Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — FY2020 Earnings Presentation
58 slides from Howden Joinery's earnings presentation, Feb 25, 2021
Slide 1: 2020 Full Year Results
2020 Full Year Results 25th February 2021 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: Business performed well in a challenging year
Business performed well in a challenging year • Adapted to Covid conditions • Progressed strategic priorities • Strength of our trade only model, founded on local relationships • Ability to evolve the business • Whilst prioritising health and well being of staff & customers Annual Report & Accounts
Slide 4: Results reflect Q2 lockdown then increase in 2nd half sales and profit
Results reflects Q2 lockdown then increase in 2nd half Sales & Profit • H1 UK Sales -29% Shortfall vs 2019 all in Q2 • H2 UK Sales + 16% Sales trending upwards across H2 • Performance reflects measures to help staff work safely and support for Customers • New services, lower prices, high stock a
Slide 5: Managed stakeholder relationships fairly & responsibly
Managed stakeholder relationships fairly & responsibly 5 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 6: A demanding market place plays to our in stock model
A 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: Paul Hayes, Chief Financial Officer
Paul Hayes Chief Financial Officer 2020 Full Year Results
Slide 8: Highlights
Highlights Revenue, £m Gross profit, £m, and margin, % Operating profit, £m, and margin, % HJ UK Cont Europe 1,650 1,000 62.3% 270 16.4% 1,583.6 260 1,600 1,547.5 950 60.1% 250 1,550 33.3 240 37.9 230 1,500 900 220 1,450 986.2 210 200 260.0 12.7% 1,400 1,550.3 850 930.0 190 1,509.6 1,350 180 800 170
Slide 9: Revenue
Revenue UK Europe 2020 Total sales £1,509.6m €42.6m Total growth -2.6% 13.0% Same depot basis -4.5% 2.5% Number of depots 748 30 New in 2020 16 4 9 2020 Full2019 Howdens Year Results Interim Results
Slide 10: UK Revenue Progression
UK Revenue Progression £m +15.8% 1056.2 2019 2020 912.2 -28.9% 638.1 +1.1% -55.8% 453.4 336.8 301.3 304.6 148.8 Q1 Q2 H1 H2 10 2020 Full2019 Howdens Year Results Interim Results
Slide 11: Profit Before Tax and Gross Profit Margin
Profit Before Tax Group gross profit margin • 2019: 62.3% • 2020: 60.1% Profit before tax Gross profit £m £m Price (revenue) Change Change £75.4m £56.2m Volume (revenue) Gross Volume Profit Operating & mix Cost Costs* (COGS) pressure/ Covid Interest savings, etc.** etc. (net) * Operating costs inclu
Slide 12: Operating Costs
Operating Costs £m Other costs France Change expansion £8.0m Growth New related depots European closures IFRS 16 impact Older depots 12 2020 Full2019 Howdens Year Results Interim Results
Slide 13: Income Statement
Income Statement FY 2020 Impact of 2020 2019 £m pre-IFRS16 IFRS16 Revenue 1,547.5 0.0 1,547.5 1,583.6 Cost of goods sold (617.5) 0.0 (617.5) (597.4) Gross profit 930.0 0.0 930.0 986.2 Operating costs (742.4) 8.1 (734.3) (726.2) Operating profit 187.6 8.1 195.7 260.0 Net interest (0.1) (10.3) (10.4)
Slide 14: Earnings Per Share & Shareholder Returns
Earnings Per Share & Shareholder Returns 2020 2019 • Earnings per share 24.9p 35.0p • Share buybacks £9.8m £55.2m Board have recommended • Final dividend 9.1p Dividend cover 2.7x • Special dividend 9.1p* • The Board expects to announce a 2021 interim dividend in July of 3.0p, in line with policy of
Slide 15: Net Cash and Cash Flow
Net Cash and Cash Flow £m 2020 2019 Opening net cash 267.4 231.3 Operating cashflows before IFRS16 depreciation 233.8 300.8 IFRS16 depreciation 79.5 - Operating cash flows before movements in working capital 313.3 300.8 Working capital* 70.3 (6.3) Capital expenditure (69.7) (61.1) Tax paid (32.2) (4
Slide 16: Working Capital
Working Capital Working capital decreased by £70.3m • stock up £23m • debtors down £2m • creditors up £91m 16 2020 Full2019 Howdens Year Results Interim Results
Slide 17: Current Trading and Outlook for Full Year 2021
Current Trading and Outlook for Full Year 2021 • UK sales in periods 1 & 2 up 5.1%, LFL up 4.5% – excluding week 1 +7.1%, LFL +6.5% • International sales up 32.3%, LFL up 31.2% – excluding week 1 +38.6%, LFL +37.5% • Continuation of market uncertainties and near term costs of Covid-19 • Price increa
Slide 18: Andrew Livingston, Chief Executive Officer
