allied presentation pd jan 2015
TRANSCRIPT
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The Allied Opportunity1
“To re-launch Britain’s best known flooring retail brand and revolutionise the customer experience”.
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Agenda 2
Introductions
Background and History
The UK Flooring Market
Allied market positioning
The Franchise model
Our proposition
Headline Financials
Summary
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Introductions
3
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Introductions 4
Clive Hutchings (Pending)Over 35 years retail experience from the sales floor to the Boardroom. Clive was CEO of Allied Carpets Group plc from January 2002 to 2009 (reporting directly to the French owners) and after taking Allied to its first operating profit in 7 years, he oversaw the management of the business through its sale to Hilco and administration. Paul Davies (In-situ)With nearly 30 years Franchise experience with major brands such as Perfect Pizza, KFC, & Haagen Dazs, Paul spent the last 6 years developing the franchise model at United Carpets before joining the Allied team. He is a regular speaker at franchise events and is well know and respected amongst the franchise community. Moony Victoire-Nijjar (Pending)Moony previously worked with Clive and graduated at Allied. He has considerable experience as a commercial finance director and change manager with particular expertise in the retail and distribution sectors. He has managed M&A projects including acquisitions, private equity fund raising and main market IPO.
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Background & History
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HistoryOver 60 Years Flooring Heritage
6
1953 Creation of the
company by Harold Plotnek in Birmingham
1978 Acquisition of
Allied by the ASDA Group
1993 Acquisition by Carpetland
of Allied (excluding the Maples Furniture). The combined group was renamed Allied Carpets Group
1996 Floatation of
Allied Carpets on LSE on 23 July 1996 with Mkt Cap of £350m
1999 Launch of Allied
at Home Acquisition of
Allied Carpets by Saint-Maclou for £83m
2009 - 2012 Administration
followed by Hilco re-structuring with the objective to downsize the business to a profitable going concern
2004/05 Allied Carpets
first Profit for seven years.
New Chairman appointed.
2002 Appointment
of Clive Hutchings to CEO of Allied Carpets Group plc.
2012 - Present Hodges family
acquire Allied Brand
Franchise concept tested
Clive Hutchings joins team
Investment partner sought
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The UK Flooring market
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Flooring Market Overview 8
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Carpet57%
Wood & Lam-inate16%
Vinyl15%
Other12%
Sales by product category
Flooring Market Overview
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Competitor Review 10
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Allied market positioning
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Original Allied Brand No.1 Carpet retail brand Still receiving over 3000
hits to the web address Customer profile ABC1-
Middle England Brand perceptions:
Reliable Trustworthy Great Service Carpet specialists Always in SALE A little dated
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New Allied BrandValues: On Trend & Innovative Simple, Clear & Transparent Trustworthy, Credible & Professional
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Target Customers: ABC1 (Traditional Allied) Professional Women Younger couples/families
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15New Allied Brand
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16New Allied Brand
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17New Allied Brand
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Customer Journey
Selection
• Room• Carpet type –
twist etc.• Price per sq mtr
Estimate
• Measure & plan• Add Fitting,
Underlay etc.
Install• Delivered to
store• Fitted by sub-
contractors
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Selection• Colour• Texture –
suitability• Project Budget
Estimate• Measure & plan• Upgrade
underlay, confirm
Install
• Delivered to Fit Centre
• Fitted to SLA standards
• Follow up “Happy Call”
OLD WAY NEW WAY
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The Franchise Model
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UK Franchising Overview 20
930 franchises in UK contributing £13.7b to economy
39,000 outlets employing 560k people 92% of franchisee businesses in profit Only 2.3% of all closures due to commercial failure Average age of new franchisee is 41yrs 50% increase in female franchisees 2005 to 2013 22,500 franchisees in UK (25% operate multiple
units) 1 in 4 UK franchises export their model overseas Biggest issue is recruitment
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Allied Benefits to the Franchisee
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Re-launch of a recognised and respected brand Low entry price of £65k, up to 70% funding
available Use of 21st century technology & cutting edge
design Full support by team with proven achievement Impressive ROI with committed franchisee Competitive commission structure Female friendly BFA membership Multi-site opportunity for suitable candidates
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22Allied Franchise TerritoriesSum Avg. Min. Max.
