Wh Smith Plc · LSE:SMWH
Wh Smith — FY2009 Earnings Presentation
39 slides from Wh Smith's earnings presentation, Oct 15, 2009
Slide 1: WH Smith PLC Preliminary Results 2009
WH Smith PLC Preliminary Results 2009 15 October 2009 Preliminary Results 2009
Slide 2: Disclaimer
Disclaimer This document contains forwardlooking statements with respect to the operations, performance and financial condition of WH Smith PLC. By their nature, these statements are subject to risks, assumptions and uncertainties that could cause actual results to differ materially from those expr
Slide 3: WH Smith PLC agenda
WH Smith PLC § Introduction Robert Walker § Financial review Robert Moorhead § Business review Kate Swann Travel Simon Marinker High Street Stephen Clarke § Summary Kate Swann Preliminary Results 2009
Slide 4: Robert Moorhead, Group Finance Director
Robert Moorhead Group Finance Director Preliminary Results 2009
Slide 5: Group financial summary
Group financial summary Year to Year to Aug 2009 Aug 2008 Change £m £m % Revenue 1,340 1,352 (1)% Profit from trading operations 97 88 10% Profit before tax and exceptional items 82 76 8% Underlying EPS1 41.3p 35.3p 17% Free cash flow 89 63 41% Final dividend per share 11.3p 9.7p 16% Total dividend
Slide 6: Group profit before tax
Group profit before tax Year to Year to Aug 2009 Aug 2008 Growth £m £m % Travel1 48 41 17% High Street1 49 47 4% Trading operations 97 88 10% Unallocated central costs (14) (14) Operating profit 83 74 12% Net finance income 2 Pension interest (1) Profit before tax2 82 76 8% 1 Stated after direct
Slide 7: Revenue analysis
Revenue analysis Year to Year to LFL Aug 2009 Aug 2008 Change Change Revenue £m £m % % Travel 448 413 8% (2)% High Street 892 939 (5)% (6)% Total revenue 1,340 1,352 (1)% (5)% Year to H1 H2 Aug 2009 % % % LFL sales by category Books (3)% (4)% (4)% Stationery 2% 1% News & Impulse (3)% (2)% (2)% Ent
Slide 8: Profit from trading operations
Profit from trading operations Year to Year to Aug 2009 Aug 2008 Change £m £m % Revenue 1,340 1,352 (1)% Gross contribution 655 632 4% Costs (558) (544) Costs – occupation costs (231) (217) – store costs (209) (207) – other costs (118) (120) Profit from trading operations1 97 88 10% Gross margin 48.
Slide 9: Group free cash flow
Group free cash flow Year to Year to Aug 2009 Aug 2008 £m £m Operating profit 83 74 Depreciation and amortisation 41 42 Working capital 11 2 Capital expenditure (28) (39) Tax (23) (21) Provisions (1) (3) Net interest earned1 2 Non cash items 6 6 Free cash flow 89 63 1 Stated before interest receiv
Slide 10: Group net funds movement
Group net funds movement Year to Year to Aug 2009 Aug 2008 £m £m Free cash flow 89 63 Dividends paid (23) (21) Pension deficit and retirement benefit funding (10) (10) Tax refund and associated interest received 6 15 Purchase of own shares (8) (9) Return of cash to shareholders (90) Acquisitions a
Slide 11: Group balance sheet
Group balance sheet 2009 2008 £m £m Goodwill & other intangible assets 56 55 Property, plant & equipment 163 177 Working capital (41) (30) Corporation tax (34) (31) Other assets 9 7 Provisions (8) (8) Operating assets employed 145 170 Net funds 45 (9) Total net assets (excluding pensions) 190 161 Pe
Slide 12: Group key indicators
Group key indicators Year to Year to Aug 2009 Aug 2008 Growth £m £m % Underlying EPS 1 41.3p 35.3p 17% Fixed charges cover 1.5x 1.4x Free cash flow 89 63 Final dividend per share 11.3p 9.7p 16% Total dividend per share – ordinary2 16.7p 14.3p 17% 1 Diluted weighted average no. of shares 2009: £155m;
Slide 13: Kate Swann, Group Chief Executive
Kate Swann Group Chief Executive Preliminary Results 2009
Slide 14: Group – overview
Group – overview § Strong profit performance § Group resilient in difficult trading conditions § Strong cash generation continues – up to £35m return of cash announced today § Proposed final dividend up 16% YoY § Operating performance ahead of expectations in both divisions § Business well positione
Slide 15: Travel – overview
Travel – overview § Profit up 17% to £48m, demonstrating strength of model § Compelling consumer proposition § Strong track record with landlords § Model translates well to new formats and channels § Sales growth of 8% driven by new business, LFL sales down 2% § Gross margin improvement of c. 220bps
Slide 16: Travel – market overview
Travel market overview § Market conditions and growth opportunities vary by channel § Air passenger numbers soft as expected § Further passenger reductions likely, planned accordingly § Medium term forecasts show return to growth; § Well positioned for the recovery § Rail & Motorways trends br
Slide 17: 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 18: Simon Marinker, Managing Director, Travel
Simon Marinker Managing Director, Travel Preliminary Results 2009
Slide 19: Travel – Air
Travel – Air § In Air LFL sales down 4%; continued outperformance vs passenger numbers § Adapting to new passenger trends and purchasing patterns § 4 small ‘pod’ units opened and trading well § Continue to grow portfolio of specialist booksonly stores Preliminary Results 2009
Slide 20: Travel – Rail & Motorway
