Annual report 2022/23: A challenging year for Bang & Olufsen, aims to return to profitable growth in 2023/24
July 06 2023 - 2:36AM
Annual report 2022/23: A challenging year for Bang & Olufsen,
aims to return to profitable growth in 2023/24
Group revenue was DKK 2,752m in 2022/23, a decline of 7% (-8% in
local currencies) compared to last year. The decline was primarily
driven by macroeconomic headwinds and the unexpected COVID-19
development in China, negatively impacting product sales. The
company’s strategic efforts to expand its Brand Partnering business
resulted in revenue growth of 22% in that segment.
In December, China suddenly abandoned its COVID-19 lockdown
policy. This led to a surge in infections, which impacted the
company’s sales. In Asia, revenue declined by 19% in 2022/23.
Revenue in EMEA declined 6%, while Americas achieved 2% growth.
Both regions were impacted by macroeconomic headwinds caused by
high inflation and increasing interest rates. In addition, European
retail partners were more cautious with replenishing inventory.
Like-for-like sell-out declined by 2%, mainly impacted by
China.
Gross margin was 44.2% against 45.3% last year. The decline was
mainly related to a change in product mix being skewed towards
lower-margin products. The overall margin level reflected
higher-than-normal component and logistics costs of around DKK
160m. In Q4, component and logistics costs significantly decreased,
and the company achieved a gross margin of 51.4%, up 7.8pp compared
to Q3 of 2022/23. The EBIT margin before special items was negative
3.8% for the year, driven by the lower revenue and gross margin.
The free cash flow improved by DKK 152m compared to 2021/22 and was
negative DKK 20m in 2022/23. In Q4, the company had free cash flow
of DKK 27m. This was the third consecutive quarter of positive free
cash flow. Net working capital on 31 May 2023 was DKK 222m, a
decrease of DKK 113m year-on-year primarily due to lower
inventories.
In January, Bang & Olufsen presented a sharpened strategic
direction with the ambition to strengthen its luxury timeless
technology proposition. The Win City concept continued to yield
results in Paris and London with like-for-like sell-out in
company-owned stores growing by 16%. In Q4, New York was added to
the list of Win Cities, and Bang & Olufsen expects the Win City
concept to be a key driver of growth in the future. The company
continued to invest in building a better and more connected
portfolio of products based on its proprietary software platforms.
Seven new product innovations were introduced this year. In
addition, the company introduced its new Atelier Editions, which
showcase Bang & Olufsen’s capabilities to offer bespoke
solutions and create limited editions. The partnership with Ferrari
helped increase awareness of the Bang & Olufsen brand, and the
new product collaboration is expected to support that as well as
drive revenue. This year, Bang & Olufsen also committed to
long-term climate targets as part of its work to support the
transition to a more sustainable future.
CEO Kristian Teär comments:
“It was a challenging year for Bang & Olufsen with COVID-19
and macroeconomic headwinds impacting our business. I am proud to
see the continued passion and resilience of our colleagues and
partners, and I want to thank them and our customers for their
support in 2022/23. We are not satisfied with the financial results
and aim to return to profitable growth next year.”
“Our strategy is right, and we aim to scale our initiatives as
quickly as we can. Our Ferrari partnership is helping us increase
global brand awareness, and we will soon launch our product
collaboration. Our Win City concept is working, and we are
expanding that to more cities. We have improved our portfolio based
on our new software platforms and are building modular and
long-lasting products that our customers can enjoy for
decades.“
“We still expect much uncertainty in the coming year, especially
in China. Therefore, we will also be phasing in our strategic
investments while working to ensure a lean cost base and continue
improving our profitability. We have the right direction for the
year and the future and will work closely with our partners to
deliver the right customer experience in the stores, online, and in
our products and services.”
Financial highlights, FY 2022/23
- Revenue was DKK 2,752m and declined 7% (-8% in local
currencies). Product sales declined 9.8% (-11% in local currencies)
and Brand Partnering & other activities grew 21.8% (17% in
local currencies).
- The decline in product revenue was mainly driven by Asia,
across all channels and categories. Revenue from China was severely
impacted by regional lockdowns and a surge in COVID-19 infections
and declined by 28% year-on-year. Reported growth for the three
regions EMEA, Asia and Americas was negative by 6%, 19% and
positive by 2% respectively (-6%, -21% and -6% in local currencies
respectively).
- Like-for-like sell-out declined by 2% mainly impacted by China.
Like-for-like sell-out in China declined by 12% for the year.
