Smiths News The Bertrams Consortium Marketing Interim Results · 2014-03-26 · Smooth integration...

Interim Results 17 April 2013

Smiths News

Bertrams

The Consortium

Media & Marketing


Highlights

2

Group sales, £905m up 1%

Underlying PBT, £24.9m up 16% including acquisitions

Free cash flow, £10.2m up 70%

Strong financial performance

Profit growth in all divisions

27% of profits outside of N&M wholesaling (H112: 17%)

Smiths News:

- Over £350m pa of revenue awarded to 2019

- £4m efficiencies achieved

Bertrams:

- Launch of direct to consumer - Wordery

- European acquisitions – delivers £20m of annualised revenues

The Consortium:

- Performing to expectations with WMS integration on track

- Investing in multi-channel strategy – web, CRM, telesales

Strategic targets on track to deliver 50% of profits from outside of

newspaper and magazine wholesaling by 2016

Underlying EPS 10.3p, up 16%

Interim dividend 3.0p, up 7%

On track to meet full year market expectations

Continued strong shareholder returns

Group Financial Update Nick Gresham

Chief Financial Officer


Cautionary statement

4

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’, ‘believes’, ‘seeks’, ‘estimates’, ‘targets’, ‘may’, ‘will’, ‘continue’, ‘project’ and similar expressions, as well as statements in the future tense, identify forward-looking statements. These forward-looking statements are not guarantees of Smiths News PLC’s future performance and relate to events and depend on circumstances that may occur in the future and are therefore subject to risks, uncertainties and assumptions. There are a number of factors which could cause actual results and developments to differ materially from those expressed or implied by such forward looking statements, including, among others the enactment of legislation or regulation that may impose costs or restrict activities; the re-negotiation of contracts or licences; fluctuations in demand and pricing in the industry; fluctuations in exchange controls; changes in government policy and taxations; industrial disputes; war and terrorism. These forward-looking statements speak only as at the date of this document. Unless otherwise required by applicable law, regulation or accounting standard, Smiths News PLC undertakes no responsibility to publicly update any of its forward-looking statements whether as a result of new information, future developments or otherwise. Nothing in this document should be construed as a profit forecast or profit estimate. This document may contain earnings enhancement statements which are not intended to be profit forecasts and so should not be interpreted to mean that earnings per share will necessarily be greater than those for the relevant preceding financial period. The financial information referenced in this document does not contain sufficient detail to allow a full understanding of the results of Smiths News PLC. For more detailed information, please see the interim announcement for the half-year ended 28 February 2013 which can be found on the Investor Relations section of the Smiths News PLC website – www.smithsnews.co.uk. However, the contents of Smiths News PLC’s website are not incorporated into and do not form part of this document. The financial information contained within is presented on an underlying basis excluding non-recurring and other items. Definitions Underlying 2013 and 2012 results exclude non-recurring items and amortisation of acquired intangibles and includes the results from acquisitions. Pro forma is the contribution of acquired businesses to the results of the Group as if the acquisitions had been made at the beginning of the period. Smiths News like-for-like revenues exclude newspaper and magazine publisher contract gains and losses during the period and the annualisation impact of gains and losses in the prior year. It also excludes revenues for part-works and one-shots. Like-for-like revenue growth in Bertrams excludes new sales channels and the results of acquired businesses in the period. Like for like revenue growth in The Consortium excludes the impact of gains and losses in the prior year. Like for like revenue growth in Media and Marketing excludes liquidated titles. Free cash flow is cash flow excluding the following; payment of the dividend, acquisitions and disposals, the proceeds on the disposal of freehold properties, repayments of obligations under finance leases, the repayment of bank loans, EBT share purchase, and cash flows relating to non-recurring and other items. Net debt is calculated as total debt less cash and cash equivalents. Total debt includes loans and borrowings, overdrafts and obligations under finance leases.


