Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — FY2015 Earnings Presentation
39 slides from Howden Joinery's earnings presentation, Feb 25, 2016
Slide 1: 2015 Preliminary Results
2015 PRELIMINARY RESULTS 25 February 2016
Slide 2: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 3: A very successful business
A very successful business 8,000+ full-time employees 8m sq.ft. of space • 2 factories • 1 national distribution centre • 623 depots c.60 kitchen ranges, c.8,000 SKUs Sales 360,000+ nett monthly accounts Profit Cash Supporting local communities Investing in growth opportunities 2015 Preliminary Resu
Slide 4: Mark Robson, Deputy CEO and Chief Financial Officer
Mark Robson Deputy CEO and Chief Financial Officer
Slide 5: Business developments
Business developments • 30 new depots • Investment in product, including 20 new kitchen ranges plus granite and branded appliances trials • Supply – investment in resilience and capacity • 7 depots in northern France, and larger outlets in Holland and southern France opened 2015 Preliminary Results
Slide 6: Highlights
Highlights Revenue, £m Operating profit, £m, and margin, % Uses of ‘cash’, £m HJ UK Cont Europe 250 Pension def Cap ex Dividend Share rep 1250 1220.2 200 225 18.2% 16.4 175 1200 45.3 221.9 150 795.1 1203.8 200 125 59.9 1150 17.4% 100 41.0 189.8 75 45.9 1100 1090.8 175 50 32.8 15.3 1075.5 25 45.0 35.
Slide 7: Revenue
Revenue 2015 UK depot revenue £1,203.8m • total +11.9% • LFL +9.2% 2015 Cont’l Europe depot revenue £16.4m • underlying sales in original French depots up 4% 2015 Preliminary Results 7
Slide 8: Profit before tax (continuing operations)
Profit before tax (continuing operations) Group gross profit margin ● 2015: 64.3% ● 2014: 63.7% Gross £m profit Profit before tax £m 89.9 Volume & mix Gross profit (revenue) 110 Change £89.9m Currency Change 10 784.4 £30.8m Volume & mix Cost (COGS) pressure/ 219.6 (44) savings, Operating Interest, e
Slide 9: Operating costs
Operating costs Operating Change costs £57.8m £m Growth Other related 5 562.5 16 Older depots 24 New depots 13 504.7 • 2014 2015 2015 Preliminary Results 9
Slide 10: Income statement
Income statement * Continuing operations, £m 2015 2014 Revenue 1220.2 1090.8 Cost of goods sold (435.8) (396.3) Gross profit 784.4 694.5 Operating costs (562.6) (504.7) Operating profit 221.9 189.8 Net interest (2.3) (1.0) Profit before tax 219.6 188.8 Tax (44.2) (40.1) Profit for the period 175.4 1
Slide 11: Earnings per share and dividend
Earnings per share and dividend £m 2015 2014 Earnings per share before exceptional items • from continuing operations 27.3p 23.2p Dividend • final (recommended) 7.1p 6.5p full year 9.9p 8.4p • 2015 final dividend costing £45m 2015 Preliminary Results 11
Slide 12: Net cash and cash flow
Net cash and cash flow £m 2015 2014 Opening net cash 217.7 140.5 Operating cash flows before movements in working capital 251.9 217.4 Working capital (19.2) (1.2) Capital expenditure (45.9) (32.8) Tax paid (35.3) (30.3) Dividends (59.9) (41.0) Share repurchases (45.3) - Pension contribution (39.1) (
Slide 13: Working capital
Working capital • Working capital up £19m – stock up £34m – debtors down £4m – creditors up £11m 2015 Preliminary Results 13
Slide 14: Return of excess cash to shareholders
Return of excess cash to shareholders • February 2015: £70m share repurchase programme announced – £45m returned in 2015 – along with ordinary dividend payments, 2015 shareholder payments totalled £105m • £25m still to be returned in 2016 (‘old’ excess cash) • £55m ‘new’ excess cash – to be returned
Slide 15: Pension scheme deficit
Pension scheme deficit £m IAS19 basis Current service Net charge interest 18 4 143 Contribution Change (57) £94m Asset returns 6 49 Net discount rate (65) • Dec Dec 2014 2015 2015 Preliminary Results 15
Slide 16: Current trading and outlook for 2016
Current trading and outlook for 2016 • Sales in first period two periods up 7.1%* • Expectations unchanged • Things to note: – additional operating costs: continental Europe, warehousing, depreciation (£15m) – increased capital expenditure (£75m) – currently weaker exchange rate • Will take timely a
Slide 17: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 18: Worthwhile for all concerned
Helping others to do well Future staff Apprentices Current staff Pensioners Builders Worthwhile for Suppliers all concerned Tenants Investors Landlords Homeowners Local communities 2015 Preliminary Results 18
Slide 19: Focused on the needs of the small builder
Focused on the needs of the small builder Trade counter Everything in stock Familiar faces Experienced staff • Knowledge • Advice • Authority A physical hub that offers practical help 2015 Preliminary Results 19
Slide 20: An in-stock, manager-driven business
An in-stock, manager-driven business Manager is in charge: • Customer relationships • Staff • Stock levels • Display • Storage • Local marketing • Local P&L Incentivised to deliver better service 2015 Preliminary Results 20
Slide 21: The value of an account with Howdens
