Smiths News Plc · LSE:SNWS
Smiths News — FY2012 Earnings Presentation
48 slides from Smiths News's earnings presentation, Oct 16, 2012
Slide 1: Preliminary Results
Preliminary Results 16 October 2012
Slide 2: Highlights
Highlights Mark Cashmore Group Chief Executive
Slide 3: Highlights
Highlights Group sales, £1,803.9m up 4% Strong financial performance Underlying PBT, £47.5m up 23% Free cash flow, £27.2m up 21% Profit growth in all divisions Growth and progress Key News International contract secured, £200m per annum Strong printed and digital sales from Bertrams Ac
Slide 4: Future strategic direction
Future strategic direction Group Leading Specialist Distributor Newspapers Education and Markets Physical and Media and and Care digital books marketing magazines consumables The Business Smiths News Bertrams Consortium DMD Instore Dawson Books Units Rascal Houtschild West Mercia MMC Supplies Share
Slide 5: Group Financial Update
Group Financial Update Nick Gresham Chief Financial Officer
Slide 6: Cautionary statement
Cautionary statement Cautionary Statement This document contains certain forward-looking statements with respect to Smiths News PLC’s financial condition, its results of operations and businesses, strategy, plans, objectives and performance. Words such as ‘anticipates’, ‘expects’, ‘intends’, ‘plans’
Slide 7: Group performance
Group performance £m FY 2012 FY 2011 Change Smiths News operating profit 39.0 38.0 2.6% Bertrams Group operating profit 6.8 3.7 83.8% The Consortium 3.6 - - Media and Marketing 1.8 - - Group operating profit 51.2 41.7 22.8% Net finance charges (3.7) (3.1) Group PBT 47.5 38.6 23.1% Tax (11.4) (10.4)
Slide 8: Smiths News income statement
Smiths News income statement £m FY 2012 FY 2011 Change LFL Total revenue 1,570.7 1,600.7 (1.9)% (4.3)% Gross profit 133.2 137.4 Operating costs (94.2) (99.4) Operating profit 39.0 38.0 2.6% Gross margin 8.5% 8.6% (10 bps) Cost ratio (6.0%) (6.2%) 20 bps Operating margin 2.5% 2.4% 10 bps • LFLs in li
Slide 9: Bertrams income statement
Bertrams income statement £m FY 2012 FY 2011 Change LFL Total revenue 174.3 132.9 31.2% 5.8% Gross profit 33.1 22.6 Operating costs (26.3) (18.9) Operating profit 6.8 3.7 83.8% Gross margin 19.0% 17.0% 200 bps Cost ratio (15.1%) (14.2%) (90) bps Operating margin 3.9% 2.8% 110 bps • Total revenue cha
Slide 10: The Consortium income statement
The Consortium income statement £m 4 months FY 2011 Change 2012 Total revenue 26.5 - - Gross profit 10.2 - Operating costs (6.6) - Operating profit 3.6 - - Gross margin 38.5% - Cost ratio (24.9%) - Operating margin 13.6% - • Trading ahead of expectation • Proforma FY operating profit £6.4m Figures q
Slide 11: Media and marketing income statement
Media and marketing income statement £m FY 2012 FY 2011 Change Total revenue 32.4 0.8 - Gross profit 13.7 0.1 Operating costs (11.9) (0.1) Operating profit 1.8 - - Gross margin 42.3% - Cost ratio (36.7%) - Operating margin 5.6% - • Strong Media Direct performance partially offset by weaker marketing
Slide 12: Non recurring and other items
Non recurring and other items Smiths News Group £m FY 2012 FY 2011 Integration costs (2.7) (0.7) Network reorganisation costs (2.0) (2.7) Amortisation of acquired intangibles (2.1) (0.9) Acquisition costs (4.6) (1.7) Gain on sale of investment 0.5 - Property provisions - (0.5) Total before taxation
