Wh Smith Plc · LSE:SMWH
Wh Smith — H1 2019 Earnings Presentation
48 slides from Wh Smith's earnings presentation, Apr 11, 2019
Slide 1: 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
Slide 2: WH Smith PLC Interim Results 2019
WH Smith PLC Interim Results 2019 11 April 2019
Slide 3: Agenda
WH Smith PLC ▪ Introduction Stephen Clarke ▪ Financial review Robert Moorhead ▪ Business review Stephen Clarke Carl Cowling ▪ Questions Interim Results 2019
Slide 4: Distinct strategies for each business continue to deliver
Distinct strategies for each business continue to deliver ▪ Strong trading performance across the Group ➢ Total Group revenue up 8%; like-for-like revenue up 1% ▪ Strong performance in Travel ➢ Total revenue up 18% (up 8% excluding InMotion); LFL revenue up 3% ▪ Completed acquisition of InMotion on
Slide 5: Robert Moorhead, Chief Financial Officer
Robert Moorhead Chief Financial Officer
Slide 6: Group financial summary
Group financial summary 6 mths to 6 mths to Feb 2019 Feb 2018 Change £m £m % Revenue 695 643 8% Group profit from trading operations1 92 91 1% Headline Group profit before tax2 81 82 (1)% Headline EPS2, 3 60.6p 60.9p -% Free cash flow (£m) 27 39 (31)% Total dividend per share 17.2p 16.0p 8% 1 Stated
Slide 7: Revenue analysis
Revenue analysis H1 2019 H1 2018 Change Total Revenue £m £m % Travel 364 308 18% High Street 331 335 (1)% Total revenue 695 643 8% 1 International 104 59 76% H1 2019 H1 2018 LFL Revenue % % Travel 3% 3% High Street (2)% (4)% 1% (1)% 1 Included in Travel. 2019 includes £30m from InMotion. Interim Res
Slide 8: Group LFL revenue performance by category
Group LFL revenue performance by category H1 2019 H1 2018 % % Stationery 2% 3% News & Impulse 2% -% Books (5)% (7)% 1% (1)% Interim Results 2019
Slide 9: Group profit before tax
Group profit before tax 6 mths to 6 mths to Feb 2019 Feb 2018 Change £m £m % Travel trading profit 1,2 44 41 7% High Street 1 48 50 (4)% Group profit from trading operations 1 92 91 1% Unallocated central costs (9) (8) Group operating profit 3 83 83 -% Net finance costs (2) (1) Headline Group profit
Slide 10: Non-underlying items
Non-underlying items Non-underlying items in the half relate to: ▪ Acquisition of InMotion ▪ High Street review completed. All costs now taken 6 months to end Feb 2019 Income Cash Statement Impact £m £m Acquisition of InMotion – Transaction costs 6 6 – Integration costs 2 - – Amortisation 1 - 9 6 Co
Slide 11: Profit from trading operations
Profit from trading operations 6 mths to 6 mths to Feb 2019 1 Feb 2018 Growth £m £m % Revenue 695 643 8% Gross contribution 415 383 Costs (323) (292) Costs – occupation costs (140) (128) – store costs (119) (108) – other costs (64) (56) Group profit from trading operations 2 92 91 1% Gross margin 59
Slide 12: Group free cash flow
Group free cash flow 6 mths to 6 mths to Feb 2019 Feb 2018 £m £m Group operating profit 1 83 83 Depreciation, amortisation and impairment 24 22 Non cash items 3 3 Capital expenditure (31) (26) Working capital (38) (27) Employers payroll tax on exercised share awards (1) (2) Net tax paid (10) (13) Ne
Slide 13: Group net debt
Group net debt 6 mths to 6 mths to Feb 2019 Feb 2018 £m £m Free cash flow 27 39 Dividends paid (41) (37) Pension funding (1) (2) Net purchase of own shares for employee share schemes (5) (5) Other 1 (6) (6) Purchase of own shares for cancellation (25) (9) (51) (20) Non-underlying items (9) - Acquisi
Slide 14: Disciplined approach to cash and capital allocation remains unchanged
Disciplined approach to cash and capital allocation remains unchanged CAPEX ACQUISITIONS Appropriate investment Over £1.0bn In line with value for growth with returned since creation strategy attractive returns 2007 1 £60m for this year Efficient balance sheet DIVIDEND Operate with net SHARE BUYBACK
Slide 15: Return of cash to shareholders
Return of cash to shareholders ▪ Over £1.0bn returned 5,6 ▪ Interim dividend up 8% c.1095 ▪ Supplemented by buybacks and a special dividend 96 93 91 84 84 81 80 503 79 47 41 Share Buyback⁴ 54 26 61 50 Final Dividend¹ 41 55 50 Interim Dividend¹ 35 41 37 34 31 28 23 26 23 20 19 17 15 15 16 17 182 12 1
Slide 16: Group key indicators
Group key indicators 6 mths to 6 mths to Change Feb 2019 Feb 2018 % Headline Group profit before tax (£m) 1 81 82 (1)% Headline EPS1, 2 60.6p 60.9p -% Fixed charges cover 1.7x 1.8x Total dividend per share 17.2p 16.0p 8% 1 Headline Group profit before tax is before non-underlying items of £16m for 2
