Grafton Group PLC · LSE:GFTU
Grafton — H1 2010 Earnings Presentation
35 slides from Grafton's earnings presentation, 2010
Slide 1: Interim Results 2010
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Slide 2: Profile
Profile UK and Ireland based Building Materials Group Principal activities Builders and Plumbers Merchanting (No. 1 in ROI, No. 4 in UK) DIY Retailing in Ireland (No. 1 in ROI) Dry Mortar Manufacturing (No. 1 in UK) Annualised turnover circa €2 billion Market leader or strong market po
Slide 3: Group Locations
Group Locations g Builders Merchanting Plumbers Merchanting Manufacturing DIY Retailing 2
Slide 4: Interim Reporting Comments
Interim Reporting Comments Demand fundamentals for Grafton Groups lower cost base and spare UK Merchanting – particularly in capacity means well placed to benefit RMI market remain strong. from cyclical growth and development opportunities as they arise. H1 2010 Improving turnover trends in H1 Irish
Slide 5: Interim Financial Highlights - 2010
Interim Financial Highlights - 2010 H1 2010 H1 2009 Turnover €979m €990m EBITDA €40.9m €25.8m Operating profit / (loss) €14.8m (€8.3)m Profit before tax €13.4m €3.7m Basic EPS 5.6c 1.5c Free cash flow €56m €91m Rationalisation costs €2.9m €9.1m Annualised cost savings €88m 4
Slide 6: Segmental Turnover Analysis H1 2010 v H1 2009
Segmental Turnover Analysis H1 2010 v H1 2009 Operating Segments Total Group • Merchanting revenue marginally lower in H1 2010. Manufacturing • DIY & Manufacturing 7% DIY lower. • Group revenue down 1% to Merchanting €0.98 bn. UK Merchanting • Growth returns to UK Merchanting Irish Merchanting 6 Mon
Slide 7: Group Operating Result– H1 2010
Group Operating Result– H1 2010 Period H1 2010 H1 2009 €m €m Operating profit before adjustments (below) 23.9 2.0 Property profit - 6.1 Restructuring costs (2.9) (9.1) Operating profit / (loss) after restructuring costs 21.0 (1.0) Central activities (5.1) (6.2) Intangible amortisation (1.1) (1.1) Gr
Slide 8: Operating Result by Segment – H1 2010
Operating Result by Segment – H1 2010 Period H1 2010 H1 2009 Segment Merchanting Retail Manufacturing Merchanting Retail Manufacturing €’M €’M €’M €’M €’M €’M Segment operating profit 27.4 (1.2) (2.3) 12.8 (0.6) (4.1) /(loss) Restructuring costs (2.9) - - (7.9) (0.3) (0.9) Segment operating profit 2
Slide 9: Management Initiatives – providing positive operating improvements
Management Initiatives – providing positive operating improvements in 2010 & going forward Head count reduction Overhead cost reduction Overhead Management Integration / re-organisation Debtor management Cost Reduction Working capital management Cash conversion Cash Generation Customer
Slide 10: Improving Trends Identified
Improving Trends Identified Return to like for like sales growth in UK Merchanting and Manufacturing sectors Irish Merchanting tending towards breakeven (loss €0.5m) Strong cash generation Free Cash Flow of €56m for the half year €330m in available liquid cash deposits Overheads €22.6m l
Slide 11: Cash Generation
H1 2010 Full Year Cash Generation 2009 € million € million Operating profit (before restructuring costs) 18 24 Restructuring costs (3) (19) Operating profit 15 5 Depreciation, amortisation & other 26 59 Investment profit realised in cash - 22 Proceeds on asset disposals 2 13 Total cash inflow 43 99
Slide 12: Reducing Net Debt
Reducing Net Debt € 584m € 551m € 550m Net Debt Strengthened balance €436m sheet €322m Sustained reduction in €281m gearing & net debt Good liquidity, positive free cash flow and high cash deposits 2005 2006 2007 2008 2009 2010 Debt reduced by €269m (June) since December 2007 or 49% Year 200
Slide 13: Components of Change
Components of Change Turnover Operating profit / (loss) €’million €’million 2009 990 (8) Organic change - Merchanting (19) 17 Organic change - DIY (9) (-) Organic change - Manufacturing (2) 2 2009 acquisitions - Merchanting 2 - 2010 acquisitions - Merchanting - - New branches 09 &10 & discontinued –
Slide 14: Benefits of Cost Reduction Initiatives – reflected in Results
Benefits of Cost Reduction Initiatives – reflected in Results Total headcount reduced by further 100 in 1st half of 2010 to 9,200. (Total reduction since 1st January 2008 is approx 2,900 employees) €80m achieved in 2009 with a further €22.6m achieved up to June 2010 Tight overhead & margin man
Slide 15: Rationalisation Costs and Benefits
Rationalisation Costs and Benefits Restructuring Cost Benefit Staff Reductions – 30 months to June 30 months to June 2010 per annum 2010 €’ millions €’ millions Employee Changes Payroll Savings per annum Numbers € millions UK 9 49 -1,541 42 Ireland 25 39 -1,324 37 34 88 -2,865 79 Annual Payroll Cost
