Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — H1 2012 Earnings Presentation
49 slides from Howden Joinery's earnings presentation, Jul 19, 2012
Slide 1: 2012 Half Yearly Report
2012 HALF YEARLY REPORT 19 Jully 2012
Slide 2: Matthew Ingle, Chief Executive Officer
Matthe ew Ingle Chief Execcutive Officer
Slide 3: Howdens continues to perform well
Howdens continues to perfo orm well H1 2012: • Solid trading: sales up by 6.8% • Operating profit up to £29..1m (2011: £25.5m) • Gross margin up to 60.1% % (2011: 59.3%) • Cash position improved vss. H1 2011 Sustained focus on proven model m 0.3p interim dividend declared A robust business in a an u
Slide 4: Mark Robson, Chief Financial Officer
Mark Robson R Chief Finan ncial Officer
Slide 5: Context of financial results
Context of financial results • Increased turnover and profit • Cash flow finances legacy issu ues and growth of the business • Legacy property portfolio contiinues to diminish 2012 Half Yearly Report 5
Slide 6: Highlights
Highlights Revenue, £m Operating g profit, £m Net cash, £m HJ UK France 60 370 364.6 30 57.1 50 360 11.1 6.9 29.1 28 40 11.7 357.7 350 37.4 341.7 26 30 340 6.8 25.5 20 24 330 334.9 756.4 10 51 5.1 320 22 0 2011 2012 2011 2012 Jun-11 Dec-11 Jun-12 HJ UK: +6.8% Gross profit margin, % Profit beforre ta
Slide 7: Revenue
Revenue 2012 UK depot reevenue £357.7m • total t t l +6.8% 6 8% • LFL +5.0% 5 0% 2012 French depo ot revenue £6.9m + 5% in €s 2012 Half Yearly Report 7
Slide 8: Profit before tax
Profit before tax Group grosss profit margin ● 2012: 60.1% % ● 2011: 59.3% Profit before tax £m Gross £m Gross profit profit 16.5 Mix and volume Change 3.0 £16.5m Price Change 18.0 £1.9m m 219.3 Cost pressures, etc. Operating 25.4 (4.5) 23.5 costs Interest, (12 9) (12.9) etc 1.7 202.8 • • 2011 2012
Slide 9: Operating costs
Operating costs Operating Change costs £12.9m £m Other Other - 2.2 190.2 growth Olde er 2.2 depoots 5.5 5 New depots 3.0 177.3 • 2011 2012 2012 Half Yearly Report 9
Slide 10: Income statement
Income statement £m H1 2012 H1 2011 Revenue 364.6 341.7 Cost of goods sold (145.3) (138.9) Gross profit 219.3 202.8 O Operating ti costs t (190 2) (177.3) (190.2) (177 3) Operating profit 29.1 25.5 Net interest (3 7) (3.7) (2 0) (2.0) Profit before tax 25.4 23.5 Tax (5.6) (6.5) Profit for the period
Slide 11: Earnings per share and dividend
Earnings per share and divid dend H1 2012 H1 2011 Earnings per share 3.2p 2.8p Interim dividend per sharre 0.3p nil 2012 Half Yearly Report 11
Slide 12: Net cash and cash flow
Net cash and cash flow £m H1 2012 H1 2011 Opening net cash 57.1 35.0 Operating cash flows before movements in workking capital 37.9 35.9 Working capital (10.4) (10.7) Capital expenditure (6.5) (7.9) Interest (net) (0.1) (0.5) Tax paid (9.0) (11.6) Legacy properties (13.9) (17.2) Pension deficit cont
Slide 13: Working capital
Working capital • Working capital up £10.4m – stock t k down d £6 £6.0m 0 – debtors up £24.6m – creditors up £8.2m 2012 Half Yearly Report 13
Slide 14: Reducing our legacy property liabilities
Reducing our legacy propertty liabilities Number of £33m2 properties1 80 £24m 60 £18m £12m 40 £7m 20 £5m £5m3 £2m £2m £0.2m 0 Oct-08 Dec-08 Dec-09 Dec-10 Dec-11 Jul -12 Dec-12 Dec-14 Dec-19 Dec-24 • 5 legacy property deals in so far 2012: £11.7m exit cost → £27m liability extinguished 1 Vacant and t
Slide 15: Pension scheme deficit
Pension scheme deficit £m IAS19 basis Finance charge Asset 3 returns 3 Discouunt Triennial review rate & other o completed in June - 137 assumptions £35m p.a. funding 1 agreed for 3 years commencing April 2012 Change £15m 122 Deficit Funding (20) • Dec Jun 2011 2012 2012 Half Yearly Report 15
Slide 16: Outlook for remainder of 2012
Outlook for remainder of 201 12 • Sales in first four weeks of seccond half down 0.9% – reflects strong g comparator p from same p period in 2011 • Rest of year: – no change in expectations – cautious about the outlook – continue to invest in growth • Will take timely actions, as req quired 2012 Hal
Slide 17: Matthew Ingle, Chief Executive Officer
Matthe ew Ingle Chief Execcutive Officer
Slide 18: A proven and adaptable business model
A proven and adaptable bussiness model “To o supp supply y from o loca ocaal sstock, a oc , nationwide, a o de, the small builder’s evver-changing routine kitchen and joinery requirements, assuring no-call-back quality and a best local price” 2012 Half Yearly Report 18
