Slide 1: Preliminary Results Year ended 31 March 2018
Preliminary Results Year ended 31 March 2018
Slide 2: Introduction
Introduction Martin Towers Chairman 2
Slide 3: Highlights
Highlights Ninth consecutive year of growth Revenue £300.1m +8.6%1 Underlying operating profit up 15.1% at £27.4m Underlying operating profit (2017: £23.8m) £27.4m +15.1 % Underlying EPS Group operating profit was £19.6m (2017: £16.8m) 29.5p +6.1 % Full year dividend increased by 8.3% to 7.8
Slide 4: Financial Review
Financial Review Shaun Smith Group Finance Director 4
Slide 5: Income Statement
Income Statement 2018 2017 +/- +/- Constant £m £m Reported Currency Revenue 300.1 271.2 +10.7% +8.6% Underlying1 operating profit 27.4 23.8 +15.1% +13.7% Margin 9.1% 8.8% Finance charges – cash (1.1) (0.9) Underlying1 PBT 26.3 22.9 +14.8% Exceptional operating items2 (2.1) (2.3) IAS19R admin expense
Slide 6: Income Statement – Key Bridges
Income Statement – Key Bridges Revenue Underlying operating profit 5.5 - 6.6 21.3 11.7 2.1 5.1 1.2 £m £m 0.3 300.1 27.4 271.2 23.8 2017 Currency Merlyn UK SA 2018 2017 Currency UK SA 2018 Revenue1 +8.6% Underlying operating profit / ROS% 300.1 9.1% 276.3 8.8% 27.4 +10.0% 23.8 9.5% 9.3% 200.6 182.3 1
Slide 7: Tax, Earnings and Dividends
Tax, Earnings and Dividends Diluted underlying EPS (pence) Underlying1 Reported +6.1% 2018 2017 2018 2017 29.5 £m £m £m £m 27.8 2017 2018 Profit before Tax 26.3 22.9 13.5 11.5 Dividend per share (pence) Tax charge (5.7) (5.3) (3.6) (3.0) +8.3% Earnings 20.6 17.6 9.9 8.5 7.2 7.8 Effective Tax rate 21
Slide 8: High cash conversion
High cash conversion 2018 2017 £m £m Underlying EBITDA 33.8 30.2 Underlying Operating Cash Flow / Underlying EBITDA Working capital (2.8) (1.8) Other - 1.4 99% 92% 76% Underlying operating cashflow 31.0 29.8 Capital expenditure (7.7) (8.0) Pension deficit recovery (2.5) (2.5) 2016 2017 2018 Tax (4.9
Slide 9: Strong Balance Sheet
Strong Balance Sheet £m Net debt (IFRS) 47.1 32.5 Strong cash generation leaves net debt at £47.1m after the 23.2 acquisition of Merlyn 2016 2017 2018 Leverage 1.2x underlying EBITDA on a pro forma* basis times Leverage - Net debt (IFRS) to EBITDA Underlying ROCE at 18.0% above our medium term
Slide 10: UK Pension Scheme
UK Pension Scheme IAS 19R deficit £48.0m (March 17: £62.7m) UK Pension IAS 19R Assets & Liabilities Assets reduced by £4.8m to £399.6m Liabilities reduced by £19.5m to £447.6m as a result of a higher discount rate of 2.65% (March 2017: 2.60%), lower inflation and reduced mortality improvement
Slide 11: Operating Review
Operating Review Nick Kelsall Group Chief Executive 11
Slide 12: Key Messages
Key Messages Overview 9th consecutive year of revenue and underlying profit growth Execution of strategy – strong momentum Benefits of geographical and product diversity Strong financial position UK UK growth and export momentum maintained Strong performance in trade channel offsetti
Slide 13: Business Overview
Business Overview Group Revenue 1 % UK market leader in the manufacture and marketing of showers £ 52.8m 17.6 Leading manufacturer and supplier of taps, mixer showers, bathroom accessories and valves £ 42.9m 14.3 Market leading, innovative designer, manufacturer and distributor of high quality £ 24.
Slide 14: UK Operations
UK Operations Nick Kelsall Group Chief Executive 14
Slide 15: UK Revenue – Excellent Trade & Export Growth
UK Revenue – Excellent Trade & Export Growth % Revenue Change Overall UK Export 8.4% 7.0% Return to growth in the UK. Strong export momentum in 15.3% Ireland 13.0% 1 14.8% Solid progress with independent retail and house builders 2.3% 15.3% 14.1% Robust UK specification. Export momentum 18.4%
Slide 16: UK Channels – Trade and Independent Retail Momentum
UK Channels – Trade and Independent Retail Momentum Trade Strong Screwfix growth - Triton and Adhesives % Revenue FY181 (v FY13) Strong house builder momentum maintained – Vado, Merlyn & Johnson Tiles 2% 17% (FY13: 2%) Specification contract wins – e.g. McCarthy & Stone, Inhabit & Bahrain (F
Slide 17: UK Channels – Reduced DIY Focus; Export Momentum
UK Channels – Reduced DIY Focus; Export Momentum DIY Retail % Revenue FY181 (vs FY17) Johnson Tiles and Adhesives – robust growth with Wickes Abode – new business with Wickes & Benchmarx 2% (FY17: 2%) 17% (FY17: 2%) (FY17: 15%) Johnson Tiles - B&Q decline; ONE Kingfisher programme (FY17: 15%
Slide 18: UK NPD – Continued Investment Driving Differentiation
UK NPD – Continued Investment Driving Differentiation Key driver of differentiation and market leading positions Strong new product vitality – >25%*, driving revenue and profit growth Triton & Vado Digital showers launched – brands targeting different market segments Triton “Best of British”
Slide 19: UK Operations – Strong Operational & Customer Service Culture
