FULL YEAR RESULTS 26 TH APRIL 2018 2 Overview Profit growth in a - - PowerPoint PPT Presentation

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FULL YEAR RESULTS

26TH APRIL 2018

Overview

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• 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

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FINANCIALS

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

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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%

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£m Q1 (13wks) Q2 (13wks) Q3 (18wks) Q4 (8wks) 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%

Product revenue by brand

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£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% Product total 652.6 627.2 +4.1% Financial Services 269.6 260.5 +3.5% Group Revenue 922.2 887.7 +3.9%

Product revenue by category

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£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%

Product gross margin

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• 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)

FX sensitivity

$ exposure; pre mitigating actions FY19 FY20 % Hedged 100% 43% Hedging rate 1.33 1.34 PBT headwind yoy (unhedged exposure at 1.40) c.£3m tailwind c.£3m tailwind 5 cents movement sensitivity (on unhedged position)

• c.£2m

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Financial Services gross margin

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• 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

Operating expenses

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£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) Depreciation & amortisation (28.1) (27.6) +1.9% Operating Profit 90.5 88.3 +2.5% Operating margin 9.8% 9.9% (10bps)

Group profit

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£m FY18 FY17 Operating profit 90.5 88.3 Net finance costs (8.9) (7.7) Trading profit 81.6 80.6 Impact of 53rd 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

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)

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Balance sheet

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£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%)

Balance sheet refinance

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• 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

Receivables & provisioning

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£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%) Provision ratio 7.5% 10.8% (330bps)

IFRS 9

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• 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 balances and not displaying financial risk largely not provisioned against All credit customers have a provision against them to some extent No macro-economic overlay Macro-economic overlay; changes in macro assumption can impact provision

IFRS 9

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• 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

Net debt bridge

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FY19 Guidance

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• 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

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FINANCIAL SERVICES

Financial Services

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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%)

• 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

Minimum payment changes

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• 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

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FY18 PERFORMANCE

KPI dashboard

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CUSTOMER Actives +3.6% Power Brand actives +2.4% Loyals (H2) -0.2% Customer satisfaction 85.8% ONLINE Online revenue +10%; Power Brands +17% Online penetration 73% New customer online penetration 81% Conversion 5.3% 76% traffic from mobile PRODUCT 5.6% ladieswear size 16+ share, +60bps 2.7% menswear chest size 44” share, +30bps 27.1% returns rate

Customer Satisfaction

Source: UK Institute of Customer Services

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KPI dashboard

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CUSTOMER Actives +3.6% Power Brand actives +2.4% Loyals (H2) -0.2% Customer satisfaction 85.8% ONLINE Online revenue +10%; Power Brands +17% Online penetration 73% New customer online penetration 81% Conversion 5.3% 76% traffic from mobile PRODUCT 5.6% ladieswear size 16+ share, +60bps 2.7% menswear chest size 44” share, +30bps 27.1% returns rate

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

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KPI dashboard

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CUSTOMER Actives +3.6% Power Brand actives +2.4% Loyals (H2) -0.2% Customer satisfaction 85.8% ONLINE Online revenue +10%; Power Brands +17% Online penetration 73% New customer online penetration 81% Conversion 5.3% 76% traffic from mobile PRODUCT 5.6% ladieswear size 16+ share, +60bps 2.7% menswear chest size 44” share, +30bps 27.1% returns rate

Shape of promotions through H2

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Winning in the Plus Size market

• Digital fit further differentiating our proposition
• Great choice for our customers whatever their size

Source: Company analysis

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Number of lines

Winning in the Plus Size market

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Winning in the Plus Size market

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Power Brands

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Go-to online brand for 25-45 year old curvy confident women Revenue +16.3%; active customers +>20% Rollout of Perks loyalty scheme SS18 ‘Rules Rewritten’ campaign our boldest yet

Power Brands

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Go-to online brand for 25-45 year old curvy confident women Revenue +16.3%; active customers +>20% Rollout of Perks loyalty scheme SS18 ‘Rules Rewritten’ campaign our boldest yet Catering for 25-45 year

• ld men of all body

shapes, from small to 5XL Revenue +5.1% Live your Moment campaign Strengthening our fashion credentials

FROM THIS…. TO THIS….

