Grafton Group Plc · LSE:GFTU
Grafton — FY2021 Earnings Presentation
40 slides from Grafton's earnings presentation, February 2022
Slide 1: Grafton Group plc Final Results
Grafton Group plc Final Results FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021
Slide 2: Cautionary statement & notes
Cautionary statement & notes Cautionary statement Notes Certain statements made in this presentation are forward-looking The term “Adjusted” means before exceptional items and acquisition statements. Such statements are based on current expectations and related items (see Appendix 1). are subject to
Slide 3: Gavin Slark, CEO and David Arnold, CFO
Gavin Slark David Arnold Chief Executive Officer Chief Financial Officer Grafton Group plc – Final Results 2021 3
Slide 4: Introduction & highlights
Introduction & highlights GAVIN SLARK, CEO
Slide 5: 2021 Review
2021 Review Record performance and transformational year for business • Outstanding performance from all our colleagues • Excellent results that were slightly ahead of expectations from our portfolio of high performing businesses • Record contributions from Selco and Woodie’s • A year of strategic t
Slide 6: Financial highlights
2021 Financial highlights 2021 2020 Change (Restated) ** Revenue £2,110m £1,679m +25.6% Adjusted operating profit £288.0m £170.6m +68.8% Adjusted earnings per share 93.0p 50.3p +84.9% Dividend 30.5p 14.5p +110.3% Net cash (before IFRS 16 Leases) £588.0m £181.9m +£406.1m Adjusted operating margin pre
Slide 7: Sustainability update
Sustainability update Progress since the Capital Markets Event in Nov 2021 • Received a B- assessment from our first Carbon Disclosure Project (CDP) submission which provides a good base to build on • First TCFD disclosure to be published in the 2021 Annual Report • Implementation of a sustainabilit
Slide 8: Financial review
Financial review DAVID ARNOLD, CFO
Slide 9: Income statement Continuing operations
Income statement Continuing operations £m 2021 2020 Change 2019 Restated Restated Revenue 2,109.9 1,679.2 +25.6% 1,643.6 Adjusted operating profit pre property profit 271.2 170.7 +58.9% 173.2 Property profit/(loss) 16.7 (0.1) 4.1 Adjusted operating profit 288.0 170.6 +68.8% 177.3 Amortisation1 and a
Slide 10: Revenue bridge
Revenue bridge Grafton Group plc – Final Results 2021 10
Slide 11: Analysis of organic movement in revenue (constant currency)
Analysis of organic movement in revenue (constant currency) Like for like business Distribution Grafton Group plc – Final Results 2021 11
Slide 12: Adjusted operating profit – bridge 2020 to 2021 (IFRS 16)
Adjusted operating profit – bridge 2020 to 2021 (IFRS 16) Grafton Group plc – Final Results 2021 12
Slide 13: Analysis of movement in operating profit in like-for-like business
Analysis of movement in operating profit in like-for-like business Distribution Grafton Group plc – Final Results 2021 13
Slide 14: Drop through analysis of movement in operating profit
Drop through analysis of movement in operating profit in like-for-like business 23% 15% 24% 16% 29% 26% Distribution Grafton Group plc – Final Results 2021 14
Slide 15: UK Distribution
UK Distribution Revenue £m 2021 2020 Change 821.9 (restated) 630.9 682.1 Revenue 821.9 630.9 +30.3% £’m Operating profit pre property 102.5 55.8 +83.7% Operating margin pre property 12.5% 8.8% +370bps 2021 2020 2019 Operating profit before property profit • Very strong operating profit performance f
Slide 16: Irish Distribution
Irish Distribution Revenue £m 2021 2020 Change 544.3 Revenue 544.3 463.9 +17.3% £’m 463.9 464.8 Operating profit pre property 66.8 41.8 +59.6% Operating margin pre property 12.3% 9.0% +330bps 2021 2020 2019 Operating profit before property profit • Two distinct phases of trading in the year: • H1 tr
Slide 17: Netherlands Distribution
Netherlands Distribution Revenue £m 2021 2020 Change 290.5 276.6 211.8 Revenue 290.5 276.6 +5.1% £’m Operating profit pre property 30.5 28.4 +7.4% Operating margin pre property 10.5% 10.3% +20bps 2021 2020 2019 Operating profit before property profit • Average daily like-for-like revenue up by 5.6%
Slide 18: Finland Distribution
Finland Distribution £m 2021 Revenue 70.8 Operating profit pre property 10.0 Operating margin pre property 14.1% • IKH acquired on 1 July at a cost of €199 million on a cash and debt free basis • IKH is one of the largest workwear, PPE, tools, spare parts and accessories technical wholesalers and di
Slide 19: Retailing
Retailing Revenue 282.8 £m 2021 2020 Change 246.6 205.5 Revenue 282.8 246.6 +14.7% £’m Operating profit pre property 50.9 42.0 +21.0% Operating margin pre property 18.0% 17.0% +100bps 2021 2020 2019 Operating profit before property profit • Woodie’s is a unique DIY, Home and Garden proposition in Ir
Slide 20: Manufacturing
Manufacturing Revenue £m 2021 2020 Change 99.6 79.4 Revenue 99.6 61.3 +62.4% 61.3 £’m Operating profit pre property 24.0 13.3 +80.8% Operating margin pre property 24.1% 21.7% +240bps 2021 2020 2019 CPI EuroMix StairBox Operating profit before property profit • Good growth in revenue and • Excellent
Slide 21: Balance Sheet
Balance Sheet 31 Dec 2021 31 Dec 2020 Goodwill and intangible assets 744.1 820.0 • Movement reflects disposal of GB Right-of-use assets 421.3 505.9 Traditional Merchanting Tangible assets 351.9 523.9 • Increase in working capital a function of: Working capital 158.5 112.6 • Revenue growth (incl. inf
Slide 22: Cash from operations
Cash from operations £m 2021 2020 Restated Profit before taxation from continuing operations 249.8 133.6 Profit/(loss) before taxation from discontinued operations 143.8 (0.8) Finance costs 20.6 26.9 Operating profit 414.3 159.7 Depreciation & amortisation of intangible assets 115.1 121.4 Property p
Slide 23: Cash flow
Cash flow £m 2021 2020 Cash from operations 303.2 377.7 Interest and tax (64.0) (60.7) Replacement capex net of asset disposals (2.3) (12.9) Free cash flow 237.0 304.1 Development capex (19.9) (17.0) Dividends (84.9) 0.0 Share issue/(repurchase) 3.0 2.8 Acquisitions & business disposals (incl. debt
Slide 24: 2022 Technical guidance
2022 Technical guidance FY22 year property profit c.£3m - potential opportunity for upside Depreciation and amortisation c.£85m - £90m in total (c.£40m on a pre IFRS 16 basis) 2022 gross capex spend (ex acquisitions and asset disposals) – replacement spend anticipated of c.£35m and development of c.