Andrew Livingston Chief Executive Officer 18 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 19: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 19 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 20: Depot Evolution
DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 20 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 21: Updated format, no change to fit-out cost
Updated format, no change to fit-out cost • In 2020 UK depot openings fewer than planned • Opening programme on hold in 1st Half Prioritised cashflow Finding safe ways for depots to trade • Opened 16 depots in 2nd Half • Circa 35 openings planned for 2021 21 Howdens 2019 Interim Results
Slide 22: Converting more existing depots to the updated format
Converting more existing depots to the updated format • 30 conversions in 2020 in line with plan Having reduced the number of depot openings and re-racks • Average cost per depot in line with budget ( £225k) • Plan to convert 40 depots in 2021 (similar average cost to 2020) • In 2021, plan to re-r
Slide 23: New format depots and re-racked depots
New format depots and re-racked depots End 2020 : Total Depots in New Format &/or Re-racked 150 80 117 79.8 125 79.6 100 79.4 75 79.2 79 79 50 76 78.8 25 41 78.6 0 78.4 New Depots Existing Depots New Format Depots Re-Rack Only End 2021 : Total Depots in New Format &/or Re-racked 225 125 192 200 99 1
Slide 24: Range and Supply Management
DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 24 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 25: NPI sales significant contributor to total sales each year
“NPI“ sales significant contributor to total sales each year • 18 new kitchens in 2020 • Handleless platform for more affordable linear look • 2020 “NPI” Kitchens on sale earlier than 2019 Well positioned with product as depots re-opened 2020 NPI sales ahead of 2019 25 Howdens Howdens 2019 2019
Slide 26: 2021 New Product features 16 new kitchens
2021 New Product features 16 new kitchens Elmbridge (Dove Grey) Howdens 2019 Interim Results 26
Slide 27: Contemporary shaker range
Contemporary shaker range Chilcomb Porcelain 27 Howdens 2019 Interim Results
Slide 28: New colourways in mid-priced families
New colourways in mid-priced families Hockley Sandstone handleless 28 Howdens 2019 Interim Results
Slide 29: New colourways to entry price points
New colourways to entry price points Hockley navy 29 Howdens 2019 Interim Results
Slide 30: New added value decorative accessories
New added value decorative accessories 30 Howdens 2019 Interim Results
Slide 31: 2021: New Product on sale earlier than previous years
2021 : New Product on sale earlier than previous years All new kitchens in-stock by end of Q2 31 Howdens 2019 Interim Results
Slide 32: Disciplined range management for best availability & profitability
Disciplined range management for best availability & profitability • End of 2019, 67 current ranges • By end of 2020, 63 current ranges • Around 65 current ranges is appropriate for our market at present • Managing ranges to around this number in 2021 32 Howdens 2019 Interim Results
Slide 33: XDC: Improving service and availability
“XDC” : Improving service and availability 33 Howdens 2019 Interim Results
Slide 34: XDC: rebalancing stock levels and delivery pattern of some lines
“XDC” : rebalancing stock levels and delivery pattern of some lines Simpler & more efficient for depots to deliver superior service improve product availability free up time and resources spent on stock management • Using third party logistics partners and their infrastructure • Service availa
Slide 35: Dedicated manufacturing & supply: key part of our in-stock offer
Dedicated manufacturing & supply : key part of our in-stock offer 35 Howdens 2019 Interim Results
Slide 36: New COVID safe ways to manufacture and supply
New “COVID safe” ways to manufacture and supply • Initially closed substantially all of manufacturing & supply • Developed additional safety measures, new work processes with support of Employees Re-opened manufacturing and distribution in April Maintained stock availability as demand changed •
Slide 37: 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 • Utilised disaster recovery capacity • Took extra temporary warehouse capacity and more space at Raunds than planned • Significant engagement with Supply base • Protecting
