Preliminary results for year to 31 March 2006 24 May 2006
Sir Victor Blank Chairman Introduction
This presentation is not an offer of securities for sale in any jurisdiction. Any shares to be issued in Experian have not been and will not be registered under the US Securities Act of 1933 (the “Securities Act”) and may not be offered or sold within the United States absent registration under the Securities Act or an exemption from registration. No public offering of such shares will be made in the United States. Certain statements made in this presentation are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward looking statements.
GUS – delivering shareholder value • Further operational and strategic progress in 2006 • Separation is natural final step in strategy which started in 2000 • Strong and experienced management teams in all our businesses
Agenda Financial review David Tyler Strategic and operational review John Peace Q&A
David Tyler Group Finance Director Financial review
Summary results 2 0 0 6 2 0 0 5 Change £ m £ m % 1 2 m onths to 3 1 March Continuing operations - Sales 7,262 6,663 9 - EBIT 745 695 7 Reported Benchmark PBT 829 910 (9) See Appendix for definition of Benchmark PBT and for details of 2005 IFRS restatements
Profit by business Change at 2 0 0 6 2 0 0 5 constant FX £ m £ m £ m 1 2 m onths to 3 1 March Argos Retail Group 348.9 434.0 (85.4) ARG one-off charges - (34.5) 34.5 Experian 416.7 317.0 90.6 Central activities (20.2) (21.8) 1.6 Continuing operations 7 4 5 .4 6 9 4 .7 4 1 .3 Discontinued operations * 119.4 239.0 (120.3) Net interest (36.3) (23.7) (13.1) Benchm ark PBT 8 2 8 .5 9 1 0 .0 ( 9 2 .1 ) * Represents Lewis, Burberry and Wehkamp
ARG 2 0 0 6 2 0 0 5 Change £ m £ m % 1 2 m onths to 3 1 March Sales 5,548 5,313 4 EBIT Argos 291.0 320.0 (9) Homebase 51.8 113.8 (54) Financial Services 6.1 0.2 na 348.9 434.0 (20) One-off charges for OFT fine - (16.2) na Reorganisation costs - (18.3) na 348.9 399.5 (13)
Argos 2 0 0 6 2 0 0 5 Change £ m £ m % 1 2 m onths to 3 1 March Sales 3,893 3,652 7 EBIT* 291.0 320.0 (9) EBIT margin 7.5% 8.8% • Sales up 7% ; new space of 8% including Index stores • Like-for like sales down 1% ; outperformed market; helped by Argos Extra • Consumer electronics and white goods performed well • Gross margin in line • EBIT after one-off costs of £11m relating to Index stores and changing staffing arrangements * 2005 restated by (£1.2m)
Argos – costs 2 0 0 6 £ m One-off costs 1% Underlying inflation 4% Investments/ productivity improvements etc 6% – Argos Extra – New space (especially Index in H2) – Distribution Total cost increase 1 1 %
Homebase – store impairment • Clearer guidance under IFRS leads to impairment on store by store basis • Operating fixed assets at 1 April 2004 reduced by £36m • Consequent reduction in depreciation in 2005 of £7.6m, partly offset by onerous lease provision of £2.4m • Further store impairment charge in 2006 of £12.8m; falls below Benchmark PBT line
Homebase 2 0 0 6 2 0 0 5 Change £ m £ m % 1 2 m onths to 2 8 February Sales 1,562 1,580 (1) EBIT* 51.8 113.8 (54) EBIT margin 3.3% 7.2% • Gained share in deteriorating market; kitchens and furniture sales up double-digit in total • Sales fell 1% ; like-for-like down 4% ; core DIY down mid- single digit like-for-like • Promotional activity increased as year progressed • Gross margin in line with last year • High gross margin rate exacerbates impact of weak demand and cost pressures * 2005 restated by £5.2m
Homebase – costs 2 0 0 6 £ m Underlying inflation 4% Investments/ productivity improvements etc 4% – New space/ mezzanines – Furniture Extra Total cost increase 8 %
Experian Sales EBI T £ m £ m 3 1 6 4 1 7 1 ,1 1 5 1 ,2 0 1 1 ,2 8 6 2 2 4 2 5 6 2 8 2 1 ,3 3 2 1 ,7 2 2 + 2 9 % + 2 7 % + 1 6 % + 1 8 % + 2 0 % + 1 4 % + 2 0 % + 1 2 % 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 Year to March Year to March
Experian North America 2 0 0 6 2 0 0 5 Grow th $ m $ m % 1 2 m onths to 3 1 March* Sales 1,789 1,315 36 EBIT - direct business 411.8 285.5 44 - FARES 62.6 63.8 (2) 474.4 349.3 36 EBIT margin 23.0% 21.7% • Sales up 36% ; organic growth 13% ; 23% from corporate acquisitions • Exceptional sales growth from Credit, reflecting strong consumer credit market; business credit also strong • Consumer Direct up over 30% ; Interactive acquisitions on plan • EBIT margin up 130bp; mix, leverage and FACTA recovery • FARES in line despite decline in mortgage market * Continuing activities only; EBIT margin excludes FARES
