SPORTS DIRECT INTERNATIONAL PLC Preliminary Results .../media/Files/S... · SPORTS DIRECT...

SPORTS DIRECT INTERNATIONAL PLC

Preliminary Results PresentationFor the 52 weeks ended 26 April 2015

Thursday 16 July 2015

Dave ForseyCHIEF EXECUTIVE

FY15: Group highlights of a record year….

3SPORTS DIRECT INTERNATIONAL PLC / Preliminary Results Presentation / Thursday 16th July 2015

• Sports Retail gross margin increased by 170 bps to 44.6%

• Group underlying EBITDA increased by 15.7% to £383.2m

• Underlying profit before tax up 20.5% to £300.3m

• Underlying free cash generation of £301.8m

• Sports Retail like-for-like stores gross contribution increased

by 7.4% (FY14: 10.5%) *

• Continued roll-out of large format city centre stores

• Successful UK launch of Click and Collect in FY15 H2

• Record EBITDA achieved v. 4th year Share Scheme target

• Strategic investments working

• Net debt decreased to £59.7m (£212.0m at 27 April 2014)

…..despite some headwinds.

* Excludes contribution in EAG and SIG as prior year comparative is not a full year

Aintree

Glasgow

Aintree

FINANCIAL REVIEW

Rev

enue

(£m

)

+3.9%

+4.1%

£2,706m

£2,833m+14.4%


FY15: Group Revenue Bridge

• Sports Retail revenue growth of 5.5%

• Group revenue growth of 4.7%

-3.0%

Sports Retail Revenue

40.340.9 40.3

43.242.9

44.5

44.6

40.0

40.5

41.0

41.5

42.0

42.5

43.0

43.5

44.0

44.5

45.0

FY'12 H1'13 FY'13 H1'14 FY'14 H1'15 FY'15

Gro

ss M

argi

n (%

)

Sports Retail Gross Margin

£1,939m £2,015m

£335m £384m

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

FY14 FY15

Revenue (

£m

)

Online Stores and other

• Online revenue growth of 14.4%

• Stores and other growth of 3.9%


£2,399m

£2,274m

FY15: Sports Retail Overview

• Gross margin increase of 170 bps year on year, primarily due to higher proportion of ‘better’ and ‘best’ Group branded products

* A like-for-like store is one that has been trading for the full 12 months in both periods and has not been affected by a significant change, e.g, major refurbishment. Excludes contribution in EAG and SIG as the prior year comparative is not a full year

3.7%

6.8%

0.7%

10.6% 10.5%

7.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

FY10 FY11 FY12 FY13 FY14 FY15

Sports Retail Like-for-Like Contribution Growth

• FY15 like-for-like Sports Retail stores only gross contribution: +7.4% (2014: +10.5%) *


FY15: Sports Retail Operating Costs

FY15 (£m)

FY14 (£m)

Change (%)

Store Wages 239 211 13.1

Premises Costs 211 193 9.5

Other Retail costs 281 246 14.2

Currency impact* (16) 6 -

Sports Retail Operating Costs 715 656 9.0

Sports Retail Underlying EBITDA pre associates 354 319 10.9

Associates (Heatons & others) 3 2 50.0

Sports Retail Underlying EBITDA 357 321 11.0

• Sports Retail operating costs impacted by the full year effect of proportionally higher costs in our acquired European businesses and costs in our recently established Fitness division

* Due to the translation of Euro denominated costs in our European businesses into Sterling

FY15(£m)

FY14(£m)

Change (%)

Revenue 207.6 214.1 (3.0)

Gross margin 80.5 86.3 (6.7)

Gross margin % 38.8% 40.3%

Store Wages (20.8) (25.6) (18.8)

Premises Costs (39.3) (50.0) (21.4)

Other Costs (28.1) (31.1) (9.6)

Total Operating Costs (88.2) (106.7) (17.3)

Division Underlying EBITDA (7.7) (20.4) (62.3)

FY14 • May 2013: acquired remaining 20% of Cruise• July 2013: acquired 51% of Pulp, a six store retail fashion chain


