Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — H1 2014 Earnings Presentation
37 slides from Howden Joinery's earnings presentation, Jul 24, 2014
Slide 1: 2014 Half-Yearly Report
2014 HALF-YEARLY REPORT 24 July 2014
Slide 2: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 3: A successful business with prospects
A successful business with prospects Significant improvement in sales, profits and cash Interim dividend increased to 1.9p (H1 2013: 1.0p) Product Property Better service Continuing for the local to invest in: People Processes builder 2014 Half-Yearly Report 2
Slide 4: Mark Robson, Deputy CEO and Chief Financial Officer
Mark Robson Deputy CEO and Chief Financial Officer
Slide 5: Business developments
Business developments • 17 depots opened so far – on track for 30 • Investment in product, including eleven new kitchen ranges • Existing depots – ‘virtual showroom’ project complete – A3 printer roll-out • Supply – replacing ‘tractor’ units of lorry fleet • Central IT hardware refreshed 2014 Half-Y
Slide 6: Highlights
Highlights Revenue, £m Operating profit pre except’ls, £m Net cash, £m HJ UK France 60 175.0 450 57.6 11.1 50 161.1 435.4 150.0 7.2 40 44.2 425 140.5 125.0 428.2 30 102.0 400 390.8 100.0 7.1 20 102.0 375 756.4 383.7 10 75.0 350 0 2013 2014 50.0 2013 2014 Jun-13 Dec-13 Jun-14 HJ UK: +11.6% Gross prof
Slide 7: Revenue
Revenue 2014 UK depot revenue £428.2m • total +11.6% • LFL +8.7% 2014 French depot revenue £7.2m > +5% in €s 2014 Half-Yearly Report 7
Slide 8: Profit before tax
Profit before tax Group gross profit margin ● 2014: 63.2% ● 2013: 61.5% Profit before tax £m £m Gross profit Gross profit Volume 34.8 & mix Change (revenue) Change 31 £34.8m £15.6m Currency 3 275.2 57.2 Volume & mix Cost (COGS) savings, Operating Interest, (12) cost pressures, costs etc Price etc. 1
Slide 9: Operating costs
Operating costs Operating Change costs £21.4m £m Growth related Other 11.0 0.2 217.6 Older depots 4.4 New depots 5.8 196.2 • 2013 2014 2014 Half-Yearly Report 9
Slide 10: Income statement – pre exceptionals
Income statement – pre exceptionals * Continuing operations unless stated, £m H1 2014 H1 2013 Revenue 435.4 390.8 Cost of goods sold (160.2) (150.4) Gross profit 275.2 240.4 Operating costs (217.6) (196.2) Operating profit 57.6 44.2 Net interest (0.4) (2.6) Profit before tax 57.2 41.6 Tax (14.9) (10
Slide 11: Earnings per share, continuing operations, and dividend
Earnings per share, continuing operations, and dividend H1 2014 H1 2013 Earnings per share 6.6p 4.8p Interim dividend per share 1.9p 1.0p 2014 Half-Yearly Report 11
Slide 12: Net cash and cash flow
Net cash and cash flow £m H1 2014 H1 2013 Opening net cash 140.5 96.4 Operating cash flows before movements in working capital 70.2 54.7 Working capital (6.9) (11.3) Capital expenditure (17.2) (8.8) Interest (net) 0.2 0.1 Tax paid (13.9) (11.3) Legacy properties (1.2) (5.3) Pension deficit contribut
Slide 13: Working capital
Working capital • Working capital up £6.9m – stock up £11.4m – debtors up £17.1m – creditors up £21.6m 2014 Half-Yearly Report 13
Slide 14: Pension scheme deficit
Pension scheme deficit £m Discount rate & other assumptions IAS19 basis 49 Change £18m Asset returns 72 Finance (19) Deficit charge Funding 54 1 (13) • Dec Jun 2013 2014 Triennial review of scheme underway – will set deficit payments for three years from April 2015 2014 Half-Yearly Report 14
Slide 15: Recent trading and outlook for remainder of 2014
Recent trading and outlook for remainder of 2014 • Sales in first four week period of H2 up 14.0% – feedback from depot remains positive • Well placed to achieve our expectations – tougher comps – important period 11 still to come • Continue to invest in growth – 30 new depots this year 2014 Half-Ye
Slide 16: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 17: Things have changed since 1995 …
Things have changed since 1995 … Materials Technologies Trends Less Less Expectations time tolerance Internet of mistakes Regulation Housing market 2014 Half-Yearly Report 17
Slide 18: … but some things don't change
… but some things don’t change Howdens is a trade-only business Offering good, personal service in an increasingly complex world 2014 Half-Yearly Report 18
Slide 19: Our mission is our model
Our mission is our model “To supply from local stock, nationwide, the small builder’s ever-changing, routine, integrated joinery/kitchen requirements, assuring no call back quality and best local price” 2014 Half-Yearly Report 19
Slide 20: Offering a complete service to the small builder
Offering a complete service to the small builder Very local depots • Free planning service • Relevant product range • Everything in stock, always • Best local price • Won’t break • Easy to fit • Can swap any item Confidential discount, nett monthly credit account 2014 Half-Yearly Report 20