The value of an account with Howdens Security for the builder • Cash flow • Margin • Can get paid before he needs to pay us • Product is robust • Can swap items • Everything is local We support the builder’s livelihood 2015 Preliminary Results 21
Slide 22: A proven model that allows reliable service
A proven model that allows reliable service Local Stock manager absolute autonomy Success at scale Pricing Quality More choices confidential discount no-call-back More opportunities Trade Supply More challenges only guaranteed Range well-designed 2015 Preliminary Results 22
Slide 23: Investing in four main areas
Investing in four main areas 1 Things that 2 New ways of become old or doing things need to be retired 3 Disaster recovery 4 Capacity at scale to ensure to meet growth availability aspirations Managing scale AND complexity 2015 Preliminary Results 23
Slide 24: Plenty of room for more depots
Plenty of room for more depots Currently 623 depots • 30 depots opened in 2015 • Plan to open c.30 depots in 2016 • Scope for up to 800 depots Low cost • c.10,000 sq.ft • Rent c.£5.50 / sq.ft • Fit out c.£280,000 • Breakeven point c.£650,000 Opened in 2015 2015 Preliminary Results 24
Slide 25: Improving service and depot performance
Improving service and depot performance More planners, sales reps, managers, etc. Better products More tools More training Better systems Highly incentivised and looking after the builder 2015 Preliminary Results 25
Slide 26: Investing in new product development
Investing in new product development Granite worktops Premium cabinet Branded appliances Joinery Connected kitchens Continuous testing 2015 Preliminary Results 26
Slide 27: Investing in new product development
Investing in new product development Granite worktops Premium cabinet Branded appliances Joinery Connected kitchens Continuous testing 2015 Preliminary Results 27
Slide 28: Investing in new product development
Investing in new product development Granite worktops Premium cabinet Branded appliances Joinery Connected kitchens Continuous testing 2015 Preliminary Results 28
Slide 29: Investing in new product development
Investing in new product development Granite worktops Premium cabinet Branded appliances Joinery Connected kitchens Fast Fit V-Groove flooring Linear Oak glazed door Continuous testing 2015 Preliminary Results 29
Slide 30: Investing in new product development
Investing in new product development Granite worktops Premium cabinet Branded appliances Joinery Connected kitchens Continuous testing 2015 Preliminary Results 30
Slide 31: Ongoing tests in continental Europe
Ongoing tests in continental Europe Continuing progress in France • Depot profitability improved • 20 depots now open, including two large-format test depots in Lyon and Marseille Further trials under way • 2 depots opened in Belgium • 1 depot opened in Holland • 1 depot to open in Germany Depots at
Slide 32: Looking after the builder
Looking after the builder Understanding the builder’s lifestyle • In stock means never letting the builder down • The importance of no-call-back quality • Howdens culture and values = service • Profit share and incentives • Speed of recovery The builder’s reputation is our reputation 2015 Preliminar
Slide 33: Investing in the future of supply
Investing in the future of supply Guarantee an uninterrupted supply of product to depots Flex up for peak October trading period A special business with a special supply chain • Only one customer • Manufacture our own cabinets • Value our people Planning our capacity and capability for the future •
Slide 34: Investing in the future of supply
Investing in the future of supply • The first stage of development at Raunds: our 650,000 sq. ft. warehouse under construction • Complete for Q4 2016 2015 Preliminary Results 34
Slide 35: Investing in the future of service
Investing in the future of service Exceptional service is the cost of being Howdens • Property – increasingly local depots • People – new staff, Howdens culture • Stock – right stock at right price • Debtors – bad debt <1% of sales NO bottlenecks • Capex – supply and infrastructure Investing for a o
Slide 36: The builder is our brand
The builder is our brand Help the builder Resource the builder Resource our staff 2015 Preliminary Results 36
Slide 37: Howdens is a successful, balanced business…
Howdens is a successful, balanced business… … investing in sensible things and prepared for opportunities as well as threats • Lowest cost of production • Flexible production • Low depot breakeven point • Focused on RMI market • Growing trade account base 2015 Preliminary Results 37
Slide 38: Our mission is our model
Our mission is our model To supply from local stock nationwide the small builder’s ever-changing, routine, integrated kitchen and joinery requirements, assuring best local price, no-call-back quality, and confidential trade terms 2015 Preliminary Results 38
Slide 39: 2015 Preliminary Results
2015 PRELIMINARY RESULTS 25 February 2016