Slide 13: Free cash flow
Free cash flow Smiths News Group £m FY 2012 FY 2011 Operating profit 51.2 41.7 Depreciation and amortisation 6.9 6.8 EBITDA 58.1 48.5 Working capital (9.1) (10.3) Capital expenditure (5.1) (3.1) Net interest (3.3) (4.9) Taxation (8.0) (1.7) Pension funding (6.8) (6.2) Other 1.4 0.2 Free cash flow 27
Slide 14: Net debt
Net debt Smiths News Group £m FY 2012 FY 2011 Opening net debt (63.3) (48.0) Free cash flow 27.2 22.5 Dividend (14.9) (13.8) Non recurring items (10.3) (5.2) New finance leases (1.6) (0.6) Other (0.5) (0.3) Acquisitions (37.1) (17.9) Closing net debt (100.5) (63.3) • Net debt: EBITDA 1.6x versus cov
Slide 15: Business Update
Business Update Mark Cashmore Group Chief Executive
Slide 16: Consistently delivering on our strategy
Consistently delivering on our strategy Acquisition of Acquisition of The Dawson Holdings Consortium - immediately accretive acquisition in large £459m contract Expansion into and growing education and wins from academic books care markets publishers Now operating in Acquisition of Integration of Ac
Slide 17: Smiths News
Smiths News Smiths NewsPLC
Slide 18: Smiths News 2012 Highlights
Smiths News - strategy / highlights KPI Revenue 2012 Highlights 1 2.6% profit growth to £39.0m £1,570.7m -1.9% 2 £5m efficiencies achieved 3 Flagship depot in Birmingham KPI Profit 4 New senior team 5 News International contract Secures £200m of revenues per annum Underpins future efficiencies £
Slide 19: Newspapers and magazines - markets
Newspapers and magazines - markets Newspapers Magazines Smiths News LFL sales % Smiths News LFL sales % 0 % 0 -4.7% -6.7% -7.8% -8.4% -4.2% -2.5% -1.2% -3.1% -2 -1 Weeklies/monthlies 0.7% Partworks/one-shots -4 -2 -6 Proportional impact of 1.0% 1.9% part works and one-shots -3 on total magazine -8 -
Slide 20: Sales run rate within strategic forecasts
Sales run rate within strategic forecasts % Change FY 2012 FY 2011 Newspapers (2.1) (2.5) Magazines (6.6) (9.0) Reported total (3.8) (5.2) Excluding partworks / one shots (0.5) 1.1 Underlying run rate (4.3) (4.1) Medium term strategic forecast -3% : -5% 20 Preliminary Results 16 October 2012
Slide 21: Smiths News – strategic direction
Smiths News – strategic direction Regional consolidation Network Step change in scale of locations Process and service re-engineering Process Industry wide optimisation Integrate new territories from News International contract Contracts Other publisher contracts Deliver new products a
Slide 22: Bertrams
Bertrams
Slide 23: Bertrams 2012 Highlights
Bertrams - strategy / highlights KPI Revenue 2012 Highlights 1 Integration of Dawson Books £174.3m +31.2% 2 UK sales ahead of consumer market 3 Strong international sales KPI Profit 4 Acquisition of Houtschild 5 Digital sales growing at 44% £6.8m +83.8% 23 Preliminary Results 16 October 2012
Slide 24: Bertrams – sales by sector
20 18 16 Bertrams – sales by sector 14Bertrams LFL sales Bertrams sales performance 12 % 10 International 10.4% (+12.3% LFL) 8 23% 6 6.8% 46% 4 UK Academic Libraries 13% 2 UK Wholesale 2.1% (+2.5% LFL) 15% 0 -1.4% -2.3% 3% -2 Public Libraries (+11.2% LFL) -4 6.8% -2.3% 2.1% 10.4% Academic 2012 e-boo
