Slide 1: Eurocell Plc 2018 Half Year Results
EUROCELL PLC 2018 Half Year Results
Slide 2: Agenda
AGENDA Manufacturer Business Review Mark Kelly Chief Executive Officer Financial Review Distributor Michael Scott Chief Financial Officer Summary and Outlook Mark Kelly Recycler 1
Slide 3: Overview
OVERVIEW Mark Kelly – Chief Executive Good progress with strategic priorities Revenue Further gains in market share £118.8m Optimising existing branch estate ▲ 10% (H1 2017: £108.1m) Increasing use of recycled material Acquisition of Ecoplas Adjusted EBITDA £14.2m Financial results in line with expe
Slide 4: Market Backdrop: Mixed Economic Indicators
Private Housing RMI Spend (£bn) MARKET BACKDROP 21.9 22.8 Mixed Economic Indicators 21.9 22.3 19.9 18.6 Driver Description '15a '16a '17e '18e '19e '20e UK GDP has slowed and is forecast to grow by 1.3% in GDP Lower scenario Central scenario Upper scenario 2018 and 1.4% in 2019 (2017: 1.7%) Dropped
Slide 5: Sales Overview: Gaining Share in Flat RMI Market
Total Window Units Supplied to SALES OVERVIEW Each Sector of the Market (%) Gaining Share in Flat RMI Market 13% 13% 7% Sales Growth (%) H1 2017 H2 2017 H1 2018 Group 21% 46% Organic 9% 7% 10% Like-for-like(1) 6% 2% 5% First time replacements Extensions Profiles Second time replacements New Build Co
Slide 6: Profiles – Performance in H1 2018
DIVISIONAL REVIEW Profiles – Performance in H1 2018 ► Gaining share – 9% like-for-like growth Profiles Division P&L £m H1 H1 ► Benefit of new account wins 2018 2017 Change - > 20 account wins in 2017 3rd Party Revenue 50.5 46.4 ▲9% - Good prospect pipeline, with 4 new accounts so far in 2018 Inter-s
Slide 7: Profiles – Co-extrusion Capacity
DIVISIONAL REVIEW Profiles – Co-extrusion Capacity Estimated Capacity Utilisation Levels 120% ► Sharp uplift in demand and significant mix change in Q2 100% - Co-extruded products well ahead of expectations 80% - Sales demand met partially via safety stocks 60% ► Shortage of co-extrusion capacity in
Slide 8: Building Plastics – Performance in H1 2018
DIVISIONAL REVIEW Building Plastics – Performance in H1 2018 ► Gaining share – 10% organic growth Building Plastics Division P&L £m H1 H1 ► Like-for-like(1) sales up 3% 2018 2017 Change - Driven by maturing branches – opened 2016 and prior 3rd Party Revenue 68.3 61.8 ▲11% - One-stop shop: traded goo
Slide 9: Building Plastics – Focus for 2018
DIVISIONAL REVIEW Building Plastics – Focus for 2018 Indicative Branch Economics (Rounded) Branch Open ► 2018 focus on optimising existing estate <2 2-4 >4 years years years - Historically 2 years to break-even and 4 years to maturity No. of Branches 37 33 126 - 37 branches < 2 years old Average Sal
Slide 10: Financial Highlights
FINANCIAL HIGHLIGHTS Michael Scott – Chief Financial Officer Revenue Gross Margin Adjusted(2) EBITDA £118.8m 50.0% £14.2m ▲10% (H1 2017: £108.1m) ▼ 1.4% (H1 2017: 51.4%) ▼ 5% (H1 2017: £14.9m) Adjusted(2) Basic EPS Interim Dividend Net Debt 8.8p 3.1p per share £16.4m ▼ 6% (H1 2017: 9.4p) ▲ 3% (H1 20
Slide 11: Financial Performance: Group Profit and Loss
FINANCIAL PERFORMANCE Group Profit and Loss £m H1 2018 H1 2017 Change Revenue 118.8 108.1 ▲ 10% Gross Profit 59.4 55.6 Gross Margin % 50.0% 51.4% Overheads (45.2) (40.7) Adjusted EBITDA(1) 14.2 14.9 ▼ 5% Depreciation and Amortisation (3.4) (3.3) Finance Costs (0.3) (0.3) Adjusted Profit Before Tax(2
Slide 12: Sales Performance: Strong Sales Growth
SALES PERFORMANCE Strong Sales Growth Like-for-like(1) 120 sales ▲5% 0.5 118.8 4.5 115 1.6 113.8 4.1 £m 110 108.1 105 100 H1 2017 Profiles LFL Building Plastics Group LFL 2017 / 2018 Acquisitions H1 2018 LFL branches ► Sales ▲ 10% excluding acquisitions ► Building Plastics: ▲ 7% from branches - Grou
Slide 13: Gross Margin: Increased Manufacturing Costs
GROSS MARGIN Increased Manufacturing Costs 51.4% -0.9% +£0.1m / -0.8% +0.3% 50.0% 62 2.2 (2.1) 60 0.3 59.4 3.4 £m 58 56 55.6 54 H1 2017 Underlying Selling price Raw material Increased H1 2018 volume increases costs recycling ► Underlying volume (-90 bps) ► Raw material cost inflation and selling pri
Slide 14: Overheads: Investment in Business Expansion
OVERHEADS Investment in Business Expansion Like-for-like(1) 46 overheads▲4% 2.2 0.2 45.2 44 1.4 42.8 £m 42 0.7 40.7 40 38 H1 2017 Wage inflation Other Group LFL 2017 / 2018 Acquisitions H1 2018 branches ► Like-for-like(1) cost increase ▲ 4% ► 37 new branches opened in 2017 / 2018 - Impact of minimum
Slide 15: Capex: Investment in Business Expansion
CAPEX Investment in Business Expansion Total Capital Expenditure 8 7.5 7.2 ► H1 2018 capex £3.1m (H1 2017: £3.6m) 6 6.4 - Growth capex £1.6m 5.1 £m • Increase recycling capacity £1.2m (includes new co-extrusion lines 4 and tooling) 3.6 • New branches £0.4m 3.1 2 - Recurring / maintenance capex £1.5m