Group performance

5

£m Feb 2013 Feb 2012 Change

Smiths News operating profit 19.7 19.2 2.6%

Bertrams operating profit 3.5 3.2 7.6%

The Consortium operating profit 2.9 - 9.1%*

Media and Marketing operating profit 0.9 0.8 6.2%

Group operating profit 26.9 23.2 16.0%

Net finance charges (2.0) (1.7)

Group PBT 24.9 21.5 15.8%

Tax (6.2) (5.4)

Group PAT 18.7 16.1

EPS 10.3p 8.9p 15.7%

DPS 3.0p 2.8p 7.1%

Figures quoted are on an underlying basis * Indicates profit growth on a pre-acquisition period


Non recurring and other items

6

Smiths News Group

£m Feb 2013 Feb 2012

Integration costs (0.5) (0.9)

Network reorganisation costs (1.0) (0.9)

Acquisition costs (2.1) -

Amortisation of acquired intangibles (1.4) (0.9)

Total before taxation (5.0) (2.7)

Taxation 0.4 0.4

Total after taxation (4.6) (2.3)


Free cash flow

7

Smiths News Group

£m Feb 2013 Feb 2012

Operating profit 26.9 23.2

Depreciation and amortisation 3.7 3.3

EBITDA 30.6 26.5

Working capital (7.2) (13.2)

Capital expenditure (3.7) (0.4)

Net interest (2.1) (1.4)

Taxation (5.0) (3.0)

Pension funding (3.1) (3.1)

Other 0.7 0.6

Free cash flow 10.2 6.0


Net debt

8

£m 28 Feb 2013 31 Aug 2012 29 Feb 2012

Opening net debt (100.5) (63.3) (63.3)

Free cash flow 10.2 27.2 6.0

Dividend (10.6) (14.9) (9.8)

Non recurring items (2.2) (10.3) (4.8)

Acquisitions (3.4) (37.1) -

Other (2.9) (2.1) (2.1)

Closing net debt (109.4) (100.5) (74.0)

Net debt: EBITDA 1.6x versus covenant of 2.5x

Total committed facilities of £177m through to November 2014

Smiths News Group


Smiths News Business Update Mark Cashmore

Group Chief Executive


Smiths News - strategy and highlights

10

HY13 Highlights

2.6% profit growth to £19.7m

£4m efficiencies achieved – on track for £20m 3 year target

Contract extensions: £350m pa (23%) of revenue now awarded to 2019

News International: 13% of revenue secured to 2019

Marketforce: 10% of revenue secured to 2019

Winning incremental news revenues

£761.1m

£19.7m +2.6%

-3.0%

Strategic target: Maintain profitability through new contracts, new efficiencies, new revenues

Revenue

Operating profit

2.

1.

3.

4.


Newspapers and magazines – sales analysis

11

LFL sales down 8.3%

One shot and partworks up 0.6%

Continued economic impact

LFL sales down 3.9%

Sundays impact total market by -0.5%

Total newspaper revenues flat

5.8%

10.4% 9.6%

3.2%

Newspapers Magazines

2.8% 2.1%

5.8%

Underlying LFL run rate (5.0%) : Total revenue (3.0%)

-12

-10

-8

-6

-4

-2

0

Smiths News LFL sales

1.9%

-9.0%

2011

-6.8% 2012

H1

-6.5% 2012

H2

-7.7% 2013

H1

Proportional impact of part works and one-shots on total magazine category

Weeklies/monthlies

Partworks/one-shots

-8.4% -7.8% -6.7%

%

-8.3%

2.3%

1.0%

Reported

-5

-4

-3

-2

-1

0

Smiths News LFL sales

-2.5%

2011

-1.2% 2012

H1

-3.1% 2012

H2

-3.9% 2013

H1

-3.1%

%

-1.2% -2.5% -3.9%

0.6% 1.9%

1.0%

-2.3%

Bertrams Business Update Mark Cashmore



Bertrams - strategy and highlights

13

HY13 Highlights

Total LFL sales +2.8%

Exclusive WHSmith Online contract to 2016

Launch of Wordery into direct to consumer market

£98.3m

£3.5m +7.6%

+7.0%

Strategic target: profit of £10m by 2014

Revenue

Operating profit

2.

1.

3.

4. European acquisitions:

£20m of revenue

Consolidation of European footprint


Direct to consumer

14

A top seller on Amazon, eBay and Play.com

99% positive customer feedback

Delivering to 50 countries worldwide

Wordery website launch for Christmas trading


Bertrams - strategy and highlights

15

HY13 Highlights

Total LFL sales +2.8%

Exclusive WHSmith Online contract to 2016

Launch of Wordery into direct to consumer market

£98.3m

£3.5m +7.6%

+7.0%

Strategic target: profit of £10m by 2014

Revenue

Operating profit

2.

1.

3.

