Grafton Group Plc · LSE:GFTU
Grafton — H1 2015 Earnings Presentation
41 slides from Grafton's earnings presentation, August 2015
Slide 1: Half Year Results Presentation
Half Year Results Presentation For the six months ended 30 June 2015
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 Operating profit up 21% to £61.2m Basic earnings per share up 31% toHighlight 20.2p Highlight Highlight 3 5 Excellent 1 cash generation – net debt reduced to £51m Organic growth initiatives progressing well Highlight Significant contribution from UK acquisitions and new
Slide 6: Financial Review
David Arnold Group CFO Financial Review
Slide 7: Group Financial Highlights – H1 2015
Group Financial Highlights – H1 2015 Change at constant 2015 2014 Change exchange rates Revenue (£’m) 1,083.7 1,015.3 +6.7% +9.7% Operating profit (£’m) 61.2 50.6 +20.9% Operating margin 5.6% 5.0% +60 bps Operating profit (£’m) (pre property) 55.1 49.0 +12.4% Operating margin (pre property) 5.1% 4.8
Slide 8: Revenue Growth
Revenue Growth Like-for-like 2014 2015 2015 Q3 Q4 Q1 Q2 H1 Total Revenue Constant Reported currency Merchanting UK 5.9%. 4.0%. 3.5%. 5.1% 4.3% 9.6% 9.6%. Ireland 16.3%. 12.4%. 16.4%. 11.1% 13.7% 14.8% 2.3%. Belgium (12.7%) (2.7%) (2.0%) 3.1% 1.1% 8.0% (3.9%) Irish Retailing (2.0%) (3.3%) 3.0% 1.1% 1
Slide 9: Revenue Growth Analysis
Revenue Growth Analysis 1,120 27 1,100 69 1,084 1,080 (27) £’m 1,060 1,040 1,015 1,020 1,000 2014 Organic Acquisitions FX 2015 Growth 9
Slide 10: Organic Revenue Growth Analysis
Organic Revenue Growth Analysis 80 18.7 68.8 70 (1.8) 60 3.5 50 14.8 0.3 1.2 £’m 40 32.1 30 20 10 0 Ireland Organic UK Belgium Retail Manufacturing Growth Branch Merchanting Merchanting Merchanting Initiatives Consolidations/ Growth Disposals LFL Constant currency 10
Slide 11: Operating Profit Analysis
Operating Profit Analysis 65 4.5 60 2.5 (0.3) 61.2 0.5 55 3.4 £’m 50 50.6 45 40 35 30 2014 Like for Like Growth Acquisitions Property FX 2015 Initiatives Disposals 11
Slide 12: Like for Like Operating Profit Analysis
Like for Like Operating Profit Analysis 5.0 1.4 4.5 4.0 3.5 - 0.3 2.5 (1.3) 3.0 Group £’m 2.5 3.4 2.0 1.5 1.0 0.5 0.5 0.0 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 5.0 40% 4.5 4.0 6% 25% 3.5 17% (1.3) 3.0 Group £’m 2.5 2.0 1.5 1.0 2% 0.5 0.0 UK Irish Belgium Retail Manufacturing Central Like for Like Merchanting Merchanting Merchanting Operating Profit 13
Slide 14: Operating Profit Drop Through
Operating Profit Drop Through 5.0 40% Drop 4.5 Through ex Plumbase 6% 4.0 8% 25% 3.5 17% (1.3) 3.0 Group £’m 2.5 8% 2.0 1.5 1.0 0.5 0.0 UK Irish Belgium Retail Manufacturing Central Like for like Merchanting Merchanting Merchanting Operating Profit 14
Slide 15: UK Merchanting
UK Merchanting 2015 2014 % Change £m £m Revenue 816.7 745.0 +9.6% Operating profit 53.5 45.2 +18.3% Operating margin 6.5% 6.1% +40 bps Trading Growth in average daily like-for-like turnover of 4.3% Building materials price inflation estimated at 1.0% to 1.5% and volume growth of c.3% Held gross marg
Slide 16: Irish Merchanting
Irish Merchanting 2015 2014 % Change £m £m Reported Constant currency Revenue 124.1 121.4 +2.3% +14.8% Operating profit 7.4 5.6 +33.9% +50.2% Operating margin 6.0% 4.6% +140 bps - Trading Strong competitive position delivered like-for-like turnover growth of 13.7% Focus on underpinning gross margin
Slide 17: Belgian Merchanting
