Grafton Group PLC · LSE:GFTU
Grafton — H1 2007 Earnings Presentation
33 slides from Grafton's earnings presentation, 2007
Slide 1: >, | = = al —/ a c= UILOERS MERCHANTS q >” al JiR
>, | = = al —/ a c= UILOERS MERCHANTS q >” al JiR » As, Ms be ” 7
Slide 2: Profile
Profile • UK and Ireland based Building Materials Group • Principal activities – Builders and Plumbers Merchanting – DIY Retailing – Dry Mortar Manufacturing • Annualised turnover over €3 billion • Market leader or strong market positions • Trading from over 550 locations in the UK and Ireland • 11,
Slide 3: Principal Brands – UK and Northern Ireland
Principal Brands – UK and Northern Ireland 2
Slide 4: Principal Brands – Irish Merchanting and Manufacturing
Principal Brands – Irish Merchanting and Manufacturing 3
Slide 5: Irish Retail Brands
Grafton Group ple 3% Interim Results 2007 Irish Retail Brands x ATLANTIC WY HOMECARE Mnovuse AT THE PANELLING CENTRE
Slide 6: Strategy
Strategy • Consistent – Focused • To continue 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 ar
Slide 7: Interim Highlights - 2007
Interim Highlights - 2007 • 18 per cent earnings growth in line with market expectations • Like for like sales growth continued in both the UK and Ireland • DIY sector performs strongly in the first half and further growth anticipated • Irish operating margins maintained • UK operating margin increa
Slide 8: Group Financial Highlights – Interim Results
Group Financial Highlights – Interim Results 2007 2006 % Change Turnover €1.61 bn €1.43 bn +13% Operating profit* €124.4 m €106.9 m +16% Property profits - €28.1 m Pre-tax profit # €106.4 m €90.2 m +18% EBITDA # €151.3 m €131.7 m +15% Adjusted E.P.S.* 39.09 c 33.00 c +18% Share Purchase 10.00 c 8.25
Slide 9: Continuation of Strong Double Digit Growth in Earnings
Continuation of Strong Double Digit Growth in Earnings 78.0 cent 80 +15% 70 +21% 60 +23% 39.1 cent 50 +22% +18% Earnings Interim 40 +15% +24% Final 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 8
Slide 10: Segmental Turnover Analysis – First Half
Segmental Turnover Analysis – First Half 2007 2006 Group €1.61 billion Group €1.43 billion 10% 5% 5% 26% 10% 29% Irish Merchanting 59% 56% UK Merchanting DIY Retail Irish & UK Manufacturing 9
Slide 11: UK & Irish Operating Margins – First Half
UK & Irish Operating Margins – First Half UK Ireland 49% 51% 2007 2006 UK operating margin 6.5% 6.0% plus 50 basis points ROI operating margin 9.7% 9.7% Group operating margin 7.7% 7.5% plus 20 basis points 10
Slide 12: Components of Growth
Components of Growth Turnover Operating Profit* €’million €’million H1 2006 1,427 106.9 Organic growth - Ireland 26 2.5 Organic growth - UK 44 11.6 2007 acquisitions - UK 7 0.8 - Ireland 1 0.2 2006 acquisitions - UK 62 3.6 New branches 2006 & 2007 and discontinued 26 (2.1) Exchange 15 0.9 H1 2007 1,
Slide 13: Positive Financial Statistics
Positive Financial Statistics H1 2007 H1 2006 EBITDA margin* 9.4% 9.2% Operating profit margin # 7.7% 7.5% Total equity €1,104 m €907 m Net debt €587 m €544 m Gearing 53% 60% Debt to market capitalisation 26% 22% Interest cover - EBITA 7.4 8.6 Tax Rate 13% 14% Pensions Funding 101% 87% Annualised re
Slide 14: Cash Generation
Cash Generation H1 2007 H1 2006 € million € million Operating profit 123.3 105.8 Depreciation, amortisation & other 30.3 27.6 Property disposals, interest income 10.9 63.0 Total cash inflow 164.5 196.4 Replacement capital expenditure (24.7) (23.4) Interest & tax (24.9) (24.5) Working capital movemen
Slide 15: Group Development Spend
Group Development Spend 600 Heitons Acquisition & Investment Spend €41.2 million 500 Development Asset Purchases 400 €32.2 million Jacksons Replacement Asset Purchases 300 €24.7 million 200 First half only 100 2007 0 2000 2001 2002 2003 2004 2005 2006 2007 14
Slide 16: Group Locations
Group Locations 550 Trading Locations Builders Merchanting g Plumbers Merchanting Manufacturing DIY Retailing 15
Slide 17: UK Sales and Operating Profit Performance 2000 to 2006