Population 240,337
9,950 3749 14,420
Households 109,244
4306 1,672 6,555
Target HH’s 10,704 640 0 5191A21 HH’s 567 22 0 262A24 HH’s 503 22 0 264
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Franchisee Economics 23
Max. cash requirement = £65k (Discounted Franchise Fee )
Strong working capital model<2 years cash payback of Fee11% - 13% EBITDAAverage 51% ROI per annum-10% sales = 26% ROI per annum
Year 1 Year 2 Year 3Cashflow £ £ £Income 489,492 650,053 732,173Payments (448,537) (591,567) (656,762)Cashflow 40,955 58,485 75,411Fee (65,000)Cash balance c/f (24,045) 34,441 109,851P&LSales 386,660 539,015 607,375EBITDA 611 59,336 79,080EBITDA % 0.2% 11.0% 13.0%
Balance sheetShareholders funds (53,556) 5,780 84,860
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Our Proposition
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Our proposition Locations
1000 – 1500 sq ft Showrooms Main Rd/High St with good visibility and passing trade Franchisee holds lease No need for warehouse space
25
Operations Owner/Managers supported by experienced Retail
teams Outsource service options until skills acquired SAP system with data analysis and KPI reporting
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Our proposition Supply Chain
Multiple suppliers No Stock Individual Franchisee credit terms
26
Key milestones (Delayed) Aug/Sept – Re-launch Yeovil Store & open 2
Franchises Dec 2014 - 2 more stores opened to support “POC” Feb 2015 – Launch at National Franchise Exhibition
(NEC) Dec 2015 – 28 stores opened with a further 20
territory commitments
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Marketing Platform Website:
Simple, clear, inspirational & informative View in a Room and Samples delivered within 48 hours Full SEO and PPC strategy Lead generator - Transactional for non-franchise territories Micro site for franchisees
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Store support Initial launch using local radio, newspapers and Leaflets Ongoing local magazines & radio Potential Regional TV & Radio (when territories allow) Social Media campaigns – Facebook, Twitter, Pinterest Home Interest Magazine editorial – Allied Ambassadors
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Growth Strategies 28
POC – 100Franchisees
100 – 400Franchisees
EuropeanFranchise
Proof Of Concept. Feb 2015 Launch. Year 1
30 Franchisees 6 Corporate
Local & Social media
Recruitment Drive Call Centre
Support Website Leads Opening Teams TV, Radio,
Magazines Supplier Rebates
Re-sales Cutting Warehouse Affinity schemes Kiosks Europe
Short -Term Medium -Term Longer -Term
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Headline Financials
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Trading Summary 30
Max. cash requirement £529k includes £254k of set-up
2 years cash payback20 Self funded owned Franchises83 Total stores tradingOnline Transactions & LeadsCombined EBITDA £3M+Safety margin v “What-if’s”
Year 1 Year 2 Year 3Cashflow £ £ £Income 3,817,403 11,530,001 20,485,973Payments (3,940,566) (10,043,576) (17,152,364)Net Cash (123,164) 1,486,424 3,333,609Set-up (253,800) 0 0Cash c/f (376,964) 1,109,461 4,443,070Max. Cash need (529,006)P&LSalesFranchisor 371,164 1,912,473 4,339,631Owned Stores 952,077 3,770,595 8,321,894Online 1,728,938 3,921,465 4,464,780Total Sales 3,052,179 9,604,534 17,126,306EBITDAFranchisor (330,993) 556,211 1,921,664Owned Stores (32,304) 136,496 589,317Online 94,003 554,313 664,727Total EBITDA (269,295) 1,247,020 3,175,708EBITDA % -8.8% 13.0% 18.5%
No' of Owned Stores 5 13 20Total no' of Stores 20 50 83
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Franchisor Summary 31
Max. cash requirement £534k includes £140k of set-up
2 years cash paybackEBITDA = £1.9m Year 3Trading breakeven at 17 stores
Year 1 Year 2 Year 3Cashflow £ £ £Income 330,174 2,064,577 4,892,024Payments (712,643) (1,533,345) (2,989,950)Cashflow (382,468) 531,232 1,902,074Set-up (140,400)Cash c/f (522,868) 8,364 1,910,438Max. Cash need (534,690)P&LSales 371,164 1,912,473 4,339,631EBITDA (330,993) 556,211 1,921,664EBITDA % 29.1% 44.3%
Total no' of Stores 20 50 83
Balance sheetShareholders funds (447,993) 108,218 1,605,286**Excludes Website & Owned stores [total 83 stores/50 trading full year]
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Online Summary 32
Max. cash requirement £121k.Includes £68k development / launch costs.
Pay back within 1 year.Good w/c trading model.15%+ EBITDA.
Year 1 Year 2 Year 3Cashflow £ £ £Income 2,239,238 4,740,189 5,384,242Payments (2,075,179) (4,175,202) (4,838,676)Net Cashflow 164,058 564,987 545,566Set-up (68,400)Cash c/f 95,658 660,645 1,206,211Max. Cash need (120,782)P&LSales 1,728,938 3,921,465 4,464,780EBITDA 94,003 554,313 664,727EBITDA % 5% 14% 15%
Balance sheetShareholders funds (210,013) 186,033 696,384
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Owned Stores Summary 33
Max. cash requirement £45k.Pay back by Q1Good working cap. trading model
£1.4m value (£85k each)Full year EBITDA = £1.5m
Year 1 Year 2 Year 3Cashflow £ £ £Income 1,247,990 4,725,235 10,209,707Payments (1,152,744) (4,335,030) (9,323,738)Cashflow 95,246 390,205 885,969Set-up (45,000) 0 0Cash c/f 50,246 440,451 1,326,420Max. Cash need (45,000)P&LSales 952,077 3,770,595 8,321,894EBITDA (32,304) 136,496 589,317EBITDA % -3.4% 3.6% 7.1%
Total no' of Stores 5 13 20
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Investment Opportunity 34
Maximum cash flow need = £700kPay back within 2 years£1.4m value of 20 owned Franchises
EBITDA Year 3 potential exit valueFuture £17k per Franchise fee profit
Market Sales £65.2 m £121.5 m £242.9 mNo of Stores 100 200 400Owned Stores 20 15 15Turnover £ £ £Franchise Fee Income 6,073,748 12,147,496 24,294,99150% of Supplier rebate 321,909 643,817 1,287,635Website Revenue 4,464,780Owned Stores Revenue 12,147,496 9,110,622 9,110,622Total Revenue 23,007,933 21,901,935 34,693,248
EBITDAFranchise model 2,546,678 6,869,808 16,700,369Website 664,727 -260,410 -286,451Owned Stores 1,581,603 1,186,202 1,186,202Total EBITDA 4,793,009 7,795,601 17,600,120EBITDA % 21% 36% 51%
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Summary
35
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Summary 36RIGHT PROPOSITION:
That reflects Todays Customer needs Simple, Clear & Female friendly Franchise for rapid expansion and Owner/Manager
motivation “light” with no huge establishment cost or stock Outsource supply chain to avoid handling and warehouse
costs Qualified Team to supportRIGHT TIMING Housing market set to improve - Flooring market will follow Pensions and “Buy to Let” exhausted Franchise market looking for new Brand opportunities Women in business on the rise