Grafton Group Plc · LSE:GFTU
Grafton — H1 2020 Earnings Presentation
53 slides from Grafton's earnings presentation, Aug 26, 2020
Slide 1: Half Year Results For the Six Months Ended 30 June 2020
Building progress together Half Year Results For the Six Months Ended 30 June 2020
Slide 2: Cautionary Statement & Notes
Cautionary Statement & Notes 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
Slide 3: Gavin Slark, Chief Executive; David Arnold, Chief Financial Officer
Gavin Slark David Arnold Chief Executive Chief Financial Officer Officer Grafton Group plc – Interim Results 2020 3
Slide 4: Introduction & Highlights
Introduction & Highlights Gavin Slark, CEO Half Years Results For the Six Months Ended 30 June 2020
Slide 5: 2020 First Half Overview
2020 First Half Overview • Group emerging from Covid-19 crisis in excellent position • Strong recovery in the RMI focused business • Continuous trading through crisis in The Netherlands and Leyland SDM • Digital capability transformed in Selco and Buildbase • Strategic and operational progress maint
Slide 6: Dividend Update
Dividend Update • Dividends remain an important consideration for Grafton • Suspended payment of second interim dividend for 2019 • Not proposing to pay first interim dividend for 2020 • Will consider scope for payment of both dividends as part of the overall review of the full year results Grafton
Slide 7: Financial Review
Financial Review David Arnold, CFO Half Year Results For the Six months Ended 30 June 2020
Slide 8: Operating Profit Margin and ROCE Progression
Operating Profit Margin and ROCE Progression ROCE 14.7% 14.3% Adjusted operating margin 13.6% 12.2% 12.5% 11.1% 10.4% 7.8% 7.8% 6.1% 7.3% 7.6% 7.2% 4.6% 5.8% 6.0% 5.7% 5.3% 4.1% 3.5% 3.7% 2.7% FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 H1 19 H1 2020 Pre IFRS 16 Reported Strategic focus on
Slide 9: Operating Profit Margin and ROCE Progression
Operating Profit Margin and ROCE Progression ROCE 14.7% 14.3% Adjusted operating margin 13.6% 12.2% 12.5% 11.1% 10.4% 7.8% 7.8% 6.1% 7.3% 7.6% 7.2% 4.6% 5.8% 6.0% 5.7% 5.3% 4.1% 3.5% 3.7% 2.7% FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 H1 19 H1 2020 Pre IFRS 16 Reported … reaped rewards i
Slide 10: Net (Debt)/Cash Progression (Pre-IFRS 16)
Net (Debt)/Cash Progression (Pre-IFRS 16) £’m ... came into Covid-19 crisis with balance sheet in good shape Grafton Group plc – Interim Results 2020 10
Slide 11: Net (Debt)/Cash Progression (Pre-IFRS 16)
Net (Debt)/Cash Progression (Pre-IFRS 16) £’m Net cash £7.8m 31 Dec 2019 ... came into Covid-19 crisis with balance sheet in good shape Grafton Group plc – Interim Results 2020 11
Slide 12: Net (Debt)/Cash Progression (Pre-IFRS 16)
Net (Debt)/Cash Progression (Pre-IFRS 16) £’m Net cash increased to £58.6m as at 30 June 2020 … and we continued to generate cash over the last six months Grafton Group plc – Interim Results 2020 12
Slide 13: Income Statement – Continuing Operations
Income Statement – Continuing Operations H1 2019 £m H1 2020 Restated Change Revenue 1,058 1,314 (19%) Adjusted operating profit pre property profit 39.1 95.1 (59%) Property profit 0.3 4.7 (93%) Adjusted operating profit 39.4 99.8 (61%) Amortisation* (4.3) (2.7) (61%) Statutory operating profit 35.1
Slide 14: Revenue Bridge
Revenue Bridge £’m Grafton Group plc – Interim Results 2020 14
Slide 15: Analysis of Organic Movement in Revenue (Constant Currency)
Analysis of Organic Movement in Revenue (Constant Currency) LFL Business £’m UK Ireland NL Retail Manufacturing Organic Branch Organic Growth Consolidations/ Movement Distribution Initiatives Disposals Grafton Group plc – Interim Results 2020 15
Slide 16: Adjusted Operating Profit – Bridge H1 19 to H1 20
Adjusted Operating Profit – Bridge H1 19 to H1 20 £’m H1 2019 Plumbase H1 2019 Like-for Like Growth Branch Acquisitions Property FX H1 2020 Reported Disposal Restated Business Initiatives Consolidations/ (Polvo) Disposals Disposals Grafton Group plc – Interim Results 2020 16
