WH Smith PLC Preliminary Results October 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 preliminary results announcement for the twelve months ended 31 August 2018 which can be found on the Investor Relations section of the WH Smith PLC website -

2 WH Smith PLC 11 October 2018

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

4 Distinct strategies for each business continue to deliver Good performance across the Group Total Group revenue up 2%; like-for-like revenue flat Strong performance in Travel Two thirds of Group operating profit More profit in second half than High Street in full year Record year for International wins 42 new units won year to date Good performance in High Street despite challenging conditions Final dividend up 13% Investing in both businesses to deliver shareholder value

5 Robert Moorhead Chief Financial Officer

6 Group financial summary Year to Aug 2018 m Year to Aug 2017 m Change % Revenue 1,262 1,234 2% Group profit from trading operations % Headline Group profit before tax % Headline EPS 2, p 4% Free cash flow ( m) (9)% Total dividend per share 54.1p 48.2p 12% 1 Stated after directly attributable share-based payment and pension service charges, and before non-underlying items, unallocated costs, finance costs and taxation 2 Headline Group profit before tax is before non-underlying items of 11m 3 Diluted (weighted average number of shares 31 August 2018:110m; 2017: 112m)

7 Revenue analysis Total Revenue Year to Aug 2018 m Year to Aug 2017 m Change % Travel % High Street (3)% Total revenue ,234 2% 1 International % Year to LFL Revenue H H Aug 2018 % % % Travel 3% 3% 3% High Street (4)% (2)% (3)% (1)% 1% -% 1 Included in Travel

8 Group LFL revenue performance by category H % H % Year to Aug 2018 % Stationery 3% 4% 3% Books (7)% (4)% (6)% News & Impulse -% 1% 1% (1)% 1% -%

9 Group profit before tax Year to Aug 2018 m Year to Aug 2017 m Change Travel trading profit % High Street (3)% Group profit from trading operations % Unallocated central costs (16) (16) Group operating profit % Net finance costs (2) (2) Headline Group profit before tax % Non-underlying items 3 (11) - Group profit before tax (4)% % 1 Stated after directly attributable share-based payment and pension service charges, and before non-underlying items, unallocated costs, finance costs and taxation 2 Headline, 2018 excludes 11m non-underlying items 3 Non-underlying items detailed on following slide.

10 Non-underlying items Business review in High Street giving benefits now and in future Costs relating to an uncompleted transaction Non-underlying due to magnitude and incidence c. 16m across FY18 and FY19 Year to Aug 2018 m Estimate Year to Aug 2019 m High Street business review - Restructuring Cardmarket and store closure costs and onerous lease charge 6 - Costs relating to an uncompleted transaction 2 - Total income statement impact 11 5 Cash flow impact in year 3 5

11 Profit from trading operations Year to Aug 2018 m Year to Aug 2017 m Change % Revenue 1,262 1,234 2% Gross contribution Costs (598) (575) Costs occupation costs (269) (256) store costs (209) (201) other costs (120) (118) Group profit from trading operations % Gross margin 60.3% 59.4% 90bps 1 Stated after directly attributable share-based payment and pension service charges, and before non-underlying items, unallocated costs, finance costs and taxation.

12 Group free cash flow Year to Aug 2018 m Year to Aug 2017 m Group operating profit Depreciation, amortisation and impairment Non cash items 4 5 Capital expenditure (53) (48) Working capital (14) (7) Employers payroll tax on exercised share awards (2) (2) Net tax paid (27) (25) Net interest paid (1) (1) Movement in provisions (2) (1) Free cash flow Headline, 2018 excludes 11m non-underlying items

13 Group net (debt) / funds Year to Aug 2018 m Year to Aug 2017 m Free cash flow Dividends paid (54) (50) Pension funding (3) (3) Net purchase of own shares for employee share schemes (3) (9) Purchase of own shares for cancellation (26) (40) Acquisitions/investments in JVs (5) - Return of payment on account to HMRC 1 - (2) Other 2 (6) (5) Net cash movement before non-underlying items (1) (4) Non-underlying items 3 (3) - Net cash movement (4) (4) Closing net (debt) / funds Cash Finance leases (14) (12) (2) relates to interest on a 2016 repayment to HMRC. 2 Other includes proceeds from sale and leaseback of equipment, repayment of finance leases and other items. 3 Cash flow effect of non-underlying items, see separate slide.

14 Group balance sheet Aug 2018 m Aug 2017 m Goodwill & other intangible assets Property, plant & equipment Working capital (29) (34) Corporation tax (9) (12) Other assets 10 8 Provisions (6) (5) Operating assets employed Cash Finance leases (14) (12) Total net assets (excluding pensions) Pension liability (net of deferred tax) (3) (5) Total net assets

15 Return of cash to shareholders Investing capex for growth (2018: total capex 53m) Progressive dividend policy, consistent record of growing dividends Supplemented by buybacks and a special dividend Over 1.0bn returned 5, c Share Buyback² Final Dividend¹ 35 Interim Dividend¹ Cash dividend paid 2 Buyback in the year 3 Buyback of up to 50m announced on 11 October Proposed final dividend for year ended 31 August Includes buyback announced on 11 October 2018, proposed final dividend for FY 2018 and, for illustrative purposes only, assumes interim dividend to be the same as in Includes 128m from 2007 and 2008

16 Group key indicators Year to Aug 2018 Year to Aug 2017 Growth % Headline Group profit before tax ( m) % Headline EPS 1, p 103.6p 4% Fixed charges cover 1.7x 1.7x ROCE (after capitalised operating leases) 26% 25% Free cash flow ( m) Total dividend per share 54.1p 48.2p 12% 1 Headline Group profit before tax is before non-underlying items of 11m 2 Diluted (weighted average number of shares 31 August 2018: 110m; 2017: 112m).