Power Brands

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Go-to online brand for 25-45 year old curvy confident women Revenue +16.3%; active customers +>20% Rollout of Perks loyalty scheme SS18 ‘Rules Rewritten’ campaign our boldest yet Catering for 25-45 year

• ld men of all body

shapes, from small to 5XL Revenue +5.1% Live your Moment campaign Strengthening our fashion credentials The online department store for Midsters New brand launch a great success New customers +21% following relaunch 19% online growth

into new

VISIT JDWILLIAMS.CO.UK OR CALL 0871 231 2000

Fifty Plus migration

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• Brand migrations important in an online retail world
• From AW17, migrated Fifty Plus customers received JD Williams marketing

programme

• Fifty Plus:

–c.200k customers –FY17 revenue c.£45m –Online shoppers, similar shopping habits as JD Williams

• Fifty Plus customers more classic in their fashion choices; relaunched JD Williams
• nline proposition didn’t resonate with them as strongly as planned
• Corrective actions taken, early results encouraging

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OUR GROWTH LEVERS

Our growth levers

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Gain share in the UK Improve customer experience Develop product offer Improve brand cut- through International expansion USA our first priority Global Ship Anywhere Leverage our strengths Partnerships Capsule ranges on other retailers’ sites Influencer marketing Access to new customers Focus on customer acquisition and loyalty Continue to invest in the business to grow revenue

• 1. Gain share in the UK

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Improve customer experience Develop product offer Improve brand cut- through The key enablers Flexible supply chain Continued investment in customer experience Good value for money Compelling brand campaigns Expansion into new categories and third party brands FY18 performance Market share gains Integrated supply chain, logistics and product teams Further lead time reduction Success in expanded Athleisure ranges

• 2. International expansion

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USA our first priority Global Ship Anywhere Leverage our strengths The key enablers New USA website live Global Ship Anywhere Growing brand awareness Targeted local presence Global culture FY18 performance Simply Be brand relaunched in USA, initial response very encouraging USA H2 revenue +21% Global Ship Anywhere launched

• 3. Partnerships

Capsule ranges on other retailers’ sites Influencer marketing Access to new customers The key enablers Strength of our own label brands Fit expertise Global brand credibility FY18 performance Increasing use of influencers, with strong success in the USA Live on ASOS and Zalando; announced deals with THE ICONIC (Australia) and Lamoda (Russia)

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Summary

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• Clear leaders in the plus size fashion market
• Strong Power Brand performance
• Online penetration continues to grow
• International expansion prospects are strong
• Partnership portfolio developing well
• Financial Services loan book healthy and growing
• Recent refinancing underpins future growth plans

Any questions?

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APPENDIX

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Customer KPI’s

TY LY Change Active customer accounts 4.45m 4.30m +3.6% Power Brand active customers accounts 2.22m 2.17m +2.4% % growth of most loyal customers

• 0.2%

+3.6%

• 3.8ppts

Customer satisfaction rating 85.8% 83.7% +210bps

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Online KPI’s

TY LY Change Online penetration 73% 69% +4ppts Online penetration of new customers 81% 77% +4ppts Conversion rate 5.3% 5.6%

• 30bps

% of traffic from mobile devices 76% 71% +5ppts

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Product KPI’s

TY LY Change Ladieswear share, size 16+ 5.6% 5.0% +60bps Menswear share, chest size 44”+ 2.7% 2.4% +30bps Group returns rate 27.1% 26.8% +30bps

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Operating cash flow

£m FY18 FY17 Operating profit 33.6 65.1 Depreciation, Amortisation & share

• ption charge

31.4 28.1 Increase in Inventory (5.1) (4.0) Increase in Receivables (77.6) (21.6) (Decrease)/increase in Payables 33.0 (0.2) Increase in Provisions 29.3 19.9 Pension obligation (0.3) (0.2) Cash generated from operations 44.3 87.1

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Group cash flow

£m FY18 FY17 Cash generated from operations 44.3 87.1 Taxation paid (12.1) 1.9 Dividends paid (40.3) (40.2) Capital expenditure (39.2) (42.3) ESOT share issue net proceeds

• 0.1

Net finance costs (8.6) (7.8) Net cash outflow (55.9) (1.2) Opening Net Debt 290.9 289.7 Closing Net Debt 346.8 290.9

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Financial calendar

• Q1 trading statement

14th June 2018

• Half year results

October 2018

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IR contact details

Bethany Barnes (nee Hocking) Director of Investor Relations and Corporate Communications Email: Bethany.Barnes@nbrown.co.uk Tel: 0161 238 1845 Mobile: 07887 536153

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