Preliminary results for year to 31 March 2006 24 May 2006 Sir - - PowerPoint PPT Presentation

Preliminary results for year to 31 March 2006 24 May 2006

Introduction Sir Victor Blank Chairman

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. 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.

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

Financial review David Tyler Group Finance Director

Summary results

Continuing operations

• Sales

7,262 6,663 9

• EBIT

745 695 7 Reported Benchmark PBT 829 910 (9) 2 0 0 6 2 0 0 5 Change £ m £ m % 1 2 m onths to 3 1 March

See Appendix for definition of Benchmark PBT and for details of 2005 IFRS restatements

1 2 m onths to 3 1 March Change at 2 0 0 6 2 0 0 5 constant FX £ m £ m £ m 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 )

Profit by business

* Represents Lewis, Burberry and Wehkamp

2 0 0 6 2 0 0 5 Change £ m £ m % 1 2 m onths to 3 1 March 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)

ARG

Sales 5,548 5,313 4

2 0 0 6 2 0 0 5 Change £ m £ m % 1 2 m onths to 3 1 March

• 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

Argos

EBIT* 291.0 320.0 (9) EBIT margin 7.5% 8.8% Sales 3,893 3,652 7

* 2005 restated by (£1.2m)

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 %

Argos – costs

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
• ffset by onerous lease provision of £2.4m
• Further store impairment charge in 2006 of £12.8m; falls

below Benchmark PBT line

2 0 0 6 2 0 0 5 Change £ m £ m % 1 2 m onths to 2 8 February

• 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

Homebase

EBIT* 51.8 113.8 (54) EBIT margin 3.3% 7.2% Sales 1,562 1,580 (1)

* 2005 restated by £5.2m

2 0 0 6 £ m Underlying inflation 4% Investments/ productivity improvements etc 4% – New space/ mezzanines – Furniture Extra Total cost increase 8 %

Homebase – costs

EBI T £ m 2002 2003 2004 2005 2006

Experian

Sales £ m 2002 2003 2004 2005 2006 Year to March Year to March

1 ,1 1 5 1 ,2 0 1 1 ,2 8 6 2 2 4 2 5 6 2 8 2 + 1 2 % + 1 4 % + 2 0 % + 2 0 % + 1 8 % 1 ,3 3 2 + 1 6 % 3 1 6 1 ,7 2 2 4 1 7 + 2 7 % + 2 9 %

2 0 0 6 2 0 0 5 Grow th $ m $ m % 1 2 m onths to 3 1 March* 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%

Experian North America

• 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

Sales 1,789 1,315 36

2 0 0 6 2 0 0 5 Grow th # £ m £ m % 1 2 m onths to 3 1 March*

• 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

Experian International

EBIT 151.3 126.6 20 EBIT margin 21.0% 20.4%

* Continuing activities only # At constant exchange rates

Sales 722 620 16

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

Discontinued operations

• 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

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% )

2 0 0 6 2 0 0 5 Change £ m £ m % 1 2 m onths to 3 1 March

EPS and dividends

Benchmark PBT 829 910 (9) Benchmark EPS 62.3p 62.0p

• Dividend per share*

31.5p 29.5p Dividend cover 1.98x 2.10x 2 0 0 6 2 0 0 5 Change £ m £ m % 1 2 m onths to 3 1 March

* 2006 dividend per new consolidated GUS share; 2005 dividend per old share

2 0 0 6 2 0 0 5 £ m £ m 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

Cash flow

* Excluding amortisation of acquisition intangibles # For continuing operations only. Under IFRS, net cash flow of discontinued operations is shown separately

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 )

Cash flow

* For continuing operations only. Under IFRS, net debt flow of discontinued operations is shown separately

2 0 0 6 2 0 0 5 £ m £ m 1 2 m onths to 3 1 March

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

Group balance sheet

Net debt (1,974) (1,427) Capital em ployed 3 ,1 3 2 3 ,3 1 1 2 0 0 6 2 0 0 5 £ m £ m

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

Pro form a EBI T* £ 7 6 6 m

5 5 % 4 5 %

Transforming the Group

Operating profit * £ 5 1 9 m

4% 30 % 3 9 % 9% 5 % 6 % 7 % Experian ARG Burberry Lew is Finance Property Experian ARG * Before central activities

