Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — FY2021 Earnings Presentation
66 slides from Howden Joinery's earnings presentation, Feb 24, 2022
Slide 1: 2021 Full Year Results
2021 Full Year Results 24 February 2022
Slide 2: Andrew Livingston, Chief Executive Officer
Andrew Livingston Chief Executive Officer
Slide 3: A successful year for Howdens
A successful year for Howdens • Record Sales & Profit, exceptional trading conditions • Sales increase v 2019 trending upwards across year • Improved profitability Profit increased at a higher rate than revenues • Progressed our strategic plans for the business and our ESG agenda • Strong cashflow
Slide 4: Strength of our in-stock model founded on local relationships
Strength of our in-stock model founded on local relationships in exceptional market conditions Performance reflects: • Combination of strong product line-up, high stock availability & very engaged team • Plus strategic investments and 2020 measures to support our customers • Serviced heightened dema
Slide 5: Strength of in-stock model
Strength of in-stock model • Repeated 2020 “P21” approach to peak trading • P21 Sales exceeded initial expectations • Record results in both periods (P10 and P11) • Momentum maintained in P12 & P13 versus tough comparators • Successfully navigated dual challenges of sharp demand rises and stock shor
Slide 6: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 6
Slide 7: Paul Hayes, Chief Financial Officer
Paul Hayes Chief Financial Officer
Slide 8: Record growth in revenue and operating profit
Record growth in revenue and operating profit £m 2021 2020 2019 * • Differentiated service and industry leading stock Revenue 2,093.7 1,547.5 1,583.6 availability Gross profit 1,289.0 930.0 986.2 • Above market revenue growth: Gross margin % 61.6% 60.1% 62.3% + 35% on 2020 Operating costs (887.3) (7
Slide 9: Revenue growth
Revenue growth Actual Growth vs • UK very strong underlying 2021 2020 2019 growth and benefit of new and revamped depots UK Revenue £2,043.3m 35.4% 31.8% Same depot basis 33.7% 26.8% • Record P21 performance Number of depots 778 748 732 • Encouraging sales in higher priced kitchen ranges Internation
Slide 10: 2 year comparison of profit before tax 2021 vs 2019
2 year comparison of profit before tax 2021 vs 2019 Group gross profit margin 2019: 62.3% 2021: 61.6% £m Price (revenue) Volume / mix Sales increase • Strong volume growth +91 Change Product cost £129m pressure / • Disciplined pricing saving etc • Investment in operating costs to support additional
Slide 11: 2 year comparison of operating costs 2021 vs 2019
2 year comparison of operating costs 2021 vs 2019 Change Other £161m £m costs Operating costs include: International growth Digital / Commercial • New UK depots Warehouse & Transport Non-repeat benefit of • Higher activity levels in Existing depots European existing depot network closures & incl. he
Slide 12: Strong cashflow with investments in inventory
Strong cashflow with investments in inventory £m 2021 2020 • Working capital movements: Stock £(47)m Opening cash 430.7 267.4 Debtors £(39)m Creditors £ 84m Operating cash flows* 530.7 313.6 Working capital (1.7) 70.3 • Investment in stock to support customer service Capital expenditure (85.9) (69.7
Slide 13: Capital allocation
Capital allocation Investing in organic growth in line Progressive and sustainable ordinary with the strategy dividend growth through the cycle 1 2 Significant shareholder value creation 4 3 Return surplus cash to shareholders Modest investment in adjacencies e.g. solid work surfaces - Distribute ca
Slide 14: Earnings Per Share and Shareholder Returns
Earnings Per Share and Shareholder Returns 2021 2020 2019 • Earnings per share 53.2p 24.9p 35.0p • Share buybacks £50.0m £9.8m £55.2m • Dividend paid £133.6m - £70.6m • Interim dividend pence per share 4.3p - 3.9p • Final dividend pence per share 15.2p 9.1p - • Special dividend pence per share - 9.1
Slide 15: Current Trading and Summary
Current Trading and Summary Revenue growth Periods 1-2 Periods 1-2 adj* % LFL% % LFL% UK depots 17.1% 15.6% 19.5% 18.0% International depots** 21.4% 18.9% * compared with 2021 which had 38.5 trading days, 1 more than 2022 in the UK, trading days are the same in Continental Europe in both 2021 and 20
Slide 16: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 16
Slide 17: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 17
Slide 18: Extending the UK footprint
