Smiths News PLC · LSE:SNWS
Smiths News — FY2011 Earnings Presentation
44 slides from Smiths News's earnings presentation, Oct 20, 2011
Slide 1: Preliminary Results
Preliminary Results 20 October 2011
Slide 2: Strong performance in 2011
Strong performance in 2011 Delivering strong financial performance • PBT of £38.6m, up 10% despite economic conditions • Generated free cash flow of £22.5m Strength in our core business • £22m of efficiencies achieved in 2011 • Smiths News - 15% growth in operating profit • Bertrams - outperforming
Slide 3: Delivering strong financial performance
Delivering strong financial performance
Slide 4: Cautionary statement
Cautionary statement Cautionary Statement This document contains certain forward-looking statements with respect to Smiths News PLC’s financial condition, its results of operations and businesses, strategy, plans, objectives and performance. Words such as ‘anticipates’, ‘expects’, ‘intends’, ‘plans’
Slide 5: Group PBT up over 10%
Group PBT up over 10% £m FY 2011 FY 2010 Change Smiths News operating profit 38.0 33.1 14.8% Bertrams operating profit 3.7 4.0 (7.5%) Group operating profit 41.7 37.1 12.4% Net finance charges (3.1) (2.1) Group PBT 38.6 35.0 10.3% Tax (10.4) (8.6) Group PAT 28.2 26.4 6.8% EPS 15.5p 14.6p 6.2% DPS 8.
Slide 6: Cost efficiency underpins 15% operating profit growth
Cost efficiency underpins 15% operating profit growth Smiths News income statement £m FY 2011 FY 2010 Change LFL Newspapers 935.7 952.0 (1.7%) (2.5%) Magazines 582.7 663.5 (12.2%) (6.7%) Other 82.3 77.0 6.9% - Total revenue 1,600.7 1,692.5 (5.4%) (4.1%) Gross profit 137.4 151.6 (9.4%) Operating cost
Slide 7: Profit decline with stable operating margin
Profit decline with stable operating margin Bertrams income statement £m FY 2011 FY 2010 Change LFL Revenue 131.8 137.1 (3.9%) (2.3%) Gross profit 22.4 25.4 (11.8%) Operating costs (18.7) (21.4) 12.6% Operating profit 3.7 4.0 (7.5%) Gross margin 17.0% 18.5% (150 bps) Cost ratio (14.2%) (15.6%) 140 b
Slide 8: Non recurring and other items
Non recurring and other items Smiths News Group £m FY 2011 FY 2010 Re-organisation and integration costs (2.7) (6.7) Amortisation of acquired intangibles (0.9) (0.9) Acquisition costs (2.4) - Property provisions (0.5) - The Returns Company - 0.7 Total before taxation (6.5) (6.9) Taxation 0.2 1.7 Tot
Slide 9: Cash generative
Cash generative Smiths News Group £m FY 2011 FY 2010 Operating profit 41.7 37.1 Depreciation and amortisation 6.8 7.3 EBITDA 48.5 44.4 Working capital (10.3) (1.4) Capital expenditure (3.1) (8.6) Net interest (4.9) (2.6) Taxation (1.7) (5.9) Pension funding (6.2) (6.4) Other 0.2 0.9 Free cash flow 2
Slide 10: Maintaining low gearing
Maintaining low gearing Smiths News Group £m FY 2011 FY 2010 Opening net debt (48.0) (49.5) Free cash flow 22.5 20.4 Dividend (13.8) (12.6) Non recurring items (5.2) (6.7) New finance leases (0.6) 0.4 Share purchase (0.3) - Net debt pre-acquisition (45.4) (48.0) Acquisitions (17.9) - Closing net deb
Slide 11: An immediately earnings enhancing acquisition