Slide 25: Strategic Update & Outlook
Strategic Update & Outlook GAVIN SLARK, CEO 25
Slide 26: Structural shift in operating margin following disposal of GB Traditional Merchanting
Structural shift in operating margin following disposal of GB Traditional Merchanting business in December 2021 Group operating margin 10% 12.9% target (Post IFRS 16) 10.2% 7.4% 6.4% 5.5% 5.5% 5.9% 5.3% 4.1% 3.4% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Pre IFRS 16 Post IFRS 16 Grafton Grou
Slide 27: Return on capital employed targets reflect expectation of further acquisitions
Return on capital employed targets reflect expectation of further acquisitions in new geographies Group ROCE 13% 19.4% target (Post IFRS 16) 15.0% 13.6% 12.2% 12.5% 11.1% 10.8% 11.9% 7.8% 6.1% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Pre IFRS 16 Post IFRS 16 Grafton Group plc – Final Result
Slide 28: Our investment criteria
Our investment criteria Good market Good business Good management team Type of Operating investment margin ROCE Organic investment >8% >13% Platform acquisitions >8% >10% Bolt-on acquisitions >8% >12% Grafton Group plc – Final Results 2021 28
Slide 29: Disciplined approach to capital allocation
Disciplined approach to capital allocation Organic investment in existing businesses e.g. Selco branches, Woodie’s store upgrade programme Acquisition investment Disciplined Portfolio approach management Platforms Bolt-ons to capital allocation e.g. Isero in Netherlands, IKH e.g. Polvo in Netherland
Slide 30: Growth investment update
Growth investment update Balance sheet strength means we have the firepower to invest and grow • At least seven new Selco stores between now and the end of 2023 – target of 100 stores by end 2026 • Isero acquired Regts BV on 11 Jan 2022 (2021 revenue €26m) • MacBlair acquired Woodfloor Warehouse on
Slide 31: Current trading
Current trading Average daily like-for-like revenue growth 1 Jan 2022 – Qtr 4 2021 13 Feb 2022 Distribution UK +4.9% +13.2% • Positive start in UK Ireland +6.6% +47.2% • Irish construction had significant restrictions in Q1 last year Netherlands +7.7% +6.7% • Consistent growth in the Netherlands • R
Slide 32: Outlook
Outlook • 2022 has started well and in line with our expectations • Underlying fundamentals of our markets remain positive • Gross margin moving as flagged – 2021 benefited from customer/product mix and significant price inflation • Inflation, labour market and supply chain pressures could be headwi
Slide 33: 2021 saw record profits and a step change to higher returning businesses
2021 saw record profits, a step change to higher returning businesses following the divestment of our GB Traditional Merchanting business, exposure to a new growth platform in the Nordics and increased focus on digital and sustainability opportunities. Grafton Group plc – Final Results 2021 33
Slide 34: Questions
Grafton a a Group pic a Questions
Slide 35: Appendices
G Grafton Group pic Appe [..
Slide 36: Appendix 1 Notes & Definitions
Appendix 1 Notes & Definitions Notes Definitions • Adjusted earnings per share is earnings before exceptional items, As amounts are reflected in £’m some non- acquisition related items, intangible asset amortisation arising on material rounding differences may arise. acquisitions and before profit/l
Slide 37: Appendix 2 Revenue bridge 2 Year (2019-2021)
Appendix 2 Revenue bridge 2 Year (2019-2021) Grafton Group plc – Final Results 2021 37
Slide 38: Appendix 3 Analysis of organic movement in revenue 2 Year
Appendix 3 Analysis of organic movement in revenue 2 Year (constant currency) Like for like business Distribution Grafton Group plc – Final Results 2021 38
Slide 39: Appendix 4 Adjusted operating profit – bridge 2019 to 2021
Appendix 4 Adjusted operating profit – bridge 2019 to 2021 (IFRS 16) Grafton Group plc – Final Results 2021 39
Slide 40: Appendix 5 Analysis of movement in operating profit in like-for-like business (2 Year)
Appendix 5 Analysis of movement in operating profit in like-for-like Business (2 Year) Distribution Grafton Group plc – Final Results 2021 40