Interim results for six months ended 30 September 2004 18 November 2004
Introduction Sir Victor Blank Chairman
Agenda Financial review David Tyler Operational review John Peace Argos Retail Group Terry Duddy Q&A
Financial review David Tyler Group Finance Director
Strong financial performance 2004 2003 Growth £m £m % 6 months to 30 September Sales 3,749 3,736 - Profit before goodwill, exceptionals and tax 406 354 15 EPS before goodwill and exceptionals 28.9p 26.0p 11 Dividend per share 9.0p 8.0p 13
Continued momentum PBT Earnings per share pence £m 187 206 247 354 406 14.1 15.5 18.0 26.0 28.9 +15% +11% +44% +44% +20% +16% +11% +10% 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 Six months to September Six months to September Before amortisation of goodwill and exceptional items
Continued momentum Return on capital Return on capital pre-tax post-tax 8.8% 9.8% 10.8% 12.2% 13.6% 6.7% 7.5% 8.3% 9.4% 10.4% +1.4% +1.0% +1.1% +1.4% +0.8% +1.0% +0.8% +1.0% 2001 2002 2003 2003 2004 2001 2002 2003 2003 2004 12 months 12 months 12 months 12 months to March to September to March to September
Profit growth in all businesses 2004 2003 Change at £m £m constant FX 6 months to 30 September £m Argos Retail Group 172.7 153.0 20.1 Experian 152.7 145.7 18.5 Burberry 78.8 66.9 15.0 Other* 14.0 10.0 3.1 Continuing operations 418.2 375.6 56.7 Discontinued operations # - 15.0 (15.0) Interest (12.4) (36.2) 23.3 Profit before goodwill, exceptionals and tax 405.8 354.4 65.0 * Represents Lewis Group £24.8m (2003: £19.8m) and Central activities (£10.8m) (2003: (£9.8m)) # Represents Property
17% core profit growth in first half Profit before exceptional items £m 420 400 380 360 £24m 340 (£16m) 354 348 (£14m) 320 300 2003 Discont. FX Interest Adjusted ARG Experian Burberry Lewis 2004 reported activities* base Group reported * Includes £1m increase in Central activities
17% core profit growth in first half Profit before exceptional items £m 420 £4m £15m 400 £19m 380 £20m 360 406 £24m 340 (£16m) 354 348 (£14m) 320 17% core growth 300 2003 Discont. FX Interest Adjusted ARG Experian Burberry Lewis 2004 reported activities* base Group reported Growth in continuing activities at constant FX * Includes £1m increase in Central activities
P&L account 2004 2003 Change £m £m £m 6 months to 30 September Profit before goodwill, exceptionals and tax 406 354 52 Exceptional items 16 (16) 32 Goodwill amortisation (99) (91) (8) Tax* (99) (85) (14) Minority interests (19) (10) (9) Profit for the period 205 152 53 * Effective tax rate on profit before amortisation of goodwill and profits and losses on sale of businesses 24.4% (6 months to 30 September 2003: 23.9%; Year to 31 March 2004: 23.4%)
Cash flow 2004 2003* £m £m 6 months to 30 September Operating profit 418 391 Depreciation 134 136 Capital expenditure (164) (158) Change in working capital (45) (56) Operating cash flow 343 313 Interest (6) (17) Corporation tax (119) (60) Free cash flow 218 236 * Restated for UITF Abstract 38
Cash flow 2004 2003* £m £m 6 months to 30 September Free cash flow 218 236 Acquisitions (36) (52) Divestments - 477 Dividends (191) (164) Share repurchases (67) - Net cash flow (76) 497 FX movements 18 70 Movement in net debt (58) 567 * Restated for UITF Abstract 38
Group balance sheet 30 Sept 30 Mar 2004 2004* £m Fixed assets 1,241 1,197 Investments 119 103 Working capital 774 765 Trading assets 2,134 2,065 Goodwill 2,284 2,338 Dividends and taxation (244) (363) Transaction consideration 233 131 Net debt (1,258) (1,200) Capital employed 3,149 2,971 * Restated for UITF Abstract 38
Lewis Group • Partial IPO another important step in reshaping GUS portfolio • Sold 46% stake, raising £105m • In addition, up to 3.3% given to employee share schemes • Retain c51% stake • c2% dilutive in a full year for GUS • Strong first half: – Sales up 13% – Operating profit up 20%
GUS share buyback • c£200m buyback programme announced in May 2004 • Completed £67m to date (7.8m shares at average price of 850p) • On track for remainder in H2 • Should enhance EPS by c1.5% in a full year • Scope for further buybacks will be reviewed regularly
Burberry share repurchase • Review of balance sheet strategy led to repurchase programme of c£250m by March 2006 • GUS will maintain its 66% stake in Burberry and benefit from cash return to shareholders • Impact on GUS: – Cash available to GUS will increase by c£165m – GUS reported net debt will increase by c£85m – EPS neutral