Slide 19: A proven and adaptable business model
A proven and adaptable bussiness model Trade only In stock all the time Very local depot Ability to swap things im mmediately Opening hours to suit builders b Confidential discount – builder’s margin Nett monthly account – builder’s cash flow No retail pricing = no co onfusion 2012 Half Yearly Repor
Slide 20: A proven and adaptable business model
A proven and adaptable bussiness model Focus on one customer Sell Product that helps the M Make money builder to: Grrow reputation p Business geared to needs of builde er = greater efficiency at least cost 2012 Half Yearly Report 20
Slide 21: A proven and adaptable business model
A proven and adaptable bussiness model Considered range of kitchenss and joinery Up-to-date designs, traditional and modern Product “families” Matching joinery, accesso ories and hardware Range of price points 2012 Half Yearly Report 21
Slide 22: A proven and adaptable business model
A proven and adaptable bussiness model Supporting the builder’s sale Industry-leading catalogue es Cookbooks, lookbooks, etc Selective lifestyle advertising Hardware and flooring van ns Excellent kitchen planning g service 2012 Half Yearly Report 22
Slide 23: A proven and adaptable business model
A proven and adaptable bussiness model Reliable product Easy and quick to fit Rigid box Does not break Manufactured to consisten nt standards Meets legislation Environmentally sound Enhancing the builder’s reputation with his customers 2012 Half Yearly Report 23
Slide 24: A proven and adaptable business model
A proven and adaptable bussiness model Stable, focussed supply chain n Ownership and control of manufacturing process Well-invested, bespoke e facilities Specialised products exxclusive to Howdens Quality + availability Integrated systems sup pporting business processes • Manufacturing, wareehousing
Slide 25: A proven and adaptable business model
A proven and adaptable bussiness model Manufacturing efficiently at le east cost Improving productivvity and reducing waste Supporting margin Ensuring security off supply End Small Depot Distribution Manufacture Sourcing customer builder our own organisation 2012 Half Yearly Report 25
Slide 26: A proven and adaptable business model
A proven and adaptable bussiness model Efficient and effective depot model m Warehouse Trade counter Floorplan of a typical depot Staff outside Cleethorpes depot, 10,500 sq ft Rent c.£5 per square foot Opened January 2012 2012 Half Yearly Report 26
Slide 27: A proven and adaptable business model
A proven and adaptable bussiness model Local accountability Depot managers responsible for: • Local sales and margin • Hiring local staff • Local stock levels • Local marketing Manager and staff incentivised on local profit Focus on opening and trading new accounts Kettering depot 2012 Half Yearly R
Slide 28: Adapting to changing circumstances
Adapting to changing circum mstances 1995 – 2004 Established mo odel, rolled out to 300+ depots 2004 - 2006 MFI in i crisis i i 2005 - 2008 onstruction Corporate reco Disposal off MFI “Rough Dia amond” Unlocked ro oute to profit and value • Re-engiineered supply chain • Renewe ed systems • Resume ed
Slide 29: Adapting to changing circumstances
Adapting to changing circum mstances 2008 Economic crisis MFI collaps ll ses Legacy obligations Meanwhile, R id and Rapid d continuing ti i d development l t off H Howdens d from 2006 Product “fa amilies”, quality and design onwards L Lamona b brand d llaunched h d New system ms implemented U off BD
Slide 30: Continuous investment
Adapting to survive and thrivve Accelerating pace of change Continuous Constantly sophisticating New w product development market investment Ongoing product developm ment is critical to growth 2012 Half Yearly Report 30
Slide 31: Continuing to develop the business
Continuing to develop the bu usiness Opening new depots 517 depots d t now open • On track to open 20 in 20 012 F French h pilot il t continues ti 2 additional depots in 2012 O Opening i new accounts t 40,000 accounts opened in H1 • 17,000 17 000 net new accountss • 260,000 total credit accou unts N
Slide 32: Continuing to develop the business
