Wh Smith Plc · LSE:SMWH

Wh Smith — FY2011 Earnings Presentation

42 slides from Wh Smith's earnings presentation, Oct 13, 2011

1. Slide 1: Preliminary Results 2011

   WH Smith PLC Preliminary Results 2011 13 October 2011 Preliminary Results 2011

2. 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

3. Slide 3: Kate Swann, Group Chief Executive

   Kate Swann Group Chief Executive Preliminary Results 2011

4. Slide 4: Introduction, financial review, business review, summary

   WH Smith PLC  Introduction Kate Swann  Financial review Robert Moorhead  Business review Kate Swann Stephen Clarke  Summary Kate Swann Preliminary Results 2011

5. Slide 5: Robert Moorhead, Group Finance Director

   Robert Moorhead Group Finance Director Preliminary Results 2011

6. Slide 6: Group financial summary

   Group financial summary Year to Year to Aug 2011 Aug 2010 Change £m £m % Revenue 1,273 1,312 (3)% Profit from trading operations1 109 104 5% Profit before tax 93 89 4% EPS2 51.4p 45.7p 12% Free cash flow 96 89 8% Total dividend per share 22.5p 19.4p 16% 1 Stated after directly attributable share-bas

7. Slide 7: Group profit before tax

   Group profit before tax Year to Year to Aug 2011 Aug 2010 Growth £m £m % Travel operating profit1 57 53 8% High Street operating profit1 52 51 2% Profit from trading operations 109 104 5% Unallocated central costs (16) (15) Profit before finance charges and tax 93 89 4% Net finance cost (1) - Pensio

8. Slide 8: Revenue analysis

   Revenue analysis Year to Year to LFL Aug 2011 Aug 2010 Change Change Revenue £m £m % % Travel 455 452 1% (3)% High Street 818 860 (5)% (6)% Total revenue 1,273 1,312 (3)% (5)% Year to H1 H2 Aug 2011 % % % LFL sales by category Stationery (2)% (3)% (2)% Books (3)% (5)% (4)% News & Impulse (4)% (2)% (

9. Slide 9: Profit from trading operations

   Profit from trading operations Year to Year to Aug 2011 Aug 2010 Change £m £m % Revenue 1,273 1,312 (3)% Gross contribution 662 662 -% Costs (553) (558) Costs – occupation costs (239) (241) – store costs (199) (202) – other costs (115) (115) Profit from trading operations1 109 104 5% Gross margin 52

10. Slide 10: Group free cash flow

    Group free cash flow Year to Year to Aug 2011 Aug 2010 £m £m Operating profit 93 89 Depreciation and amortisation 38 39 Working capital 3 3 Net capital expenditure (36) (29) Net tax paid (10) (20) Provisions - (2) Net interest earned - 1 Non cash items 8 8 Free cash flow 96 89 Preliminary Results 20

11. Slide 11: Group net cash movement

    Group net cash movement Year to Year to Aug 2011 Aug 2010 £m £m Free cash flow 96 89 Dividends paid (29) (26) Pension deficit and retirement benefit funding (14) (13) Net purchase of own shares for employee share schemes (12) (4) Purchase of own shares for cancellation (55) (35) Acquisition of busin

12. Slide 12: Group balance sheet

    Group balance sheet 2011 2010 £m £m Goodwill & other intangible assets 56 56 Property, plant & equipment 151 158 Working capital (47) (49) Corporation tax (37) (30) Other assets 1 4 Provisions (9) (8) Operating assets employed 115 131 Net funds 41 56 Total net assets (excluding pensions) 156 187 Pen

13. Slide 13: Return of cash to shareholders

    Return of cash to shareholders • Continue to invest in the business • Consistent record of growing dividends • Supplemented by buybacks and a special dividend Ordinary Special Financial Dividend 1 Buyback Dividend Total Year £m £m £m £m 2012 20 3 50 2 70 2011 29 55 84 2010 26 35 61 2009 23 23 2008 2

14. Slide 14: Group key indicators

    Group key indicators Year to Year to Aug 2011 Aug 2010 Growth £m £m % EPS 1 51.4p 45.7p 12% Fixed charges cover 1.5x 1.5x Free cash flow 96 89 ROCE (after capitalised operating leases) 18% 18% Total dividend per share 22.5p 19.4p 16% 1 Diluted weighted average no. of shares 2011: 142m; 2010: 151m Pr

15. Slide 15: Kate Swann, Group Chief Executive

    Kate Swann Group Chief Executive Preliminary Results 2011

16. Slide 16: Group – overview

    Group – overview  Another good profit performance from the Group  Good operating performance continues in both divisions  Both Travel and High Street continue to make progress with the implementation of their distinct strategies  Strong cash generation - optimal use of cash continues to be a foc

17. Slide 17: Travel – overview

    Travel – overview  Profit up 8% to £57m, demonstrating strength of model  Total sales up 1%, LFL sales down 3%  Gross margin improvement of c.140 bps YoY  Costs well controlled  Well-positioned for further growth in the UK  as the economy improves and passenger numbers return to growth  35 un

18. Slide 18: Travel – Air

    Travel – Air  In Air LFL sales down 3%  Passenger numbers continue to be soft, with continued variability between airports and passenger types  Medium-term forecasts show return to growth; we are well positioned for the recovery  Margin and cost management successful  Continue to invest in serv

19. Slide 19: Travel – Self-Service Tills

    Travel – Self-Service Tills Self-Service Tills Staffed Tills Preliminary Results 2011

20. Slide 20: Travel – Rail and Motorway

    Travel – Rail and Motorway Rail  In Rail, LFL sales down 4%  LFL London mainline rail down 3%, regional rail down 6%  13 major refits complete  7 units opened during the year; further 5 to open in 2011/12 Motorway  Performance in line with expectations  119 units trading, all bar 4 units opera

