Headlam Group Plc · LSE:HEAD
Headlam — FY2022 Earnings Presentation
29 slides from Headlam's earnings presentation, March 2023
Slide 1: Final Results Presentation March 2023
The leading, most trusted experts in FINAL RESULTS PRESENTATION flooring March 2023
Slide 2: Agenda
AGENDA Chris Payne Chief Executive • About Us • 2022 Financial Performance • Growth Strategy • ESG Strategy • Board and Operational Team • Investments and Shareholder Returns • Post Year End and Current Trading 2
Slide 3: About Us
ABOUT US Long heritage, and strong foundations 30 years of operating Nationwide network excellence and operations • Knowledgeable and long • 67 national and regional serving colleagues (+2,200) businesses / brands to maximise reach and sales opportunity • Servicing a large and diverse trade customer
Slide 4: Financials 2022
2022 FINANCIALS
Slide 5: Financial Highlights
FINANCIAL HIGHLIGHTS Revenue Financial Results 2022 2021 % change Revenue £663.6m £667.2m -0.5% Gross margin 33.1% 33.0% +10bps Underlying1 expenses £180.8m £183.2m -1.3% Underlying1 operating profit £39.2m £37.3m +5.1% Underlying1 operating margin 5.9% 5.6% +30bps Underlying1 profit before tax £37.
Slide 6: Income Statement
INCOME STATEMENT Income Statement 2022 2021 Continuing operations £m % £m % Revenue 663.6 100.0% 667.2 100.0% • Revenue supported by new Cost of sales (444.1) (66.9)% (446.7) (67.0)% revenue development under the strategy, and product price Gross profit 219.5 33.1% 220.5 33.0% increases Distribution
Slide 7: Revenue Movement
REVENUE MOVEMENT Revenue Continuing operations £m % £m % 2021 Revenue: • Positive contributions from Continental Europe and UK 585.8 87.8 commercial sector offsetting Continental Europe 81.4 12.2 weak UK 667.2 100.0 • 5.4% uplift in Continental UK incremental items: Europe (France and the Netherland
Slide 8: UK Distribution Daily Sales
UK DISTRIBUTION DAILY SALES* • Strong overall recovery from impact of COVID-19 in H1 2020 • Commercial sector weak in both 2020 £ and 2021 following COVID-19, recovery in 2022 2,900K • Residential sector previously a beneficiary of COVID-19 due to 2,700K limited opportunities to spend 2,500K • Resid
Slide 9: Underlying Operating Profit Movement
UNDERLYING OPERATING PROFIT MOVEMENT • Underlying distribution costs and administrative expenses decreased by £2.4m Non- • Widespread operational cost inflation offset by efficiency Operating Profit Underlying underlying Total measures, including transport Continuing operations £m £m £m integration
Slide 10: Non-Underlying Items
NON-UNDERLYING ITEMS • In 2021 non-underlying impairment of £7.3m recognised Non-underlying items 2022 2021 following fire that destroyed Continuing operations £m £m Kidderminster distribution centre Impairment of goodwill and intangibles - 2.1 • £6.2m of insurance proceeds Amortisation of intangibl
Slide 11: Cash Flow Movement
CASH FLOW MOVEMENT 2022 2021 • Net cash outflow of £59.4m in the year. Cash Flow Movement £m £m • Includes £37.1m of shareholder Underlying EBITDA 57.9 56.4 returns Change in inventories (8.3) (26.6) • £27.3m dividend outflow Change in receivables (3.5) (16.6) (ordinary and special payments) Change
Slide 12: Balance Sheet
BALANCE SHEET • Strong balance sheet 2022 2021 underpinned by inventory, Balance Sheet £m £m property portfolio, and net funds position Property, plant and equipment 119.9 113.3 • Uplift in inventory partly due to Intangibles 17.8 18.1 price inflation Inventories 139.8 130.9 • UK freehold properties
Slide 13: UK Sterling Net Debt Daily Balances
UK STERLING NET DEBT DAILY BALANCES 13
Slide 14: Strategy and Operations
STRATEGY AND OPERATIONS
Slide 15: Growth Strategy
