WH Smith PLC · LSE:SMWH

WH Smith — H1 2006 Earnings Presentation

46 slides from WH Smith's earnings presentation, Apr 12, 2006

  1. Slide 1: WH Smith PLC Interim Results 2006

    WH Smith PLC Interim Results 2006 12 April 2006

  2. Slide 2: Robert Walker, Chairman

    Robert Walker Chairman

  3. Slide 3: Agenda

    WH Smith PLC  Financial review Alan Stewart  WHSmith Group review Kate Swann  Travel Retail performance  High Street Retail performance  News Distribution performance Interim Results 2006

  4. Slide 4: Alan Stewart, Group Finance Director

    Alan Stewart Group Finance Director

  5. Slide 5: Group financial summary

    Group financial summary 6 mths to 6 mths to Feb 2006 Feb 2005 Change £m £m % Revenue 1,302 1,359 (4%) Headline profit before tax1 73 70 4% Profit before tax 76 60 27% Headline EPS2 32.6p 28.4p 15% EPS3 33.1p 23.5p 41% Interim dividend per share 5.1p 4.5p 13% 1 Headline: Profit before tax, exceptiona

  6. Slide 6: Group revenue

    Group revenue 6 mths to 6 mths to LFL Feb 2006 Feb 2005 Change £m £m % High Street Retail 621 670 (6%) Travel Retail 150 146 3% Retail 771 816 (5%) News Distribution 587 599 (2%) Revenue 1,358 1,415 (3%) Internal sales (56) (56) - Total revenue 1,302 1,359 (3%) Interim Results 2006

  7. Slide 7: Group profit before tax

    Group profit before tax 6 mths to 6 mths to Feb 2006 Feb 2005 Growth £m £m % High Street Retail 57 54 6% Travel Retail 13 11 18% Retail 70 65 8% News Distribution 20 19 5% Trading operations 90 84 7% Support costs (5) (7) Pension service charge (5) (5) Share based payments (4) (2) Internal rents 1 1

  8. Slide 8: Retail profit and loss

    Retail profit and loss 6 mths to 6 mths to Feb 2006 Feb 2005 Change £m £m % Revenue 771 816 (6%) Gross contribution 330 327 1% Costs (260) (262) 1% Costs - occupation costs (94) (90) - store (95) (98) - central (71) (74) Divisional profit* 70 65 8% Gross contribution margin 42.7% 40.1% 260 bps Store

  9. Slide 9: Retail LFL sales by category

    Retail LFL sales by category 6 months to 28 Feb 2006 % Stationery (4%) Books (4%) News & Impulse 2% Entertainment (17%) Total (5%) Interim Results 2006

  10. Slide 10: News Distribution profit & loss

    News Distribution profit & loss 6 mths to 6 mths to Feb 2006 Feb 2005 Change £m £m % Revenue 587 599 (2%) Gross contribution 65 66 House costs (32) (32) Administration costs (13) (15) Divisional profit* 20 19 5% * Before interest, tax, share based payments and pension service charges Interim Results

  11. Slide 11: Group free cash flow

    Group free cash flow 6 mths to 6 mths to Feb 2006 Feb 2005 £m £m Profit before tax1 71 68 Depreciation and amortisation 21 24 Working capital (23) (25) Capital expenditure (12) (10) Fixed asset proceeds 3 - Tax - (3) Provisions (1) (2) Non cash items 3 2 Free cash flow 62 54 1 Before exceptional ite

  12. Slide 12: Group net debt movement

    Group net debt movement 6 mths to 6 mths to Feb 2006 Feb 2005 £m £m Free cash flow 62 54 Dividends paid (16) (14) Pension deficit and retirement benefit funding (9) (64) Sale and leaseback proceeds 5 - Net disposals 9 206 Finance leases - (3) Corporate advisory and financing costs - (10) Purchase of

  13. Slide 13: Group balance sheet

    Group balance sheet Feb 2006 Feb 2005 Aug 2005 £m £m £m Goodwill & other intangible assets 32 35 33 Property, plant & equipment 204 207 219 Working capital (28) (12) (38) Corporation tax (21) (28) (27) Deferred tax 18 34 41 Provisions (15) (18) (17) Operating assets employed 190 218 211 Net debt (12