Experian International 2 0 0 6 2 0 0 5 Grow th # £ m £ m % 1 2 m onths to 3 1 March* Sales 722 620 16 EBIT 151.3 126.6 20 EBIT margin 21.0% 20.4% • Sales up 16% , 7% organic growth; 9% from acquisitions • UK sales up 6% ; ROW up 8% • Strong organic growth in Credit and Marketing • Further client wins in Outsourcing • EBIT margin up 60bp after investment in Asia Pacific resources * Continuing activities only # At constant exchange rates
Discontinued operations 2 0 0 6 2 0 0 5 £ m £ m 1 2 m onths to 3 1 March EBIT – Lewis 5.2 55.2 – Burberry 94.1 161.3 – Wehkamp 20.1 22.5 1 1 9 .4 2 3 9 .0 • 2006 EBIT up until date of disposal • Lewis – remaining 50% stake placed May 2005 • Burberry – 65% stake demerged December 2005 • Wehkamp – sold January 2006
Income statement 2 0 0 6 2 0 0 5 Change £ m £ m % 1 2 m onths to 3 1 March Benchm ark PBT 8 2 9 9 1 0 ( 9 ) Amortisation of acquisition intangibles (37) (11) Store impairment charges (13) - Exceptional items 18 (4) Fair value remeasurements (3) - Taxation * (199) (250) Profit for the period 5 9 5 6 4 5 ( 8 ) Minority interests (26) (49) Attributable profit 5 6 9 5 9 6 ( 5 ) * Effective tax rate on Benchmark PBT 25.6% (2005: 26.3% )
EPS and dividends 2 0 0 6 2 0 0 5 Change £ m £ m % 1 2 m onths to 3 1 March Benchmark PBT 829 910 (9) Benchmark EPS 62.3p 62.0p - Dividend per share * 31.5p 29.5p Dividend cover 1.98x 2.10x * 2006 dividend per new consolidated GUS share; 2005 dividend per old share
Cash flow 2 0 0 6 2 0 0 5 £ m £ m 1 2 m onths to 3 1 March EBIT 745 695 Depreciation* 258 230 Capital expenditure (365) (344) Change in working capital 3 (3) Operating cash flow 6 4 1 5 7 8 Interest (33) (34) Corporation tax (108) (170) Free cash flow # 5 0 0 3 7 4 * Excluding amortisation of acquisition intangibles # For continuing operations only. Under IFRS, net cash flow of discontinued operations is shown separately
Cash flow 2 0 0 6 2 0 0 5 £ m £ m 1 2 m onths to 3 1 March Free cash flow 5 0 0 3 7 4 Acquisitions (819) (176) Divestments 360 106 Dividends (284) (281) Share repurchases - (200) Special pension contributions (100) (76) Net debt flow * ( 3 4 3 ) ( 2 5 3 ) Exchange and other movements - 56 Net debt flow of discontinued operations (204) (30) Movem ent in net debt ( 5 4 7 ) ( 2 2 7 ) Closing net debt ( 1 ,9 7 4 ) ( 1 ,4 2 7 ) * For continuing operations only. Under IFRS, net debt flow of discontinued operations is shown separately
Group balance sheet 2 0 0 6 2 0 0 5 £ m £ m As at 3 1 March Fixed assets 1,491 1,354 Investment in associates 129 110 Working capital 304 762 Trading assets 1 ,9 2 4 2 ,2 2 6 Goodwill 3,068 2,485 Taxation (44) (1) Net retirement benefit assets/ (obligations) 18 (112) Home Shopping receivable 140 140 Net debt (1,974) (1,427) Capital em ployed 3 ,1 3 2 3 ,3 1 1
Strategic and operational review John Peace Group Chief Executive
2006 – further strategic progress • Pursued strategy of focusing on fewer activities since 2000 • Plan to demerge ARG and Experian is natural final step in strategy • Disposed of more businesses in 2006 – Lewis – Wehkamp – Burberry • Continue to invest organically and by acquisition in ARG and Experian
Transforming the Group Operating profit * Pro form a EBI T * £ 5 1 9 m £ 7 6 6 m Hom e shopping 7 % Property 6 % ARG Finance ARG 5 % 30 % 9% Lew is 4 5 % 5 5 % 4% Burberry 3 9 % Experian Experian Year to March 2 0 0 0 Year to March 2 0 0 6 * Before central activities
Update on demerger process • In March 2006, the GUS Board proposed, subject to shareholder approval, a UK listing for ARG and Experian • Today announcing – Aiming for completion in October 2006 – Net debt allocation of about £1.0bn to Experian and about £200m to ARG – Equity raising of about £800m – Dividend cover no less than: 2x for ARG and 3x for Experian – Bond amendments proposed – Tax rates of c.30% for ARG and low 20s for Experian – Experian to report in US dollars – ARG in General Retailers; Experian in Support Services • We will continue to update market as further decisions are made
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