Slide 1: WH Smith PLC Preliminary Results 2010
WH Smith PLC Preliminary Results 2010 14 October 2010 Preliminary Results 2010
Slide 2: 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 3: Kate Swann, Group Chief Executive
Kate Swann Group Chief Executive Preliminary Results 2010
Slide 4: Introduction and agenda
WH Smith PLC Introduction Kate Swann Financial review Robert Moorhead Business review Kate Swann - Travel Simon Marinker - High Street Stephen Clarke Summary Kate Swann Preliminary Results 2010
Slide 5: Robert Moorhead, Group Finance Director
Robert Moorhead Group Finance Director Preliminary Results 2010
Slide 6: Group financial summary
Group financial summary Year to Year to Aug 2010 Aug 2009 Change £m £m % Revenue 1,312 1,340 (2)% Profit from trading operations1 104 97 7% Profit before tax and exceptional items 89 82 9% Underlying EPS2 45.7p 41.3p 11% Free cash flow 82 89 (8)% Final dividend per share 13.3p 11.3p 18% Total divide
Slide 7: Group profit before tax
Group profit before tax Year to Year to Aug 2010 Aug 2009 Growth £m £m % Travel1 53 48 10% High Street1 51 49 4% Trading operations 104 97 7% Unallocated central costs (15) (14) Operating profit 89 83 7% Net finance cost - - Pension interest - (1) Profit before tax2 89 82 9% 1 Stated after directly
Slide 8: Revenue analysis
Revenue analysis Year to Year to LFL Aug 2010 Aug 2009 Change Change Revenue £m £m % % Travel 452 448 1% (2)% High Street 860 892 (4)% (4)% Total revenue 1,312 1,340 (2)% (4)% Year to H1 H2 Aug 2010 % % % LFL sales by category Books (4)% (3)% (3)% Stationery 2% (1)% 1% News & Impulse (1)% (2)% (2)%
Slide 9: Profit from trading operations
Profit from trading operations Year to Year to Aug 2010 Aug 2009 Change £m £m % Revenue 1,312 1,340 (2)% Gross contribution 662 655 1% Costs (558) (558) Costs – occupation costs (241) (231) – store costs (202) (209) – other costs (115) (118) Profit from trading operations1 104 97 7% Gross margin 50.
Slide 10: Group free cash flow
Group free cash flow Year to Year to Aug 2010 Aug 2009 £m £m Operating profit 89 83 Depreciation and amortisation 39 41 Working capital 3 11 Capital expenditure (29) (28) Tax (27) (23) Provisions (2) (1) Net interest earned1 1 - Non cash items 8 6 Free cash flow 82 89 1 Stated before interest receiv
Slide 11: Group net funds movement
Group net funds movement Year to Year to Aug 2010 Aug 2009 £m £m Free cash flow 82 89 Dividends paid (26) (23) Pension deficit and retirement benefit funding (13) (10) Tax refund and associated interest received 7 6 Net purchase of own shares for employee share schemes (4) (8) Purchase of own shares
Slide 12: Group balance sheet
Group balance sheet 2010 2009 £m £m Goodwill & other intangible assets 56 56 Property, plant & equipment 158 163 Working capital (49) (41) Corporation tax (30) (27) Other assets 4 2 Provisions (8) (8) Operating assets employed 131 145 Net funds 56 45 Total net assets (excluding pensions) 187 190 Pen
Slide 13: Group key indicators
Group key indicators Year to Year to Aug 2010 Aug 2009 Growth £m £m % Underlying EPS1 45.7p 41.3p 11% Fixed charges cover 1.5x 1.5x Free cash flow 82 89 Final dividend per share 13.3p 11.3p 18% Total dividend per share 19.4p 16.7p 16% ROCE (after capitalised operating leases) 18% 17% 1 Diluted weigh
Slide 14: Kate Swann, Group Chief Executive
Kate Swann Group Chief Executive Preliminary Results 2010
Slide 15: Group – overview
Group – overview Good profit performance Good operating performance continues in both divisions Strong cash generation – up to £50m return of cash announced today. Proposed final dividend up 18% YoY Travel and High Street continue to make good progress with the implementation of their distinct strat
Slide 16: Travel – overview
Travel – overview Profit up 10% to £53m, demonstrating strength of model Sales growth of 1%, LFL sales down 2% Gross margin improvement of c.170 bps YoY Costs well controlled Positioned to continue to grow - Well-positioned for recovery in Air passenger numbers - Space opportunities in UK Air and Re
Slide 17: Simon Marinker, Managing Director, Travel
Simon Marinker Managing Director, Travel Preliminary Results 2010
Slide 18: Travel – Air
Travel – Air In Air LFL sales down 4% Passenger numbers soft as expected; we continue to outperform Medium term forecasts show return to growth; we are well positioned for the recovery Margin and cost management successful 7 new units opened in the year; further 8 units due to open during 2010/11 Pr
Slide 19: Travel – Rail
Travel – Rail In Rail, LFL sales up 1% Focus on mix and space changes Plan to refit key sites during 2011 New space opportunities identified in Regional Rail Market is fragmented with many different landlords Targeting sites with over 2m passengers p.a. Opened 4 new Regional Rail stores in the year
Slide 20: Travel – Rail
Travel – Rail Preliminary Results 2010
Slide 21: Travel – Motorway
Travel – Motorway Performance robust, in line with expectations 119 units now trading in this channel Franchise operation provides useful experience Preliminary Results 2010
Slide 22: Travel – Hospitals
Travel – Hospitals Strong presence in growing and under-developed hospital market with scope for further expansion Structure of hospital channel different to established travel channels 103 units now open in this channel Performance continues to be encouraging and in line with expectations 9 new uni
Slide 23: Travel – Workplaces