FY15: Premium Lifestyle

FY15 • Continued rationalisation of USC/Republic business• Consolidation of key head office functions across the division• Further growth in online sales

USC/ Republic USC/ Republic

Van MildertVan Mildert

Premium

0

50

100

150

200

250

FY14 FY15R

ev

en

ue

£214.1m£207.6m

Premium

• Gross margin impacted by clearance of surplus stock in our Premium businesses

193.3

32.3 33.1

0

50

100

150

200

250

FY14 FY15

Rev

enue

(£m

)

185.2

• Revenue: up 4.1%– Licensing: up 2.5%– Wholesale: up 4.4%

• Wholesale margin: 30.1%– Down 310 bps

• Licensing:– FY15: 58 deals completed / contractual minimum royalties of $25m over the life of the contracts

£217.5m

Licensing

Wholesale

£226.4m


FY15: Brands Division

FY15 (£m)

FY14 (£m)

Change (%)

Wages 21.2 22.9 (7.4)

Advertising & promotion 12.7 15.0 (15.3)

Other Brands Costs 23.1 25.2 (8.3)

Total Brands Operating Costs 57.0 63.1 (9.7)

Brands Underlying EBITDA 34.1 30.2 12.9


FY15: Brands Operating Costs

+12.9%

£35.6m

£12.7m £3.8m(£10.1m)

280

300

320

340

360

380

FY14 pre ShareSchemes' non-cash

charges

Sports Retail Premium Lifestyle Brands FY15 pre ShareSchemes' non-cash

charges

Share Schemes'non-cash charges

FY15

£373.1m£383.2m

£331.1m

-£10.1

UN

DE

RLY

ING

E

BIT

DA

(£M

)


FY15: Underlying EBITDA Bridge

+11.1%

-15.1%+62.3%

• Group underlying EBITDA (pre Share Scheme charges) increased by 15.7%

FY15 (£m)

FY14 (£m)

Change(% )

Underlying EBITDA (pre share scheme) 383.2 331.1 15.7

Share scheme charge (10.1) (11.9) (15.1)

Depreciation (excl. impairment) (67.8) (63.7) 6.4

Interest (6.5) (7.8) (16.7)

Investment Income 1.5 1.6 (6.2)

Underlying PBT 300.3 249.3 20.5

Underlying Taxation (69.1) (62.3) 10.9

Non-controlling interests (0.9) 0.6 -

Underlying Profit after Tax 230.3 187.6 +22.8

Number of shares (000s) (1) 592,294 585,514

Underlying Basic Earnings per Share 38.9p 32.1p +21.2


FY15: PBT / PAT / EPS

(1) The weighted average number of shares includes the full year impact of the vesting of 23.5 million shares in August 2013 and October 2013 under the 2009 Share Scheme and the Executive Share Scheme respectively.

FY15 (£m)

FY14 (£m)

Change(% )

Sports Retail - Stores, warehouse and amortisation of goodwill 50.5 49.7 1.6

Sports Retail - Change in estimated useful life – fixtures & fittings 3.6 2.2 63.6

Sports Retail - Change in estimated useful life – warehouse 4.3 - -

Total Sports Retail 58.4 51.9 12.5

Premium Lifestyle 3.2 5.4 (40.7)

Brands 6.2 6.8 (8.8)

Total 67.8 64.1 5.8


FY14: The useful life of fixtures and fittings was reduced from 7 years to 6 years

FY15: The useful life of fixtures and fittings was reduced from 6 years to 5 years, and the depreciation policy was changed

from reducing balance to straight line

The useful life of our Shirebrook warehouse has been reduced from 15 to 10 years straight line

FY15: Depreciation & Amortisation

FY15(£m)

FY14(£m)

Reported PBT 313.4 239.5

Standard rate of corporation tax (1) 65.8 55.1

Non-qualifying depreciation 3.5 4.9

Other differences 2.8 (0.2)

Effective tax 72.1 59.8

Actual effective tax rate 23.0% 25.0%


FY15: Taxation

(1) The standard rate of corporation tax was 21% in FY15 (FY14: 23%)

The effective rate for FY16 is expected to be in the region of 22%.