Belgian Merchanting 2015 2014 % Change £m £m Reported Constant currency Revenue 44.4 46.3 -3.9% +8.0% Operating profit 0.4 0.7 -46.3% -39.8% Operating margin 0.8% 1.5% -70 bps - Trading Like-for-like revenue increased by 1.1%. Disposal of non core and capital hungry readymix business completed Focus
Slide 18: Retailing
Retailing 2015 2014 % Change £m £m Reported Constant currency Revenue 72.2 79.6 -9.3% +2.0% Operating profit 0.6 0.4 +61.6% +81.3% Operating margin 0.9% 0.5% +40 bps Trading Revenue up by 1.8% per cent in like-for-like stores Stable pricing environment following a number of years of deflationary pre
Slide 19: Manufacturing
Manufacturing 2015 2014 % Change £m £m Revenue 26.3 23.0 +14.2% Operating profit 4.5 3.1 +44.7% Operating margin 16.9% 13.3% +360 bps Trading Pace of revenue growth moderated to +14.2% in H1 2015 Pricing and gross margin gains during 2014 continued in H1 2015 Acquisition of Carlton completed in July
Slide 20: Property
Property The Group has a significant freehold estate (December 2014: £280m) to support its branch operations The Group has historically sought to maintain a balance between freehold and leasehold property In addition 23 properties (June 2015: £9.0m) are held for sale (largely in the UK) and 21 prope
Slide 21: Finance and Tax
Finance and Tax 30 June 2015 30 June 2014 Net debt: EBITDA (12 month rolling) 0.33x 0.79x Gearing 5% 12% Tax Rate (underlying) 21% 22% EBITDA interest cover 26.8x 15.2x Net debt of £51m at lowest level since 1998 Finance charge fell by £1.4m to £3.3m - impact of lower debt and refinancing Strong liq
Slide 22: Free Cash Flow
Free Cash Flow 90 80 16.1 77.3 2.2 70 (6.3) 60 (10.3) 50 (6.2) 56.7 £’m 40 61.2 30 20 10 0 Operating Depreciation EBITDA Pensions, Working Interest and Replacement Free cash profit and claims paid capital tax capex (net of flow amortisation & other non asset sales) cash items 22
Slide 23: Free Cash Flow
Free Cash Flow 90 93% of 80 operating 16.1 77.3 2.2 70 profit (6.3) 60 (10.3) 50 (6.2) 56.7 £’m 40 61.2 30 20 10 0 Operating Depreciation EBITDA Pensions, Working Interest and Replacement Free cash profit and claims paid capital tax capex (net of flow amortisation & other non asset sales) cash items
Slide 24: Movement in Net Debt
Movement in Net Debt 80 (56.7) 70 75.3 16.3 (16.0) 60 10.8 50 51.1 £’m 40 21.4 30 20 10 0 Net Debt Free cash flow Acquisitions Development Dividends F/x / shares Net Debt Dec 2014 net of capex issued etc June 2015 disposals 24
Slide 25: Strategic Progress & Outlook
Gavin Slark Group CEO Strategic Progress & Outlook 25
Slide 26: Grafton’s Strategic Pillars
Grafton’s Strategic Pillars Good progress since Capital Markets Day in November 2013 +18.8% +220 bps +0.4x Revenue Operating Capital £1.08bn Margin Turn 5.6% 2.2x Revenue Operating Capital £912m Margin Turn 3.4% 1.8x 2015 H1 H1 2013 2015 2013H1 H1 2015 2013 H1H1 26
Slide 27: Good Progress on Growth Initiatives
Good Progress on Growth Initiatives 74 Electricbases, 118 Hirebases and 23 SelcoHires open at end June 13 Plumbase Industrial branches open at end June New Selco in Redhill opened in January 2015 and Coventry in July 2015 40 Selco stores open by end December 2015 (June 2015 : 36) Selco Direct launch
Slide 28: Acquisitions Growth
Acquisitions Growth TG Lynes acquired in February 2015 which strengthens the Group’s growing position in mechanical services and complements Plumbase Industrial Carlton acquired in July 2015 which expands UK Mortar business presence in bagged products Parkes Services Ltd acquired in August 2015 expa
