Smiths News PLC · LSE:SNWS
Smiths News — FY2007 Earnings Presentation
29 slides from Smiths News's earnings presentation, Oct 18, 2007
Slide 1: Preliminary Results
Preliminary Results 18 October 2007 Mark Cashmore Chief Executive
Slide 2: Agenda
Agenda Highlights of 2007 Mark Cashmore Financial performance Alan Humphrey Strategy update Mark Cashmore Questions Preliminary Results 2007
Slide 3: Highlights of 2007
Highlights of 2007 Industry leading profit performance – Profit before tax of £31.0m – Earnings per share 14p Strong cash generation Dividend for year of 6.4p Service and efficiency targets achieved Further investment to create future efficiencies Preliminary Results 2007 Range of new bu
Slide 4: Financial Performance
Financial Performance Alan Humphrey Financial Director
Slide 5: Basis of Preparation
Basis of Preparation August 2007 underlying results: – Exclude pension curtailment credit of £5.4m August 2006 proforma results: – Exclude property profits of £1.3m – Include £2.7m of additional finance costs to reflect a Preliminary Results 2007 comparable debt and pension position
Slide 6: Financial Summary
Financial Summary Underlying Proforma Aug 2007 Aug 2006 Increase £m £m % Revenue 1,232.4 1,210.6 1.8 Operating profit 36.0 33.0 9.1 Profit before tax 31.0 28.0 10.7 EPS 14.0p 13.0p 7.7 Preliminary Results 2007 Dividend per share 6.4p 6.0p (1) 6.7 1 Smiths News apportionment of old WH Smith dividend
Slide 7: Revenue
Revenue Like-for-like Aug 2007 Aug 2006 Increase revenue £m £m % growth (1) % Newspapers 640.8 628.7 1.9 1.0 Magazines 541.2 531.6 1.8 (3.6) Other 50.4 50.3 0.2 0.2 Preliminary Results 2007 Total Revenue 1,232.4 1,210.6 1.8 (1.1) 1 Like-for-like revenue growth excludes publisher contract gains
Slide 8: Operating Profit
Operating Profit Fav/(Adv) Aug 2007 Aug 2006 Change £m £m % Revenue 1,232.4 1,210.6 1.8 Gross profit 125.2 129.1 (3.0) Net operating costs (89.2) (96.1) 7.2 Underlying operating profit 36.0 33.0 9.1 Preliminary Results 2007 Net margin % 2.9% 2.7%
Slide 9: Profit before and after Tax
Profit before and after Tax Underlying Proforma Increase Aug 2007 Aug 2006 % £m £m Operating profit 36.0 33.0 9.1 Finance costs (5.0) (5.0) Profit before tax 31.0 28.0 10.7 Taxation (6.1) (5.6) Profit after tax 24.9 22.4 11.2 Preliminary Results 2007 Effective Tax Rate 20% 20%
Slide 10: Earnings per Share
Earnings per Share Underlying Proforma EPS EPS Aug 2007 Aug 2006 Profit after tax £24.9m £22.4m Basic earnings per share 14.0p 13.0p Weighted average number of shares 177.8m 172.2m Dividend per share 6.4p 6.0p Preliminary Results 2007
Slide 11: Free Cash Flow
Free Cash Flow Aug 2007 Aug 2006 £m £m Profit before interest and tax 36.0 34.3 Working capital 6.4 (8.1) Depreciation and amortisation 5.5 6.6 Non cash items 0.5 1.2 Capital expenditure (3.2) (2.1) Net interest paid (3.8) - Taxation (8.1) (4.4) Preliminary Results 2007 Additional pension funding (6
Slide 12: Net Debt Movement
Net Debt Movement Year to Aug 2007 £m Free cash flow 27.1 Dividend (10.9) New finance leases (2.2) Movement in net debt 14.0 Opening net debt (41.7) One off pension payment (25.0) Proforma opening net debt (66.7) Preliminary Results 2007 2007 movement 14.0 Closing net debt (52.7)
Slide 13: Pensions
Pensions £m IAS 19 deficit at 31 August 2006 (49.0) One off payment 25.0 Additional funding 5.4 P&L Charge and other cash movement (0.4) Curtailment gain 5.4 Actuarial gains 23.5 IAS 19 surplus at 31 August 2007 9.9 Preliminary Results 2007 Asset Cap (9.9) IAS 19 balance per accounts -
Slide 14: Financial Summary
Financial Summary Solid profit performance, driven by strong efficiency savings Strong cash management, leading to good progress on reducing debt and pension liabilities Preliminary Results 2007
Slide 15: Strategy Update
Strategy Update Mark Cashmore Chief Executive
Slide 16: Newspaper Markets
