Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — H1 2021 Earnings Presentation
59 slides from Howden Joinery's earnings presentation, Jul 22, 2021
Slide 1: 2021 Half Year Results
2021 Half Year Results 22 July 2021
Slide 2: Andrew Livingston, Chief Executive Officer
Andrew Livingston Chief Executive Officer
Slide 3: Strong 1st Half performance
Strong 1st Half performance • Record H1 Sales & Profit • Sales increase trending upwards across H1 2021 • Sales of everyday & promotional items particularly strong • Improved profitability Profit increased at a higher rate than revenues • Progressed our strategic plans for the business • Value of
Slide 4: Strength of our in-stock model founded on local relationships
Strength of our in-stock model founded on local relationships • Result reflects 2020 measures to help staff work safely and support for customers • Increased spend on the home, some spend brought forward • Signs of pent-up demand • Improved awareness of Howdens • Benefitted from constraints on “reta
Slide 5: Paul Hayes, Chief Financial Officer
Paul Hayes Chief Financial Officer
Slide 6: A strong start to the year
A strong start to the year £m H1 2021 H1 2020 H1 2019* • Strong start to year with sales + 69% on 2020 Revenue 784.9 465.0 652.6 + 20% on 2019 Gross profit 481.0 276.1 404.2 Gross margin % 61.3% 59.4% 61.9% • Gross margin on track, with Operating costs (356.7) (285.9) (326.5) • Higher mix of everyda
Slide 7: Sales growth
Sales growth Actual Growth vs H1 2021 2020 2019 UK Sales £764.1m 68.5% 19.8% • Strong sales performance Same depot basis 67.1% 15.3% Number of depots (at half year) 754 732 708 • Good underlying growth and benefit of new and revamped depots International Sales €23.8m 77.3% 44.8% Same depot basis 74.
Slide 8: 2 year comparison of profit before tax vs H1 2019
2 year comparison of profit before tax vs H1 2019 Group gross profit margin £m • 2019: 61.9% • 2021: 61.3% Price (revenue) Change Volume / mix £41m • Higher mix of lower margin Product cost everyday products and pressure / saving etc promotional activity Sales Operating 110 Costs Interest on adoptio
Slide 9: 2 year comparison of Operating Costs H1 2021 vs H1 2019
2 year comparison of Operating Costs H1 2021 vs H1 2019 £m • Operating costs include: Change • New UK depots Other costs £30m International expansion Growth related • Investment in digital, Older depots warehousing & logistics New depots European closures IFRS 16 impact • International expansion Non
Slide 10: Earnings Per Share, Shareholder Returns & Pensions
Earnings Per Share, Shareholder Returns & Pensions H1 2021 H1 2020 H1 2019 Earnings per share 16.4p (1.8)p 10.3p The Board have recommended: • Interim dividend pence per share 4.3p - 3.9p • Recommencing share buyback programme £50m Pension Scheme • £1.5bn pension scheme now with small surplus • £30m
Slide 11: Strong cashflow with investments in inventory
Strong cashflow with investments in inventory £m H1 2021 H1 2020 Opening net cash 430.7 267.4 • Working capital movements: Stock £(29)m Operating cash flows (before movements in working capital) 177.7 44.5 Debtors £(42)m Working capital (27.5) 14.5 Creditors £ 43 m Capital expenditure (23.8) (22.3)
Slide 12: Current Trading and Outlook for Full Year 2021
Current Trading and Outlook for Full Year 2021 • UK sales in period 7 up 31.0%, LFL up 29.5% v 2020 up 33.8%, LFL up 28.9% v 2019 • International sales up 52.3%, LFL up 48.3% v 2020 up 122.6%, LFL up 98.9% v 2019 • Strong start to year benefitting from some pent up demand and competitors unable to s
Slide 13: Andrew Livingston, Chief Executive Officer
Andrew Livingston Chief Executive Officer
Slide 14: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 14
Slide 15: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 15
Slide 16: Extending the UK footprint – High service levels valued by customers
Extending the UK footprint – High service levels valued by customers • Cost effective updated format • Opened 7 depots in 1st Half 2021 • In all, c.35 openings planned for 2021 • Potential for at least 900 in the UK 16
Slide 17: Converting more existing depots to the updated format
