Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — FY2010 Earnings Presentation
37 slides from Howden Joinery's earnings presentation, Mar 3, 2011
Slide 1: 2010 Preliminary Results
2010 Preliminary Results 3 March 2011
Slide 2: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 3: 2010: Howdens moves forward
2010: Howdens moves forward Sales up by 5% Gross profit margin up by 3.6 percentage points 27 new depots opened 20,000 net new accounts 12 new kitchen ranges Increased range of appliances Improved product quality Continued to invest in manufacturing and systems Created 350 new jobs 3
Slide 4: Mark Robson, Chief Financial Officer
Mark Robson Chief Financial Officer
Slide 5: Context of financial results
Context of financial results • Good performance in gross margin, operating profit and operating cash flow • Cash flow finances legacy issues • Legacy property portfolio continues to diminish • No exceptional items or discontinued operations 5
Slide 6: Highlights
Highlights Revenue, £m Operating profit, £m Net cash/(debt), £m HJ UK France Other 25 35.0 110 820 107.4 2008 100 2.4 807.9 0 805.7 11.1 800 11.1 12.8 90 2009 2010 11.7 795.1 -25 80 780 79.5 782.9 769.5 70 75.9 -50 760 12.0 60 756.4 (61.2) 740 50 -75 2008 2009 2010 2008 2009 2010 HJ UK: +5.1% Uses o
Slide 7: Howdens revenue
Howdens revenue 2010 revenue £795.1m • total +5.1% • LFL +3.6% % change 10 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2010 -5 -10 7
Slide 8: Profit before tax
Profit before tax Group gross profit margin ● 2010: 59.8% ● 2009: 56.2% £m £m Gross Change Depot profit Change Gross profit Margin, £50.9m 50.9 £32.2m etc 27.9 483.0 Interest, etc 4.3 100.9 COGS Operating savings Volume & 9.7 costs mix (23.0) 13.3 68.7 432.1 • • 2009 2010 2009 2010 8
Slide 9: Operating costs
Operating costs Operating costs £m Change £23.0m Other Other - 4.5 375.8 growth 7.5 Older depots 5.3 New depots 5.7 352.7 • 2009 2010 9
Slide 10: Income statement
Income statement £m 2010 2009 Continuing operations: Profit before tax 100.9 68.7 Tax (34.0) (18.5) Profit after tax before exceptional items 66.9 50.2 Exceptional items before tax - (0.1) Tax - - Profit from continuing operations 66.9 50.1 Discontinued operations: Exceptional items before tax - (4.
Slide 11: Net cash/borrowings and cash flow
Net cash/borrowings and cash flow £m 2010 2009 Opening net cash/(borrowings) 2.4 (61.2) Operating cash flows before movements in working capital 127.0 97.2 Working capital 3.4 46.8 Capital expenditure (18.2) (8.1) Asset disposals 0.3 1.2 Interest (net) (1.0) (2.9) Tax paid (16.0) (5.0) Legacy proper
Slide 12: Working capital
Working capital • Working capital down £3.4 m – stock up £19.2m – debtors down £0.4m – creditors up £22.2 m 12
Slide 13: Reducing our legacy property liabilities
Reducing our legacy property liabilities Number of £31m 100 properties 80 £24.5m 60 £18m 40 £12m £11m £11m 20 £6m £4.5m £0.5 m 0 Oct-06 Dec-08 Dec-09 Dec-10 Mar-11 Dec-11 Dec-14 Dec-19 Dec-24 12 legacy property deals in 2010: £19.4m exit cost - £75m liability extinguished 3 legacy property deals
Slide 14: Pension scheme deficit
Pension scheme deficit £m Discount Finance rate & other charge assumptions 5 26 IAS19 basis Asset returns (2) 196 Deficit funding (25) Change £60m 136 CPI (64) • Dec Dec 2009 2010 14
Slide 15: Current trading and outlook for 2011
Current trading and outlook for 2011 • Sales in first two periods1 of 2011 up 14.2% (LFL +11.6%) – material impact of cold weather at start of 2010 – benefit from initiative to capitalise on busy post-Xmas non-trade kitchen market – estimate underlying growth of around 5% • Plan to open 30 new depot
Slide 16: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 17: Howdens' mission
Howdens’ mission “To supply from local stock, nationwide, the small builder’s ever-changing routine joinery/kitchen requirements, assuring no call back quality and best local price” 17
Slide 18: The key features of Howdens
The key features of Howdens Cash-generative Focused entirely Market-beating A defining on the Vertically functioning culture small builder Low-cost Growth prospects 18
Slide 19: The importance of cash generation
