Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — FY2017 Earnings Presentation
38 slides from Howden Joinery's earnings presentation, Mar 1, 2018
Slide 1: 2017 Preliminary Results
2017 PRELIMINARY RESULTS 1 March 2018
Slide 2: Richard Pennycook, Chairman
HOWDENS JOINERY CO. Richard Pennycook Chairman
Slide 3: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 4: A very successful business
A very successful business Good year for Howdens • Pricing initiatives • Revenue, gross profit growth and cash Product development • 26 ranges introduced in 2017 • Expanding range of kitchen styles Revenue Cash Investment drive Investment • Howden and Runcorn • Raunds operational in Period 11 2017 P
Slide 5: Mark Robson, Deputy CEO and CFO
Mark Robson Deputy CEO and Chief Financial Officer
Slide 6: Business developments
Business developments • 19 new UK depots • Supply – Howden and Runcorn new facilities on track • Raunds utilised for Period 11 Expect to migrate majority of distribution during 2018 • Introduced 26 new kitchen ranges 2017 Preliminary Results 6
Slide 7: Highlights
Highlights Revenue, £m Operating profit, £m, and margin, % Uses of ‘cash’, £m HJ UK Cont Europe 250 Pension def Cap ex Dividend Share rep 18.1% 16.6% 1450 250 237.2 234.4 1403.8 225 200 80.0 1400 31.8 47.9 200 150 1372.0 65.4 1350 68.4 100 1307.3 175 63.5 1300 25.6 50 48.5 1281.7 35.0 30.0 150 0 125
Slide 8: Revenue
Revenue 2017 UK depot revenue £1,372.0m • total +7.1% • LFL +5.2% 2017 Cont’l Europe depot revenue £31.8m • France total +11.1% • LFL +6.4% 2017 Preliminary Results 8
Slide 9: Profit before tax
Profit before tax Group gross profit margin • 2017: 63.3% • 2016: 64.2% Profit before tax Gross profit £m £m Volume Gross Profit & mix (revenue) 48 81 Cost pressure/ savings, Change etc. £48.5m Change (net) Volume (3) £4.8m & mix 888.4 Interest, (COGS) Currency etc. (30) (15) 237.0 (2) 232.2 Price (
Slide 10: Operating costs
Operating costs Change Operating £51.3m costs £m 53rd week 8 654.0 Growth Other related 5 19 Older depots 9 New depots 10 602.7 • 2016 2017 2017 Preliminary Results 10
Slide 11: Income statement
Income statement £m 2017 2016 Revenue 1403.8 1307.3 Cost of goods sold (515.4) (467.4) Gross profit 888.4 839.9 Operating costs (654.0) (602.7) Operating profit 234.4 237.2 Net interest (2.2) (0.2) Profit before tax 232.2 237.0 Tax (47.2) (51.4) Profit for the period 185.0 185.6 2017 Preliminary Res
Slide 12: Earnings per share, dividends and repurchases
Earnings per share, dividends and repurchases £m 2017 2016 Earnings per share 29.9p 29.5p Dividend • final (recommended) 7.5p 7.4p full year 11.1p 10.7p • 2017 final dividend costing £46.0m • Repurchased £48m of shares during 2017 2017 Preliminary Results 12
Slide 13: Net cash and cash flow
Net cash and cash flow £m 2017 2016 Opening net cash 226.6 226.1 Operating cash flows before movements in working capital 266.6 265.1 Working capital (26.9) 1.5 Capital expenditure (48.5) (63.5) Tax paid (41.8) (28.8) Dividends (68.4) (65.4) Share repurchases (47.9) (80.0) Pension contribution (21.2
Slide 14: Working capital
Working capital • Working capital increased £26.9m – stock up £25m – debtors up £2m – creditors flat 2017 Preliminary Results 14
Slide 15: Return of excess cash to shareholders
Return of excess cash to shareholders • February 2017 – up to £80m to be returned via new share repurchase programme during next two years – £48m returned in 2017 remaining £32m due in 2018 • Along with ordinary dividend payments, 2017 shareholder payments totalled £116m • March 2018 – Further share
Slide 16: Pension scheme deficit
Pension scheme deficit Net discount £m rate 79 IAS19 basis Contribution Current (41) Change Net service interest £3.3m charge 2 20 109.3 106.0 Asset returns (57) • Dec Dec 2016 2017 2017 Preliminary Results 16
Slide 17: Current trading and outlook for 2018
Current trading and outlook for 2018 • Sales in first two periods up 12.5% (excluding week 1 & 2) – extra week trading in 2018 compared to 2017 – up 7.9% in same period 2016-2018 • Up to 30 new depots in UK • Cost pressures – ongoing and inflation – continued investment including digital upgrades –
Slide 18: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 19: Focused on the trade