17 Stephen Clarke Group Chief Executive

18 WHSmith Travel

19 Continue to drive good growth Total revenue up 8%; LFL revenue up 3% Fifth year in a row of good LFL sales growth Good profit performance - up 7% to 103m 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 42 new international units won during the year 286 international units open as at 31 August 2018

20 Sales growth in all key channels Channel Total revenue LFL revenue* UK Air 7% 4% UK Rail 1% 1% UK Hospital 6% 3% International 22% 4% Air performance ahead of pax despite slight softening due to hot weather in UK Rail impacted by network upgrades and introduction of new timetables Continued investment in Hospital channel * Constant currency

21 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 Large store formats now open in London Gatwick North and South Terminals and Heathrow T3; extended store under construction in Heathrow T4 Encouraging results; positive landlord and customer feedback New large store formats in the pipeline

22 Investment in formats Large airport stores Gatwick Airport, North Terminal Gatwick Airport, South Terminal

23 Investment in formats Large airport stores Heathrow Airport, Terminal 3

24 Investment in formats Rail London Bridge Station

25 Investment in formats Hospitals Sales in hospital stores set to overtake rail making it our second biggest channel in the UK Food and drink are key categories in hospitals Healthy ranges are an increasing part of the mix Positive results from M&S implant stores; expect to open a further 11 in current financial year Expect to open around 8 new hospital stores this year Alder Hey Hospital

26 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 Opened 20 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 12 months to 31 Aug months to 31 Aug 2017 YoY LFLs Sales ( m) % 4%* Profit ( m) % 42 new units won, including recent wins in Schiphol Airport and São Paulo Airport 286 units open as at 31 August 2018 Investing for longer term growth 11m profit * Constant currency

28 Madrid Airport Madrid Barajas Airport, Terminal 4

29 Significant wins in South America 3 units now open in Galeão Airport, Rio de Janeiro; further 4 units due to open by November Recently won 4 new units in São Paulo Airport Units due to open in November C.40m passengers Partnering with Duty Free Americas in a joint venture Leverage existing expertise Galeão Airport, Rio de Janeiro

30 Now present in 50 airports and 27 countries outside of the UK Location Directly run Joint venture Franchise Total Europe Middle East India Asia Australia Total Europe the biggest territory and growing 52% 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 review Continued good performance in High Street business despite challenging conditions on the UK high street Profit of 60m; third highest profit performance over past 15 years Successful strategy remains unchanged; continues to create value Undertaken a business review to ensure we remain fit for purpose and fit for the future Review will deliver benefits in the current year and beyond Continue to drive value from our space, margin and cost initiatives; third party partnerships; and online businesses Considered investment in our stores

34 Carl Cowling Managing Director, High Street

35 High Street continues to perform well Good performance from High Street business Like-for-like sales down 3% versus last year H2 like-for-like sales down 2% despite challenging environment Margin up 70 bps Strong performance from Stationery categories Delivered cost saving initiatives

36 Continued margin optimisation Margin growth of 70 bps in the year 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

37 Continued focus on cost efficiencies Cost efficiencies key to our strategy Sustainable cost saving initiatives and variable costs to sales 12m cost savings delivered in the year Continue to develop pipeline of new initiatives 2018 Actual Total m October Further savings identified Total savings

38 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 2017 Improved performance in second half Continue to improve customer offer and books operating model Focused on making WHSmith the home for the lighter reader and children s and educational books

39 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 2017 with good growth in seasonal ranges Strong sales of slime products in H2

40 Driving Stationery growth in store Good results from new concept store trials 11 stores refitted Plan to develop small store and lower cost options Continue to monitor results closely Winchester Henley-on-Thames

41 Driving Stationery growth digital channels Continued good performance from Funky Pigeon Increased traffic volumes; mobile continues to be the main channel Extended gifting ranges throughout the year Cult Pens integration largely complete Complements existing Stationery ranges and enhances our customer offer Increased focus and prominence of stationery ranges on whsmith.co.uk

42 Partnerships Post Office Ltd Post Office partnership important part of High Street business model Drives footfall and provides financial benefits from commercial agreement 135 franchised Post Offices and 33 hosted Post Offices open within our High Street stores New agreement for further 40 to open during 2019 Convert 33 hosted to franchise Over 200 by end of 2019

43 Partnerships - InComm Extended partnership with InComm; current provider of successful giftcard mall Established a gaming hub in all our stores Pre-paid gaming cards and gifting market UK digital gaming market is large with good YoY category growth Maidstone

44 Stephen Clarke Group Chief Executive

45 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 Final dividend up 13% 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 new financial year in both businesses

46 WH Smith PLC 11 October 2018