Slide 1: Disclaimer
Disclaimer This document contains forward-looking 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 2: WH Smith PLC Preliminary Results 2018
WH Smith PLC Preliminary Results 2018 11 October 2018
Slide 3: Introduction, Financial review, Business review, Questions
WH Smith PLC Introduction Stephen Clarke Financial review Robert Moorhead Business review Stephen Clarke Carl Cowling Questions Preliminary Results 2018
Slide 4: Distinct strategies for each business continue to deliver
Distinct strategies for each business continue to deliver Good performance across the Group Total Group revenue up 2%; like-for-like revenue flat Strong performance in Travel Two thirds of Group operating profit More profit in second half than High Street in full year Record year for Int
Slide 5: Robert Moorhead, Chief Financial Officer
Robert Moorhead Chief Financial Officer
Slide 6: Group financial summary
Group financial summary Year to Year to Aug 2018 Aug 2017 Change £m £m % Revenue 1,262 1,234 2% Group profit from trading operations1 163 158 3% Headline Group profit before tax2 145 140 4% Headline EPS2, 3 108.2 103.6p 4% Free cash flow (£m) 96 105 (9)% Total dividend per share 54.1p 48.2p 12% 1 St
Slide 7: Revenue analysis
Revenue analysis Year to Year to Aug 2018 Aug 2017 Change Total Revenue £m £m % Travel 672 624 8% High Street 590 610 (3)% Total revenue 1262 1,234 2% 1 International 132 108 22% Year to H1 2018 H2 2018 Aug 2018 LFL Revenue % % % Travel 3% 3% 3% High Street (4)% (2)% (3)% (1)% 1% -% 1 Included in Tr
Slide 8: Group LFL revenue performance by category
Group LFL revenue performance by category Year to H1 2018 H2 2018 Aug 2018 % % % Stationery 3% 4% 3% Books (7)% (4)% (6)% News & Impulse -% 1% 1% (1)% 1% -% Preliminary Results 2018
Slide 9: Group profit before tax
Group profit before tax Year to Year to Aug 2018 Aug 2017 Change £m £m % Travel trading profit1 103 96 7% High Street1 60 62 (3)% Group profit from trading operations 1 163 158 3% Unallocated central costs (16) (16) Group operating profit 2 147 142 4% Net finance costs (2) (2) Headline Group profit
Slide 10: Non-underlying items
Non-underlying items Business review in High Street giving benefits now and in future Costs relating to an uncompleted transaction Non-underlying due to magnitude and incidence c.£16m across FY18 and FY19 Estimate Year to Year to Aug 2018 Aug 2019 £m £m High Street business review - Restruct
Slide 11: Profit from trading operations
Profit from trading operations Year to Year to Aug 2018 Aug 2017 Change £m £m % Revenue 1,262 1,234 2% Gross contribution 761 733 Costs (598) (575) Costs – occupation costs (269) (256) – store costs (209) (201) – other costs (120) (118) Group profit from trading operations 1 163 158 3% Gross margin
Slide 12: Group free cash flow
Group free cash flow Year to Year to Aug 2018 Aug 2017 £m £m Group operating profit 1 147 142 Depreciation, amortisation and impairment 44 42 Non cash items 4 5 Capital expenditure (53) (48) Working capital (14) (7) Employers payroll tax on exercised share awards (2) (2) Net tax paid (27) (25) Net i
Slide 13: Group net (debt) / funds
Group net (debt) / funds Year to Year to Aug 2018 Aug 2017 £m £m Free cash flow 96 105 Dividends paid (54) (50) Pension funding (3) (3) Net purchase of own shares for employee share schemes (3) (9) Purchase of own shares for cancellation (26) (40) Acquisitions/investments in JVs (5) - Return of paym
Slide 14: Group balance sheet
Group balance sheet Aug 2018 Aug 2017 £m £m Goodwill & other intangible assets 72 67 Property, plant & equipment 179 164 Working capital (29) (34) Corporation tax (9) (12) Other assets 10 8 Provisions (6) (5) Operating assets employed 217 188 Cash 12 16 Finance leases (14) (12) Total net assets (exc
Slide 15: Return of cash to shareholders
Return of cash to shareholders Investing capex for growth (2018: total capex £53m) Progressive dividend policy, consistent record of growing dividends Supplemented by buybacks and a special dividend c.1095 Over £1.0bn returned 5,6 96 93 91 84 84 81 80 503 79 54 47 41 26 Share Buyback² 61 50