Focused on the trade Professionals doing a complex job The builder is the centre of what we do Depot managers feel confident with the right product Designed with the builder in mind Supplied from local stock The builder depends on Howdens 2017 Preliminary Results 19
Slide 20: The changing market
The changing market Fashion cycles are faster The right design at the right price Increasing demand for choice Kitchen SKUs More documentation 700 6,000 (2008) (2017) New technologies Technology allows for more affordability 2017 Preliminary Results 20
Slide 21: Accelerating product introductions in 2017
Accelerating product introductions in 2017 26 new ranges in 2017 11 new grey options More accessories New oak cabinet Greenwich Super Matt Grey Managing complexity in a sophisticating market 2017 Preliminary Results 21
Slide 22: Making design affordable
Making design affordable Howdens now installs 30% of all solid surface worktops sold • Up from 10% in 2016 • Solid surface worktops now account for 50% of total market • Increasing solid surface fitters Introduced linear style of kitchen Developing online presence White Mirror Chip Quartz worktop an
Slide 23: Increasing complexity
Increasing complexity The demand for more choice Make complex as simple as possible Expect to introduce around 20 new ranges New styles and finishes Grey Oak cabinet Investing to benefit from change 2017 Preliminary Results 23
Slide 24: Investing in the future of supply
Investing in the future of supply Raunds used for bulk storage during Period 11 650,000 sq.ft. with double the height Fully operational for Period 11 Upgraded to SAP Hana Building for the future 2017 Preliminary Results 24
Slide 25: Ongoing depot opening programme
Ongoing depot opening programme Currently 662 depots • 19 depots opened in 2017 • Scope for up to 800 depots Low cost • c.10,000 sq.ft • Rent c.£5.50 / sq.ft • Fit out c.£300,000 • Breakeven point c.£650,000 Opened in 2017 2017 Preliminary Results 25
Slide 26: Flexibility – a local business
Flexibility – a local business Each depot has its own customers and cost base Differing styles of manager and rhythm of customers = different balance, depot by depot Addressing complexity generates margin Local accountability = inherent flexibility 2017 Preliminary Results 26
Slide 27: Continental Europe
Continental Europe 24 depots • 20 depots in France • 2 depots in Belgium • 1 depot in Netherlands • 1 depot in Germany France • FY LFL sales + 6.4% Depots at Dec 2017 2017 Preliminary Results 27
Slide 28: Rob Fenwick, Chief Operating Officer, Supply
Rob Fenwick Chief Operating Officer, Supply
Slide 29: Investment to meet a complex market
Investment to meet a complex market Distribution • Good progress at Raunds • Will be used for Period 11 • Permission for two new facilities 2017 10k deliveries and 8 million pieces in P11 alone Capacity • Runcorn and Howden on track • Capacity and complexity • Site visit in 2018 to Howden 2017 Preli
Slide 30: Andy Witts, Chief Operating Officer, Trade
Andy Witts Chief Operating Officer, Trade
Slide 31: Andy Witts, COO Trade
Andy Witts, COO Trade Product ranges • Rapid introduction of kitchen ranges in 2017 • ~20 new ranges for 2018 Gearing up the depots Right product • New catalogue with aspirational photography Right price • Technology brings high-end looks mainstream Autonomy of local managers • Price flexibility wor
Slide 32: Theresa Keating, Finance Director
Theresa Keating Finance Director
Slide 33: Theresa Keating, Finance Director
Theresa Keating, Finance Director Week 53 impact in 2017 P11 impact in FY 2018 Debt collection remains robust with bad debt <1% of revenue Strong financial Pension review process ongoing structure Planning for growth 2017 Preliminary Results 33
Slide 34: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 35: A good year for Howdens
A good year for Howdens Flexibility in pricing Broadening appeal Growth Plenty of and cash opportunities New ranges Local and flexible A successfulThe business suitedtotomake capability a changing environment our own future 2017 Preliminary Results 35
Slide 36: Richard Pennycook, Chairman
HOWDENS JOINERY CO. Richard Pennycook Chairman
Slide 37: Q&A
HOWDENS JOINERY CO. Q&A
Slide 38: 2017 Preliminary Results
2017 PRELIMINARY RESULTS 1 March 2018