WH Smith PLC Interim Results April 2018

Transcription

1 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 expressed or implied because they relate to future events. Unless otherwise required by applicable law, regulation or accounting standard, we do not undertake to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise. Nothing in this presentation should be construed as a profit forecast. The financial information referenced in this presentation does not contain sufficient detail to allow a full understanding of the results of WH Smith PLC. For more detailed information, please see the interim results announcement for the six months ended 28 February 2018 which can be found on the Investor Relations section of the WH Smith PLC website -

2 WH Smith PLC 12 April 2018

3 WH Smith PLC Introduction Stephen Clarke Financial review Robert Moorhead Business review Stephen Clarke Questions

4 Distinct strategies for each business continue to deliver Good first half performance and good start to second half Remain confident in outcome for the full year Strong performance in Travel Two thirds of Group operating profit More profit in second half than High Street in full year Record period for International wins 26 new units year to date Good profit performance in High Street given challenging conditions Interim dividend up 10% Value creation for shareholders is central to our plans

5 Robert Moorhead Chief Financial Officer

6 Group financial summary 6 mths to Feb 2018 m 6 mths to Feb 2017 m Change % Revenue % Profit from trading operations (1)% Group profit before tax (1)% EPS p 61.6p (1)% Free cash flow ( m) (11)% Interim dividend per share 16.0p 14.6p 10% 1 Stated after directly attributable share-based payment and pension service charges 2 Diluted (weighted average number of shares 28 February 2018: 110m; 2017: 112m)

7 Revenue analysis Total Revenue H m H m Change % Travel % High Street (5)% Total revenue % LFL Revenue H % H % Travel 3% 5% High Street (4)% (3)% (1)% -%

8 Category LFL revenue performance H % H % H % Stationery 3% 2% 4% Books (7)% (3)% (6)% News & Impulse -% 1% 1% (1)% -% -%

9 Group profit before tax 6 mths to Feb 2018 m 6 mths to Feb 2017 m Change % Travel trading profit % High Street trading profit (6)% Group profit from trading operations (1)% Unallocated central costs (8) (8) Group operating profit (1)% Net finance cost (1) (1) Group profit before tax (1)% 1 Stated after directly attributable share-based payment and pension service charges

10 Profit from trading operations 6 mths to Feb 2018 m 6 mths to Feb 2017 m Change % Revenue % Gross contribution Costs (292) (285) Costs occupation costs (128) (127) store costs (108) (102) other costs (56) (56) Group profit from trading operations (1)% Gross margin 59.6% 58.6% 100bps 1 Before interest and tax and after directly attributable share-based payment and pension service charges

11 Group free cash flow 6 mths to Feb 2018 m 6 mths to Feb 2017 m Group operating profit Depreciation, amortisation and impairment Share based payments 3 3 Working capital (27) (25) Employers payroll tax on exercised share awards (2) (2) Capital expenditure (26) (23) Net tax paid (13) (14) Net interest paid - - Movement on provisions (1) - Free cash flow 39 44

12 Group net debt 6 mths to Feb 2018 m 6 mths to Feb 2017 m Free cash flow Dividends paid (37) (34) Pension funding (2) (2) Net purchase of own shares for employee share schemes (5) (9) Purchase of own shares for cancellation (9) (24) Finance lease capital repayments (2) (2) Acquisitions/investment in JV (3) - Other (1) (1) Net cash movement (20) (28) Closing net debt Net overdraft (4) (8) Finance leases (11) (13) (15) (21)

13 Group balance sheet Feb 2018 m Aug 2017 m Goodwill & other intangible assets Property, plant & equipment Working capital (4) (34) Corporation tax (14) (12) Other assets 8 8 Provisions (4) (5) Operating assets employed Cash (4) 16 Finance leases (11) (12) Total net assets (excluding pensions) Pension liability (net of deferred tax) (5) (5) Total net assets

14 Return of cash to shareholders Investing capex for growth capex of 50m for this year Interim dividend up 10% Supplemented by buybacks Over 900m returned Interim Dividend¹ Final Dividend¹ Special Dividend 17 Share Buyback³ Cash dividend paid 2 Interim dividend declared 3 Buyback in financial year 4 Up to 50m buyback announced on 12 October 2017, 8m returned at 12 April Includes buyback announced on 12 October 2017, and interim dividend declared

15 Group key indicators 6 mths to Feb mths to Feb 2017 Change % Group profit before tax ( m) (1)% EPS p 61.6p (1)% Fixed charges cover 1.8x 1.9x ROCE (after capitalised operating leases) 13% 13% Free cash flow ( m) Interim dividend per share 16.0p 14.6p 10% 1 Diluted (weighted average number of shares 28 February 2018: 110m; 2017: 112m).

