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BoConcept Holding A/S Annual Report 2006/07

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.

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BoConcept Holding A/S Annual Report 2006/07

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  1. BoConcept Holding A/SAnnual Report 2006/07

  2. 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: vm@boconcept.com E-mail: hb@boconcept.com

  3. 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

  4. 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. 5 years of strong financial performance

  6. 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.

  7. Financial developments in 2006/07

  8. 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)

  9. 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

  10. 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

  11. 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%

  12. …also impact cash flow • 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

  13. Markets, concept and strategy

  14. OUR BRAND SOULthe most singular way to describe our brand CUSTOMISEDURBAN DESIGN :

  15. 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

  16. Updated identity as platform for future growth

  17. 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 HIGH PRICE HIGH PRICE Rochebobois Rochebobois Lignet Lignet Roset Roset Natuzzi Natuzzi Heals Heals Crate & Barrel Crate & Barrel Habitat Habitat Bolia Bolia Ilva Ilva LOW IMAGE LOW IMAGE HIGH IMAGE HIGH IMAGE IDEm IDEm ø ø bler bler DFS DFS Better quality Better quality Argos Argos IKEA IKEA at same price at same price Jysk Jysk More m2 used on More m2 used on high high - - end products end products Hyper Markets Hyper Markets LOW PRICE LOW PRICE Source: BoConcept Source: BoConcept

  18. 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

  19. 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

  20. 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

  21. 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

  22. Long term targets and2007/08 Guidance

  23. 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 Long term targets upgraded 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 flow2.5% of revenues • 341 sales units of which 193 Brand Stores

  24. 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

  25. 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

  26. Q&A For further information visit us at www.boconcept.com

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