Slide 1: Final Results Presentation
FINAL RESULTS PRESENTATION YEAR ENDED 31 DECEMBER 2017 MARCH 2018
Slide 2: Company Overview
COMPANY OVERVIEW • Europe’s largest distributor of floorcoverings: Distribution channel between suppliers and customers of floorcoverings Linking together a global manufacturing supply base and the most extensive customer base across the UK and Continental Europe • Suppliers: Global manufactur
Slide 3: Market-Leading Core Business & Business Model
MARKET-LEADING CORE BUSINESS & BUSINESS MODEL • Extensive network and dense geographical footprint: 67 million cubic feet of warehouse capacity 64 trade counters / showrooms / specification centres Multiple businesses and touch-points • Market-leading core business characterised by: High vol
Slide 4: Investment Case
INVESTMENT CASE SIGNIFICANT BARRIERS TO ENTRY CREATED THROUGH YEARS OF INVESTMENT AND DEVELOPMENT OF OPERATIONAL EXPERTISE 1. MARKET LEADER 2. RELATIONSHIPS 3. CURRENCY EXPOSURES 4. DEGREE OF RESILIENCE 5. DISTRIBUTION NETWORK Market-leading position, Depth and breadth of Management of transactional
Slide 5: 2017 Financial Highlights
2017 FINANCIAL HIGHLIGHTS • Total revenue increased 2.0% to £707.8 million (2016: £693.6 million): Despite weaker markets for the majority of H2 2017 • Like-for-like revenue* growth in the UK and Continental Europe of 0.5% and 4.2% respectively (2016: UK 4.2%; Continental Europe 3.1%): Represent
Slide 6: Financial Track Record (5 Years)
FINANCIAL TRACK RECORD (5 YEARS) XXX.X XX.X XX.X 635.2 41.1 40.1 654.1 36.8 35.6 635.2 31.5 30.3 XX.X 38.7 33.8 28.6 30.3 * Before non-underlying items being intangibles amortisation relating to businesses acquired, acquisitions fees and non-recurring costs relating to personnel changes 5
Slide 7: 2017 Operational Highlights
2017 OPERATIONAL HIGHLIGHTS • Considerable new expertise added to the Board, Senior Management Team and at managerial level, both in UK and Continental Europe: Tony Judge & Chris Payne, Executive Directors appointed to the Board Health & Safety, HR, Communications, Company Secretary and Legal Co
Slide 8: 2017 UK Daily Sales
2017 UK DAILY SALES* *Calculated on a like-for-like revenue basis, being based on activities and businesses that made a full contribution in all the periods and adjusted for any variances in working days 7
Slide 9: 2017 Income Statement
2017 INCOME STATEMENT Underlying* Non-underlying Total Underlying* Non-underlying Total 2017 2017 2017 2016 2016 2016 £000 £000 £000 £000 £000 £000 Revenue 707,764 – 707,764 693,572 - 693,572 Cost of sales (487,683) – (487,683) (481,068) - (481,068) Gross profit 220,081 – 220,081 212,504 - 212,504 D
Slide 10: 2017 Revenue Movement
2017 REVENUE MOVEMENT £000 % £000 % Revenue for the year ended 31 December 2016 UK 602,104 86.8 Continental Europe 91,468 13.2 693,572 100.0 Items contributing to growth during the 12-month period to 31 December 2017 UK: Like-for-like* growth 3,043 0.5 One less working day (2,421) (0.4) Acquisitions
Slide 11: Margin Improvement and Initiatives
MARGIN IMPROVEMENT AND INITIATIVES • Concerted focus on delivering margin enhancement throughout 2017 • Gross margin returned to historic level of 31% through implementing various 31.1% +50 basis points (2016: 30.6%) efficiency initiatives and more effective organisation and streamlining of processe
Slide 12: 2017 Movement in Net Expenses
2017 MOVEMENT IN NET EXPENSES Total expenses Distribution Administration £000 % £000 % £000 % Expenses for 2016 173,359 127,982 73.8 45,377 26.2 Significant movements in 2017: People cost 1,211 32.3 2,391 204.7 (1,180) (45.7) Vehicle expenses 483 12.9 537 46.0 (54) (2.1) Carriage and packaging costs
Slide 13: 2017 Underlying Operating Profit Movement
2017 UNDERLYING OPERATING PROFIT MOVEMENT Underlying Non-underlying Total £000 £000 £000 Operating profit 2016 41,072 (1,927) 39,145 Gross margin improvement in 2017 Volume benefit 3,011 - 3,011 Pricing benefit 3,137 - 3,137 Effect of acquisitions 1,429 - 1,429 7,577 - 7,577 Expenses increase Distri
