Grafton Group PLC · LSE:GFTU
Grafton — FY2005 Earnings Presentation
41 slides from Grafton's earnings presentation, 2006
Slide 1: Grafton Group Plc Final Results 2005
GRAFTON GROUP PLC FINAL RESULTS 2005
Slide 2: Profile
Profile • UK and Ireland based Building Materials Group • Principal activities – Builders and Plumbers Merchanting – DIY Retailing – Dry Mortar Manufacturing • 2005 Turnover exceeded €2.6 billion • Market leader or strong market positions • Trading from 480 locations • 10,300 employees • Full listin
Slide 3: Development History - Summary
Development History - Summary • 1987 Grafton Group became and independent plc. Turnover €62.8 million, Operating profit €2.2 million, EPS 0.9 cent (full year) • 1987 First Woodie’s DIY superstore opened • 1994 Acquired First UK Plumbers Merchant • 1995 Entered UK Dry Mortar market • 1996 Acquired fi
Slide 4: Principal Brands - UK
Principal Brands - UK Builders Merchanting - Significant Market Positions Plumbers Merchanting - Significant Market Position Silo Mortar Manufacturing - Market Leader 3
Slide 5: Principal Brands - Ireland
GRAFTON GROUP PLC FINAL RESULTS 2005 FHeiton Buckley BUILDERS MERCHANTS *Heiton Steel Principal Brands - Ireland A ATLANTIC HOMECARE YOUR HOME, InSIDE & OUT EuroMix iMhouse AT THE PANELLING CENTRE
Slide 6: Strategy
Strategy • Consistent – Focused • To achieve above average long-term returns for shareholders by: – Building on strong market positions in businesses serving the UK and Irish construction markets – Developing in other Irish Markets – Growing outside Ireland in businesses with which we are familiar 5
Slide 7: Profitability and Earnings Percentage Change
Consistently Moving Forward Profitability and Earnings 1400 Year on year percentage changes 1200 EPS 1000 Percentage Change 800 Share Purchase/DPS 600 400 PBT 200 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 IRISH GAAP IFRS PBT 13.9 19.6 23.2 28.2 38.2 52.8 67.2 80.2 102.0 145.8 192.2 EP
Slide 8: 2005 Overview
2005 Overview • A year benefiting from a continuation of strong trading in Ireland compensating for a weaker trading environment in the UK • Over €527 million invested in acquisitions and organic developments • A very positive contribution made by Heiton Group plc trading at a new record level post
Slide 9: Group Financial Highlights
Group Financial Highlights 2005 2004 % Change Turnover €2,629 m €1,872 m +40% Operating profit* €213.8 m €159.5 m +34% Pre-tax profit €192.2 m €145.8 m +32% EBITDA €273.8 m €203.2 m +35% Property profits €9.6 m €7.5 m +28% Adjusted E.P.S.* 67.80 c 56.11 c +21% Share Purchase/ Dividend 15.75 c 13.00
Slide 10: Consistently Strong Growth in Earnings
Consistently Strong Growth in Earnings 70 67.8 cent +21 % 60 +23 % 50 +22 % Earnings 40 +15 % Interim +24 % Final 30 20 10 0 2000 2001 2002 2003 2004 2005 9
Slide 11: Components of Profit Growth Full Year 2005
Components of Profit Growth Full Year 2005 220 €215.9 m 200 5% Acquisitions 34% +3 180 Organic Growth 3% 160 €159.5 m 140 New Branches/ - 2% 120 Currency 100 80 60 40 20 0 -20 2004 2005 10
Slide 12: Components of Profit Growth
Components of Profit Growth €million 2004 operating profit* 159.5 Organic growth - Ireland 6.5 Organic growth - UK (2.4) 2004 acquisitions - UK incremental 3.6 2005 acquisitions - Ireland 48.3 - UK 3.0 New branches 2004 & 2005 (1.8) Exchange effects (0.8) 2005 operating profit 215.9 _____ ____ ____
Slide 13: Analysis of Increased Activity to December 2005
Analysis of Increased Activity to 31 December 2005 Established Established Group Business and Business and Increase Other Other Acquisitions Heiton* 2005 Acquisitions 2004 Increase Group plc 2005 V 2004 Increase €’000 €’000 €’000 €’000 % % Turnover UK 1,420 103 74 1,597 12% 7% ROI 452 47 534 1,033 1