FY15 (£m)

FY14 (£m)

EBITDA (pre scheme costs) 383.2 331.1Realised (loss)/profit on fx contracts (3.7) 1.8

Taxes paid (77.7) (55.7)

Underlying free cash flow 301.8 277.2

Working capital Inventory 57.0 (54.8)

Debtors / Creditors, other (121.8) (55.3)

Acquisitions (including debt) (1) (2) (3.8) (144.2)

Net (purchase of) / proceeds from investments (3) 4.1 (4.6)

Purchase of properties (inc. warehouses) (24.0) (20.8)

Proceeds from the sale of freehold properties (inc. warehouses) 21.2 -

Other Capital expenditure (76.3) (48.3)

Finance costs and other financing activities (5.9) (7.2)

Decrease/ (Increase) in net debt 152.3 (58.0)


FY15: Cash Flow

(1) Acquisitions in FY14 included EAG, SIG, Yeomans and Gelert(2) The purchase of EAG included 12 properties with a book value of £67.6 million(3) Includes the purchase and sale of Debenhams shares

FY15 (£m)

FY14 (£m)

Freehold acquisitions 5.3 13.4Warehouse and Shirebrook store expansion 37.4 5.2New stores (leasehold)* 25.1 16.1Maintenance capex 15.2 11.9

Other 10.3 11.0

Sports Retail 93.6 57.6Premium Lifestyle 2.3 7.0Brands 4.4 4.5

100.3 69.1

Proceeds on disposal of Fixed Assets (21.2) -

Net Capital Expenditure 79.1 69.1

• FY16: target capital expenditure: c.£100m including completion of Phase 3 of the Shirebrook warehouse


FY15: Capital Expenditure

* Includes gyms

NE

T D

EB

T (

£M)

212.0

59.7

379.5

(68.6) 4.1

(100.3)

21.2

(5.9)

(77.7)

-200

-150

-100

-50

0

50

100

150

200

250Net Debt

FY14EBITDA &

FXWorkingcapital &

other

Income frominvestments

CapitalExpenditure

Sale offreeholdproperty

Interest Tax Net DebtFY15


FY15: Net Debt Bridge

• Investment in working capital• Capital expenditure including stores and Phase 3 of the Shirebrook development

Matt PearsonACTING CHIEF FINANCIAL OFFICER

FINANCIAL REVIEWOPERATIONAL REVIEW


Sports Retail : Property Portfolio UKFY15 FY14

UK Stores (3) 440 417

Openings 39 32

Closures 16 10

SPORTSDIRECT.com fascia 428 401

Retail Area (sq. ft.) c.4.75m(1) c.4.5m

• Square footage increased to c. 4.75m sq. ft. (1)

• 39 new stores opened in the period (2)

• 12 out of the 16 closures in FY15 have been relocations into larger and better configured space

• Leasehold expiry profile is now 4.6 years (3)

• Target 30 to 40 store openings, 30% of which are expected to be relocations.

• Continued enhancement and investment in the existing store portfolio such as:

• improved visual merchandising;• lower stock densities; and• specialist performance areas within stores.

• Target c. 300k sq. ft. of existing space to be refitted

• Continued focus on large format stores in key markets

(1) Due to differing methodologies, this implies a range between 4.5m sq. ft. – 5.0m sq. ft.

(2) Includes four concessions currently being trialled within Debenhams

(3) Excluding Lillywhites Piccadilly


Sports Retail: Mega Store Format

Glasgow city centre extension

• New Glasgow city centre store opened in March 2015• Net sales area increased from 22,000 sq. ft. over 2 floors to

c.50,000 sq. ft. over 5 floors.• Enhanced in-store concepts.• Collaboration with key suppliers e.g. Under Armour.

