Financial results Q3 FY16 Management Discussion & Analysis Unaudited December 9, 2016
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Introductory remarks FY16 relates to the 52 weeks starting February 1, 2016 and ending January 29, 2017 Q3 FY16 relates to the 13 weeks starting August 1, 2016 and ending October 30, 2016 This presentation provides a management discussion and analysis of HEMA s operating results in Q3 FY16 Q3 FY16 has not been audited 3
Key takeaways Q3 FY16 Seventh consecutive quarter of LFL group consumer sales growth Q3 FY16 net sales were 301.2m, an increase of 2.9% on Q3 FY15 Q3 FY16 Group LFL consumer sales reported growth on growth with an increase of 0.2% versus Q3 FY15 (Q3 FY15 LFL consumer sales versus Q3 FY14 were +7.0%) Netherlands directly owned stores reported LFL consumer sales growth of 1.3% Continued gains in market share in Apparel and Household & Personal Care in the Netherlands 4
Key takeaways Q3 FY16 Solid gross profit & margin growth driving continued improvement in Adjusted EBITDA Q3 FY16 Gross profit of 137.4m (45.6% gross profit margin) vs. Q3 FY15 of 124.2m (42.4% gross profit margin). A significant y-o-y improvement for the period of +320bps Reported Q3 FY16 Adjusted EBITDA of 31.3m vs. Q3 FY15 of 23.5m. Improvement of +33.2% compared to prior year period Third consecutive quarter of strong Adjusted EBITDA growth LTM Adjusted EBITDA position at the end of Q3 FY16 of 102.5m 5
Key takeaways Q3 FY16 Continued focus on key short term business priorities has delivered good results Further productivity improvements were achieved in Dutch stores. Q3 FY16 adjusted wage quote decreased by 60bps, from 13.7% in Q3 FY15 to 13.1% in Q3 FY16 Strong focus on cash and liquidity management resulted in a solid end of Q3 FY16 cash position of 141.8m compared to 84.1m at the end of the prior year period On track to achieve further year on year reduction of total inventory by end of FY16 with a strongly improved stock quality profile 6
Contents 1. Key macro economic indicators in the Netherlands 2. Market developments in the Netherlands 3. Results Q3 FY16 4. Cash flow Q3 FY16 5. Strategy update 6. Q&A 7
1. Key macro economic indicators in the Netherlands 8
Key macro economic indicators Source: CBS, Central Bureau of Statistics, http://www.cbs.nl and other independent third parties Positive consumer confidence and declining unemployment trends continue The US dollar has strengthened recently towards the 1.06 level ( /$) 9
2. Market developments in the Netherlands 10
Softer Q3 retail spending non-food Q3 2016 vs Q3 2015 (Jul-Sep) Sales - 0.6% Volume - 1.3% Price + 0.7% Source: CBS, Central Bureau of Statistics, http://www.cbs.nl Note the CBS figures shown above represent a make-up of the total retail market in the Netherlands and as such include a number of categories that are less relevant to HEMA (e.g. Consumer electronics, drugstores and DIY) 11
Retail spending food meaningfully up in Q3 Retail spending on Food picked up again in Q3 2016 after a slow down in Q2 2016 Q3 2016 vs Q3 2015 (Jul-Sep) Sales +2.4% Volume +1.5% Price +0.9% Source: CBS, Central Bureau of Statistics, http://www.cbs.nl 12
HEMA performs in line with market HEMA slightly outperformed the market in Apparel and Household Goods & Personal Care, but trended marginally below the total market for the last 3 months on the back of lower food sales Whilst HEMA continued to strongly outperform the market in catering, a focus on reducing shrinkage and substantially less promotional activities compared to the prior year period led to a reduction in market share within Food Market HEMA Sales growth (y-o-y, indexed ) Source: third party information as of September 2016. Services not included given lack of market information. Food includes out of home 13
3. Results Q3 FY16 14
Headline financials Q3 FY16 klik om foto toe te voegen * EBITDA and Adjusted EBITDA are non-gaap measures. Refer to the interim financial report Q3 FY16 for the definitions Strong year on year performance for the period and year to date mainly driven by increased sales, gross profit and lower operating expenses LTM EBITDA strongly improving to 86.4m LTM Adjusted EBITDA improving to 102.6m 15
Bridge EBITDA to Adjusted EBITDA Q3 FY16 klik om foto toe te voegen Excluding the VAB provision, total non recurring items are 2.1m lower compared to prior year period 16
Adjusted EBITDA bridge Q3 FY15 to Q3FY16 9.5 1.4 0.1 0.4 (1.4) (2.2) 31.3 23.5 klik om foto toe te voegen Gross margin % improvement is the main driver behind improved Adjusted EBITDA 17
Continued strong gross profit margin improvement klik om foto toe te voegen Gross profit improvement driven by higher sales and stronger gross margin on the back of better intake margin, favourable sales mix and reduced shrinkage 18
Like for like consumer sales klik om foto toe te voegen Positive group LFL consumer sales, however growth was negatively affected across Europe by unseasonably warm weather for a 6 week period Overall retail market in Belgium and France remained soft in the period 19
Q3 FY16 operating expenses klik om foto toe te voegen Excluding the VAB provision, operating expenses increased with 2.3m primarily driven by increased marketing investments to support the HEMA 90 years campaign The impact from an increase in the net store count of 21 from 690 stores at the end of Q3 FY15 to 711 at the end of Q3FY16 was largely offset by cost savings across the business 20
Positive operating result in Q3 FY16 klik om foto toe te voegen On the back of a strongly improved operating result, a small net loss is reported for Q3 which reflects a significant improvement compared to the prior year period 21
4. Cash flow Q3 FY16 22
Cash flow from operations Q3 FY16 klik om foto toe te voegen The positive cash flow from operating activities in Q3 FY16 was driven by a solid operating performance and a very positive movement in working capital helped by an early Q3 cut-off date (last day of the month is when several taxes are paid and is after closing for Q3 FY16) Adjusting for the early cut-off date, the positive movement in working capital would still have been 29.9m Compared to Q3FY15 increased intake in of fresh inventory ahead of the Saint Nicolas and Christmas trading 23
Net cash flow Q3 FY16 klik om foto toe te voegen Total positive net cash inflow in Q3 FY16 was primarily driven by operating activities Catch up in CAPEX in Q3 FY16 24
Cash available end of Q3 FY16 klik om foto toe te voegen Strong operational performance and solid cash management led to an increase in cash of 70.8m compared to the end of the prior year period and 57.6m compared to year end FY15 25
Capital structure end of Q3 FY16 klik om foto toe te voegen Net debt decreased by 69.2m compared to the end of the same quarter last year and 58.2m compared to year end FY15 26
FY16 Focus on track Building on momentum from 2015 Gross profit gains from pricing and procurement initiatives Store productivity improving Continued improvements in product availability Accelerating e-commerce growth klik om foto toe te voegen Further international expansion 27
5. Strategy Update 28
Three pillar strategy update revitalise Benelux HEMA Worlds pilots stores in the Netherlands & Belgium imminent launch of loyalty program stock reduction program on track grow e-commerce redesign has led to growth in sales re-platforming being planned accelerate international newly opened stores trading well healthy expansion pipeline enablers operating model review investment in systems
15 International stores opened in FY16 30
Investor event We would like to invite you to a HEMA investor day in the spring of 2017 During this event we will present our Annual Financial Statements for FY16 Various members of the management board will provide an update on our key strategic initiatives The event will be held in Amsterdam, the Netherlands Further information and a formal invitation will be shared in due course klik om foto toe te voegen 31
6. Q&A 32