EBITA margin increase of 0.9 percentage point Y/Y Total operating costs are developing according to expectations Other external costs increased to 8.9% of sales in Q2 compared to 8.1% last year due higher IT and distribution costs Staff cost increased to 20.4% of sales from 19.9% last year due to increased costs at the warehouse and new activities centrally at HQ Staff costs were broadly unchanged in the stores as a percentage of sales Smaller cost reduction programme at HQ in Q2 FY 2014/15 staff costs are expected to be slightly higher than FY 2013/14 as a percentage of sales 2014/ /14 DKK million Q2 Q2 Chg. Other external costs % - of which special items, net 0 0 Other external costs before special items in percentage of revenue 8.9% 8.1% Staff costs % - of which special items, net 0 0 Staff costs before special items in percentage of revenue 20.4% 19.9% 7

8 Income Statement Q2 2014/ / /14 DKK million Q2 Q2 Growth Revenue % Gross profit % Gross margin 47.0% 44.7% Other external costs % Staff costs % EBITDA % Amortisation and depreciation % Operating profit % Net financials % Profit before tax % Tax on profit for the period % Profit for the period % Earnings per share, DKK % Net execptional items EBITDA before net exceptional items % EBITA % EBITA margin 15.8% 14.9% - Adjusted profit after tax % 8

9 Development in Inventories Inventories increased by DKK 56m in the quarter due to seasonality and temporary higher inventories Focus on finding the right long-term level for the inventories 9

10 Negative Working Capital Development DKK 142m in cash outflow from changes in net working capital Trade payables decreased by DKK 89m Negative effect from the improved payment terms in Q1 Shift in payments 2014/ / / / /14 DKK millions Q2 Q1 Q4 Q3 Q2 Change in inventories Change in receivables Change in trade and other payables trade payables other payables Total change in net working capital

11 Q2 2014/15 Cash Flow Development Cash flow from operations decreased to DKK -1m in Q2 compared to DKK 96m in Q2 2013/14 Free cash flow in Q2 of DKK -34m compared to DKK 71m last year 2014/ / / / / / /14 (DKK million) Q2 Q1 Full year Q4 Q3 Q2 Q1 Cash generated from operations Paid interest and taxes Cash flow from operating activities Acquisition of PPE and intangibles Acquisition of subsidiaries and activities Free cash flow Cash flow from financing activities Net cash flow from operating, inv. and fin. activities

12 Net Interest Bearing Debt 12

13 Capital Structure and Cash Return Policy Target Capital Structure Gross debt level DKK 1,600-1,800m Dividend and share buy-back Dividend pay-out ratio Share buyback At least 60% of Adjusted net profit Distribution of excess cash through share buybacks 13

14 Updated 2014/15 Guidance Revenue 18. November August 2014 Realised 2013/14 Reported revenue Just short of DKK 3.5bn Approx. 3.5bn DKK 3,345m Like-for-like growth assumption 1-2% 2-3% 3.4% Earnings EBITA margin On level with the 2013/14 EBITA margin, which was 17.1% On level with the 2013/14 EBITA margin, which was 17.1% 17.1% 14

15 Appendix Introduction to Matas 15

16 Our Store Concepts Chain started in 1949 First store opened in 2013 Matas online store opened in 2008 Stylebox online store opened in

17 Our Shop in Shops (Matas) The Beauty Shop Vital Shop Own Brands: Stripes 74% Revenues 10% Revenues 17% of Revenues Across Segments Material Shop Matas MediCare (OTC) Professional Advice 9% Revenues 6% Revenues ~1,200 Materialists Highly Skilled Store Personnel True One-Stop Shopping Experience, with High Level of In-Store Service 17