Leeds city centre• New Leeds city centre store to open summer 2015• Existing store trades 16,000 sq. ft. over 2 floors.• New store will trade c. 50,000 sq. ft. over 4 floors.

Birmingham city centre

• Contractually committed to take the former Primark unit in Birmingham city centre.

• Relocating from c 18,000 sq. ft. to c.60,000 sq. ft.• Expected to open during 2017/18

Close to securing other large format city centre st ore opportunities

Glasgow city centre

BeforeNarrow entrance with no ground floor area

AfterNew ground floor sales entrance leading to extended and refurbished store

Leeds city centre – new store


Sports Retail: Property Portfolio EU

(1) Includes only stores with SPORTLAND or SPORTSDIRECT.com fascias, Sports Direct owns a 60.0% stake in this business

(2) Sports Direct owns a 50.1% stake(3) Sports Direct owns a 50.0% stake

(4) Sports Direct owns a 40.0% stake(5) Due to differing methodologies, this implies a range between 2.5m sq. ft. - 3.5m sq. ft.

Territory Stores FY15

Stores FY14

Austria 46 52

Belgium 43 44

Estonia (1) 24 20

Latvia (1) 13 13

Lithuania (1) 12 12

Portugal (2) 17 15

Slovenia 15 15

Poland 10 7

France 7 6

Czech Republic 6 4

Holland 6 6

Cyprus 6 5

Hungary 5 4

Slovakia 4 3

Germany 3 3

Luxembourg 2 2

Spain 1 1

Switzerland 1 0

Total 221 212

Associates No. of Stores

Rep. of Ireland (3) 27

Iceland (4) 1

Total 28

• Square footage remained at c. 3.0m sq. ft.

• 16 new stores opened in nine different countries in FY15

• 7 closures in two countries in FY15

• Leasehold expiry profile is now 4 years

• Target is to open between 20 and 30 new stores in seven countries in FY16

• Continued roll-out of the Boot Room concept

Salzburg Kasern


Sports Retail: Austria and Baltics Update

Austria

• Continued reconfiguration of Mega stores

• Key Austrian Mega stores to be re-branded to Lillywhites fascia

• Similar to UK city centre format

• Wintersports/outdoor still key areas

• Collaboration with key suppliers (e.g. Salomon)

• Sportsdirect stores (former Sports Experts) continue to be relocated and/or upgraded

Lillywhites, Innsbruck

Sportland, Estonia

Baltics

• Two stores in Estonia opened under the SPORTSDIRECT.com fascia

• 2 stores in Lithuania and 1 store in Latvia opening during FY16 under the SPORTSDIRECT.com fascia

• Sportland investment in relocations/new sites/re-fits

• Strengthen relationships with key suppliers

Sports Retail: Fitness Division Created


• Acquired 25 former LA Fitness sites

• Opened an additional 2 gyms in Aintree and Keighley in FY15.

• Aintree is a new build site with:

• 40,000 sq. ft. retail space over 2 floors

• A separate 20,000 sq. ft. dry gym

• Additional gym openings planned for FY16.

• Continuing to explore combined gym and retailopportunities in the UK

Aintree

24

Sports Retail: Marketing

SPORTS DIRECT INTERNATIONAL PLC / Preliminary Results Presentation / Thursday 16th July 2015

BETTER IMAGE NEEDED

• February 2015 saw adidas launch its final version of the iconic F50 football boot, with Sports Direct channels chosen as key marketed distribution points

• Executed in store through bespoke window executions and refreshed fixturing and supported online with product & ambassador assets through Sports Direct and Soccer Scene

• In collaboration with Under Armour, the Ground Floor of our new extended Glasgow City Centre store has opened during July 2015

• Through high quality store in store visual merchandising and a wide range of sporting and lifestyle products the concept is fully aligned with the Under Armour brand identity.

