2014 Full Year Results Presentation 5 June 2014

Transcription

1 2014 Full Year Results Presentation 5 June 2014

2 Disclaimer This presentation includes statements that are, or may be deemed to be, forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms believe, estimates, plans, projects, anticipates, expects, intends, may, will, or should or, in each case, their negative or other variations or comparable terminology. These forwardlooking statements include matters that are not historical facts and include statements regarding the Company s intentions, beliefs or current expectations. Any forward-looking statements in this presentation reflect the Company s current expectations and projections about future events. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak only as of the date of this presentation. No representations or warranties are made as to the accuracy of such statements, estimates or projections. Please note that the Directors of the Company are, in making this presenation, not seeking to encourage shareholders to either buy or sell shares in the Company. Shareholders in any doubt about what action to take are recommended to seek financial advice from an independent financial advisor authorised by the Financial Services and Markets Act

3 Today s Agenda 1 Highlights John Roberts 2 Operational and Financial Review Steve Caunce 3 Strategic Overview John Roberts 4 Summary and Q&A 3

4 1 Highlights

5 AO Is On A Mission To Redefine retailing through a devotion to happiness and amazing customer service 5

6 Highlights 1 Revenue growth of 40.0% to 384.9m (2013: 274.9m) 2 AO Website Sales growth of 45.4% to 287.1m (2013: 197.4m) 3 Adjusted EBITDA for 2014 of 11.2m, up 10.9% (2013: 10.1m) 4 Completed re-branding of principal website to ao.com in August Launched online proposition for TV s on ao.com on 15 May Listed on London Stock Exchange in March 2014 Well Placed To Deliver On Our Exciting Plans Ahead 6

7 2 Operational And Financial Review

8 Financial & Operational Highlights Sales Growth Strong top-line growth at 40.0% y-o-y in FY14 Growth driven by ao.com, up 45.4% y-o-y Gross margin improves by 0.8pps to 19.3% Operating Leverage Advertising and marketing costs increased to 4.7% of sales (FY13 2.6%) following commencement advertising on television and increase in web traffic from paid channels Scale benefits coming through in warehousing and other administration costs Sustaining Culture Commitment to customer service is unwavering currently c1.5 million facebook likes, and Winner of 2014 Retail Week Awards for Customer Service Initiative Ranked 4 th in 2014 Sunday Times Best Companies to Work For ( th place also) while head count continues to grow Expanded to new headquarters building - AO Park 8

9 Summary Income Statement Year ended 31 March ( m) Growth AO website sales % Third-party website sales % Third-party logistics services % Revenue % Gross profit % Gross margin 19.3% 18.5% Adjusted EBITDA % Adjusted EBITDA margin 2 2.9% 3.7% Operating Profit before exceptional items % Operating (Loss)/Profit (7.2) 8.4 Adjusted EPS 3 (p) 1.50p 1.58p -5.1% Total Revenue growing by 40.0% compared to the previous year. Sales driven by ao.com which continues to grow strongly through customer proposition enhancements, delivering great service and brand investment Gross margin increase due to increased product margin as well as delivery efficiencies Adjusted EBITDA margin fall as expected due to brand investment and temporary increases in customer acquisition costs Exceptional items relate to 15.4m of IPO costs charged to income statement 5 Adjusted EPS of 1.50p declines by 5.1% Notes 1. Adjusted EBITDA is defined by the Group as loss/profit before tax, depreciation, amortisation, net finance costs, fees incurred in relation to IPO, and Share based payments charge. 2. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Revenue 3. Adjusted Earnings Per Share is Basic Earnings Per Share excluding Share based payments charge, exceptional items and their associated tax impact 4. Certain financial data have been rounded. As a result of this rounding, the totals of data presented in this document may vary slightly from the actual arithmetic totals of such data 5. Comparatives numbers in the financial information have been restated for IFRS. 9