An immediately earnings enhancing acquisition Pre acquisition Dawson Holdings income statement £m 11 months 11 months Change Aug 11 Aug 10 Revenue 71.2 71.5 (0.4%) Gross profit 13.8 12.7 8.7% Operating costs (11.4) (10.6) 7.5% Head office costs (1.1) (1.0) (10.0%) Operating profit 1.3 1.1 18.2% Gros
Slide 12: We will realise tangible synergies
We will realise tangible synergies Pre acquisition Proforma Post acquisition (FY11) (FY11 + year 1 synergy) Turnover Op profit Turnover Op profit Smiths News 1,600.7 38.0 1,600.7 38.0 Bertrams 131.8 3.7 172.5 5.9 Media & Marketing - - 30.5 1.5 Total 1,732.5 41.7 1,803.7 45.5 Finance costs - (3.1) -
Slide 13: Strength in our core business
Strength in our core business Smiths News Review
Slide 14: The newspaper and magazine markets are robust
The newspaper and magazine markets are robust Newspapers Magazines • A £2.3 billion market • A £1.5 billion market • 10m newspapers sold every day • 3,500 titles in circulation • Price mitigating volume decline • 8.7 million magazines sold weekly • Customer loyalty • Responsive to trends • Print sub
Slide 15: Newspapers – resilient and improving performance
Newspapers – resilient and improving performance Smiths News LFL sales % 1 Improving trend -1 -2.0% 15 cover price rises -2.8% -3.0% -3 -4.0% Less price discounting -4.3% 2010 2010 2011 2011 -5 2009 H1 H2 H1 H2 15 Preliminary Results 20 October 2011
Slide 16: Resilience of Sunday market
Resilience of Sunday market Jun-11 Aug-11 4 -7% 46 3 Habitual demand 33 Millions sold 2 +75% +9% Publisher investment 22 1 +80% +126% +24% c.80% substitution 11 - NOTW Sunday Sunday Star on Mail on Sunday Total Mirror People Sunday Sunday Express market Source: Audit Bureau of Circulations Percentag
Slide 17: Magazines – more impacted by consumer environment
Magazines – more impacted by consumer environment Smiths News LFL sales 2 2009 2010 2011 H1 2011 H2 Improvement in H2 0 -6.6% -4.7% -7.6% -5.8% -2 0.7% Positive impact of Royal Wedding -4 -6 -1.0% -1.8% -8 -2.3% 2012: Euros and Olympics -10 Reported: -7.6% -4.0% -9.9% -7.6% Weeklies / monthlies Part
Slide 18: Sales run rate within strategic forecasts
Sales run rate within strategic forecasts % Change FY 2011 FY 2010 Newspapers (2.5) (4.2) Magazines (9.0) (4.0) Reported total (5.2) (4.1) Excluding partworks / one shots 1.1 (0.3) Underlying run rate (4.1) (4.4) 18 Preliminary Results 20 October 2011
Slide 19: £19m of cost savings achieved in 2011
£19m of cost savings achieved in 2011 Smiths News operational savings £5m network • Full year effect of 2009/10 closures • 7 further depots closed in 2011 £9m operational efficiencies • Continued contractor and staff profiling • Route optimisation £5m central cost savings • Procurement efficiencies
Slide 20: Strength in our core business: Bertrams Review
Strength in our core business Bertrams Review
Slide 21: Books – challenging UK market
Books – challenging UK market Bertrams LFL sales % 6 6.8% 4 Improvement in H2 2 0 -4.6% -3.0% -1.4% UK consumer market -4% -2 -4 Outperformed the market -6 2009 2010 2011 H1 2011 H2 21 Preliminary Results 20 October 2011
Slide 22: Strength in growing sectors
Strength in growing sectors Bertrams 2011 sales mix Wholesale • Performing ahead of the market Public Libraries • Internet growing rapidly (- 21 %) UK Wholesale (+0.8%) Library Services 18% • Library sales stabilising International • Growing pipeline of orders (+14%) 17% 65% International • Trading
