Grafton Group Plc · LSE:GFTU
Grafton — H1 2014 Earnings Presentation
42 slides from Grafton's earnings presentation, Aug 27, 2014
Slide 1: Interim Results Presentation
Interim Results Presentation Six months ended 30 June 2014 27 August 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: Gavin Slark, Group Chief Executive Officer
Gavin Slark Group Chief Executive Officer
Slide 4: H1 2014 Highlights
H1 2014 Highlights 2014 2013 Change Revenue (£m) 1,015.3 912.2 +11% Operating profit (£m) 50.6 31.2 +62% Profit before tax (£m) 45.9 24.5 +88% Earnings per share (pence) 15.39 8.02 +92% Interim dividend (pence) 3.75 3.00 +25% Cash generated from operations (£m) 88.1 56.9 +55% Net debt (£m) 101.1 149
Slide 5: David Arnold, Group Chief Financial Officer
David Arnold Group Chief Financial Officer
Slide 6: Group Financial Performance Highlights
Group Financial Performance Highlights Strong profit drop through – 11% revenue growth – Improved gross margins – UK merchanting +40 bps – Good cost control Focus on balance sheet efficiency – Strong cash generation from working capital – Ongoing property opportunities Performance ahead of expectati
Slide 7: Revenue Growth
Revenue Growth Like-for-Like Growth Like-for-Like Growth Total Revenue 2013 2014 2014 Q1 Q2 Q3 Q4 Q1 Q2 H1 H1 Merchanting UK (0.6%) 4.2% 5.4% 3.9% 9.8% 6.8% 8.2% 11.1% Ireland 2.4% (0.6%) 5.8% 6.7% 7.4% 18.6% 13.1% 5.6% Belgium (29.6%) (0.8%) (7.2%) (8.9%) 28.7% (11.7%) 3.8% 58.0% Irish Retailing (1
Slide 8: Revenue Analysis
Revenue Analysis £m 1,025 2 7 Merchanting 1,000 18 (8) 14 1,015 (4) 975 20 (1) 950 55 925 900 912 875 850 825 800 2013 Like- Acq / Branch Like- Branch Belgium Retailing Currency 2014 for-like New Consl. for-like Consl. Manufacturing Branches/Implants Ireland UK Merchanting 8
Slide 9: Operating Profit Analysis
Operating Profit Analysis £m 55 Merchanting 0.6 50 0.2 2.2 0.4 (0.1) 50.6 45 4.1 1.1 40 10.9 35 30 31.2 25 20 Like-for-like Acq/New Ireland Belgium Retailing Manufacturing FX Central/ 2013 Branches Other 2014 UK 9
Slide 10: Operating Profit Analysis
Operating Profit Analysis £m 55 Merchanting 0.6 50 0.2 2.2 0.4 (0.1) 50.6 45 4.1 1.1 40 10.0 Operations 35 0.9 Property 30 31.2 25 20 Like-for-like Acq/New Ireland Belgium Retailing Manufacturing FX Central/ 2013 Branches Other 2014 UK 10
Slide 11: Strong H1 Drop Through
Strong H1 Drop Through £m 55 Merchanting 0.6 50 UK – 0.2 2.2 18% LFL Drop 0.4 (0.1) 50.6 Through 4.1 45 1.1 40 Manufacturing 10.0 Ireland - 29% 35% LFL Drop LFL Drop Through 35 Through 0.9 30 31.2 25 20 Like-for-like Acq/New Ireland Belgium Retailing Manufacturing FX Central/ 2013 Branches Other 201
Slide 12: UK Merchanting
UK Merchanting 2014 2013 % Change £m £m Revenue 745.0 670.6 +11.1% Operating profit 45.2 33.2 +36.0% Operating margin 6.1% 5.0% +1.1% Market Trading Recovery in UK economy gained momentum – Growth in average daily like-for-like turnover of 8.2% fastest pace of expansion since 2007 Merchanting volume
Slide 13: Irish Merchanting
Irish Merchanting 2014 2013 % Change . £m £m Reported Constant Currency Revenue 121.4 114.9 +5.6% +9.4% Operating profit 5.6 1.5 +266.9% +279.9% Operating margin 4.6% 1.3% +3.3% Market Trading Improvement in world economy benefits Ireland – Like-for-like turnover growth of 13.1% export growth reboun
Slide 14: Belgian Merchanting
Belgian Merchanting 2014 2013 % Change . £m £m Reported Constant Currency Revenue 46.3 29.3 +58.0% +63.8% Operating profit 0.7 0.2 +173.1% +182.6% Market Trading Belgian economy expanded in Q1 but pace of Average daily like-for-like revenue in the 11 YouBuild growth declined in Q2 branches up 29% in
