1 FULL YEAR RESULTS 26 TH APRIL 2018
2 Overview • Profit growth in a challenging market • Simply Be – standout performance • Strategic momentum: – UK market share gains – USA +21% in H2 – New partnerships announced • Financial Services enabled H2 trading • Current year expectations unchanged
3 FINANCIALS
4 Financial Summary • Revenue £922.2m, +3.9% • Product revenue +4.1%; gross margin -250bps to 52.2% • Financial Services revenue +3.5%; gross margin +550bps to 61.2% • Group gross margin 54.8%, -20bps • Trading Profit £81.6m, +1.3% • EBITDA £118.6m, + 2.3% • Adjusted EPS 23.06p, +0.1% • Net debt £346.8m; significantly exceeded by £598.8m net customer loan book • Full year dividend of 14.23p unchanged
5 Revenue by quarter £m FY18 FY17 Change Product 652.6 627.2 +4.1% Financial Services 269.6 260.5 +3.5% Group 922.2 887.7 +3.9% £m Q4 (8wks) Q1 (13wks) Q2 (13wks) Q3 (18wks) Product +10.2% +4.9% +2.7% (4.1%) Financial Services (4.9%) +7.2% +4.6% 8.2% Group +5.6% +5.6% +3.2% +0.0%
6 Product revenue by brand £m FY18 FY17 Change JD Williams 163.4 158.3 +3.2% Simply Be 132.8 114.2 +16.3% Jacamo 68.6 65.3 +5.1% Power Brands 364.8 337.8 +8.0% Secondary Brands 149.2 155.2 (3.8%) Traditional Segment 138.6 134.2 +3.3% 652.6 627.2 +4.1% Product total 269.6 260.5 +3.5% Financial Services Group Revenue 922.2 887.7 +3.9%
7 Product revenue by category £m FY18 FY17 Change Ladieswear 267.6 256.5 +4.3% Menswear 89.2 85.8 +4.0% Footwear & Accessories 74.9 69.0 +8.6% Home & Gift 220.9 215.9 +2.3% Product total 652.6 627.2 +4.1%
8 Product gross margin • Product gross margin FY18 52.2%, -250bps (FY17: 54.7%) Product Gross Margin Bridge FY18 H1 H2 Buying in Margin +110bps +80bps +140bps FX Cost Headwind (120bps) (140bps) (100bps) Impact of $ Hedge Rates YoY (160bps) (240bps) (70bps) Promotions (50bps) +110bps (220bps) P&P (30bps) - (70bps) Total Movement (250bps) (190bps) (320bps)
9 FX sensitivity $ exposure; pre mitigating actions FY19 FY20 % Hedged 100% 43% Hedging rate 1.33 1.34 PBT headwind yoy (unhedged exposure c.£3m tailwind c.£3m tailwind at 1.40) 5 cents movement sensitivity (on - c.£2m unhedged position)
10 Financial Services gross margin • Financial Services gross margin 61.2%, +550bps (FY17: 55.7%) Financial Services Gross Margin Bridge FY18 H1 H2 Underlying quality of the loan book +180bps +150bps +100bps Minimum payment changes +200bps +70bps +340bps Initiatives +160bps +100bps +270bps Debt sale +10bps (170bps) +220bps Total Movement +550bps +150bps +940bps
11 Operating expenses £m FY18 FY17 Change Product gross profit 340.5 343.1 (0.8%) Financial Services gross profit 165.1 145.2 +13.8% Group gross profit 505.6 488.3 +3.6% Warehouse & fulfilment (85.8) (79.6) +7.8% Marketing & production (164.0) (162.5) +0.9% Admin & payroll (137.2) (130.3) +5.3% EBITDA 118.6 115.9 +2.3% EBITDA margin 12.9% 13.1% (20bps) (28.1) (27.6) +1.9% Depreciation & amortisation Operating Profit 90.5 88.3 +2.5% Operating margin 9.8% 9.9% (10bps)
12 Group profit £m FY18 FY17 Operating profit 90.5 88.3 Net finance costs (8.9) (7.7) Trading profit 81.6 80.6 Impact of 53 rd week - 2.0 Exceptional costs (56.9) (25.2) Unrealised FX movement (8.5) 0.2 Profit before tax 16.2 57.6 Taxation (3.7) (13.3) Net Profit / (Loss) 12.5 44.3
13 Exceptional costs £m FY18 Customer redress for historic insurance products (40.0) Store closures (13.8) External costs related to tax matters (3.1) (56.9)
14 Balance sheet £m 3 March 2018 4 March 2017 Change Non current assets 226.2 217.8 +3.9% Inventories 110.6 105.5 +4.8% Net customer loan balances 598.8 534.8 +12.0% Other receivables and prepayments 53.9 43.1 +25.1% Total receivables 652.7 577.9 +12.9% Creditors / Accruals (153.2) (120.5) +27.1% Provisions (49.2) (19.9) Retirement benefit surplus 19.3 8.3 Net Debt 346.8 290.9 19.2% Net Assets 459.6 478.2 (3.9%)
15 Balance sheet refinance • Extending our securitisation facility to enable future growth • Opportunity to increase headroom given quality of the Financial Services loan book • Previous financing structure: £125m RCF and £280m Securitisation • New financing structure secured until September 2021: – RCF £125m • Leverage covenant excludes securitisation debt – Customer loan book securitisation facility up to £500m • Pricing rates comparable to existing facility terms