Slide 16: Group key indicators
Group key indicators Year to Year to Growth Aug 2018 Aug 2017 % Headline Group profit before tax (£m) 1 145 140 4% Headline EPS1, 2 108.2p 103.6p 4% Fixed charges cover 1.7x 1.7x ROCE (after capitalised operating leases) 26% 25% Free cash flow (£m) 96 105 Total dividend per share 54.1p 48.2p 12% 1 H
Slide 17: Stephen Clarke, Group Chief Executive
Stephen Clarke Group Chief Executive
Slide 18: WHSmith Travel
WHSmith Travel
Slide 19: Continue to drive good growth
Continue to drive good growth Total revenue up 8%; LFL revenue up 3% Fifth year in a row of good LFL sales growth Good profit performance - up 7% to £103m Continue to invest in future growth in UK New format for large airport stores Range development Expect to open 15 - 20 UK stores th
Slide 20: Sales growth in all key channels
Sales growth in all key channels Channel Total revenue LFL revenue* UK Air 7% 4% UK Rail 1% 1% UK Hospital 6% 3% International 22% 4% Air performance ahead of pax despite slight softening due to hot weather in UK Rail impacted by network upgrades and introduction of new timetables Continued in
Slide 21: Investment in formats – Large airport stores
Investment in formats – Large airport stores In airports, larger stores deliver significantly higher ATV and sales per passenger Complete up to 100,000 transactions per week in our busiest stores Improving circulation and ease of shopping drives customer conversion Large store formats now op
Slide 22: Investment in formats – Large airport stores
Investment in formats – Large airport stores Gatwick Airport, North Terminal Preliminary Results 2018 Gatwick Airport, South Terminal
Slide 23: Investment in formats – Large airport stores
Investment in formats – Large airport stores Heathrow Airport, Terminal 3 Preliminary Results 2018
Slide 24: Investment in formats – Rail
Investment in formats – Rail London Bridge Station Preliminary Results 2018
Slide 25: Investment in formats – Hospitals
Investment in formats – Hospitals Sales in hospital stores set to overtake rail making it our second biggest channel in the UK Food and drink are key categories in hospitals Healthy ranges are an increasing part of the mix Positive results from M&S implant stores; expect to open a further 11
Slide 26: Looking ahead: UK growth
Looking ahead: UK growth Airports continue to forecast passenger growth Continue to open new space in all channels Invest in existing stores to drive sales per passenger Opened 20 stores this financial year across all channels Active space management Preliminary Results 2018
Slide 27: International business is profitable and growing fast
International business is profitable and growing fast Sales per passenger continue to be strong 12 months 12 months YoY LFLs to 31 Aug to 31 Aug 2018 2017 Sales (£m) 132 108 22% 4%* Profit (£m) 11 9 22% 42 new units won, including recent wins in Schiphol Airport and São Paulo Airport 286 units
Slide 28: Madrid Airport
Madrid Airport Madrid Barajas Airport, Terminal 4 Preliminary Results 2018
Slide 29: Significant wins in South America
Significant wins in South America 3 units now open in Galeão Airport, Rio de Janeiro; further 4 units due to open by November Recently won 4 new units in São Paulo Airport Units due to open in November C.40m passengers Partnering with Duty Free Americas in a joint venture Leverage existi
Slide 30: Now present in 50 airports and 27 countries outside the UK
Now present in 50 airports and 27 countries outside of the UK Location Directly run Joint Franchise Total venture Europe 41 5 31 77 Middle East 8 7 42 57 India - - 47 47 Asia 10 11 30 51 Australia 54 - - 54 Total 113 23 150 286 Europe the biggest territory and growing 52% franchised Preliminary
Slide 31: Further growth opportunities overseas
Further growth opportunities overseas International Travel is a large, growing market WHSmith still a small player with good growth potential Short-term investment for long-term future growth Our broad customer offer and sales per pax are attractive to overseas landlords Good success in a