Slide 17: Stephen Clarke, Group Chief Executive
Stephen Clarke Group Chief Executive
Slide 18: WH Smith Travel
WH Smith Travel
Slide 19: Travel – strategy
Travel – strategy ▪ Drive like-for-like revenue in existing stores through improved execution and service ➢ A forensic store by store focus on space and category management ➢ Develop new formats ➢ Invest in store environments and layouts ▪ Win new space in the UK and retain existing space ▪ Win new
Slide 20: Continue to drive good growth
Continue to drive good growth ▪ Total revenue up 18% (up 8% excluding InMotion); LFL revenue up 3% ➢ Now into sixth year in a row of good LFL sales growth ▪ Strong profit performance - up 7% to £44m ▪ Continue to invest in future growth in UK ➢ New format for large airport stores ➢ Range development
Slide 21: Sales growth in all key channels
Sales growth in all key channels Channel Total revenue LFL revenue* UK Air 5% 4% UK Hospital 11% 4% UK Rail - % 1% International (inc InMotion) 76% 4% ▪ Air performance ahead of pax ▪ Continued investment in Hospital channel ▪ Rail impacted by network upgrades and softer passenger trends * Constant
Slide 22: Investment in formats – Large store format in airports
Investment in formats – Large store format in airports ▪ In airports, larger stores deliver significantly higher ATV and sales per passenger ▪ Improving circulation and ease of shopping drives customer conversion ▪ Large store formats now open in London Gatwick North and South Terminals, London Heat
Slide 23: WH Smith pharmacy format
WH Smith pharmacy format ▪ Working with Well Pharmacy for past 12 months to develop a new airport format ▪ Small scale trial in Southampton and Southend airports ▪ Discussions with Gatwick Airport for a large store airside format ▪ New 5,000 sq ft store opened in Gatwick North on 1 April 2019 ▪ 2,50
Slide 24: WH Smith pharmacy format – Gatwick Airport
WH Smith pharmacy format – Gatwick Airport Gatwick Airport, North Terminal Interim Results 2019
Slide 25: Investment in formats – Hospitals
Investment in formats – Hospitals ▪ Hospital channel is an important business with good growth opportunities ▪ 133 units now open in hospitals; scope to operate c.300 units using one of our store formats ▪ Hospital channel isn’t subject to cyclical nature of other travel formats ▪ Continue to grow t
Slide 26: Investment in formats – Hospitals
Investment in formats – Hospitals ▪ Positive results from M&S implant stores; on track to have around 20 open in the current financial year ▪ Entered into new partnership with Costa Coffee Guys Hospital, London Costa, Blackburn Hospital Interim Results 2019
Slide 27: Investment in formats – Rail
Investment in formats – Rail ▪ Continue to invest in Rail ▪ Developed further our Tech Express format ▪ Expect to open two new rail units in the second half, including a new Tech Express at Euston Station ▪ Positive feedback from landlords and customers; scope for more units as space becomes availab
Slide 28: Looking ahead: UK growth
Looking ahead: UK growth ▪ Airports continue to forecast passenger growth ▪ Continue to open new space in all channels ▪ Invest in existing stores to drive sales per passenger ▪ Expect to open around 20 stores this financial year across all channels ▪ Active space management Interim Results 2019
Slide 29: WH Smith International
WH Smith International
Slide 30: Completed acquisition of InMotion
Completed acquisition of InMotion ▪ InMotion – market-leading, pure play digital accessories travel retailer in North America ▪ InMotion provides a scalable platform to launch the WH Smith airport format into the US, the world’s largest travel retail market for news, books and convenience products ▪
Slide 31: Integration of InMotion on track
Integration of InMotion on track ▪ Integration into the WH Smith Group is progressing well ▪ Well positioned for future growth ▪ Tender pipeline looks encouraging; won a further 4 new units in the US ▪ Met with a number of major US landlords to re-establish direct relationships with WH Smith ▪ Won t
Slide 32: International business is profitable and growing fast
International business is profitable and growing fast ▪ Sales per passenger continue to be strong 6 months 6 months to YoY LFLs to 28 Feb 28 Feb 2019 2018 Sales (£m) 1041 59 76% 4%2 Profit (£m) 61 4 50% ▪ 21 new units won in the half, including a further 5 airport units in Australia and 4 InMotion u
