Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — H1 2020 Earnings Presentation
54 slides from Howden Joinery's earnings presentation, Jul 23, 2020
Slide 1: 2020 Half Year Results
2020 Half Year Results 23rd July 2020 1 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 2: Andrew Livingston, Chief Executive Officer
Andrew Livingston Chief Executive Officer 2 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 3: Overall result reflects Lockdown at start of quarter two
Overall result reflects “Lockdown” at start of quarter two • UK Sales -29%, Shortfall V 2019 all in Q2 • “Lockdown” Day 2 of Q2 • All depots initially shut • Phased re-opening with new ways of working to keep staff & customers safe • By P6 all depots trading for whole period UK Sales + 74% period
Slide 4: Response to COVID: People first, then be open & in-stock safely
Response to COVID : People first, then be open & in-stock safely • Took care of our peoples’ well being Safety first, consensual approach to re-opening HMG guidance as a minimum Discrete COVID well-being programme Financial support for furloughed colleagues • Reduced cash spend, protecting e
Slide 5: Response to COVID: People first, then be open & in-stock safely
Response to COVID : People first, then be open & in-stock safely • Supported our customers and local communities Re-opened depots safely with full stock availability Lower prices, new services and ways to trade • Applied learnings from trading under COVID conditions On-line call & collect and
Slide 6: A more demanding market place plays to our in stock model
A more demanding market place plays to our “in stock” model DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 6 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 7: Mark Robson, Deputy CEO and Chief Financial Officer
Mark Robson Deputy CEO and Chief Financial Officer My CEO and Chief Financial Officer
Slide 8: Highlights
Highlights Revenue, £m Gross profit, £m, and margin, % Operating profit, £m, and margin, % HJ UK Continental Europe 700 450 80 11.9% 652.6 61.9% 650 14.5 400 60 600 550 77.7 350 40 638.1 500 465.0 404.2 450 11.6 300 59.4% 20 400 453.4 -2.1% 250 276.1 0 350 (9.8) 300 200 -20 2019 2020 2019 2020 2019
Slide 9: Revenue
Revenue 2020 UK depot revenue £453.4m Sales LFL Q1 1.1% -0.8% Q2 -55.9% -56.9% H1 total -29.0% -30.3% 202O Continental Europe depot revenue £11.6m • France total (€) -19.2% • LFL -24.5% 2020 Half Year Results 9 Howdens 2019 Interim Results
Slide 10: UK Revenue Progression
UK Revenue Progression H1 H2 +1.1%* £m 301.3 304.6 2019 2020 -86.5% -55.4% -25.5% +2.2% 113.6 113.9 114.1 116.7 109.2 84.8 48.7 15.3 Q1 P4 P5 P6 P7 *+2.2% adjusted for week 1 trading 2020 Half Year Results 10 Howdens 2019 Interim Results
Slide 11: Profit Before Tax
Profit Before Tax Group gross profit margin • 2019: 61.9% • 2020: 59.4% Profit before tax Gross profit £m £m Price Change (revenue) Volume £128.1m & mix (COGS) Currency Change £92.3m Cost pressure/ Operating savings, Costs Volume etc. & mix (net) 2019 2020 (revenue) Interest, etc. Gross Profit 2020
Slide 12: Operating Costs
Operating Costs £m New depots Growth related Older depots Other costs Change £40.6m Furlough payments European closures IFRS 16 impact 2020 Half Year Results 12 Howdens 2019 Interim Results
Slide 13: Income Statement
Income Statement H1 2020 Impact of H1 2020 H1 2019 £m pre-IFRS16 IFRS16 Revenue 465.0 0.0 465.0 652.6 Cost of goods sold (189.2) 0.3 (188.9) (248.4) Gross profit 275.8 0.3 276.1 404.2 Operating costs (289.5) 3.6 (285.9) (326.5) Operating (loss) / profit (13.7) 3.9 (9.8) 77.7 Net interest 0.2 (4.6) (
Slide 14: Earnings Per Share & Shareholder Returns
Earnings Per Share & Shareholder Returns £m H1 2020 H1 2019 Earnings per share (1.8)p 10.3p Interim dividend pence per share - 3.9p Board to review shareholder returns Share buyback suspended (£10m H1) 2020 Half Year Results 14 Howdens 2019 Interim Results
Slide 15: Net Cash and Cash Flow
Net Cash and Cash Flow £m H1 2020 H1 2019 Opening net cash 267.4 231.3 Operating cash flows before movements in working capital 44.5 96.7 Working capital 14.5 (9.8) Capital expenditure (22.3) (24.1) Tax paid (12.3) (20.8) Share repurchases (9.8) (46.3) Pension contribution (2.6) (9.8) IFRS16: Intere
Slide 16: Covid-19 Cash Management
Covid-19 Cash Management Our actions Depot openings & cap ex Operating costs Shareholder returns Pension deficit contributions Government support Furlough receipts (£15m) HMRC payment deferral (£61m) 2020 Half Year Results 16 Howdens 2019 Interim Results
Slide 17: Working Capital
