Smiths News Plc · LSE:SNWS
Smiths News — Connect Group — FY2016 Earnings Presentation
30 slides from Smiths News's earnings presentation, Oct 18, 2016
Slide 1: Preliminary Results
Preliminary Results 18 October 2016
Slide 2: Highlights
Highlights Mark Cashmore Group Chief Executive
Slide 3: Highlights
Highlights Solid Group performance in line with expectations ► Total revenue £1,907m +1.7% ► Adjusted PBT £60.7m +7.4% ► Adjusted EPS 19.8p +0.5% ► Free cash flow £49.6m +24.6% ► DPS 9.5p +3.3% Good progress on strategic and operational priorities ► Continued strong performance of Tuffnells ► Growin
Slide 4: Group Financial Update
Group Financial Update David Bauernfeind Chief Financial Officer
Slide 5: Group performance
Group performance £m Aug 2016 Aug 2015 Change % News & Media 42.4 43.7 (3.0)% Parcel Freight 15.0 9.7* - Education & Care 7.8 7.8 (0.1)% Books 2.5 2.6 (3.8)% Adjusted operating profit 67.7 63.8 6.2% Net finance charges (7.0) (7.3) 3.7% Adjusted PBT 60.7 56.5 7.4% Tax (12.4) (11.1) (12.6%) Adjusted P
Slide 6: Exceptional items
Exceptional items £m Aug 2016 Aug 2015 Network and reorganisation costs (4.4) (4.5) Acquisition and disposal costs (3.8) (15.1) Pension credit 1.1 - Amortisation of acquired intangibles (10.2) (7.9) Legal provision – potential health and safety (1.5) - offences Total before taxation (18.8) (27.5) Ta
Slide 7: Free cash flow
Free cash flow £m Aug 2016 Aug 2015 Operating profit 67.7 63.8 Depreciation and amortisation 13.4 11.6 EBITDA 81.1 75.4 Working capital - (8.0) Capital expenditure (13.9) (9.2) Net interest and fees (4.9) (5.8) Taxation (8.5) (8.7) Pension funding (5.3) (5.4) Other 1.1 1.5 Free cash flow 49.6 39.8 F
Slide 8: Capital expenditure – cash outlay
Capital expenditure – cash outlay £m Aug 2016 Aug 2015 Capital expenditure Maintenance investment (9.6) (6.2) Growth investment (4.3) (3.0) Total capital expenditure (13.9) (9.2) • 2016 higher maintenance investment due to need to improve Parcel Freight infrastructure • £25m to support planned growt
Slide 9: Net debt
Net debt £m Aug 2016 August 2015 Opening net debt (153.4) (93.0) Free cash flow 49.6 39.8 Dividend (22.7) (21.4) Exceptional items (10.8) (8.2) Net acquisition financing - (67.0) Finance lease payments & other (4.4) (3.6) Closing net debt (141.7) (153.4) Net debt : EBITDA 1.7x 1.9x • Committed Bank
Slide 10: Future assumptions
Future assumptions Pass My Parcel £2.5m net cost in 2017 Employee related costs £2m gross impact in 2017, rising to £5m over the medium term before mitigating actions Capital investment £25m to support growth initiatives in 2017 Reducing in 2018 and beyond Cash and Net Debt Circa £40m FCF with flat
Slide 11: Business update
Business update Connect a
Slide 12: Connect News & Media
Connect News & Media ► Smiths News 2016 YE ► Sales in line with medium term forecast Total Revenue £1,471.4m -2.2% ► Contract wins secure revenues and territories Total Adj. Op Profit £42.4m -3.0% News Revenue £1,443.8m -2.4% ► £5m efficiency target achieved in full News Profit £40.0m -3.4% ► £10m c
Slide 13: Pass My Parcel
Pass My Parcel Progress 2016 Market continues to grow strongly ▶ 500k parcels delivered ► Click & Collect market forecast to grow at 16%p.a. in FY2016 ► Speed and convenience are key requirements ▶ 92% customers intend to use PMP again Operational capability proven ▶ 60% + Net Promotor Score ► Excel
Slide 14: Connect Parcel Freight
Connect Parcel Freight 2016 YE ► Continued revenue and profit growth Total Revenue £174.4m 7.3%* ► Investment to modernise the network and fleet LFL Revenue 7.3% Adj. Op Profit ► Increasing our share in a growing market £15.0m 4.9% Key Statistics ► Further £15m investment planned in FY17 ▶ National
Slide 15: Connect Education & Care
Connect Education & Care 2016 YE ► Good performance in a difficult market Total Revenue £64.8m -1.6% ► Increased teacher costs affecting school budgets LFL Revenue -2.4% Adj. Op Profit ► Early Years – 12% CAGR since acquisition £7.8m -0.1% Segmented LFLs ► Ecommerce strategy on track Early Years +6.
