Grafton Group Plc · LSE:GFTU
Grafton — FY2020 Earnings Presentation
46 slides from Grafton's earnings presentation, March 2021
Slide 1: Final Results – Financial year ended 31 December 2020
Building Progress Together Final Results Financial year ended 31 December 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, CEO and David Arnold, CFO
Gavin Slark David Arnold Chief Executive Officer Chief Financial Officer Grafton Group plc – Final Results 2020 3
Slide 4: Introduction & Highlights
Introduction & Highlights Gavin Slark, CEO Final Results Financial Year Ended 31 December 2020
Slide 5: Resilient 2020 Performance – Progressing Strategic Initiatives
Resilient 2020 Performance – Progressing Strategic Initiatives • Outstanding contribution from our 11,000 colleagues • Strong recovery in profitability in second half with operating profit for the year exceeding our expectations • Investment strategy driving higher returns • Three acquisitions compl
Slide 6: 2020 Financial Highlights
2020 Financial Highlights 2020 2019 Change Revenue £2,509m £2,672m (6.1%) Adjusted operating profit £193.3m £204.8m (5.6%) Adjusted earnings per share 56.7p 62.8p (9.8%) Dividend 14.5p 19.0p (23.7%) Net cash (before IFRS 16 Leases) £181.9m £7.8m £174.1m Grafton Group plc – Final Results 2020 6
Slide 7: Resilience underpinned by investment and diversification strategy
Resilience underpinned by investment and diversification strategy 2019 Netherlands 2020 Netherlands 14.1% 9.5% UK UK 43.8% 58.6% Ireland Ireland 31.9% 42.1% Split of operating profit before exceptional items, intangible amortisation, central costs and property profits Grafton Group plc – Final Resul
Slide 8: Our Purpose: Building Progress Together
Our Purpose: Building Progress Together Ambition Innovation Sustainability Sustainable, Trustworthy Value our Be Brilliant for Entrepreneurial Ambitious and Responsible People our and Empowering Grafton Group plc – Final Results 2020 Customers 8
Slide 9: Ambition
Ambition • Ambitious to grow whilst continuing to maintain a very disciplined approach to capital allocation • Covid travel restrictions an impediment to investments in new territories but optimistic that travel might resume later in the year • “3 Gs” Strategy for new regions or products: Good busin
Slide 10: Innovation
Accelerated investment into digital solutions, online account Innovation management and electronic proof of delivery (EPOD) solutions E-Commerce Logistics Product and Service Woodie's Chadwicks ✓ Invested in capability to meet increased online Selco ✓ Invested in Product Information Management deman
Slide 11: Sustainability
Sustainability • Committed to building a sustainable future for everyone where Grafton’s businesses play a leading role • Five key focus areas under our strategy: • Customer and product • People • Resources • Community • Ethics • Some good achievements in the year: ✓ £3.2m investment into Selco LED
Slide 12: Financial Review
Financial Review David Arnold, CFO Final Results Financial Year Ended 31 December 2020
Slide 13: Operating Profit Margin and ROCE Progression
Operating Profit Margin and ROCE Progression ROCE 14.7% 14.4% Adjusted operating margin 13.6% 13.6% 12.2% 12.5% 11.1% 10.8% 10.4% 7.8% 6.1% 7.3% 7.4% 7.6% 7.2% 7.2% 4.6% 5.8% 6.0% 5.7% 5.3% 4.1% 3.5% 2.7% FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 2019 FY 2020 Pre IFRS 16 Reporte
Slide 14: Net (Debt)/Cash Progression (Pre-IFRS 16)
Net (Debt)/Cash Progression (Pre-IFRS 16) £’m Strong operating cash flow with year end cash figure reflecting no dividend payment in 2020 and lower acquisition spend than planned Grafton Group plc – Final Results 2020 14
Slide 15: Continuing investment in the business
Continuing investment in the business £’m 200 150 Acquisition cash spend (net of cash 100 acquired) 50 Development expenditure 0 Net (debt)/cash pre -50 leases -100 -150 -200 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Over the last ten years we have invested over £400m on new acquisitions and
Slide 16: Income Statement – Continuing Operations
Income Statement – Continuing Operations H1 H2 £m 2020 2020 2020 2019 Change Revenue 1,058.4 1,450.7 2,509.1 2,672.3 (6%) Adjusted operating profit pre property profit 39.1 151.6 190.7 197.9 (4%) Property profit 0.3 2.3 2.6 6.9 (62%) Adjusted operating profit 39.4 153.9 193.3 204.8 (6%) Amortisation