  14. Slide 14: Group key indicators

    Group key indicators 6 mths to 6 mths to Growth Feb 2006 Feb 2005 % Headline EPS 1 32.6p 28.4p 15% Interim dividend per share 5.1p 4.5p 13% Free cash flow (£m) 62 54 Fixed charges cover 1.7x 1.7x ROCE 41% 33% 1 Headline EPS: profit after tax, before exceptional items and IAS 19 pension interest - un

  15. Slide 15: Current trading

    Current trading LFL sales LFL sales 6 mths to 6 weeks to 28 Feb 2006 8 April 2006 High Street Retail (6)% (4%) Travel Retail 3% 2% Retail (5%) (3%) News Distribution (2%) 1% Total sales (3%) (1%) Interim Results 2006

  16. Slide 16: Kate Swann, Group Chief Executive

    Kate Swann Group Chief Executive

  17. Slide 17: Group overview

    Group overview  Good profit performance across the Group  Another strong performance from Travel Retail with sales growth, margin growth and well controlled costs  Continued profit improvement in High Street Retail  Industry leading performance from News Distribution in a tough market  Central

  18. Slide 18: Travel Retail

    Travel Retail  Another strong performance with profit up 18%  LFL sales growth of 3%  Airport sales up 6%  Rail sales down 1%  Average transaction value increased through range improvements and targeted promotional activity  Gross margin driven by mix changes and improved buying  Costs contro

  19. Slide 19: Travel Retail - Airport stores

    Travel Retail - Airport stores  Continued strong growth; LFL 2% ahead of passenger growth  Improved product ranges  More efficient use of space, e.g. improved queuing systems and increased fixture densities  Good progress with contracts  Heathrow T4 – renewed  Heathrow T5 – negotiations underw

  20. Slide 20: Travel Retail – Rail stores

    Travel Retail – Rail stores  Total rail LFL sales down 1%  London rail LFL sales down 2%  Regional rail LFL sales up 1%  Trialling new layouts with space rebalanced by category in regional rail stores  Focus on London rail performance in H2. Programme includes:  Improving customer service thro

  21. Slide 21: Travel Retail - Rail stores: new formats

    Travel Retail - Rail stores New formats  Specialist stationery stores opened at London Bridge and Charing Cross stations  Specialist book store opened at London Liverpool Street station Interim Results 2006

  22. Slide 22: Charing Cross

    Interim Results 2006 Charing Cross 45

  23. Slide 23: Charing Cross Station

    Charing Cross Station Interim Results 2006

  24. Slide 24: Liverpool Street

    Interim Results 2006 Liverpool Street 75

  25. Slide 25: Liverpool Street Station

    Liverpool Street Station Interim Results 2006

  26. Slide 26: Travel Retail – new channels

    Travel Retail – new channels  Motorway service stations  Franchise agreement with Moto  Trial stores in Leigh Delamere (M4) and Birch (M62) Interim Results 2006

  27. Slide 27: High Street Retail

    High Street Retail  Good profit improvement in line with our plan  LFL sales down 6% in tough trading conditions  Strong gross margin performance up by c. 250 bps  Focused cost control; savings delivered ahead of schedule  Turnaround plan on track Interim Results 2006

  28. Slide 28: High Street Retail turnaround plan

    High Street Retail turnaround plan  Rebuild position as Britain’s most popular bookseller, stationer and newsagent  Retailing basics and cost control  Drive the gross margin by category mix management  Focus on core categories, rebuilding authority as a specialist  Reducing our reliance on ente

  29. Slide 29: Margin optimisation programme

    Margin optimisation programme  Margin growth from category mix management  Additional margin growth from:  Improved price and promotion management  Better buying terms  Far East sourcing  Reduction in shrinkage and improved mark down management  Mix improvements will continue to be a key driv

  30. Slide 30: Cost efficiency improvements

    Cost efficiency improvements  October we targeted £48m of savings over 4 years to 2008; £12m in 2006  In H1 delivered savings of £9m; plan ahead of schedule  Consolidated distribution into two warehouses, completely withdrawing from one warehouse in February  Created shared services facility in

