Taking Sonae SR to the world. Meichen Luo Kyle Watson Bhanu Narne Manjunath Nellaiappan

Transcription

1 Taking Sonae SR to the world Meichen Luo Kyle Watson Bhanu Narne Manjunath Nellaiappan

2 Objective Sonae SR aims to: Become profitable in Spain Expand into new market worldwide

3 Agenda

4 Existing Market Portugal Maintain status quo Spain Worten Zippy, Sport Zone and MO New Market Adopt Evolutionary business strategy Pilot capital-light model Transition to organic stores Wrap Up

5 SWOT Strengths Store Operations Competent labor Weakness Lack of knowledge of international markets Threats Bad partnerships Local competition Opportunity New Partnerships Brand development Dedicated IT system

6 Core competencies Value chain control Flexible expansion models Knowledge of existing markets

7 Portugal is profitable Turnover increased by 5.7% EBITDA increased by 18.8% Maintain Status Quo in Portugal

8 Lower Margins-Worten, Spain Revenue/ 1000 sq ft.(mill Euros) 231% larger stores % less revenue/1000sq ft High investment, low reward High competition Heavy focus on components and service than on whole products 2H2013 1H2014 2H2014 1H2015 Spain Portugal

9 -Worten, Spain Short Term Reduce store size by 57% Maintain organic stores Rationale Market dynamics are known Geographical proximity Long Term Switch to B2B wholesale model Leverage buyer power Close down Worten stores Rationale Worten brand is 10% of portfolio and not selling

10 New Market: Evolutionary model Zippy, MO, Sport Zone Franchising model 5years Organic model Rationale Time to understand market dynamics/ customer behaviour Plan efficient operations Lower risk

11 New Market: Worten Competition Measure Wholesale Franchise Organic Operation risk E-Commerce threats

12 (Worten, Spain) Feasibility of store size reduction Store size reduction B2B wholesale feasibility analysis Partner for B2B sales Monday Morning 1H2017 2H2017 1H2018 2H2018 1H2019 KPIs Revenue/sq m Revenue/e mployee

13 (New Market) Monday Morning 1H2017 2H2017 1H2018 2H2018 1H > Feasibility of franchise deals In depth analysis of lucrative markets Identify dependable partners Close deals Feasibility analysis of organic growth Enter/Exit franchise decision

14 Material Improvement in Margins by Reducing Worten Spain Store Size Numbers in Millions of Euros All Regions Worten All Brands Worten Portugal Spain Sales 1, OPEX 1, EBITDA (139) EBITDA Margin 0.9% 0.9% 20.8% -82.6% Assumptions Stores Total sqm 68% of Revenue & Profit Attributable to Worten Portugal Revenue per Store same in Portugal & Spain Spain OPEX per sqm same in Portugal & Spain Total

15 NPV between 1.4 & 3.2 bn Euros Levered Beta EBITDA Assumptions at 20.8% Margin 35 EBITDA as proxy for Cash Flow at -82.6% Margin (139) Risk Free Rate: 2.3% Net Improvement 174 Market Risk Premium: 7% Growth 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% ,675 1,853 2,073 2,354 2,721 3, ,620 1,786 1,990 2,247 2,580 3, ,569 1,724 1,914 2,150 2,453 2, ,521 1,667 1,843 2,061 2,338 2, ,476 1,613 1,777 1,979 2,233 2, ,433 1,562 1,716 1,903 2,137 2,436

16 High Impact 2. Change Management 1. Loss of market share for Worten, Spain 1. Reduction in costs will improve margins 2. Restructuring specialist 3. Cost of doing business Low Probability High Probability 3. Bad franchise deal Low Impact

17 Measure Scrap Worten Wholesale Worten Organic, new countries Revenue Franchise, new countries Cost Overall risk

18 Existing Market Portugal Maintain status quo Spain Worten Zippy, Sport Zone and MO New Market Adopt Evolutionary business strategy Pilot capital-light model Transition to organic stores