Smiths News Plc · LSE:SNWS
Smiths News — Connect Group — H1 2014 Earnings Presentation
43 slides from Smiths News's earnings presentation, Apr 23, 2014
Slide 1: Interim Results 23 April 2014
Interim Results 23 April 2014
Slide 2: The leading supply chain, trading and distribution partner
The leading supply chain, trading and distribution partner in our chosen supply markets - delivering consistently strong returns to shareholders Connect Group PLC Interim Results April 2014 2
Slide 3: Evolution of Smiths News Group
Evolution of Smiths News Group 2006 2009 2011 2012 News Distribution Books Media Education & Care Smiths News, UK’s largest A multichannel distributor Supplying news and inflight A leading distributor newspaper and magazine of printed and digital media to 80 airlines in 50 of consumables to the whol
Slide 4: Connect Group
Connect Group News Distribution Media Connect Group PLC Interim Results April 2014 4
Slide 5: Core skills and competencies
Core skills and competencies Operating in large and fragmented markets we connect suppliers with customers – performing an essential and value added role in these supply chains ► Market knowledge and expertise ► Outstanding service ► Change management and integrations ► Unmatched efficiency ► Leadin
Slide 6: Delivering promises; realising potential
Delivering promises; realising potential Connect Group PLC Interim Results April 2014 6
Slide 7: Highlights
Highlights Mark Cashmore Group Chief Executive
Slide 8: Highlights
Highlights ► Group revenue £899m -0.3% ► Underlying PBT £24.0m +3.0% ► Free cash flow £11.9m +16.7% ► News & Media: Profit +4.9%, £1.1bn annualised News revenue contracted to at least 2019 ► Books: strong growth in Wordery offset by weaker margin and return on investments impacting profit ► Educatio
Slide 9: Group Financial Update
Group Financial Update Nick Gresham Chief Financial Officer
Slide 10: Cautionary statement
Cautionary statement This document contains certain forward-looking statements with respect to Connect Group PLC’s financial condition, its results of operations and businesses, strategy, plans, objectives and performance. Words such as ‘anticipates’, ‘expects’, ‘intends’, ‘plans’, ‘believes’, ‘seek
Slide 11: Group performance
Group performance £m Feb 2014 Feb 2013 Change Non N&M mix % News Distribution 20.5 19.7 +4.1% - Media 1.0 0.8 +36.2% 4% News & Media operating profit 21.5 20.5 +4.9% - Books operating profit 2.3 3.5 (33.8)% 9% Education & Care operating profit 3.0 2.9 +3.4% 11% Group operating profit 26.8 26.8 - 24%
Slide 12: Non recurring and other items
Non recurring and other items £m Feb 2014 Feb 2013 Integration costs - (0.5) Network reorganisation costs (0.3) (1.0) Release of property provisions 0.6 - Acquisition costs (0.4) (2.1) Amortisation of acquired intangibles (1.3) (1.4) Impairment of acquired intangibles (0.5) - Disposal of MMC - 0.1 T
Slide 13: Free cash flow
Free cash flow £m Feb 2014 Feb 2013 Operating profit 26.8 26.8 Depreciation and amortisation 3.7 3.7 EBITDA 30.5 30.5 Working capital (2.8) (7.2) Capital expenditure (4.5) (3.7) Net interest and fees (4.2) (2.1) Taxation (5.2) (5.0) Pension funding (2.1) (3.1) Other 0.2 0.8 Free cash flow 11.9 10.2
Slide 14: Net debt
Net debt £m 28 Feb 2014 31 Aug 2013 28 Feb 2013 Opening net debt (98.5) (100.5) (100.5) Free cash flow 11.9 32.6 10.2 Dividend (11.7) (16.0) (10.6) Non recurring items (1.9) (5.9) (2.2) Acquisitions (0.3) (5.1) (3.4) Other (4.5) (3.6) (2.9) Closing net debt (105.0) (98.5) (109.4) Net debt : EBITDA 1
Slide 15: Business update: Connect News & Media
Business update Connect News & Media
Slide 16: Connect News & Media – News distribution