18 Our Channel and Position n 1 Market Position in All Key Segments Unmatched Store Network (2) Segment Market Share in 2013, % High-end Mass VMS OTC Other n 1 n 1 n 1 n 1 Matas 62% Matas 29% Matas 26% Matas 15% Rønne Frederikshavn 294 Other Other Other (1) Aalborg Leading Online H&B Store 38% Share in Beauty Lemvig Viborg Randers n 1 Beauty and Personal Care Brand Market Share in 2012, % Ringkøbing Holstebro Herning Silkeborg Aarhus 3.1% 2.6% 2.3% 2.0% Horsens Vejle Roskilde Copenhagen 1.8% 1.7% 1.6% 1.5% 1.5% 1.4% Esbjerg Kolding Odense Aabenraa Sønderborg Næstved (Mass) (Haircare) 273 Retail Stores 21 Associated Stores 5 StyleBox 1. Restrictions on owning more than four pharmacy locations in Denmark have kept the industry fragmented and no single pharmacist exceeds the 15% market share of Matas 2. Map shows Matas Store Network including Associated Stores, but excluding the associated store in Nuuk, Greenland, our own retail store in the Faroe Islands and our two retail stores in Sweden. Matas Store Network totals 297 stores, with 272 Danish Retail Stores, 2 Swedish Retail Stores and 23 Associated Stores Nykøbing Falster 18 Source: Management Analysis and Estimates, Euromonitor

19 More Than Stores: We Are Becomming A True Multi-Channel Retail Retailer Matas will leverage its unique in-store shopping experience and exploit its online and loyalty programs potential to become one of Mobil App Matas leaflet Club Matas the best multi-channel retailers in the world ClubM 295 Matas stores Sociale media Matas Webshop 19

20 Our Competition Traditional Supermarkets Share of beauty and personal care is decreasing Department Stores Improving performance, but limited potential for new locations Online Growing, but still represents a limited sales channel New Players / Foreign Entrants Several examples of limited success. New concepts have emerged Pharmacies Very fragmented market 20

21 Our Brand Position Overall Impression of Danish Retail Stores (2014) 4,2 4,1 4,0 3,9 3,8 40% 50% 60% 70% 80% 90% 100% % Respondents Who Indicate Good or Very Good Knowledge of Retail Chain (2014) Source: Carat Deep Blue 21

22 Our Strategic Priorities 5 6 Potential Expansion into Pharmacy Market 4 StyleBox 3 Grow Online Sales Launched: June 13 2 Expand and Consolidate Matas Network Enhance and Increase the Value of Loyalty Programs Well-Invested Platform, Yet to Be Fully Monetised Today Existing Business New Initiatives Tomorrow 1 Strong Market Fundamentals: 3-4% CAGR Long-Term Forecast Market Growth 22

23 1 Attractive Danish Health and Beauty Market DKK 8.5bn Health & Beauty Market Resilient, Growing Market Outpaced Economy and Retail Spending Outperformed by Matas Over the Last 10 Years in % Forecast Long-term Market Growth OTC - 8% VMS 16% High-end Beauty 21% Indexed, 2002 = GDP drop worst since 1950 s Solid Market Outperformance +5.1% -0.6% +2.3% +8.6% -0.8% +3.7% H&B Market Matas H&B (3) Mass Beauty % CAGR Mass Beauty 55% Beauty 115 Large gap indicates Large Market Share Gains in Core Segments (1) 77% retail potential ppt High-end Beauty Health & Beauty Market (2) Nominal GDP Total Retail Spending 19% 54% 2002 Mass Beauty 26% 58% % 62% 2012 High-End Beauty % CAGR Source: Management Analysis and Estimates, Statistics Denmark, Euromonitor 1. Refers to the Company s analysis and estimate on market share gains and future growth in the Danish Health and Beauty market 2. Nominal GDP calculated as the sum of real GDP and CPI growth rates 3. Based on sales registered through the POS terminals of all Matas Danish stores, including the Online Store and Associated Stores The data is extracted from Matas' data warehouse and is unadjusted and unaudited 23

