boconcept holding a/s annual report 2006/07
DESCRIPTION
BoConcept Holding A/S Annual Report 2006/07. Agenda. Introduction to BoConcept Financial developments in 2006/07 Markets, concept and strategy Long term targets and 2007/08 Guidance Q&A. - PowerPoint PPT PresentationTRANSCRIPT
BoConcept Holding A/SAnnual Report 2006/07
Agenda
• Introduction to BoConcept
• Financial developments in 2006/07
• Markets, concept and strategy
• Long term targets and 2007/08 Guidance
• Q&A
Contacts:Viggo Mølholm, CEO Hans Barslund, EVP & CFOE-mail: [email protected] E-mail: [email protected]
Historical development
Phase I (1952-1992)• From carpenter to furniture manufacturer
Phase II (1993-2003)• Furniture production and own franchise based retail chain
Phase III (2004-)• Retail oriented concept holder / international marketing and logistics business
with furniture production– BPR and implementation of focused business plan– Optimising distribution setup, upgrading and trimming Store-portfolio as
well as divesting subsidiaries and non-core areas• One company – One brand – One distribution channel• Vision: To make BoConcept no. 1 brand within urban interiors
Today's BoConcept at a glance
• International retail-oriented concept holder within furniture and lifestyle products for private homes
• Following a turn-around and restructuring process focus is now purely on development, support and supply to the global individually run franchise-based retail chain, BoConcept
– 193 BoConcept Brand Stores• Most important sales channel• 400-800 m2 individual operated franchise stores• High-traffic locations• Only BoConcept products are sold
– 148 BoConcept Studios• 100-400 m2 shop-in-shops• BoConcept's products supplement other brands and products
– Brand Stores and Studios in 45 countries throughout the world
• Core competencies– Design and branding– Best practice in retail and sales processes– Supply Chain Management and sourcing– Production of board furniture
5 years of strong financial performance
Revenue / Growth
0
200
400
600
800
1.000
1.200
2002/03 2003/04 2004/05 2005/06 2006/07
Mio
. kr.
-10%
-5%
0%
5%
10%
15%
20%
Revenue Growth %
Profit/loss before tax
(60)
(40)
(20)
-
20
40
60
80
2002/03 2003/04 2004/05 2005/06 2006/07
Mio
. kr
.
Equity / Interest bearing debt
0
100
200
300
400
2002/03 2003/04 2004/05 2005/06 2006/07
Mio
. kr.
Equity Interest bearing debt
Operating margin / Return on capital employed
-15
-10
-5
0
5
10
15
2002/03 2003/04 2004/05 2005/06 2006/07
%
Operating margin Return on capital employed
Shareholder information
• From July 2007 member of MidCap+ on OMX Copenhagen Stock Exchange
• Liquidity continues to increase – trade volume up 32% (1Y)
• 240,000 A-shares / 2,360,000 B-shares– 800+ registered shareholders– Free float approx. 75%– M’cap approx. DKK 1,300m (B-shares)
• Dividend proposal for 2006/07: DKK 2 per share of DKK 10 nom.
