Preliminary Results. 18 October 2016

Transcription

1 Preliminary Results 18 October 2016

2 Highlights Mark Cashmore Group Chief Executive

3 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 Growing scale and capability in Pass My Parcel Delivered 7m of business efficiencies across the Group Investing in core capability and capacity Closer collaboration between Smiths News and Tuffnells Connect Group PLC 3

4 Group Financial Update David Bauernfeind Chief Financial Officer

5 Group performance m Aug 2016 Aug 2015 Change % News & Media (3.0)% Parcel Freight * - Education & Care (0.1)% Books (3.8)% Adjusted operating profit % Net finance charges (7.0) (7.3) 3.7% Adjusted PBT % Tax (12.4) (11.1) (12.6%) Adjusted PAT % Weighted average number of shares 243.4m 230.9m 5.4% Adjusted earnings per share 19.8p 19.7p 0.5% *Parcel Freight FY15 represents 36 weeks trading post acquisition in December 2014 Connect Group PLC 5

6 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 Amortisation of acquired intangibles (10.2) (7.9) Legal provision potential health and safety offences (1.5) - Total before taxation (18.8) (27.5) Taxation Total after taxation (14.9) (24.0) Total cash cost of non recurring and other items to August m (August m) Connect Group PLC 6

7 Free cash flow m Aug 2016 Aug 2015 Operating profit Depreciation and amortisation EBITDA 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 Free cash flow Free cash flow excludes the impact of exceptional items Connect Group PLC 7

8 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 growth investment in 2017 Planned reduction in capital expenditure from 2018 Connect Group PLC 8

9 Net debt m Aug 2016 August 2015 Opening net debt (153.4) (93.0) Free cash flow 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 facilities of 250m to November 2018 Connect Group PLC 9

10 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 net debt in 2017 Reduction in net debt from 2018 Connect Group PLC 10

11 Business update

12 Connect News & Media 2016 YE Total Revenue 1,471.4m -2.2% Total Adj. Op Profit 42.4m -3.0% News Revenue 1,443.8m -2.4% News Profit 40.0m -3.4% Media Revenue 27.6m +8.9% Media Profit 2.4m +3.5% LFL revenue Newspapers -3.2% Magazines -4.3% Media +1.6% Smiths News Sales in line with medium term forecast Contract wins secure revenues and territories 5m efficiency target achieved in full 10m cost savings over the next two years Price inflation supporting resilience in newspapers Continued improvement in magazine sales trend Jack s Beans generating revenue of 1.3m DMD - Media Revenue and profit in line with expectations New contract wins in both print and digital Connect Group PLC 12

13 Pass My Parcel Progress k parcels delivered in FY % customers intend to use PMP again 60% + Net Promotor Score National parcelshop network Pipeline of new clients and services Market continues to grow strongly Click & Collect market forecast to grow at 16%p.a. Speed and convenience are key requirements Operational capability proven Excellent service performance across the network Returns solution with ASOS and Amazon Network expansion through Tuffnells partnership Planning for growth Further investment planned Targeting volume of 3 million parcels in 2017 Connect Group PLC 13

14 Connect Parcel Freight 2016 YE Continued revenue and profit growth Total Revenue 174.4m 7.3%* LFL Revenue 7.3% Adj. Op Profit 15.0m 4.9% Investment to modernise the network and fleet Increasing our share in a growing market Key Statistics National network of 37 depots Diversified base of 4,700 customers Mixed fleet of over 1,200 vehicles Strong service performance 97% on time Delivering over 13m consignments p.a. Further 15m investment planned in FY17 Service driving customer loyalty and new business Over 11% growth in customers Synergy and integration plan on track * Compared to the same 52 week period in 2015 Closer cooperation with Smiths News Smiths News providing last mile deliveries Tuffnells delivering for Pass My Parcel Connect Group PLC 14