Slide 32: WHSmith High Street
WHSmith High Street
Slide 33: High Street review
High Street review Continued good performance in High Street business despite challenging conditions on the UK high street Profit of £60m; third highest profit performance over past 15 years Successful strategy remains unchanged; continues to create value Undertaken a business review to ensu
Slide 34: Carl Cowling, Managing Director, High Street
Carl Cowling Managing Director, High Street
Slide 35: High Street continues to perform well
High Street continues to perform well Good performance from High Street business Like-for-like sales down 3% versus last year H2 like-for-like sales down 2% despite challenging environment Margin up 70 bps Strong performance from Stationery categories Delivered cost saving initiatives Pr
Slide 36: Continued margin optimisation
Continued margin optimisation Margin growth of 70 bps in the year Main driver continues to be category mix management – both across and within categories Further margin growth from: Trading terms and Far East sourcing Improved markdown management Continue to see opportunities to grow mar
Slide 37: Continued focus on cost efficiencies
Continued focus on cost efficiencies Cost efficiencies key to our strategy Sustainable cost saving initiatives and variable costs to sales £12m cost savings delivered in the year Continue to develop pipeline of new initiatives Total 2018 2019 2020 2021 2019–21 Actual £m October 2017 9 5 4 -
Slide 38: Building on areas of strength in Books
Building on areas of strength in Books Books market remains fairly stable Annualised strong sales from spoof humour titles last year No new, big publishing trends over Christmas 2017 Improved performance in second half Continue to improve customer offer and books operating model Focused
Slide 39: Driving Stationery growth across the business
Driving Stationery growth across the business Stationery now accounts for half High Street sales and c.60% of contribution Our most attractive and highest growth category Continue to invest to drive growth across our stores, Post Offices and digital channels Strong performance over Christmas
Slide 40: Driving Stationery growth – in store
Driving Stationery growth – in store Good results from new concept store trials 11 stores refitted Plan to develop small store and lower cost options Continue to monitor results closely Winchester Henley-on-Thames Preliminary Results 2018
Slide 41: Driving Stationery growth – digital channels
Driving Stationery growth – digital channels Continued good performance from Funky Pigeon Increased traffic volumes; mobile continues to be the main channel Extended gifting ranges throughout the year Cult Pens integration largely complete Complements existing Stationery ranges and enhance
Slide 42: Partnerships – Post Office Ltd
Partnerships – Post Office Ltd Post Office partnership important part of High Street business model Drives footfall and provides financial benefits from commercial agreement 135 franchised Post Offices and 33 hosted Post Offices open within our High Street stores New agreement for further 40
Slide 43: Partnerships - InComm
Partnerships - InComm Extended partnership with InComm; current provider of successful giftcard mall Established a gaming hub in all our stores Pre-paid gaming cards and gifting market UK digital gaming market is large with good YoY category growth Maidstone Preliminary Results 2018
Slide 44: Stephen Clarke, Group Chief Executive
Stephen Clarke Group Chief Executive
Slide 45: Continue to deliver shareholder value
Continue to deliver shareholder value Strong growth in Travel: further opportunities in UK and International Good profit performance from High Street, particularly given challenging UK trading environment Final dividend up 13% Good cash generation in both businesses Disciplined use of cash
Slide 46: WH Smith PLC Preliminary Results 2018
WH Smith PLC Preliminary Results 2018 11 October 2018