Slide 14: Financial Statistics
Financial Statistics 2005 2004 Interest Cover – EBITA 7.2 7.4 Gearing 72% 70% Tax Rate 13.6% 13.7% Annualised return avg. cap employed 16.5% 19.9% Annualised return avg. equity (after tax) 21.4% 26.6% 13
Slide 15: Cash Generation
Cash Generation 2005 2004 € million € million Operating profit 213.8 159.5 Depreciation, amortisation & other 52.6 35.5 Property disposals, interest/investment income 38.0 37.2 Total cash inflow 304.4 232.2 Replacement capital expenditure (44.3) (39.9) Interest & tax (54.4) (34.4) Free cash flow 205
Slide 16: Group Development Spend
Group Development Spend €’ m 600 Heiton’s Acquisition & Investment Spend 500 Development Asset Purchases 400 Replacement Asset Purchases Jacksons 300 200 Full Year 2005 100 0 2000 2001 2002 2003 2004 2005 15
Slide 17: Enlarged Group Locations
Enlarged Group Locations g 16
Slide 18: UK Performance 2000/2005
UK Performance 2000/2005 300% 250% Turnover & Operating Profit % Increase since 2000 200% 150% 100% 50% 0% 2000 2001 2002 2003 2004 2005 Turnover 520.0 657.2 808.5 1,111.5 1,420.6 1,596.6 Operating Profit 29.2 40 53.7 78.6 108.2 108.2 Operating Profit Margin 5.6% 6.1% 6.6% 7.1% 7.6% 6.8% Interim Mar
Slide 19: Heiton Group plc
Heiton Group plc • THE HEITON BUSINESS POST ACQUISITION – Net investment by Grafton €406 m (based on January 05 share price) – Turnover increased to €608 million – another record for Heiton – Strong like for like sales growth in Ireland in buoyant sector – Integration benefits being realised as proj
Slide 20: Estimated Integration Benefits of Heitons
Estimated Integration Benefits of Heitons • Heiton Group – period operating profit €49 million (last reported April 2004 €33 million) • Target areas to extract benefits – Purchasing benefits – Plc overheads – Operational efficiencies • Total integration improvement anticipated going forward: – 2005
Slide 21: Group Strengths
Group Strengths • Highly cash generative and profitable businesses • Strong balance sheet • Prominent market positions in the UK and Ireland • Motivated management teams • Proven strategic record • Unique acquisition / integration skills • Buoyant trading conditions in our home markets 20
Slide 22: Chadwicks
Si CHADWICKS ERCHANTS ce BUILDERS&SM
Slide 23: Irish Merchanting 2005
Irish Merchanting 2005 Overview of the Year: 2005 +/- vs’04 % Group Sales €’m 690 +141% 26% • Strong sales & PBIT growth – Buoyant construction sector – Over 81,000 new homes built in 2005 • Merchanting sales up 141% + – Heiton Group 55% of total • Like for like sales up 7% – Positive outlook for 20
Slide 24: Woodie's DIY
Woodie’s DIY a CORIEED NY'SUt PESTO imnause
Slide 25: Irish Retailing 2005
Irish Retailing 2005 Overview of the Year: • More competition from new stores 2005 +/- vs’04 % Group – Sq. ft. occupied by DIY superstores increased by 46% in 2005 Sales €’m 273 +110% 11% – some cannibalisation • Continued PBIT growth • Sales +110% including Atlantic • Like for like sales down -2% –
Slide 26: Comparison of DIY Store Sizes in Ireland
Comparison of DIY Store Sizes in the Republic of Ireland 900,000 Total 2.2 m sq. ft. 800,000 % +83 7% +4 700,000 Total 1.5 m sq. ft. Woodie 's DIY % +25 600,000 Total 1.2 m sq. ft. Atlantic Home care 500,000 Square Ft. B&Q 400,000 Home base 300,000 Atlantic Homecare Atlantic Homecare Atlantic Homeca
Slide 27: Les Counter
LES COUNTER / aa, 4 oe’ | > = ~ os J a TIMBER & BUILDING ‘SUPPLIES
Slide 28: Ww ” q r = o |
Ww ” q r 2 2 = o |
Slide 29: UK Merchanting 2005