Slide 25: Bertrams – strategic direction
Bertrams – strategic direction Grow Internet fulfilment UK Key retailer relationships Grow public and academic library sales Structural growth in English language books International New contract wins Bolt-on opportunities Continued investment in the leading academic e-book platform Di
Slide 26: The Consortium
The Consortium Smiths NewsPLC
Slide 27: The Consortium 2012 Highlights
The Consortium - strategy / highlights KPI Revenue 2012 Highlights 1 Scale business acquired – pro £26.5m +8.1% forma revenue £64m, EBIT £6.4m 2 Growth in all key segments 3 WMS integration progressing well KPI Profit 4 Contributing 8% EPS accretion 5 Strategic and cultural fit £3.6m +9.7% Note: Yea
Slide 28: The Consortium – sales by sector
20 18 16 The Consortium – sales by sector 14 The Consortium YOY sales The Consortium sales performance 12 10% Export, Office, other 9.6% 8 (-8.3% YOY) 8.1% Early years (+7.7% YOY) 6 6.8% 9% 5.8% Care 6% 4 (+27.9% YOY) 5% 2 0 -1.4% 80% -3.5% -2.3% Education -2 (+9.2% YOY) -4 -3.5% +5.8% +8.1% 2010 20
Slide 29: The Consortium – strategic direction
The Consortium – strategic direction Increase existing customer spend Share of wallet Invest in CRM and sales One-stop offer Penetration of schools in targeted areas Market share New contracts with Care providers New contracts with Early Years providers Wider health care Adjacencies
Slide 30: Media & Marketing
Media & Marketing
Slide 31: Media & Marketing 2012 Highlights
Media & Marketing - strategy / highlights KPI Revenue 2012 Highlights 1 New/renewed print contracts £32.4m +2.9% 2 New digital contracts 3 Process and security improvements KPI Profit 4 Operational efficiency 5 MMC – operational progress / new team £1.8m +8.8% Note: Year on year comparatives reflect
Slide 32: Media & Marketing – strategic direction
Media & Marketing – strategic direction New contracts and infill routes in structurally growing markets Airline and rail Operational efficiency Innovative digital solutions Inflight entertainment Premium and budget travel offers New senior team UK fulfilment Leverage Group services 32 Pr
Slide 33: Summary and Outlook
Summary and Outlook 16 October 2012
Slide 34: Strong shareholder returns
Strong shareholder returns Strong profit and cash growth • PBT of £47.5m, up 23% • Cash generative - £27.2m FCF £47.5m PBT Returning value to shareholders • EPS of 19.9p • EPS growth 28% YOY 19.9p EPS Rewarding shareholders with dividends • Dividend +8%, 6th consecutive year of growth • Total cash d
Slide 35: Defined medium term growth strategy
Defined medium term growth strategy Smiths News – maintain profits • New contracts, new efficiencies, new revenues • Continue to generate strong free cashflow Bertrams – grow international & digital 50% of profits • Sales led strategy for print and digital outside of • Grow to £200m+ turnover, £10m+
Slide 36: Preliminary Results
Preliminary Results 16 October 2012
Slide 37: Appendices
consortium ; — Appendices Smiths NewsPLC
Slide 38: Financial KPIs