Year to March 2 0 0 0 Year to March 2 0 0 6

Hom e shopping

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

ARG in 2006

• Consumer spending under pressure

in 2006

• ARG delivered many operational

improvements – People – Infrastructure – Space

• Continued to invest in key initiatives

while effectively controlling costs

• Further benefited from leveraging ARG

infrastructure

• Leading to Argos and Homebase both
• utperforming their markets

Argos – greater choice

• Argos Extra rolled out from July 2005
• Contributed an estimated 2% to sales
• Optimising ranges in 2006/ 07
• Trialling a standalone home catalogue

Pick up Deliver in store to home Total Receipt channel

Argos – integrated multi-channel model

Year to 3 1 March 2 0 0 6 Order channel Internet 6% 6% 12% Phone 4% 4% 8% In store 68% 12% 80% Total 78% 22% 100%

Argos – integrated multi-channel model

Homebase

• Weak demand in DIY market
• Increased promotional activity from

competitors

• Tactical promotions in H2 unproductive
• Looking forward, Homebase pursuing a less

promotional stance to improve gross margin

• Continued to invest in 2006 in key initiatives

in line with stated strategy

Homebase – rationale for acquisition

• Acquired in 2002 for three reasons

– Operates in attractive DIY and home furnishing markets – Homebase brand well-positioned in these markets – Significant synergies between Argos and Homebase benefiting both businesses

Homebase – key initiatives

• Pursuing initiatives that differentiate it from
• ther players

– All major product groups repositioned since acquisition – Customer service improved – Furniture Extra catalogue rolled out, increasing sales performance – Trialling 200-page home furnishing catalogue in 30 stores – Ten new stores opened; added more mezzanine floors – Further cost and revenue synergies from leveraging ARG infrastructure

ARG – summary

• Planning on basis of cautious outlook for recovery in

consumer spending

• ARG well-positioned in its markets

– Argos: multi-channel general merchandise retailing – Homebase: serving most attractive part of wider home enhancement market

• Strong management team with clear strategies for growth

Experian in 2006

• Sales up 27% ; EBIT up 29%
• About 100% of EBIT converted into
• perating cash flow for fourth

consecutive year

• Balance of organic and acquired growth
• Reinforced position as leader in global

information solutions

• Significant investment in new products

and emerging markets

• Continued reshaping of the portfolio
• Strong platform for helping acquired

companies grow

2006 - introduced new products

• Triple Advantage (Interactive): Tri-bureau credit monitoring

service for consumers

• Hunter II (Credit):

Web-based application fraud prevention software

• Vantage Score (Credit):

Joint development by three US credit bureaux of more consistent and predictive credit score

• Mosaic Japan (Marketing):

Classifies every Japanese household into 50 socio-economic types

The Queen’s Awards for Enterprise: Innovation Presented for Experian’s anti-fraud system, Hunter II

2006 - strengthened presence in emerging markets

• Significant investment in talent and

infrastructure – Now employ nearly 200 people in Asia Pacific; up more than 50% in year – Over 150 contributors signed up to Russian bureau – Helping to establish bureaux in Bulgaria and Romania

• Serving domestic and global clients

– Winning significant contracts

Siam Commercial Bank

2006 - £775m spent on acquisitions

• Technology platform to enable business lending
• Strengthens Experian’s offer in business credit
• Shopper counting and analysis
• Strengthens retail and property presence
• On line lead generation for mortgages and loans
• Provides wider financial services product offering
• On line comparison shopping services
• Extends services available to retail clients
• Bespoke marketing database solutions
• Brings more flexible technology to Experian

Transforming the portfolio

Sales Year to March 2 0 0 6 Sales Year to March 2 0 0 1

Credit 4 7 % Marketing 2 5 % Outsourcing 8 % I nteractive 2 0 % Credit 5 7 % Marketing 2 7 % Outsourcing 1 6 %

£ 1 .0 bn £ 1 .7 bn

Broad portfolio – helps in tough economy

• UK consumer lending growth slowed in

calendar 2005

• Experian in UK still delivered organic sales

growth of 6% (2005: 7% )

• Credit slowdown reduced rate of growth in

core credit origination products, but offset by – Selling other products to financial services clients: fraud prevention, customer retention and collections tools – Selling more into non-traditional sectors: telecomms, public sector – Consumer Direct nearly trebled as have exclusive arrangements with top five UK portals

Broad portfolio – cross-selling opportunities

• HSBC already a major global client for

Experian

• Recently signed global multi-million pound,

multi-year deal for Strategy Management software, initially in 22 countries

• Experian will enable up to 50bn customer

decisions annually

• Contract won due to

– High quality product – Global reach of Experian – Strength of existing relationship with Experian

