Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — H1 2009 Earnings Presentation
28 slides from Howden Joinery's earnings presentation, Jul 22, 2009
Slide 1: 2009 Half Yearly Report
2009 Half Yearly Report 22 July 2009
Slide 2: Matthew Ingle, Chief Executive
Matthew Ingle Chief Executive
Slide 3: Overview
Overview The Howdens model is continuing to perform well: • Margins increased • Stock levels reduced • Depot and supply costs reduced • Focused supply chain delivering further efficiencies • Robust maturity curve … enabling us to manage the legacy issues successfully … and prepare for the next
Slide 4: Mark Robson, Finance Director
Mark Robson Finance Director
Slide 5: Context of financial results
Context of financial results Resilient performance by Howdens business seen in operating results, particularly % gross margin and cash flow Cash flow continues to be impacted by legacy issues • Pension deficit funding and properties Further progress on dealing with legacy issues • Release from
Slide 6: Highlights
Highlights H1 H1 £m * Before exceptionals 2009 2008 Revenue Howden Joinery 310.1 342.6 Group 316.8 354.6 Gross profit margin 54.1% 52.7% Operating profit* 10.0 20.8 Profit before tax* 4.7 20.1 Exceptional charge (discont’d operations) (4.4) - 13 June 27 Dec £m 2009 2008 Net borrowings 50.3 61.2 afte
Slide 7: Profit before tax and exceptional items
Profit before tax and exceptional items Howdens’ revenue £310.1m Group gross profit margin £m ● Total -8.3% ● LFL -9.8% ● 2009: 54.1% ● 2008: 52.7% 20.1 £m Gross profit 186.8 Change £15.5m Operating costs Prices Change 171.3 4.8 13 £15.4m COGS savings 6 Volume 4.7 27 Gross Currency profit Interest,
Slide 8: Operating costs
Operating costs Operating costs £m 2008 depots 1.7 166.1 Change £4.8m Other Other depots 3.6 161.3 (3.5) Logistics (6.6) H1 2008 H1 2009 7
Slide 9: Income statement
Income statement H1 H1 £m 2009 2008 Continuing operations: Profit before tax and exceptional items 4.7 20.1 Tax (1.7) (7.5) Profit from continuing operations before exceptional items 3.0 12.6 Exceptional items - 1.5 Profit from continuing operations 3.0 14.1 Discontinued operations: Exceptional item
Slide 10: Borrowings and cash flow
Borrowings and cash flow H1 H1 £m 2009 2008 Opening net borrowings (61.2) (3.3) Operating cashflows before movements in working capital 19.9 32.3 ‘Underlying’ working capital 23.2 (3.4) ‘Legacy’ properties (15.0) (3.1) Other ‘exceptional’ creditors (0.8) (34.2) 7.4 (40.7) Pension deficit contributio
Slide 11: Working capital
Working capital ‘Underlying’ working capital down £23m • Stock down £22m • Debtors up £1m • Trade/other creditors up £2m Legacy property payments totalling £15m Reported working capital cash inflow of £7.4m 10
Slide 12: Reducing our property liabilities
Reducing our property liabilities 1 October 2006 22 July 2009 Net rent and Net rent and No of No of rates liability rates liability properties properties £m £m Guaranteed (gross) 56 25 32 16 Guaranteed (net) Residual Vacant 15 5 4 1 Tenanted 18 11 HDCs Vacant 2 5 5 4 Tenanted 5 1 96 34 54 21 Notes:
Slide 13: Legacy property developments
Legacy property developments £15m cash payments to landlords in H1 2009 • £0.5m lease exit – two ‘deals’ Five guaranteed property deals since end of H1 • £6m exit cost – c. twice annual cost • c. £22m liability extinguished • Original 46 properties now 32 – liability reduced by c. £65m Future
Slide 14: Pension scheme deficit – funding agreement
Pension scheme deficit – funding agreement Schedule of payments agreed for three-year period ending April 2012 • Reduced if agreed level of performance not achieved Year ending 5 April 2010 2011 2012 £19m £28m £33m Contingent payment* £5m £8m £8m * reduction from above payments Cash contribution
Slide 15: Pension scheme balance sheet deficit
Pension scheme balance sheet deficit £m Finance IAS19 basis charge Actuarial 4 assumptions 18 Change £9m 131 Deficit funding Asset (13) returns 122 1 Dec June 2008 2009 14
Slide 16: Outlook for 2009
Outlook for 2009 Sales remain consistent with last quarter of 2008 • Period 7 (4 weeks ending 11 July) down 5.2% Expect market to remain challenging • Will manage business accordingly • Prudent approach to capital expenditure: no new depots – yet Exchange rate remains weak vs last year 15
Slide 17: Matthew Ingle, Chief Executive
Matthew Ingle Chief Executive
Slide 18: Howdens mission
Howdens mission “To supply from local stock, nationwide, the small builder’s routine joinery/kitchen requirements, assuming no call back quality and best local price” 17
Slide 19: A business built on recommendation
A business built on recommendation New build Repair Maintenance Improvement Big builders Landlords Retail 180,000 houses 8m houses 16m homes per annum Small builder Local project manager Entrepreneur Expert fitter Manufacturers & merchants Showrooms & sheds Howdens Simple but good and very well done
Slide 20: Retail without the costs
Retail without the costs Showrooms National advertising NO Retail rents Teams of fitters Home delivery Call centres Retail comes to us via the local builder 19
Slide 21: Improving depot profitability
Improving depot profitability Significantly improved depot margins driven by: Better, more Better focused availability range Inf orm • Better planning ati m s New price on ste Right • Lower stock levels sy architecture ved sh staff levels • Better service pro ari Im ng • Sales per head More Motiva
Slide 22: Effective account management
Effective account management Monitoring the value of new accounts to clients • Credit terms → improved cash flow for the builder • Progressive discounts → enhanced margin • Invitations to trade → higher sales per head for Howdens Rigorous central screening Efficient ‘pruning’ of accounts • Ens
Slide 23: Focused on customers
Focused on customers RMI kitchen market Landlord Direct contact Specification Availability Small Private builder Entrepreneurial New build depot staff Range Stock Reassuring Local + Now Exciting (telepathic) X Quality Price Rigid Value to: • small builder No call-back • end-user 22
Slide 24: Underpinned by critical factors
Underpinned by critical factors Lowest cost fulfilment Lowest cost production Motivated staff Security of supply Delivering value and Low cost property service to customers Effective systems Scale Central control Local availability Range Direct access to market Credit 23
Slide 25: Depot expansion
Depot expansion Staff Demographics Right people - Howdens way Knowledgeable, service orientated, Right catchments entrepreneurial Next locations identified Right training and experience Property Financing Right property 10 -12k sq ft Fit out £150k Right rent £5 per sq ft Stock £150k Right trade park
Slide 26: Robust maturity curve
Robust maturity curve Average annual sales by opening year group Year 1 Year 2 Year 3 Sales (£m) 0.2 0.8 1.0 Range (£m) 0.2 - 0.3 0.6 - 1.0 0.9 - 1.3 Recent openings follow same track as all previous year groups Autumn trading yet to come Successful autumn reassurance for decision- making on
Slide 27: In summary ...
In summary ... The Howdens trade model performs in all environments Competitive advantage based on a unique combination: • Lowest cost fulfilment • Local availability everywhere • Entrepreneurial, motivated staff • Tight central control of credit and range The MFI legacy is being actively addr
Slide 28: 2009 Half Yearly Report
2009 Half Yearly Report 22 July 2009