Extending the UK footprint – High service levels valued by customers • Cost effective updated format • 31 depots opened in 2021 • Testing new smaller sized format (increase site options & for local infills) • Potential for at least 950 depots in the UK, plan to open circa 25 in 2022 18
Slide 19: Converting more existing depots to the updated format
Converting more existing depots to the updated format • Focus on older depots with most incremental sales potential • Positive feedback from depot teams and customers • 62 Depots revamped in 2021 (103 in total) • Average cost per depot of £225k going forward • Investment to be recouped in less than
Slide 20: New format depots and re-racked depots
New format depots and re-racked depots End 2021 : Total UK Depots in New Format &/or Re-racked 350 350 325 300 300 275 250 250 225 210 200 200 175 150 150 125 98 100 100 75 50 107 103 50 25 0 0 New Depots Existing Depots New Format Depots Re-Rack Only * End 2022 : Total UK Depots in New Format &/or
Slide 21: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 21
Slide 22: NPI is a significant contributor to our competitive position
“NPI“ is a significant contributor to our competitive position • Product lifecycles shortening • Customers expect new product from us • 17 new kitchen ranges in 2021 • More emphasis on higher priced kitchens • Making most popular styles accessible to all budgets • New product sales much higher than
Slide 23: Benefitting from alignment of business teams and better planning
Benefitting from alignment of business teams and better planning • Improved range performance and rhythm of product launches • Pre-Christmas launch of brochure, trade book and promotional materials • 2021 Ranges in stock four weeks earlier than 2020 • Similar approach for 2022 • Aligned Rooster prom
Slide 24: Disciplined range management for best availability and profitability
Disciplined range management for best availability and profitability • Re-organised range architecture and removed duplications in recent years • Plus improved balance between introductions and discontinuations • More efficient way of testing new kitchen colours and finishes adopted • 2022 line-up i
Slide 25: New product for 2022 features new kitchens
New product for 2022 features 20 new kitchens 25
Slide 26: New entry priced Shaker family, Witney
New entry priced Shaker family, Witney Witney Dove Grey 26
Slide 27: New colours for timber Shaker families
New colours for timber Shaker families Chilcomb In-Frame Reed Green 27
Slide 28: New colours for timber Shaker families
New colours for timber Shaker families Chilcomb Charcoal 28
Slide 29: New colours for timber Shaker families
New colours for timber Shaker families Elmbridge Sage Green & Porcelain mix 29
Slide 30: New In-Frame solution
New In-Frame solution Elmbridge In-Frame Pebble 30
Slide 31: Refreshed look for our most successful families
Refreshed look for our most successful families 31
Slide 32: Market-leading product introductions in other categories
Market-leading product introductions in other categories 32
Slide 33: Using XDCs to facilitate high stock availability
Using XDCs to facilitate high stock availability 33
Slide 34: XDC: Rebalancing stock levels and delivery pattern of some lines
XDC: Rebalancing stock levels and delivery pattern of some lines • More warehouse space to faster selling lines • Simpler and more efficient for depots to: deliver superior service improve product availability • Frees up time and resources spent on stock management • Using third party logistics
Slide 35: Protecting our in-stock offer against supply chain disruption
Protecting our in-stock offer against supply chain disruption • Increased levels of safety stock and back-up sources of supply • Policy retained for 2022 • “DR” manufacturing capacity utilised for peak trading • Significant engagement with Supply base 35
Slide 36: Make or buy to improve cost, supply chain resilience and flexibility
Make or buy to improve cost, supply chain resilience and flexibility Runcorn – 25 acres Howden – 75 acres 36
Slide 37: Making more doors for our kitchen ranges
Making more doors for our kitchen ranges • Investment to make Hockley kitchen doors in 2019 • Frontal capability broadened with investment in a new facility at Howden site • Operational in 2nd Half 2022 37
Slide 38: Increased architrave & skirting capability ready July 2022
Increased architrave & skirting capability ready July 2022 38
Slide 39: New solid surface capabilities, a growing market segment