15 Connect Education & Care 2016 YE Good performance in a difficult market Total Revenue 64.8m -1.6% LFL Revenue -2.4% Adj. Op Profit 7.8m -0.1% Increased teacher costs affecting school budgets Early Years 12% CAGR since acquisition Segmented LFLs Early Years +6.4% Education -2.8% Care -7.8% Core -2.2% Other -3.5% Ecommerce strategy on track Over 35% of total orders placed online Targeting 50% in FY17 Good peak trading underpinned by strong operational performance Market forecast to return to growth in medium term Connect Group PLC 15

16 Connect Books 2016 YE Total Revenue 195.9mm +3.1% LFL Revenue +7.4% Adj. Op Profit 2.5m -3.8% Highlights Challenging year due to tough library markets and cost headwinds Strong growth in UK wholesale sales LFLs Wholesale +8.9% Wordery +26.7% Libraries -10.5% International -1.5% Wordery continues impressive growth UK library markets remain very difficult Impact of National Living Wage Market conditions limiting potential for growth Connect Group PLC 16

17 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 predictable revenues and continued delivery of cost efficiencies Drive organic revenue primarily through Pass My Parcel Invest to expand and modernise the network for further growth Closer collaboration with Smiths News Continue to deliver ecommerce growth and maintain cash generation Deliver further Wordery growth, while maintaining tight cost control and cash generation

18 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 and increased investment Confident in longer term prospects

19 Appendices

20 Reported Sales Performance FY July IMS FY2016 FY2015 FY2014 Jan July July FY H1 Jan IMS FY IMS IMS IMS H1 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%) (8.1%) - LFL (3.4%) (3.8%) (2.3%) (3.7%) (3.4%) (3.5%) (3.3%) (2.8%) (2.1%) (2.1%) (2.8%) (2.8%) Total (2.2%) (2.3%) (2.2%) (2.7%) (3.0%) (3.4%) (2.0%) (1.8%) (0.3%) (1.2%) (1.6%) (2.0%) Media LFL 1.6% 3.5% 0.5% 1.8% (3.1%) (2.3%) (1.9%) 0.4% (0.6%) (0.3%) 1.8% 0.2% Total 8.9% 5.5% 4.0% 2.5% 1.0% 1.9% 3.5% 5.2% (3.3%) (3.2%) 3.9% 2.0% Books LFL 7.4% 4.8% 4.6% 1.2% 3.1% 2.3% 1.1% 1.8% (2.5%) (3.2%) (0.3%) (0.4%) Total 3.1% 1.1% 0.1% (0.8%) (1.8%) (1.1%) (3.0%) (1.2%) 3.1% 2.6% 8.4% 9.7% Education & Care LFL (2.4%) (3.3%) (1.3%) 0.1% 1.7% 1.8% 0.5% (1.2%) 3.1% 2.2% 3.2% 4.2% Total 1.6% (3.3%) 0.2% 0.1% 1.7% 1.9% 0.9% (2.0%) 1.7% 2.2% 2.5% 4.2% H1 Jan IMS Parcel Freight LFL 7.3% 10.2% 12.0% 12.1% 19.6% 20.6% 16.9% - Total 7.3% 10.2% 12.0% 12,1% 19.6% 20.6% 16.9% - Connect Group PLC Preliminary Results October

21 Financial KPIs m FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 Revenue 1, , , , ,803.9 Adjusted profit before tax Adjusted profit after tax Adjusted EPS p 19.6p 19.0p 17.9p Free cash flow DPS 9.5p 9.2p 8.8p 8.4p 7.8p Net Debt 141.7m Connect Group PLC Preliminary Results October

22 Income Statement m FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 Revenue 1, , , , ,803.9 Adjusted Operating profit Non recurring items (18.8) (27.5) (6.9) (10.8) (10.9) Statutory Operating profit Net finance charges (7.0) (7.3) (5.5) (6.7) (3.7) Statutory Profit before tax Income tax expense (8.5) (7.6) (8.3) (10.2) (9.1) Statutory Profit after tax Earnings per share Statutory - basic - diluted 13.7p 13.5p 9.3p 9.0p 16.8p 16.2p 14.2p 13.3p 13.7p 13.3p Adjusted - basic -diluted 19.8p 19.5p 19.7p 19.0p 19.6p 19.0p 19.0p 17.8p 17.9p 17.4p Connect Group PLC Preliminary Results October