25

Sports Retail: Marketing


• In only its second period of audit circulation results our consumer magazine, Forever Sports, is now ranked as the bestselling sports magazine in the UK

• Even within the highly competitive Men’s Lifestyle category, Forever Sports is now the 2nd best selling title, ahead of the like of GQ & Esquire

• Lonsdale ambassador Carl Froch stunned a sell out Wembley Stadium audience of 80,000 with an 8th

round KO of George Groves in May 2014

Online Sports Sales

Sports Retail: Online Overview

Overview

26SPORTS DIRECT INTERNATIONAL PLC / Interim Results Presentation / Thursday 16th July 2015

£174m

£264m

£335m

£384m

£0m

£50m

£100m

£150m

£200m

£250m

£300m

£350m

£400m

£450m

FY12 FY13 FY14 FY15

• Successful UK launch of Click and Collect – now over 20% of all UK orders delivered by Click and Collect

o Exceptional considering the £4.99 charge

• Resulting in accelerated online growth in FY15 H2

• Continued improvements to responsive websites

• Mobile site visits continue to increase and now represent over 50% of all traffic

• Mobile site ranked in the top four retailers in the FTSE 100 in terms of mobile website performance*

• Checkout redesign - introduction of a guest checkout and streamlining of the checkout process

• Improvements to our Customer Relationship Management system resulting in better response times and ability to pool resource from other parts of the business

Objectives:• Introduction of a fast pay check-out solution

• Introduction of dedicated websites and new payment types for our European business

* The Search Agency UK’s Mobile Experience Scorecard: FTSE 100 Companies –http://go.thesearchagency.com/mobile-experience-scorecard-ftse-100-2015


Premium Lifestyle

Store count

Fascia April 2015 April 2014

USC 66 90

Cruise 10 10

Flannels.com 8 8

Van Mildert 10 9

Others 9 9

Total 103 126

• Consolidation of key head office functions in Flannels.com, Cruise and Van Mildert, resulting in operating cost savings

• Beginning to see the benefit of the re-structuring of Republic in the prior year and the closure of loss-making stores in FY15

• Successful launch of Click and Collect in USC stores now over 15% of all UK orders delivered by Click and Collect

• Strong growth in online revenue driven by stock availability and system improvements

• Continue to strengthen relationships with key suppliers


Brands: Wholesale

• Overall wholesale revenue of £193.3m up 4.4% on prior year

• Sales growth in a challenging UK wholesale market

• US trading in line with expectations and remains c.40% of total wholesale sales

• Sales in Europe down 3.8% due to the adverse trading conditions in Southern Europe in H2

• Wholesale gross margin down by 310 basis points to 30.1% due to a shift in sales mix towards lower margin lines

• Investment in key Group Brands expected to continue at similar levels to previous years

• Expected A & P spend FY16 between £10 and £20m


Brands: Licensing

• Licensing revenues were up 2.5% to £33.1m.

• 58 new license agreements, covering multiple brands and product categories, were signed during the year with minimum contracted values of $25.0m over the term of the agreements

• Group has 401 license agreements worldwide across 264 licensees, with contracted minimums of $305m over the remaining life of the agreements

• Sports Direct Retail licensing continues to grow with 14 stores open in Malaysia and 13 open in the Middle East

• Everlast, Dunlop & Slazenger continue to drive growth, representing c. 65% of total licensing income between them

• Growth in Australia due to numerous Dunlop & Slazenger agreements following the purchase of the IP in the region

• Licensing in certain territories has become challenging due to currency devaluations, in particular Russia and India

• Licensing model still regarded as key driver of Brands division growth and profitability

FY16: Outlook Statement


Group’s success underpinned by delivering exceptional quality and unbeatable value to our consumers

30

• Trading since the year end has been in line with management’s expectations, underpinning the revised FY16 target of £420m for the 2015 Bonus Share Scheme

• Performance continues to be driven by

• Investment in product range and availability

• Optimisation of in-store and web offer and introduction of UK Click and Collect

• Growing proportion of ‘better’ and ‘best’ Group branded products in key categories

• Investment in store portfolio

Our returns for shareholders are driven by our workforce: All targets for 2011 Bonus Share Scheme are achieved, c.5m shares to c.2,000 participating employees

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