Share price performance (2Y)
0
100
200
300
400
500
May
-05
Jun-0
5
Jul-0
5
Aug-05
Sep-0
5
Oct-0
5
Nov-05
Dec-05
Jan-
06
Feb-0
6
Mar
-06
Apr-06
May
-06
Jun-0
6
Jul-0
6
Aug-06
Sep-0
6
Oct-0
6
Nov-06
Dec-06
Jan-
07
Feb-0
7
Mar
-07
Apr-07
Financial developments in 2006/07
Continued solid top-line performance
• Revenues at DKK 1,047m – up 17.7% YoY
– Marginally lower than expected (approx. 20%) due to very strong 4Q2005/06, postponements in openings and below-expectations growth in the US
• Growth in same store sale at +9%
• Net addition of 30 Brand Stores and 4 Studios during the year
• Strategic focus on Brand Stores as primary growth driver
– Sales up 45% in the channel (76% of total revenues)
– Product customers continues to diminish as planned (down 42% YoY)
Revenue split, sales channels
0%10%20%30%40%50%60%70%80%
BoConcept® BrandStores
BoConcept® Studios Product customers
2005/06 2006/07
Revenue (LTM)
0
200
400
600
800
1000
1200
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2004/05 2005/06 2006/07
Mio
.dkk
Further execution of the strategic gameplan
• Taking measures to secure delivery and service
– In 1H2006/07 problems occurred due to large product replacement, heavy order intake and low inventories
– To solve, production capacity and inventories were increased
• Strong managerial focus on cost-efficiency and building on core-competencies
– Further outsourcing of upholstery products to China
– Danish upholstery production plant closed – future production to European market will be sourced from strategic partnership with Lithuanian manufacturer
– BoConcept's wood component production unit in Lithuania sold
Sourcing of manufactured goods
0%
20%
40%
60%
80%
100%
2005 2006E 2007E
Sourcing Own production
Profit improvements carry on
• Gross margin reduced from 41.4% to 40.6%
– Gross margin declines as hikes on raw material, energy and labour can not be transferred to product prices in short term (new prices fixed from Sept. 2007)
• EBIT-margin up from 4.1% to 6.6% (6.0% expected)
– Economy of scale– Continued upturning trend as
effects of cost control and focus on SCM pays off
• PTP at DKK 61.7m (expected DKK 55-60m) - up DKK 34m YoY and slightly better than expected
-20-10
01020304050607080
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2004/05 2005/06 2006/07
Mio
. d
kk
-2%-1%0%1%2%3%4%5%6%7%8%
EBIT (LTM) EBIT-margin (LTM)
Gross margin
30,0%
35,0%
40,0%
45,0%
2002/03 2003/04 2004/05 2005/06 2006/07
Investments in expansion and inventories…
• Balance sheet increased by DKK 47.6m to DKK 546.9m during the year
– Investments made in inventories due to strong demand
– Acq. of 3 Brand Stores in the US
– Opening of own Brand Store in Tokyo
• Increased receivables caused by high activity
• NIBD reduced to DKK 183m
• Shareholder equity at DKK 148m corresponding to an equity ratio of 27%
Total balance
0
100
200
300
400
500
600
2002/03 2003/04 2004/05 2005/06 2006/07
Mio
. dk
k
Long term assets Current assets
Equity / Interest bearing debt
0
100
200
300
400
2002/03 2003/04 2004/05 2005/06 2006/07
Mio
. kr.
Equity Interest bearing debt
…also impact cash flow
Cash flow before instalments on long-term debt
-100
-50
0
50
100
2002/03 2003/04 2004/05 2005/06 2005/06
Mio
. kr.
-15%
-10%
-5%
0%
5%
10%
15%
Cash flow Cash flow % of revenue
• Cash flow before instalments on non-current debt items comes in at DKK 25.7m (min. DKK 10m expected)
• Impacted by– Acq./opening of own Brand
Stores– Hike in inventories
Markets, concept and strategy
CUSTOMISEDURBAN DESIGN
OUR BRAND SOULthe most singular way to describe our brand
:
Global mega-trend is driving demand
• The urban city is today's ultimate mega-trend– Metropolises are growing as people across the world are settling down in big cities – or
duplicating the life and lifestyles in these– With metropolises increasing in numbers and size, the market for customised designed
furniture is expanding rapidly– The market is moving from traditional to modern
• BoConcept is exceptionally positioned to take advantage of the marked drivers– Global concept and presence– One global style
Updated identity as platform for future growth
Moving up in the competitive landscape
• BoConcept's concept is truly global
• BoConcept's products are the most commercial and coordinated on the market in terms of design
• BoConcept's primary target group consists of brand-oriented trendsetters who want reasonable priced designer furniture
Source: BoConcept
HIGH PRICE
Lignet Roset
Heals
Crate & Barrel
HabitatBolia
IlvaLOW IMAGE HIGH IMAGE
IDEm øblerDFSArgos IKEA
Jysk
Hyper Markets
LOW PRICE
Natuzzi
Rochebobois
Better quality at same price
More m2 used on high-end products
Source: BoConcept
