Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — FY2019 Earnings Presentation
80 slides from Howden Joinery's earnings presentation, Feb 27, 2020
Slide 1: 2019 Preliminary Results
2019 Preliminary Results 27th February 2020 1 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 2: Andrew Livingston, Chief Executive Officer
Andrew Livingston Chief Executive Officer 2 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 3: A year of progress
A year of progress • Operating Profit increased at a higher rate than revenues Sales 4.8% Gross Profit 5.8% Operating Profit 8.3% • Price increase in January • More profitable balance between volume and price • Period 11 record sales • Continued to make investments in the business 3 Howdens Ho
Slide 4: Initiatives to increase volumes and profits
Initiatives to increase volumes and profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 4 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 5: Mark Robson, Deputy CEO and Chief Financial Officer
Mark Robson Deputy CEO and Chief Financial Officer My CEO and Chief Financial Officer
Slide 6: Highlights
Highlights Revenue, £m Gross profit, £m, and margin, % Operating profit, £m, and margin, % HJ UK Cont Europe 1,650 1,000 62.3% 270 1,583.6 16.4% 1,600 260 33.3 950 61.7% 1,550 1,511.3 986.2 250 1,500 15.9% 260.0 34.0 1,550.3 900 240 1,450 932.2 1,477.3 850 230 1,400 240.1 1,350 220 800 1,300 210 1,2
Slide 7: Revenue
Revenue 2019 UK depot revenue £1,550.3m • total +4.9% • LFL +2.5% 2019 Continental Europe depot revenue £33.3m • France total (€) +3.8% • LFL +3.1% 2019 Preliminary Results 7 Howdens 2019 Interim Results
Slide 8: Group gross profit margin
Profit before tax Group gross profit margin • 2018: 61.7% • 2019: 62.3% Profit before tax Gross profit Volume & £m Gross £m mix Profit (revenue) Change 54 Price 11 £54.0m Change (revenue) £22.2m 61 Volume & mix Currency 986.2 Interest, (COGS) (3) etc. Cost (4) 260.7 pressure/ 2 savings, Operating et
Slide 9: Operating costs
Operating costs £m Change £34.1m GMP Closure Costs equalisation Growth 4 6 related 726.2 Older 8 depots 7 New depots 17 692.1 • 2018 2019 2019 Preliminary Results 9 Howdens 2019 Interim Results
Slide 10: Income statement
Income statement £m 2019 2018 Revenue 1,583.6 1,511.3 Cost of goods sold (597.4) (579.1) Gross profit 986.2 932.2 Operating costs (before GMP equalisation charge) (726.2) (688.3) GMP equalisation charge - (3.8) Operating profit 260.0 240.1 Net interest 0.7 (1.6) Profit before tax 260.7 238.5 Tax (51
Slide 11: Earnings per share & dividends
Earnings per share & dividends £m 2019 2018 • Earnings per share 35.0p 31.3p • Dividend - Final (recommended) 9.1p 7.9p - Full year 13.0p 11.6p 2019 final dividend costing £54.9m 2019 Preliminary Results 11 Howdens 2019 Interim Results
Slide 12: Net cash and cash flow
Net cash and cash flow £m 2019 2018 Opening net cash 231.3 241.1 Operating cash flows before movements in working capital 300.8 274.6 Working capital (6.3) (49.7) Capital expenditure (61.1) (44.3) Tax paid (46.2) (45.4) Dividends (70.6) (68.3) Share repurchases (55.2) (62.2) Pension contribution (26
Slide 13: Working capital
Working capital • Working capital increased £6.3m – stock up £5m – debtors up £7m – creditors up £6m 2019 Preliminary Results 13 Howdens 2019 Interim Results
Slide 14: Return of excess cash to shareholders
Return of excess cash to shareholders • Two year share repurchase programmes: - February 2017: £80m - March 2018: £60m - February 2019: £50m - February 2020: £85m Shareholder Returns 2018 2019 2020 Total Feb 2017 programme 32 - 80 March 2018 programme 30 30 60 Feb 2019 programme - 25 25 50 Feb 2020
Slide 15: Pension scheme deficit
Pension scheme deficit Net discount £m rate 197 IAS19 basis Contribution (47) Current Change service £20.6m charge + admin cost + interest 21 56.6 36.0 Asset returns (150) • Dec Dec 2018 2019 2019 Preliminary Results 15 Howdens 2019 Interim Results
Slide 16: Current trading and outlook for 2020
Current trading and outlook for 2020 • UK sales in first two periods up 1.6%, LFL down 0.2% Excluding week 1 +3.5%, LFL +1.6% • Operating expenditure – Cost benefit £6m • Europe – Cost investment £20m • phase 2 Raunds transfer (dual running) • digital development • pension increases • depreciation –