Connect News & Media – News distribution 2014 H1 Total Revenue £748.6m -1.6% ► New business wins driving sales LFL Revenue -2.8% Profit £20.5m +4.1% ► Strong dynamics in newspaper market: total sales +0.9% Segmental LFLs ► Continued weakness in magazine sales ► Newspapers -0.5% ► Magazines -8.1% ► M
Slide 17: Connect News & Media – Media
Connect News & Media – Media 2014 H1 Total Revenue £12.3m +4.2% LFL Revenue +1.8% ► Good progress in H1 Profit £1.0m +36.0% ► Global BA contract secured to May 2019 Segmental LFLs ► Mirror contract: 18m copies per annum secured ► UK 11.0% ► International -4.5% ► 11,000 iPads now deployed across 17 a
Slide 18: Business update
Business update
Slide 19: Connect Books
Connect Books 2014 H1 Total Revenue £106.6m +8.4% ► Sales mix and margin dilution impacting profitability LFL Revenue -0.3% Profit £2.3m -33.8% ► Wordery: doubled sales; now making profit ► Challenging academic environment Segmental LFLs ► Trade -4.6% ► Planned H1 investment adding short term pressu
Slide 20: Business update: Education & Care
Business update Education & Care
Slide 21: Connect Education & Care
Connect Education & Care 2014 H1 Total Revenue £31.2m +2.5% ► Strong sales performance in core categories +5.0% LFL Revenue +3.2% Profit £3.0m +3.4% ► Expanding geographic footprint from framework wins in Scotland and NI Segmental LFLs ► Education +5.1% ► Continued investment in warehouse management
Slide 22: Summary & outlook
Summary & outlook
Slide 23: Summary & outlook
Summary & outlook ► Rebranding complete ► Strong performance in 2 of 3 divisions : representing 91% profit ► Challenges in Books division being addressed ► Diversification strategy unchanged, maintaining target of 50% profit mix by 2016 ► Strong cash flow dynamics and new committed facilities ► Main
Slide 24: Interim Results April 2014
Interim Results 23 April 2014
Slide 25: Appendices
Appendices
Slide 26: News Distribution Income Statement
Connect News & Media – News Distribution Income Statement £m Feb 2014 Feb 2013 Change LFL Total revenue 748.6 761.1 (1.6%) (2.8%) Gross profit 61.7 62.1 Operating costs (41.2) (42.4) Operating profit 20.5 19.7 4.1% Gross margin 8.2% 8.2% - Cost ratio (5.5%) (5.6%) 10 bps Operating margin 2.7% 2.6% 1
Slide 27: Media Income Statement
Connect News & Media – Media Income Statement £m Feb 2014 Feb 2013* Change LFL Total revenue 12.3 11.8 4.2% 1.8% Gross profit 6.1 5.2 Operating costs (5.1) (4.4) Operating profit 1.0 0.8 36.0% Gross margin 49.6% 44.1% 550 bps Cost ratio (41.5%) (37.3%) (420 bps) Operating margin 8.1% 6.8% 130 bps *
Slide 28: Connect Books Income Statement
Connect Books Income Statement £m Feb 2014 Feb 2013 Change LFL Total revenue 106.6 98.3 8.4% (0.3%) Gross profit 19.4 18.7 Operating costs (17.1) (15.2) Operating profit 2.3 3.5 (33.8%) Gross margin 18.1% 19.0% (90 bps) Cost ratio (16.0%) (15.5%) (50 bps) Operating margin 2.2% 3.6% (140 bps) Connect
Slide 29: Connect Books sales comparison
Connect Books sales comparison HY 2014 FY 2013 Digital Digital (4% mix) Consumer (5% mix) +2.2% (4% mix) +38.0% Consumer (11% mix) +101.4% UK Library UK Library (13% mix) (10% mix) Trade -10.9% Trade -14.9% (50% mix) (58% mix) -4.6% -3.3% Academic Academic (20% mix) (25% mix) -11.4% -9.8% Connect Gr
Slide 30: Connect Education & Care Income Statement
Connect Education & Care - Income Statement £m Feb 2014 Feb 2013 Change LFL Total revenue 31.2 30.5 2.5% 3.2% Gross profit 12.6 12.0 Operating costs (9.6) (9.1) Operating profit 3.0 2.9 3.4% Gross margin 40.5% 39.3% 120 bps Cost ratio (31.0%) (29.8%) (120 bps) Operating margin 9.5% 9.5% - Connect Gr
Slide 31: Reported Sales Performance
Reported Sales Performance FY14 FY13 FY12 July July Jan H1 Jan IMS FY H1 Jan IMS FY H1 IMS IMS IMS Smiths News News (0.5%) - (2.7%) - (3.9%) - (2.1%) - (1.2%) - Magazines (8.1%) - (9.9%) - (7.7%) - (6.6%) - (7.8%) - LFL (2.8%) (2.8%) (4.6%) (4.6%) (5.0%) (4.7%) (4.3%) (4.1%) (3.7%) (3.2%) Total (1.6