Converting more existing depots to the updated format • Focus on older depots with most incremental sales potential • 41 Depots revamped by end 2020 • Positive feedback from depot teams and customers • Average cost per depot of £225k going forward • Investment to be recouped in less than 4 years • D
Slide 18: New format depots and re-racked depots
New format depots and re-racked depots End 2021 : Total UK Depots in New Format &/or Re-racked 225 200 214 175 150 125 106 100 75 50 111 103 25 0 New Depots Existing Depots New Format Depots Re-Rack Only * *Number of re-racked depots excludes such depots subsequently re-formatted 18
Slide 19: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 19
Slide 20: NPI is a significant contributor to our competitive position
“NPI“ is a significant contributor to our competitive position • Product lifecycles shortening • Customers want new product from us • 17 new kitchen ranges in 2021 20
Slide 21: New traditional shaker range
New traditional shaker range Elmbridge Dusk Blue 21
Slide 22: New added value decorative accessories
New added value decorative accessories 22
Slide 23: Contemporary shaker range
Contemporary shaker range Chilcomb Porcelain 23
Slide 24: New in-frame solution
New in-frame solution HOWDENS Elmbridge ALSO AVAILABLE IN Pebble In-Frame Frontal Type: Shaker style door with a square edge stile ; © € ‘and rail, no tram lines ® Door Thickness: 20mm 24 ® Door Construction: Constructed 5 Piece Shaker
Slide 25: New slate grey cabinet for Handleless kitchens
New slate grey cabinet for Handleless kitchens 25
Slide 26: New colourways in mid-priced families
New colourways in mid-priced families Chelford Dusk Blue handleless 26
Slide 27: New colourways to entry price points
New colourways to entry price points 27
Slide 28: New value-based Shaker family
New value-based Shaker family 28
Slide 29: 2021: New product on sale earlier than previous years
2021: New product on sale earlier than previous years • Pre-Christmas launch of brochure, trade book and promotional materials • “NPI” Sales above 2019 in H1 • All new kitchens in-stock • Four weeks earlier than 2020, with 3 more in H2 (brought forward from 2022) • Aligned Rooster promotions in 2nd
Slide 30: Disciplined range management for best availability & profitability
Disciplined range management for best availability & profitability • Improved balance between introductions and discontinuations in recent years • Further investment in our traditional strength, entry-level kitchens • NPI of higher-priced kitchens have proved popular Upscaling our offer in these s
Slide 31: XDC: Improving service and availability
“XDC”: Improving service and availability 31
Slide 32: XDC: Rebalancing stock levels and delivery pattern of some lines
“XDC”: Rebalancing stock levels and delivery pattern of some lines • More warehouse space to faster selling lines • Simpler and more efficient for depots to deliver superior service improve product availability • Frees up time and resources spent on stock management • Using third party logistics
Slide 33: Dedicated manufacturing and supply: A key part of our in-stock offer
Dedicated manufacturing and supply: A key part of our in-stock offer UK MANUFACTURED 33
Slide 34: Protecting our in-stock offer against supply chain disruption
Protecting our in-stock offer against supply chain disruption • Increased levels of safety stock and back-up sources of supply • No immediate stock issues following grounding of “Ever Given“ in Suez Canal • Using multi–modal freight route out of China to help mitigate risk of delays • Peak manufactu
Slide 35: Make or buy to improve cost, supply chain resilience and flexibility
Make or buy to improve cost, supply chain resilience and flexibility Runcorn – 25 acres Howden – 75 acres 35
Slide 36: Making more doors for our kitchen ranges
Making more doors for our kitchen ranges • Investment to make Hockley kitchen doors in 2019 • Upscaling frontal manufacturing with new line at Howden site • Operational in 2nd Half 2022 36
Slide 37: Increasing capacity for architrave & skirting during H1 2022
Increasing capacity for architrave & skirting during H1 2022 37
Slide 38: New solid surface capabilities
New solid surface capabilities • Acquired assets of a leading UK fabricator to create Howdens Work Surfaces • Competitive price vs building new facilities • Factory now operational with volumes increasing 38