24 2 Data Is Key For Future Success Data Collected at Registration Data Collected When Card is Used Basic Info Name Date of birth Mobile phone number Address Housing type Timing of purchase Place of purchase Basket size Basket items Utilisation of promotional offers Members behaviour on the Club Matas website Personal Interests Number of children Most frequented Matas store Specific interests, e.g. Fragrances, Haircare, Skincare Data Collected Online 24

25 2 Big Potential in Using Data Marketing / Data Collection Data collection at registration +20m transactions registered Marketing channel for promotions, based on profile (gender, age etc.) Suggestion on upselling items based on current basket ~1.4 million members ~60% of all Danish women aged First Usage of CRM First use of CRM / proprietary data Product bundling and floor planning Member s engagement: in-store events and targeted campaigns Testing tailored promotions 1.5 Building a Platform 1.5 Target customers outside Matas 14 leading Danish retailers signed Utilise Full CRM Potential Full use of buying habits analysis Targeted marketing / vouchers Missing in basket / Next best buy Targeted supplier campaigns Develop Club-in-Club concept Sale of CRM data to suppliers Building Loyalty to Matas Sign up more partners Boost knowledge and use of card Partner vouchers in Pointshop Customer intelligence reports Yesterday Today Tomorrow 25

26 3 Expanding and Consolidating the Retail Network Historical Retail Store Network Expansion # of Stores, FY 2007/08 FY 2013/14 (1) Year-end Retail Store m 2, thousands Store Network Growth Levers New store openings Potential store locations identified Aim to be in all major new shopping centers Recently opened a ~300 Sqm store in Sønderborg Expand m 2 in existing retail stores 1 associated stores acquired June associated stores acquired 1 November associated stores acquired February/March associated stores acquired September Acquired 57 Associated Stores (2) Gross Margin Potential Through Acquisition of Associated Stores Gross Margin, FY 2013/14 2 Opened 14 new stores, 7 stores closed 17% 46% 3 Expanded selling space of the existing Retail Stores Wholesale Gross Margin Group Gross Margin Source: Company Information and Statutory Accounts 1. Excluding two Retail stores in Sweden, one Associated Store acquired after FY2012/13 and recently acquired Esthetiquestores 2. Since 2007 acquisition until November 2013, i.e. including one Associated Store acquired after FY2012/13 but and excluding the acquired Esthetique stores 26

27 4 Growing Our Leading Online Position Strong Online Platform Increasing Revenue Contribution Well-Positioned for Future Growth Already one of Denmark s leading health and beauty website Revamped online store launched in 2011 Access to selective beauty products Dedicated online store team in-place StyleBox webshop opened November 2013 Expand product selection online Larger share of Matas full product range Online-only products Adjacent product categories (watches, jewellery, bags, electronics) Further exploit synergistic relationship Club Matas ClubM Promote daily deals and flash sales 27

28 5 : New Concept Leveraging Existing Retail Platform New One-Stop-Shop Beauty Concept Leveraging on Our Core Competencies First Danish retail chain concept combining hair, nail and make-up treatments with sale of selective beauty products Stores to be located in larger cities on high streets and in shopping centers with high footfall Open up for a new range of professional products not available in the Matas retail stores Leveraging on our core competencies: extensive market and consumer knowledge, proven retail excellence and scale advantages Launched in June Initial period 5 stores opened since June in prime locations Test and adjust concept 2 Concept roll-out If successful during the test period, the concept could be rolled out in larger cities and shopping centers 28