UK Merchanting 2005 Overview of the Year: 2005 +/- vs’04 % Group • Increased sales through acquisition and organic growth Sales €’m 1,534 +13% 58% • Flat like for like comparatives • Some cost cutting • Some recent signs of improved trading • Expanding product range Builders Merchants • Positive mac
Slide 30: 29
29
Slide 31: UK & Irish Manufacturing 2005
UK & Irish Manufacturing 2005 Overview of the Year: 2005 +/- vs’04 % Group • 8th Dry Mortar plant commissioned in Sales €’m 133 +37% 5% Bristol • Increased competition as expected in UK Mortar market and some price pressure in No.1 the market - flat UK like for like sales Dry Mortar Plants UK: 8 Loc
Slide 32: Overview of Enlarged Group
Overview of Enlarged Group • Sales: UK 61% - Ireland 39% (2004: 76% - 24% respectively) • Annualised Group turnover now € 2.6 billion and planned to grow • Market leader in both Irish Merchanting and DIY markets • Strong No. 4 in UK Merchanting market – over 345 Branches • Modest gearing and strong
Slide 33: Irish Economic Background
Irish Economic Background Housing, RMI and DIY drivers • €16 billion to mature in SSIA between May 06 and May 07. • €2.5 billion per annum was being invested in these accounts. • Population is growing by over 2% per annum. • Large increase in net inward migration from new EU states. • 25-29 age grou
Slide 34: Outlook Ireland
Outlook Ireland • Residential new build market to continue strongly in 2006 • RMI sector will show single digit like for like growth • DIY remains a competitive market • Release of SSIA funds to fuel consumer demand in our sector • Continuing integration of Heiton businesses with Grafton activities
Slide 35: Outlook - UK
Outlook - UK • Grafton view of the UK economy is positive - Lower interest rates, strong demographics and buoyant planning permissions and mortgage approvals • Weaker first half 2006 with leading indicators predicting recovery • Main UK merchanting exposure to RMI market • Demand in RMI market antic
Slide 36: UK Merchanting Super League Table
UK Merchanting Super League Table Circa 2,000 Grafton Independents to 9% be consolidated 39% 18% Jewson 15% 19% Wolseley Travis Perkins (excluding Wickes) Sector Turnover £12 billion plus Unconsolidated £4.6 billion plus 35
Slide 37: Group Performance to December 2005
Group Performance to December 2005 Average Per Annum Compound Growth 5 Year 10 Year Since 1987 Turnover 26% 30% 23% Adjusted EPS 21% 27% 27% Share purchase/ 21% 27% 23% dividend per share 36
Slide 38: Group Properties
Group Properties History of realised capital profits from relocations and sale of surplus properties 2001 2002 2003 2004 2005 €2.3 m €3.7 m €3.4 m €7.5 m €9.6 m 480 locations 171 freehold 309 leasehold Last valuation December 1998 (Grafton Irish properties) and April 2004 for Heiton properties Curre
Slide 39: IFRS - Principal Policy Changes for Grafton
International Financial Reporting Standards – Principal Policy Changes for Grafton IFRS Impact On Profit • Goodwill IFRS 3 - • Intangibles IAS 38 (€2.1 m) • Pensions IAS 19 €1.5 m • Deferred tax IAS 12 - • Financial Instruments IAS 32 & 39 - • Share based payments IFRS 2 (€2.2 m) • Business combinat
Slide 40: Research Coverage
Research Coverage Matteo Colombo Robert Eason Mark Hake 0044 207 425 8000 +353 1 641 9462 0044 207 966 1194 Florence O’Donoghue Howard Seymour John Mattimoe John Sheehan +353 1 614 8997 0044 207 003 3501 +353 1 240 4256 +353 1 6115912 Aynsley Lammin Darren Shaw Stuart Draper 0044 207 986 4092 0044 2
Slide 41: For Further Information
For Further Information Michael Chadwick Executive Chairman Colm ó Nualláin Finance Director Leo Martin Executive Director Charles Rinn Group Financial Controller / Secretary Address: Grafton Group plc, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18 Telephone: 353 1 216 0600 Fax: 3