Grafton Group Plc · LSE:GFTU
Grafton — FY2014 Earnings Presentation
39 slides from Grafton's earnings presentation, Mar 10, 2015
Slide 1: Final Results 2014
Final Results 2014 Financial Year ended 31 December 2014
Slide 2: Cautionary Statement
Cautionary Statement 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 those expressed or implied by
Slide 3: Introduction & Highlights
Gavin Slark Group CEO Introduction & Highlights 3
Slide 4: Agenda
Agenda Introduction & Highlights - Gavin Slark Highlight Highlight Highlight 3 5 1 Financial Review - David Arnold Highlight 4 Strategic Progress & Outlook - Gavin Slark Questions 4
Slide 5: Group Performance Highlights
Group Performance Highlights Revenue up 9.6% to £2.1bn (11.0% in constant currency) Group operating profit margin increased by 120 basis points to 5.3% Highlight Highlight Highlight 3 5 Operating 1 profit up 43% to £110.1m Profit before taxation up 56% to £101.2m Highlight Adjusted basic earnings pe
Slide 6: Financial Review
David Arnold Group CFO Financial Review 6
Slide 7: Group Financial Highlights
Group Financial Highlights Change at constant 2014 2013 Change exchange rates Revenue (£’m) 2,081.7 1,899.8 +9.6% +11.0% Operating margin 5.3% 4.1% +120 bps Operating profit (£’m) 110.1 77.2 +43% Earnings per share (pence) 34.4 22.3 +54% Full year dividend (pence) 10.75 8.5 +26% Net debt (£’m) 75.3
Slide 8: Revenue Growth
Revenue Growth 2014 Like for Like 2014 Q1 Q2 Q3 Q4 FY Total Revenue Constant Reported currency Merchanting UK 9.8% 6.8% 5.9% 4.0% 6.5% 9.5% 9.5% Ireland 7.4% 18.6% 16.3% 12.4% 13.9% 11.7% 6.0% Belgium 28.7% (11.7%) (12.7%) (2.7%) (2.1%) 63.8% 55.6% Irish Retailing 3.1% 3.2% (2.0%) (3.3%) 0.2% (0.6%)
Slide 9: Revenue Growth Analysis
Revenue Growth Analysis 2,200 50 156 2,000 (24) 2,082 1,800 1,900 £’m 1,600 1,400 1,200 1,000 2013 Organic Acquisitions FX 2014 Growth 9
Slide 10: Organic Revenue Growth Analysis
Organic Revenue Growth Analysis 180 31.1 160 140 11.9 (8.1) 31.1 0.2 156.2 120 (0.8) £’m 100 80 90.8 60 40 20 0 UK Ireland Belgium Retail Manufacturing Growth Branch Organic Merchanting Merchanting Merchanting Initiatives Consolidations Growth LFL 10
Slide 11: Operating Profit Analysis
Operating Profit Analysis 120 1.9 0.6 110 1.6 (0.4) 110.1 100 29.2 90 £’m 80 70 77.2 60 50 40 30 2013 Like for Like Growth Property Acquisitions FX 2014 Initiatives Disposals 11
Slide 12: Like for Like Operating Profit Analysis
Like for Like Operating Profit Analysis 35 30 1.2 4.0 (0.6) Group 0.3 25 29.2 11.0 20 £’m 15 13.3 10 5 0 UK Irish Belgium Retail Manufacturing Central Like for like Merchanting Merchanting Merchanting Operating Profit 12
Slide 13: Operating Profit Drop Through
Operating Profit Drop Through 35 34% 22% 30 35% (0.6) Group 25 20 £’m 15% 15 10 5 0 UK Irish Belgium Retail Manufacturing Central Like for like Merchanting Merchanting Merchanting Operating Profit 13
Slide 14: UK Merchanting
UK Merchanting 2014 2013 % Change £m £m Revenue 1,525.6 1,393.0 +9.5% Operating profit 92.8 75.9 +22.2% Operating margin 6.1% 5.5% +0.6% pt Trading Growth in average daily like-for-like turnover of 6.5% Building materials price inflation estimated at 2.5% and volume growth 4.0% Gross margin 0.5% hig
Slide 15: Irish Merchanting
