Wh Smith Plc · LSE:SMWH
Wh Smith — FY2007 Earnings Presentation
36 slides from Wh Smith's earnings presentation, Oct 11, 2007
Slide 1: WH Smith PLC Preliminary Results 2007
WH Smith PLC Preliminary Results 2007 11 October 2007 Preliminary 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 Preliminary Results 2007
Slide 3: Alan Stewart, Group Finance Director
Alan Stewart Group Finance Director Preliminary Results 2007
Slide 4: Group financial summary
Group financial summary Year to Year to Aug 2007 Aug 2006 Change £m £m % Revenue 1,299 1,340 (3%) Profit before tax and exceptional items1 66 51 29% Profit before tax 76 44 73% Underlying EPS2 29.3p 23.3p 26% Basic EPS3 33.1p 18.2p 82% Final dividend per share 8.1p 6.2p 31% Total dividend per share4
Slide 5: Group profit before tax
Group profit before tax Year to Year to Aug 2007 Aug 2006 Growth £m £m % 44 42 5% High Street 1 Travel 1 36 31 16% Trading operations 80 73 10% Central costs (14) (14) Internal rents 1 1 Operating profit2 67 60 12% Net finance income 1 (6) Pension interest (2) (3) Profit before tax2 66 51 29% 1 Stat
Slide 6: Profit from trading operations
Profit from trading operations Year to Year to Aug 2007 Aug 2006 Change £m £m % Revenue 1,299 1,340 (3%) Gross contribution 591 579 2% Costs (511) (506) (1%) Costs – occupation costs (196) (187) – store costs (194) (193) – other costs (121) (126) Profit from trading operations1 80 73 10% Gross margi
Slide 7: Revenue analysis
Revenue analysis Year to Year to LFL Aug 2007 Aug 2006 Change Revenue £m £m % High Street 961 1,021 (6%) Travel 338 319 2% Total revenue 1,299 1,340 (4%) Year to Aug 2007 H1 H2 % LFL sales by category Books 3% 1% Stationery (4%) (1%) (3%) News & Impulse 1% 1% Entertainment (36%) (23%) (32%) Tota
Slide 8: Group free cash flow
Group free cash flow Year to Year to Aug 2007 Aug 2006 £m £m Operating profit1 67 60 Depreciation and amortisation 41 37 Working capital 9 9 Capital expenditure (32) (29) Tax (8) (2) Provisions (2) (3) Net interest earned / (paid) 2 (5) Other items 4 1 Free cash flow 81 68 1 Stated before exceptiona
Slide 9: Group net debt movement
Group net debt movement Year to Year to Aug 2007 Aug 2006 £m £m Free cash flow 81 68 Dividends paid (17) (15) Pension deficit and retirement benefit funding (35) (12) Tax refund and associated interest received 14 Purchase and issue of own shares (12) (6) Sale and leaseback and fixed asset proceed
Slide 10: Group balance sheet
Group balance sheet 2007 2006 £m £m Goodwill & other intangible assets 35 35 Property, plant & equipment 176 184 Available for sale investments 4 Working capital (20) (11) Corporation tax (25) (20) Deferred tax 3 16 Provisions (10) (12) Operating assets employed 163 192 Net funds 64 42 Total net a
Slide 11: Pensions
Pensions § We have reduced the pension deficit significantly since 2003 2003 2004 2005 2006 2007 Gross IAS 19 pension deficit £152m £146m £60m £41m1 £nil Actuarial pension deficit (est.) £178m £203m £120m £91m1 £46m § £25m one off post demerger cash contribution § Pension scheme closed to defined be
Slide 12: Group key indicators
Group key indicators Year to Year to Aug 2007 Aug 2006 Growth £m £m % Underlying EPS 1 29.3p 23.3p 26% Final dividend per share 8.1p 6.2p 31% Total dividend per share2 11.8p 9.3p 27% Free cash flow (£m) 81 68 Fixed charges cover 1.4x 1.3x ROCE 41% 35% 1 Underlying EPS: profit before exceptional item
Slide 13: Kate Swann, Group Chief Executive
Kate Swann Group Chief Executive Preliminary Results 2007
Slide 14: Group – Overview
Group – Overview § Strong performance across the Group § Both halves now profitable § Continued progress in delivery of High Street plan § Further good performance from Travel § Strong cash generation in both High Street and Travel § Good progress with implementation of strategy more still to do P
Slide 15: High Street – Overview
High Street – Overview § Continued delivery of strategy to rebalance the mix of our business – Second half performance – Further rebalancing planned § LFL sales down 6% § Strong gross margin performance up by c. 280 bps § Cost saving target successfully delivered – Further savings identified § Post
Slide 16: 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 17: Books
Books § Strategy to rebuild our authority remains unchanged § Further improvement in performance vs general high street § Strong, profitable sales on Harry Potter § Further progress in category planning and management – Promotional architecture – Range management § Continued investment in operationa
Slide 18: Books
Books Preliminary Results 2007
Slide 19: Stationery