Slide 23: £3m of cost savings achieved in 2011
£3m of cost savings achieved in 2011 Bertrams operational savings Handling efficiencies Carriage savings Process improvements Headcount reductions Leeds closure 23 Preliminary Results 20 October 2011
Slide 24: Committed to growing our business
Committed to growing our business
Slide 25: Dawson: an immediately EPS accretive acquisition
Dawson: an immediately EPS accretive acquisition Transaction summary Strategic rationale • Immediately earnings enhancing • No1 in academic market • £3.8m annualised synergy benefits • Leading eBooks platform by 2014 • International expansion opportunity • Pro forma EBITDA of 3.4x • Strength of comb
Slide 26: Diversification strategy progressing well
Diversification strategy progressing well 3rd party Specialist B2C logistics distribution fulfilment Clear preferred sectors Targets identified Acquisition criteria Actively engaged • Consistent revenue growth • Fragmentation • Market leading position • Service and efficiency 26 Preliminary Results
Slide 27: Key growth drivers
Key growth drivers Operational efficiency • £10m savings identified over next 2 years • Ongoing network and central savings • £4m Dawson synergies by 2014 Base business revenues • International expansion • eBooks growth • Academic and public library contracts • Regional Press, Euro 2012, Olympics •
Slide 28: Consistently returning value to shareholders
Consistently returning value to shareholders
Slide 29: Strong shareholder returns
Strong shareholder returns Strong profit and cash growth • PBT of £38.6m, up 10% • Cash generative - £22.5m FCF £38.6m PBT Returning value to shareholders • EPS of 15.5p • EPS growth 6% YOY 15.5p EPS Rewarding shareholders with dividends • Progressive dividend policy up 8% YOY • Total cash dividend
Slide 30: Defined medium term growth strategy
Defined medium term growth strategy Grow Smiths News • Modest profit growth despite declining markets • Continue to generate strong free cashflow Grow Bertrams • Integrate Dawson Books • Grow to £200m+ turnover, £10m+ profit by FY14 Grow Media & Marketing • Build customers across UK and globally • G
Slide 31: Appendices
Appendices 20 October 2011 Smiths News PLC
Slide 32: Appendix: financial KPIs
Appendix: financial KPIs £m FY 2011 FY 2010 FY 2009 FY 2008 FY 2007 Revenue 1,734.4 1,829.6 1,326.0 1,240.6 1,232.4 Profit before tax 38.6 35.0 30.5 32.5 31.0 EPS 15.5 14.6p 13.8p 14.5p 14.0p Free cash flow 22.5 20.4 23.7 21.4 27.1 DPS 8.0 7.4p 6.8p 6.7p 6.4p Net Debt 63.3 48.0 49.5 44.0 52.7 Profit
Slide 33: Appendix: operational KPIs
Appendix: operational KPIs Smiths News FY 2011 FY 2010 FY 2009 FY 2008 FY 2007 Newspaper pack accuracy 99.8% 99.8% 99.8% 99.8% 99.8% Magazine pack accuracy 99.6% 99.6% 99.7% 99.6% 99.6% On time delivery 97.6% 97.2% 97.0% 96.3% 96.3% Newspaper returns 98.9% 98.8% 99.8% 98.3% 98.0% collection time Mag
Slide 34: Appendix: operational KPIs
Appendix: operational KPIs Bertrams FY 2011 FY 2010 FY 2009 Number of titles in stock 220k 180k 165k Availability of titles in core range 88.0% 94.4% 94.1% On–shelf stock integrity 99.6% 99.8% 99.8% Same day despatch 100% 100% 100% Delivered next day 97.0% 98.7% 98.2% Preliminary Results 20 October