Travel – Workplaces Market potential large - economics and speed of rollout similar to Hospital channel 8 workplace units now open and trading Locations include business parks, locations in offices and locations just outside offices Early days, but stores are performing well Anticipate opening aroun
Slide 24: Travel – International update
Travel – International update Current locations To date, we have opened stores in 6 international locations In each location, we are choosing the most appropriate operating model: directly-run, joint venture or franchise Where appropriate, working with partners that have strong local links in each t
Slide 25: Travel – International update
Travel – International update Performance to date Whilst it is early days, performance to date has been encouraging We have demonstrated that we can add value and deliver improved performance Location Indicative % change in spend per PAX Copenhagen Mid teens Shannon High twenties Muscat (Oman) Mid f
Slide 26: Travel – International update
Travel – International update Preliminary Results 2010
Slide 27: Travel – International update
Travel – International update New locations Stores previously agreed and opening soon Dublin: 3 units due to open Autumn/Winter 2010 Delhi: 3 further units due to open Autumn/Winter 2010 6 further units now agreed: Oman: 1 unit due to open Spring 2011 Mumbai: 1 unit due to open Summer 2011 Sydney ar
Slide 28: Kate Swann, Group Chief Executive
Kate Swann Group Chief Executive Preliminary Results 2010
Slide 29: High Street – overview
High Street – overview LFL sales down 4%, down 1% excluding Entertainment Market shares encouraging Strong gross margin performance up by c.150 bps Cost savings of £12m delivered in line with plan Continued strong cash generation Continue to make progress delivering our strategy - Continue to rebala
Slide 30: Stephen Clarke, Managing Director, High Street
Stephen Clarke Managing Director, High Street Preliminary Results 2010
Slide 31: Category performance - Stationery
Category performance - Stationery Strategy to build on market-leading position in stationery remains unchanged Strong shares in both general and seasonal stationery Additional space for general stationery at Christmas Seasonal stationery lines performed well over Christmas and benefited from additio
Slide 32: Category performance - Stationery
Category performance - Stationery Personalised greetings cards Profitable growth market; builds on our strong presence in cards Existing personalised greetings cards offer at whsmith.co.uk Launched new improved offer through Funky Pigeon brand Stand-alone website with links from WHSmith website Supp
Slide 33: Category performance - Stationery
Category performance - Stationery Preliminary Results 2010
Slide 34: Category performance - Books
Category performance - Books Market soft, but varied by sub-category and improved during the year Further good share performance vs general retail market Authority in books continues to develop well Children’s Bookseller of the Year Exclusive Richard and Judy Book Club Preliminary Results 2010
Slide 35: The eBooks Market
The eBooks Market eBooks seeing growth, but not impacting overall market performance UK eBook market growth of 300% p.a., around 0.5% of total book sales 60% eBook downloads are Fiction, but physical Fiction Books market up 5% Some eBook demand will be incremental In the more mature US market, eBook
Slide 36: WHSmith and eBooks
WHSmith and eBooks Mass market specialist positioning strong and sustainable WHSmith core market – lighter book buyers New developments provide incremental opportunities Developing a strong presence in embryonic eBooks market Hardware: - available instore and online eBook downloads: - Competitive ra
Slide 37: Category performance
Category performance News & Impulse Magazine market continues to be challenging Maintained market share in news and magazines Further development of strongly-growing bookazine category Continued growth from impulse categories Preliminary Results 2010
Slide 38: Category performance
Category performance Entertainment LFL sales down in line with our strategy Now accounts for less than 5% of the business Progress with space rebalancing, more planned post-Christmas - Extend ranges within core categories - Additional services - Improve store efficiency by improving layouts - Increa
Slide 39: Margin optimisation
Margin optimisation Margin growth of c.150 bps, delivered through continued focus on category mix management Additional margin growth from: - Better buying terms - Improved mark-down and promotional management - Far East office Mix improvements will continue to be a driver of profit growth Prelimina
Slide 40: Cost efficiency improvements
Cost efficiency improvements Continued successful and focused cost control Delivered savings of £12m in 2010 Savings from across the business, including: - Variable costs associated with Entertainment - Store efficiencies through use of technology - Supply chain efficiencies via Birmingham DC Furthe
Slide 41: Kate Swann, Group Chief Executive
Kate Swann Group Chief Executive Preliminary Results 2010
Slide 42: Summary
Summary Good profit performance from the Group Highly cash generative business, further return of cash announced Proposed dividend up 18% YoY Record profit in Travel with opportunities for growth High Street continues to deliver profit growth and high levels of cash generation Not expecting any impr
Slide 43: WH Smith PLC
WH Smith PLC Preliminary Results 2010 14 October 2010 Preliminary Results 2010