4. European acquisitions:

£20m of revenue

Consolidation of European footprint


-6

-4

-2

0

2

4

6

8

10

12

14

16

18

20 Bertrams – sales analysis

16

Strong internet fulfilment driving UK wholesale growth

47% growth of eBooks

c.£60m pa international sales pro forma

Total sales up 7.0%

Total LFL sales up 2.8%

UK consumer market, down 3.4%

UK Wholesale (+2.3% LFL)

47%

24%

25%

4% -2.3%

2011

+2.1% 2012 H1

+10.4% 2012

H2

5.8%

-2.3% -1.4%

10.4% 9.6%

Public and academic libraries

(-2.7% LFL)

Academic eBooks (+47.4% LFL)

-2.3%

International (+4.3% LFL)

+2.8% 2013 H1

3.2%

Bertrams LFL sales Sales by segment

2.8% 2.1%

5.8%

The Consortium Business Update Mark Cashmore



The Consortium - strategy and highlights

18

HY13 Highlights

Smooth integration into the Group

Growth in all core segments

WMS integration progressing well

Investing in multi-channel: web, CRM, telesales

Scottish framework agreement

Succession Planning

£30.5m

£2.9m +9.1%*

+3.2%*

Strategic target: Organic profits to grow by 10% per annum

Revenue

Operating profit

2.

1.

3.

4.

5.

* Indicates profit growth on a pre-acquisition period

6.


-6

-4

-2

0

2

4

6

8

10

12

14

16

18

20The Consortium – sales analysis

19

Education outperforming the market

Strong performance in Care

Investment supporting sales growth

Total sales up 3.2%

Total LFL sales up 3.3%

Sales momentum for H2

Education (+4.8% LFL)

74%

12%

8%

6%

5.8%

2011

+1.5% 2012 H1

+8.2% 2012

H2

5.8%

-2.3% -1.4%

8.2%

9.6%

Early years (+2.6% LFL)

Care (+18.4% LFL)

1.5%

-3.5%

Note: Year on year comparatives reflect the movement on the equivalent prior year period pre-acquisition

Other (-15.5% LFL)

+3.2% 2013 H1

3.2%

The Consortium YOY sales Sales by segment

3.2%

1.5%

5.8%

Media & Marketing Business Update Mark Cashmore



Media & Marketing - strategy and highlights

21

HY13 Highlights

New/renewed print contracts:

Seamless integration of BMI into BA contract

Global contract win with United Airlines

New digital contracts:

7,000 iPads deployed

Launched Digiredoo – digital content platform

Smiths News now running all UK operations

MMC – operational progress / new team

£14.8m

£0.9m +6.2%

-2.6%*

Strategic target: Underlying profits to grow by 10% per annum

Revenue

Operating profit 2.

1.

3.

4.

* Prior year revenue adjusted to exclude agency sales

Summary and Outlook Mark Cashmore



Strong shareholder returns

23

•PBT of £24.9m, up 16%

•Cash generative - £10.2m FCF, up 70%

Strong profit and cash growth

•EPS of 10.3p, up 16%

• Interim dividend 3.0p, up 7%

Returning value to shareholders

•On track to meet full year market expectations:

• Continued investment in top line growth and new revenues

• On-going efficiency reducing the cost base

• Efficient integration of acquisitions

Outlook

•50% of profits outside newspapers and magazines by 2016

On track with strategic ambition

£24.9m PBT

10.3p EPS

3.0p DPS

Appendices

Smiths News

Bertrams

The Consortium

Media & Marketing


Smiths News income statement

25

£m Feb 2013 Feb 2012 Change LFL

Total revenue 761.1 784.3 (3.0%) (5.0%)

Gross profit 62.1 65.9

Operating costs (42.4) (46.7)

Operating profit 19.7 19.2 2.6%

Gross margin 8.2% 8.4% (20 bps)

Cost ratio (5.6%) (6.0%) 40 bps

Operating margin 2.6% 2.4% 20 bps


Bertrams income statement

26


Total revenue 98.3 91.9 7.0% 2.8%

Gross profit 18.7 16.8

Operating costs (15.2) (13.6)


Gross margin 19.0% 18.3% 70 bps

Cost ratio (15.5%) (14.8%) (60 bps)



The Consortium income statement

27


Total revenue 30.5 - 3.2%* 3.3%*

Gross profit 12.0 -

Operating costs (9.1) -

Operating profit 2.9 - 9.1%*

Gross margin 39.3% 200 bps

Cost ratio (29.8%) (150 bps)