16 Stephen Clarke Group Chief Executive

17 WHSmith Travel

18 Continue to drive good growth Total sales up 7%; LFL sales up 3% Fifth year in a row of good LFL sales growth Good profit performance - up 5% to 41m Continue to invest in future growth in UK New format for large airport stores Range development Expect to open UK stores this year Increased investment in International business following success in a number of significant tenders 26 new international units won 258 international units open as at 28 February 2018

19 Sales growth in all key channels Channel Total sales LFL sales* UK Air 6% 5% UK Rail -% -% UK Hospital 9% 4% International 18% 4% Air passenger numbers continue to grow sales Amplified by our investment in growth Rail impacted by snow and network upgrades Continued investment in Hospital channel * Constant currency

20 Investment in formats Large airport stores In airports, larger stores deliver significantly higher ATV and sales per passenger Complete up to 100,000 transactions per week in our busiest stores Improving circulation and ease of shopping drives customer conversion First large store format opened in London Gatwick in December Encouraging results; positive landlord and customer feedback

21 Investment in formats Large airport stores London Gatwick South Terminal

22 Investment in formats Large airport stores Increased spend per passenger Store in Heathrow Terminal 3 due to open in June Extended store in Heathrow Terminal 4 due to open in July New store in Gatwick North due to open in July

23 Investment in formats Rail St Pancras Station London Bridge Station Continue to invest in rail formats New store format recently opened at St Pancras International Station Increased ranges Tech Express Specialist staff Standalone bookshop due to open at London Bridge Station in May

24 Investment in formats Rail Abbey Wood Station

25 Investment in formats Hospitals Food and drink are the key categories in hospitals Healthy ranges are an increasing part of the mix Positive results from new 1,000 2,000 sq ft trial stores Expect to open around 6 new hospital stores this year East Surrey Hospital

26 Looking ahead: UK growth Airports continue to forecast passenger growth Continue to open new space Invest in existing stores to drive sales per passenger Expect to open stores this financial year across all channels Active space management

27 International business is profitable and growing fast Sales per passenger continue to be strong 6 month to 28 Feb months to 28 Feb 2017 YoY LFLs Sales ( m) % 4%* Profit ( m) 4 4 -% 26 new units won, including Madrid T4 and Rio de Janeiro Galeão Recently opened 10 units in Singapore and 6 units in Rome 258 units open as at 28 February 2018 Investing for longer term growth 4m profit including 1m of set-up costs * Constant currency

28 Significant win in Europe - Madrid Airport Eight units won across Madrid Airport T4; largest airport in Spain with over 50m passengers in 2017 Units will open ahead of summer peak Further strengthens our presence in Spain

29 Significant win in South America Rio de Janeiro South America - a new territory for WHSmith Partnering with Duty Free Americas in a joint venture; Rio de Janeiro Galeão Airport DFA have an extensive network of stores throughout the region Over 16m passengers Leverage existing expertise Seven units won; expected to open later this year

30 Now present in 48 airports and 27 countries outside the UK Location Directly run Joint Venture Franchise Total Europe Middle East India Asia Australia Total Europe the biggest territory and growing 56% franchised

31 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 number of regions Expect to win between new units in an average year Continue to use three economic models

32 WHSmith High Street

33 High Street continues to perform well Good performance from High Street business, particularly in context of challenging UK high street and no new publishing trend over Christmas period Like-for-like sales down 4% versus last year Profit of 50m in line with latest guidance; strategy continues to create value Margin up 80 bps Strong performance from Stationery categories Delivered cost saving initiatives Continued strong cash generation

34 Continued margin optimisation Margin growth of 80 bps for the half Main driver continues to be category mix management both across and within categories Further margin growth from: Trading terms and Far East sourcing Improved markdown management Continue to see opportunities to grow margin going forward

35 Continued focus on cost efficiencies Cost efficiencies key to our strategy Sustainable cost saving initiatives and variable costs to sales 7m cost savings delivered in the first half 5m planned for the second half Continue to develop pipeline of new initiatives

36 Building on areas of strength in Books Books market remains fairly stable Annualised strong sales from spoof humour titles last year No new, big publishing trends over Christmas Continue to improve customer offer and books operating model

37 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 across our stores, Post Offices and digital channels Strong performance over Christmas with good growth in seasonal ranges

38 Driving Stationery growth in store Good results from trials in Reading and Holborn Extended to five more stores Plan to develop small store and lower cost options Trafford Centre, Manchester

39 Driving Stationery growth Post Offices WHSmith now operates 168 Post Offices in its stores New supply agreement with Post Office Limited WHSmith stationery to be ranged and sold within 175 Directly Managed Post Offices WHSmith products currently ranged in 115 Directly Managed Post Offices Agreement will run for five years

40 Driving Stationery growth digital channels Continued good performance from Funky Pigeon Mobile continues to grow as the main channel Extended gifting ranges over Christmas period Acquired Cultpens.com in the period Leading online specialist pen retailer Over 18,000 products available online Complements existing Stationery ranges and enhances our customer offer

41 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 Good cash generation in both businesses Disciplined use of cash with attractive returns Focused on investing for the long-term and creating value for shareholders Good start to the second half; confident in the outcome for the full year with interim dividend up 10%

42 WH Smith PLC 12 April 2018