Slide 14: 2017 Cash Flow
2017 CASH FLOW 2017 2016 Variance £000 £000 £000 Cash flow from operating activities Operating Profit 41,384 39,145 2,239 Depreciation, amortisation and impairment 5,845 5,276 569 Profit on sale of fixed assets (45) (15) (30) Equity settled share-based payments 1,218 1,239 (21) Operating cash flows
Slide 15: Balance Sheet and Net Funds
BALANCE SHEET AND NET FUNDS 2017 2016 Variance £000 £000 £000 Non-current assets PPE 101,631 102,934 (303) Intangible assets 44,662 10,388 34,274 Deferred tax assets 648 1,138 (490) 146,941 114,460 33,481 Current assets Inventory 131,566 126,037 5,529 Receivables 127,976 128,934 (958) Cash 42,030 59
Slide 16: UK Sterling Net Debt Daily Balances
£ Thousands 0 10,000 20,000 30,000 40,000 50,000 60,000 (50,000) (40,000) (30,000) (20,000) (10,000) 01-Jan 08-Jan 15-Jan 22-Jan 29-Jan 05-Feb 12-Feb 19-Feb 26-Feb 05-Mar 12-Mar 19-Mar 26-Mar 02-Apr 09-Apr 16-Apr 23-Apr UK sterling bank balance 2015 30-Apr 07-May 14-May 21-May 28-May 04-Jun 11-Jun 1
Slide 17: Re-Focused Acquisition Strategy
RE-FOCUSED ACQUISITION STRATEGY • Recent history, focused on acquiring small, bolt-on and underperforming businesses within core area, predominantly to achieve greater geographic coverage in UK • During 2017, largely refocused on acquiring market-leading, financially strong businesses that: Broade
Slide 18: Acquisition of Domus - December 2017
ACQUISITION OF DOMUS - DECEMBER 2017 • UK’s leading specification consultant and supplier of hard surfaces for premium construction and refurbishment projects • Core product offering - premium ceramic tiles and engineered flooring (engineered wood, LVT and laminate) • Total revenue split c 48% resid
Slide 19: Domus Acquisition - Terms
DOMUS ACQUISITION - TERMS • Total minimum consideration of £32.7 million 2017(e) EBITDA multiple 7.2x • Total maximum consideration of £35.4 million 2017(e) EBITDA multiple 7.8x Initial consideration of £29.4 million, on an EV basis EV Adjustments*** Consideration + under IFRS Deferred consideration
Slide 20: Dersimo Acquisition - March 2018
DERSIMO ACQUISITION - MARCH 2018 • Acquisition of Dersimo based in Western Netherlands completed on 2 March 2018 • Revenue of €10.1 million and PBT of €0.4 million (year-ended 31 December 2017) • Established in 1972, a highly-regarded family-owned floorcoverings distribution business involved in bot
Slide 21: Investments and Dividends
INVESTMENTS AND DIVIDENDS Investments • People & Culture: UK & Continental Europe – Managerial, H&S, HR, Governance Making the business stronger in every area • Operational processes: Warehouse and distribution processes Majority aimed at improving margins • Network: New Ipswich distributi
Slide 22: Post Year-End and Current Trading
POST YEAR-END AND CURRENT TRADING • Dersimo acquisition, and strong M&A pipeline reflecting the revised and refocused acquisition strategy: Ample opportunities to supplement growth and market position Intention to retain disciplined approach, targeting most rewarding, no recourse to excessive le
Slide 23: Strategic Pillars
STRATEGIC PILLARS WITH THE STRATEGIC AIM OF CREATING VALUE FOR THE BENEFIT OF ALL STAKEHOLDERS DYNAMIC MARGIN CULTURE GROWTH CUSTOMERS MODEL IMPROVEMENT & ETHOS • Continue growing • Customer service • Position at the • Optimise the • Focus on culture to market-leading core and satisfaction at forefr
Slide 24: Summary
SUMMARY • Continue diversifying and broadening overall position in the industry • Focus on profit enhancement against market backdrop • Maintain the improved gross margin of +31% through a more cohesive approach across the businesses • Ongoing and additional operational efficiencies and initiatives
Slide 25: www.headlam.com
WWW.HEADLAM.COM HEADLAMGROUP@HEADLAM.COM 0