10 Revenue Growth Driven By ao.com Website Sales Strong Revenue Growth, Focus on AO Website Sales 1 AO Website sales, principally ao.com, are the main focus of sales growth Revenue for FY14 of 287.1m (FY13: 197.4m) Representing Y-o-Y revenue growth of 45.4%, now accounting for 74.6% of Total Revenue M Third Party Website and Trade Sales refers to websites operated for selected third parties and trade fulfilment Channel increased by 28.5% to 79.3m (FY13: 61.7m) Driven by higher volumes for both insurance replacement clients and branded websites AO delivers products for third parties through its inhouse logistics service Helps utilise fleet more efficiently Plan to maintain the Third-Party Logistics Services contracts FY13 FY14 AO website sales Third Party Retail Third Party Logistics 10

11 Volume driven growth, with stable order values # Of Settled Orders (1) Average Order Value ( AOV ) (2) # of Orders (thousands) 1, ,000 1, FY11 FY12 FY13 FY Average Products per Order ( PPO ) (3) # of Products FY11 FY12 FY13 FY FY11 FY12 FY13 FY14 1. Total number of orders taken to completion in connection with AO Website Sales and Third-party Website Sales. 2. The sum of AO Website Sales and Third-party Website Sales divided by total number of orders. 3. Total number of units sold in connection with AO Website Sales and Third-party Website Sales divided by Number of orders. 11

12 Incremental Gross Margin Improvement Cost of Sales and Gross Margin Development Key Gross Margin Drivers m % 19.5% 1 Gross Margin increased by 0.8pp from FY13 to FY14 due to % Higher product margin and bulk buying as a result of stockholding strategy % % Delivery fleet efficiency is managed through the placement of stockless outbases, allocation of driver resources and optimised delivery route planning 18.0% % % % Cost of Sales GP 16.0% 12

13 Cost Contribution Analysis SG&A Expenses Year ended 31 March ( m) Growth Advertising and marketing % % of sales 4.7% 2.6% Warehousing % % of sales 3.4% 3.3% Other Admin % % of sales 9.0% 9.5% Total SG&A % Evolution of SG&A Expenses as a % of Revenue 20% 17.3% 17.0% 15.1% 15.4% 16% 2.9% 2.4% 2.6% 4.7% 3.2% 12% 3.2% 3.3% 3.4% 8% 11.2% 9.5% 9.5% 4% 9.0% 1 Significant Advertising and Marketing spending increase due to Re-establishing search marketing ranking with new AO.com brand Investment in brand and market share via selective national TV advertising 5.0m 2 Warehousing expenses at 3.4% of revenue were higher as scale efficiencies were offset by cost impact from introduction of new outbases and roll out of Same Day Delivery launched in October Other Administrative expenses increased by 31.9% on continued build of the cost base driven by increased volumes and in anticipation of future growth into new categories and internationally 0% FY11 FY12 FY13 FY14 Advertising and Marketing Warehousing Other Admin 13

14 Detailed Income Statement Year ended 31 March ( 'm) Revenue Cost of sales (310.7) (224.1) Gross profit Administrative expenses (66.0) (42.4) Operating profit before exceptional items Exceptional Items (15.4) - Operating (loss)/profit (7.2) 8.4 Net finance costs (0.3) (0.2) (Loss)/profit before tax (7.5) 8.1 Taxation (charge) on ordinary activities (2.0) (1.8) (Loss/profit for the year (9.5) 6.3 Reconciliation of Operating Profit to Adjusted EBITDA Operating (loss)/profit (7.2) 8.4 Add: Depreciation and amortisation EBITDA (4.4) 10.1 Add: Exceptional Items Add: Share based payments charge Exceptional Item - Total IPO costs were 19.7m, of which 15.4m is charged to Income Statement with the balance of 4.3m being charged to Share Premium account. Tax The effective tax rate for the year was 26.8% (2013: 20.9%) Share based payment charge relates to LTIP option awards made to senior managers on IPO. Adjusted EBITDA Note: Certain financial data have been rounded. As a result of this rounding, the totals of data presented in this document may vary slightly from the actual arithmetic totals of such data. 14