Slide 15: Retailing
Retailing 2014 2013 % Change . £m £m Reported Constant Currency Revenue 79.6 80.7 -1.4% +2.3% Operating profit 0.4 0.2 +63.6% +69.7% Market Trading Significant improvement in consumer Revenue up by 3.2 per cent in like-for-like stores sentiment 2014 is a year of transition in a stable market Disposa
Slide 16: Manufacturing
Manufacturing 2014 2013 % Change £m £m Revenue 23.0 16.7 +37.9% Operating profit 3.1 0.8 +262.7% Market Trading Recovery in UK housing market continued EuroMix is market leader in the silo based mortar market with significant spare capacity in 9 mortar plants Rate of growth in new housing registrati
Slide 17: Finance and Tax
Finance and Tax 30 June 2014 30 June 2013 Net debt: EBITDA (12 month rolling) 0.79x 1.53x Gearing 12% 17% EBITDA Interest cover* 14.2x 9.7x *As defined for bank covenant purposes Finance charge reduced by £2.1m to £4.6m Interest on net debt down by £0.5m Refinancing completed in May 2014 Five year
Slide 18: Free Cash Flow
Free Cash Flow £m 120 100 24.3 78.5 80 15.9 66.5 (5.6) (4.1) 60 50.6 (2.6) 40 20 0 Statutory Depreciation and EBITDA Pensions, claims Working Capital Interest and tax Replacement Free cash flow Operating Profit amortisation paid & other non capex (net of cash items disposals) 18
Slide 19: Working Capital Improvement
Working Capital Improvement £m 120 100 24.3 78.5 80 15.9 66.5 (5.6) (4.1) 60 50.6 (2.6) 40 20 0 Statutory Depreciation and EBITDA Pensions, claims Working Capital Interest and tax Replacement Free cash flow Operating Profit amortisation paid & other non capex (net of cash items disposals) Successful
Slide 20: Full Year Capex Guidance
Full Year Capex Guidance £m 120 100 24.3 78.5 80 15.9 66.5 (5.6) (4.1) 60 50.6 (2.6) 40 20 0 Statutory Depreciation and EBITDA Pensions, claims Working Capital Interest and tax Replacement Free cash flow Operating Profit amortisation paid & other non capex (net of cash items disposals) 2014 replacem
Slide 21: Movement in Net Debt
Movement in Net Debt £m 140 133.7 (78.5) 120 (6.8) 12.8 101.1 100 16.5 23.4 80 60 40 20 0 Net Debt Dec Free Cash flow Acquisitions Development Dividend Shares issued / Net Debt June 2013 capex F/x etc 2014 21
Slide 22: Movement in Net Debt
Movement in Net Debt £m 140 133.7 (78.5) 120 (6.8) 12.8 101.1 100 16.5 23.4 80 60 40 20 0 Net Debt Dec Free Cash flow Acquisitions Development Dividend Shares issued / Net Debt June 2013 capex F/x etc 2014 H1 2014 acquisitions comprised Mpro (Belgium) and Beaumont Forest Products (UK Merchanting) 22
Slide 23: Gavin Slark, Group Chief Executive Officer
Gavin Slark Group Chief Executive Officer
Slide 24: 2014 H1 Progress
Grafton’s Strategic Pillars 2014 H1 Progress Operating Capital Revenue Margin Turn +11.3% +160 bps +0.2x to to 5.0% 2.0x 24
Slide 25: 2014 Growth Update
2014 Growth Update Implants Hirebase: 17 tool, small plant and equipment hire implants opened in Buildbase branches – trading from 110 implants at the end of June 2014 Electricbase: 30 implants opened in Buildbase and Plumbase branches – trading from 50 implants at the end of June 2014 Greenfiel
Slide 26: Current Trading – From 1 July to 17 August 2014
Current Trading – From 1 July to 17 August 2014 UK merchanting average daily like-for-like revenue up by 5.2% Irish merchanting average daily like-for-like revenue up 15.4% Retailing like-for-like revenue declined by 2.6% Manufacturing like-for-like revenue up by 23.5% Group like-for-like revenue up
Slide 27: Outlook
