Grafton Group Plc · LSE:GFTU
Grafton — FY2018 Earnings Presentation
40 slides from Grafton's earnings presentation, February 2019
Slide 1: Final Results 2018
Final Results 2018
Slide 2: Cautionary Statement and Notes
Cautionary Statement and 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 fro
Slide 3: Final Results 2018 – Presenters
Final Results 2018 Gavin Slark David Arnold CEO CFO 3 Grafton Group plc - Final Results 2018
Slide 4: Introduction & Highlights
Introduction & Highlights Gavin Slark, CEO 4 Grafton Group plc - Final Results 2018
Slide 5: Record Set of Results
Record Set of Results Revenue Adjusted operating profit Adjusted EPS up 9% to £2.95bn (8% in up 19% to £194.5m up 20% constant currency) Dividend Up 16% Adjusted operating profit ROCE Sixth consecutive year of margin up 140bps to 15.0% double digit growth up 60bps to 6.6% 5 Grafton Group plc - Final
Slide 6: Strong Performance On All Key Metrics
Strong Performance On All Key Metrics All segments Broadly based Integration of Excellent Continued ahead of last organic Leyland SDM progress strong cash year growth progressing towards flow and low well medium term net debt financial enables us to targets reinvest in further growth opportunities 6
Slide 7: Operating Profit Margin and ROCE
Operating Profit Margin and ROCE 16.0% 15.0% 15.0% 13.6% 14.0% 13.0% 12.2% 12.5% 12.0% 11.1% 11.0% 10.0% 9.0% 7.8% 8.0% 6.6% 7.0% 6.1% 6.0% 5.8% 5.7% 6.0% 5.3% 5.0% 4.6% 4.1% 4.0% 3.5% 2.7% 3.0% 2.0% 1.0% 0.0% FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 ROCE Adjusted operating margin 7 Grafton G
Slide 8: Financial Review
Financial Review David Arnold, CFO 8 Grafton Group plc - Final Results 2018
Slide 9: Income Statement
Income Statement Movement Constant £m 2018 2017 Reported Currency Revenue 2,952.7 2,715.8 +9% +8% Adjusted operating profit pre property profit 189.6 160.9 +18% Property profit 4.9 2.7 Adjusted operating profit 194.5 163.7 +19% Amortisation & loss on disposal of Group businesses (7.0) (2.8) Statutor
Slide 10: Mix benefits of investment and faster growth more than offset competitive market conditions
Mix benefits of investment and faster growth more than offset competitive market conditions Pre Incl. Property Property Property Profits Profits Profits 2017 operating margin 5.9% 0.1% 6.0% Increase in Group gross margin 0.2% - 0.2% Improvement in operating expense efficiency 0.3% - 0.3% 2018 operat
Slide 11: Revenue Growth Analysis
Revenue Growth Analysis £’m £’m 3,100 2,953 3,000 58 7 172 2,900 Revenue 2,800 2,716 2,700 2,600 2,500 2,400 2017 Organic Growth Acquisitions FX 2018 11 Grafton Group plc - Final Results 2018
Slide 12: Incremental Revenue from Organic Growth
Incremental Revenue from Organic Growth (Constant Currency) £’m £’m 200 58 180 172 160 (13) 140 13 Revenue 120 16 Revenue 100 9 1 31 80 60 57 40 20 0 UK Ireland Netherlands Belgium Retail Manufacturing Organic Growth Branch Organic Growth Initiatives Consolidations Merchanting /Disposals LFL Busines
Slide 13: Adjusted Operating Profit Analysis
Adjusted Operating Profit Analysis £’m £’m 200 2.1 0.4 194.5 195 7.1 190 20.7 1.2 185 (0.7) Adjusted EBITA 180 175 170 165 163.7 160 155 150 2017 Like-for-Like Growth Initiatives Branch Acquisitions Property FX 2018 Business Consolidations Disposals /Disposals 13 Grafton Group plc - Final Results 20
Slide 14: Like-for-Like Business Incremental Operating Profit Drop-Through Analysis