Operating margin 9.5% 50 bps

* Indicates profit growth on a pre-acquisition period


Media and marketing income statement

28


Total revenue 14.8 15.3* (2.6%) (0.3%)

Gross profit 6.6 6.5 1.5%

Operating costs (5.7) (5.7) 0.0%


Gross margin 44.6% 42.5% 210 bps

Cost ratio (38.5%) (37.3%) (120 bps)


* Prior year revenue adjusted to exclude agency sales


Financial KPIs

29

£m HY 2013 FY 2012 FY 2011 FY 2010 FY 2009

Revenue 904.7 1,803.9 1,734.4 1,829.6 1,326.0

Profit before tax 24.9 47.5 38.6 35.0 30.5

EPS 10.3p 19.9p 15.5p 14.6p 13.8p

Free cash flow 10.2 27.2 22.5 20.4 23.7

DPS 3.0p 8.6p 8.0p 7.4p 6.8p

Net Debt 109.4 100.5 63.3 48.0 49.5

Figures quoted are on an underlying basis


Income statement

30

£m HY 2013 FY 2012 FY 2011 FY 2010 FY 2009

Revenue 904.7 1,803.9 1,734.4 1,829.6 1,326.0

Operating profit before non recurring items 26.9 51.2 41.7 37.1 32.4

Non recurring items (5.0) (10.9) (6.5) (6.9) (10.8)

Operating profit 21.9 40.3 35.2 30.2 21.6

Net finance charges (2.0) (3.7) (3.1) (2.1) (3.2)

Profit before tax 19.9 36.6 32.1 28.1 18.4

Income tax expense (5.8) (9.1) (10.2) (6.9) (0.7)

Profit after tax 14.1 27.5 21.9 21.2 17.7

Earnings per share

Statutory

- basic

- diluted

Underlying

- basic

-diluted

7.8p

7.3p

10.3p

9.7p

15.2p

14.7p

19.9p

19.3p

12.1p

11.9p

15.5p

15.3p

11.7p

11.5p

14.6p

14.4p

9.9p

9.9p

13.8p

13.8p


464

929 935 953

703

255

560 583 662

509

98

174 133 139

54

42

82 83

75

61

31

27

15

32

0

200

400

600

800

1000

1200

1400

1600

1800

HY 2013 FY 2012 FY 2011 FY 2010 FY 2009

Newspapers Magazines Books Other SN Education & Care Media & Marketing

Sales mix and LFL

31

Like for like sales H1 2013 H2 2012 H1 2012 H2 2011 H1 2011 H2 2010 H1 2010 H2 2009 H1 2009

Newspapers (3.9%) (3.1%) (1.2%) (2.0%) (3.0%) (4.1%) (4.3%) (3.5%) (2.0%)

Magazines (7.7%) (6.5%) (6.8%) (7.6%) (9.9%) (4.9%) (3.1%) (7.0%) (8.0%)

Books 2.8% 10.4% 2.1% (1.4%) (3.0%) 1.8% 10.9% (2.2%)

Education & care 3.3% 8.1%

Media & marketing (0.3%)

Tota

l re

ven

ue

£m

Revenue growth (5%) 38% 7% 4% 1%


Balance sheet

32

£m HY 2013 FY 2012 FY 2011 FY 2010 FY 2009

Intangible assets 66.7 67.1 36.9 12.7 12.7

Property, plant & equipment 23.3 24.5 18.7 21.0 21.1

Other non current assets 6.7 6.3 7.0 5.3 6.8

Total non current assets 96.7 97.9 62.6 39.0 40.6

Cash 10.1 5.1 4.2 4.0 4.3

Other current assets 158.7 164.9 145.2 138.2 145.9

Total assets 265.5 267.9 212.0 181.2 190.8

Other current liabilities (187.9) (200.3) (194.8) (188.8) (198.3)

Borrowings (117.6) (103.1) (65.2) (48.8) (49.4)

Other non current liabilities (14.4) (16.3) (12.2) (6.0) (11.5)

Total liabilities (319.9) (319.7) (272.2) (243.6) (259.2)

Total net liabilities (54.4) (51.8) (60.2) (62.4) (68.4)


Cash flow

33

£m HY 2013 FY 2012 FY 2011 FY 2010 FY 2009

Operating profit 26.9 51.2 41.7 37.1 32.4

Depreciation and amortisation 3.7 6.9 6.8 7.3 6.7

EBITDA 30.6 58.1 48.5 44.4 39.1

Working capital (7.2) (9.1) (10.3) (1.4) 4.6

Capital expenditure (3.7) (5.1) (3.1) (8.6) (5.2)