Slide 35: Appendix: income statement
Appendix: income statement £m FY2011 FY 2010 FY 2009 FY 2008 FY 2007 Revenue 1,734.4 1,829.6 1,326.0 1,240.6 1,232.4 Operating profit before non recurring items 41.7 37.1 32.4 36.0 36.0 Non recurring items (6.5) (6.9) (10.8) 0.1 5.4 Operating profit 35.2 30.2 21.6 36.1 41.4 Net finance charges (3.1)
Slide 36: Appendix: sales mix & LFL
Appendix: sales mix & LFL 2000 77.0 1800 84.2 Newspapers Magazines Books Other 137.1 1600 131.8 1400 60.6 663.5 55.3 1200 582.7 53.5 50.4 1000 Total revenue 800 508.6 527.7 541.2 £m 600 935.7 952.0 400 703.3 657.6 640.8 200 0 2011 2010 2009 2008 2007 935.7 Revenue growth (5%) 38% 7% 1% 2% Like for l
Slide 37: Appendix: balance sheet
Appendix: balance sheet FY £m FY 2011 FY 2010 FY 2009 FY 2008 2007 Non current assets Intangible assets 36.9 12.7 12.7 4.1 3.4 Property, plant & equipment 18.7 21.0 21.1 15.5 18.2 Deferred tax assets 3.0 1.6 3.3 11.6 6.0 Other non current assets 4.0 3.7 3.5 3.5 1.1 Total non current assets 62.6 39.0
Slide 38: Appendix: cash flow
Appendix: cash flow £m FY2011 FY 2010 FY 2009 FY 2008 FY 2007 Operating profit 41.7 37.1 32.4 36.1 36.0 Depreciation and amortisation 6.8 7.3 6.7 6.1 5.5 EBITDA 48.5 44.4 39.1 42.2 41.5 Working capital (10.3) (1.4) 4.6 (3.0) 6.4 Capital expenditure (3.1) (8.6) (5.2) (3.8) (3.2) Net interest (4.9) (2
Slide 39: Appendix: net debt
Appendix: net debt £m FY 2011 FY 2010 FY 2009 FY 2008 FY 2007 Opening net debt (48.0) (49.5) (44.0) (52.7) (66.7)* Free cash flow 22.5 20.4 23.7 21.4 27.1 Dividend (13.8) (12.6) (12.0) (11.7) (10.9) Non recurring items (5.2) (6.7) (1.2) - - Acquisitions (17.9) - (12.2) (2.1) - Disposal of freeholds
Slide 40: Appendix: taxation
Appendix: taxation £m FY 2011 FY 2010 FY 2009 FY 2008 FY 2007 Current tax 11.3 9.8 9.5 9.6 10.6 Adj in respect of prior year UK (0.5) (1.4) (2.4) (4.5) (3.9) corporation tax Total current tax charge 10.8 8.4 7.1 5.1 6.7 Deferred tax – current year (0.4) (0.1) (0.6) 1.2 (0.6) Deferred tax – prior yea
Slide 41: Appendix: lease commitments
Appendix: lease commitments £m FY 2011 FY 2010 FY 2009 FY 2008 FY 2007 Land and buildings within one year 9.9 8.8 8.7 6.1 5.4 in second to fifth year 29.3 28.7 28.9 18.9 17.6 beyond fifth year 38.3 29.5 24.7 18.5 19.2 Total 77.5 67.0 62.3 43.5 42.2 Equipment and vehicles within one year 1.6 1.0 1.3
Slide 42: Appendix: defined benefit scheme
Appendix: defined benefit scheme FY 2011 FY 2010 FY 2009 FY 2008 FY 2007 Scheme assets 375.1 408.6 357.4 382.5 321.2 Scheme liabilities (348.3) (367.4) (338.1) (320.1) (311.3) Surplus 26.8 41.2 19.3 62.4 9.9 Asset cap (26.8) (41.2) (19.3) (62.4) (9.9) IAS 19 balance per accounts - - - - - Actuarial
Slide 43: Appendix: contingent liability
Appendix: contingent liability £m FY 2011 FY 2010 FY 2009 FY 2008 FY 2007 No. of Reversionary leases 90 105 122 136 150 Contingent liability 13.9 21.2 26.6 34.4 40.9 Maximum annual liability 5.0 5.0 5.0 5.0 5.0 Under the terms of the 2006 Demerger Agreement, Smith News has a contingent liability for
Slide 44: Preliminary Results
Preliminary Results 20 October 2011