Stationery § LFL sales down 3%; gross margin well up YoY § Continue to focus on core sub categories § Improving ranges through category reviews – Recent work delivering improved category performance – Review process continues to be key part of strategy going forward § Improved performance during Bac
Slide 20: Stationery
Stationery Preliminary Results 2007
Slide 21: News & Impulse
News & Impulse § Continued tough trading in magazine market § Maintained market share in news and magazines § Growth in snacking and confectionery − Strong promotional activity − Range developments § Gross margin up YoY and supply chain efficiencies delivered § Magazine category management now rolle
Slide 22: Entertainment
Entertainment § Market continues to be extremely competitive; further aggressive trading expected as we go into Christmas period § LFL sales down, reflecting market weakness and our continuing strategy to reduce reliance on entertainment and focus on profitable sales § Range reviews and improved sig
Slide 23: Post Office
Post Office § Integration of Post Offices into High Street stores on track – Public consultation process close to completion for all Post Offices – 23 Post Offices now open § Early customer feedback encouraging § Operationally complex but execution progressing to plan – Separate Post Office manageme
Slide 24: Post Office – Openings
Post Office Openings Preliminary Results 2007
Slide 25: Margin optimisation programme
Margin optimisation programme § Margin growth from category mix management § Additional margin growth from: – Improved promotions management – Better buying terms – Improved sourcing – Improved markdown management – Shrinkage control § Mix improvement continues to be a key driver of profit growth P
Slide 26: Cost efficiency improvements
Cost efficiency improvements § Continued successful and focused cost control § In October 2006, targeted £22m savings over 3 years; £7m in 2007 § Delivered savings of £10m in 2007; £3m ahead of schedule 2007 2008 2009 2010 Total Actual Forecast Forecast Forecast £ m October 2006 7 9 6 22 Projectio
Slide 27: Christmas 2007
Christmas 2007 § Uncertain consumer environment § Expect very competitive Christmas § Continue to focus only on profitable activity § Continued active management of entertainment category and mix § Christmas range focused on core categories; value and choice improved § Further improvement to catalog
Slide 28: Travel – Overview
Travel – Overview § Further good performance, profit up 16% to £36m § Total sales growth of 6% § LFL sales growth of 2% § Gross margin up driven by category mix management § Costs continue to be tightly controlled § Good progress with contract renewals § 18 new units opened § Motorway expansion ahea
Slide 29: 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 30: Travel – Airport stores
Travel – Airport stores § LFL sales growth of 5% § Continued progress with rebalance of sales from landside to airside – Improved fixtures with more density – Upgraded queue fixtures § Product ranges improved, extended and tailored to location and destination – New ranges specifically for airside or
Slide 31: Travel – Rail stores
Travel – Rail stores § LFL rail sales flat with tough trading in H2 § London LFL sales down 2% § Regional rail LFL sales up 1% § Improved display and promotions in core categories § EPOS rollout complete – Faster transaction times – Improved customer offer (e.g. egiftcard, etop up) Preliminary Res
Slide 32: Travel – Motorway stores
Travel – Motorway stores § Rapid rollout programme has established a strong presence in this new channel – Moto and Welcome Break rollouts completed with 50 Moto stores and 35 Welcome Break stores now open – Stores trading well – Positive customer feedback § Key strengths of WHSmith Travel offer int
Slide 33: Travel – Motorway stores
Travel – Motorway stores Preliminary Results 2007
Slide 34: Travel – Contracts
Travel – Contracts § Good progress renewing contracts § 20 contracts renewed – 8 in Air – 11 in Rail – Manchester Royal Infirmary § 18 new units opened in addition to MSAs – 15 in Air – 2 in Rail – Royal Cornwall Hospital § 16 new business wins and units due to open in 07/08 – 11 in Air – 5 in Rail
Slide 35: Summary
Summary § Further profit progress from the Group § Continued improvement in High Street § Strong performance from Travel § Strong cash generation supporting dividend growth § Consumer outlook uncertain going forward § Tough trading conditions expected for Christmas 2007, however we have planned acco
Slide 36: WH Smith PLC
WH Smith PLC Preliminary Results 2007 11 October 2007 Preliminary Results 2007