Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — H1 2017 Earnings Presentation
37 slides from Howden Joinery's earnings presentation, Jul 20, 2017
Slide 1: 2017 Half Year Report
2017 Half Year Report 20 July 2017
Slide 2: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 3: A very successful business
A very successful business Solid start to year notwithstanding market conditions • Revenue and gross profit growth • Strong cash generation Continuing investment to support future growth opportunities • Manufacturing and distribution Broadening • Systems, services, organisation the appeal of • New p
Slide 4: Mark Robson, Deputy CEO and CFO
Mark Robson Deputy CEO and Chief Financial Officer
Slide 5: Highlights
Highlights Revenue, £m Operating profit, £m Uses of ‘cash’, £m HJ UK Continental Europe 80 Pension def Cap ex Share repurchase 553.0 550 13.5 75 528.9 100 525 10.0 539.5 74.7 70 500 518.9 75 53 65 475 66.6 50 450 60 756.4 11 25 28 425 55 22 400 12 10 50 0 2016 2017 2016 2017 2016 2017 HJ UK: +4.0% G
Slide 6: Revenue
Revenue 2017 UK depot revenue £539.5m • total +4.0% • LFL +2.4% 2017 continental Europe revenue £13.5m • France depots LFL +5.3% in €s 2017 Half Year Report 6
Slide 7: Profit before tax
Profit before tax Group gross profit margin ● 2017: 64.1% ● 2016: 64.5% Profit before tax Gross profit £m £m Gross profit Volume 13 & mix (revenue) 14 Cost pressures, Change cost £13.2m savings, Volume & etc. Change mix 6 354.6 74.8 Interest, £9.2m Price (COGS) 10 (5) etc (1) Currency 65.6 (12) Oper
Slide 8: Operating costs
Operating costs Operating costs £m Change £21.3m Other Growth 4 288.0 related 12 New depots 5 266.7 • 2016 2017 2017 Half Year Report 8
Slide 9: Income statement
Income statement £m H1 2017 H1 2016 Revenue 553.0 528.9 Cost of goods sold (198.4) (187.5) Gross profit 354.6 341.4 Operating costs (288.0) (266.7) Operating profit 66.6 74.7 Net interest (1.0) 0.1 Profit before tax 65.6 74.8 Tax (13.5) (17.0) Profit for the period 52.1 57.8 2017 Half Year Report 9
Slide 10: Earnings per share, dividends and share repurchase
Earnings per share, dividends and share repurchase H1 2017 H1 2016 Earnings per share 8.4p 9.1p Interim dividend per share 3.6p 3.3p • Share repurchase expenditure of £11.3m 2017 Half Year Report 10
Slide 11: Net cash and cash flow
Net cash and cash flow £m H1 2017 H1 2016 Opening net cash 226.6 226.1 Operating cash flows before movements in working capital 81.0 88.3 Working capital (31.2) (30.6) Capital expenditure (22.0) (28.0) Interest (net) 0.1 0.6 Tax paid (20.0) (10.2) Share repurchases (11.3) (52.8) Pension contribution
Slide 12: Working capital
Working capital • Working capital increased £31.2m – stock up £29.6m – debtors up £37.1m – creditors up £35.5m 2017 Half Year Report 12
Slide 13: Pension scheme deficit
Pension scheme deficit £m IAS19 basis Net discount rate 95 Change Contribution £18m 19 Current 124 service Asset costs + returns admin + 68 interest 10 106 • Dec Jun 2016 2017 2017 Half Year Report 13
Slide 14: Recent trading and outlook for 2017
Recent trading and outlook for 2017 • UK depot sales in period 7 increased 6.5% • 2017 outlook unchanged 2017 Half Year Report 14
Slide 15: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 16: Focused on the trade
Focused on the trade Professionals doing a complex job in a sophisticating market Dependent on reliable products and services available locally Managing unpredictable events and customer demands The builder depends on Howdens 2017 Half Year Report 16
Slide 17: A superior, integrated offer to suit the builder's needs
A superior, integrated offer to suit the builder’s needs Price Range Terms Local Robust Quality Service Availability Reliable The builder’s reputation is our reputation 2017 Half Year Report 17
Slide 18: Our changing world
Our changing world More More Social media functionality designs and colours No time Concerns for Ease of safety product More choice comparison for the same price – or a lower one Landlords’ costs rising Political / economic New Higher tax uncertainty Better technologies and stamp Property looks duty
Slide 19: Managing complexity
Managing complexity 1995 2017 • 14 depots Making complexity • 653 depots • 2 staff / depot as simple as • 10 staff / depot (average) • 7 kitchen ranges • 68 kitchen ranges possible • No sales reps • 680 sales reps • No CAD • 1,500 kitchen planners • No delivery • CAD planning and A3 • No hot water!