Working Capital Working capital decreased £14.5m • stock up £34m • debtors down £39m • creditors up £9m 2020 Half Year Results 17 Howdens 2019 Interim Results
Slide 18: Pension Scheme Deficit
Pension Scheme Deficit £m Net discount rate 119 IAS19 basis Contribution (14) Current service charge + admin cost Change + interest £23.3m 11 56.6 33.3 Asset returns (140) Dec Jun 2019 2020 2020 Half Year Results 18 Howdens 2019 Interim Results
Slide 19: Current Trading and Outlook for Full Year 2020
Current Trading and Outlook for Full Year 2020 • UK sales in period 7 up 2.2%, LFL up 0.3% • Operating expenditure Cost benefit £6m o Europe Cost investment £20m (£6m in H1) o phase 2 Raunds transfer (dual running) o pension increases o depreciation Cost pressures o growth & inflation o additi
Slide 20: Andrew Livingston, Chief Executive Officer
Andrew Livingston Chief Executive Officer 20 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 21: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 21 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 22: Lockdown curtailed customer activity
Lockdown curtailed customer activity • Stable total account base at end of Q1 Core credit account holders spent more Total transactions and number of customers trading both increased at a higher rate • Onset of Lockdown curtailed builders’ ability to work in peoples’ homes from beginning of Q2
Slide 23: Supporting trusted relationships during a difficult time
Supporting trusted relationships during a difficult time • Help with lower promotional prices • Opened for business as soon as practicable • Remained in-stock • Provided a safe place to trade 23 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 24: Depot Evolution
DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 24 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 25: Trading safely under COVID conditions – HMG Guidelines as minimum standard
Trading safely under COVID conditions – HMG Guidelines as minimum standard • Emergency provision to NHS, care providers and vulnerable people throughout • Changing number of depots trading and ways of trading “Locked down” call & collect service, limited number of depots Phased increase in depot
Slide 26: New depot format to create best business environment
New depot format to create best business environment • 60 new format depots by end of 2019 • Vertical racking of product in the warehouse Space utilisation improvements Potential for productivity gains • Improved format at no extra cost • Option to open smaller sized depots 26 Howdens Howdens 20
Slide 27: Plan to open all new depots in updated format
Plan to open all new depots in updated format • Planned to open 30 UK depots this year, prior to lockdown • Opening programme on hold in 1st Half Prioritised cashflow Finding safe ways for depots to trade Circa 15 now planned for 2nd Half 27 Howdens 2019 Interim Results
Slide 28: Testing the roll-back opportunity in existing estate
Testing the roll-back opportunity in existing estate • 11 depots converted to new format in 2019 • Planned to convert circa 30 more in 2020 prior to lockdown • Total unchanged for this year Having reduced the number of depot openings and re-racks • 18 conversions started prior to lockdown complete
Slide 29: New format depots and re-racked depots
New format depots and re-racked depots End 2019 : Total Depots in New Format &/or Re-racked 80 80 71 70 70 62 60 60 50 50 40 40 30 60 30 20 20 10 10 11 0 0 New Depots Existing Depots New Format Depots Re-Rack Only End 2020 : Total Depots in New Format &/or Re-racked 150 140 115 120 125 100 100 87 80
Slide 30: Range and Supply Management
DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 30 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 31: NPI sales significant contributor to total sales each year
“NPI“ sales significant contributor to total sales each year • 1st Half “NPI” Kitchens launched and in-stock prior earlier this year & synchronised with Rooster promotional offers 11 of 13 ranges in place prior to lockdown NPI sales ahead of last year Well positioned with product as depots re-
Slide 32: Disciplined range management: best availability and profitability
Disciplined range management : best availability and profitability • End of 2019, 67 current ranges, including some 2020 pre-launch stock • Targeting 16 range clearances in 2020 • By end of 2020, 66 current ranges, including some 2021 “NPI” pre-launch stock • Around 65 current ranges is appropriate
Slide 33: Dedicated manufacturing & supply: key part of our in-stock offer
Dedicated manufacturing & supply : key part of our in-stock offer 33 Howdens 2019 Interim Results
