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FY14 INVESTOR PRESENTATION
18 September 2014
CEO/MD – Mark Newman
CFO – Kevin Fine
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Group Highlights – company invests to grow
FY14 (1)
($ M)
FY13 (2)
Continuing
($ M)
Change
Revenue 124.9 99.5 +26%
Net Margin (%) 62.5% 67.2%
Total Expenses (%) 51.3% 55.9%
EBITDA 18.8 17.1 +10%
EBIT 13.3 11.9 +12%
EBIT Margin (%) 10.6% 11.9%
NPAT 8.3 7.1 +16%
EPS (cents) 20.2 17.5 +16%
DPS in cents & Fully franked 16.0 50.0
Group Like for Like Sales Growth (%) +8% -4%
Beginning of transformational investment stage
- Oroton brand transformation process began
- Gap brand traded for 9 months since November 2013
- Brooks Brothers joint venture launched February 2014
- 1st year of post Ralph Lauren era
Group Revenue up 26% to $124.9m
- Positive like for like sales of +8% in Oroton
- GAP sales for 9 months trade
- Brooks Brothers numbers not included due to JV equity accounting
Net margin declined to 62.5% due to:
- Oroton – continued discounting, price reductions and changes to product and
channel mix
- GAP – higher volume, lower margin business
CODB improved to 51.3% of sales (FY13: 55.9% ) led by:
- Leveraging the Head Office infrastructure to operate the two new brands
- Tight focus on expense control across the business
- Offset by early start up costs for GAP and Brooks Brothers
EBIT increased by $1.4m to $13.3m
- Includes establishment costs/losses for GAP and Brooks Brothers and further
investment in Asia
EPS up 16% to 20.2 cents
- Current effective tax rate at 37.3% due to non-deductibility of international
losses (FY13: 36.2%)
DPS of 16.0 cps
- The Board has declared a final fully franked dividend of 8.0 cps taking the full
year dividend to 16.0 cps
- This compares with a FY14 dividend of 50.0 cps which included the benefit of
the Ralph Lauren business with a reported EPS of 67.2 cps for the period
(1): Includes GAP brand from November 2013 & equity accounting for Brooks Brothers JV
(2): Continuing operations only. Excludes Ralph Lauren business discontinued from 30 June 2013
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Oroton – Strong growth as transformation opportunities identified
Like for like sales +8% (FY13: -4%) with H1 +3% and H2 +14%.
• Year of consolidation and self reflection
• Strong sales performance through consistent promotional plan
Strategy to elevate the brand to a true attainable luxury positioning commenced with:
• Negotiation of Rose Byrne as the celebrity face of the brand from August 2014
• Development of new store concept showcased at our flagship store QVB, Sydney and a new store at Emporium, Melbourne in August 2014 and a further 6 stores planned in FY15. The new concept is already showing positive sales results
• Product and price architecture designed to increase average selling price and average transaction value
Oroton online continues to grow and represents ~10% of brand sales
Margin decline driven by:
• continued discounting, particularly over the peak Christmas and New Year trading period as prior year promotional calendar followed
• retail price reductions in H1-14 without commensurate cost reductions which was reversed in H2-14
• changes to both product and channel mix
• FY15 to focus on reversing this trend and on quality margin generation through higher average selling price, less discounting and lower costs
Continue to review store network for opportunities to relocate in key centers and continue to review and close non performing stores
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Continued momentum in Asia
- Strong double digit like for like sales growth
- 5 new stores opened during the year, 2 in China, 2 department store
concessions in Singapore and a franchised store in Dubai. We
closed one underperforming store in Singapore (Marina Bay Sands)
at lease expiry
- Continue to review current stores performance vs. key metrics
- Total number of International stores is now 11:
5 x Malaysia
3 x Singapore
2 x China
1 x franchised store in Dubai
- Wholesale continuing to grow and includes business with
Singapore Airlines, Kuala Lumpur International Airport and Middle
East Distributor
Net international losses of ~$3.4m (FY13: $2.0m) driven by the
investment to open the new China stores, offsetting good results in
Malaysia which is now cash-flow positive
FY15 focus on consolidation and reducing losses overall and growth in
Singapore. We have signed a new store at Vivo City (Singapore) to
open in December 14 and are reviewing other department store
concessions opportunities
Continuing discussions with potential distribution partners for other
markets including China
Oroton International
Shanghai - Kerry Centre Store
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Rose Byrne as the celebrity face of the brand to lift our
brand position
Long term partnership with Rose Byrne as the face of Oroton
Rose epitomises the essence of what Oroton is about: relaxed glamour and
effortless style
Commenced with the recently launched Spring / Summer 14-15 advertising
campaign shot in London
Forms part of our strategy to elevate the brand and invest in marketing including
strong campaigns, events, traditional media and social media
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New store concept key step in Oroton brand transformation
New luxury concept designed in collaboration between
Oroton and a leading London-based creative
consultancy to elevate the brand
The new concept captures the brand’s heritage, place of
origin and celebrates Oroton’s 75 year old history
The conceptual palette for the project is a selection of
fresh neutrals and ceramic hues inspired by the warmth
of the Australian rural landscapes, natural light and
architectural details
Successfully launched at our Flagship store in QVB,
Sydney and a new store at Emporium, Melbourne in
August 2014
A further 6 stores planned for roll out in strategic
locations during FY15 including relocations to larger
stores in more prime retail locations
New concept already showing positive sales results
Oroton QVB – reopened August 2014
Oroton Emporium – opened August 2014
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Oroton on the Red Carpet
Jennifer Lopez carries
Oroton’s Raisa Clutch
while out-and-about in LA
Catherine Middleton,
Duchess of Cambridge
carries Oroton’s Odeion
Clutch while touring Australia
Jessica Alba selects
Oroton’s Freize clutch for
the helping hand of LA
Mother’s Day Luncheon
Hilary Duff carries Oroton’s
Freize Clutch for the 2014
Musicares Person of the Year
Event Honoring Carole King
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Successful integration of the 3 GAP stores from November 2013 at Pitt
Street (Sydney), Chadstone and Melbourne Central (Melbourne) under
new 10 year Franchise Agreement with a further 10 year option including
joint venture set up and exit options
Asset Purchase Agreement completed with previous franchisee for the
purchase of store assets, inventory and transfer of staff for $7.2M as
reported at half year
Encouraging positive like for like sales growth across all stores driven by
seasonal relevant product in store and global price harmonisation
FY14 was a period of transition and learning the GAP business model.