Slide 17: Revenue Bridge
Revenue Bridge £’m Grafton Group plc – Final Results 2020 17
Slide 18: Analysis of Organic Movement in Revenue (Constant Currency)
Analysis of Organic Movement in Revenue (Constant Currency) £’m LFL Business UK Ireland NL Retail Manufacturing Organic UK Distribution Organic Growth Branch Movement Distribution Initiatives Consolidations Grafton Group plc – Final Results 2020 18
Slide 19: Adjusted Operating Profit – Bridge 2019 to 2020
Adjusted Operating Profit – Bridge 2019 to 2020 £’m 2019 Like-for Like Growth UK Distribution Acquisitions Property FX 2020 Business Initiatives Branch Disposals Consolidations Grafton Group plc – Final Results 2020 19
Slide 20: 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 – Final Results 2020 20
Slide 21: Analysis of Movement in Operating Profit in Like-for-Like Business
Analysis of Movement in Operating Profit in Like-for-Like Business £’m H1 LFL operating profit was £53.3m lower UK Ireland NL Retail Manufacturing Central Like-for-like Business Distribution Grafton Group plc – Final Results 2020 21
Slide 22: UK Distribution
UK Distribution £m 2020 2019 Change Revenue Revenue 1,461 1,711 -15% £865.8m £845.0m £855.3m Operating profit pre property 76 105 -27% £605.4m Operating margin pre property 5.2% 6.1% -90bps • Most branches temporarily closed on 24 March with reopening on a phased basis from beginning of May. Full se
Slide 23: Irish Distribution
Irish Distribution £m 2020 2019 Change Revenue Revenue 464 465 -0% £273.7m £238.6m £226.2m Operating profit pre property 42 43 -3% £190.2m Operating margin pre property 9.0% 9.3% -30bps H1 2019 H2 2019 H1 2020 H2 2020 • Branches temporarily closed from 28 March except for emergency supplies and only
Slide 24: Netherlands Distribution
Netherlands Distribution £m 2020 2019 Change Revenue Revenue 277 212 +31% £130.9m £138.1m £138.5m Operating profit pre property 29 20 +43% £80.9m Operating margin pre property 10.3% 9.4% +90bps H1 2019 H2 2019 H1 2020 H2 2020 • Operations in The Netherlands continued to trade as classified as an ess
Slide 25: Retailing
Retailing £m 2020 2019 Change Revenue Revenue 247 206 +20% £147.3m Operating profit pre property 42 23 +86% £99.9m £105.6m £99.3m Operating margin pre property 17.0% 11.0% +600bps H1 2019 H2 2019 H1 2020 H2 2020 • Woodie’s temporarily closed from 28 March to 18 May except for online sales Operating
Slide 26: Manufacturing
Manufacturing £m 2020 2019 Change Revenue Revenue 61 79 -23% £40.7m £38.7m £35.9m Operating profit pre property 13 19 -29% £25.4m Operating margin pre property 21.7% 23.4% -170bps H1 2019 H2 2019 H1 2020 H2 2020 • All mortar plants temporarily closed from 24 March with phased reopening late April/ea
Slide 27: Balance Sheet
Balance Sheet £m 31 31 December December 2020 2019 Intangible assets 820.0 761.1 Right-of-use assets 505.9 522.2 Tangible assets 523.9 529.7 Lease receivable 2.3 2.7 Working capital 112.6 196.5 Other assets/(liabilities) (92.1) (94.6) Pension deficit (50.6) (21.2) 1,822.0 1,896.5 Net (debt) (355.0)
Slide 28: Cash from Operations
Cash from Operations £m 2020 2019 Profit before taxation 132.7 149.1 Finance costs 26.9 25.1 Operating profit 159.7 174.2 Depreciation & amortisation of intangible assets 121.4 114.8 Property profits (2.6) (6.9) Loss on disposal of Group businesses 0.0 19.8 Other movements incl. property and provisi
Slide 29: Cash Flow
Cash Flow £m 2020 2019 Cash from operations 377.7 291.1 Interest and tax (60.7) (56.6) Replacement capex net of asset disposals (12.9) (9.9) Free cash flow 304.1 224.6 Development capex (17.0) (25.2) Dividends 0.0 (44.0) Share issue/(repurchase) 2.8 (5.8) Acquisitions & business disposals (incl. deb
Slide 30: 2021 Technical Guidance
2021 Technical Guidance • Full year property profits expected to be c.£2-3m • Depreciation currently forecast at c.£100m - £110m in total (£50m on a pre IFRS 16 basis) • Working capital expected to increase in 2021 as trading normalises –dependent on sales growth but c.£30m-£40m increase a reasonabl
Slide 31: Strategic Update & Outlook
Strategic Update & Outlook Gavin Slark, CEO Final Results Financial Year Ended 31 December 2020
Slide 32: Current Trading