UK Sales and Operating Profit Performance 2000 to 2006 300% +292% Percentage increase since 2000 250% +233% 200% 150% 100% 50% 0% 2000 2001 2002 2003 2004 2005 2006 Turnover 520.0 657.2 808.5 1,111.5 1,420.6 1,596.6 1,733.3 Operating Profit 29.2 40 53.7 78.6 108.2 108.2 114.6 Operating Profit Margin
Slide 18: Recovery in UK Operating Profit Margin
Recovery in UK Operating Profit Margin A return to positive like for like % sales growth is reflected in margin 9 recovery and profit growth 8 Second Half 7 6 First Half 5 4 3 2 1 0 2001 2002 2003 2004 2005 2006 2007 Second Half Margin 2005 First Half Margin 2006 Second Half Margin 2006 First Half M
Slide 19: Quarterly Percentage UK Like for Like Merchanting Sales Changes
Quarterly Percentage UK Like for Like Merchanting Sales Changes Adjusted for Trading Days UK had 5% like for like sales growth during the first half of 2007 0 Qtr 1 2005 Qtr 2 2005 Qtr 3 2005 Qtr 4 2005 Qtr 1 2006 Qtr 2 2006 Qtr 3 2006 Qtr 4 2006 Qtr 1 2007 Qtr 2 2007 UK Merchanting 18
Slide 20: Group Strengths
Group Strengths • Highly cash generative and profitable businesses - free cash flow €72.2 million • Strong balance sheet - gearing 53% • Prominent market positions in the UK and Ireland – market share circa 10% and 20% respectively • Motivated management teams • Proven strategic record • Unique acqu
Slide 21: Economic Background
Economic Background Housing and RMI • Population and employment growth continues in both UK and Ireland • Large increase in net immigration from new EU states continues into both countries • Household formation groups still growing in both economies • Irish house completions to fall and upside for U
Slide 22: Outlook Ireland
Outlook Ireland • Residential new build market will continue to decline • RMI sector will continue to show single digit like for like growth • DIY remains a competitive growth market - Few DIY store openings in the pipeline - Grafton opened a store in Limerick in July 2007 and relocation of the Tall
Slide 23: Outlook UK
Outlook UK • Rate of sustainable single digit like for like sales growth to continue • Grafton view of the UK economy remains positive over the medium term • Strong demographics pushing demand • Population growth exceeding 300,000 per annum – political focus on housing • Grafton’s UK merchanting exp
Slide 24: Chadwicks
CHADWICKS
Slide 25: Woodie's DIY and Atlantic Homecare
Wioodie’s DIY EY ATLANTIC ano, GARDEN CENTRES LY HOMECARE y A ATLANTIC) HOMECARE
Slide 26: Comparison of DIY Store Sizes in the Republic of Ireland
Comparison of DIY Store Sizes in the Republic of Ireland Total 2.5 m sq. ft. +100% Total 2.4 m sq. ft. 1,600,000 Total 2.2 m sq. ft. No change 1,400,000 in first t half 2007 Total 1.5 m sq. ft. ecas For 1,200,000 +9% +4% Total 1.2 m sq. ft. 1,000,000 800,000 600,000 400,000 200,000 0 2003 2004 2005
Slide 27: Slide 27
Slide 28: Slide 28
Slide 29: UPI
UPI — EuroMix lit Mortar nen you need it!
Slide 30: UK Merchanting League Table
UK Merchanting League Table Circa 2,000 independents to be consolidated Grafton 10% 18% 39% Jewson 15% 19% Wolseley Sector Turnover £12 billion plus Travis Perkins Unconsolidated £4.6 billion plus (excluding Wickes) 29
Slide 31: Group Performance to December 2006
Group Performance to December 2006 Average Per Annum Compound Growth 5 Year 10 Year Since 1987 Turnover 24% 28% 22% Adjusted EPS 19% 24% 26% Share purchase/ 20% 25% 23% dividend per share 30
Slide 32: Research Coverage
Research Coverage Robert Muir Robert Eason Mark Hake 0044 207 425 1838 +353 1 641 9462 0044 207 966 1194 Florence O’Donoghue John Mattimoe John Sheehan +353 1 614 8997 +353 1 240 4256 +353 1 6115912 Aynsley Lammin Howard Seymour Stuart Draper 0044 207 986 4092 0044 207 003 3501 +353 1 633 3800 31
Slide 33: For Further Information
For Further Information Michael Chadwick Executive Chairman Colm ó Nualláin Finance Director Leo Martin Chief Operating Officer Charles Rinn Group Financial Controller / Secretary Address: Grafton Group plc, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18 Telephone: 353 1 216 0600 F