Slide 17: Adjusted Operating Profit – Bridge H1 19 to H1 20
Adjusted Operating Profit – Bridge H1 19 to H1 20 £’m Selco store opening costs increased by £0.2m H1 2019 Plumbase H1 2019 Like-for Like Growth Branch Acquisitions Property FX H1 2020 Reported Disposal Restated Business Initiatives Consolidations/ (Polvo) Disposals Disposals Grafton Group plc – Int
Slide 18: Analysis of Movement in Operating Profit in Like-for-Like Business
Analysis of Movement in Operating Profit in Like-for-Like Business £’m UK Ireland NL Retail Manufacturing Central Like-for-like Business Distribution Grafton Group plc – Interim Results 2020 18
Slide 19: UK Distribution
UK Distribution £m H1 2020 H1 2019 Change Revenue 605.4 865.8 (30.1%) Operating profit pre property profit 2.3 55.5 (95.9%) Operating margin pre property profit 0.4% 6.4% (600bps) • Majority of UK branches temporarily closed on 24 March and were not fully operational until 22 June • Good recovery in
Slide 20: Irish Distribution
Irish Distribution Change Reported Constant £m H1 2020 H1 2019 Currency Revenue 190.2 226.2 (15.9%) (16.0%) Operating profit pre property profit 15.2 19.3 (21.2%) (22.0%) Operating margin pre property profit 8.0% 8.5% (50bps) • Chadwicks branches temporarily closed from 28 March to 18 May • Deliveri
Slide 21: Netherlands Distribution
Netherlands Distribution Change Reported Constant £m H1 2020 H1 2019 Currency Revenue 138.1 80.9 +70.6% +70.4% Adjusted operating profit 14.1 9.0 +56.9% +56.1% Adjusted operating margin 10.2% 11.1% (90bps) • Operations in The Netherlands continued to trade as categorised as an essential business • M
Slide 22: Retailing
Retailing Change Reported Constant £m H1 2020 H1 2019 Currency Revenue 99.3 99.9 (0.6%) (1.5%) Operating profit 9.7 9.5 +1.8% (1.6%) Operating margin 9.8% 9.5% +30bps • Woodie’s temporarily closed from 28 March to 18 May except for online sales • Impact of closure largely offset by growth in like-fo
Slide 23: Manufacturing
Manufacturing Change Reported Constant £m H1 2020 H1 2019 Currency Revenue 25.4 40.7 (37.7%) (37.7%) Operating profit 3.6 9.2 (61.0%) (61.0%) Operating margin 14.1% 22.5% (840bps) • All mortar plants temporarily closed from 24 March with phased reopening late April/early May – Scotland late June • G
Slide 24: Balance Sheet
Balance Sheet £m 30 June 30 June 2020 2019 Intangible assets 776.2 714.8 Right-of-use assets 504.0 525.5 Tangible assets 530.9 534.9 Lease receivable 2.4 2.7 Working capital 173.5 186.6 Other assets/(liabilities) (86.4) (92.5) Assets/liabilities – discontinued operations 0.0 2.5 Pension deficit (44.
Slide 25: Balance Sheet
Balance Sheet £m 30 June 30 June 2020 2019 Intangible assets 776.2 714.8 Polvo acquisition July 2019 Right-of-use assets 504.0 525.5 Tangible assets 530.9 534.9 Lease receivable 2.4 2.7 Working capital 173.5 186.6 Other assets/(liabilities) (86.4) (92.5) Assets/liabilities – discontinued operations
Slide 26: Balance Sheet
Balance Sheet £m 30 June 30 June 2020 2019 Intangible assets 776.2 714.8 Right-of-use assets 504.0 525.5 Tangible assets 530.9 534.9 Lease receivable 2.4 2.7 Working capital 173.5 186.6 H1 reduction of £24m in stock Other assets/(liabilities) (86.4) (92.5) Assets/liabilities – discontinued operation
Slide 27: Balance Sheet
Balance Sheet £m 30 June 30 June 2020 2019 Intangible assets 776.2 714.8 Right-of-use assets 504.0 525.5 Tangible assets 530.9 534.9 Lease receivable 2.4 2.7 Working capital 173.5 186.6 Other assets/(liabilities) (86.4) (92.5) Assets/liabilities – discontinued operations 0.0 2.5 Pension deficit (44.
Slide 28: Balance Sheet
Balance Sheet £m 30 June 30 June 2020 2019 Intangible assets 776.2 714.8 Right-of-use assets 504.0 525.5 Tangible assets 530.9 534.9 Lease receivable 2.4 2.7 Working capital 173.5 186.6 Other assets/(liabilities) (86.4) (92.5) Assets/liabilities – discontinued operations 0.0 2.5 Pension deficit (44.