Irish Merchanting 2014 2013 % Change £m £m Reported Constant currency Revenue 257.5 243.0 +6.0% +11.7% Operating profit 16.4 5.2 +217.3% +234.3% Operating margin 6.4% 2.1% +4.3% pt - Trading Strong competitive position delivered like-for-like turnover growth of 13.9% Building materials price inflati
Slide 16: Belgian Merchanting
Belgian Merchanting 2014 2013 % Change £m £m Reported Constant currency Revenue 91.6 58.8 +55.6% +63.8% Operating profit 0.8 0.6 +31.8% +38.8% Operating margin 0.9% 1.1% -0.2% pt - Trading Like-for-like revenue down 2.1% in the YouBuild business – principally readymix Acquisition of Mpro completed i
Slide 17: Retailing
Retailing 2014 2013 % Change £m £m Reported Constant currency Revenue 158.2 167.9 (5.7%) (0.6%) Operating profit 2.4 1.2 +104.6% +115.5% Operating margin 1.5% 0.7% +0.8% pt Trading Revenue up by 0.2 per cent in like-for-like stores Stable pricing environment 2014 a transitional year - Woodie’s refoc
Slide 18: Manufacturing
Manufacturing 2014 2013 % Change £m £m Revenue 48.7 37.0 +31.7% Operating profit 7.9 3.9 +100.4% Operating margin 16.2% 10.7% +5.5% pt Trading EuroMix is market leader in the silo mortar market - 9 mortar plants in England and Scotland Pricing and gross margin gains during 2014 Pace of revenue growt
Slide 19: Finance and Tax
Finance and Tax 2014 2013 Net debt: EBITDA 0.53x 1.23x Gearing at 31 December 2014 8% 15% Tax Rate 21.0% 20.4% EBITDA interest cover 19.4x 11.0x Net debt of £75m at lowest level since 1999 Finance charge fell by £3.4m to £8.9m – impact of lower debt and refinancing Strong liquidity at year end - cas
Slide 20: Free Cash Flow
Free Cash Flow 180 160 140 21.8 32.5 142.6 (4.4) (18.7) 120 (14.9) 126.4 100 £’m 110.1 80 60 40 20 0 Operating Depreciation EBITDA Pensions, Working Interest and Replacement Free cash Profit and claims paid & Capital tax capex (net of flow amortisation other non disposals) cash items 20
Slide 21: Free Cash Flow
Free Cash Flow 115% of 180 operating 160 profit 140 21.8 32.5 142.6 (4.4) (18.7) 120 (14.9) 126.4 100 £’m 110.1 80 60 40 20 0 Operating Depreciation EBITDA Pensions, Working Interest and Replacement Free cash Profit and claims paid & Capital tax capex (net of flow amortisation other non disposals) c
Slide 22: Movement in Net Debt
Movement in Net Debt 140 (126.4) 120 133.7 100 21.5 (13.4) 80 £’m 26.8 75.3 60 40 33.1 20 0 Net Debt Free Cash flow Acquisitions Development Dividends Shares issued Net Debt Dec 2013 capex / F/x etc Dec 2014 22
Slide 23: Strategic Progress & Outlook
Gavin Slark Group CEO Strategic Progress & Outlook 23
Slide 24: Strategic Pillars
Strategic Pillars +9.6% +120bps +0.2x Revenue Operating Capital £2.1bn Margin Turn 5.3% 2.1x Revenue Operating Capital £1.9bn Margin Turn 4.1% 1.9x 2014 2013 2014 2013 2014 2013
Slide 25: Good Progress on Growth Initiatives
Good Progress on Growth Initiatives 59 Electricbases, 115 Hirebases and 22 SelcoHires open at end December 10 Plumbase Industrials open at end December New Selco in Isleworth opened in August and Redhill opened in January 2015 Good progress with Woodie’s new store formats Kitchens now in 10 Woodie’s
Slide 26: Acquisitions Growth
Acquisitions Growth 3 UK acquisitions into Buildbase extending our coverage in the South East of UK Acquisition of Beaumont Forest Products will extend our timber capabilities further 2 acquisitions in Belgium T G Lynes acquired 27 February 2015 which strengthens the Group’s growing position in mech