21. Slide 21: Travel – Hospitals and Workplace

    Travel – Hospitals and Workplace Hospitals  Strong presence in growing and under-developed hospital market with scope for further expansion  In Hospital LFL sales flat  9 new units opened in the year  111 units now open in this channel  Anticipate opening c. 10 new units per annum Workplace  8

22. Slide 22: Travel – Funky Pigeon

    Travel – Funky Pigeon  4 units opened late last year  Initial performance encouraging  Further 5 new units planned for 2011/12 Preliminary Results 2011

23. Slide 23: Travel – International

    Travel – International  To date we have opened 32 stores internationally  Performance continues to be good  Further 15 stores won and yet to open giving a total of 47 stores  Announcing a further 13 new units today  2 units in Dublin  2 units in Dubai  2 units in Stockholm  7 units in Hydera

24. Slide 24: Travel – International

    Travel – International  Continue to utilise 3 operating models: Operating model No of units % Direct lease 16 27% Joint venture 5 8% Franchise 39 65% Total 60 100%  Stores by location: Location Number of units Australia 7 India 21 Middle East 15 Denmark 5 Sweden 3 France 2 Ireland 7  Stores now o

25. Slide 25: Travel – International

    Travel – International International Business Division Project New Business Commercial Implementation Development Optimisation • Store Planning • New Business • Franchise Management • Store Openings • Organised by area • Business Management Preliminary Results 2011

26. Slide 26: Travel – Summary

    Travel – Summary  Another good year despite economic climate  Well positioned to grow in the UK  Across 5 channels and 3 formats  Well positioned to grow internationally  Channel, format and region development progressing well  Strong track record of profit growth, cash generation and risk man

27. Slide 27: High Street

    High Street Preliminary Results 2011

28. Slide 28: High Street – overview

    High Street – overview  Another resilient profit performance  LFL sales down 6%, down 3% excluding Entertainment  Encouraging market shares  Improvement in gross margin; up by c. 160 bps  Cost savings of £14m delivered, £3m ahead of plan  Continued strong cash generation  Well positioned for

29. Slide 29: Stephen Clarke, Managing Director, High Street

    Stephen Clarke Managing Director, High Street Preliminary Results 2011

30. Slide 30: Category performance - Stationery

    Category performance - Stationery  Strategy to build on market-leading position in stationery unchanged  Strong shares in both general and seasonal stationery  Good stock and markdown management  Further progress with new ranges in stationery markets  Gift offer for Christmas includes further n

31. Slide 31: Category performance - Stationery

    Category performance - Stationery Funkypigeon.com  Encouraging performance, supported by strong marketing activity  Created good brand awareness through TV advertising  New smartphone ‘app’ launched in July Preliminary Results 2011

32. Slide 32: Category performance - Books

    Category performance - Books  Market performance continues to vary by sub-category  Non-Fiction hardback performance improved YoY  Fiction and Kids annualised strong publishing from 2009/10  Maintained good share performance vs general retail market  Strong performance in Non-Fiction Christmas

33. Slide 33: WHSmith and eBooks

    WHSmith and eBooks  eBooks seeing growth but remains small percentage of total books  Well established position in academic / text books  Minimal impact on Non-Fiction and Kid’s books  Growth focussed in Fiction  WHSmith core market is less impacted by eBooks  Lighter book buyers  Strongest s

34. Slide 34: WHSmith and Kobo

    WHSmith and Kobo  Kobo: No 1 eBook brand in Canada and Australia  Kobo: 5 million customers worldwide  Kobo partnership with Indigo, the leading bookseller in Canada  WHSmith partnership with Kobo for UK and Ireland  High quality eReading devices combined with high quality eBook store and custo

35. Slide 35: WHSmith and Kobo

    WHSmith and Kobo Preliminary Results 2011

36. Slide 36: Category performance – News & Impulse

    Category performance – News & Impulse  Magazine market continues to be challenging  Growing market share in news and magazines  Resilient performance in newspapers driven by successful promotions  Further development of strongly-growing bookazine category  Continued development of impulse range

37. Slide 37: Category performance - Entertainment

    Category performance - Entertainment  LFL sales down in line with our strategy  Progress with space rebalancing, more planned for 2011/12  Extend ranges within core categories  Additional services  Improve store efficiency by improving layouts  Increase space for end-of-season ranges  New sto

38. Slide 38: Margin optimisation

    Margin optimisation  Margin growth of c.160 bps, delivered through continued focus on category mix management  Additional margin growth from:  Better buying terms and improved sourcing, including further Far East office utilisation  Improved mark-down and promotional management Preliminary Resul

39. Slide 39: Cost efficiency improvements

    Cost efficiency improvements  Continued successful and focussed cost control  Delivered savings of £14m in 2011, £3m ahead of plan  Further savings of £11m identified  Self-scan checkouts in selected stores  New energy efficiency plan 2011 2012 2013 2014 Total Actual Forecast Forecast Forecast

40. Slide 40: Kate Swann, Group Chief Executive

    Kate Swann Group Chief Executive Preliminary Results 2011

41. Slide 41: Summary

    Summary  Good profit performance from the Group  Record profit performance in Travel with further opportunities for growth in both the UK and internationally  High Street continues to deliver profit growth with strong cash generation  Highly cash generative Group  Full year dividend up 16% YoY

42. Slide 42: WH Smith PLC

    WH Smith PLC Preliminary Results 2011 13 October 2011 Preliminary Results 2011

WH Smith — FY2011 Earnings Presentation on 6ix