Slide 16: Working Capital: Cash Flow Management
WORKING CAPITAL Cash Flow Management Key Working Capital Metrics(1) Stock Debtor Creditor ► Net outflow from working capital £4.7m Days Days Days - H1 2017 outflow £1.9m June 2017 58 41 52 Dec 2017 55 37 43 ► Debtor days at 43 vs 41 at June 2017 June 2018 58 43 56 - H1 2018 receivables ▲ £8.7m - Sea
Slide 17: Cash Flow: Robust Cash Flow Generation
CASH FLOW Reconciliation of Net Debt Robust Cash Flow Generation £m Dec 2017 June 2018 Change 16 Cash 11.4 4.5 (6.9) 14.2 4.7 Borrowing (25.9) (20.9) 5.0 Net Debt (14.5) (16.4) (1.9) 12 1.9 7.6 (1) 3.2 8 0.1 £m 0.2 6.0 4 0 (1.9) -4 H1 2018 Working Tax and Net cash Capex Acquisition Financing Dividen
Slide 18: Strategic Priorities
STRATEGIC PRIORITIES Mark Kelly – Chief Executive Clear strategy to create long term value Focus in 2018 Increase use of recycled materials • Investing to increase usage to c.10kt • Improving consistency of offering Expand the branch network • On track for up to 15 new branches 5 Target growth in ma
Slide 19: Increased Recycling – Acquisition of Ecoplas
STRATEGIC PRIORITIES Increased Recycling – Acquisition of Ecoplas ► Strategic priority to increase use of recycled material Acquisition summary: - Widening gap in price of recycled vs virgin compound ► £5m for 95% of Ecoplas • Resin up c.£150/t in last 2 years - Remaining 5% for up to £1m in 3-5 - E
Slide 20: Summary and Outlook
SUMMARY And Outlook Financial results in line with expectations and outlook unchanged Strong sales growth Gross profit in line Gross margin % lower – short-term increase in manufacturing costs, following significant uplift in demand in Q2 EBITDA down as anticipated, reflecting timing of branch openi
Slide 21: Appendices
Appendices eurocell: All together better
Slide 22: Product Range
PRODUCT RANGE Ranges of window and door profile Skypod pitched skylights Aspect bi-folding doors Conservatories and Equinox tiled roofs Fascias, soffits and guttering Traded goods Products sold through two major trading divisions: Profiles and Building Plastics (branches) 21
Slide 23: Profiles Division
PROFILES DIVISION Use of Recycled PVC in Manufacturing (%) 20% ► Manufactures: 17% - Extruded rigid and foam PVC profiles using 16% 14% virgin PVC compound 12% 9% - Rigid products also include recycled compound 8% 6% - Full manufacturing margin recorded in Profiles 4% 4% – benefits from branch expan
Slide 24: Building Plastics Division
BUILDING PLASTICS DIVISION Typical Branch Format ► Sells: - Range of Eurocell manufactured and branded PVC foam roofline and window fitting / maintenance products - Third party manufactured ancillary products: sealants, tools and rainwater products - Vista doors - Windows fabricated by third parties
Slide 25: Locations
LOCATIONS Centrally located Extrusion centre Secondary Recycling Warehousing & HQ, Manufacturing, 140,000 sq ft operations (foiling) Factory (Merritt) Conservatory Warehousing, 50 extruders 120,000 sq ft Injection Moulding 10 foiling machines 75,000 sq ft Roofs and Recycling 260,000 sq ft Injection
Slide 26: Route to Market
ROUTE TO MARKET Recycling: Merritt Plastics 8,300 tonnes of recycled compound consumed (17% of profile raw material consumed) Third Party Suppliers Manufacturing Facilities: Retail Branches: Third Party 35,000 tonnes of virgin Eurocell Profiles Eurocell Building Plastics Suppliers e.g. compound cons
Slide 27: Recycling at Merritt Plastics
RECYCLING AT MERRITT PLASTICS Post-consumer Post-industrial 14,200 tonnes 6,300 tonnes collected and collected and recycled by Merritt recycled by Merritt 8,300 tonnes 4,900 tonnes Recycled recycled compound recycled compound compound used in production of used in trade stock rigid profile extrusion
Slide 28: Differentiation
DIFFERENTIATION B2B supplier Sustainability Vertically Stable ownership Clear strategy of innovative PVC In-house integrated Fresh focus, with Grow market share, building products closed loop business model new horizons expand branch recycling facility Recycling, network, develop manufacturing new p
Slide 29: Corporate and Operational History
CORPORATE AND OPERATIONAL HISTORY Eurocell Building Branch expansion Branch expansion Branch expansion reaches 100 Plastics launched reaches 150 reaches 50 Operational Branch 1st Eurocell expansion Building Plastics reaches 196 Extrusion branch business Rebranding: Primary founded, Primary Primary s
Slide 30: Disclaimer
DISCLAIMER This Presentation may contain forward-looking statements form of commitment on the part forward-looking statements that involve risks and uncertainties of the Company to proceed with involve substantial risks and because they relate to events and any transaction. uncertainties, and actual
Slide 31: Eurocell – All together better
eurocell ® All together better 30