Slide 20: Investing to deliver more choice and service
Investing to deliver more choice and service Infrastructure • £180m manufacturing capex programme announced 2015 • New distribution facility • IT and systems Kitchen SKUs Addressing the market 2008: 700 • New product development 2017: 6,000 • Broadening entry-level appeal Addressing Howdens’ many op
Slide 21: New distribution facility at Raunds on stream
New distribution facility at Raunds on stream 650,000 square feet • Enables significant operational improvement • IT systems integration completed Gearing up for Period 11 2017 Half Year Report 21
Slide 22: Ongoing depot opening programme
Ongoing depot opening programme Currently 653 depots • 11 depots opened in H1 2017 • Plan to open up to 30 depots in FY 2017 • Scope for up to 800 depots Low cost • c.10,000 sq.ft • Rent c.£5.50 / sq.ft • Fit out c.£300,000 • Breakeven point c.£650,000 Opened in H1 2017 2017 Half Year Report 22
Slide 23: Accelerating product introductions in 2017
Accelerating product introductions in 2017 22 new ranges in H1 8 new grey options New designs More accessories Fairford Slate Grey Managing complexity in a sophisticating market 2017 Half Year Report 23
Slide 24: Woodgrains eclipsed by shades of grey
Woodgrains eclipsed by shades of grey Sales value participation 100% White 90% Other Cashmere 80% Skye Grey 70% Ivory 60% Cream Dark Woodgrain 50% Light Woodgrain 40% 30% 20% 10% 0% 2017 Half Year Report 24
Slide 25: Broadening the entry-level appeal of Howdens
Broadening the entry-level appeal of Howdens Allendale Antique White, introduced in H1 2017 2017 Half Year Report 25
Slide 26: More choice and availability
More choice and availability Technology at an accessible price (e.g pyrolitic ovens) Design update for Lamona brand Lamona touch-control pyrolitic oven Broadening appeal to builders and their customers 2017 Half Year Report 26
Slide 27: New flooring, joinery and cabinets
New flooring, joinery and cabinets 11 new flooring options 20 new sinks and taps 3 new pre-finished door styles • Reflecting builders’ demand for time-saving products New cabinet sizes • Deeper wall cabinets Linear Smooth internal door Helping the builder to do a better job 2017 Half Year Report 27
Slide 28: New worktops and services
New worktops and services Howdens now installs 25% of all solid surface worktops sold • Up from 10% in 2016 • Solid surface worktops now account for 50% of total market Developing online presence • Including social media White Mirror Chip Quartz worktop Continuing to develop the Howdens proposition
Slide 29: Howdens is a local business
Howdens is a local business Each depot has its own customers and cost base Local P&L accountability Local manager autonomy Differing styles of manager and rhythm of customers = different balance, depot by depot Offer tailored to local requirements = local development opportunities Local accountabili
Slide 30: Continental Europe
Continental Europe 24 depots • 20 depots in France • 2 depots in Belgium • 1 depot in Netherlands • 1 depot in Germany France • Trading under one banner Depots at July 2017 • H1 LFL sales + 5.3% 2017 Half Year Report 30
Slide 31: Investing in our IT infrastructure
Investing in our IT infrastructure Dedicated support for manufacturing, distribution and depots Robust security measures Ongoing projects to improve performance and efficiency • EPOS systems upgrade • SAP HANA upgrade Focus on in-house capability to ensure control Supporting Howdens’ growth prospect
Slide 32: Rob Fenwick, Chief Operating Officer, Supply
Rob Fenwick Chief Operating Officer, Supply
Slide 33: Supply underpins Howdens' competitive advantage
Supply underpins Howdens’ competitive advantage Prerequisites • Uninterrupted supply • Lowest cost • Capacity and capability to match complexity Investing in Howdens’ future • Asset replacement Howden West Side • Capacity for growth 2016 60m pieces delivered to depots (7.4 million pieces in P11 alon
Slide 34: Ensuring Supply can meet future needs
Ensuring Supply can meet future needs Greatly increased capacity and flexibility • Supports growing SKU count Dual running manufacturing capability • Business continuity planning • Due to come on stream in 2018 Raunds Supporting exceptional levels of service 2017 Half Year Report 34
Slide 35: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 36: Continuing to grow Howdens business
Continuing to grow Howdens business Clear strategy Proven model Broadening Even more entry-level Cash generative opportunities appeal Local and flexible A successful A robustbusiness businesssuited to a suited tochanging environment a changing environment 2017 Half Year Report 36
Slide 37: 2017 Half Year Report
2017 Half Year Report 20 July 2017