Thorntons PLC 20022003 Final Results Presentation

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Thorntons PLC2002/2003Final Results
Presentation
9 September 2003
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Agenda

• Financial Review
• Recent Trading and Outlook
• Strategic Update

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2002/2003 Results Summary
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2002/03 Sales
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Sales by Volume
Other Routes to Market
Own Shops
Memo By Value 80 Own Shops
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Margins
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Cost Issues(presented last year)

• Insurance 0.6m
• Pensions 0.3m
• Rent reviews Over 100 shops
• National Insurance 0.5m
• Strategic investments
• New Product Development
• Training
• Information Systems
• Incentives

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Administration Costs
Excluding asset disposals
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Cash Generation
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Cash Summary
PBIT Interest Cover 3.1 3.2 EBITDA Interest
Cover 7.1 7.3
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Tax, EPS and Dividend
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Agenda

• Financial Review
• Recent Trading and Outlook
• Strategic Update

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2002/3 Like for Like Sales
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2002/3 Like for Like Sales
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2002/3 Like for Like Sales
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Current TradingFirst 9 weeks
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Current TradingFirst 9 weeks
Commercial 24.6
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Current TradingFirst 9 weeks
Franchise -7.2
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Current TradingFirst 9 weeks
Gift Delivery Service 6.9
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Outlook for Christmas

• Continuing improvements in product and packaging

• Strong promotional offer for first part of season

• Much stronger advertising for TV and radio
• Campaignable theme The Art of Gift Giving
• Personality (good appeal to men and women)
• Witty executions with focus on product and
  promotion

• Positive impact of range and space planning

• New store incentive scheme introduced in July
  very positively received

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Agenda

• Financial Review
• Recent Trading and Outlook
• Strategic Update
• Vision and Corporate Strategy
• Strategic Agenda

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Our Vision

• The UKs leading
• retailer and distributor
• of sweet special food

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What are we?
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Are there Risks?
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2002/03 Strategic Agenda

• Brand development and communication

• Outward growth

• Project Focus (formerly Retail Support Processes)

• Product and packaging innovation

• Café Thorntons

• New sources of growth

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Brand Development and Communication Our brand
values

• The artistry and craft of the chocolatier
• Chef expertise in recipe development
• Unwavering quest for the best ingredients
• High presentational standards

• Emotional warmth
• Interested and thoughtful about others needs
• Charming and witty
• Approachable

• Innovation
• Surprising, inspiring and intriguing

• Trust and credibility
• Authentic
• Honest

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Brand Development and Communication Putting
our values into action

• Two-day brand workshops between July and February
  for over 850 colleagues

• Brand marketing training for the new Trading and
  Marketing team

• Brand manuals and sub-manuals to guide NPD

• New look website to be launched in Autumn

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Outward Growth

• Strategy
• Rapid evolution of distribution and range
• Listings in all major grocers bar one (still in
  negotiation for stand-alone fixture)
• Gaining listings in other confectionery retailers
• Licensed products development being focused on
  existing categories

• Organisation
• Total overhaul of structure and team members for
  next phase of growth
• New management processes being introduced
• Systems investment in supply chain required

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Project FOCUS(Formerly Retail Support Processes)

• Investigative stage revealed that supply chain
  not store based processes were the priority

• Investment in systems will enable
• Complete visibility of stock/best before status
• More accurate forecasting and warehouse picking
• Lower stock in system
• Enhanced margin for retail, franchise and GDS
• Enhanced sales and margin for commercial channel

• Expenditure likely to be in region of 6m spread
  over 2 3 years, commencing in 2004, with
  benefits of about 2m p.a.

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Product and Packaging Innovation

• NPD process redesigned to improve speed and
  allocation of resources

• NPD Strategy Group, chaired by Chief Executive,
  meeting bimonthly to guide resource allocation
  and encourage experimentation

• Eden successfully launched with 1.5m sales in FY
  2002/03

• Continental and Toffee relaunched this month

• Batons to be launched in November

• New boxed chocolate ranges for next year

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Café Thorntons

• Cafes performing ahead of the rest of the estate
  with 2.9 like for like growth
• Café products the main driver with 11 like for
  like through NPD and pricing
• Confectionery requires more focus

• New concept producing enhanced sales and profit
  in 5 locations but not ready for total roll-out
• Designer/factory outlets payback in less than 2
  years
• Insertions have good payback but few
  opportunities
• Resites in attractive towns do not pay back well
  enough yet
• Investigating EOT and mall kiosk formats for
  trial next year

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New Sources of Growth

• Acquisitions (reviewed to date) and international
  franchises have been rejected for the foreseeable
  future

• Export to North America and Commonwealth
  countries appears attractive but
• More work required, eg. Supply chain
• Not a short payback opportunity

• UK outward growth and improving retail is the
  main priority and has much potential for growth

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2003/04 Strategic Agenda

• Café Thorntons

• Project FOCUS

• Product margin enhancement

• Delivering Chocolate Heaven

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Summary

• Great brand

• Great assets

• New strategy underway

• Work on delivery continuing

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Questions