Accelerating growth of acquired companies

• QAS acquired in 2004. Since then

– Strengthened presence in global markets, by leveraging Experian’s sales force and infrastructure – Joint development of new products

• Baker Hill acquired in 2005. Since then

– Won contracts with Fifth Third Bank and Westpac, helped by scale of Experian – Pursuing cross-sell opportunities as

• nly 80 common clients out of over

4,000

Experian - summary

• Global leader in information solutions
• Strong financial performance in 2006
• Well-positioned to capitalise on
• pportunities in growth markets

– Online advertising – Consumer credit – Multi-channel marketing – Fraud prevention – New sectors – Emerging markets

GUS - summary

• Planned demerger in October 2006 is the natural final step
• f our strategy
• Created £8bn of shareholder value since start of 2000
• Giving shareholders the choice to invest directly in three

well-positioned businesses – ARG – Burberry – Experian

Appendix

Benchmark PBT and EPS

• GUS has identified measures of Benchmark PBT and

Benchmark EPS that it believes will assist understanding of the performance of the business

• Benchmark PBT is defined as profit before amortisation of

acquisition intangibles, store impairment charges, exceptional items (i.e. gains or losses on disposal, demerger or closure of businesses and goodwill impairment charges), financing fair value remeasurements and taxation. It includes the Group’s share of associates’ pre-tax profit and the profits or losses of discontinued operations up to the date of disposal or closure

• Benchmark EPS takes Benchmark PBT less taxation

(attributable to Benchmark PBT) and minority interests, divided by the weighted average number of shares in issue (excluding own shares held in Treasury and in the ESOP Trust)

Sales by division

Argos Retail Group 5,548 5,313 1 Experian 1,725 1,362 36 Inter-divisional sales (11) (12)

• Total continuing operations

7 ,2 6 2 6 ,6 6 3 3 7 Discontinued operations* 653 1,124 6 Total sales 7 ,9 1 5 7 ,7 8 7 4 3

* Represents Lewis, Burberry and Wehkamp

I m pact of 2 0 0 6 2 0 0 5 exchange £ m £ m rate £ m 1 2 m onths to 3 1 March

Argos Retail Group 348.9 399.5 0.3 Experian 416.7 317.0 9.1 Central activities (20.2) (21.8)

• Total continuing operations

7 4 5 .4 6 9 4 .7 9 .4 Discontinued operations* 119.4 239.0 0.7 Net interest (36.3) (23.7) 0.5 Benchm ark PBT 8 2 8 .5 9 1 0 .0 1 0 .6

EBIT by division

* Represents Lewis, Burberry and Wehkamp

I m pact of 2 0 0 6 2 0 0 5 exchange £ m £ m rate £ m 1 2 m onths to 3 1 March

IFRS changes to 2005 comparatives

Argos1 305.0 303.8 (1.2) Homebase2 90.3 95.5 5.2 Benchmark PBT 906.0 910.0 4.0 Amortisation of acquisition (4.1) (11.6) (7.5) intangibles3 Tax (250.2) (249.7) 0.5 Attributable profit 598.8 595.8 (3.0) As As reported restated Change £ m £ m £ m

1 Clearer guidance on treatment of Guaranteed Rental Uplifts 2 Lower depreciation on impaired stores of £7.6m partly offset by onerous lease provisions of £2.4m 3 Reclassification of goodwill into acquired intangibles and resulting amortisation

1 2 m onths to 3 1 March 2 0 0 5

EPS calculation

• EPS calculation based on the weighted average number of

shares in issue (excluding own shares held in Treasury and in the ESOP Trust) 2005: 1,000.1m 2006: 946.7m 2007(e): 854m

Contacts

GUS plc One Stanhope Gate London W 1 K 1 AF Tel: + 4 4 2 0 7 4 9 5 0 0 7 0 Fax: + 4 4 2 0 7 4 9 5 1 5 6 7 W ebsite: w w w .gusplc.com

David Tyler Finance Director Tel: + 44 20 7 318 6204 Fax: + 44 20 7 318 6257 Email: david.tyler@gusplc.com Fay Dodds Director of I nvestor 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 6215 Fax: + 44 20 7 318 6253 Email: peter.blythe@gusplc.com Alison Collins I nvestor Relations Manager Tel: + 44 20 7 318 6294 Fax: + 44 20 7 318 6253 Email: alison.collins@gusplc.com