Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — H1 2016 Earnings Presentation
38 slides from Howden Joinery's earnings presentation, Jul 21, 2016
Slide 1: 2016 Half-Yearly Report
2016 HALF-YEARLY REPORT 21 July 2016
Slide 2: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 3: A successful business, performing well
A successful business, performing well Proven business model • Tested in different market conditions Inherently low-cost Intrinsically profitable Well-invested manufacturing and systems Flexible • Lowest cost of production Profitable Cash- 390,000 nett monthly accounts and growing generative Maximis
Slide 4: Mark Robson, Deputy CEO and Chief Financial Officer
Mark Robson Deputy CEO and Chief Financial Officer
Slide 5: Business developments
Business developments • 10 UK depots opened so far – on track for around 30 • Supply – Howden: new factory built, assembly lines being installed – Runcorn: cabinet component line being commissioned – Raunds: 650k sq ft warehouse fit-out underway • Investment in product, including two new kitchen ran
Slide 6: Highlights
Highlights Revenue, £m Operating profit continuing ops, £m Uses of ‘cash’, £m HJ UK Continental Europe 80 Pension def Cap ex Share repurchase 550 11.1 75 528.9 100 525 10.0 74.7 70 500 518.9 75 53 482.6 65 475 6.8 4 50 475.8 60 450 756.4 60.9 25 12 28 425 55 21 12 400 50 0 2015 2016 2015 2016 2015 2
Slide 7: Revenue
Revenue 2016 UK depot revenue £518.9m • total +9.1% • LFL +6.7% 2016 continental Europe revenue £10m • sales in original French depots up 3% in €s 2016 Half-Yearly Report 7
Slide 8: Profit before tax
Profit before tax Group gross profit margin ● 2016: 64.5% ● 2015: 63.7% Profit before tax Gross profit £m £m Gross profit Volume 34.1 & mix Cost Change Change (revenue) pressures, £34.1m cost £15.6m 27 savings, Interest, etc. etc 1 341.4 1.8 74.8 Volume & mix Currency Price (COGS) (3) Operating 19 (
Slide 9: Operating costs
Operating costs Operating costs £m Change Growth £20.3m related Older 6 depots 266.7 11 Other (3) New depots 6 246.4 • 2015 2016 2016 Half-Yearly Report 9
Slide 10: Income statement
Income statement £m H1 2016 H1 2015 Revenue 528.9 482.6 Cost of goods sold (187.5) (175.3) Gross profit 341.4 307.3 Operating costs (266.7) (246.4) Operating profit 74.7 60.9 Net interest 0.1 (1.7) Profit before tax 74.8 59.2 Tax (17.0) (13.2) Profit for the period 57.8 46.0 2016 Half-Yearly Report
Slide 11: Earnings per share, dividends and share repurchase
Earnings per share, dividends and share repurchase H1 2016 H1 2015 Earnings per share 9.1p 7.1p Interim dividend per share 3.3p 2.8p • Share repurchase expenditure of £53m – £25m outstanding from 2015 – half of new £55m repurchase announced in Feb 2016 2016 Half-Yearly Report 11
Slide 12: Net cash and cash flow
Net cash and cash flow £m H1 2016 H1 2015 Opening net cash 226.1 217.7 Operating cash flows before movements in working capital 88.3 74.9 Working capital (30.6) (18.0) Capital expenditure (28.0) (11.7) Interest (net) 0.6 0.3 Tax paid (10.2) (15.8) Share repurchases (52.8) (4.1) Pension contribution
Slide 13: Working capital
Working capital • Working capital up £30.6m – stock up £7.4m – debtors up £30.5m – creditors up £7.3m 2016 Half-Yearly Report 13
Slide 14: Pension scheme deficit
Pension scheme deficit £m IAS19 basis Net discount rate Change 78 £37m 86 Contribution 19 Asset Current returns service 30 cost 8 49 • Dec Jun 2015 2016 2016 Half-Yearly Report 14
Slide 15: Recent trading and outlook for remainder of 2016
Recent trading and outlook for remainder of 2016 • UK depot sales in first four week period of H2 up 5.2% – EU referendum in middle of period • Remainder of 2016 – too early to see any impact of referendum result or judge what it might be – continuing with plans, but remain watchful – £ has weakened
Slide 16: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 17: A trade-only business
A trade-only business Domestic fitted kitchens and prepared joinery fitted by the builder Howden New build RMI 160k – 200k Spend £3bn - £3.5bn p.a. households p.a. Landlord Owner-occupier 17m households Public Private 5m households 5m households Small builders service all channels and are decision m
Slide 18: What the builder wants
What the builder wants A suitable product range • Looks good • Doesn’t break • Easy to fit • Meets standards • Always available from local stock Local manager can make decisions Account terms = cash flow + margin The builder relies on Howdens 2016 Half Yearly Report 18
Slide 19: Low-cost, local depots and a growing account base
Low-cost, local depots and a growing account base c.390,000 nett monthly accounts • +7% in H1 629 depots • On track for 30 this year Low cost • c.10,000 sq.ft • Rent c.£5.50 / sq.ft • Fit out c.£280,000 (vs. retail) • Breakeven point c.£650,000 • Typical depot breaks even by end of Year 2 2016 Half
