Update 31 March 2015az498215.vo.msecnd.net/static/files/presentations... · 31 March 2015 Closing...
Transcript of Update 31 March 2015az498215.vo.msecnd.net/static/files/presentations... · 31 March 2015 Closing...
Update
31 March 2015
DISCLAIMER
2
This presentation does not constitute or form part of and
should not be construed as, an offer to sell or issue or the
solicitation of an offer to buy or acquire securities issued
by Bang & Olufsen A/S in any jurisdiction, including the
United States of America, Canada, Australia, Japan or
the United Kingdom, or an inducement to enter into
investment activity in any jurisdiction.
This presentation contains forward looking statements.
Such statements concern management’s current
expectations, beliefs, intentions or strategies relating to
future events and hence involve substantial risks and
uncertainties. Actual future results and performance may
differ materially from those contained in such statements.
This presentation does not imply that Bang & Olufsen
A/S has undertaken to revise these forward looking
statements, except what is required under applicable law
or stock exchange regulation.
This presentation does not constitute or form part of and
should not be construed as, an offer to sell or issue or the
solicitation of an offer to buy or acquire securities issued
by Bang & Olufsen A/S in any jurisdiction, including the
United States of America, Canada, Australia, Japan or
the United Kingdom, or an inducement to enter into
investment activity in any jurisdiction.
KEY HIGHLIGHTS
Focus on Bang & Olufsen and B&O PLAY brands
Leverage brand value through select partnerships
Restructuring to a new operating model
New consumer focused
strategy
Agreement regarding sale of minority stake in Medicom signed
ICEpower considered non-core and future ownership to be
investigated
Non-core B2B activities
Estimated historical financials and guidance for continuing business
Automotive transaction financials
Financials and
guidance Financials and guidance
3
Automotive brand license agreement with HARMAN
Transfer of the Automotive assets to HARMANAutomotive Automotive
License
agreement
Transfer
of assets
1. Automotive
2. New consumer focused strategy
3. Other non-core B2B activities
4. Continuing business
5. Near-term events
AGENDA
4
5
AUTOMOTIVE BRAND LICENSE AGREEMENT WITH HARMAN
Automotive 21%*
Automotive share of Group
revenue
Significant reduction of organisational
complexity
Enable stronger consumer focused
strategy
Reduce
complexity
Focus on value creation
Upfront cash payments
Future license payments per unit sold to
new brand partners
Attractive
valuation
Maximise shareholder value
Create strong capital base in order to
support new consumer focused strategy
Reduce the company’s bank facilities
Future capital structure communicated at
announcement of full year results for
2014/15
Use of
proceeds
New Automotive brand license agreement and transfer of Automotive assets to HARMAN
Potential significant increase in
Automotive volumes
Effective expansion of Bang & Olufsen
and B&O PLAY brand awareness
Brand
awareness
Upfront cash
payments
Future cash flow
from license
payments
* Full year 2013/14
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A UNIQUE BRAND LICENSE AGREEMENT…
High-end and
premium
consumer
brands
Acoustics
Design and
craftsmanship
Distribution
and scale
Car integration
and
technology
Financial
strength
…leveraging key strengths
and competencies of
Bang & Olufsen and HARMAN
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KEY PAYMENT TERMS OF THE TRANSFER OF AUTOMOTIVE ASSETS AND
BRAND LICENSE AGREEMENT WITH HARMAN
Future license paymentsUpfront cash payment
DKK ~255mDKK ~75m
Upfront cash payment
DKK ~1,095m
Payment for the
transfer of Automotive
assets
Fixed license
pre-payment
Guaranteed annual
minimum license fee of
DKK 12.7 million for a
duration of 20 years
Automotive brand license agreement
Variable license payments
subject to volumes sold
• Fixed per unit license
payment
• After 20 years, an
aggregate threshold of
DKK 3 billion determines
the future terms of license
payments
Cash payment to be paid at closing of approx. DKK 1,170 million
Transfer of the Automotive assets
Represents a significant license revenue opportunity
potentially exceeding the upfront payments
8
SMOOTH TRANSITION OF COMPETENCIES AND ACTIVITIES
High-level transition process