Slide 39: Digital reinforces our local relationship-based model
Digital reinforces our local relationship-based model DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 39
Slide 40: 51% more search impressions a month, site visits up 52%
51% more search impressions a month, site visits up 52% 40
Slide 41: Depot leads via the website up 61% year on year
Depot leads via the website up 61% year on year, brochure requests +44% 41
Slide 42: Increasing social media presence
Increasing social media presence Social Followers - Facebook & Instagram • Follower base 282,000 by end of 300,000 1st Half, up 89% 250,000 200,000 • Reaching over 10.4 million users a month 150,000 100,000 • With active engagement up 65% 230,369 102,806 279,827 year on year 199,125 91,169 50,000 0
Slide 43: Showcasing our kitchens in people's homes
Showcasing our kitchens in people’s homes 43
Slide 44: Kitchen visualiser introduced
Kitchen visualiser introduced 44
Slide 45: Online Trade account management
Online Trade account management 45
Slide 46: c.40% of credit account holders now on-boarded
c.40% of credit account holders now on-boarded Manage accounts and View credit details and make Download invoices and information relationship with depot payments 46
Slide 47: Usage across the week and both in and out of hours
Usage across the week and both in and out of hours • Account holders making payments up 57% • Users viewing documents up 62% 47
Slide 48: Anytime ordering launched
Anytime ordering launched • “Anytime Ordering” launched February • Major upgrade on “Call & Collect” Service • Efficiencies for Depots & Customers Bespoke pricing for each customer Account holders can see their prices, order product and quote for jobs out of hours Select a depot collection poi
Slide 49: Digital account application process launched
Digital account application process launched 15% of new accounts 49
Slide 50: Initiatives to increase volumes & profits
DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 50
Slide 51: 2020/21 performance gives us confidence to open more depots in France
2020/21 performance gives us confidence to open more depots in France • 1st Half 2021 Sales up 45% on 2019, 77% on 2020 • Customers recognising the advantages of our model • 4 depot openings last year, taking total to 30 at year end • 11 depot openings in 2021 planned • Expect to open more in 2022 5
Slide 52: Opening for business in the Republic of Ireland
Opening for business in the Republic of Ireland Target locations 5 • “City Based” approach as in France 1. Ballymount 2. Finglas 3. Sandyford 4. Tallaght 2 5. Swords • Initially c.5 depots around Dublin Dublin • All open by end of Q1 2022 1 4 • Supported by UK infrastructure and 3 digital platform 5
Slide 53: 2021 priorities
2021 • Safety of staff and customers first priority, COVID contingency measures in place • Operational focus on delivering our plans and peak Autumn trading • Increased prices, profitable balance between margin and volume with costs aligned • Stock cover increased • 2021 ranges on sale earlier than
Slide 54: Investing in key capabilities
Investing in key capabilities • Improvements to service & availability by utilising XDCs • Investments in door, solid surface, and skirting capabilities • New Digital platform capabilities, with “Anytime Ordering“ the centre piece • Around 35 UK depot openings and 62 revamps • 11 depot openings in F
Slide 55: Appendix
*/HOWDENS Appendix
Slide 56: 1 year comparison of profit before tax for H1 2021 vs H1 2020
1 year comparison of profit before tax for H1 2021 vs H1 2020 Group gross profit margin • 2020: 59.4% • 2021: 61.3% Gross Margin +205 £m Cost Price pressure / (revenue) savings etc Operating Volume Covid (net) Costs* / mix Change £133m interest etc Sales 294 * 2020 included £21m of furlough payment
Slide 57: 1 year comparison of Operating Costs of H1 2021 vs H1 2020
1 year comparison of Operating Costs of H1 2021 vs H1 2020 Change £50m £m Other costs International Growth expansion Older related depots Inc. Furlough New UK depots 21 286 57
Slide 58: Pension Scheme moves into surplus
Pension Scheme moves into surplus IAS19 basis £m Contribution Change Net discount rate £80m Asset returns Current service charge + admin cost + interest 58
Slide 59: 2021 Half Year Results
2021 Half Year Results 22 July 2021