Slide 1: Final Results Presentation
FINAL RESULTS PRESENTATION For the year ended 31 December 2018 March 2019
Slide 2: Company Overview
COMPANY OVERVIEW Europe’s leading distributor of floorcoverings: • Distribution channel between suppliers and trade customers of floorcoverings • Working in partnership with suppliers and trade customers • Linking together a global manufacturing supply base and the most extensive customer base acros
Slide 3: Company Overview (Continued)
COMPANY OVERVIEW (CONTINUED) Suppliers: Customers: • Global manufacturing supply base (199 suppliers, • Most extensive customer base across the UK and 22 countries) Continental Europe (+71,000 active customer • Multiple product categories (+30,000 product accounts) units offered to UK customers) • R
Slide 4: Business Model
BUSINESS MODEL UK FLOORCOVERINGS MARKET VALUED AT £2.05 BILLION IN 2018* Extensive network and dense geographical footprint: Revenue • 67 businesses each operate under own unique trade brand and utilise Residential Commercial individual sales team to maximise customer penetration 64.6% 35.4% • Multi
Slide 5: Strategy
STRATEGY Develop and Broaden: • Continue developing the market-leading distribution business • Broaden position within the overall industry to expand revenue streams and customer base • Grow in identified product categories and market segments, with focus on higher-margins Network Utilisation: • Imp
Slide 6: Financial Track Record (5 Years)
FINANCIAL TRACK RECORD (5 YEARS) Revenue* £million Underlying** Operating Profit £million Underlying** Profit before Tax £million £708.4m £44.3m £43.4m +2.3% (2017: £692.5m) +1.1% (2017: £43.8m) +0.6% (2017: £43.1m) 2018 708.4 2018 44.3 2018 43.4 2017 692.5 2017 43.8 2017 43.1 2016 677.7 2016 41.1 2
Slide 7: 2018 Financial Highlights
2018 FINANCIAL HIGHLIGHTS • Total revenue +2.3% to £708.4 million (2017: £692.5 million) despite the generally softer trading backdrop evident throughout the year • Like-for-like* revenue declined in both the UK and Continental Europe (4.2% and 1.8% respectively) with the softer market being more ke
Slide 8: 2018 Operational Highlights
2018 OPERATIONAL HIGHLIGHTS Efficiency initiatives Broadening of operations and People • 10 efficiency initiatives expansion of network • Board supplemented with a focused on improving • 5 smaller strategic wealth of experience, and operational practices and acquisitions completed, several operation
Slide 9: 2018 UK Daily Sales
2018 UK DAILY SALES* £k Sales 2,800 2,600 2,400 2,200 2,000 2014 1,800 2015 2016 1,600 2017 2018 1,400 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec *Calculated on a like-for-like revenue basis, being based on activities and businesses that made a full contribution in all the periods and adjusted
Slide 10: 2018 Income Statement
2018 INCOME STATEMENT 2018 2017 Variance £000 £000 2018 V 2017 Revenue 708,423 100.0% 692,540 100.0% 2.3% Cost of sales (479,349) 67.7% (474,436) 68.5% 1.1% Gross Profit 229,074 32.3% 218,104 31.5% 4.8% Distribution costs (134,316) (19%) (127,145) (18.4%) 5.3% Administrative expenses (50,485) (7.1%)
Slide 11: 2018 Non-Underlying Items
2018 NON-UNDERLYING ITEMS 2018 2017 £000 £000 Non-recurring people costs 836 677 GMP equalisation 1,214 - Release of contingent consideration (1,384) - Amortisation of acquired intangibles 1,763 931 Acquisitions related fees 513 791 2,942 2,399 10
Slide 12: 2018 Revenue Movement
2018 REVENUE MOVEMENT £000 £000 £000 UK Europe Total Revenue for the year ended 31 December 2017 (restated) 593,476 99,064 692,540 Split 85.7% 14.3% Incremental items during the 12-month period to 31 December 2018: Like for like organic decline (24,651) (1,791) (26,442) LFL -4.2% -1.8% -3.8% Acquisi
Slide 13: Efficiency Initiatives and Margin Improvement
EFFICIENCY INITIATIVES AND MARGIN IMPROVEMENT 10 EFFICIENCY INITIATIVES* AIMED AT IMPROVING MARGIN: • Most at an early-stage of implementation • Streamlining of processes and pricing discipline implemented since late 2016 • Gross margin +130 basis points since 2016 to a historic high in 2018 • Focus
