Smiths News PLC · LSE:SNWS
Smiths News — FY2010 Earnings Presentation
35 slides from Smiths News's earnings presentation, Oct 21, 2010
Slide 1: Smiths News PLC Preliminary Results 2010
Smiths News PLC Preliminary Results 2010 Mark Cashmore, Group Chief Executive 21 October 2010 Preliminary Results 21 October 2010 1
Slide 2: Agenda
Agenda Highlights Financial performance Business update Questions Preliminary Results 21 October 2010 2
Slide 3: Highlights
Highlights Revenue of £1,830m, up 38% Underlying profit before tax of £35m, up 15% Strong performance EPS of 14.6p, up 6% Full year dividend of 7.4p, up 9% Strong free cash of £20m SAP installed, initial network changes complete Operational excellence £3m costs removed – further £3m secured for 2011
Slide 4: Group Financial Update
Group Financial Update Preliminary Results 2010 Nick Gresham, Group Chief Financial Officer 21 October 2010 Preliminary Results 21 October 2010 4
Slide 5: Group income statement
Group income statement £m FY 2010 FY 2009 Change Revenue £1,829.6 £1,326.0 38.0% Gross profit 177.0 130.6 35.5% Operating costs (139.9) (98.2) (42.5%) Operating profit 37.1 32.4 14.5% Finance costs (2.1) (1.9) (10.5%) Profit before tax 35.0 30.5 14.8% Taxation (8.6) (5.7) (50.9%) Tax rate 25% 19% -
Slide 6: Smiths News income statement
Smiths News income statement £m FY 2010 FY 2009 Change LFL Newspapers 952.0 703.3 35.4% (4.2%) Magazines 663.5 508.6 30.5% (4.0%) Other 77.0 60.6 27.1% Total revenue 1,692.5 1,272.5 33.0% Gross profit 151.6 121.2 25.1% Operating costs (118.5) (89.5) (32.4%) Operating profit 33.1 31.7 4.4% Gross marg
Slide 7: Smiths News revenues
Smiths News revenues £6.5bn revenue £5bn revenue 100% 100% 100% 87% % revenue per annum FY 2011 FY 2012 FY 2013 FY 2014 • Smiths News revenues for next 3 years Preliminary Results 21 October 2010 7
Slide 8: Bertrams income statement
Bertrams income statement £m FY 2010 FY 2009 Change LFL Revenue 137.1 53.5 156.3% 6.8% Gross profit 25.4 9.4 170.2% Operating costs (21.4) (8.7) (146.0%) Operating profit 4.0 0.7 471.4% Gross margin 18.5% 17.6% 90 bps Cost ratio (15.6%) (16.3%) 70 bps Operating margin 2.9% 1.3% 160 bps Bertrams resu
Slide 9: Non recurring and other items
Non recurring and other items £m FY 2010 FY 2009 Dawson integration (6.1) (4.6) Library Services move to Norwich (0.6) - The Returns Company 0.7 (3.1) Amortisation of intangibles (0.9) (0.4) Cross currency contract - (1.5) Reversionary leases - (2.5) Total before taxation (6.9) (12.1) Taxation 1.7 5
Slide 10: Earnings per share
Earnings per share £m FY 2010 FY 2009 Change No. of shares 180.6m 179.5m 1.1m Underlying basis Profit after tax £m 26.4m 24.8m 6.5% Tax rate % 25.0% 19.0% 600 bps EPS 14.6p 13.8p 5.8% DPS 7.4p 6.8p 8.8% Statutory basis Non recurring costs (5.2m) (7.1m) 26.8% Profit after tax £m 21.2m 17.7m 19.8% EPS
Slide 11: Free cash flow
Free cash flow £m FY 2010 FY 2009 Operating profit 37.1 32.4 Depreciation and amortisation 7.3 6.7 EBITDA 44.4 39.1 Working capital (1.4) 4.6 Capital expenditure (8.6) (5.2) Net interest (2.6) (2.9) Taxation (5.9) (5.6) Pension funding (6.4) (5.7) Other 0.9 (0.6) Free cash flow 20.4 23.7 Preliminary
Slide 12: Net debt
Net debt £m FY 2010 FY 2009 Opening net debt (49.5) (44.0) Free cash flow 20.4 23.7 Dividend (12.6) (12.0) Non recurring items (6.7) (1.2) Acquisitions - (12.2) New finance leases 0.4 (3.8) Decrease/(Increase) in debt 1.5 (5.5) Closing net debt (48.0) (49.5) • Net debt to EBITDA of 1.1 versus covena
Slide 13: New bank facilities
New bank facilities £135m facilities repayable November 2014 Banks : HSBC, Barclays, Santander, Clydesdale, RBS Repayments starting September 2012 (£3m, £3m, £4m) Margin 162.5 bps Net debt : EBITDA 2.5x, interest cover 3x, fixed charge cover 2.5x Preliminary Results 21 October 2010 13
Slide 14: Business Update
Business Update Preliminary Results 2010 Mark Cashmore, Group Chief Executive 21 October 2010 Preliminary Results 21 October 2010 14
Slide 15: Newspapers
Newspapers Newspapers market £2.4bn 2.3% 2.0% 1.0% 1.0% 2006 2007 2008 2009 2010 -2.0% -2.8% -4.2% -6.0% Smiths News LFL sales Challenging but resilient market Price discounting impacting sales not margin Smiths News total sales up 35% Preliminary Results 21 October 2010 15
Slide 16: Magazines
Magazines 4.0% Magazines market £1.9bn Smiths News LFL sales 0.0% 2006 2007 2008 2009 2010 -0.9% -2.5% -4.0% -3.6% -4.0% -8.0% Smiths News LFL sales -7.6% Tough market but improving World Cup sales of £14m Smiths News total sales up 30% Preliminary Results 21 October 2010 16
Slide 17: Books
Books Books market £3.3bn 18.0% 15.0% Library Independents 18% 19% 10.0% 8.3% 6.8% International 16% 3.3% Internet 2.0% Media 39% 2% 2006 2007 2008 2009 2010 High St 6% Bertrams mix -6.0% -4.6% Bertrams LFL sales Bertrams outperforms market Strong Internet and international sales Library contracts -
