Grafton Group Plc · LSE:GFTU
Grafton — FY2010 Earnings Presentation
36 slides from Grafton's earnings presentation, Mar 3, 2011
Slide 1: Final Results 2010
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Slide 2: Profile
Profile UK and Ireland based Building Materials Group Principal activities Builders Merchanting (No. 1 in ROI, No. 3 in UK) Plumbers Merchanting (No. 2 in ROI, No 4 in UK) DIY Retailing in Ireland (No. 1 in ROI) Dry Mortar Manufacturing (No. 1 in UK) Turnover of €2 billion Market lea
Slide 3: Group Locations
Group Locations g Builders Merchanting Plumbers Merchanting Manufacturing DIY Retailing 2
Slide 4: Final Results Comments for 2010
Final Results Comments for 2010 • Improving turnover trends in H1 were sustained in H2 despite impact of very poor weather Improving in Q4 2010 Turnover • Strong profit recovery experienced throughout 2010 – Merchanting in particular Profit Recovery Demand • Demand fundamentals for Grafton UK Mercha
Slide 5: Grafton Group – Reasons for Optimism
Grafton Group – Reasons for Optimism Well positioned for recovery – reduced cost base Strong position in UK Merchanting market (>70% of Group Turnover) Now back into profit growth - Group experiencing strong profit recovery Consistent focus on development and growth of business Good history of
Slide 6: Final Financial Highlights - 2010
Final Financial Highlights - 2010 2010 2009 % Growth Turnover €2,004m €1,980m 1% EBITDA €95.1m €74.1m 28% Adjusted Operating profit *** €50.6m €26.2m 93% Operating profit €33.0m €4.9m 576% Basic EPS 27.7c 5.8c 376% Adjusted EPS# 18.5c 5.4c 246% Free cash flow €95 m €171m **Before intangible amortisa
Slide 7: Financial Highlights 2010 - Summary
Financial Highlights 2010 - Summary Group Turnover up 1% on 2009 Positive group like-for-like sales trends maintained since Q2 2010. Group adjusted operating profit up 93% on 2009. Dividend total for the year 7.0c - up 40% on 2009 levels Free cash flow of €95m Continued focus on controll
Slide 8: Segmental Turnover Analysis 2010 v 2009
Segmental Turnover Analysis 2010 v 2009 Group Revenue up 1% to €2.0 bn. Euro Turnover €’millions H2 Group Revenue up 3.6% on 2009 Merchanting Revenue up 2.6% on 2009. Merchanting Improved H2 performance – Up 5% on 2009. Growth which returned to UK Merchanting in H1 2010 continues and grows
Slide 9: Geographical Analysis
Geographical Analysis 71% UK Based Turnover FY 2010 Geographical Analysis €571.9m 71% of Group turnover (2009:€637.8m) generated in the UK €1,432.5m (2009:68%) (2009: €1,342.0m) UK turnover up 7% (8% H2 2010) Republic of Ireland down UK Ireland 10%. (7% H2 2010) Over 71% of turnover from UK ma
Slide 10: Quarterly Turnover Trends 2009 - 2010
Quarterly Turnover Trends 2009 - 2010 Quarterly Turnover 600 Millions 500 400 300 200 Quarterly Turnover 100 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2009 2009 2009 2010 2010 2010 2010 Return to Modest Growth Maintained since Q2 2010 9
Slide 11: Group Operating Result– 2010
Group Operating Result– 2010 Year 2010 2009 €m €m Adjusted operating profit 50.6 26.2 Restructuring costs (5.3) (18.9) Intangible amortisation (2.2) (2.2) Goodwill impairment - (5.5) Asset Impairment provision – Ireland (10.1) - Past service credit – pension scheme - 5.3 Group operating profit per i
Slide 12: Operating Result by Segment
Operating Result by Segment Period 2010 2009 Segment Merchanting Retail Manufacturing Merchanting Retail Manufacturing €’M €’M €’M €’M €’M €’M Segment operating profit 61.5 2.4 (3.5) 39.3 3.3 (5.1) /(loss) Restructuring costs (5.1) - (0.2) (17.0) (0.5) (1.4) Segment operating profit 56.4 2.4 (3.7) 2
Slide 13: Cash Generation
2010 2009 Cash Generation € million € million Segment operating profit (before restructuring costs) 61 38 Head office costs (10) (12) Adjusted operating profit 51 26 Depreciation, impairment & other 50 57 Restructuring Costs (5) (19) Investment profit realised in cash - 22 Proceeds on asset disposal
Slide 14: Reducing Net Debt
Reducing Net Debt € 584m € 551m € 550m €280m debt successfully €436m refinanced in August 2010 [largely out to 2013] €322m Sustained reduction in €255m gearing & net debt Good liquidity, positive free cash flow and high cash deposits Debt reduced by over half (€295m or 54%) in 3 years since
Slide 15: Working Capital Trends
Working Capital Trends 2007 2008 2009 2010 €’m €’m €’m €’m Stock 386 331 265 272 Debtors 536 354 307 306 Creditors (490) (417) (387) (400) Total 432 268 185 178 164 83 7 Currency & other items (56) 11 2 Year on year reduction 108 94 9 3 Yr Total Reduction to Dec 2010 €211m or 49% 14
Slide 16: Management Initiatives for 2011
Management Initiatives for 2011 Customer retention & growth – focus on key target & growth areas Increase market share in key sectors, develop in smaller specialist markets Maintain the positive operating improvements achieved in 2010 going forward Focus on margin improvement Working capital managem