Like-for-Like Business Incremental Operating Profit Drop-Through Analysis £’m £’m 25.0 4.1 20.0 (0.3) 5.5 Group 15.0 20.7 3.0 10.0 (0.1) 6.3 5.0 2.2 0.0 UK Ireland Netherlands Belgium Retail Manufacturing Central Like-for-Like Business Merchanting 14 Grafton Group plc - Final Results 2018
Slide 15: Like-for-Like Business Incremental Operating Profit Drop-Through Analysis
Like-for-Like Business Incremental Operating Profit Drop-Through Analysis £’m £’m 25.0 32% 20.0 34% Group 15.0 16% 34% 10.0 20% 5.0 4% 0.0 UK Ireland Netherlands Belgium Retail Manufacturing Central Like-for-Like Business Merchanting 15 Grafton Group plc - Final Results 2018
Slide 16: UK Merchanting
UK Merchanting £m 2018 2017 Movement Revenue 1,987.6 1,845.1 +7.7% Adjusted operating profit pre property profit 110.1 100.9 +9.1% Adjusted operating margin pre property profit 5.5% 5.5% - • Average daily like-for-like revenue growth of 2.7% – volumes broadly in line with last year • Overall gross m
Slide 17: Irish Merchanting
Irish Merchanting Movement Constant £m 2018 2017 Reported Currency Revenue 441.1 403.6 +9.3% +8.4% Operating profit pre property profit 41.3 34.5 +19.8% +18.9% Operating margin pre property profit 9.4% 8.5% +90bps • Average daily like-for-like revenue growth of 7.7% • House completions increased to
Slide 18: Netherlands Merchanting
Netherlands Merchanting Movement Constant £m 2018 2017 Reported Currency Revenue 155.5 131.0 +18.7% +17.6% Adjusted operating profit 16.0 12.6 +26.9% +25.9% Adjusted operating margin 10.3% 9.6% +70bps • Average daily like-for-like revenue growth of 6.6% with good activity across the branch network a
Slide 19: Belgium Merchanting
Belgium Merchanting Movement Constant £m 2018 2017 Reported Currency Revenue 91.6 89.6 +2.2% +1.3% Operating profit 0.8 0.9 (12.2%) (11.9%) Operating margin 0.9% 1.0% (10bps) • After a slow start to the year, the second half saw an improved financial performance • Disposal of geographically peripher
Slide 20: Retailing
Retailing Movement Constant £m 2018 2017 Reported Currency Revenue 198.2 180.4 +9.9% +8.8% Operating profit 16.8 11.2 +50.1% +48.7% Operating margin 8.5% 6.2% +230bps • Average daily like-for-like revenue growth of 8.8% - broadly split between transactions and average transaction value • Seasonal pr
Slide 21: Manufacturing
Manufacturing £m 2018 2017 Movement Revenue 78.8 66.1 +19.3% Operating profit 19.2 15.1 +27.3% Operating margin 24.4% 22.9% +150bps • Another record year for CPI Euromix, Great Britain’s market leading dry silo mortars business • Volume growth significantly outperformed growth in housebuilding • 150
Slide 22: Balance Sheet
Balance Sheet 31 Dec 31 Dec £m 2018 2017 Intangible assets 726.0 646.1 Tangible assets 548.3 531.5 Working capital 192.6 169.5 Other assets/(liabilities) (97.1) (86.1) Pension deficit (20.2) (23.5) 1,349.6 1,237.5 Net debt (53.1) (62.9) Equity 1,296.5 1,174.6 ROCE 15.0% 13.6% Net debt/EBITDA 0.2x 0.
Slide 23: Cash Flow
Cash Flow 2018 2017 £m Cash from operations 209.2 210.7 Interest and tax (30.0) (23.9) Replacement capex net of asset disposals (21.8) (23.3) Free cash flow 157.4 163.5 Development capex (40.9) (49.3) Dividends (38.6) (33.7) Share issue 1.3 1.9 Acquisitions & business disposals (incl. debt acquired)
Slide 24: 2019 Guidance
2019 Guidance • Full year property profits currently expected to be c.£3m • Depreciation currently forecast at c.£49m (excluding impact of IFRS 16) • Total 2019 capex currently anticipated to be c.£75m – replacement c.£50m and development c.£25m (note excludes acquisition spend) • Interest charge c.
