Interim results for six months ended 30 September 2004 18 November - - PowerPoint PPT Presentation

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

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 2004 2003 Growth £m £m % 6 months to 30 September

Earnings per share pence

2000 2001 2002 2003 2004 14.1 15.5 18.0 26.0 28.9 +10% +16% +44% +11%

Six months to September PBT £m

2000 2001 2002 2003 2004

Six months to September

187 206 247 354 406 +11% +20% +44% +15%

Continued momentum

Before amortisation of goodwill and exceptional items

Return on capital post-tax

2001 2002 2003 2003 2004 6.7% 7.5% 8.3% 9.4% 10.4% +0.8% +0.8% +1.1% +1.0%

Return on capital pre-tax

2001 2002 2003 2003 2004

12 months to March

8.8% 9.8% 10.8% 12.2% 13.6% +1.0% +1.0% +1.4% +1.4%

Continued momentum

12 months to September 12 months to September 12 months to March

2004 2003 Change at £m £m constant FX £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

Profit growth in all businesses

6 months to 30 September

* 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

354 348

£24m (£14m) (£16m)

300 320 340 360 380 400 420 2003 reported Discont. activities* FX Interest Adjusted base ARG Experian Burberry Lewis Group 2004 reported * Includes £1m increase in Central activities

17% core profit growth in first half

Profit before exceptional items £m

354 406 348

£4m £24m (£14m) (£16m) £20m £19m £15m

300 320 340 360 380 400 420 2003 reported Discont. activities* FX Interest Adjusted base ARG Experian Burberry Lewis Group 2004 reported

Growth in continuing activities at constant FX

17% core growth

* Includes £1m increase in Central activities

* 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%)

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

P&L account

2004 2003 Change £m £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

Cash flow

2004 2003* £m £m 6 months to 30 September

* Restated for UITF Abstract 38

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

Cash flow

2004 2003* £m £m 6 months to 30 September

* Restated for UITF Abstract 38

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

Group balance sheet

£m

* Restated for UITF Abstract 38

30 Sept 30 Mar 2004 2004*

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

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

ARG – outperforming its market

2004 2003 Growth* £m £m % 6 months to 30 September

* At constant exchange rates

Sales 2,675 2,435 10

Sales 1,552 1,377 13 Operating profit 85.7 73.9 16 Operating margin 5.5% 5.4%

Argos

• 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

2004 2003 Growth £m £m % 6 months to 30 September

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

Sales 981 917 6* Operating profit 76.3 71.5 7 Operating margin 7.8% 7.8%

Homebase

• 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 2004 2003 Growth £m £m % 7 months to 30 September

* Excluding 29 February 2004

Experian – continued strong growth

Sales £m 2000 2001 2002 2003 2004 Operating profit £m 2000 2001 2002 2003 2004

Growth rates at constant exchange rates and in 2004 for continuing activities only

Six months to September Six months to September

487 545 578 638 645 106 107 118 146 153 +6% +10% +13% +15% +1% +14% +28% +13%

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

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% 2004 2003 Growth $m $m %

Experian North America

• 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

6 months to 30 September

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

• 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

2004 2003 Growth* £m £m %

Experian International

Sales 290 254 16 Operating profit 62.0 51.7 21 Operating margin 21.4% 20.4% 6 months to 30 September

Continuing activities only * At constant exchange rates

HBOS – over £40m five-year contract

• Experian offers a unique combination of services:

– Credit Information

• Consumer and Business lending

– Credit Solutions

• Application processing/scoring solutions
• Fraud prevention capabilities
• Consumer and Business customer

authentication

– Marketing Information

• Analysis and consultancy support

– Marketing Solutions

• Database hosting
• Outsourced data processing
• Experian sells new products, such as

fraud prevention

• Experian supports HBOS across its product

groups

Experian – consistent global strategy

Build on core businesses Sell new solutions Grow by acquisition

Consumer Direct

• Sales up by 27% in first half in US
• Over 2.0m subscribers in US
• First to market in UK
• Driven by:

– Market growth – New products – Ability to attract consumers through skills in online marketing (via broadcast, web and portals)

• Become the brand trusted and preferred by consumers to

access and manage relevant personal data and transactions

Build on core businesses

Sell new solutions

Repositioning US marketing

Catalogue Multi-sector

THEN NOW

Information Solutions Direct mail Multi-channel

Grow by acquisition

Grow by acquisition

Selected acquisitions since 30 September 2003

Email delivery (US and UK) Market research (US) Address management software (UK) Internet loyalty marketing (US) Automotive dealer information (US) Insurance solutions (UK) Decision solutions (Global) Anti money laundering solutions (US) Micromarketing (Norway, Sweden and Hong Kong)