Slide 38: Make or buy to improve cost, supply chain resilience & flexibility
Make or buy to improve cost, supply chain resilience & flexibility Howden – 75 acres Runcorn – 25 acres 38 Howdens 2019 Interim Results
Slide 39: Making more doors for our kitchen ranges
Making more doors for our kitchen ranges • Investment to make Hockley kitchen doors in 2019 • Upscaling frontal manufacturing with new line at Howden site • Operational in 2nd Half 2022 39 Howdens 2019 Interim Results
Slide 40: Increased capacity for architrave and skirting on stream H1 2022
Increased capacity for architrave and skirting on stream H1 2022 40 Howdens 2019 Interim Results
Slide 41: New solid surface capabilities
New solid surface capabilities • Acquired assets of a leading UK fabricator • Competitive price v building new facilities • Factory operational during 2021 Howdens 2019 Interim Results 41
Slide 42: Digital reinforces our local relationship-based model
Digital reinforces our local relationship-based model DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 42 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 43: 48% more search impressions a month, site visits up 53%
48% more search impressions a month, site visits up 53% 43 Howdens 2019 Interim Results
Slide 44: Depot leads via the website up 88% year on year
Depot leads via the website up 88% year on year, brochure requests +39% 44 Howdens 2019 Interim Results
Slide 45: Growing social media presence
Growing social media presence • Follower base 213,000 by end of 2nd Half, up 119% • Reaching over 8 million users a month • With active engagement up 165% year on year 45 Howdens 2019 Interim Results
Slide 46: Extended on-line services for customers
Extended on-line services for customers 46 Howdens 2019 Interim Results
Slide 47: 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 47 Howdens 2019 Interim Results
Slide 48: 30% of credit account holders on-boarded by end 2020
30% of credit account holders on-boarded by end 2020 • Significant out of hours use • 43% of users made a payment • 68% of users viewing documents Monday Tuesday Wednesday Thursday Friday Saturday Sunday Out of hours 40% 60% In hours 48 Howdens 2019 Interim Results
Slide 49: Call and collect service launched
Call and collect service launched 49 Howdens 2019 Interim Results
Slide 50: Kitchen design service available online
Kitchen design service available online 50 Howdens 2019 Interim Results
Slide 51: 2021: Anytime Ordering added to trade platform
2021 : “Anytime Ordering“ added to trade platform • “Anytime Ordering” available from February • Major upgrade on “Call & Collect” Service • Efficiencies for Depots & Customers Bespoke pricing for each customer Account holders can see their prices, order product and quote for jobs out of hours
Slide 52: International
DEPOT EVOLUTION RANGE MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 52 Howdens Howdens 2019 2019 Interim Interim Results Results
Slide 53: 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 • Renewed trade only focus • 5 depots opened in 2019 53 Howdens 2019 Interim Results
Slide 54: 2020 performance gives confidence to open more depots
2020 performance gives confidence to open more depots • Step change in performance post lockdown • Similar approach to re-opening as UK • 1st Half Sales down circa 18%, up in last two periods • 2nd Half Sales up 38%, 13% for year • 4 depot openings in 2nd Half, taking total to 30 • 11 depot openings
Slide 55: Prospects for 2021
Prospects for 2021 • Safety of staff & customers first priority, Covid contingency plans in place • Increased prices, profitable balance between margin and volume with costs aligned • Stock cover increased • 2021 ranges on sale earlier than 2020 • Improvements to service and availability by utilisin
Slide 56: Appendix
Appendix 2020 Full Year Results
Slide 57: Appendix: Pension Scheme Deficit
Appendix: Pension Scheme Deficit £m Net discount rate IAS19 basis Contribution Current service charge + admin cost Change + interest £8.9m Asset returns 57 2020 Full2019 Howdens Year Results Interim Results
Slide 58: 2020 Full Year Results
2020 Full Year Results 25th February 2021 58 Howdens Howdens 2019 2019 Interim Interim Results Results