Financial results Q1 FY17
Management Discussion & Analysis
Unaudited
Shared on June 26, 2017 for discussion on June 28, 2017
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Introductory remarks
 FY17 relates to the 52 weeks starting January 30, 2017 and ending
January 28, 2018
 Q1 FY17 relates to the 13 weeks starting January 30, 2017 and ending
April 29, 2017
 This presentation provides a management discussion and analysis of
HEMA’s operating results in Q1 FY17
 Q1 FY17 has not been audited
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Key takeaways Q1 FY17
 Ninth consecutive quarter of LFL group consumer sales growth
− Q1 FY17 net sales were €283.4m, an increase of +4.8% on Q1 FY16
− Q1 FY17 Group LFL consumer sales reported growth on growth with an
increase of +2.7% versus Q1 FY16 (Q1 FY16 LFL consumer sales versus
Q1 FY15 were +1.2%)
− Netherlands directly owned stores reported LFL consumer sales growth of
+2.4%; franchise stores outperforming with +2.8%
− Online sales up 44% in Q1 FY17 compared with the same period a year
earlier
− Opening of 2 new international stores, one in France and one in Spain
− Closing of 11 temporary outlet stores in the Netherlands following successful
results in our stock reduction program
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Key takeaways Q1 FY17
 Solid gross profit & margin growth driving continued year on year
improvement in Adjusted EBITDA
− Q1 FY17 Gross profit of €131.1m (46.3% gross profit margin) vs. Q1 FY16 of
€119.5m (44.2% gross profit margin).
•
A significant y-o-y improvement for the period of +210bps
− Reported Q1 FY16 Adjusted EBITDA of €17.6m vs. Q1 FY16 of €15.8m.
•
Improvement of +11.4% compared to prior year period
− Fifth consecutive quarter of Adjusted EBITDA growth
− LTM Adjusted EBITDA position at the end of Q1 FY17 of €110m
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Contents
1.
Key macro economic indicators in the Netherlands
2.
Market developments in the Netherlands
3.
Results Q1 FY17
4.
Cash flow Q1 FY17
5.
Strategy update
6.
Q&A
6
To update
1. Key macro economic indicators
in the Netherlands
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Key macro economic indicators
Source: CBS, Central Bureau of Statistics, http://www.cbs.nl and other independent third parties


Positive consumer confidence and declining unemployment trends continue
The US dollar has weakened recently towards the 1.11 level (€/$)
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2. Market developments
in the Netherlands
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Q1 retail spending in non-food up 2.5%

Q1 2017 vs. Q1 2016 (Jan-Mar)
─ Sales
+2.5%
─ Volume +2.0%
─ Price
+ 0.5%
Source: CBS, Central Bureau of Statistics, http://www.cbs.nl

Note the CBS figures shown above represent a make-up of the total retail market
in the Netherlands and as such include a number of categories that are less
relevant to HEMA (e.g. consumer electronics, drugstores and DIY)
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Retail spending food down due to Easter shift to Q2
Q1 2017 vs. Q1 2016 (Jan-Mar)
─ Sales
+0.9%
─ Volume - 0.9%
─ Price
+1.8%
Source: CBS, Central Bureau of Statistics, http://www.cbs.nl
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HEMA performed in line with the market over L6M
Total
105

L6M performance in line with market
104
(outperformance in apparel and household
goods and personal care offset by partial
L6M
underperformance in food)
Apparel
108
108

Focus on reducing shrinkage and
eliminating food waste to improve
profitability has had a slight impact on our
L6M
Household goods & Personal Care
105
104
Food & Catering topline
− Strategic initiatives to enhance Food &
Catering performance identified for FY17
L6M
(see later)
Food & Catering
103
101
L6M
Market
HEMA
Sales growth (y-o-y, indexed )
Source: third party information as of March 2017.
Services not included given lack of market information.
Food includes out of home
12
To update
3. Results Q1 FY17
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Headline financials Q1 FY17
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EBITDA and Adjusted EBITDA are non-GAAP measures. Refer to the interim financial report Q1 FY17 for the definitions

Solid net sales increase of +4.8% as a result of LFL growth and new store
openings

Adjusted EBITDA improved by +11.4% in Q1 FY17 aided by significantly
enhanced gross margin rates
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Bridge EBITDA to Adjusted EBIYDA Q1 FY17
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
Q1 FY17 adjusted legal and consulting expenses relate predominantly to
consulting support in assessing various strategic initiatives

Expenses for stock clearance are no longer adjusted for
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Adjusted EBITDA bridge Q1 FY16 to Q1 FY17
2.4
0.6
0.4
(4.4)
5.6
(2.8)
+11.4%
YoY growth
17.6
15.8
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 Gross margin % improvement is the main driver behind improved Adjusted EBITDA
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Solid group like for like consumer sales of +2.7%
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
Group LFL Consumer Sales improved by +2.7% (+1.2% in Q1 FY16)

Franchise stores in the Netherlands (+2.8%) outperforming directly owned stores (+2.4%)

Strong momentum in Belgium and Luxembourg

France about flat in a challenging market and against a tough comparison with Q1 FY16
− HEMA however, performing in line with market

Strong e-commerce growth in Germany continued to boost LFL consumer sales
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Q1 FY17 operating expenses
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
Q1 FY17 labour costs have increased as a result of the increase in the store
base, more eDC staff hours to support significantly increased volumes and
additional resources in the support office to enable various initiatives
− Planned mechanisation of eDC to crystallise labour efficiencies (see later)