The importance of cash generation Over £30m net cash inflow after legacy payments 19
Slide 20: Successful depot openings
Successful depot openings 27 new depots opened in 2010 489 total depots Locally managed Locally staffed Locally incentivised New depots opened in 2010 20
Slide 21: Active management of trade accounts
Active management of trade accounts Focus on opening trade accounts 20,000 net new accounts 200,000 active credit accounts Accounts closed after 15 months of inactivity Limited exposure to any one customer Cost of managing accounts, including bad debts = 1.5% of sales 21
Slide 22: Supplying what the small builder wants
Supplying what the small builder wants Well designed Easy to sell Attractive Good quality Robust Relevant Available Credit terms Well-priced 22
Slide 23: The builder serves all parts of the market
The builder serves all parts of the market New build Repair Maintenance Improvement Big builders Landlords Retail 100,000 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 w
Slide 24: New product introduced in 2010
New product introduced in 2010 12 new kitchens Product families Standardised range content Improved cabinetry Waste solutions Worktops Appliances Joinery & hardware Flooring Leading and influencing the market 24
Slide 25: An effective operation
An effective operation Raw Low cost Efficient Consistent materials manufacturing distribution availability Reliable, scalable systems New manufacturing & warehouse management systems Improved stock accuracy Market-leading kitchen design software Sophisticated information systems 25
Slide 26: A vertically functioning business
A vertically functioning business • Continuing to benefit from ownership of manufacturing – Source of competitive advantage • Monitoring further opportunities to improve access to LCP – Enhanced margin opportunities • Ensuring low cost and availability – Underpins value to builder 26
Slide 27: Howdens is not a retail business
Howdens is not a retail business High Street rents National advertising Delivery costs Fitters NO 7-day working Showrooms Stock write-off Stock loss 27
Slide 28: The Howdens road to growth
The Howdens road to growth More of the same More trade accounts More depots Scope for at least 650 depots in all areas Long maturity profile offers further opportunities Sales per head Margin Accounts 28
Slide 29: Extending the "families" concept
Extending the “families” concept Matching product Joinery doors Architrave Skirting Hardware 29
Slide 30: Developing Lamona, our own brand
Developing Lamona, our own brand Encouraging results from new appliance packs + or + 30
Slide 31: The Lamona roadshows
The Lamona roadshows Selling a competitive product with confidence Margin opportunity for the builder Chef John Topham with the basic Lamona oven 31
Slide 32: Extending our appliance ranges in 2011
Extending our appliance ranges in 2011 Taps Sinks Lighting Worktops Flooring Waste 32
Slide 33: Principles of new product introduction
Principles of new product introduction Is it wanted and needed in the home? How does it help the builder? Price Is it easy for him to sell and fit? Availability Does it help him make money? Quality How does it complement our existing product? Choice Can we guarantee consistent: Quality? Knowledge Av
Slide 34: Further opportunities to enhance value
Further opportunities to enhance value Use cash to eliminate legacy Strengthen position of business as it emerges from restructuring Continuing to invest to secure growth Understand why focus on builder has proved so successful Any other areas must possess similar margin and cash characteristics 34
Slide 35: Howdens' culture is the key to continuing growth
Howdens’ culture is the key to continuing growth Each individual is important Everyone must be clear about the objective Everyone is motivated to achieve it Everyone is allowed to work out the best way of doing so Networks of partnerships harnessed to drive growth 35
Slide 36: Summary
Summary Design Quality Supply efficiencies Service Margin development Availability 36
Slide 37: 2010 Preliminary Results
2010 Preliminary Results 3 March 2011