15 Operating Cash Flow Statement Year ended 31 March ( 'm) Adjusted EBITDA Loss on disposal of fixed asset Net change in working capital Change in provisions (0.6) (0.8) Taxation Paid (1.9) (0.7) Cash generated from operating activities Operating Cash flow conversion 121% 121% 1 Cash generated from operating activities Adjusted operating cash flow for FY14 was 13.6m (2013: 12.2m), with operating cash flow conversion of 121% of EBITDA (2013: 121%) For FY14 the company has generated cumulative positive change in net working capital As at year end 31 March ( 'm) Cash Borrowing (6.4) (6.8) Net cash position at year end Net Cash Position Net cash position of 48.7m reflects receipt of IPO Proceeds of 40.3m being 60.0m of new shares less 19.7m of IPO costs Borrowing at year end relate to finance leases 15

16 Balance Sheet Year ended 31 March ( 'm) Intangible assets Property, plant and equipment Trade and other receivables Deferred tax asset Non Current Assets Inventories Trade and other receivables Cash and cash equivalents Current Assets Total Assets Trade and other payables Current tax liabilities Borrowings Provisions Current Liabilities Borrowings Total Liabilities Share capital Share premium Other reserves Retained earnings (2.2) 10.2 Shareholders' Funds Equity and Liabilities Capital Expenditure Gross Capital expenditure for the year was 7.5m (2013: 2.9m), relating to the new headquarters building completed in December and additional trailers for the trunking fleet. Internally funded 3.3m (2013: 1.7m) balance by finance leases. Inventories Inventories were 15.9m (2013: 8.7m) reflecting an increase in sales volumes and the change in stock holding policy to hold more stock in order to provide customers with same-day and next-day delivery options on an increased number of SKUs. As a result average stock days increased to 17 days (2013: 10 days). Trade and other payables increased to 62.9m (2013: 44.6m) as manufacturers continued to extend credit on a higher volume of sales. 16

17 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Customer s Responding to Raised Brand Profile 1 2 TV campaigns and IPO are helping build brand Unprompted brand awareness up from 2% in March 2013 to 10% March 2014 Total Sessions up 43% on previous year while average monthly conversion is consistent with previous year at 3.4% (2013: 3.3%) High Quality Customer Feedback Average Net Promoter Score increase to over 80% (FY13: 74%) Whilst service efficiencies also continue to improve Monthly Sessions (m) Sessions & Conversion Graph FY13-14 FY13 Mnthly Sessions FY14 Mnthly Sessions Conversion (%) Conversion 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Reducing Contacts Whilst Improving Customer Service (1) 3 Recognised for excellence in customer service Percent Increasing Net Promoter Score Units Decreasing Contacts Per Order Source: Company data. (1) On a score from 1 to 10 those that attributed 9-10 are considered Promoters, those that attributed 7-8 Passives and those that attributed 1-6 Detractors. NPS (LHS) CPO (RHS) 17

18 Delivering Best Service 1 Delivery Proposition Considerably Enhanced in FY14 Introduction of Same Day Delivery (SDD) Cut-off time for Next Day Delivery (NDD) time extended from 10p.m. to midnight Range available for SDD and NDD extended to over 3000 SKU s Additional Three Outbases Added in FY13 (1) 2 3 Distribution Network extended Additional Outbases opened in Yaxley (Aug 13), Spennymore (Oct 13), and Exeter (Oct 13) On Time: Delivering as Promised AO s in house logistics service consistently delivers products as promised, with average monthly DTP of 98.2% (FY %) on volumes up by c.40% 100.0% 96.0% 92.0% 88.0% 84.0% 80.0% Deliver to Promise (2) (1) Picture shows Outbase at Spennymore, opened in October 2013 (2) DTP (Deliver to Promise) is the % of deliveries made successfully, on the customer s chosen delivery date, at the first time of asking with the desired device or a higher specification device at no extra cost. 18