Travel – Rail & Motorway Rail § LFL sales down 2% § Network changes continue in preparation for 2012 Olympics § Focus on mix and space changes Motorway § Performance robust, in line with expectations § All RoadChef units now converted to WHSmith brand § 118 units now trading in this channel Prelimin
Slide 21: Travel – Hospitals
Travel Hospitals § Strong presence in growing and underdeveloped hospital market with scope for further expansion § Channel structure different to existing channels § UNS units now fully integrated into WHSmith business § New hospitalspecific format, tailored to hospital staff, patients and visi
Slide 22: Travel – Workplaces
Travel Workplaces § New format developed based on hospital learnings § Market potential large but some similarities to hospital channel § Trial in large workplaces, targeting locations with over 2,000 employees § 3 workplace units now open § Plan to open 8 – 10 units by the end of 2009/10 Prelimin
Slide 23: Travel – International Trials
Travel – International Trials § Exploring new growth opportunities in international travel retail locations § Trials planned to evaluate three operating models: § WHSmith directly run Shannon § Joint venture Copenhagen § Franchise Stockholm, Delhi § Working with partners that already have a st
Slide 24: Travel – Business Development
Travel Business Development § Good progress renewing contracts with 18 contracts renewed covering 20 units § Contract extensions secured in key locations § 12 refits completed § 51 new units opened in 2008/9 § Scheduled to open c.29 units in 2009/10 Opened Total Opening 2008/09 31 Aug ’09 2009/10
Slide 25: Kate Swann, Group Chief Executive
Kate Swann Group Chief Executive Preliminary Results 2009
Slide 26: High Street – overview
High Street – overview § Consistent delivery of our plan in a tough consumer environment § LFL sales down 6%, down 2% excluding entertainment § Strong gross margin performance up by c. 230bps driven by further mix changes § Cost savings delivered as planned, further £14m cost savings identified § Fu
Slide 27: High Street – market overview
High Street – market overview § Tough consumer environment – relatively resilient § Changes to competitive landscape § Mixed performance of core markets § Share by category encouraging § Expect challenging market in 09/10 but have planned accordingly Preliminary Results 2009
Slide 28: 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 29: Stephen Clarke, Managing Director, High Street
Stephen Clarke Managing Director, High Street Preliminary Results 2009
Slide 30: Category performance – Books
Category performance Books § Strategy to rebuild authority remains unchanged § Further good share performance vs general retail market § Continue to focus on improving ranges and profitable promotions Preliminary Results 2009
Slide 31: Category performance – Stationery
Category performance Stationery § Core categories remain our focus § ‘Bolt on’ ranges for core categories successfully rolling out § Strong, wellexecuted Back to School campaign § Extended Back to College period § Stock well managed, contributing to margin growth Preliminary Results 2009
Slide 32: Category performance – News & Impulse, Entertainment
Category performance News & Impulse § Magazine market continues to be challenging § Maintained market share in news and magazines § Focus on development of stronglygrowing bookazine category § Continued growth from impulse categories Entertainment § LFL sales down in line with our strategy § Supply
Slide 33: Margin optimisation
Margin optimisation § Margin growth of c. 230 bps in line with targets, delivered through continued focus on category mix management § Additional margin growth from: Better buying terms and improved sourcing Improved markdown and promotional management Shrinkage control § Mix improvements con
Slide 34: Cost efficiency improvements
Cost efficiency improvements § Continued successful and focused cost control § In October 2008, targeted £25m savings over next 3 years § Delivered savings of £15m in 2009; ahead of schedule § Savings from across the business, including: Variable costs associated with Entertainment IT contracts
Slide 35: Cost efficiency – Distribution network changes
Cost efficiency – Distribution network changes § Review of network following category mix changes § Opportunity for cost reduction and improved efficiency § Opportunity to enhance returns facilities § New Birmingham distribution centre; 6 smaller facilities removed § Implementation phased through 20
Slide 36: Christmas 2009
Christmas 2009 § Currently no material change in consumer environment § Planning for a competitive Christmas season § Christmas strategy competitive but profitable § Active management of entertainment category and mix continues § Seasonal offer will focus on value and choice in our core categories §
Slide 37: Kate Swann, Group Chief Executive
Kate Swann Group Chief Executive Preliminary Results 2009
Slide 38: Summary
Summary § Strong profit performance from the Group § Strong cash generation; return of cash announced § Proposed dividend up 16% YoY § Good performance from Travel with opportunities for growth § Focused execution of High Street plan § Challenging trading environment, however we are wellpositioned
Slide 39: WH Smith PLC
WH Smith PLC Preliminary Results 2009 15 October 2009 Preliminary Results 2009