Full Low
Transition objectives
▪ The overall aim is to carry out the
transition of Automotive
competencies and activities as
smoothly and efficiently as
possible
▪ The planned transition process
will minimise disruption for OEMs
and create an even stronger and
more efficient setup
▪ All Bang & Olufsen Automotive
employees will be transferred to
HARMAN to ensure the delivery
of the level of unique innovation,
visual design, and craftsmanship,
which Bang & Olufsen is known
for High
Bang & Olufsen involvement
Signing
31 March 2015
Closing
6-10 weeks after signingFollowing closing
▪ Bang & Olufsen continues to
operate all Automotive activities
▪ Detailed transition actions are
agreed with HARMAN for each
functional area
▪ Bang & Olufsen continues to supply key components,
incl. aluminum parts
▪ Integration of the Bang & Olufsen Automotive business
with HARMAN’s Car Audio business
Transfer of
employees
1. Automotive
2. New consumer focused strategy
3. Other non-core B2B activities
4. Continuing business
5. Near-term events
AGENDA
9
NEW CONSUMER FOCUSED STRATEGY
Further strengthen areas of core competencies within acoustics, design and craftsmanship
Continue to focus on leveraging technology partnerships and platforms
Optimise supply-chain and manufacturing footprint to reduce complexity and enable scale
Continue to lift quality and customer experience in exclusive B1/SiS network and expand TPR distribution
Strategy for the future
consumer business
10
Further strengthen the position of Bang & Olufsen as a luxury brand
Leverage the new generation of Audio and Video products combining our unique design with our modern digital
wireless platforms
Strengthen the position of B&O PLAY as a premium brand for portable audio and headphones, based on
superior design and acoustics
Vision for the future
consumer business
THE LEADING BRAND IN LUXURY CONSUMER ELECTRONICS
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Luxury AV
experience
Premium
portable
audio and
headphones
Targeted
brand
licencing
…to be leveraged in the new consumer focused
strategy
Back bone of the company
World class, luxury brand proposition
High-end retail network
Driver of innovation
Extension of the Bang & Olufsen brand to:
Attract new and younger audience
Increase brand awareness
Gain volume and generate cash flow
Leverage brand value
Increase brand awareness
Enable even stronger growth and
awareness of the brand
by
by
The unique brand…
Coolbrands rated
B&O as the UK’s
11th coolest brand
in 2014/15 and
B&O has been in
top ~10 since 2008
Focus’ in German
market rated B&O
as no. 1 in 2014
based on product
quality and
workmanship
3 Red Dot design
awards within last
3 years to Bang &
Olufsen and B&O
PLAY products
STRATEGY TO BUILD A FUTURE CONSUMER FOCUSED BUSINESS
Reduce complexitySecure new
profitability model
Strengthen brand
position
Build future
operating model
▪ Reduce complexity and
maximize shareholder value
through divestments of non-
core assets
▪ Ensure profitability
and complexity reduction of
consumer business
▪ Strengthen position as
luxury consumer brand
▪ Launch significant structural
changes to build future
operating model
▪ Transfer of the Automotive
assets
▪ Divestment of Medicom
▪ Future ICEpower ownership to
be investigated
▪ Consumer focus with AV and
B&O PLAY
▪ Ensure strong revenue from
strategic brand licensing
partnerships, e.g. the recently
announced Hewlett-Packard
partnership
▪ Address costs
▪ Optimise the footprint and
deliver significant cost
reductions
▪ Continue to strengthen retail
operating model and invest in
marketing
▪ Focus AV on the home and
interior design and focus B&O
PLAY on design and sound
▪ Increased use of partnerships
to transform current operating
model and significantly
increase scale and reduce
complexity
▪ Accelerate third party revenue
(TPR) partners for B&O PLAY
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Ma
in
foc
us
Ke
y
ac
tivit
ies
1. Automotive
2. New consumer focused strategy
3. Other non-core B2B activities
4. Continuing business
5. Near-term events
AGENDA
13
14
OTHER NON-CORE B2B ACTIVITIES
As a consequence of the new consumer focused strategy, it has been
decided to investigate the future ownership alternatives of ICEpower
ICEpower is the leader in the audio engineering market providing
class D audio solutions to manufacturers of professional and
consumer audio products.
