Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — H1 2013 Earnings Presentation
44 slides from Howden Joinery's earnings presentation, Jul 25, 2013
Slide 1: 2013 Half-Yearly Report
2013 HALF – YEARLY REPORT 25 July 2013
Slide 2: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 3: The business is performing well
The business is performing well Proven Howdens model delivering results: • Sales up by £26m • Operating profit up by £15m • PBT up by £17m • Strong cash generation Benefits of continuing investment in people, products, property, manufacturing and systems Interim dividend of 1.0p declared 2013 Half-Y
Slide 4: Mark Robson, Chief Financial Officer
Mark Robson Chief Financial Officer
Slide 5: Highlights
Highlights Revenue, £m Operating profit pre except’ls, £m Net cash, £m HJ UK France 50 125 400 40 45.1 11.1 390.8 100 102.0 7.1 96.4 11.7 30 75 375 364.6 29.6 6.9 383.7 20 50 350 357.7 756.4 10 25 37.4 325 0 0 2012 2013 2012 2013 Jun-12 Dec-12 Jun-13 HJ UK: +7.3% P2-6 +4.3% Gross profit margin, % Pr
Slide 6: Revenue
Revenue 2013 UK depot revenue £383.7m • total +7.3% • LFL +5.5% • periods 2 to 6 total +4.3% 2013 French depot revenue £7.1m -0.7% in LFL €s 2013 Half-Yearly Report 6
Slide 7: Profit before tax
Profit before tax Group gross profit margin ● 2013: 61.5% ● 2012: 60.3% Profit before tax £m Change £m Gross Gross profit £17.3m profit 20.6 43.2 Extra Cost savings, Change week (revenue) cost £20.6m 10 Operating Interest, pressures, etc. costs etc 1 240.4 Price, (5.1) 1.8 etc. Extra week Currency 1
Slide 8: Operating costs
Operating costs Operating costs Change £m £5.1m Other Other - 1.0 195.3 growth 2.7 New depots 3.0 Older depots 190.2 (1.6) • 2012 2013 2013 Half-Yearly Report 8
Slide 9: Income statement – pre exceptionals
Income statement – pre exceptionals * Continuing operations, £m ** H1 2013 H1 2012 Revenue 390.8 364.6 Cost of goods sold (150.4) (144.8) Gross profit 240.4 219.8 Operating costs (195.3) (190.2) Operating profit 45.1 29.6 Net interest (1.9) (3.7) Profit before tax 43.2 25.9 Tax (11.2) (5.8) Profit f
Slide 10: Earnings per share and dividend
Earnings per share and dividend H1 2013 H1 2012 Earnings per share pre except’ls 5.0p 3.2p Interim dividend per share 1.0p 0.3p 2013 Half-Yearly Report 10
Slide 11: Net cash and cash flow
Net cash and cash flow £m H1 2013 H1 2012 Opening net cash 96.4 57.1 Operating cash flows before movements in working capital 55.6 37.9 Working capital (11.3) (10.4) Capital expenditure (8.8) (6.5) Interest (net) 0.1 (0.1) Tax paid (11.3) (9.0) Legacy properties (5.3) (13.9) Pension deficit contribu
Slide 12: Working capital
Working capital Working capital up £11.3m • stock up £4.7m • debtors up £25.0m • creditors up £18.4m 2013 Half-Yearly Report 12
Slide 13: Reducing our legacy property liabilities
Reducing our legacy property liabilities Two early exits announced in February Since then, five more exits: • two early exits • two terminations • one expiry £7.5m exit cost so far this year Nine legacy properties remaining • net annual rent & rates < £2m 2013 Half-Yearly Report 13
Slide 14: Pension scheme deficit
Pension scheme deficit £m Finance charge IAS19 basis 154 2 Discount rate & other assumptions Change (35) £61m Asset returns (15) 93 Deficit Funding (14) • Dec Jun 2012 2013 2013 Half-Yearly Report 14
Slide 15: Recent trading and outlook for remainder of 2013
Recent trading and outlook for remainder of 2013 Sales in first four-week period of H2 up 7.6% • not evidence of improvement in market conditions, which remain uncertain Expectations for the rest of the year unchanged • gain from extra week’s trading in H1 reverses out in H2 • important period 11 st
Slide 16: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 17: Continuing focus on one customer
Continuing focus on one customer “To supply from local stock, nationwide, the small builder’s ever-changing, routine, integrated kitchen and joinery requirements, assuring no call back quality and best local price” 17
Slide 18: Principles of the Howdens model
Principles of the Howdens model Absolute focus on the small builder Trade only Good product Local stock Low-cost manufacturing Incentivised local management Designed for resilience 18
Slide 19: The small builder's daily challenge
The small builder’s daily challenge Customers who change their plans Securing the right product • At the right time • In the right place A very • At the right price complex task Time (£) taken to complete a job External factors, e.g. weather Getting paid on time 19
Slide 20: Howdens' integrated offer to the builder
Howdens’ integrated offer to the builder Price Range Service Simplifying Local complexity reliability Quality Availability Terms Helping the builder to save time and make a living 20
Slide 21: Helping the builder to sell
Helping the builder to sell Relevant, well-designed range of kitchens Matching joinery, hardware and accessories Varied styles and price points Rigid cabinets • Easy to install • Robust Full range of Lamona appliances Making the builder’s life easier 21
Slide 22: Lamona supports the Howdens brand
Lamona supports the Howdens brand Ovens, hobs, extractors, microwaves, dishwashers, refrigeration and laundry Designed to look good and work well Competitively priced Beating industry ‘failure rates’ 2-year warranty as standard 5-year guarantee on oven door glass Scale + credibility = awareness + gr