Financial KPIs £m FY 2012 FY 2011 FY 2010 FY 2009 FY 2008 Revenue 1,803.9 1,734.4 1,829.6 1,326.0 1,240.6 Profit before tax 47.5 38.6 35.0 30.5 32.5 EPS 19.9p 15.5p 14.6p 13.8p 14.5p Free cash flow 27.2 22.5 20.4 23.7 21.4 DPS 8.6p 8.0p 7.4p 6.8p 6.7p Net Debt 100.5 63.3 48.0 49.5 44.0 Figures quote
Slide 39: Income statement
Income statement £m FY 2012 FY 2011 FY 2010 FY 2009 FY 2008 Revenue 1,803.9 1,734.4 1,829.6 1,326.0 1,240.6 Operating profit before non recurring items 51.2 41.7 37.1 32.4 36.0 Non recurring items (10.9) (6.5) (6.9) (10.8) 0.1 Operating profit 40.3 35.2 30.2 21.6 36.1 Net finance charges (3.7) (3.1)
Slide 40: Sales mix and LFL
Sales mix and LFL 32 75 1800 27 83 82 139 1600 174 133 1400 61 Total revenue £m 662 54 1200 560 583 55 1000 509 528 800 600 929 935 953 400 703 658 200 0 935.7 FY 2012 FY 2011 FY 2010 FY 2009 FY 2008 Newspapers Magazines Books Other SN Education & care Media & Marketing Revenue growth 1% 4% (5%) 38%
Slide 41: Balance sheet
Balance sheet £m FY 2012 FY 2011 FY 2010 FY 2009 FY 2008 Intangible assets 67.1 36.9 12.7 12.7 4.1 Property, plant & equipment 24.5 18.7 21.0 21.1 15.5 Other non current assets 6.3 7.0 5.3 6.8 15.1 Total non current assets 97.9 62.6 39.0 40.6 34.7 Cash 5.1 4.2 4.0 4.3 3.4 Other current assets 164.9
Slide 42: Cash flow
Cash flow £m FY 2012 FY 2011 FY 2010 FY 2009 FY 2008 Operating profit 51.2 41.7 37.1 32.4 36.1 Depreciation and amortisation 6.9 6.8 7.3 6.7 6.1 EBITDA 58.1 48.5 44.4 39.1 42.2 Working capital (9.1) (10.3) (1.4) 4.6 (3.0) Capital expenditure (5.1) (3.1) (8.6) (5.2) (3.8) Net interest (3.3) (4.9) (2.
Slide 43: Net debt
Net debt £m FY 2012 FY 2011 FY 2010 FY 2009 FY 2008 Opening net debt (63.3) (48.0) (49.5) (44.0) (52.7) Free cash flow 27.2 22.5 20.4 23.7 21.4 Dividend (14.9) (13.8) (12.6) (12.0) (11.7) Non recurring items (10.3) (5.2) (6.7) (1.2) - Acquisitions (38.1) (17.9) - (12.2) (2.1) Disposals 1.0 - - - - O
Slide 44: Taxation
Taxation £m FY 2012 FY 2011 FY 2010 FY 2009 FY 2008 Current tax 14.1 11.3 9.8 9.5 9.6 Adj in respect of prior year UK (2.3) (0.5) (1.4) (2.4) (4.5) corporation tax Total current tax charge 11.8 10.8 8.4 7.1 5.1 Deferred tax – current year (0.4) (0.4) (0.1) (0.6) 1.2 Deferred tax – prior year - - 0.3
Slide 45: Lease commitments
Lease commitments £m FY 2012 FY 2011 FY 2010 FY 2009 FY 2008 Land and buildings within one year 10.0 9.9 8.8 8.7 6.1 in second to fifth year 28.9 29.3 28.7 28.9 18.9 beyond fifth year 29.6 27.4 29.5 24.7 18.5 Total 68.5 66.6 67.0 62.3 43.5 Equipment and vehicles within one year 1.3 1.6 1.0 1.3 1.4 i
Slide 46: Defined benefit schemes
Defined benefit schemes FY 2012 FY 2011 FY 2010 FY 2009 FY 2008 Scheme assets 433.1 375.1 408.6 357.4 382.5 Scheme liabilities (395.3) (348.3) (367.4) (338.1) (320.1) Surplus 37.8 26.8 41.2 19.3 62.4 Asset cap (40.3) (26.8) (41.2) (19.3) (62.4) IAS 19 balance per financial statements before deferred
Slide 47: Contingent liability
Contingent liability £m FY 2012 FY 2011 FY 2010 FY 2009 FY 2008 No. of Reversionary leases 59 90 105 122 136 Contingent liability 10.9 13.9 21.2 26.6 34.4 Maximum annual liability 5.0 5.0 5.0 5.0 5.0 Under the terms of the 2006 Demerger Agreement, Smith News has a contingent liability for 35% of any
Slide 48: Preliminary Results
Preliminary Results 16 October 2012