Slide 21: Uniquely able to deliver value to the builder
Uniquely able to deliver value to the builder Successfully combining all the Supply Trade critical elements guaranteed only Pricing Local Based on personal confidential manager relationships and discount autonomy solid values Stock Quality absolute Range 2014 Half-Yearly Report 21
Slide 22: More local accounts, more local depots
More local accounts, more local depots 317,000 active credit accounts • 58,600 accounts opened in H1 2014 • Total credit accounts up from 278,000 at end of H1 2013 576 depots • 17 opened in H1 2014 • A further 13 planned in H2 Opened in H1 2014 2014 Half-Yearly Report 22
Slide 23: The typical Howdens depot
The typical Howdens depot 10,000 sq.ft Trade parks • Average rent c. £5.50 per sq.ft Low fit-out costs • One-off, c. £180k - £300k Low breakeven point • At sales of c.£650,000 p.a. 6 – 10 staff Open 5½ days a week Repeating what works 2014 Half-Yearly Report 23
Slide 24: From our interim results, July 2009
From our interim results, July 2009 Time is money 2014 Half-Yearly Report 24
Slide 25: The builder is prepared to pay for Howdens' offer
The builder is prepared to pay for Howdens’ offer c.£130m of stock in the business at any one time… c.£200m of debt to collect at peak… Design / Local Quality Price A compelling, range stock integrated Local Confidential Free expert Credit offer decisions discount planning The builder is more likely
Slide 26: Continuing to invest in our supply chain
Continuing to invest in our supply chain Manufacturing capacity • High volumes, long runs, no waste External suppliers Efficient warehousing Industrial product design and development Reliable systems to support growth New equipment installed at Howden in 2013 2014 Half-Yearly Report 26
Slide 27: Progress with our French pilot
Progress with our French pilot Improvements in depot margin and profitability • More understanding required • A very different market Ongoing testing • 2 depots in southern Belgium, close to our Lille HQ • 1 test format near Lyon 2014 Half-Yearly Report 27
Slide 28: Organisational development
Organisational development Mark Robson, Deputy CEO and CFO Andy Witts, COO Trade Rob Fenwick, COO Supply Theresa Keating, FD Positioning ourselves to take advantage of further growth opportunities 2014 Half-Yearly Report 28
Slide 29: New depot performance
New depot performance Local means really local Builders don’t like travelling New depots continue to perform well • Adding locations helps us increase sales in specific areas, e.g. Lincoln + North Lincoln = 100% improvement • Some customer movement based on convenience and relationships, as expected
Slide 30: Supply chain flexibility
Supply chain flexibility Bringing it all together • 576 depots, 5,700 SKUs, 200+ suppliers Control of our own cabinet manufacturing, supported by: • 5-year chipboard supply agreements • Two sites, flexible working arrangements Flexibility built in to agreements with suppliers • Multiple sourcing, sh
Slide 31: Effective account management
Effective account management 385,000 total accounts • 317,000 credit accounts: allowing 4 - 8 weeks’ credit Peak trade debt c.£200m Centrally managed credit control, c.150 people Total cost of credit control (including bad debts) less than 1% of sales • In-stock model • Rigorous procedures, consiste
Slide 32: A young and successful business with prospects
A young and successful business with prospects Relevant, imaginative, strong Continued Clear business proposition growth and Unique, proven model development 20 years Delivers profit and cash Doing what we do well, and doing it even better 2014 Half-Yearly Report 32
Slide 33: Appendix
Y NS HOWDENS JOINERY CO. Making kitchens work for you Appendix
Slide 34: New product introductions, H1 2014
New product introductions, H1 2014 11 new kitchens • Including 8 new options in Greenwich, our successful entry-level range • New worktop and backboard designs Greenwich Gloss Navy & White 34
Slide 35: New product introductions, H1 2014
New product introductions, H1 2014 Lamona is the UK’s No. 1 integrated appliance brand, and continues to grow • Domino hobs & compact ovens for smaller kitchens Lamona Ceramic Domino Hob • New range of contemporary sinks and taps Lamona Dorney 1.5 bowl sink 2014 Half-Yearly Report 35
Slide 36: New product introductions, H1 2014
New product introductions, H1 2014 New external doors • Including pre-glazed versions of successful designs New hardware • Focus on handle development New flooring options • Fast fit, easier for the Professional Fast Fit builder V Groove Light Grey Oak Laminate Flooring External Dordogne Oak Glazed
Slide 37: 2014 Half-Yearly Report
2014 HALF-YEARLY REPORT 24 July 2014