Slide 33: New store opening in Sydney International Airport
New store opening in Sydney International Airport Interim Results 2019
Slide 34: Now present in 99 airports and 30 countries outside of the UK
Now present in 99 airports and 30 countries outside of the UK Location Directly Joint Franchise Total run Venture Europe 43 5 31 79 North America 115 - - 115 South America - 11 - 11 Middle East 9 7 38 54 India - - 56 56 SE Asia 10 13 33 56 Australia 54 - - 54 Total 232 36 158 425 Interim Results 201
Slide 35: Further growth opportunities overseas
Further growth opportunities overseas ▪ International Travel is a large, growing market ➢ WHSmith still a small player with good growth potential ➢ Short-term investment for long-term future growth ▪ Our broad customer offer and sales per pax are attractive to overseas landlords ▪ Good success in a
Slide 36: Carl Cowling, Managing Director, High Street
Carl Cowling Managing Director, High Street
Slide 37: WH Smith High Street
WH Smith High Street
Slide 38: High Street – strategy
High Street – strategy ▪ Strategy focused on creating sustainable profits ▪ Growing our stationery business is key to delivering on the three elements of the strategy: ➢ space management ➢ margin growth ➢ lowering our cost to serve ▪ Create value from our assets including third party partnerships th
Slide 39: High Street continues to perform well
High Street continues to perform well ▪ Good performance from High Street business ▪ Profit of £48m in line with expectations ▪ Total revenue down 1% with like-for-like revenue down 2% ▪ Margin up 70 bps ▪ Strong performance from Stationery and seasonal categories over the peak Christmas trading per
Slide 40: Continued margin optimisation
Continued margin optimisation ▪ Margin growth of 70 bps in the year ▪ Space management continues to help drive the mix: ➢ Five straight years of growth in Stationery category ➢ Plenty of scope to increase Stationery space further ➢ Further opportunities to reconfigure front of store space ▪ Further
Slide 41: Continued focus on cost efficiencies
Continued focus on cost efficiencies ▪ Cost efficiencies key to our strategy ➢ Sustainable cost saving initiatives and variable costs to sales ▪ £4m cost savings delivered in the half; on track to deliver a further £5m, making a total of £9m for the year ▪ Rent savings at lease renewal continue to b
Slide 42: Building on areas of strength in Books
Building on areas of strength in Books ▪ Books market remains fairly stable ▪ No new, big publishing trends over Christmas 2018 ▪ Good performances from Becoming and Fing ▪ Continue to improve customer offer and books operating model ▪ Focused on making WH Smith the home for children’s and education
Slide 43: Driving Stationery growth across the business
Driving Stationery growth across the business ▪ Stationery now accounts for half High Street sales and c. 60% of contribution ▪ Our most attractive and highest growth category ▪ Continue to invest to drive growth in Stationery across our stores, Post Offices and digital channels ▪ Strong performance
Slide 44: Driving Stationery growth – digital channels
Driving Stationery growth – digital channels ▪ funkypigeon.com ➢ Continued good performance from Funky Pigeon ➢ Increased traffic volumes; mobile continues to be the main channel ➢ Strong performance over Christmas and Valentine’s Day ▪ whsmith.co.uk ➢ Continue to see good growth from Stationery ran
Slide 45: Partnerships – Post Office Ltd
Partnerships – Post Office Ltd ▪ Strong partnership with Post Office Limited ▪ Drives footfall and provides financial benefits from commercial agreement ▪ Opened a further 9 Post Offices in the first half and converted 33 branches, taking the total number of Post Offices open within our High Street
Slide 46: Stephen Clarke, Group Chief Executive
Stephen Clarke Group Chief Executive
Slide 47: Continue to deliver shareholder value
Continue to deliver shareholder value ▪ Strong growth in Travel: further opportunities in UK and International ▪ Good profit performance from High Street, particularly given challenging UK trading environment ▪ Interim dividend up 8% ▪ Good cash generation in both businesses ▪ Disciplined use of cas
Slide 48: WH Smith PLC Interim Results 2019
WH Smith PLC Interim Results 2019 11 April 2019