Slide 17: Improving Trends
Improving Trends Return to like for like sales and profit growth in UK Merchanting and UK manufacturing sectors during H1 2010 maintained into H2 and 2011. 71% of Group turnover in UK in 2010 Irish merchanting returned to profitability in 2010 Continued strong cash generation Free cash flo
Slide 18: Benefits of Cost Reduction Initiatives
Benefits of Cost Reduction Initiatives –Continues to be Evident in Results Total headcount reduced by further 250 during 2010 to 9,050. (Total reduction since 1st January 2008 is approx 3,000 employees) Almost €100m in annual cost reductions achieved from rationalisation measures implemented to
Slide 19: Rationalisation Costs and Benefits
Rationalisation Costs and Benefits Restructuring Cost Benefit Staff Reductions – 36 months to 36 months to December 2010 per annum December 2010 €’ millions €’ millions Employee Changes Payroll Savings per annum Numbers € millions UK 10 50 -1,564 42 Ireland 27 42 -1,450 41 37 92 -3,014 83 Almost €10
Slide 20: Margin Recovery
Operating Margin History (Core – before central costs) Year UK ROI Group 2000 5.9% 12.7% 8.4% 2001 6.3% 13.1% 8.6% 2002 2003 7.0% 7.3% 12.2% 13.0% 8.5% 8.7% Margin 2004 2005 7.8% 6.9% 13.1% 10.7% 9.1% 8.4% Recovery 2006 6.7% 11.3% 8.6% 2007 7.3% 10.8% 8.7% 2008 4.5% 5.5% 4.9% 2009 3.2% -1.7% 1.6% 20
Slide 21: Improved Debt Maturity to 2013
Improved Debt Maturity to 2013 Dec 2010 Dec 2009 Debt Maturity € million €’million €'Millions Gross debt 489 624 225 Cash (234) (302) 150 Net debt 255 322 75 Gearing 26% 35% 0 Gross debt maturities – calender year ** 2010 - 99 2011 147 330 2012 84 149 2013 224 14 2014-2016 34 32 Cash on deposit avai
Slide 22: 2011 Outlook
2011 Outlook Group Improved trends in turnover evident during H2 2010 continue into 2011 Further growth in profitability expected in 2011 – largely UK based Group well positioned with latent capacity High operational leverage UK Overall outlook in UK continues to improve Demand fundament
Slide 23: Group Focus for 2011
Group Focus for 2011 Gain Improve Working Grow direct Increased operating Continue to sourcing and shareholder market profit drive cost capital supply chain value and share reduction management margin management returns 22
Slide 24: Principal Brands – UK and Northern Ireland
Principal Brands – UK and Northern Ireland 23
Slide 25: Principal Brands – Irish Merchanting and Manufacturing
Principal Brands – Irish Merchanting and Manufacturing 24
Slide 26: Irish Merchanting
*Heiton Buckley CHADWICKS BUILDERS MERCHANTS Irish Merchanting
Slide 27: Irish DIY Retail Brands
oo rt ‘aon ‘an . oup ple e 010° There’s no better buy in DIY § Tei é Woadie's DIY isn RAS mefors ift}hOUse AT THE PANELLING CENTRE 26
Slide 28: Irish DIY Retail Brands
Wiloodie’s DIY ABS bE IS Irish DIY Retail Brands 27
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Slide 30: CPI
CPI | Zz Eu romMix
Slide 31: Estimated UK Merchanting League Table
Estimated UK Merchanting League Table Circa 2,000 independents 10% 3rd Largest Builders 30% Grafton Merchant 18% 23% 19% Jewson Wolseley Travis Perkins (excluding Wickes) Sector Turnover £12 billion plus Independents Independents £4.6 billion plus 30
Slide 32: Top 10 Debtors in UK and Ireland
Top 10 Debtors in UK and Ireland Ire Ire UK UK Total in Dec Dec Dec Dec Euro 2010 2009 2010 2009 €’000 €’000 £’000 £’000 1 524 530 1,153 1,000 2 478 358 855 730 3 328 317 450 335 4 252 257 400 297 5 234 241 339 274 Only one account 6 202 229 316 270 exceeds €1m across the Group 7 152 205 307 267 at
Slide 33: Gross Margin Remains Consistent
Gross Margin Remains Consistent. Gross Margin Management Financial 2005 2006 2007 2008 2009 2010 Year Gross 31.5% 32.3% 32.7% 32.3% 31.6% 31.8% Margin 32
Slide 34: Bank Covenants
Bank Covenants Bank Covenants Current Net worth as defined €782m €1,127m Gearing * 85% 23% Current Liabilities : Current Assets 120% 72% Debt €’Million Minimum EBITDA / Interest Ratio Bank Debt 373 Year To Actual Covenant 12 Months To US Loan Notes & other 116 31/12/10 11:3 1:1 30/6/11 Cash (234) 31
Slide 35: Comparison of DIY Store Sizes in the Republic of Ireland
Comparison of DIY Store Sizes in the Republic of Ireland Total 2.57 m sq ft Total 2.59 m sq ft. Total 2.4 m sq. ft. Total 2.5 m sq. ft. Total 2.2 m sq. ft. Total 1.5 m sq. ft. Total 1.2 m sq. ft. Woodie’s & Atlantic 74% 74% 66% 64% 65% 63% 63% B&Q 13% 14% 19% 18% 19% 20% 20% Homebase 13% 12% 15% 16%
Slide 36: For Further Information
For Further Information Michael Chadwick Executive Chairman Colm ó Nualláin Finance Director Leo Martin Chief Operating Officer Charles Rinn Group Financial Controller / Secretary Address: Grafton Group plc, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18 Telephone: 353 1 216 0600 F