Slide 32: Financial KPIs
Financial KPIs £m HY 2014 FY 2013* FY 2012 FY 2011 FY 2010 Revenue 898.7 1,806.9 1,803.9 1,734.4 1,829.6 Profit before tax 24.0 49.9 47.5 38.6 35.0 Profit after tax 18.8 38.9 36.1 28.2 26.4 EPS 10.1p 20.8p 19.9p 15.5p 14.6p Free cash flow 11.9 32.6 27.2 22.5 20.4 DPS 3.1p 9.3p 8.6p 8.0p 7.4p Net Deb
Slide 33: Income Statement
Income Statement £m HY 2014 FY 2013* FY 2012 FY 2011 FY 2010 Revenue 898.7 1,806.9 1,803.9 1,734.4 1,829.6 Underlying Operating profit 26.8 56.4 51.2 41.7 37.1 Non recurring items (1.9) (10.8) (10.9) (6.5) (6.9) Statutory Operating profit 24.9 45.6 40.3 35.2 30.2 Net finance charges (2.8) (6.7) (3.7
Slide 34: Balance Sheet
Balance Sheet £m HY 2014 FY 2013 FY 2012* FY 2011* FY 2010 Intangible assets 67.0 68.2 67.1 36.9 12.7 Property, plant & equipment 25.6 26.6 24.5 18.7 21.0 Other non current assets 12.8 12.8 14.5 16.1 5.3 Total non current assets 105.4 107.6 106.1 71.7 39.0 Cash 12.5 10.1 5.1 4.2 4.0 Other current as
Slide 35: Cash flow
Cash flow £m HY 2014 FY 2013 FY 2012 FY 2011 FY 2010 Operating profit 26.8 56.5 51.2 41.7 37.1 Depreciation and amortisation 3.7 7.6 6.9 6.8 7.3 EBITDA 30.5 64.1 58.1 48.5 44.4 Working capital (2.8) (5.0) (9.1) (10.3) (1.4) Capital expenditure (4.5) (7.9) (5.1) (3.1) (8.6) Net interest (4.2) (4.2) (
Slide 36: Net debt
Net debt £m HY 2014 FY 2013 FY 2012 FY 2011 FY 2010 Opening net debt (98.5) (100.5) (63.3) (48.0) (49.5) Free cash flow 11.9 32.6 27.2 22.5 20.4 Dividend (11.7) (16.0) (14.9) (13.8) (12.6) Non recurring items (1.9) (5.9) (10.3) (5.2) (6.7) Acquisitions (0.3) (5.1) (38.1) (17.9) - Disposals - - 1.0 -
Slide 37: Non-recurring and other items
Non-recurring and other items £m HY 2014 FY 2013 FY 2012 FY 2011 FY 2010 Integration costs - (1.1) (2.7) - - Network re-organisation costs (0.3) (3.3) (2.0) (2.7) (6.7) Acquisition costs (0.4) (3.7) (4.6) (2.4) - Property provisions 0.6 - - (0.5) - Amortisation of acquired intangibles (1.3) (2.8) (2
Slide 38: Taxation
Taxation £m HY 2014 FY 2013 FY 2012 FY 2011 FY 2010 Current tax 5.1 15.7 13.6 11.3 9.8 Adj in respect of prior year UK - (2.6) (1.6) (0.5) (1.4) corporation tax Total current tax charge 5.1 13.1 12.0 10.8 8.4 Deferred tax – current year (0.1) (0.7) (0.6) (0.4) (0.1) Deferred tax – prior year 0.2 (0.
Slide 39: Lease commitments
Lease commitments £m HY 2014 FY 2013 FY 2012 FY 2011 FY 2010 Land and buildings within one year 7.7 8.1 10.0 9.9 8.8 in second to fifth year 26.1 26.2 28.9 29.3 28.7 beyond fifth year 23.7 26.7 29.6 27.4 29.5 Total 57.5 61.0 68.5 66.6 67.0 Equipment and vehicles within one year 1.8 1.6 1.3 1.6 1.0 i
Slide 40: Defined benefit schemes
Defined benefit schemes HY FY FY FY FY 2014 2013 2012 2011 2010 Scheme assets 483.2 469.6 433.1 375.1 408.6 Scheme liabilities (428.0) (419.2) (395.3) (348.3) (367.4) Surplus 55.2 50.4 37.8 26.8 41.2 Asset cap (58.1) (53.2) (40.3) (26.8) (41.2) Additional liability – IFRIC 14 (18.8) (20.3) (33.5) (3
Slide 41: Contingent liability
Contingent liability £m HY 2014 FY 2013 FY 2012 FY 2011 FY 2010 No. of Reversionary leases 32 35 59 90 105 Contingent liability 7.3 8.4 10.9 13.9 21.2 Maximum annual liability 5.0 5.0 5.0 5.0 5.0 Under the terms of the 2006 Demerger Agreement, Connect Group Plc has a contingent liability for 35% of
Slide 42: Restatement of retirement benefit obligation
Restatement of retirement benefit obligation During the period the Group adopted IAS 19 (revised) affecting the accounting for defined benefit schemes and specifically to reflect pension interest in the income statement calculated on the net balance sheet position at the beginning of the period.
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