Slide 17: Andrew Livingston, Chief Executive Officer
Andrew Livingston Chief Executive Officer 17 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 18: Initiatives to increase volumes and profits
Initiatives to increase volumes and profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 18 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 19: Customers spending more with us, more frequently
Customers spending more with us, more frequently • 470,000 Credit and Cash Trade Accounts • Sales per customer increased • More transactions per customer • New customer spend up • Profit per new account up Lower acquisition costs 19 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 20: Our model: locally empowered depot teams
Our model: locally empowered depot teams … Local Recruitment Local Relationships Local Pricing Howdens Howdens 2019 2019 Interim Interim Results Results Local Stock 20
Slide 21: ... served by dedicated supply chain
... served by dedicated supply chain Scale Changing requirements 700+ customers Size 2x Peak Trading 21 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 22: A key feature of Howdens success is that we are trade only
A key feature of Howdens success is that we are trade only Builder forums held regularly across the country 22 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 23: Depot evolution
DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 23 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 24: Range and supply management
DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 24 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 25: New depot format to create best business environment
New depot format to create best business environment • Vertical racking of product in the warehouse Space utilisation improvements Potential for productivity gains 25 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 26: New depot format to create best business environment
New depot format to create best business environment • Open front area connecting depot staff and customers • Visibility and standard of design area improved • Doubling the display space for kitchens • Small items picking area behind the counter • Improved format at no extra cost • Adopted for all U
Slide 27: Improved densities: option to open smaller depots
Improved densities: option to open smaller depots • Smaller depots of c. 6,000 square feet • 8 smaller format depots opened in 2019 • Gives potential for 850 depots in the UK 27 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 28: Number of new depot openings increased in 2019
Number of new depot openings increased in 2019 • 39 new UK depots including 5 in Northern Ireland, all in new format 28 • Plan to open around 30 UK depots thisHowdens year 2019 Howdens 2019 Interim Interim Results Results
Slide 29: Roll-back opportunity of new depot format
Roll-back opportunity of new depot format • Initially converted 3 older depots Park Royal, Swansea & Guilford Trading for 8 months Encouraging performance • A further 8 older depots completed prior to P11 Deployed several capital spends 29 Howdens Howdens 2019 2019 Interim Interim Results Re
Slide 30: Learnings from reformats to date
Learnings from reformats to date • Improved our skill base and understanding of when to implement reformats during the year • Developed our thinking about how to scope, structure and execute a reformat • Now able to complete in 8 weeks, at lower cost • Refined the format, reducing refurbishment and
Slide 31: More reformats planned in 2020
More reformats planned in 2020 • Positive feedback from depots and customers at the converted depots • Encouraged by performance to date and expectations for 2020 • Plan to convert 30 more in 2020 • Budgeting for a average re-format cost of £225k 31 Howdens Howdens 2019 2019 Interim Interim Results
Slide 32: New format depots and re-racked depots
New format depots and re-racked depots End 2019 : Total Depots in New Format &/or Re-racked 80 80 71 70 70 62 60 60 50 50 40 40 30 60 30 20 20 10 10 11 0 0 New Depots Existing Depots New Format Depots Re-Rack Only End 2020 : Total Depots in New Format &/or Re-racked 150 140 131 120 125 112 100 100 8
Slide 33: Range and supply management
DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 33 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 34: 12 new kitchen ranges launched in 2019
12 new kitchen ranges launched in 2019 34 Howdens 2019 Interim Results
Slide 35: Kitchen trends
Kitchen trends 35 Howdens 2019 Interim Results
Slide 36: Contrasting colours and cleaner shaker look
Contrasting colours and cleaner shaker look 36 Howdens 2019 Interim Results
Slide 37: Matt technologies
Matt technologies 37 Howdens 2019 Interim Results
Slide 38: 2019: Traditional cabinet updated
2019: Traditional cabinet updated 38 Howdens 2019 Interim Results
Slide 39: 2019: Anthracite colour storage systems introduced
2019: Anthracite colour storage systems introduced 39 Howdens 2019 Interim Results
Slide 40: 2019: Extended range of worktops
2019: Extended range of worktops 40 Howdens 2019 Interim Results
Slide 41: 2019: 25 Lamona appliances
2019: 25 Lamona appliances 41 Howdens 2019 Interim Results
Slide 42: 2019: Key joiner's products added, ironmongery range extended
2019: Key joiner’s products added, ironmongery range extended 42 Howdens 2019 Interim Results
Slide 43: 2019: Pre-Finished Doors – saving fitting time
2019: Pre-Finished Doors – saving fitting time 43 Howdens 2019 Interim Results
Slide 44: 2019: New technology vinyl flooring, quicker and easier to fit
2019: New technology vinyl flooring, quicker and easier to fit 44 Howdens 2019 Interim Results
Slide 45: 2020: 13 new kitchen ranges in first half, 2 new styles
2020: 13 new kitchen ranges in first half, 2 new styles 45 Howdens 2019 Interim Results
Slide 46: 2020: Chilcomb, new timber range
2020: Chilcomb, new timber range 46 Howdens 2019 Interim Results
Slide 47: 2020: More colours in new ranges, Fairford Green
2020: More colours in new ranges, Fairford Green 47 Howdens 2019 Interim Results
Slide 48: 2020: Greenwich, Pebble
2020: Greenwich, Pebble 48 Howdens 2019 Interim Results
Slide 49: 2020: New handleless platform to meet demand for the linear style
2020: New handleless platform to meet demand for the linear style 49 Howdens 2019 Interim Results
Slide 50: 2020: New handleless platform to meet demand for the linear style
2020: New handleless platform to meet demand for the linear style 50 Howdens 2019 Interim Results
Slide 51: 2020: New handleless platform, many more style options
2020: New handleless platform, many more style options Kitchen ranges 51 Howdens 2019 Interim Results
Slide 52: 2020: New handleless platform: more affordable price points
2020: New handleless platform: more affordable price points 52 Howdens 2019 Interim Results
Slide 53: 2020: Clearer Range Architecture, clearer customer choice
2020: Clearer Range Architecture, clearer customer choice Modern Linear Shaker 53 Howdens 2019 Interim Results
Slide 54: 2020: New worktops, lighter shades and thinner profiles
2020: New worktops, lighter shades and thinner profiles 54 Howdens 2019 Interim Results
Slide 55: 2020: New technology Lamona at lower price points
2020: New technology Lamona at lower price points 55 Howdens 2019 Interim Results
Slide 56: Disciplined range management
Disciplined range management • 19 ranges cleared during the year • End of 2019, 67 current ranges, including some 2020 pre-launch stock • Around 65 current ranges is appropriate for our market at present • In 2020, we are aiming to remove at least the number of ranges we add 56 Howdens 2019 Interim
Slide 57: New Commercial Structure
New Commercial Structure • Clearer accountabilities for ranging decisions • Accessing of supply chain benefits • Improve communication across the business and suppliers • New kitchen and trade book launched week 3 • Strengthened promotional programme • All new products in stock prior to launch • Sup
Slide 58: Making more in the UK
Making more in the UK 58 Howdens 2019 Interim Results
Slide 59: Reducing costs, increasing flexibility and security of supply
Reducing costs, increasing flexibility and security of supply • Making doors for 5 of our new kitchen ranges Reducing costs of these doors Increasing supply chain flexibility • Installed a small batch production line Makes low volume, important SKUs Which third party vendors cannot supply at
Slide 60: Digital reinforces our strong local model