HIGH PRICE
Lignet Roset
Heals
Crate & Barrel
HabitatBolia
IlvaLOW IMAGE HIGH IMAGE
IDEm øblerDFSArgos IKEA
Jysk
Hyper Markets
LOW PRICE
Natuzzi
Rochebobois
Better quality at same price
More m2 used on high-end products
Attractive franchise concept
• Very attractive franchise model built on centralised marketing, distribution, support and conceptual development
– BoConcept is the sole supplier and delivers a complete range of products, accessories and shop fixtures to BoConcept Brand Stores and Studios
• Store strategy aims at– Considerable expansion of
Brand Stores in excellent locations
– Increasing same store sale, hit rate and basket size
– Offering customers an exceptional shopping experience
Scaling up in channels and markets
• Net-addition of 30 Brand Stores (42 opened, 12 closed) and 4 Studios (32 opened, 28 closed) in 2006/07
• In total 17 Brand Stores are currently owned by BoConcept
– Are to be divested as it is not the company’s long term strategy to have a Brand Store portfolio
• Focus on 10 main markets
• Market dispersal helps to minimise cyclical sensitivity
Stores StudiosShare of
revenues
USA + 20 21 12%Germany + 14 12 11%Spain + 35 3 10%J apan + 19 7%France 14 10%Denmark 11 8 9%Norway 41 6%UK 6 3 5%Sweden 4 1 4%China 10 2%
133 89 76%
60 59 24%
Total 193 148 100%
A-markets total
B- & C-markets
121 144 148 150
147163
193
350
0
100
200
300
400
500
2004/05 2005/06 2006/07 2010/11
# of shops
Studios Brand Stores
Production and Supply Chain optimisation continues at undiminished strength
• Strong focus on SCM and production optimisation as value driving vehicles
– Own production of board furniture in DK – all other production is sourced (primarily from Eastern Europe and China)
– Distribution centres in Ølgod (DK), Bayonne (US) and Tokyo (JPN)
• Own production continuously measured on same metrics as external suppliers so secure competitive position and profitability
• Future capacity expansion by increasing outsourcing of inventories and distribution planned
• 60% of the total production is sourced – thus number is expected to increase
50%60% 65%
75%
50%40% 35%
25%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2005/06 2006/07 2007/08E 2010/11
Total production Sourced production Own production
Growth strategy with focus on further improving profitability to be continued
• Focus in all parts of the company is on maximising positive customer experience
• Organic growth to be realised via– Optimising same store sale by further investments in education of sales
staff and focused development of shop and product concepts (BoConcept University and BiC)
– Considerably grow number of Brand Stores on main markets(35-50 net additions p.a.)
– Product customers to be phased out by 2008/09
• Increased sourcing and improved productivity in own production to maintain gross margin
– Introduction of best practise tools to make supply chain costs flexible and dependable on demand
• Economy of scale in additional sales to further grow EBIT-margin
• Limited investments in non-current assets as growth is not capital intensive
Long term targets and2007/08 Guidance
Old targets (2008/09)
• EBIT-margin min. 10%• ROCE min. 20%• Cash flow min. 4% of
revenues
• 500 sales units of which min. 300 Brand Stores by 2010/11
New targets (2010/11)
• Revenues of DKK 2bn
• EBIT-margin min. 12%• ROCE min. 30%• Cash flow min. 6% of
revenues
• 500 sales units of which min. 350 Brand Stores
Current status
• RevenuesDKK 1,047m
• EBIT-margin 6.6%
• ROCE 14%• Cash flow
2.5% of revenues
• 341 sales units of which 193 Brand Stores
Long term targets upgraded
2007/08 Guidance
• Operations– 15-20% growth in revenues (continued businesses)
• Same store sale to increase due to focus and support• Revenues from product customers will drop considerably
– Increased productivity and effects of plant closings and divestments will improve EBIT-margin to 8%
– Pre-tax profit between expected in the range DKK 85-95m
• # of Brand Stores– Net addition of 30-40 Brand Stores
• CAPEX and cash flow– Investments in non-current assets of DKK 40-45m (well above previous
years' level)– Cash flow before instalments on non-current debt items expected to reach
a minimum of DKK 35m
In summary
• 2006/07 – a successful and reassuring year for BoConcept proving the feasibility of our vision
• BoConcept's concept and design perfectly aligned with global mega-trend
• Business model, strategy and organisation updated and fully in place to take advantage of core competencies and previous refocusing efforts
• Ambitious plan launched – road to steep and profitable non- capital-intensive growth paved
Q&A
For further information visit us at
www.boconcept.com