29 6 Well Positioned to Enter the DKK 12bn Pharmacy Market If.. Pillars Underpinning Potential Pharmacy Expansion Logical Extension of One-Stop Shop for Health and Beauty Extensive Store Network in Place with High Traffic The Process is Underway 2011: Danish government established an interdepartmental commission to review pharmacy market and prepare proposals Associated with Market Through Online Pharmacy and Collection Points 88 Favourable Position in OTC Compared to Peers Would Buy OTC at Retailer (%) Pharmacies Føtex Brugsen Kvickly Matas Bilka Helsam June 2012: Danish Competition Authority recommends pharmacy liberalisation May 2013: Danish Productivity Commission recommends pharmacy liberalisation July 2014: Unfavouable changes to the pharmacy legislation proposed by the Government Winter 2014/15: New legislation likely to be passed in the Parliament Attractive Market Opportunity DKK12bn of sales (1) - large revenue potential DKK2bn of this is non-prescription drugs and other goods 58 million packages sold annually (2) Traffic and cross-selling opportunity Source: Company Information, Carat Deep Blue Retail Survey November Based on all sales of prescription drugs, OTC and other goods through pharmacies. DKK m of OTC sales overlap with the Danish Health and Beauty Market. Some sales of other goods, including VMS and Mass Beauty, are included in the Danish Health and Beauty market. 2. Number of prescription packages sold to individuals in Denmark in 2011, according to the Danish Health and Medicines Authority 29

30 Long-Term Sales Growth of Matas Chain Matas Chain (1) Sales for FY Ending in March, in Value ~5% CAGR Danish Stores (2) Long History of Growth with Recent Resilience and Improved Profitability Despite Economic Downturn Source: Company Information 1. Based on sales registered through the POS terminals of all Danish Matas stores, including the Online Store and Associated Stores. The data is extracted from Matas' data warehouse and is unadjusted and unaudited 2. Refers to Matas Danish Store Network at FYE 30 30

31 Attractive Growth in Revenue and Profitability Top Line Growth Improved Gross Profit Margin Increased Profitability Revenue split, DKK m Number of stores Gross Profit, DKK m Margin, % Adj. EBITDA and EBIT, DKK m Adj. EBITDA Margin, % 3.8% CAGR 4.6% CAGR 5.6% CAGR 45.0% 45.6% 46.0% % 45.6% 46.0% 46.1% 17.7% 18.7% 18.9% 18.8% ~3% like-for-like revenue growth and Retail Store network development Improved supplier terms, Associated Stores acquisitions and moderate price increases Increasing gross margin, cost control and efficiency improvements 31

32 Stable Cost Base Staff Costs Remained Stable Staff Costs, DKK m % of Revenues Lease Structure is Favourable Marketing Supports Leadership Property Costs, DKK m % of Revenues Gross Marketing % of Revenues Spend, DKK m 18.6% 18.0% 18.1% 18.7% 5.4% 5.6% 5.6% 4.6% 4.9% 4.8% Increase due to new activities Increased number of Danish Retail Stores from 254 to 257 in FY 12/13 and new warehouse costs in FY12/13 Gross spend approximately ~5% of revenues 32

33 Strong and Stable Cash Flow Generation 2010/ / / /14 FY FY FY FY Adj. EBITDA Change in inventory Change in receivables Change in trade and other payables Total change in net working capital Capex Adj. pre-tax cash flow Cash conversion 92% 112% 97% 102% Net debt / EBITDA 4.7x 3.6x 2.9x 2.6x 33

34 Long-term Incentive programme Participants Executive management and key employees can be eligible to receive a number of stock options, on an annual basis, at the Board discretion Compensation Size Stock options with a value at grant of up to 75% of their annual base salary (excluding pension contributions). Stock options will vest after three financial years (1) Vesting Vesting will be subject to fulfillment of KPIs defined by the Board of Directors for a three year period for each grant based on two KPIs; one based on EBITDA growth and one based on the share price performance. The KPIs are weighted at 50% each when determining the number of stock options vesting Exercise Vested stock options will become available for exercise after the announcement of the annual report for the third financial year from the time of grant Participants have a subsequent period of two years to exercise the stock options Each vested stock option entitles the holder to purchase one share in the company at a strike price per share of 5% of the market value of the shares at the time of the grant of the stock option 34

35 The Danish Retail Market (Indexed Development) 35

36 Danish Consumer Confidence Indicator 36

37 The Matas share Listed on NASDAQ OMX 28 June m shares in one share class Market capitalization DKK 5.3bn (USD ~1.2bn) Contact investor relations: Jesper Breitenstein Head of Investor Relations Tel Mobile