Slide 34: New COVID safe ways to manufacture and supply
New “COVID safe” ways to manufacture and supply • Initially closed substantially all of manufacturing & supply • Partial operational teams on-hand to receive in bound shipments Stock available when depots started trading again • Prepared for a phased return to work Developed series of social dis
Slide 35: Protecting our in stock offer against supply chain disruption
Protecting our in stock offer against supply chain disruption • Increased levels of safety stock and back-up sources of supply Accommodate COVID outbreaks and irregular demand patterns • Utilised disaster recovery capacity • Took extra temporary warehouse capacity pending availability at Raunds •
Slide 36: Digital reinforces our strong local model
Digital reinforces our strong local model Increase awareness Improve communications Streamline processes 36 Howdens 2019 Interim Results
Slide 37: 1.4m more search impressions per month
1.4m more search impressions per month 37 Howdens 2019 Interim Results
Slide 38: Site visits +31% year on year
Site visits +31% year on year ; In Q2 visits 350,000+ a week Graph requires updating 38 Howdens 2019 Interim Results
Slide 39: More of our total range being browsed, kitchen views up 61%
More of our total range being browsed, kitchen views up 61% 39 Howdens 2019 Interim Results
Slide 40: Depot leads via the website up 58% year on year
Depot leads via the website up 58% year on year 40 Howdens 2019 Interim Results
Slide 41: Growing social media presence
Growing social media presence • Follower base at 153,000, up 136% by end of 1st Half • Reaching nearly 9 million users a month • With active engagement up 255% year on year 41 Howdens 2019 Interim Results
Slide 42: Extended on-line services for customers
Extended on-line services for customers 42 Howdens 2019 Interim Results
Slide 43: Roll-out of on-line account facilities
Roll-out of on-line account facilities Manage accounts and View credit details and make Download invoices and information relationship with depot payments 43 Howdens 2019 Interim Results
Slide 44: 19% of credit account holders on-boarded in 1st Half
19% of credit account holders on-boarded in 1st Half Significant out of hours use 40% of users made a payment 39% of users downloaded documents Monday Tuesday Wednesday Thursday Friday Saturday Sunday Above average payments Out of hours 38% 62% In hours 44 Howdens 2019 Interim Results
Slide 45: 1st generation call and collect service introduced
1st generation call and collect service introduced • Curated on our website • Safe way to trade post lockdown • Regular updates on depot openings 45 Howdens 2019 Interim Results
Slide 46: On-line kitchen design service added
On-line kitchen design service added 46 Howdens 2019 Interim Results
Slide 47: We will continue to improve content and add more capabilities to our platform
We will continue to improve content and add more capabilities to our platform 47 Howdens 2019 Interim Results
Slide 48: International
DEPOT EVOLUTION RANGE MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 48 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 49: In 2019, we re-focussed International
In 2019, we re-focussed International • City based approach based in France • Operations in Germany and Netherlands closed • Business Leader appointed • 5 depots opened in 2019 49 Howdens 2019 Interim Results
Slide 50: Performance encouraging given lockdown
Performance encouraging given lockdown • Sales up circa 3% prior to lockdown • Similar approach to re-opening as UK • 1st Half Sales down circa 19% overall • Sales increased year on year in final two periods • Sales of depots opened 2019 in line with expectations • Sales in 2nd Half up 46% in P7 • F
Slide 51: Summary
Summary 1st Half Performance • Performance reflects onset of lockdown at start of Q2 • Profitably restored in P6, following losses in P4 & P5 when <50% of depots trading • Took care of our people with a safety first approach • Reduced cash expenditure but supported essential areas • Supported our cu
Slide 52: Summary (Cont'd)
Summary (Cont’d) Current Trading • 2nd Half UK Depot Sales £116.7m in first period (P7) +38% on p6 +2% on 2019 (+0.3 % LfL) Surveys and builders trading trending upwards Some signs of pent-up demand Sales of “everyday” items higher proportion of mix Lead bank above pre Lockdown level • W
Slide 53: Q&A
Q&A 53 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 54: 2020 Half Year Results
2020 Half Year Results 23rd July 2020 54 Howdens Howdens 2019 2019 Interim Interim Results Results