Wh Smith Plc · LSE:SMWH
Wh Smith — H1 2007 Earnings Presentation
39 slides from Wh Smith's earnings presentation, Apr 19, 2007
Slide 1: WH Smith PLC Interim Results 2007
WH Smith PLC Interim Results 2007 19 April 2007 Interim Results 2007
Slide 2: WH Smith PLC agenda
WH Smith PLC § Introduction Robert Walker § Financial review Alan Stewart § Operational review Kate Swann – High Street – Travel Interim Results 2007
Slide 3: Alan Stewart, Group Finance Director
Alan Stewart Group Finance Director Interim Results 2007
Slide 4: Group financial summary
Group financial summary 6 mths to 6 mths to Feb 2007 Feb 2006 Change £m £m % Revenue 721 771 (6)% Headline profit before tax1 60 56 7% Profit before tax and exceptional items2 59 55 7% Profit before tax 59 60 (2)% Headline EPS3 27.3p 26.7p Basic EPS4 26.7p 29.1p Interim dividend per share 3.7p 3.1p5
Slide 5: Group profit before tax
Group profit before tax 6 mths to 6 mths to Feb 2007 Feb 2006 Growth £m £m % High Street 1 51 53 (4)% Travel 1 15 13 15% Trading operations 66 66 Central costs (7) (7) Internal rents 1 1 Net finance charges (4) Headline profit before tax2 60 56 7% Pension interest (1) (1) Profit before tax2 59 55
Slide 6: Profit from trading operations
Profit from trading operations 6 mths to 6 mths to Feb 2007 Feb 2006 Change £m £m % Revenue 721 771 (6)% Gross contribution 329 330 Costs (263) (264) Costs – occupation costs (96) (94) – store costs (103) (104) – other costs (64) (66) Profit from trading operations1 66 66 Gross margin 45.6% 42.7%
Slide 7: Revenue analysis
Revenue analysis 6 mths to 6 mths to LFL Feb 2007 Feb 2006 Change Revenue £m £m % High Street 565 621 (8)% Travel 156 150 4% Total revenue 721 771 (6)% 6 mths to Feb 2007 LFL sales by category % Books Stationery (4)% News & Impulse 1% Entertainment (36)% Total (6)% Interim Results 2007
Slide 8: Group free cash flow
Group free cash flow 6 mths to 6 mths to Feb 2007 Feb 2006 £m £m Headline profit before tax1 60 56 Net finance charges 4 Profit before interest and tax2 60 60 Depreciation and amortisation 21 19 Working capital (7) (7) Capital expenditure (9) (11) Tax Provisions (1) (1) Net interest paid3 1 (3
Slide 9: Group net debt movement
Group net debt movement 6 mths to 6 mths to Feb 2007 Feb 2006 £m £m Free cash flow 66 58 Dividends paid (11) (10) Pension deficit and retirement benefit funding (30) (6) Tax refund and associated interest received 14 Purchase and issue of own shares (11) Demerger costs (5) Sale and leaseback a
Slide 10: Group balance sheet
Group balance sheet Feb Aug 2007 2006 £m £m Goodwill & other intangible assets 29 30 Property, plant & equipment 172 184 Available for sale investments 3 Working capital (2) (6) Corporation tax (32) (20) Deferred tax 11 16 Provisions (11) (12) Operating assets employed 170 192 Net funds / (debt) 6
Slide 11: Pensions
Pensions § Continued progress in reducing volatility and risk in Pension obligations § January 2007 started consultation in respect of ceasing Service Accrual for current employees in the WHSmith Pension Trust and replacing it with a defined benefit contribution – effectively closing the scheme § Fo
Slide 12: Current trading
Current trading LFL sales LFL sales 6 mths to 6 weeks to 28 Feb 2007 14 April 2007 High Street (8)% (7)% Travel 4% 2% Total revenue (6)% (5)% Interim Results 2007
Slide 13: Group key indicators
Group key indicators 6 mths to 6 mths to Growth Feb 2007 Feb 2006 % Headline EPS 1 27.3p 26.7p Interim dividend per share 3.7p 3.1p2 19% Free cash flow (£m) 66 58 ROCE 38% 32% Fixed cover charges 1.8x 1.7x 1 Headline EPS: profit before tax, exceptional items and IAS19 pension interest – undiluted (w
Slide 14: Kate Swann, Group Chief Executive
Kate Swann Group Chief Executive Interim Results 2007
Slide 15: Group – overview
Group – overview § Good performance across the Group § Continued progress in delivery of High Street plan – Agreement to open new Post Office concessions in 70 stores will further enhance our customer offer § Strong performance from Travel – Motorway rollout on track; quickly building strong presenc
Slide 16: High Street – overview
High Street – overview § Profit in line with expectations § LFL sales down 8% § Strong gross margin performance up by c. 300 bps § Continued delivery of strategy to rebalance the mix of our business § Successful and focused cost control, with savings of £8m achieved § Good cash generation through im
Slide 17: High Street strategy
High Street strategy § Rebuild position as Britain’s most popular stationer, bookseller and newsagent § Retailing basics and cost control § Drive the gross margin by category mix management § Focus on core categories, rebuilding authority as a specialist § Reduce our reliance on entertainment § Use
Slide 18: Books
Books § Strategy to rebuild our authority remains unchanged § Improved performance vs general high street § Margin well controlled in lead up to Christmas § Range developments and space optimisation continue § Improved efficiency and operational processes – IT investment in returns process for both