23 Balance Sheet m FY 2016 FY 2015 FY 2014 FY 2013 FY 2012* Intangible assets Property, plant & equipment Other non current assets Total non current assets Cash Other current assets Total assets Other current liabilities (217.2) (222.2) (202.7) (206.1) (200.3) Borrowings (140.1) (154.9) (109.3) (106.8) (103.1) Retirement benefit (21.5) (18.5) (21.3) (23.3) (36.0) Other non current liabilities (26.1) (27.2) (9.7) (9.7) (14.3) Total liabilities (404.9) (422.8) (343.0) (345.9) (353.7) Total net assets (42.1) (56.9) (77.6) Connect Group PLC Preliminary Results October

24 Cash flow m FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 Operating profit Depreciation and amortisation EBITDA 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) (4.2) (3.3) Taxation (8.5) (8.7) (9.8) (10.5) (8.0) Pension funding (5.3) (5.4) (4.6) (6.5) (6.8) Other Free cash flow Connect Group PLC Preliminary Results October

25 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 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) Other (4.4) (3.6) (9.3) (3.6) (1.1) Closing net debt (141.7) (153.4) (93.0) (98.5) (100.5) Decrease/(Increase) in debt 11.7 (60.4) (37.2) Net debt : EBITDA 1.7x 1.9x 1.4x 1.5x 1.6x Connect Group PLC Preliminary Results October

26 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 Property provisions - (0.1) Amortisation of acquired intangibles (10.2) (7.9) (3.0) (2.8) (2.1) Impairment - - (0.5) Legal provision potential health and safety offences (1.5) Total before taxation (18.8) (27.5) (6.9) (11.0) (10.9) Taxation Total after taxation (14.9) (24.0) (5.9) (9.7) (8.6) Non-recurring cash (per cash flow) (10.8) (8.2) (4.4) (5.9) (10.3) Connect Group PLC Preliminary Results October

27 Taxation m FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 Current tax Adjustment in respect of prior year UK corporation tax (0.8) (1.1) (2.4) (2.6) (1.6) Total current tax charge Deferred tax current year (0.3) (0.2) (0.4) (0.7) (0.6) Deferred tax prior year (0.1) - (0.2) (0.3) - Deferred tax impact of rate change Total tax on profit Effective tax rate 20.4% 19.7% 18.7% 23.0% 24% Non recurring items (3.9) (3.5) (1.0) (1.3) (2.3) Tax on profit after non recurring Effective statutory tax rate 20.3% 26.3% 19.4% 26.2% 25% Connect Group PLC Preliminary Results October

28 Lease commitments m FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 Land and buildings within one year in second to fifth year beyond fifth year Total Equipment and vehicles within one year in second to fifth year beyond fifth year Total Total within one year in second to fifth year beyond fifth year Total Connect Group PLC Preliminary Results October

29 Defined benefit schemes FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 Scheme assets Scheme liabilities (531.5) (432.0) (450.6) (419.2) (395.3) Net surplus / (loss) Amounts not recognised due to asset limit (151.3) (135.6) (75.7) (53.2) (40.3) Additional liability recognised due to minimum funding requirements (10.3) (13.8) (17.3) (20.3) (33.5) Total Liability on balance sheet (21.5) (18.5) (21.3) (23.3) (36.0) Total Asset on balance sheet The Group operates four defined benefit schemes of which WHS Smith Pension Trust (the Pension Trust ) represents over 92% of the total obligation at 31 August The Pension Trust Actuarial deficit 23m at 19 June 2013, Contributions agreed at 4.1m per annum Managed through Liability Driven Investment Scheme, Closed to further accruals Connect Group PLC Preliminary Results October

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