IFRS • Will not change how we manage the business or evaluate investments • Will not change cash flow, but will increase volatility in P&L and balance sheet • Areas of impact on P&L: – Financial hedging – Pension costs and share-based remuneration – Amortisation of goodwill and other intangible assets – Tax
IFRS – communication plans May 2005 - 2005 preliminary results under UK GAAP June 2005 - Restatement of 2005 results under IFRS November 2005 - 2005/6 interim results under IFRS
Operational review John Peace Group Chief Executive
Another half of progress • Strong financial performance • Continued to transform the Group • Initiated strategic review process • Continued to invest in three main businesses to deliver growth
ARG – outperforming its market 2004 2003 Growth* £m £m % 6 months to 30 September Sales 2,675 2,435 10 Operating profit Argos 85.7 73.9 16 Homebase 76.3 71.5 7 Financial Services 0.4 (3.3) - Wehkamp 10.3 10.9 (2) 172.7 153.0 13 * At constant exchange rates
Argos 2004 2003 Growth £m £m % 6 months to 30 September Sales 1,552 1,377 13 Operating profit 85.7 73.9 16 Operating margin 5.5% 5.4% • Sales grew 7% like-for-like, 6% new space • Strong performances from consumer electronics, photography, white goods and leisure • Gross margin in line • Operating profit up 16% after investment in Argos Extra and distribution capacity
Argos – continuing to take share Combination of choice, value and convenience leading to continued above market performance • Choice – Argos Extra in 146 stores; high single-digit sales uplift in stocked-in stores maintained • Value – Prices on re-included lines down 5% in current catalogue • Convenience – 24% of sales delivered to home – 11% of sales reserved or ordered through non-store channels – New stores deliver growth above plan
Argos – improving value • Supply chain programme enables improved value • Reduce prices at catalogues launch: – Prices down 5% on re-included lines – “WOW” offers • Reduce prices after catalogue launch: – Match competition where appropriate – Strong promotional campaigns
Homebase 2004 2003 Growth 7 months to 30 September £m £m % Sales 981 917 6 * Operating profit 76.3 71.5 7 Operating margin 7.8% 7.8% • 4% like-for-like sales growth, 2% new space • Driven by mezzanine roll-out, kitchens and bathrooms and new DIY ranges • Gross margin in line • Operating profit grew 7% after investment in marketing and mezzanines * Excluding 29 February 2004
Experian – continued strong growth Sales Operating profit £m £m 487 545 578 638 645 106 107 118 146 153 +13% +15% +28% +13% +10% +14% +6% +1% 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 Six months to September Six months to September Growth rates at constant exchange rates and in 2004 for continuing activities only
Experian • No single competitor offers as many products and solutions • No single competitor operates as successfully in so many countries • No single competitor is as well positioned for growth
Experian North America 2004 2003 Growth $m $m % 6 months to 30 September Sales 631 548 15 Operating profit - direct business 131.6 113.7 16 - FARES 32.8 38.6 (15) 164.4 152.3 8 Operating margin 20.9% 20.7% • Sales up 15%; 8% from acquisitions • Underlying sales in Credit up 6% and Marketing up 11% • Margin up 20 bp despite adverse mix and FACTA set-up costs Continuing activities only; operating margin excludes FARES
FACT Act Requirements • Law passed December 2003 • Right to one free credit report annually via centralised source • Allows ‘reasonable fee’ for credit scores • Regional roll-out from 1 December 2004 Experian’s response • Announced 8% cost recovery charge, subject to a minimum of 8 cents per transaction, effective 1 October 2004 • Reward clients who improve their data quality • Fairly distributes cost burden of free reports across financial services industry
Experian International 2004 2003 Growth* 6 months to 30 September £m £m % Sales 290 254 16 Operating profit 62.0 51.7 21 Operating margin 21.4% 20.4% • Sales up 16%; 7% from acquisitions • Underlying sales in Credit up 11% and Marketing up 7% • Good progress in emerging markets • Operating margin up 100 bp, reflecting better mix and cost control Continuing activities only * At constant exchange rates
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