GROWTH STRATEGY Driving new revenue growth from a more efficient and modernised operating base Appealing to a wider base of Targeting and capturing an Improving and expanding Increasing efficiencies, and customers, beyond increased share of overall upon the customer service modernising the network t
Slide 16: Key New Revenue Growth Drivers
KEY NEW REVENUE GROWTH DRIVERS Multiple Retailers and Trade Products Digital Other Larger Customers Counters and Brands Strategy Ambition to add Actively targeting this Accelerating roll-out of Leveraging Headlam’s Enhanced digital and new revenue of segment where Headlam new and improved sites esta
Slide 17: Multiple Retailers and Larger Customers
MULTIPLE RETAILERS AND LARGER CUSTOMERS Overview Progress Good track record of servicing larger customers, but never actively Several new customers won including Homebase, builders targeted merchant, furniture retailer, a top 10 UK housebuilder Dedicated team assembled Successfully grown business wi
Slide 18: Trade Counters
TRADE COUNTERS Overview Progress Typical new trade counter site: Target of 90 invested* sites by end 2025, 53 uninvested sites in 2021 24 invested sites (5 new) • Town / conurbation, no physical presence Convenient, one-stop shop for all Demonstrating strong KPIs • Area with existing trade footfall,
Slide 19: Product and Brands
PRODUCT AND BRANDS Overview Progress Large portfolio of well recognised and regarded own product brands Over 30 product launches / relaunches in 2022 Branding an important point of differentiation New and affordable Everyroom brand launched in marketplace, typically higher margin in H2 2022 Refreshi
Slide 20: Digital Strategy
DIGITAL STRATEGY Overview Progress Important foundation for all revenue growth 26% of sales now coming from digital channels, 11% opportunities in 2019 Improves supplier and customer engagement Investment in core operating system and further systems integration Quick and effective automated informat
Slide 21: Melrose Interiors
MELROSE INTERIORS Overview Synergies Largest independent supplier to the UK online Introduces a number of new larger rug industry customers to Headlam Based in Bradford, trading for +50 years Headlam underweight in rug product Many larger customers, including major high category street and online re
Slide 22: ESG Strategy
ESG STRATEGY
Slide 23: ESG Strategy
ESG STRATEGY Well developed strategy to ensure stainability and long-term success Overview Environmental Social Governance Real opportunity from continuing Reducing environmental Making Headlam a great place Managing risk, with robust controls to progress the ESG Strategy impact and contribution to
Slide 24: Board and Operational Team
BOARD AND OPERATIONAL TEAM
Slide 25: Board and Operational Team
BOARD AND OPERATIONAL TEAM Board refreshed and enhanced, and significant operational capability added, all in support of delivery and oversight of the strategy Keith Edelman Chris Payne Stephen Bird Karen Hubbard Robin Williams Jemima Bird Adam Phillips Non-Exec Chief Senior Indep Independent Indepe
Slide 26: Investments and Shareholder Returns
INVESTMENTS AND SHAREHOLDER RETURNS
Slide 27: Investments and Shareholders Returns
INVESTMENTS AND SHAREHOLDERS RETURNS Investments Investment to improve the service proposition and support revenue growth Capital Allocation Priorities: Ongoing investment in sites, equipment and systems, with trade counters main capex 1 Maintain a strong balance sheet Investment to support ESG stra
Slide 28: Post Year End and Current Trading
POST YEAR END AND CURRENT TRADING
Slide 29: Post Year End and Current Trading
POST YEAR END AND CURRENT TRADING Post Year End Already delivering synergies with Melrose, Headlam’s existing rug operations transferred to Melrose and jointly targeting increased revenue opportunities Transport integration project (reducing commercial fleet and associated costs) completing April 20