Grafton Group Plc · LSE:GFTU
Grafton — H1 2005 Earnings Presentation
37 slides from Grafton's earnings presentation, 2005
Slide 1: Grafton Group Plc Interim Report 2005
Pt 4a i HH gueeee LiL) earth at L ae aan anys Grafton Group Pic INTERIM REPORT 2005
Slide 2: Profile
Profile UK and Ireland based Building Materials Group Principal activities Î Builders and Plumbers Merchanting Î DIY Retailing Î Dry Mortar Manufacturing 2004 Turnover exceeded €1.87 billion, First half 2005 €1.3 billion Market leader or strong market positions Trading from over 450 locati
Slide 3: Principal Brands - UK
Principal Brands - UK Builders Merchanting - Significant Market Positions Plumbers Merchanting - Significant Market Position Silo Mortar Manufacturing - Market Leader 2
Slide 4: Principal Brands – Ireland
i Grafton Group plc 7Heiton Buckley BUILDERS MERCHANTS ATLANTIC
Slide 5: Strategy
Strategy Consistent – Focused To achieve above average long-term returns for shareholders by: Î Building on strong market positions in businesses serving the UK and Irish construction markets Î Developing in other Irish Markets Î Growing outside Ireland in businesses with which we are familiar 4
Slide 6: 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 7: Group Financial Highlights
Group Financial Highlights Year H1 2005 H1 2004 % Change 2004 €1,872 m Turnover €1,293 m €911 m +42% €159.5 m Operating profit €96.55 m €70.7 m +37% €145.8 m Pre-tax profit €87.4 m €68.4 m +28% €203.2 m EBITDA €126.5 m €96.4 m +31% €7.5 m Property profits €5.9 m €7.5 m 56.11 c Adjusted E.P.S.* 29.8
Slide 8: Consistently Strong Growth in Earnings
Consistently Strong Growth in Earnings 60 +23 % 50 +22 % 40 +15 % +20% +24 % Interim 30 Final 20 10 0 2000 2001 2002 2003 2004 2005 7
Slide 9: Components of Profit Growth First Half 2005
Components of Profit Growth First Half 2005 110 7% €96.6 m 100 +3 Acquisitions 35% 90 Organic Growth 6% 80 €70.7 m New Branches/ - 4% 70 60 currency 50 40 30 20 10 0 -10 2004 2005 8
Slide 10: Analysis of Increased Activity to June 2005
Analysis of Increased Activity to June 2005 Established Heiton Increase Established Six Months Business Increase Group plc Six months to 2005 Business in to June 2004 to June 2005 to June 2005 30 June 2005 V 2004 First Half 2005 Turnover UK 690.0 67.6 35.7 793.3 +15% +9.8% ROI 221.4 19.6 259.0 500.0
Slide 11: Financial Statistics
Financial Statistics H1 2005 H1 2004 Interest Cover – EBITA 6.9 7.0 Gearing 73% 84% Tax Rate 13.8% 13.6% Annualised return avg. cap employed 17.3% 17.6% Annualised return avg. equity (after tax) 21.6% 23.1% 10
Slide 12: Cash Generation
Cash Generation H1 2005 H1 2004 € million € million Operating Profit 96.5 70.7 Depreciation, amortisation & other 24.9 17.0 Disposals, property & interest/investment income 18.5 14.6 Shares issued 178.1 0.1 Total cash inflow 318.0 102.4 Working capital movement* (4.3) 0.2 Capital expenditure** (58.
Slide 13: Group Development Spend
Group Development Spend Heiton Group 450 400 Acquisition & Investment Spend 350 Development Asset Purchases Jacksons 300 Replacement Asset Purchases 250 200 150 First Half 100 only 50 2005 0 2000 2001 2002 2003 2004 2005 12
Slide 14: Enlarged Group Locations
Enlarged Group Locations g 13
Slide 15: UK Performance 1999/2004
UK Performance 1999/2004 600% 500% Turnover & Operating Profit % Increase since 1999 400% 300% 200% 100% 0% 1999 2000 2001 2002 2003 2004 Turnover 344.4 520.0 657.2 808.5 1,111.5 1,420.6 Operating Profit 16.6 29.2 40.0 53.7 78.6 108.2 Operating Profit Margin 4.8% 5.6% 6.1% 6.6% 7.1% 7.6% Interim Mar
Slide 16: Heiton Group plc
Heiton Group plc RECOMMENDED OFFER: Î Acquisition totally unconditional on 7th January Î Net investment by Grafton €406 m (Based on January 05 share price) Î Multiples 2004: Sales 0.80x EBITA 11.6x THE HEITON BUSINESS POST ACQUISITION Î Strong like for like sales growth in Ireland in buoyant sec
Slide 17: Estimated Integration Benefits of Heitons
Estimated Integration Benefits of Heitons Heiton Group – First half operating profit €21.0 million Target areas to extract benefits Î Purchasing benefits Î Plc overheads Î Operational efficiencies Total Integration Improvement Anticipated: Î First Half 2005 €2.6 million Î Second Half 2005 €6.4
Slide 18: 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 Best Practice sharing across the Group 17
Slide 19: Heiton Builders Merchants
re = Herton BUILDERSEMERCHANTS
Slide 20: Irish Merchanting First Half 2005
Irish Merchanting First Half 2005 HY’05 +/- vs’04 % Group Overview of the Year: Sales €’m 337 +143% 26% Strong sales & PBIT growth + Merchanting sales up 143% Like for like sales up 8% N o. 1 23 Locations 25 Locations Growing share of RMI market No.1 14 Locations 14 Locations The Group conti
Slide 21: Woodie's DIY
Woodie’s DIY ALANTIC Aes Sa pi rs oe ESUPIRSTCHES iNNGUSe
Slide 22: Irish Retailing First Half 2005
Irish Retailing First Half 2005 Overview of the Year: HY’05 +/- vs’04 % Group Sales €’m 127 +97% 10% Continued PBIT growth Sales +97% Like for like sales down - 4% Strong focus on margins Strong product innovation + More competition from new stores – some cannibalisation No.1 Investments
Slide 23: Timber & Tile Counter
{i 9 3 2 TIMBER & LES COUNTER Z ¥
Slide 24: Plumbase
PLUMBASE
Slide 25: UK Merchanting First Half 2005
UK Merchanting First Half 2005 Overview of the Year: HY’05 +/- vs’04 % Group Continued like for like growth +2.3% Sales €’m 762 +16% 59% Slowing plumbers merchanting sales Some recent signs of recovery Builders Merchants Investments in: 155 Locations 5 Bolt on Acquisitions 6 Heiton UK bran
Slide 26: EuroMix
CPI i = Ved i) Eu oMix > uromMil ype 4 aes i oe it! ij ti —h gid?