Slide 25: IFRS 16 – New Lease Standard
IFRS 16 – New Lease Standard • New lease accounting standard (IFRS 16) effective from 1 Jan 2019 • Modified retrospective approach will be adopted which brings all leases onto balance sheet from the date of transition with no restatement of comparatives • No impact on cash flows • No impact on coven
Slide 26: IFRS 16 – Impact
IFRS 16 – Impact • Balance sheet liability based on current lease portfolio estimated to be £565m-£585m or c.7.5x 2018 operating lease charge • Instead of a lease rental the P&L will show a separate depreciation charge and imputed interest cost • Impact on PBT is neutral over the life of a lease but
Slide 27: Current Trading & Outlook
Current Trading & Outlook Gavin Slark, CEO 27 Grafton Group plc - Final Results 2018
Slide 28: What Makes Grafton Different
What Makes Grafton Different Good market positions Geographic spread with exposure to faster growth points Decentralised, federated structure with a real focus on our customers Strong financial base Track record of delivery 28 Grafton Group plc - Final Results 2018
Slide 29: Earnings and Dividend Per Share
Earnings and Dividend Per Share 70.0 66.0 60.0 54.9 50.0 47.7 Pence Per Share 41.2 40.0 34.4 30.0 22.3 18.0 20.0 15.5 15.1 13.8 13.4 12.5 10.8 8.5 10.0 6.5 7.0 0.0 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 Earnings Per Share Dividend Per Share • Since 2011, CAGR of EPS has been 25.6% • Sixth c
Slide 30: Grafton's Journey
Grafton’s Journey Driving earnings through investment and improvement Organic and acquisitive growth Improving the quality of the returns 7% operating margin and 15% ROCE targets Achieving financial respectability 5% operating margin and double digit ROCE 30 Grafton Group plc - Final Results 2018
Slide 31: Current Trading – January 2019 to February 2019
Current Trading – 1 January 2019 to 17 February 2019 Average Daily Like-for-Like Revenue Growth 1 January 19 – Q4 2018 17 February 19 Merchanting UK 3.4% 1.9% Ireland 9.8% 10.5% Netherlands 3.6% 4.6% Belgium 7.4% 5.5% Retailing 5.3% 5.6% Manufacturing 13.6% 1.3% Total Group 4.9% 3.7% 31 Grafton Grou
Slide 32: Outlook
Outlook UK Ireland The Netherlands and • Our focus remains on • Should continue to Belgium outperforming the benefit from positive • Outlook for the Dutch market outlook for the economy economy remains • Activity likely to be • Forward indicators point positive slightly weaker with to sustained grow
Slide 33: Summary – Strong Performance
Summary – Strong Performance Growth in Excellent progress Ongoing focus on Balance sheet profitability across towards medium growth and continues to be in all segments term financial self help excellent shape to targets support future development 33 Grafton Group plc - Final Results 2018
Slide 34: Questions
Questions 34 Grafton Group plc - Final Results 2018
Slide 35: Appendices
Appendices 35 Grafton Group plc - Final Results 2018
Slide 36: Appendix 1 - Notes & Definitions
Appendix 1 - Notes & Definitions Notes • As amounts are reflected in £’m some non-material rounding differences may arise. Definitions • Adjusted earnings per share is earnings before intangible asset amortisation arising on acquisitions and before profit/loss on disposal of Group businesses • Adjus
Slide 37: Appendix 2 - Operating Profit Bridge – Statutory to Adjusted
Appendix 2 - Operating Profit Bridge – Statutory to Adjusted 2018 2017 Change £’m £’m £’m Revenue 2,952.7 2,715.8 +236.9 Statutory operating profit 187.5 160.9 +26.6 Amortisation of intangible assets arising on acquisitions and net 7.0 2.8 +4.3 profit/loss on disposal of Group businesses Adjusted op
Slide 38: Appendix 3 - Operating Margin Analysis
Appendix 3 - Operating Margin Analysis* H2 H1 H2 H1 2018 2018 2017 2017 UK Merchanting 5.6% 5.5% 5.5% 5.5% Irish Merchanting 10.6% 8.0% 9.0% 8.0% Netherlands Merchanting 10.0% 10.5% 8.9% 10.4% Belgium Merchanting 1.5% 0.2% 1.1% 0.9% Total Merchanting 6.5% 6.0% 6.1% 6.0% Retailing 9.4% 7.5% 6.7% 5.6%
Slide 39: Appendix 4 - Revenue Growth
Appendix 4 - Revenue Growth 2018 Average Daily Like-for-Like Revenue Growth 2018 Q1 Q2 Q3 Q4 FY Total Revenue Constant Merchanting Reported Currency UK (0.4%) 3.8% 3.9% 3.4% 2.7% 7.7% 7.7% Ireland 3.7% 8.6% 8.5% 9.8% 7.7% 8.4% 9.3% Netherlands 7.6% 8.3% 6.0% 3.6% 6.6% 17.6% 18.7% Belgium (4.4%) (3.9
Slide 40: Appendix 5 - IFRS 16 – Estimated Effect
Appendix 5 - IFRS 16 – Estimated Effect Lease Adjusted Net Debt to EBITDAR 2018 Estimated net effect on Income Statement 2018 2019 £’m £’m EBITDA 236 EBITDAR - No impact Operating Lease Expense 77 EBITA effect 80 IAS 17 lease charge IFRS 16 depreciation EBITDAR 313 Depreciation (70) charge EBITA pos