Current Trading Average Daily Like-for-Like Revenue Growth 1 Jan 2021 – Qtr 4 2020 21 Feb 2021 Distribution UK 4.4% (0.9%) Ireland 13.2% (12.7%) Netherlands 0.0% 1.1% Retailing 34.9% 40.8% Manufacturing (8.3%) (29.8%) Total Group 7.9% (1.0%) • UK: Covid restrictions have dampened demand with no offs
Slide 33: Outlook
Outlook • Optimistic that vaccine rollout will mean economic and construction activity will increase in the coming months across our geographies • Beneficial to now have clarity and certainty following Brexit • In the UK, underlying demand in RMI and new build markets expected to remain favourable •
Slide 34: Summary
Summary • Proud of our achievements last year – remarkable support from our colleagues • We endeavoured to do the right things by our colleagues, customers and suppliers throughout • We emerge as a better business at the end of 2020 • Business model demonstrated its resilience, benefitting from our
Slide 35: Questions
Questions Final Results Financial Year Ended 31 December 2020
Slide 36: Appendices
Appendices Final Results Financial Year Ended 31 December 2020
Slide 37: 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 were classified as discontinued operations. The revenue of both businesses is excluded from Group reven
Slide 38: Appendix 2 - Operating Margin Analysis
Appendix 2 - Operating Margin Analysis* H2 H1 H2 H1 2020 2020 2019 2019 UK Distribution 8.7% 0.4% 5.9% 6.4% Irish Distribution 9.7% 8.0% 9.9% 8.5% Netherlands Distribution 10.5% 10.2% 8.4% 11.1% Total Distribution 9.1% 3.4% 6.9% 7.1% Retailing 22.0% 9.8% 12.4% 9.5% Manufacturing 27.1% 14.1% 24.5% 22
Slide 39: Appendix 3 - Revenue Growth
Appendix 3 - Revenue Growth Average Daily Like-for-Like Revenue Growth Year to 31 December 2020 2020 Year to 31 Q1 Q2 Q3 Q4 December Total Revenue 2020 Constant Actual Distribution Currency (Sterling) UK (11.0%) (49.6%) 1.5% 4.4% (14.2%) (14.6%) (14.6%) Ireland 1.3% (35.2%) 8.1% 13.2% (2.9%) (1.7%)
Slide 40: Appendix 4 - Income Statement – Pre IFRS 16
Appendix 4 - Income Statement – Pre IFRS 16 2020 2019 Change £m Revenue - total 2,509.1 2,672.3 (6%) Adjusted operating profit pre property profit 177.9 187.4 (5%) Property profit 2.6 6.9 Adjusted operating profit before exceptional items 180.5 194.3 (7%) Exceptional items (24.9) 0.0 Adjusted operat
Slide 41: Appendix 5 – 2020 Adjusted Operating Profit - Impact of IFRS 16
Appendix 5 – 2020 Adjusted Operating Profit - Impact of IFRS 16 Pre IFRS 16 £m IFRS 16 Impact Reported Revenue - total 2,509.1 0.0 2,509.1 Adjusted operating profit pre property profit 177.9 12.8 190.7 Property profit 2.6 0.0 2.6 Adjusted operating profit before exceptional items 180.5 12.8 193.3 Ex
Slide 42: Appendix 6 – 2020 IFRS 16 Income Statement Bridge
Appendix 6 – 2020 IFRS 16 Income Statement Bridge Pre IFRS 16 £m IFRS 16 Impact Reported Revenue 2,509.1 0.0 2,509.1 Operating costs (2,340.1) 12.8 (2,327.3) Operating profit before property profits 169.0 12.8 181.8 Property profits 2.6 0.0 2.6 Operating profit before exceptional items 171.6 12.8 18
Slide 43: Appendix 7 – 2020 IFRS 16 Cash Flow Bridge
Appendix 7 – 2020 IFRS 16 Cash Flow Bridge 2020 Pre IFRS 16 Incl £m IFRS 16 Impact IFRS 16 Cash from operations 303.5 74.2 377.7 Interest and tax (42.5) (18.1) (60.7) Replacement capex net of asset disposals (12.9) 0.0 (12.9) Free cash flow 248.1 56.1 304.1 Development capex (17.0) 0.0 (17.0) Divide
Slide 44: Appendix 8 – 2020 IFRS 16 Balance Sheet Bridge
Appendix 8 – 2020 IFRS 16 Balance Sheet Bridge December 2020 Pre IFRS 16 £m IFRS 16 Impact Reported Intangible Assets 820.0 0.0 820.0 Tangible Assets 525.9 (2.0) 523.9 Right of Use Asset 0.0 505.9 505.9 Lease Receivable 0.0 2.3 2.3 Working Capital 107.9 4.7 112.6 Other Assets / (liabilities) (105.0)
Slide 45: Appendix 9 – 2020 IFRS 16 Segmental Bridge
Appendix 9 – 2020 IFRS 16 Segmental Bridge £m 2020 Pre Segmental operating profit before exceptional items and IFRS 16 Reported intangible amortisation arising on acquisitions IFRS 16 Impact UK Distribution 68.4 8.0 76.4 Ireland Distribution 41.7 0.2 41.8 Netherlands Distribution 27.5 1.1 28.5 Total
Slide 46: Appendix 10 – 2020 IFRS 16 EPS Bridge
Appendix 10 – 2020 IFRS 16 EPS Bridge 2020 £m Pre IFRS 16 Impact Reported IFRS 16 Numerator for basic, adjusted and diluted EPS: Profit after tax for the financial period from continuing operations 111.8 (4.3) 107.5 (Loss) after tax for the financial period from discontinuing 0.0 0.0 0.0 operations