Q1 FY17 other general expenses have increased primarily due to higher one off
consulting expenses, higher marketing expenses and higher transport costs
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Positive operating result in Q1 FY17
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
Fourth consecutive quarter of positive operating result driven by sales and margin
improvements
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4. Cash flow Q1 FY17
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Cash flow from operations Q1 FY17
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
Further reduction in inventory levels, with stable and sound stock quality
profile

Negative changes in trade and other payables primarily due to annual
working capital cycle of the business and the early FY16 year end cut
off date, resulting in double payments for rents, VAT and other payables
in Q1 FY17
21
Net cash flow Q1 FY17

CAPEX in Q1 FY17 has increased by €5m compared to the
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period last year but in line with expectations

Net cash outflow primarily driven by the adverse movements in
working capital
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Cash available end of Q1 FY17
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
Decrease in cash and cash equivalents compared to Q1 FY16 due to repaid super senior
revolving credit facility which was undrawn at the end of Q1 FY17

Result of significant cash generation in the last twelve months
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Capital structure end of Q1 FY17
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
Net debt increased by €65.3m compared to FY16 year end due to
timing impact of early cut off of FY16 and the business’ position in its
annual working capital cycle

Revolving credit facility undrawn at the end of Q1 FY17
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To update
5. Strategy Update
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Three pillar strategy update
 Consistent ‘Supernormaal’ brand and formats
revitalise benelux
 Refresh core categories to attack and grow
 Improve availability, increase stock turn and develop skilled
cost efficient operation
grow e-commerce
 Improve customer experience and create an integrated
customer journey
 Improve back office efficiency and simplify fulfilment
 Develop omni channel mind set and capabilities
international
expansion
 Improve operating model
 Optimise price and assortment opportunities
 Expand in current markets, focused on France
 Improve key-processes and ways of working
enablers
 Recruit, retain and nurture talent
 Have systems support processes, and processes
support business
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2017 focus on 9 strategic initiatives, delivering value across
the entire three pillar strategy
grow
e-commerce
revitalize
benelux
rollout HEMA
worlds small
international
expansion
replatforming
e-commerce
international
expansion
pilot HEMA
worlds large
customer
loyalty
program
relaunch
food
enablers
make HEMA
simpler
integrate
sustainability
HEMA
procurement
improvement
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2017 focus on 9 strategic initiatives, delivering value across
the entire three pillar strategy



Roll out HEMA worlds small

Double digit sales growth of pilot stores vs. peer group

Start of roll-out in week 18

386 stores to be remodelled by week 40

Encouraging start & positive customer feedback

Three flagship stores will be reopened with the new
worlds format

Locations are: Tilburg (NL), Antwerp (BE) and Brussels
(BE)

Complete overhaul of food and catering proposition

This will be piloted in the three flagship stores and in
two selected franchise stores

Focus is on food for now and food for later
Pilot HEMA worlds large
Relaunch Food
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2017 focus on 9 strategic initiatives, delivering value across
the entire three pillar strategy



Re-platforming e-commerce
International expansion
Customer loyalty program

On track to go live in Q1 2018

Full integration of 7 checkouts

Enhanced international e-commerce capabilities

CAPEX light due to SAAS construct

Continued positive performance of the Cologne store
driving new store opportunities in G7 cities

On track to open 25 new stores internationally of which
the majority in France

Loyalty Programme launch exceeding expectations

2.2 mln. customers signed up in less than 6 months

Strong driver of mobile traffic leading to accelerated
online sales
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2017 focus on 9 strategic initiatives, delivering value across
the entire three pillar strategy




Positive evaluation of pilot teams

Full implementation of new operating model starts after
summer

Starting further lean process optimisation in Q3

Introduction of automated order fulfilment technology

On track to deliver our cotton and paper sustainable
goals

Partnered with TUV for social compliance auditing
across vendor base
4HEMA procurement

Strong improvement in procurement processes
improvement

Meaningful savings achieved and further
opportunities identified in both GFR and GNFR
Make HEMA simpler
Integrate sustainability
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GFR
GNFR
Goods for resale
Goods not for resale
Cost initiatives and EBITDA uplift potential
1
Run-rate impact (p.a.)
Sales
increase of
reformatted
stores
2
Operational
efficiency
savings
 Estimated run-rate uplift in sales less additional costs for 154 stores
reformatted as part of the “HEMA Worlds” refurbishment program
 Effect of annualized run-rate cost savings in our e-commerce product
fulfilment center
 Introduction of automated order fulfilment technology partially offset by
additional rent and energy costs
€2.9m
€3.2m
3
New stores
opened
4
Procurement
savings
 Reflects annualization of the trading results for the new stores opened
with less than 12 months trading history
€2.0m
 Estimated full-period effect of procurement savings resulting from
improvements to our intake margin on apparel and underwear products
 Intake margin improvements locked in through new contracts signed with
suppliers in 2017
€5.8m
5
GNFR cost
savings
 Savings in goods not for resale that are already crystallised but we are yet
to reap the annual benefit
€1.8m
GNFR
Goods not for resale
The presentation above is for informational purposes only. The calculations are based on various assumptions and management estimates. These numbers have
not been, and cannot be, audited, reviewed or verified by any independent accounting firm. This information is inherently subject to risks and uncertainties.
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To update
6. Q&A
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