Slide 29: Current Trading - July - August 2015
Current Trading - 1 July - 23 August 2015 Like-for-like 1 July to H1 2015 23 August 2015 Merchanting UK 4.3% 3.7% Ireland 13.7% 6.7% Irish Retailing 1.8% 5.7% Total Group 5.3% 4.3% Improving trends – August outperformed July Group like-for-like currently consistent with H1 29
Slide 30: Outlook - UK
Outlook - UK Generally positive for remainder of 2015 with pace of economic growth forecast to continue at similar levels to H1 Activity in the new housing market supported by good underlying demand and low mortgage rates Group’s development activity providing a platform for growth Continued focus o
Slide 31: Outlook - Ireland
Outlook - Ireland Recovery well established and looks set to continue with solid growth forecast for the remainder of 2015 Consumer spending and investment expected to be key drivers of growth Recovery in house building expected to continue and non residential activity expected to increase Increased
Slide 32: Summary
Summary Positive half year performance – results reflect success of strategy pursued in recent years Paul Hampden Smith appointed as Non-Executive Director Good pipeline of acquisition opportunities Overall outlook is positive and we are confident of further progress during 2015 Medium term target r
Slide 33: Questions
Questions Highlight Highlight Highlight 3 5 1 Highlight 4 33
Slide 34: Appendices
Appendices EuroMix
Slide 35: Operating Margin Analysis
Operating Margin Analysis H1 H2 H1 H2 H1 H2 H1 2015 2014 2014 2013 2013 2012 2012 UK Merchanting 6.5% 6.1% 6.1% 5.9% 5.0% 4.9% 4.8% Irish Merchanting 6.0% 8.0% 4.6% 2.9% 1.3% 1.7% 0.7% Belgium Merchanting 0.8% 0.4% 1.5% 1.3% 0.9% 1.7% 3.1% Total Merchanting 6.2%. 6.1%. 5.6%. 5.3%. 4.3%. 4.4%. 4.2%.
Slide 36: Summary Balance Sheet
Summary Balance Sheet 30 June 2015 30 June 2014 Change £’m £’m £’m Property, plant and equipment 424.6. 429.9 (5.3) Investment property 19.1. 20.8 (1.7) Intangibles 483.3. 486.3 (3.0) Financial assets 0.1. 0.1 - 927.1 937.1 (10.0) Working capital 135.0. 124.1 10.9 Income and deferred tax (28.8) (28.
Slide 37: UK Housing Transactions 2007 - 2015
UK Housing Transactions 2007 - 2015 ‘000 500 450 400 350 300 250 200 150 100 50 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 •Quarterly Seasonally Adjusted Source: HM Revenue & Customs UK Property Transactions Count
Slide 38: Housing Starts & Completions – England: 1999 - 2015
Housing Starts & Completions – England: 1999 - 2015 ‘000 Starts Completions 200 180 160 140 120 100 80 60 40 20 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: UK Department for Communities & Local Government on a rolling 12 month basis
Slide 39: UK Mortgage Approvals UK: 2008 - 2015
0 60 10 20 30 40 50 70 80 '000 Mar-08 Jun-08 Sep-08 Dec-08 Source: Bank of England Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 UK Mortgage Approvals UK: 2008 - 2015 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-
Slide 40: House Completions – Ireland 1993 - 2015
House Completions – Ireland 1993 - 2015 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: Department of the Environment, Community & Local Government - (DoELG) on a rolling 12 month basis
Slide 41: Mortgages Approvals in Ireland: 2002 - 2015
Mortgages Approvals in Ireland: 2002 - 2015 Value Value Volume 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 2015 Source: IBF on a rolling 12 month basis