Slide 29: Cash from Operations
Cash from Operations £m H1 2020 H1 2019 Profit before taxation 20.5 62.6 Finance costs 14.6 12.8 Operating profit 35.1 75.4 Depreciation & amortisation of intangible assets 60.1 57.9 Fair value adjustments 0.0 16.8 Goodwill impairment 0.0 9.2 Other movements* 1.2 0.5 Decrease/(increase) in working c
Slide 30: Cash from Operations
Cash from Operations £m H1 2020 H1 2019 Profit before taxation 20.5 62.6 Finance costs 14.6 12.8 Operating profit 35.1 75.4 Depreciation & amortisation of intangible assets 60.1 57.9 Fair value adjustments 0.0 16.8 Goodwill impairment 0.0 9.2 Other movements* 1.2 0.5 Reduced stock as a result of Dec
Slide 31: Cash Flow
Cash Flow £m H1 2020 H1 2019 Cash from operations 121.5 157.2 Interest and tax (24.5) (26.9) Replacement capex net of asset disposals (5.4) (2.8) Free cash flow 91.6 127.5 Development capex (6.8) (8.6) Dividends 0.0 (28.5) Share issue/(repurchase) 0.1 (6.1) Acquisitions & business disposals (incl. d
Slide 32: Cash Flow
Cash Flow £m H1 2020 H1 2019 Cash from operations 121.5 157.2 Interest and tax (24.5) (26.9) Replacement capex net of asset disposals (5.4) (2.8) Free cash flow 91.6 127.5 Development capex (6.8) (8.6) Dividends 0.0 (28.5) Share issue/(repurchase) 0.1 (6.1) Acquisitions & business disposals (incl. d
Slide 33: Cash Flow
Cash Flow £m H1 2020 H1 2019 Cash from operations 121.5 157.2 Interest and tax (24.5) (26.9) Replacement capex net of asset disposals (5.4) (2.8) Free cash flow 91.6 127.5 Development capex (6.8) (8.6) 2nd Interim dividend in respect Dividends 0.0 (28.5) of 2019 suspended Share issue/(repurchase) 0.
Slide 34: 2020 Technical Guidance
2020 Technical Guidance • Full year property profits expected to be c.£3m • Depreciation currently forecast at c.£100m - £110m in total - £50m on a pre IFRS 16 basis • Guidance on 2020 gross capex spend (ex acquisitions) – replacement spend of c.£25m and development of c.£15m • Net finance charge of
Slide 35: Strategic Update & Outlook
Strategic Update & Outlook Gavin Slark, CEO Interim Results Six months ended 30 June 2020
Slide 36: Strategic Focus
Strategic Focus • Focus remains on investing in higher margin, growth businesses with strong market positions and development potential • Acquisitions pipeline remains encouraging and continue to progress small bolt on acquisitions • Retain our disciplined approach to allocation of capital • Strong
Slide 37: Rightsizing the Cost Base
Rightsizing the Cost Base • No major restructuring necessary • Reviewed cost base of UK businesses in the light of potential downside risk, particularly in new build markets • Closing a small number of unprofitable branches (c.15) in traditional merchanting • Overall H2 restructuring cost estimated
Slide 38: Operational Milestones Achieved in Current Year
Operational Milestones Achieved in Current Year Selco Buildbase Leyland SDM • Upgrade to website strengthened • Continuing focus on business • GDC Paints, a five-branch paint & digital capability and increased digital improvement decorating products distributor in revenue London, acquired in July •
Slide 39: Operational Milestones Achieved in Current Year
Operational Milestones Achieved in Current Year Chadwicks Woodie’s Isero • Acquisition of new branch in Dundalk • All branches upgraded to new version • Gunters en Meuser branches • Second Fixing Centre opened in Cork of Microsoft Navision ERP system successfully migrated to Isero • Commenced next p
Slide 40: Current Trading and Outlook
Current Trading and Outlook Average Daily Like-for-Like Revenue Growth 1 July 2020 – H1 2020 16 August 2020 Distribution UK (30.5%) (0.7%) Ireland (16.7%) 11.6% Netherlands (0.7%) (1.3%) Retailing (2.0%) 35.6% Manufacturing (38.2%) (12.3%) Total Group (24.3%) 3.8% • Performance in any of our geograp
Slide 41: Summary