Slide 27: Current Trading – Two months to end February 2015
Current Trading – Two months to end February 2015 Like-for-like Q4 2014 2 months to Feb 2015 Merchanting UK 4.0% 4.7% Ireland 12.4% 18.1% Belgium (2.7%) (4.2%) Irish Retailing (3.3%) 3.0% Manufacturing 25.6% 19.8% Total Group 4.7% 6.2% 27
Slide 28: Outlook - UK
Outlook - UK Economy grew strongly over the past year but slowed in Q4 Recovery expected to be sustained by record levels of employment, low inflation and low interest rates Activity in the new housing market supported by economic growth, increased confidence and the Help-to-Buy scheme Activity in n
Slide 29: Outlook - Ireland
Outlook - Ireland Recovery set to continue with solid growth forecast for 2015 Growth expected in exports, manufacturing, services and construction Pick-up in house building in Dublin and regional cities to continue Growth in residential RMI market is well established Housing transactions and mortga
Slide 30: Summary
Summary Strong full year performance – results reflect success of strategy pursued in recent years First base financial respectability achieved – operating margin of 5.3% and ROCE of 11.1% Good pipeline of acquisition opportunities Overall outlook is positive and we are confident of further progress
Slide 31: Questions
Questions Highlight Highlight Highlight 3 5 1 Highlight 4 31
Slide 32: Appendices
Appendices Grafton Group plc
Slide 33: Operating Margin Analysis
Operating Margin Analysis H2 H1 H2 H1 H2 H1 2014 2014 2013 2013 2012 2012 UK Merchanting 6.1% 6.1% 5.9% 5.0% 4.9% 4.8% Irish Merchanting 8.0% 4.6% 2.9% 1.3% 1.7% 0.7% Belgium Merchanting 0.4% 1.5% 1.3% 0.9% 1.7% 3.1% Total Merchanting 6.1% 5.6% 5.3% 4.3% 4.4% 4.2% Retailing 2.5% 0.5% 1.1% 0.3% 3.8%
Slide 34: Summary Balance Sheet
Summary Balance Sheet 31 December 2014 31 December 2013 Change £’m £’m £’m Property, plant and equipment 433.0 424.7 8.3 Investment property 20.5 19.9 0.6 Intangibles 485.9 481.0 4.9 Financial assets 0.1 0.1 - 939.5 925.7 13.8 Working capital 127.1 144.0 (16.9) Income and deferred tax (24.6) (21.3)
Slide 35: UK Housing Transactions 2006 - 2014
UK Housing Transactions 2006 - 2014 ‘000 500 450 400 350 300 250 200 150 100 50 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 •Quarterly Seasonally Adjusted Source: HM Revenue & Customs UK Property Transactions Count
Slide 36: Housing Starts & Completions – England: 1998 - 2014
Housing Starts & Completions – England: 1998 - 2014 ‘000 Starts Completions 200 180 160 140 120 100 80 60 40 20 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: UK Department for Communities & Local Government
Slide 37: UK Mortgage Approvals UK: 2008 - 2014
'000 0.000 10.000 20.000 30.000 40.000 50.000 60.000 70.000 80.000 Jan-08 Apr-08 Jul-08 Oct-08 Source: Bank of England Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 UK Mortgage Approvals UK: 2008 - 2
Slide 38: House Completions – Ireland 1990 - 2014
House Completions – Ireland 1990 - 2014 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: Department of the Environment, Community & Local Government - (DoELG) except for quarter 4 for 2014 which is estim
Slide 39: Mortgages Issued in Ireland: 2002 - 2014
Mortgages Issued in Ireland: 2002 - 2014 Volume Value Volume €’bn ‘000 45 250 40 35 200 30 150 25 20 100 15 10 50 5 - - 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: IBF