Outlook UK Economy has grown strongly over the past year Prospects for a sustained recovery are encouraging but anticipated rise in interest rates may weigh on consumer sentiment Activity in the new housing market supported by economic growth, increased confidence and Help-to-Buy scheme Improving tr
Slide 28: Outlook
Outlook Ireland Positive tone to data on Irish economy released in recent months Growth in exports, manufacturing, services and construction A very gradual pick-up in house building in Dublin and regional cities is expected Growth in residential RMI market expected to continue Housing transactions a
Slide 29: Summary
Summary Strong first half performance – results reflect success of strategy pursued in recent years Highlights from the first half were the progress made by Selco and Buildbase in the UK and the Irish merchanting business Further growth anticipated in H2 but at a much slower rate than H1 as prior ye
Slide 30: Questions & Answers
\% Pier . Grafton Group plc Questions & Answers
Slide 31: Supplementary Information
\% Pier . Grafton Group plc Supplementary Information
Slide 32: Brands
Brands Merchanting Ireland Merchanting UK Manufacturing Belgium DIY Ireland 32
Slide 33: Group Trading Locations
Group Trading Locations Over 600 Trading Locations Builders Merchanting Plumbers Merchanting DIY Retailing Manufacturing UK ROI BE Total 279 39 16 334 232 2 - 234 - 44 - 44 9 1 - 10 Total 520 86 16 622
Slide 34: Summary Balance Sheet
Summary Balance Sheet 30 June 30 June Change 2014 2013 Change £m £m £m € Property, plant and equipment 429.9 476.7 (46.8) Investment property 20.8 - 20.8 Intangibles 486.3 487.5 (1.2) Financial assets 0.1 0.1 - 937.1 964.3 (27.2) Working capital 124.1 123.9 0.2 Income and deferred tax (28.0) (28.7)
Slide 35: Operating Margin Analysis
Operating Margin Analysis H1 H2 H1 H2 H1 2014 2013 2013 2012 2012 UK Merchanting 6.1% 5.9% 5.0% 4.9% 4.8% Irish Merchanting 4.6% 2.9% 1.3% 1.7% 0.7% Belgium Merchanting 1.5% 1.3% 0.9% 1.7% 3.1% Total Merchanting 5.6% 5.3% 4.3% 4.4% 4.2% Retailing 0.5% 1.1% 0.3% 3.8% -3.6% Manufacturing 13.3% 15.3% 5
Slide 36: Funding Maturity Profile
Funding Maturity Profile 300 250 Committed bank facilities 200 US loan Notes £’m 150 Finance Leases 100 Cash 50 0 Cash 2014 2015 2016 2017 2018 2019 2020 Total Group debt facilities amount to £456m of which £207m was undrawn at 30 June 14 Weighted average maturity profile of circa 4.7 years 36
Slide 37: 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 37
Slide 38: Housing Starts & Completions - England: 1998 - 2013
Housing Starts & Completions - England: 1998 - 2013 ‘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 Source: UK Department for Communities & Local Government 38
Slide 39: UK Mortgage Approvals UK: 2008 – 2014
0 10 20 30 40 50 60 70 80 '000 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Source: Bank of England Statistics Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 UK Mortgage Approvals UK: 2008 – 2014 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 39
Slide 40: House Completions – Ireland 1990 – 2013
House Completions – Ireland 1990 – 2013 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 Source: Department of the Environment, Community & Local Government - (DoELG) 40
Slide 41: Mortgages Issued in Ireland: 2002 - 2013
Mortgages Issued in Ireland: 2002 - 2013 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 41 Source: IBF
Slide 42: For Further Information
For Further Information Gavin Slark Chief Executive Officer David Arnold Chief Financial Officer Charles Rinn Group Financial Controller / Secretary Address: Grafton Group plc, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18 Telephone: +353 1 216 0600 Fax: +353 1 295 4470 Email: ema