Net interest (2.1) (3.3) (4.9) (2.6) (2.9)

Taxation (5.0) (8.0) (1.7) (5.9) (5.6)

Pension funding (3.1) (6.8) (6.2) (6.4) (5.7)

Other 0.7 1.4 0.2 0.9 (0.6)

Free cash flow 10.2 27.2 22.5 20.4 23.7


Net debt

34

£m HY 2013 FY 2012 FY 2011 FY 2010 FY 2009

Opening net debt (100.5) (63.3) (48.0) (49.5) (44.0)

Free cash flow 10.2 27.2 22.5 20.4 23.7

Dividend (10.6) (14.9) (13.8) (12.6) (12.0)


Acquisitions (3.4) (38.1) (17.9) - (12.2)

Disposals - 1.0 - - -

Other (2.9) (2.1) (0.9) 0.4 (3.8)

Closing net debt (109.4) (100.5) (63.3) (48.0) (49.5)

(Increase)/Decrease in debt (8.9) (37.2) (15.3) 1.5 (5.5)


Taxation

35

£m HY 2013 FY 2012 FY 2011 FY 2010 FY 2009

Current tax 6.9 13.6 11.3 9.8 9.5

Adj in respect of prior year UK

corporation tax (0.3) (1.6) (0.5) (1.4) (2.4)

Total current tax charge 6.6 12.0 10.8 8.4 7.1

Deferred tax – current year (0.4) (0.6) (0.4) (0.1) (0.6)

Deferred tax – prior year - - - 0.3 (0.8)

Total tax on profit 6.2 11.4 10.4 8.6 5.7

Effective tax rate 25% 24% 27% 25% 19%


Tax on profit after non

recurring 5.8 9.1 10.2 6.9 0.7

Effective statutory tax rate 29% 25% 32% 24% 4%


Lease commitments

36

£m HY 2013 FY 2012 FY 2011 FY 2010 FY 2009

Land and buildings

within one year

in second to fifth year

beyond fifth year

8.4

25.8

27.2

10.0

28.9

29.6

9.9

29.3

27.4

8.8

28.7

29.5

8.7

28.9

24.7

Total 61.4 68.5 66.6 67.0 62.3

Equipment and vehicles

within one year


beyond fifth year

2.0

2.8

-

1.3

1.8

-

1.6

1.9

-

1.0

0.8

-

1.3

0.7

-

Total 4.8 3.1 3.5 1.8 2.0

Total

within one year


beyond fifth year

10.4

28.6

27.2

11.3

30.7

29.6

11.5

31.0

27.4

9.8

29.5

29.5

10.0

29.6

24.7

Total 66.2 71.6 70.1 68.8 64.3


Defined benefit schemes

37

HY 2013

FY 2012

FY 2011

FY 2010

FY 2009

Scheme assets 469.3 433.1 375.1 408.6 357.4

Scheme liabilities (417.7) (395.3) (348.3) (367.4) (338.1)

Total Surplus 51.6 37.8 26.8 41.2 19.3

Asset limit on Smiths News scheme (54.4) (40.3) (26.8) (41.2) (19.3)

IAS 19 balance per financial statements before deferred tax (2.8) (2.5) - - -

The largest scheme across the Group is the Smiths News defined benefit pension scheme (the Trust) which as at 28 February 2013 had an IAS 19 surplus of £54.4m. However as the pension scheme is closed to further accrual, this surplus is not available as a reduction of future contributions or through a funding holiday, and as a result the Group has not recognised this surplus on the balance sheet. Other defined benefit schemes (The Consortium and WMS) had a gross pension liability of £2.8m at 28 February 2013. The impact of which reduced the total surplus on Group schemes to £51.6m.


Contingent liability

38

£m HY 2013 FY 2012 FY 2011 FY 2010 FY 2009

No. of Reversionary leases 47 59 90 105 122

Contingent liability 9.6 10.9 13.9 21.2 26.6

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 35% of any of the total WHS Group potential reversionary leases, whereby a lease liability could revert back to WH Smith if the assignee were to fail.

Smiths News The Bertrams Consortium Marketing Interim Results · 2014-03-26 · Smooth integration...

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Transcript of Smiths News The Bertrams Consortium Marketing Interim Results · 2014-03-26 · Smooth integration...