  31. Slide 31: Books

    Books  Strategy to rebuild our authority in books as a popular book specialist remains unchanged  Market, as expected, highly competitive in H1  H1 profit improved well YOY  Second consecutive period of share stabilisation versus the general High Street  Some excellent shares on key titles rein

  32. Slide 32: Books

    Books  Work on store environment, increased range and service levels receiving positive feedback  Will expand space to books in late Summer/early Autumn  Made good progress operationally in H1  Availability consistently over 97% for top lines  Industry Returns Initiative (IRI) – signed up with

  33. Slide 33: Stationery

    Stationery  Tough market with consumer spending down  Focused on core categories, successfully removing unprofitable ranges e.g. electronics  LFL sales down 4%; gross margin up strongly YoY driven by mix management and sourcing benefits  Mixed performance at a sub-category level  Encouraging tr

  34. Slide 34: Stationery

    Stationery  Full category reviews in key areas  4 completed, 7 underway  Space expanded to stationery in late Summer / early Autumn  Following trials new ranges are also being rolled out to stores, in some cases in the expanded space:  New wrap range to all stores in Spring 06  New educational

  35. Slide 35: WHSmith

    Interim Results 2006 WHSmith

  36. Slide 36: Educational games

    pre. SN pelea EN : EDUCATIONAL GAMES Interim Results 2006

  37. Slide 37: Interim Results 2006

    Interim Results 2006

  38. Slide 38: News & Impulse

    News & Impulse  Held share in news and magazines  Strong newspaper / DVD promotions  Strong magazine and promotions  Good bookazine growth  Good snacking and confectionery growth  Further range development planned in late Summer  Additional space to snacking/confectionery in c.100 stores  Ad

  39. Slide 39: Entertainment

    Entertainment  Market remains very challenging  Focused on maximising profit and delivering profitable sales  Tightly controlled stock to reflect sales patterns while maintaining availability levels  Moved to consolidator to protect margins and stock  Planning to move selectively and gradually

  40. Slide 40: News Distribution

    News Distribution  Industry leading performance with profit up 5%  Tough market with slower consumer spending and costs rising  Overall sales down 2% Newspapers -1% Magazines -3% Partworks/Oneshots -13% Interim Results 2006

  41. Slide 41: News Distribution

    News Distribution  Continued efficiency improvements  Centralisation of newspaper copy management  Central cost savings  Continued investment in service developments  Sales-based replenishment  Key performance indicators  New revenue streams  Good progress with contracts Interim Results 2006

  42. Slide 42: News Distribution – contracts: renewals

    News Distribution – contracts: renewals  Newspapers  Guardian - agreed in March  Northern & Shell - agreed in March  FT - agreed in April  Magazines  Northern & Shell – agreed in March  Brings total to c. 85% of revenue now contracted  Average length of the new contracts is 5 years Interim R

  43. Slide 43: News Distribution – contracts: new business

    News Distribution – contracts: new business New business from March 2006 Frontline Magazines Newcastle, Blackpool, Croydon, Derby, Oxford, Northampton, Cambridge/Bury St. Edmunds Comag Magazines Derby Northern & Shell Magazines Derby Northern & Shell Newspapers Derby, Grantham Interim Results 2006

  44. Slide 44: OFT update

    OFT update  Fresh draft opinion to be issued by end of May 2006  Following consultation, a final opinion is expected to be published in the autumn  Improvements made in recent years mean we are well placed to respond to any changes in the market  We remain focused on meeting the needs of publish

  45. Slide 45: Intention to separate Retail & News Distribution

    Intention to separate Retail & News Distribution  Separation will allow increased focus on the respective strategies of the Retail and News businesses  An independent News Distribution business will be  even more responsive to publisher needs and will continue to invest in publisher facing servic

  46. Slide 46: Group summary

    Group summary  Good profit performance across the Group  Continued improvement in High Street Retail  Another excellent performance from Travel Retail and an industry leading performance from News  Tough trading conditions continue however we continue to plan accordingly  Intention to separate

WH Smith — H1 2006 Earnings Presentation on 6ix