Slide 27: UK & Irish Manufacturing First Half 2005
UK & Irish Manufacturing First Half 2005 Overview of the Year: HY’05 +/- vs’04 % Group 8th Dry Mortar plant commissioned in Sales €’m 67 +39% 5% Bristol Increased competition as expected in UK Mortar market and some price N o .1 pressure in the market - flat UK like for Dry Mortar Plants UK: 8 L
Slide 28: Overview of Enlarged Group
Overview of Enlarged Group Sales: UK 61% - Ireland 39% Annualised Group Turnover > € 2.5 billion. Market leader in Irish Merchanting and DIY markets Strong No. 4 in UK Merchanting market – over 330 branches 19% of Irish Merchanting market – over 70 branches 15% of Irish DIY market – 36 s
Slide 29: Group Performance to December 2004
Group Performance to December 2004 Average per annum Compound Growth 5 Year 10 Year Since 1987 Turnover 25% 27% 22% Adjusted EPS 23% 28% 28% Share Purchase/ 24% 29% 23% dividend per share 28
Slide 30: Outlook Ireland
Outlook Ireland Construction sector peaking Residential new build market to moderate in 2006 RMI sector to continue to show single digit like for like growth DIY remains a strong growth market Ongoing integration of Heiton businesses with Grafton activities More DIY stores in the pipelin
Slide 31: Outlook - UK
Outlook - UK Grafton view of the UK economy is positive Main UK merchanting exposure to RMI market Subdued demand in RMI market Full year acquisition benefits flowing through EuroMix expansion – 8th UK plant in Bristol opened, 9th plant in planning for 2006 Greenfield developments to str
Slide 32: UK Merchanting Super League Table
UK Merchanting Super League Table Market Shares 2005* Jewson 20% Wolseley 19% Travis Perkins (Excl. Wickes) 17% Fastest Growing Merchant Grafton Group 9% *Based on AMA Research and BMJ estimates, Jan 2005 31
Slide 33: International Financial Reporting Standards – Principal Policy Changes for Grafton
International Financial Reporting Standards – Principal Policy Changes for Grafton Goodwill IFRS 3 Intangibles IAS 38 Pensions IAS 19 Deferred Tax IAS 12 Financial Instruments IAS 32 & 39 Share Based Payments IFRS 2 32
Slide 34: Comparison of IFRS and GAAP
Comparison of IFRS and GAAP Comparison Based on 2005 H1 figures GAAP IFRS % +/- Operating Profit €85.8m* €96.5 m # +12% Profit After Tax €65.3m* €75.3 m +15% Adjusted EPS 30.60 c 29.81 c -3% Net Assets €787 m €736 m -6% * Includes €11.9 million for amortisation of goodwill. # Includes €1.1 million f
Slide 35: Reconciliation of Operating Profit – Irish GAAP to IFRS
Reconciliation of Operating Profit – Irish GAAP to IFRS 30 June 30 June 31 December 2005 2004 2004 €’000 €’000 €’000 Operating Profit Irish GAAP operating profit 85,814 63,688 144,581 IFRS 3 – Amortisation of intangibles (1,060) - - IFRS 3 – Amortisation of goodwill 11,868 6,195 12,820 Operating pro
Slide 36: Research Coverage
Research Coverage Aynsley Lammin Robert Eason Mark Hake 0044 207 986 4092 +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 Darren Shaw Stuart Draper 0044 207 475 2433 +353 1 633 3800 35
Slide 37: For Further Information
For Further Information Michael Chadwick Executive Chairman Colm ó Nualláin Finance Director Leo Martin Executive Director Charles Rinn Group Financial Controller Address: Grafton Group plc, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18 Telephone: 353 1 216 0600 Fax: 353 1 295 447