Slide 19: Books
The best of Richarddudy’s Book Club g: 2p Interim Results 2007 WHSmith
Slide 20: Stationery
Stationery § WHSmith remains the leader in this broad and diverse category – Continue to focus on core subcategories § LFL sales down 4%; gross margin well up YoY § Continued focus on improving ranges through category reviews – Benefits being delivered from early seasonal reviews – Encouraging sign
Slide 21: Stationery
Stationery Interim Results 2007
Slide 22: News & Impulse
News & Impulse § Magazine market remains challenging § Market share stable in news and magazines § Further growth in snacking and confectionery § Gross margin up YoY § New ranges and range extensions rolled out – e.g. Sandwich range now in over 144 stores § Further range development planned in late
Slide 23: Entertainment
Entertainment § Market continues to be extremely challenging § LFL sales well down, reflecting strategy to reduce reliance on entertainment and focus on profitable sales § Tightly controlled stock to reflect sales patterns while maintaining availability levels § Continued rebalance of space within E
Slide 24: Entertainment
Entertainment § Entertainment space before and after integration of Post Office Interim Results 2007
Slide 25: Post Office
Post Office § Successful trial of 6 Post Offices – Complex integration into existing WHSmith store was managed well – Good customer feedback on the environment and service levels § Franchise agreement for a further 70 Post Offices to relocate to WHSmith by autumn 2008 – Secures the future of Post Of
Slide 26: Post Office
Post Office Interim Results 2007
Slide 27: Post Office
Post Office Interim Results 2007
Slide 28: Margin optimisation programme
Margin optimisation programme § Margin growth from category mix management § Additional margin growth from: – Improved promotions management – Better buying terms – Improved sourcing from low cost countries – Improved markdown management § Mix improvement continues to be a key driver of profit grow
Slide 29: Cost efficiency improvements
Cost efficiency improvements § Continued successful and focused cost control § In October 2006, targeted £22m savings over 3 years; £7m in 2007 § In H1 delivered savings of £8m; ahead of schedule § Savings from: – Staff flexibility programme enabling us to flex labour with sales – Increased efficien
Slide 30: Travel – overview
Travel – overview § Strong performance continues, profit up 15% to £15m § LFL sales growth of 4% – Further growth in airport sales up 8% – Total rail sales up 1% § Gross margin up driven by category mix management and better buying § Costs continue to be tightly controlled § Good progress with contr
Slide 31: Travel strategy
Travel strategy § Deliver organic growth in existing space by better meeting customer needs § Retailing basics and cost control § More effective use of space § Renew existing contracts § Expand CTN format to new profitable locations and channels § Develop, test and roll out new formats in our catego
Slide 32: Travel – Airport stores
Travel – Airport stores § Strong growth; LFL sales growth of 8%, 4 percentage points ahead of passenger growth § Rebalance of sales from landside to airside following new security measures – Staffing – Fixtures and tilling – Range changes § Improved and extended product ranges – Chilled food in more
Slide 33: Travel – Rail stores
Travel – Rail stores § Total LFL rail sales were up 1% in the half year § Regional rail LFL sales up 2% – England & Wales in line with last year’s trend; Scotland impacted by tobacco ban § London LFL sales flat – Encouraging performance in light of negative impact of London free newspapers § Further
Slide 34: Travel – Contracts
Travel – Contracts § Good progress renewing contracts § 12 contracts renewed – 2 in Air: Gatwick North (CTN), Heathrow T1 (Bookstore) – 10 in Rail § 14 refits completed – 3 in Air: Heathrow T4, Glasgow CTN and Bookstore – 11 out of 18 planned for the year in Rail § 6 new stores opened – Air Heathrow
Slide 35: Travel – Motorway stores
Travel – Motorway stores § Quickly establishing a strong presence in this new channel § Moto rollout on target – Early results encouraging – Positive customer feedback § Trials also underway with other major motorway service operators – CTN with Roadchef at Watford Gap – CTN with Welcome Break at Ne
Slide 36: Travel – Motorway stores
Travel – Motorway stores Interim Results 2007
Slide 37: Travel – Motorway stores
Travel – Motorway stores Interim Results 2007
Slide 38: Summary
Summary § Further profit progress from the Group § Continued improvement in High Street – Partnership with Post Office for 70 new concessions in WHSmith stores § Strong performance from Travel – Good progress made to establish a strong presence in new motorway channel § Strong cash generation suppor
Slide 39: WH Smith PLC
WH Smith PLC Interim Results 2007 19 April 2007 Interim Results 2007