UK Operations – Strong Operational & Customer Service Culture Award Winning Customer Service Triton – “Best Bathroom Supplier” award – recognition of design strength, service and customer service Merlyn – Winner of “Irish Customer Contact & Shared Services Award” 2016 & 2017 Merlyn & Vado -
Slide 20: UK – Revenue and Profit Growth in Challenging Markets
UK – Revenue and Profit Growth in Challenging Markets Revenue Underlying Operating Profit £200.6m £182.3m 9.1 £18.6m 7.9 £17.2m £17.4m £163.0m 47.1 8.0 53.2 12.8 10.6% 54.1 24.2 9.5% 10.6 9.3% 24.7 17.2 42.9 33.1 37.2 11.7 50.6 48.7 52.8 2016 2017 2018 2016 2017 2018 Triton Merlyn 1 Vado Croydex Abo
Slide 21: South Africa Operations
South Africa Operations Nick Kelsall Group Chief Executive 21
Slide 22: South Africa Revenue – Share Gains in Tough Market
South Africa Revenue – Share Gains in Tough Market % Revenue Change £ Rand 11.9% Eighth year of consecutive Rand revenue growth 5.9% 10.0% Strong retail revenue growth – two new stores opened and 4.2% three upgraded to CX format 14.7% Market share growth partially offset by lower export sales
Slide 23: Channels – Robust Performance in Tough Markets
Channels – Robust Performance in Tough Markets TAF Robust growth despite soft consumer sentiment Strong and growing bathroom sales Group synergies – key driver of successful bathroom Retail store-within-a-store concept Taps and accessories growth - benefitting from Vado Families, interior
Slide 24: South Africa – NPD & Operational Highlights
South Africa – NPD & Operational Highlights New Product Development Operations and Supply Chain TAF TAF Extensive new products 32 stores and 2 franchises launched across ten product 24 out of 32 stores upgraded to categories either CX or Lifestyle formats Group purchasing synergies Nex
Slide 25: South Africa – Further Year of Excellent Progress
South Africa – Further Year of Excellent Progress Revenue1 Underlying Operating Profit £8.8m £99.5m £94.0m 12.6 £86.4m 11.5 11.6 £6.4m 24.2 22.3 21.2 8.8% £4.1m 7.2% 5.6% 60.2 62.7 53.6 2016 2017 2018 2016 2017 2018 Tile Africa TAL Johnson Tiles Underlying Operating Profit Return on Sales % 1 On a c
Slide 26: Group Outlook & Strategy
Group Outlook & Strategy Nick Kelsall Group Chief Executive 26
Slide 27: UK and South Africa market indicators
UK South Africa Stable but Lacklustre Market Improving Sentiment Key Housing Stats % GDP growth Sources: GOV.UK & HMRC Q1 2018 Source: Investec Q2 2018 3.5% Completions Transactions 60,000 500,000 3.0% 50,000 450,000 Quarterly Transactions Quarterly Completions 2.5% 400,000 40,000 350,000 2.0% 30,00
Slide 28: Strategy Refresh – 2018 - 2023 Vision
Strategy Refresh – 2018 - 2023 Vision 2023 VISION “A leading supplier of bathroom and kitchen products in selected geographies, offering strong brands, contemporary designs, trusted quality, outstanding service, innovation and a wide product range” STRATEGIC TARGETS £600m revenue by 2023 50% revenue
Slide 29: Strategy - Organic and Acquisition Opportunities
Strategy - Organic and Acquisition Opportunities EXISTING PRODUCT PORTFOLIO POTENTIAL TO BROADEN PRODUCT PORTFOLIO COMPLEMENTARY ACQUISITION OPPORTUNITIES – WELL DEVELOPED PIPELINE CHOSEN MARKETS SUITABLE FOR CONSOLIDATION ORGANIC GROWTH MOMENTUM 29
Slide 30: Strategy - Industry Fragmentation + Consolidation Opportunity
Strategy - Industry Fragmentation + Consolidation Opportunity UK Bathroom – Selective Markets @ MSP £220m £355m £224m £350m £346m £350m £1.8bn 100% 90% 80% 70% 60% Rest of Market 50% Top 3 Players 40% 30% 20% 10% 0% Showers Brassware Enclosures & Furniture & Adhesives Tiles Total Trays Accessories S
Slide 31: Summary
Summary Robust Full Year Results Rollover of Our Successful Strategy Organic Growth and Synergy Opportunities Developed Pipeline of Acquisition Opportunities Medium Term Indicators Favourable 31
Slide 32: Appendix
, —— NOrcros = Appendix a FS | |
Slide 33: Merlyn: Key Financials
Merlyn : Key Financials Acquired 23 November 2017 Cash consideration £59.1m net of acquisition costs Total costs of £4.1m including the cost of raising equity Financing: Debt: Bank facility increased to £120m: Maturity date November 2021 Equity: 18,254,161 10p new ordinary shares issued
Slide 34: Acquisition related costs
Acquisition related costs 2018 2017 £m £m Acquisition related costs Acquisition related deferred remuneration (earn out) 0.3 (0.4) Intangible asset amortisation (2.2) (1.2) Staff costs and advisory fees (2.4) (1.1) (4.3) (2.7) 34
Slide 35: Net debt reconciliation
Net debt reconciliation 2018 2017 £m £m Net debt (IFRS) – opening (23.2) (32.5) Net cash flow (24.2) 7.8 Other non cash movements (0.2) (0.2) Foreign exchange 0.5 1.7 Net debt (IFRS) - closing (47.1) (23.2) 35
Slide 36: UK Pension Scheme cashflows
UK Pension Scheme cashflows Cash outflow remains close to peak * Source: KPMG Fusion * Annual pensioner payroll, excludes non-predicted costs such as transfer out and early retirement payments 36