Slide 16: Working Capital Trends
Working Capital Trends 2007 2008 2009 2010 H1 €’m €’m €’m €’m Stock 386 331 265 288 Debtors 536 354 307 354 Creditors (490) (417) (387) (464) Total 432 268 185 178 164 83 7 Exchange & other items (56) 11 14 Net year on year reduction 108 94 21 2 Yr Total Reduction to Dec 2009 €202m or 47% 15 30 Mont
Slide 17: Top 10 Debtors in UK and Ireland
Top 10 Debtors in UK and Ireland Ire Ire UK UK Total in Jun 10 Jun 09 Jun 10 Jun 09 Euro €’000 €’000 £’000 £’000 1 887 1,318 1,190 961 2 807 1,161 521 595 3 722 820 449 434 4 631 655 411 430 5 488 584 401 416 6 391 478 370 373 Only one account exceeds €1m across 7 382 462 339 353 the Group at June 8
Slide 18: Other Actions taken to Improve Cash Position
Other Actions taken to Improve Cash Position H1 Year Year 2010 2009 2008 Capital expenditure €5.8m €12.4m €78.6m Acquisition /investment spend €1.3m €6.9m €28.1m 17
Slide 19: Gross Margin Remains Consistent. Gross Margin Management
Gross Margin Remains Consistent. Gross Margin Management Financial 2005 2006 2007 2008 2009 2010 H1 Year Gross 31.5% 32.3% 32.7% 32.3% 31.6% 31.6% Margin Financial Year H1 2010 H1 2009 Gross Margin 31.6% 31.4% 18
Slide 20: Operating Margin History (Core – before central costs)
Operating Margin History (Core – before central costs) Year UK ROI Group 2000 5.9% 12.7% 8.4% 2001 6.3% 13.1% 8.6% 2002 7.0% 12.2% 8.5% 2003 7.3% 13.0% 8.7% 2004 7.8% 13.1% 9.1% 2005 6.9% 10.7% 8.4% 2006 6.7% 11.3% 8.6% 2007 7.3% 10.8% 8.7% 2008 4.5% 5.5% 4.9% 2009 3.2% -1.7% 1.6% 2009 (H1) 1.9% -3.
Slide 21: Quarterly Turnover Trends 2009 - 2010
Quarterly Turnover Trends 2009 - 2010 Quarterly Turnover 600 Millions 500 400 300 Quarterly Turnover 200 100 0 Q1 Q2 Q3 Q4 Q1 Q2 2009 2009 2009 2009 2010 2010 Return to Modest Growth in Q2 2010 20
Slide 22: Merchanting Like for Like Revenue Year to July 2010
Merchanting Like for Like Revenue Year to July 2010. 10.00% 5.00% 0.00% -5.00% Sterling Merchanting -10.00% Euro Merchanting -15.00% Group Merchanting -20.00% -25.00% -30.00% Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Merchanting L-for-L Trends improving across all markets. 21 *Like for like s
Slide 23: Bank Covenants
Bank Covenants Bank Covenants Current Net worth as defined €750m €1,063m Gearing 85% 26% Debt €’Million Minimum EBITDA / Interest Ratio Bank Debt 488 Year To 12 Months To US Loan Notes & other 123 31/12/10 * 1:1 30/6/11 Cash (330) 31/12/11 2:1 30/6/12 Net Debt 281 31/12/12 3:1 30/6/13 *Current EBITD
Slide 24: Pro-forma Net Debt Position and Maturity re-stated post re-financing
Pro-forma Net Debt Position and Maturity re -stated post re-financing 2010 2009 € million €’million Debt Maturity Gross debt 611 624 Cash (330) (302) 375 €'Millions Net debt 281 322 300 225 Gearing 29% 35% 150 Gross debt maturities – 75 calender year ** 0 2010 53 99 2011 150 330 2012 85 149 2013 –20
Slide 25: Outlook
Outlook UK Overall outlook in UK has improved Demand fundamentals for Group exposure to UK RMI market attractive Ireland Tentative recovery to take hold, modest growth expected in 2011 Positive spending patterns among consumers emerging Group Improving trends in turnover evident during H1
Slide 26: Principal Brands – UK and Northern Ireland
Principal Brands – UK and Northern Ireland 25
Slide 27: Principal Brands – Irish Merchanting and Manufacturing
Principal Brands – Irish Merchanting and Manufacturing 26
Slide 28: Irish Merchanting
*Heiton Buckley CHADWICKS BUILDERS MERCHANTS Irish Merchanting
Slide 29: Irish DIY Retail Brands
There’s no better buy in DIY ift}hOUse AT THE PANELLING CENTRE 28
Slide 30: Irish DIY Retail Brands
Wioodie’s DIY APACER IS Irish DIY Retail Brands Pa non 29
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Slide 32: CPI EuroMix
CPI 3 Eu romMix
Slide 33: Estimated UK Merchanting League Table
Estimated UK Merchanting League Table Circa 2,000 independents 3rd Largest Builders Grafton Merchant 10% 18% 39% Jewson 15% 19% Wolseley Sector Turnover £12 billion plus Travis Perkins Independents £4.6 billion plus (excluding Wickes) 32
Slide 34: Comparison of DIY Store Sizes in the Republic of Ireland
Comparison of DIY Store Sizes in the Republic of Ireland 1,800,000 Total 2.57 m sq ft Total 2.59 m sq ft. Total 2.4 m sq. ft. Total 2.5 m sq. ft. 1,600,000 Total 2.2 m sq. ft. 1,400,000 1,200,000 Total 1.5 m sq. ft. Total 1.2 m 1,000,000 sq. ft. 800,000 600,000 400,000 200,000 0 2003 2004 2005 2006
Slide 35: For Further Information
For Further Information Michael Chadwick Executive Chairman Colm ó Nualláin Finance Director Leo Martin Chief Operating Officer Charles Rinn Group Financial Controller / Secretary Address: Grafton Group plc, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18 Telephone: 353 1 216 0600 F