Newspaper Markets Consistent value growth Anticipate trend to continue Some encouraging signs: – publisher investment – recent price rises – promotional activity Planning for low single digit Preliminary Results 2007 value growth
Slide 17: Magazine Markets
Magazine Markets Markets remain difficult Monthlies and Partworks particularly tough Some encouraging signs: – publisher investment in weeklies market – recent sales performance of monthlies Expect challenging conditions to Preliminary Results 2007 continue
Slide 18: Market Structure
Market Structure Continue to await announcement from the OFT Constructive dialogue with OFT and Government departments Strategy focused on customer needs Not dependent on any particular outcome Preliminary Results 2007
Slide 19: Overview of Strategy
Overview of Strategy Vision Vision To To be be the the best best performing performing wholesaler wholesaler for for publishers publishers and and retailers, retailers, thereby thereby delivering delivering value value to to shareholders. shareholders. Efficiency Service New New Revenues Revenues Co
Slide 20: Costs and Efficiency
Costs and Efficiency Continued strong performance Initiatives at all levels of the business Exceeded our plans and targets Increased savings helped to offset lower sales Clear plans for 2008 Operating Costs 100 90 97 94 91 80 83 70 Preliminary Results 2007 £m 60 50 40 30 20 10 0 2004 2005
Slide 21: Service
Service Depot KPI Performance 100% Excellent progress on KPIs 80% Progress confirmed by: 60% 40% – Retailer surveys 20% – Publisher surveys 0% Investments to increase 05-06 P1 P2 P3 P4 P5 P6 P7 P8 P9 P10 P11 P12 06-07 P1 P2 P3 P4 P5 P6 P7 P8 P9 P10 P11 P12 competitive advantage: KPI Compliance
Slide 22: Technology
Technology Technology & information underpins our role Value created by information and data leadership Creates competitive advantage Savings created by exploiting our capability A platform for new business Preliminary Results 2007 Newspapers Multiples Publishers Retailers Magazines Indepe
Slide 23: Network
Network No of Depots 2002-2007 – 6 major consolidation 60 50 projects 40 30 2008-2009 – 2 planned opportunities 20 10 Further opportunities beyond 2009 0 2002 2004 2006 2008 Preliminary Results 2007
Slide 24: Category Management
Category Management Demerger has enabled closer relationships with major retailers Building a category management offer New partnerships – Tesco Preliminary Results 2007 – Alpha Retail – Martin McColl
Slide 25: New Revenues
New Revenues Publisher contract gains NewsWorks The Returns Company Range of new opportunities – New products to retailers – Leveraging our network 15 contracts with annualised sales value of Preliminary Results 2007 £22m – National newspapers £10m – Regional Press £8m – Other revenue £4m
Slide 26: Summary
Summary A good first year with progress in all key areas Lower sales offset by sustainable cost reductions Core business – strategy on track New business – opportunities developing Well positioned with clear plans for the future Preliminary Results 2007
Slide 27: Outlook
Outlook Challenging core markets Clear plans to drive further efficiencies Range of new revenue opportunities Preliminary Results 2007 Good start to new financial year
Slide 28: Statutory Result - Appendix
Statutory Result - Appendix Aug 2007 Aug 2006 £m £m Revenue 1,232.4 1,210.6 Operating profit 41.4 34.3 Finance Costs (5.0) (2.3) Profit before tax 36.4 32.0 Income tax expense (7.7) (6.4) Preliminary Results 2007 Profit after tax 28.7 25.6
Slide 29: Balance Sheet - Appendix
Balance Sheet - Appendix 31 Aug 2007 31 Aug 2006 £m £m Fixed assets 23.8 22.1 Working capital (43.6) (37.2) Taxation (4.4) (0.7) Provisions (0.5) (0.7) Operating liabilities employed (24.7) (16.5) Net debt (52.7) (41.7) Total net liabilities (excluding (77.4) (58.2) pensions) Pension liability - (49