CEO Appointment & board changes plc

boohoo Group (LON:BOO) has this morning announced the appointment of John Lyttle as Group CEO (effective 15th March 2019) and the re-alignment of its wider executive board as it positions itself for the next stage of growth. John is currently the COO of Primark, one of Europe’s fastest growing and most profitable retail businesses, a role he has been in for eight years. His appointment brings complementary operational experience to boohoo’s senior management team as it focuses on rolling out the infrastructure and technology needed to realise its ambitions of reaching £3bn in annual sales.

Joint co-founders Mahmud Kamani and Carol Kane will remain close to the businesses, moving to Group Executive Chairman and Group Co-Founder and Executive Director respectively, with a focus on driving the longer-term strategy and creative vision for the enlarged Group. Current Non-executive Chairman Peter Williams will step down from his role next March with a replacement NED role to be announced in due course. Interim Results will be announced on 26th September, and the shares trade on 44.3x FY19 PE based on Friday’s close.

Strong track record: John brings significant experience in fast-growing retail business to the boohoo Group. During his eight-year tenure as Primark’s COO, turnover grew by 158% to more than £7bn with operating profit 116% higher at £735m (FY2017). He has also held senior roles at retailers Matalan and the Arcadia Group. We believe John’s operational experience will be highly complementary to the existing executive team, with his proven ability to deliver in a fast-growing retail business.

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Strongly aligned management incentives: John’s remuneration package is weighted heavily towards creating shareholder value. Alongside basic pay of £615k it includes a performance related annual bonus of up to 150% salary and a Growth Share Plan based on achieving a five year share price CAGR of at least 10% – i.e. a 5 year CAGR of less than 10% yields nil value.

Board re-alignment: Today’s announcement also details further changes to the Group’s board. Mahmud Kamani will become Group Executive Chairman where he will focus on the long-term strategic direction of the business. Carol Kane will assume the title of Group Co-Founder and Executive Director and will continue to lead the creative vision and market positioning of the Group’s brands. Both remain committed to the group and to ensuring a smooth handover. Current Non-Executive Chairman Peter Williams will step down from his role, with the board commencing the search to recruit an additional NED.

Valuation and outlook: We believe today’s announced leadership changes is hugely positive for boohoo Group and will support the management team’s ambitions of growing the boohoo Group into a £3bn turnover business. It’s multi-branded, e-commerce proposition is well placed to capitalise on the on-going shift to online. Based on Friday’s close price boohoo trades on an FY19 P/E of 44.3x falling to 35.7x in FY20.

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