Digital reinforces our strong local model Increase awareness Improve communications Streamline processes 60 Howdens 2019 Interim Results
Slide 61: Our responsive platform is increasing builder and consumer awareness
Our responsive platform is increasing builder and consumer awareness 61 Howdens 2019 Interim Results
Slide 62: 1.5m more search impressions per month
1.5m more search impressions per month 62 Howdens 2019 Interim Results
Slide 63: Site visits +22% year on year
Site visits +22% year on year 63 Howdens 2019 Interim Results
Slide 64: Depot leads via the website up 35% year on year
Depot leads via the website up 35% year on year 64 Howdens 2019 Interim Results
Slide 65: New hierarchy enables swifter access to relevant pages
New hierarchy enables swifter access to relevant pages 80% of visits land on pages linked to specific searches 65 Howdens 2019 Interim Results
Slide 66: Product category views have increased significantly
Product category views have increased significantly 66 Howdens 2019 Interim Results
Slide 67: Richer content is enabling more successful search returns
Richer content is enabling more successful search returns Exterior door Dordogne oak External door Dordogne door Exterior door Genoa doors External doors Genoa oak Interior doors Holdenby doors Interior door Internal door Bi fold Internal doors Bi fold doors Bifold door Internal fire doors Bifold do
Slide 68: Search refinements can be tailored by users
Search refinements can be tailored by users to match their requirements 68 Howdens 2019 Interim Results
Slide 69: New, secure trade only platform
New, secure trade only platform 69 Howdens 2019 Interim Results
Slide 70: Co-built functionality with our trade customers
Co-built functionality with our trade customers Uses clear language Simple tile based design Mobile friendly user experience 70 Howdens 2019 Interim Results
Slide 71: Key user needs addressed
Key user needs addressed Manage their accounts and View credit details and make Download invoices and information relationship with depot payments 71 Howdens 2019 Interim Results
Slide 72: Trial assisted understanding of usage behaviours
Trial assisted understanding of usage behaviours Significant out of hours use 60% of users made a payment 50% of users downloaded Monday Tuesday Wednesday Thursday Friday Saturday Sunday documents In hours use 56% 44% Out of hours use Above average payments 72 Howdens 2019 Interim Results
Slide 73: Since roll-out feedback favourable, usage much higher
Since roll-out feedback favourable, usage much higher than on previous facility “Quite easy system for “Good, clear system, a novice at computer easy access to all bills” like me” “Utterly superb, especially bringing up invoice and see details. Best one by a country mile. Well done” “Very clear, eas
Slide 74: In 2020, we will continue to improve content and add capabilities
In 2020, we will continue to improve content and add more capabilities to our platform 74 Howdens 2019 Interim Results
Slide 75: International
DEPOT EVOLUTION RANGE MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 75 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 76: Development of French business
Development of French business • 5 depots opened in 2019 • New branding and leadership • Business Leader appointed • Germany & Holland closures completed 76 Howdens 2019 Interim Results
Slide 77: New Depots in France
New Depots in France • Depots opened before 2019 now cover all central costs • Further suitable sites identified • Howden trained teams available to staff more depots in 2020 Noisy le sec • Five depot openings planned subject to business performing in line with expectations 77 HowdensMassy 2019 Inte
Slide 78: Summary
Summary 2019 - A year of progress • Improved profitability • Invested in people, infrastructure, depots and product • Pleased with the response to the initiatives In 2020 • Aim to retain a profitable balance between price and volume • Continue depot openings and test roll back opportunity further •
Slide 79: Expo 2020
Expo 2020 Thursday 16th April 2020 79 Howdens 2019 Interim Results
Slide 80: 2019 Preliminary Results
2019 Preliminary Results 27th February 2020 1 Howdens Howdens 2019 2019 Interim Interim Results Results