16 Receivables & provisioning £m 3 March 2018 4 March 2017 Change Trade receivables 604.9 531.6 +13.8% Payment arrangements 42.7 67.9 (37.1%) Gross trade receivables 647.6 599.5 +8.0% Opening bad debt provision 64.7 97.6 (33.6%) Gross bad debt charge 99.5 113.5 (12.3%) Debtors written off (115.4) (146.4) (21.2%) Closing bad debt provision 48.8 64.7 (24.6%) 7.5% 10.8% (330bps) Provision ratio
17 IFRS 9 • Significant change to our provision calculation, effective FY19 onwards IAS 39 IFRS 9 Based on current customer balances Based on expected future lifetime customer balances Credit customers who are up to date with All credit customers have a provision balances and not displaying financial risk against them to some extent largely not provisioned against No macro-economic overlay Macro-economic overlay; changes in macro assumption can impact provision
18 IFRS 9 • Potential impact on FY18 of IFRS 9 (illustrative only; takes effect FY19): – Provision rate increases to a maximum of 27% (vs 7.5% reported), equating to an increase of up to £120m – Associated reduction of balance sheet net assets – Inclusion of undrawn credit balances still being assessed; exclusion of these would approximately halve the provision increase • FY19 P&L impact likely to be broadly neutral, assuming no significant macro- economic changes, changes in the quality of the book or risk profile of new credit customers • In a typical year, likely positive effect in H1 and negative in H2
19 Net debt bridge
20 FY19 Guidance • Product gross margin flat to +100bps • Financial Services gross margin -100bps to -200bps • Group operating costs +1.5% to +3.5% • Depreciation & Amortisation £32m to £33m • Net interest £12m to £13m • Tax rate c.22% • Capex c.£40m • Net debt £425m to £450m – assumes £25m to £50m loan book growth • Exceptional costs c.£4m
21 FINANCIAL SERVICES
22 Financial Services • Strong performance in Financial Services, driven by quality of the loan book and minimum payment changes • Refinance enables growth over the medium-term • IFRS9 comes into effect FY19 KPI’s TY LY Change Customer account arrears rate (>28 days) 8.7% 9.9% (120bps) Provisions rate 7.5% 10.8% (330bps) New credit recruits (rollers) 122k 129k (5.4%)
23 Minimum payment changes • Most customers had 5% minimum payment charge • At the end of H1 we moved all customers to 4% • Change was made to give customers more flexibility in managing their finances • Proportion of customers who go into arrears down 6% • 60% of customers pay more than the minimum, up 10% on FY17 • On average 7% of balance paid per month, down 1ppt • Cash flow impact expected to normalise over the next 12 months
24 FY18 PERFORMANCE
25 KPI dashboard CUSTOMER ONLINE PRODUCT Actives +3.6% Online revenue +10%; 5.6% ladieswear size 16+ Power Brands +17% share, +60bps Power Brand actives +2.4% Online penetration 73% 2.7% menswear chest size 44” share, +30bps Loyals (H2) -0.2% New customer online penetration 81% 27.1% returns rate Customer satisfaction 85.8% Conversion 5.3% 76% traffic from mobile
26 Customer Satisfaction Source: UK Institute of Customer Services
27 KPI dashboard CUSTOMER ONLINE PRODUCT Actives +3.6% Online revenue +10%; 5.6% ladieswear size 16+ Power Brands +17% share, +60bps Power Brand actives +2.4% Online penetration 73% 2.7% menswear chest size 44” share, +30bps Loyals (H2) -0.2% New customer online penetration 81% 27.1% returns rate Customer satisfaction 85.8% Conversion 5.3% 76% traffic from mobile
28 Investing in digital marketing and technology • Digital marketing now 62% of spend, versus 40% five years ago • Significant improvement in page load speed • Investment in Apps • Delivery subscription rolled out to five brands
29 KPI dashboard CUSTOMER ONLINE PRODUCT Actives +3.6% Online revenue +10%; 5.6% ladieswear size 16+ Power Brands +17% share, +60bps Power Brand actives +2.4% Online penetration 73% 2.7% menswear chest size 44” share, +30bps Loyals (H2) -0.2% New customer online penetration 81% 27.1% returns rate Customer satisfaction 85.8% Conversion 5.3% 76% traffic from mobile
30 Shape of promotions through H2
31 Winning in the Plus Size market • Digital fit further differentiating our proposition • Great choice for our customers whatever their size Number of lines Source: Company analysis
32 Winning in the Plus Size market
33 Winning in the Plus Size market
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