Challenges with inventory availability and seasonality post transition which
have improved with full responsibility for buying and planning from
Summer 14 season
Season relevant product resonates well with local consumers, resulting in
high in store conversion. We are focussed on strategic marketing and
customer engagement including building our CRM capabilities
Negative contribution as anticipated in the year due to start up costs/IT
integration and inherited inventory
3 new stores planned in FY15 at Macquarie, Miranda and Parramatta in
NSW and local ecommerce site planned for FY16
Discussions have commenced with Banana Republic for the launch of the
brand in the Australian market
GAP – successful integration of the business F
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Brooks Brothers – 10 stores opened in FY14
JV commenced trading in February 2014
OrotonGroup holds a majority of 51% in the JV company with
an initial licence term of 10 years with a 5 year renewal option
including PUT/CALL options for both partners
10 stores opened during FY14 with a further 5 stores planned
next year:
2 x Free standing stores
4 x Menswear and 2 x Womenswear concessions at
David Jones
2 x Factory outlets
Sales were $3.2M for the 6 months of trade with growing local
brand awareness
Trading loss for the year is approx. $800k in start up phase
OrotonGroup’s investment in the brand was $5.6M during the
year
A flagship store opened at Martin Place in August 2014
Local online sales website operated by the JV commenced in
August 2014. www.brooksbrothers.com.au
Martin Place Flagship - opened August 2014
Chatswood Chase - opened April 2014
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Cashflow + Balance Sheet in post Ralph Lauren era
FY14
($ M)
FY13 (1)
($ M)
PP&E 11.1 9.7
Inventory 27.6 18.5
Stockturn 2.0 2.0
Net cash 10.1 23.0
Net Assets 36.9 46.4
ROCE(2) 31.6% 23.9%
Year of investment to elevate the Oroton brand and support the new GAP and Brooks Brothers brands
- Net cash position of $10.1 M at year end
- $3.9M capital expenditure for the Oroton brand and infrastructure (LY $3.5M) with a focus on growth and strategic refurbishments:
• New stores in China and new concept store at QVB and Emporium
• Key strategic factory refurbishment at Homebush and International online website design
• IT integration of GAP and Brooks Brothers
- $7.2 M payment for purchase of GAP assets including inventory and fixed assets
- $5.6 M investment in Brooks Brothers by OrotonGroup to support inventory and CAPEX requirements
$40M bank facility currently available to support continued investment in FY15
Dividend payment of 16.0cps for the full year (Interim: 8.0 cps and Final: 8.0 cps) compared to a full
year dividend of 50.0 cps in FY13 with the benefit of the Ralph Lauren business
Hedging policy in place to manage foreign exchange risk by using foreign exchange contracts to hedge 85% of anticipated transactions up to 24 months out
23.812.8
14.7
5.4 10.1
23.0
FY14 cash Dividends Interest and Tax
CAPEX
3.9
Investment in BB & GAP
FY13 Cash Operating activities
Cashflow ($m)
(1): Continuing operations only. Excludes Ralph Lauren business discontinued from 30 June 2013
(2): EBIT/ (Total Assets - Current Liabilities)
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Outlook for FY15 – a further year of investment for growth
Open 3 stores in FY15 at Miranda,
Macquarie and Parramatta
Invest in season relevant inventory
Focus on driving supply chain
efficiencies with increased scale
Innovative promotional activity
targeted towards driving traffic to
store
Continue discussions on roll out of
Banana Republic brand
Continued investment in a
flagship store at Martin Place,
Sydney and a further 4 stores in
FY15
Launched local online store in
August 2014
www.brooksbrothers.com.au
Focus on innovative marketing to
drive in store traffic and brand
awareness
Review wholesale opportunities
Net cash of $10.1 M and a bank facility of $40m to support investment in all 3 brands
Investment in IT infrastructure to support growth and new businesses including new point of sale
and CRM in FY15
Build a true attainable luxury positioning
including investment in new store concept
to elevate the store environment
Focus on strong marketing campaigns
using the new face of the brand, Rose
Byrne
Increase investment in domestic
marketing including media and customer
engagement
Reduce the level of discounting with focus
on quality margin generation
Continue to grow Oroton International and
focus on limiting the establishment costs
in Asia
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Store Listing – As at July 2014 there were 71 Oroton stores,
3 GAP and 10 Brooks Brothers F
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OrotonGroup Limited (OrotonGroup) advises that the information in this
presentation contains general background information about the Company’s
activities as at the date of the presentation. It is information given in summary
form and is based on information available to OrotonGroup that has not been
independently verified.
The information in the presentation contains forward looking statements which
may be subject to uncertainties outside OrotonGroup’s control and therefore no
representation or warranty is made or given as to the accuracy, reliability or
completeness of the information, opinions and conclusions expressed. This
presentation should not be relied upon as a recommendation or forecast by the
Company.
This document should be read in conjunction with the FY14 Results
Announcement and the FY14 Annual Report.
Important notice and disclaimer F
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