Summary • Weathered Covid-19 well and emerging strongly - testament to the commitment and quality of our colleagues • Core businesses have built on strong market positions and emerge in an excellent position to support RMI markets • Continuing to progress strategic and operational initiatives and en
Slide 42: Questions
Questions Interim Results Six months ended 30 June 2020
Slide 43: Appendices
Appendices Interim Results Six months ended 30 June 2020
Slide 44: Appendix 1 - Notes & Definitions
Appendix 1 - Notes & Definitions Notes As amounts are reflected in £’m some non-material rounding differences may arise. Plumbase and the Belgium Distribution business were disposed of in 2019 and are classified as discontinued operations. The revenue of both businesses is excluded from Group revenu
Slide 45: Appendix 2 - Income Statement – Pre IFRS 16
Appendix 2 - Income Statement – Pre IFRS 16 Total Continuing Operations* Operations £m H1 2020 H1 2019 Change Revenue - total 1,058.4 1,313.6 (19%) Adjusted operating profit pre property profit 32.8 89.5 (63%) Property profit 0.3 4.7 Adjusted operating profit 33.1 94.2 (65%) Amortisation (4.3) (2.7)
Slide 46: Appendix 3 - Income Statement - Impact of IFRS 16
Appendix 3 - Income Statement - Impact of IFRS 16 Total Operations IFRS 16 Reported £m H1 2020 H1 2020 H1 2020 Revenue - total 1,058.4 0.0 1,058.4 Adjusted operating profit pre property profit 32.8 6.3 39.1 Property profit 0.3 0.0 0.3 Adjusted operating profit - all operations 33.1 6.3 39.4 Amortisa
Slide 47: Appendix 4 - Operating Margin Analysis
Appendix 4 - Operating Margin Analysis* H1 H2 H1 H2** H1** 2020 2019 2019 2018 2018 UK Distribution 0.4% 5.9% 6.4% 6.0% 6.0% Irish Distribution 8.0% 9.9% 8.5% 10.6% 8.1% Netherlands Distribution 10.2% 8.4% 11.1% 10.0% 10.5% Total Distribution 3.4% 6.9% 7.1% 7.2% 6.7% Retailing 9.8% 12.4% 9.5% 9.4% 7
Slide 48: Appendix 5 - Revenue Growth
Appendix 5 - Revenue Growth Average Daily Like-for-Like Revenue Growth* H1 2020 2019 2020 Q3 Q4 Q1 Q2 H1 Total Revenue* Constant Distribution Reported Currency UK (0.8%) (4.0%) (11.0%) (49.6%) (30.5%) (30.1%) (30.1%) Ireland 5.9% 2.7% 1.3% (35.2%) (16.7%) (16.0%) (15.9%) Netherlands (2.89%) (1.4%) (
Slide 49: Appendix 6 – H1 2020 IFRS 16 Income Statement Bridge
Appendix 6 – H1 2020 IFRS 16 Income Statement Bridge Pre IFRS 16 £m IFRS 16 Impact Reported Revenue 1,058.4 0.0 1,058.4 Operating costs (1,029.9) 6.3 (1,023.6) Operating profit before property profits 28.5 6.3 34.8 Property profits 0.3 0.0 0.3 Operating profit 28.8 6.3 35.1 Finance expense (5.9) (9.
Slide 50: Appendix 7 – H1 2020 IFRS 16 Cash Flow Bridge
Appendix 7 – H1 2020 IFRS 16 Cash Flow Bridge June 2020 Pre IFRS 16 Incl £m IFRS 16 Impact IFRS 16 Cash from operations 93.3 28.2 121.5 Interest and tax (15.3) (9.2) (24.5) Replacement capex net of asset disposals (5.4) 0.0 (5.4) Free cash flow 72.6 19.0 91.6 Development capex (6.8) 0.0 (6.8) Divide
Slide 51: Appendix 8 – H1 2020 IFRS 16 Balance Sheet Bridge
Appendix 8 – H1 2020 IFRS 16 Balance Sheet Bridge June 2020 Pre IFRS 16 £m IFRS 16 Impact Reported Intangible Assets 776.2 0.0 776.2 Tangible Assets 533.0 (2.2) 530.9 Right of Use Asset 0.0 504.0 504.0 Lease Receivable 0.0 2.4 2.4 Working Capital 160.8 12.7 173.5 Other Assets / (liabilities) (95.7)
Slide 52: Appendix 9 – H1 2020 IFRS 16 Segmental Bridge
Appendix 9 – H1 2020 IFRS 16 Segmental Bridge £m June 2020 Segmental operating profit before exceptional items and intangible IFRS 16 Pre amortisation arising on acquisitions Impact Reported IFRS 16 UK Distribution (1.6) 3.9 2.3 Ireland Distribution 15.1 0.1 15.2 Netherlands Distribution 13.6 0.5 14
Slide 53: Appendix 10 – H1 2020 IFRS 16 EPS Bridge
Appendix 10 – H1 2020 IFRS 16 EPS Bridge June 2020 £m IFRS 16 Pre Impact Reported IFRS 16 Numerator for basic, adjusted and diluted EPS: Profit after tax for the financial period from continuing operations 18.4 (2.4) 16.0 (Loss) after tax for the financial period from discontinuing operations 0.0 0.