- The gross margin was 44.2%, which was 1.1pp lower than last
year. The decrease was driven by a change in product mix towards
the On-the-go category, where efforts were made to reduce inventory
on products with shorter lifecycles.
- The combined additional supply chain costs for components and
logistics were DKK 160m, corresponding to a 6pp impact on product
gross margin (DKK 220m last year).
- EBIT before special items was negative DKK 105m, equivalent to
an EBIT margin before special items of negative 3.8%
(2021/22: 1.8%). The margin was impacted by the overall
revenue decline and the decline in gross margin.
- Free cash flow was DKK -20m (2021/22: DKK -172m). Free cash
flow was positively impacted by improved inventory levels.
- Available liquidity was DKK 224m 31 May 2023 (31 May 2022: DKK
301m).
Financial highlights, Q4 2022/23
- Revenue declined by 7.5% (-10% in local currencies). Both
product sales and Brand partnering & others declined in the
period. Macroeconomic headwinds impacted EMEA and Americas while
Asia was on par with last year. Brand Partnering was impacted by
lower licence income from HP.
- Like-for-like, sell-out grew by 7% driven by solid growth rate
in Asia of 30%. EMEA had growth of 1% while Americas declined 5%.
Like-for-like sell-out growth was positive across channels and the
company-owned stores grew 10% in the quarter.
- The gross margin was 51.4%, which was 3.2pp higher than last
year. Compared to the third quarter, gross margin increased by
7.8pp.
- No component spot buys affected the quarter and freight cost
was significantly below last year.
- EBIT before special items was DKK 9m, equivalent to an EBIT
margin before special items of 1.4%, against 1.7% last year.
- Free cash flow was DKK 27m (Q4 21/22: DKK -190m).
Strategic initiatives
- The Win City concept in London delivered 24% year-on-year
like-for-like sell-out growth supported by strong performance in
Company owned stores and monobrand. The Win City concept was
launched in Q4 in Paris, where we in the last quarter had sell-out
growth of 18% driven by company owned stores but also monobrand and
eCommerce.
- New York like-for-like sell-out declined 6% in Q4, with company
owned stores performing relatively better with a decline of 2%. The
company started executing on the Win City concept in Q4.
- Seven product innovations were launched during the year. The
Beosound Emerge was successfully relaunched. In Q2, the company saw
the launch of Beosound Theatre, and in March, Beosound A9 and
Beosound 2 were launched on the new modular platform. In addition,
the Beovision Harmony became available in 97 inches, and at
year-end the company launched the Beosound A5.
- The Beocom Portal was MS Teams certified and now has both Zoom
and MS Teams certification.
- The company submitted the second cradle-to-cradle certified
product, and Beosound Emerge was certified in June 2023.
- 25% customer growth and 27% growth in number of customers
owning two or more products.
- In February, the company entered into a partnership with
Scuderia Ferrari for the 2023 formula 1 season. The collaboration
was expanded with a product collaboration, which will launch during
autumn.
- The company has set emission reduction targets according to the
Science Based Target initiatives, which include target of
operational Net zero targets in 2026/27 (scope 1 and 2) and Net
zero across the value chain by 2039/2040.
OutlookThe company will continue to execute in line with its
strategy and long-term vision but will make adjustments based on
market development. The outlook for 2023/24 is subject to
uncertainty related to consumer sentiment due to high inflation,
rising interest rates and the war in Ukraine, which has increased
the risk of recession. Furthermore, there is higher geopolitical
uncertainty and risk related to the recovery in China. The
company's outlook for the financial year 2023/24 is as follows:
- Revenue growth (in local currencies):
|
0% to 9% |
- EBIT margin before special items:
|
0% to 6% |
|
-50 to 100 |
The outlook is based on certain assumptions described in the
annual report.
Conference call for analysts and investorsThe company will host
a webcast on 6 July 2023 at 10:00 CEST, where the financial
development for FY 2022/23 will be presented.
The webcast can be accessed at
https://streams.eventcdn.net/bo/annual-report-202223
Dial-in details for participants in the Q&A:Denmark: +45 78
76 84 90UK: +44 203 769 6819US: +1 646 787 0157
For further information, please contact:
Cristina Rønde HeftingInvestor RelationsPhone: +45 41 53 73
03
Jens Bjørnkjær GamborgGlobal sustainability and
communicationPhone: +45 2496 9371
- BO_2301_annual report 2022_23_UK
- B&O_Annual report 2022-23
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