19 3 Strategic Update

20 AO Is On A Mission To Redefine retailing through a devotion to happiness and amazing customer service 20

21 Maintaining AO Culture is key to continued success 1 Retained 4 th Spot in Sunday Times Best 100 Companies to Work For Award A great achievement while head count continued to grow to accommodate additional volume and bandwidth for category and international expansion 2 New Headquarters - AO Park In the December 2013 completed move to new 48,550 sq. ft. office building Fitted out with loads of cool features - staff reaction has been fantastic Migration of customer centre and IT infrastructure carried out without interruption to business 3 AO World Sharesave Scheme Launched April 14 Well received by staff with c.34% of eligible employees signing up for the scheme 21

22 Strategy For Sustainable Growth Continue to take UK MDA market share and reduce customer acquisition costs Build on Market-Leading Customer Proposition Drive Brand Awareness Broaden the Range of Products and Services in the UK Further growth opportunities Broaden ao.com into Europe 22

23 Strategy to drive continued MDA Growth FY14 Progress Plans for FY15 Build on Market-leading Proposition Same Day Delivery introduced to majority of UK postcodes NDD cut-off time changed from 10 pm to midnight Increased range of products available for SDD/NDD to +3,000 SKU s Introduced gas and electric appliance installation service for selected area Deepen website content across a wider range of appliances Further Optimise websites for mobile and tablet purchases Enhance delivery, installation and removal services Utilise customer data analysis to better understand customer needs Increase Brand Awareness Re-branded from appliancesonline.co.uk to ao.com in August 2013 Unprompted Brand awareness up from 2% March 2013 to 10% March 2014 Begun national TV advertising Re-branding of vehicle fleet Raised corporate profile through IPO Expand targeted marketing activities to improve brand awareness and lower cost per customer acquisition ( CPA ) Evolve social media content to engage customers and promote brand awareness Individualised Customer Experience Enhance automated , SMS, display and website personalisation programmes Enhance targeted programmes which highlight products based on browsing and purchase history and behaviour 23

24 Expand Range of Products and Services in UK Premium Install Service launched in certain areas Installation services for gas and electric cooking products are now available in selected areas Specialist install teams have been recruited and trained at two of the outbases Plan is to extend the service to further postcodes during FY15 24

25 Expand Range of Products and Services in UK AO.com moves into TV Category On 15 May 2014 introduced TV and related products on ao.com New series of TV ads has been developed to accompany the launch Available products include a range of higher end TV s and ancillaries including 3D and Smart TV s, DVD players, sound systems, and associated ancillaries from Samsung, Sony, Panasonic, Toshiba and LG ao.com now features video reviews to highlight and explain the technical features of the respective TV s Installation service is available in limited post-codes - plan is to extend the service to further postcodes during FY15 25

26 Germany Plans On Track 1 Strategic intention is to launch in Germany in FY15 2 Initial phase is for launch of MDA available to customers in all regions in Germany with a market leading proposition 3 Project plan is in place and on-track; site has been selected, staff are being recruited, and suppliers are engaged with the project 4 Repeating the same UK model 26

27 Germany logistics 27

28 4 Summary and Q&A

29 Outlook 1 The current year has started well with trading in line with our expectation 2 3 Our plans to broaden our product range in the UK are being implemented ahead of plan with the launch of TV and home entertainment products in May 14 Expansion into Germany is also proceeding well Well Placed To Deliver On Our Exciting Plans Ahead 29

30 Q&A 30

31 Appendix - Definitions Adjusted EBITDA Adjusted EBITDA Margin Adjusted Earnings Per Share Loss/profit before tax, depreciation, amortisation, net finance costs, fees incurred in relation to IPO, and LTIP costs. Adjusted EBITDA divided by Revenue Basic Earnings Per Share excluding LTIP costs, exceptional items and their associated tax impact Non Financial KPI s Total Sessions Conversion rate Number of orders Average order value Products per order Deliver to promise rate The number of occasions the AO.com website has been visited. Total number of orders taken to completion in connection with AO Website Sales divided by total sessions. Total number of orders taken to completion in connection with AO Website Sales and Third-party Website Sales. The sum of AO Website Sales and Third-party Website Sales divided by total number of orders. Total number of units sold in connection with AO Website Sales and Third-party Website Sales divided by Number of orders. Percentage of deliveries made successfully on the customer s chosen delivery date at the first time of asking, based on an average of weekly statistics. 31