Operating profit £m

2000 2001 2002 2003 2004

Burberry – continued strong growth

Sales £m

2000 2001 2002 2003 2004

Growth rates at constant exchange rates

Six months to September Six months to September

185 236 274 321 348 27 42 55 67 79 +26% +17% +17% +14% +57% +32% +21% +22%

2004 2003 Growth* £m £m %

Burberry

Sales 348 321 14 Operating profit 78.8 66.9 22 Operating margin 22.7% 20.8% 6 months to 30 September

* At constant exchange rates

• Sales up 14%, with double-digit growth in retail, wholesale and

licensing

• Gross margin up 300 bp to 58.6% reflecting lower clearance

activity, sourcing gains and strong licensing

• Operating profit up 22%

Burberry – key initiatives

• Opening 7% more retail space in full year
• Refurbishing key stores, such as New York

Boston, San Francisco and Paris

• Mid-to-high single digit growth in

Wholesale expected in Spring/Summer 2005

• Licensing initiatives:

– Fragrances – Upgrading position in Japan

Terry Duddy Chief Executive, Argos Retail Group

ARG – integrated business model

• Multi-brand, multi-channel
• Separate customer facing brands
• Central infrastructure, where appropriate:

– Sourcing and supplier management – Customer services (home delivery and contact centres) – Financial services – Shared services

• Integration benefits doubled to £40m by March 2006

Homebase – strong market position

• Growth markets:

– DIY – Home furnishings

• Number two brand in UK DIY
• Become the leading UK home

enhancement retailer

• Clear strategy for growth

Homebase – growth initiatives

• New stores
• Mezzanines

Increase new space Improve customer offer Leverage ARG scale

• Retail disciplines
• Range development

– Core DIY – Home furnishings

• Joint sourcing/

value chain

• Order/

delivery-to-home

• Financial services

Improve retail disciplines

• Increased stock availability:

– Discontinued stock – Refining SAP – Stockroom management – Store ordering

• Customer service:

– Store signage and navigation – ‘Homebase Way’ service culture – Continued training – Mystery shopping

• In-store standards:

– Standards for layout – Reduced clutter – Better promotion execution

Strengthen core ranges

• Range reviews completed in:

– Own label paint – Power tools – Tiling – Storage – Lighting – Garden power

Improve home furnishings

• Mezzanine layout and merchandising
• CAD roll-out completed in

November 2004

• miHome own brand products
• Home delivery
• Financial services offer
• ARG furniture catalogue trial

Open new stores

• Currently 283 stores; 12.7m square feet
• f selling space
• Open four stores in H2
• Open c45 stores in the next three years
• Smaller stores trading above

expectations

• New stores will add 12% more space
• ver next three years

Add mezzanine floors

• Low cost additional space
• 88 currently; over 110 by year end
• Mezzanine evolution delivering sales

uplifts in excess of 15%

• Achieve target of 200 stores with

mezzanines

• c2% pa benefit to like-for-like sales

growth

Leverage ARG sourcing

• Overlap of £2.1bn at cost between Argos and Homebase by major

category

• Annual cost savings by March 2006:

– At acquisition: at least £20m – Update: benefits doubling to £40m

• Early savings have come from terms harmonisation
• Value chain drives future savings:

– Joint sourcing – Joint own-brand development – More direct importing/direct sourcing

Value chain

• Sell over £80m
• Analysed net profitability over time/by

supplier

• Result:

– Reduced reliance on branded supply – Joint sourcing of own-brand – Introduction of exclusive brands – Joint tender on accessory products

• Delivered:

– Customer benefits in price and quality – 10%+ cost savings Power tools

Homebase – summary

• Confident that Homebase can deliver sustainable profitable

sales growth: – Improved customer experience – More credible DIY/decorating ranges – Growth in home furnishings – Space growth – Benefiting from being part of ARG

John Peace Group Chief Executive

GUS - summary

• Delivered another strong financial performance
• Continued to unlock value in the Group
• Investing in three main businesses to deliver growth
• While not underestimating the current challenges in some
• f our markets, we are confident of the strength of our

competitive position

Appendix

Impact of 2004 2003 exchange £m £m rate £m

Sales by division

Argos Retail Group 2,675 2,435 (4) Experian 645 638 (47) Burberry 348 321 (19) Lewis Group 86 73 3 Central activities

• 5
• Inter-divisional sales

(5) (5)

• Total continuing operations

3,749 3,467 (67) Discontinued operations*

• 269
• Total sales

3,749 3,736 (67) 6 months to 30 September

* Represents ARG discontinued operations

Argos Retail Group 172.7 153.0 (0.4) Experian 152.7 145.7 (11.5) Burberry 78.8 66.9 (3.1) Lewis Group 24.8 19.8 0.9 Central activities (10.8) (9.8)