Slide 14: 2018 Movement in Net Expenses
2018 MOVEMENT IN NET EXPENSES Total expenses Distribution Administration £000 £000 £000 Expenses for 2017 176,720 127,145 71.9% 49,575 28.1% Significant movements in 2018: People cost (3,170) (29.0)% (339) (4.8)% (2,831) (74.3)% Vehicle expenses 244 2.2% 238 3.4% 6 0.1% Carriage and packaging costs
Slide 15: 2018 Underlying Operating Profit Movement
2018 UNDERLYING OPERATING PROFIT MOVEMENT £000 Underlying operating profit 2017 43,783 Gross margin improvement Volume benefit (7,570) Pricing benefit 954 Anticipated trade creditor settlement discount 1,049 Effect of acquisitions 16,537 10,970 Expense movement Distribution 624 Administration 2,661
Slide 16: 2018 Cash Flow Movement
2018 CASH FLOW MOVEMENT 2018 2017 £000 £000 Net cash flow from operating activities Profit before taxation 40,447 40,719 Depreciation, amortisation and impairment 7,038 5,845 Profit on sale of property, plant and equipment (50) (45) Net finance cost 884 665 Share-based payments 1,478 1,218 Working c
Slide 17: Balance Sheet as at 31 December 2018
BALANCE SHEET AS AT 31 DECEMBER 2018 2018 2017 £000 £000 Non-current assets PPE 102,048 101,631 Intangible assets 50,924 44,662 Deferred tax assets 516 648 153,488 146,941 Current assets Inventory 132,704 131,566 Receivable 119,007 127,976 Cash 44,005 42,030 295,716 301,572 Total assets 449,204 448,
Slide 18: UK Sterling Net Debt Daily Balances
20,000 40,000 60,000 0 (60,000) (40,000) (20,000) 01-Jan £Thousands 08-Jan 15-Jan 22-Jan 29-Jan 05-Feb 12-Feb 19-Feb 26-Feb 04-Mar 11-Mar 18-Mar 25-Mar DAILY BALANCES 01-Apr 08-Apr 15-Apr 22-Apr UK sterling bank balance 2017 29-Apr 06-May 13-May 20-May UK STERLING NET DEBT 27-May 03-Jun 10-Jun 17-Ju
Slide 19: Investments and Dividends
INVESTMENTS AND DIVIDENDS ONGOING CAPEX • £3 - 4 million maintenance capex per annum in connection with running operations in largely freehold property portfolio • £102.0 million of property, plant and equipment assets IPSWICH • New regional distribution centre in Ipswich, total capex of c £26 milli
Slide 20: Acquisitions
ACQUISITIONS GREATER LONDON: CONTINENTIAL EUROPE: SPECIFICATION: • Expanded footprint in Greater • Dersimo increased presence • CECO, based south of Belfast, London area where have and geographical coverage in extended position in the historically been the Netherlands specification area underreprese
Slide 21: Current Trading and Outlook
CURRENT TRADING AND OUTLOOK 2019 DIVIDEND • 2019 dividend currently intended to be maintained in-line with 2018 despite anticipated lower underlying profit before tax in 2019* • Enabled by strength of Balance Sheet and operational cash generation • Reflects confidence in ability to improve profitabi
Slide 22: Appendices
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Slide 23: Investment Case
INVESTMENT CASE Significant scale and longevity of operations underpinned by capital efficiency and progressive dividend policy. MARKET LEADER DISTRIBUTION NETWORK FINANCIAL STRENGTH • 26 years of operations and expertise • Significant warehousing network and • Strong balance sheet and operational i
Slide 24: Efficiency Initiatives
EFFICIENCY INITIATIVES A number of efficiency initiatives aimed at lowering the breakeven point and improving operating margin are at the early roll-out phase or trialling. They will yield increasing benefits as 2019 progresses and have a more meaningful impact in 2020 and beyond. An overview of the
Slide 25: Efficiency Initiatives (Continued)
EFFICIENCY INITIATIVES (CONTINUED) Initiative Description Status 6. Administrative Examine all components within Administrative Expenses with the objective of 2018: Analysis arresting the growing percentage of revenue it accounts for year-on-year, and Expenses ultimately improve operating margin. 20
Slide 26: Contact Details
CONTACT DETAILS Headlam Group plc Tel: 01675 433000 PO Box 1 Fax: 01675 433030 Gorsey Lane E-mail: headlamgroup@headlam.com Coleshill Sat Nav: B46 1JU Birmingham B46 1LW www.headlam.com