Slide 18: Digital Media
Digital Media Preliminary Results 21 October 2010 18
Slide 19: Digital media
Digital media Consumer resistance to paywalls Precedent of free access BBC website – 325m visits per annum Low subscriber and advertising revenues Publisher economics High fixed cost investment Print subsidising digital Habitual purchases Purchasing patterns Demographics Format and content Format ke
Slide 20: Digital media
Digital media “..consumers feel they have already “…our website does not threaten our paid for general web access to content paper – it protects it…” with their broadband connection…” Martin Clarke – Daily Mail Sly Bailey – Mirror “… some content simply does not “…e-readers will be the novelty of tr
Slide 21: Progress 2010
Progress 2010 Preliminary Results 21 October 2010 21
Slide 22: Operational excellence
Operational excellence LINCOLN £50k saved through WIGAN overtime costs £90k saved through integration Flawless implementation Single system and data COVENTRY £75k saved in waste Process uniformity WEST LONDON £150k saved through Driving efficiencies stock management Improving service BRIGHTON £80k s
Slide 23: Operational excellence
Operational excellence Network WEST MIDLANDS NOTTINGHAM £235k saving £400k saving Closure of Kidderminster and Consolidation of depots reduction of Shrewsbury 18 network changes Phase 1 now complete Driving efficiencies SOUTHAMPTON Improving service £130k saving Investment in process PLYMOUTH Transf
Slide 24: Regional Press
Regional Press NEWCASTLE £5.3m Contract gains BOLTON £2.0m £25m annualised sales gains Expanded offer OXFORD SOUTH WALES £4.5m Recent gains of £6m £6.1m Largest distributor of Regional Press BRISTOL AND GLOUCESTER BIRMINGHAM £6.0m £5.7m Preliminary Results 21 October 2010 24
Slide 25: Bertrams
Bertrams Strong sales performance New contracts: Mail, HMV, WH Smith Library Services move to Norwich Improved service Operational and cultural fit Preliminary Results 21 October 2010 25
Slide 26: Growing revenue and profits
Growing revenue and profits Preliminary Results 21 October 2010 26
Slide 27: Growth strategy: Growing revenues and profits
Growth strategy Growing revenues and profits Operational efficiency Base business revenues Acquisitions Network refinement Bertrams Competencies and assets Process efficiencies Regional Press Supply chain solutions Central costs Leverage customers and Specialist distribution infrastructure Prelimina
Slide 28: Operational efficiencies
Operational efficiencies Central costs Process efficiencies £20m Network changes 2011 to 2013 Preliminary Results 21 October 2010 28
Slide 29: Base business revenues
Base business revenues Internet and international sales Bertrams Extended range of titles Fulfilment and publisher services Economic pressure on publishers Regional Press More comprehensive service Significant opportunity 30,000 customers Leverage the network New products and new customers Assessing
Slide 30: Competencies and assets
Competencies and assets Excellence in delivery Provision of time critical bespoke B2B delivery management Stock management and High volume, fast moving, multiple product stock pick/pack systems Continuous process, cost, Design, improve and implement system solutions to and service improvement improv
Slide 31: Supply chain solutions
Supply chain solutions Road haulage, Regional 3rd party Specialist Inbound port B2C fulfilment sea container distribution logistics distribution Specialist distribution Consistent consumer base Breaking bulk Bespoke fulfilment Volume variance Sector specialism Preliminary Results 21 October 2010 31
Slide 32: Specialist distribution
Specialist distribution Business to business specialist distribution Industry Food, beverage Household machinery and tobacco goods parts £79bn £58bn £44bn £79bn £58bn £44bn Medical and IT and telecoms Automotive parts pharmaceuticals £39bn £30bn £10bn Wide range of growth opportunities Less commodit
Slide 33: Progress and next steps
Progress and next steps Successful first acquisition Chief Commercial Officer, Jon Bunting Progress to date Focused internal team Consultancy support Financial headroom Review considered list of segments Next steps Identify short list of prospects Develop pipeline of targets Preliminary Results 21 O
Slide 34: Summary and Outlook
Summary and Outlook Profit before tax up 15% Dividend up 9% Summary £5m cost savings Bertrams performing well Integration of Dawson News Markets to remain tough Outlook Clear plans for costs and revenues Expansion into specialist distribution Current performance in line with expectations Preliminary
Slide 35: Smiths News PLC Preliminary Results 2010
Smiths News PLC Preliminary Results 2010 Mark Cashmore, Group Chief Executive 21 October 2010 Preliminary Results 21 October 2010 35