• Total continuing operations

418.2 375.6 (14.1) Discontinued operations*

• 15.0
• Operating profit

418.2 390.6 (14.1) Interest expense (12.4) (36.2) 0.5 Profit before goodwill, exceptionals and tax 405.8 354.4 (13.6)

Profit by division

6 months to 30 September Impact of 2004 2003 exchange £m £m rate £m

* Represents Property

Profit by division and geography

Profit for 12 months to 30 September 2004

Operating profit for continuing businesses and before Central activities

7% 65% 21% 7% UK/Ireland North America Continental Europe Rest of World 5% 47% 32% 16% ARG Experian Burberry Lewis Group

Argos 118.4 106.2 Homebase 107.1 99.3 Financial Services 1.4 (2.4) Wehkamp 12.3 12.8 Experian North America 123.8 134.0 Experian International 79.4 68.0 Burberry 88.5 77.3 Lewis Group 26.6 21.5 Central activities (4.9) (9.5) Continuing operations 552.6 507.2 Discontinued operations*

• 19.4

Depreciation and amortisation# (134.4) (136.0) Net interest (12.4) (36.2) Profit before goodwill, exceptionals and tax 405.8 354.4

* For 2003, represents ARG discontinued operations (being two months depreciation) of £4.1m and Property of £15.3m # Excluding amortisation of goodwill

EBITDA by division

2004 2003 £m £m 6 months to 30 September

Another year of below 25% tax rate

30.2% 24.4% 22.8% 23.5% 23.8% 22.7% 33.7% c25%* c24.4% 23.4%

1997 1998 1999 2000 2001 2002 2003 2004 2005e 2006e Year to March

* Under UK GAAP

Return on capital - definition

• Return: Profit before gross interest, amortisation of goodwill

and exceptional items

• Capital: Average of opening and closing trading net assets plus

goodwill at cost (whether capitalised or previously written off)

• Post-tax return on capital applies the Group effective tax rate
• 2003 return on capital calculation adjusted to reflect two

months of Homebase capital

• 2004 return on capital calculation adjusted to exclude opening

net assets of ARG discontinued operations

H1 2000 806 (1) (3)

• H2 2000

1,246 13 11 2 2,052 7 5 1 H1 2001 923 14 11 3 H2 2001 1,365 9 6 3 2,288 11 8 3 H1 2002 1,076 17 13 6 H2 2002 1,598 17 13 6 2,674 17 13 6 H1 2003 1,207 12 7 4 H2 2003 1,810 14 7 2 3,017 13 7 3 H1 2004 1,377 14 7 3 H2 2004 2,007 11 4 1 3,384 12 5 2 H1 2005 1,552 13 7 2

Argos – sales growth

Total LFL LFL# Sales* change change change £m % % %

* Excluding Argos Additions and jungle.com until its integration into Argos in H1 2003

Argos Market

Argos – increased range

7,300 7,700 8,300 8,700 8,900 9,300 11,400 11,600 12,700 13,000 4,800 4,500 4,000 13,200 3,800

AW99 SS00 AW00 SS01 AW01 SS02 AW02 SS03 AW03 SS04 AW04 Argos Argos Extra additional lines

Number of catalogue merchandise lines

Experian NA mortgage related sales

Experian North America sales to mortgage sector

0% 2% 4% 6% 8% 10% 12% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 % of total ENA sales Year to March 03

• 8% of ENA sales in FY 2004

were mortgage-related

• Declined to 6% in H1 2004/5

Year to March 04 Year to March 05

US mortgage market

• As expected, refinancing

has slowed

• 10% pa growth in

purchase originations

• ver last 10 years

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04F 05F

Purchase originations Refinance originations

Source: Mortgage Bankers Association – October 2004 $bn

Financial calendar 2005

13 January

• Third Quarter Trading Update

14 April

• Second Half Trading Update

25 May

• Preliminary Results

20 July

• AGM and First Quarter Trading Update

October

• First Half Trading Update

17 November

• Interim Results

Contacts

GUS plc One Stanhope Gate London W1K 1AF Tel: +44 20 7 495 0070 Fax: +44 20 7 495 1567 Website: www.gusplc.com

David Tyler Group Finance Director Tel: +44 20 7 318 6204 Fax: +44 20 7 318 6257 Email: david.tyler@gusplc.com Fay Dodds Director of Investor Relations Tel: +44 20 7 318 6245 Fax: +44 20 7 318 6253 Email: fay.dodds@gusplc.com Peter Blythe Director of Finance Tel: +44 20 7 318 6230 Fax: +44 20 7 318 6253 Email: peter.blythe@gusplc.com Stuart Ford Investor Relations Manager Tel: +44 20 7 318 6245 Fax: +44 20 7 318 6253 Email: stuart.ford@gusplc.com

Certain statements made in this announcement 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 results to differ materially from any expected future results in forward looking statements.