Approx. 10% of ICEpower’s sales is to the Bang & Olufsen Group
ICEpower
ownership
alternatives to be
investigated
Bang & Olufsen has signed an agreement to divest the minority stake
(35 per cent) in Medicom to Maj Invest
As a result of the transaction, Bang & Olufsen expects to book a non-
recurring gain of DKK 6.6 million in the fourth quarter of the 2014/15
financial year
The cash flow effect of the divestment is estimated to DKK 16 million
The transaction is subject to customary closing conditions
Divestment of
minority stake in
Medicom
1. Automotive
2. New consumer focused strategy
3. Other non-core B2B activities
4. Continuing business
5. Near-term events
AGENDA
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16
HISTORICAL REVENUE AND ESTIMATED EBIT
* I) Ranges in Estimated EBIT relate to the indirect cost allocation and highly integrated, complex processes between the
segments. II) The Estimated EBIT figures are not in accordance with IFRS as costs for shared functions are currently
allocated to Automotive based on historical allocations. A part of these will be reclassified from discontinued business to
continuing business in accordance with IFRS 5 in the annual report for the 2014/15 financial year
▪ Following the closing of the Automotive transaction and the decision
to divest non-core assets, Bang & Olufsen’s continuing business will
comprise the AV and B&O PLAY segments
▪ Estimated EBIT for the continuing business for the first nine months
of the 2014/15 financial year is negative DKK 260-280 million
– Ranges in Estimated EBIT relate to the indirect cost allocation
and highly integrated, complex processes between the
segments
▪ In addition to the recently announced restructuring activities and
related cost reduction measures further cost reduction measures
such as footprint optimisation, streamlining of supply-chain related
areas and reduction in service and support functions will be
implemented in the current financial year and in 2015/16 to mitigate
costs for shared functions which are currently allocated to Automotive
(DKK million) 2014/15 2013/14 Change, % 2014/15 2013/14 Change, %
Revenue by segment
Continuing Business
AV 457 406 13 1.217 1.149 6
B&O PLAY 172 122 41 412 408 1
Total continuing business 629 528 19 1.629 1.557 5
Discountinued Business
Automotive 128 129 (1) 406 444 (9)
ICEpower 24 23 4 69 75 (8)
Total discountinued business 152 152 (0) 475 519 (9)
Elimination of internal revenue (2) (3) - (6) (9) -
Exchange rate adjustments 20 (2) - 32 (3) -
Revenue Group 800 675 19 2.130 2.063 3
Estimated EBIT by segment*
Continuing Business - - - (280) - (260) (140) - (120) -
Automotive - - - 15 - 35 40 - 60 -
ICEpower 10 - 15 15 - 20
EBIT Group (20) - 0 (28) - (244) - (224) (61) -
3rd quarter Year to Date Q3
A STRONG GROWTH IN THIRD QUARTER
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TV production and other supply chain issues have been solved
Strong B&O PLAY supply situation
Supply chain
issues resolved
Strong portfolio introducing new B&O PLAY products, with great reception
Exclusive Love Affair Collection launched
New products
launched
Continued expansion of the Third Party distribution
Net increase in the number of B1/SiS stores while increasing sales per store
Strengthened
distribution
Growth primarily driven by new, innovative products in the consumer segment
– AV segment revenue for the third quarter 2014/15 increased 13% compared to the same period last
year and B&O PLAY revenue increased 41% during the same period
Strong growth
in consumer
business
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GUIDANCE, USE OF PROCEEDS AND FUTURE CAPITAL STRUCTURE
The Board of Directors will seek to maximise shareholder value by creating a strong capital base to support the new
consumer focused strategy
The proceeds from the transaction are expected to be partly used to reduce the company’s bank facilities
The future capital structure will be communicated in connection with the announcement of the full year results for 2014/15
Use of proceeds and
future capital
structure
The outlook for the 2014/15 financial year remains unchanged compared to the outlook previously given (see Company
Announcement 14.25 from 12 March 2015)
According to IFRS, Automotive and ICEpower will be reclassified as discontinued business in the Annual Report for the
2014/15 financial year and the guidance for the continuing business can be further specified as follows
– The continuing business is expected to show high single digit revenue growth for the 2014/15 financial year
– Estimated EBIT for the continuing business is expected to be negative DKK 230-260 million for the 2014/15 financial
year
o This Estimated EBIT assumes a positive Estimated EBIT from the continuing business in Q4
This guidance does not include costs related to the restructuring announced 12 March 2015, potential impairments, and
costs for shared functions which are currently allocated to Automotive and gains from the Automotive transaction
Full year 2014/15
outlook
1. Automotive
2. New consumer focused strategy
3. Other non-core B2B activities
4. Continuing business
5. Near-term events
AGENDA
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20
NEAR-TERM EVENTS AND COMMUNICATION
Signing
• Announcement of Automotive brand
license agreement and transfer of
Automotive assets to HARMAN
• Announcement of new consumer
focused strategy
• Divestment of Medicom and
investigation of future ICEpower
ownership
Q3 2014/15
• Release of Q3 2014/15
interim report
Closing
• Expected closing of
the transfer of
Automotive assets
and brand licensing
agreement
AR 2014/15
• Release of 2014/15 Annual Report
• Future capital structure
• Presentation of the new consumer focused strategy and
the new operating model
• Status on restructuring
• Updated financial and strategic targets
Mar Apr May Jun Jul Aug Sep
~6-10 weeks after signing16 April 201531 March 2015 13 August 2015
Fiscal year-end 2014/15