Slide 16: Connect Books
Connect Books 2016 YE Highlights Total Revenue ► Challenging year due to tough library markets and cost £195.9mm +3.1% headwinds LFL Revenue +7.4% Adj. Op Profit £2.5m -3.8% ► Strong growth in UK wholesale sales LFLs ► Wordery continues impressive growth Wholesale +8.9% Wordery +26.7% ► UK library m
Slide 17: Group Strategy
Group Strategy Core strength in specialist distribution Leveraging the portfolio to achieve sustainable profit growth and strong cash generation Managing the balance of dividend, deleverage and investment for further growth, including potential future acquisitions Profit underpinned by relatively pr
Slide 18: Summary & outlook
Summary & outlook Summary ► A solid financial performance ► Challenging conditions in some of our markets ► Good progress on key operational priorities ► Leveraging the Group to drive sustainable profit opportunities Outlook ► Expect robust financial performance in 2017 despite challenging markets a
Slide 19: Appendices
Appendices
Slide 20: Reported Sales Performance
Reported Sales Performance FY2016 FY2015 FY2014 July Jan July July Jan FY H1 FY H1 Jan IMS FY H1 IMS IMS IMS IMS IMS News Distribution News (3.2%) (3.4%) (4.0%) (4.2%) (3.4%) (3.4%) (3.4%) (2.5%) (0.7%) (0.4%) (0.5%) - Magazines (4.3%) (4.4%) (3.4%) (3.2%) (4.6%) (4.7%) (5.1%) (5.2%) (6.4%) (6.8%) (
Slide 21: Financial KPIs
Financial KPIs £m FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 Revenue 1,906.5 1,875.1 1,808.5 1,806.9 1,803.9 Adjusted profit before tax 60.7 56.5 50.0 49.9 47.5 Adjusted profit after tax 48.3 45.4 40.7 38.4 36.1 Adjusted EPS 19.8 19.7p 19.6p 19.0p 17.9p Free cash flow 49.6 39.8 37.2 32.6 27.2 DPS 9.5p
Slide 22: Income Statement
Income Statement £m FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 Revenue 1,906.5 1,875.1 1,808.5 1,806.9 1,803.9 Adjusted Operating profit 67.7 63.8 55.5 56.4 51.2 Non recurring items (18.8) (27.5) (6.9) (10.8) (10.9) Statutory Operating profit 48.9 36.3 48.6 45.6 40.3 Net finance charges (7.0) (7.3) (5.
Slide 23: Balance Sheet
Balance Sheet £m FY 2016 FY 2015 FY 2014 FY 2013 FY 2012* Intangible assets 164.8 174.8 65.7 68.2 67.1 Property, plant & equipment 50.3 44.6 29.0 26.6 24.5 Other non current assets 12.1 12.4 12.4 12.8 14.5 Total non current assets 227.2 231.8 107.1 107.6 106.1 Cash 9.1 10.9 20.4 10.1 5.1 Other curre
Slide 24: Cash flow
Cash flow £m FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 Operating profit 67.7 63.8 55.5 56.4 51.2 Depreciation and amortisation 13.4 11.6 8.0 7.6 6.9 EBITDA 81.1 75.4 63.5 64.1 58.1 Working capital - (8.0) 1.2 (5.0) (9.1) Capital expenditure (13.9) (9.2) (10.3) (7.9) (5.1) Net interest (4.9) (5.8) (6.1
Slide 25: Net debt
Net debt £m FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 Opening net debt (153.4) (93.0) (98.5) (100.5) (63.3) Free cash flow 49.6 39.8 37.2 32.6 27.2 Dividend (22.7) (21.4) (17.7) (16.0) (14.9) Non recurring items (10.8) (8.2) (4.4) (5.9) (10.3) Net acquisition financing - (67.0) (0.3) (5.1) (38.2) Othe
Slide 26: Exceptional items
Exceptional items £m FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 Integration costs - - - (1.1) (2.7) Network and re-organisation costs (4.4) (4.5) (3.0) (3.3) (2.0) Acquisition and disposal costs (3.8) (15.1) (0.9) (3.7) (4.6) Pension credit 1.1 - - - - Property provisions - (0.1) 0.5 - - Amortisation o
Slide 27: Taxation
Taxation £m FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 Current tax 13.1 12.4 12.3 15.1 13.6 Adjustment in respect of prior year UK (0.8) (1.1) (2.4) (2.6) (1.6) corporation tax Total current tax charge 12.3 11.3 9.9 12.5 12.0 Deferred tax – current year (0.3) (0.2) (0.4) (0.7) (0.6) Deferred tax – prio
Slide 28: Lease commitments
Lease commitments £m FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 Land and buildings within one year 10.7 10.2 7.7 8.1 10.0 29.8 30.3 25.6 26.2 28.9 in second to fifth year 20.7 23.3 24.3 26.7 29.6 beyond fifth year Total 61.2 63.8 57.6 61.0 68.5 Equipment and vehicles within one year 14.1 12.4 2.1 1.6 1
Slide 29: Defined benefit schemes
Defined benefit schemes FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 Scheme assets 671.9 563.3 522.6 469.6 433.1 Scheme liabilities (531.5) (432.0) (450.6) (419.2) (395.3) Net surplus / (loss) 140.4 131.3 72.0 50.4 37.8 Amounts not recognised due to asset limit (151.3) (135.6) (75.7) (53.2) (40.3) Additi
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