Continuing to develop the bu usiness New depots do not cannibalise established ones • Portsmouth • Fareham Builders require “very local” • Minimal drive time • Gosport • Low cost of fit-out • Southsea • Low breakeven 0 1 2 miles • Responsive to market conditions Gosport p opened p in 2011 Local area
Slide 33: Continuing to develop the business
Continuing to develop the bu usiness New product 3 new kit kitchens h Filling in gaps • IIntegrated t t d Handle H dl was immediately successful on i t d ti introduction in 2011 Gloss Flint Grey Integrated Handle kitchen 2012 Half Yearly Report 33
Slide 34: Continuing to develop the business
Continuing to develop the bu usiness New product 3 new kit kitchens h Filling in gaps • B f d is Burford i an established best-seller, now available il bl iin 10 different finishes Burford Gloss Flint Grey kitchen 2012 Half Yearly Report 34
Slide 35: Continuing to develop the business
Continuing to develop the bu usiness New product N New cabinets bi t Tall wall units Concave curves Filling gaps in range Glendevon Flint Grey concave curve base unit 2012 Half Yearly Report 35
Slide 36: Continuing to develop the business
Continuing to develop the bu usiness New product 7 new worktops kt Square-edged N New materials t i l New trends Travertine ‘natural stone’ worktop 2012 Half Yearly Report 36
Slide 37: Continuing to develop the business
Continuing to develop the bu usiness New product 11 new sinks i k Complete range review Lamona round bowl sink and drainer 2012 Half Yearly Report 37
Slide 38: Continuing to develop the business
Continuing to develop the bu usiness New product H d Hardware “f “families” ili ” Easier to sell Elements of the Garda family 2012 Half Yearly Report 38
Slide 39: Continuing to develop the business
Continuing to develop the bu usiness Constant product review • Analysing sales £60m sales Continuous updating generated from • Monitoring trends / materia als product launched Introductions in the past year Discontinuations • Stock control The importance of new w product development 2012 Half Yearly
Slide 40: Continuing to develop the business
Continuing to develop the bu usiness Dedicated product testing facility Practical tests simulating real-life situations Our appliances must be: • No-call-back quality • Easy to sell • Easy to fit • Easy to use 2012 Half Yearly Report 40
Slide 41: Continuing to develop the business
Continuing to develop the bu usiness Building the Howdens brand Supporting the builder’s sale July y advertising g 2012 Half Yearly Report 41
Slide 42: Continuing to develop the business
Continuing to develop the bu usiness Building the Howdens brand Supporting the builder’s sale Third edition of successful cookbook 2012 Half Yearly Report 42
Slide 43: Continuing to develop the business
Continuing to develop the bu usiness Building the Howdens brand Supporting the builder’s sale Inspirational ‘lookbooks’ 2012 Half Yearly Report 43
Slide 44: Continuing to develop the business
Continuing to develop the bu usiness £20m investment at Runcorn and Howden H I t ll ti progressing Installation i tto plan l • Runcorn Phase 1 complete; starting production • Installing Howden Phase 1 Increasing capacity Improving productivity Supporting S ti Enhancing quality margin Increasing effi
Slide 45: Continuing to develop the business
Continuing to develop the bu usiness Ownership of our own first-class manufacturing facilities 750m Howden, East Yorkshire 2012 Half Yearly Report 45
Slide 46: Continuing to develop the business
Continuing to develop the bu usiness Highest safety awards for all 3 of our sites Runcorn Howden Northampton Runcorn, Cheshire 2012 Half Yearly Report 46
Slide 47: Howdens' approach to growth
Howdens’ approach to grow wth Continuous adaptation and measurement m Flexible organisation that can n act very quickly Process creates new opportu unities as business moves forward • Levers of opportunity inclu ude: – New depots – Maturing depots – Continuing use of BDP to clo ose gaps and improve
Slide 48: Howdens' approach to growth
Howdens’ approach to grow wth Clear strategy The true T Wholly focussed on Proven model v value of g growingg trade Cash generative H Howdens customer base o offer Many opportunities A robust business suited to an a uncertain environment 2012 Half Yearly Report 48
Slide 49: 2012 Half Yearly Report
2012 HALF YEARLY REPORT 19 Jully 2012