Slide 23: Everything always in stock locally
Everything always in stock locally • Very local depot • No lead times • No need for builder to store • Trade only • Expert staff • Product knowledge • Customer knowledge Making the builder’s life easier 23
Slide 24: Making the builder's life easier
Making the builder’s life easier Investing in the best: • Designers • CAD software • Projectors • 52” screens • 3D visualisations • Videos • Cookbooks Helping the builder to sell, plan and install 24
Slide 25: Focused on the small builder's needs
Focused on the small builder’s needs Price Range Service Quality Availability Terms Confidential discount Trade credit account Nett monthly terms Helping the builder to manage margin and cash flow 25
Slide 26: Howdens' integrated offer to the builder
Howdens’ integrated offer to the builder Price Range Service Simplifying Local complexity reliability Quality Availability Terms Constantly improving everything 26
Slide 27: Growth in credit account customers
Growth in credit account customers No. of accounts • 10,000 net new 290,000 accounts in H1 278,000 270,000 • Depots focus on opening and 250,000 trading accounts 230,000 210,000 190,000 170,000 150,000 P13 2009 P6 2010 P13 2010 P6 2011 P13 2011 P6 2012 P13 2012 P6 2013 27
Slide 28: Customers are prepared to pay for Howdens service
Customers are prepared to pay for Howdens service % of sales • Tight credit 1.8% management 1.6% • Accounts that Total cost of credit control 1.4% have not traded (including bad debts) for 15 months 1.2% are deleted 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 2009 2010 2011 2012 2013 HY1 28
Slide 29: How the depot generates margin (1)
How the depot generates margin (1) Low cost • 10,000 square feet • Trade location • Rent < £5.50 Howdens Newbury per sq ft • Fit-out c.£170,000 29
Slide 30: How the depot generates margin (2)
How the depot generates margin (2) High motivation • Local accountability • Local staff • Local marketing • Manager and staff incentivised on share of profit less stock loss • Further incentives Howdens Cleethorpes 30
Slide 31: Key depot performance indicators
Key depot performance indicators Each depot’s • Sales P&L meeting • Margin focuses on: • Account openings • Sales per account • Sales per head per week • Appliance penetration • Local cost recovery • Stock management • Sales forecasting 31
Slide 32: Margin supported by focused supply chain
Margin supported by focused supply chain Dedicated manufacturing at Howden and Runcorn • Scale and predictability Industrial design • Large volumes Security of supply • Long runs Quality • Accurate forecasting Availability Low cost • One customer Minimising waste 32
Slide 33: Investing in an efficient, responsive supply chain
Investing in an efficient, responsive supply chain Howden and Runcorn • £20m investment • New lines on stream • Flexibility to increase cabinet capacity by 50% • Full disaster recovery capability • Significant improvements in Lowest cost, better quality – at scale quality, accuracy and productivity
Slide 34: Business underpinned by robust systems
Business underpinned by robust systems No limits on our systems capacity in respect of: • Manufacturing processes • Number of depots requiring support • Stock management • Warehousing • Logistics • Point of sale • Management information Simplifying complexity 34
Slide 35: Simplifying complexity
Simplifying complexity • Helping the builder to get the kitchen fitted and working in the home 35
Slide 36: More of the same
More of the same Constantly improving Better design product More Better speed quality Affordable Improved More safety functionality 36
Slide 37: Maximising potential of new trends
Maximising potential of new trends Gloss finish Solid colours • White, grey, cream Demand for good design at all price points Integrated Handle Gloss White 37
Slide 38: New kitchen ranges to support growth
New kitchen ranges to support growth Greenwich • Competitively priced • Gloss White launched end of 2012, now our fastest-growing range • 3 new Greenwich options launched H1 2013 Glendevon • Gloss Graphite launched Greenwich Gloss White H1 2013 38
Slide 39: Highly competitive at entry level
Highly competitive at entry level Local Available Robust Value Saving the builder time and money 39
Slide 40: Establishing Lamona at the forefront of its market
Establishing Lamona at the forefront of its market 550,000 Lamona appliances sold in 2012 Constantly improving range – design, quality and availability New sinks and taps New oven finishes The Lamona deluxe dishwasher 40
Slide 41: Improving service to builders
Improving service to builders • Less time • Less tolerance • More awareness 41
Slide 42: Our growing network of local depots
Our growing network of local depots 537 depots • 8 opened to date in 2013 • Expect to open up to 30 by year end Flexible opening programme • Suited to market conditions Scope for at least 700 depots in the UK 42
Slide 43: Continuing to grow Howdens business
Continuing to grow Howdens business Clear strategy Being Proven model very good at Clearly focused on Cash generative what we are the small builder good at Many opportunities A robust and flexible business suited to an uncertain environment 43
Slide 44: 2013 Half-Yearly Report
2013 HALF – YEARLY REPORT 25 July 2013