Slide 20: Profitable, local depots across the UK
Profitable, local depots across the UK Swansea Campbeltown 2015 sales c. £3.7m 2015 sales c. £800,000 20 staff 6 staff It makes sense to continue to open depots at the pace that suits prevailing conditions 2016 Half Yearly Report 20
Slide 21: The local manager is in charge
The local manager is in charge Local P&L • Local profit shared by staff Manager responsible for hiring staff Individual accountability Do what we say Incentivised to deliver better service Manager Becci Theakston and some of her team at Fleetwood depot Worthwhile for all concerned 2016 Half Yearly R
Slide 22: Well-invested supply chain
Well-invested supply chain Wholly focused on the builder Efficient processes Robust systems Renewed assets More flexibility Capacity to meet demand The “I” line at Howdens’ Runcorn factory 2016 Half Yearly Report 22
Slide 23: Flexible manufacturing
Flexible manufacturing Practical working agreements • 285 staff in P2 585 staff in P11 Flexible machine utilisation • 55,000 cabinets p.w. 110,000 cabinets p.w. at Runcorn Long experience of flexing production and logistics to meet complex demand • Period 11 Highly responsive supply chain 2016 H
Slide 24: Continuing market evolution
Continuing market evolution More Less More convenience time functionality More choice No tolerance Sophisticating of mistakes product 2016 Half Yearly Report 24
Slide 25: Continuing to introduce and test new products
Continuing to introduce and test new products 2016 Half Yearly Report 25
Slide 26: Continuing to introduce and test new products
Continuing to introduce and test new products 2016 Half Yearly Report 26
Slide 27: Continuing to introduce and test new products
Continuing to introduce and test new products 2016 Half Yearly Report 27
Slide 28: Continuing to introduce and test new products
Continuing to introduce and test new products 2016 Half Yearly Report 28
Slide 29: Continuing to introduce and test new products
Continuing to introduce and test new products 2016 Half Yearly Report 29
Slide 30: Affordable newness
Affordable newness 2016 Half Yearly Report 30
Slide 31: A suitable product range
A suitable product range 50 kitchen ranges at different price points Average kitchen price c.£2,500 • Tewkesbury c.£4,000 Routine • Greenwich c.£700 kitchens and joinery New materials technology = affordable newness Local availability and service Howdens meets a wide range of needs 2016 Half Yearly
Slide 32: Ongoing tests in continental Europe
Ongoing tests in continental Europe Continuing progress in France • 20 depots now open • Two formats, Lamona and Houdan • Depot profitability improved Further trials under way • France • Belgium • Holland • Germany Depots at July 2016 Ability to make choices To open in Q3 2016 2016 Half Yearly Repor
Slide 33: Andy Witts, COO Trade
Andy Witts, COO Trade Flexible depot operations • Managers and counter staff have experience of other roles, e.g. design, loading / unloading • Depot staff work as a team Autonomy of local managers • Ability to set local pricing and determine depot margin • Highly motivating for managers and staff I
Slide 34: Rob Fenwick, COO Supply
Rob Fenwick, COO Supply Significant part of cost base is variable • Bought-in products + raw materials = up to 90% of COGS • Scale buyer with good supplier relationships Around 75% of supply base in UK / Europe • Short lead times • Highly responsive to demand from depots Flexible manufacturing Incen
Slide 35: Theresa Keating, Finance Director
Theresa Keating, Finance Director Strong and flexible balance sheet • £180m cash at half year end • £140m asset-backed lending facility Rigorous debt collection and account management procedures Limited exposure to large individual debtors Supply chain with ability to moderate the pace of future cap
Slide 36: A proven mission and model
A proven mission and model To supply from local stock nationwide To supply from local stock nationwide the small builder’s ever-changing, routine, integrated the small kitchen and builder’s ever-changing, joinery requirements, assuringroutine, best local integrated kitchen price, no-call-back andand
Slide 37: Howdens is a successful, balanced business…
Howdens is a successful, balanced business… Well-invested, prudent and sensible Strong culture Prepared for all circumstances Low production costs Doing • Flexible production more of what works • Growing trade account base • More low-breakeven depots • Motivated and incentivised staff • Affordable k
Slide 38: 2016 Half-Yearly Report
2016 HALF-YEARLY REPORT 21 July 2016