New solid surface capabilities, a growing market segment • Acquired assets of a UK fabricator to create Howdens Work Surfaces • Factory operational in April 2021, original capacity now fully utilised 39
Slide 40: Capacity increased, leading solid surface provider acquired
Capacity increased, leading solid surface provider acquired • Acquired Sheridan a leading solid surface provider in February 2022 • As an HWS partner, Sheridan is well known to the business • More of our solid surface capability in-house, with associated margin benefits • Supports roll-out of HWS to
Slide 41: Dedicated manufacturing: A key part of our in-stock offer
Dedicated manufacturing : A key part of our in-stock offer UK MANUFACTURED UK MANUFACTURED 41
Slide 42: 3 year plan to increase scale & scope of manufacturing at Howden site
3 year plan to increase scale & scope of manufacturing at Howden site • Acquiring land adjacent to Howdens site • Space to increase cabinet making capacity • Capability to make more kitchen door styles • Ability to make doors for majority of kitchen ranges • Benefits of external sourcing retained (c
Slide 43: Investing in new warehouse & distribution centre at Capitol Park
Investing in new warehouse & distribution centre at Capitol Park near Howden • Capitol Park will be PDC for Howden Manufactured product • Howden site dedicated to manufacturing (some bulk storage retained) Site efficiencies and room to expand further • Efficient, purpose built facility (storage +
Slide 44: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 44
Slide 45: 28% more search impressions a month, site visits up 11%
28% more search impressions a month, site visits up 11% 45
Slide 46: Time spent on page +20%, pages viewed / session +11%
Time spent on page +20%, pages viewed / session +11% 46
Slide 47: Increasing social media presence
Increasing social media presence c.400,000 Follow base by year end 49% Increase on previous year +34% User reach 1.3m Active users engaging monthly 47
Slide 48: Showcasing our kitchens in people's homes
Showcasing our kitchens in people’s homes SEE MORE @brysonhouse 17.2m image views 48
Slide 49: Kitchen Visualiser introduced
Kitchen Visualiser introduced 49
Slide 50: New search functionality on-line in Autumn 2021
New search functionality on-line in Autumn 2021 50
Slide 51: Online Trade Account Management
Online Trade Account Management 51
Slide 52: Over 100,000 new account registrations in 2021
Over 100,000 new account registrations in 2021 Manage accounts and View credit details and Download invoices and relationship with depot make payments information 52
Slide 53: Usage across the week and both in and out of hours
Usage across the week and both in and out of hours Payments by users up 70% by value Users viewing documents up 41% 53
Slide 54: Anytime Ordering launched
Anytime Ordering launched • “Anytime Ordering” launched February 2021 • Efficiencies for Depots & Customers • Bespoke pricing for each customer • Account holders can see their prices, order product and quote for jobs out of hours • Select a depot collection point and delivery time 54
Slide 55: Anytime Ordering valued by customers & depots
Anytime Ordering valued by customers & depots • Weekly trade platform logins + 160% year on year • C.70% of users looking at price • On line account holders trade more frequently • Spend more across more categories • Service integrated with Lead Management System 55
Slide 56: New app-based functionality for 2022
New app-based functionality for 2022 • Trade app live February 2022 • Manage account details and see credit status • View open order summaries • Rapid check-in at all depots • Immediate notification of order updates • Easy collection using QR codes 56
Slide 57: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 57
Slide 58: 2021 performance gives us confidence to open more depots in France
2021 performance gives us confidence to open more depots in France • Sales up 37% on 2020, 55% on 2019 • Increased recognition of the advantages of our model • Number of accounts +37% Existing depots New depots in 2022 • 10 depot openings in 2021 • C.60 depots trading by end 2022 (2021:40) 58
Slide 59: Opening for business in the Republic of Ireland
Opening for business in the Republic of Ireland Target locations 5 1. Ballymount 2. Finglas 3. Sandyford • “City Based” approach as in France 2 4. Tallaght • Initially c.5 depots around Dublin 5. Swords • All open by June 2022 • Supported by UK infrastructure and Dublin Group digital platform 1 4 3
Slide 60: Well planned on our strategic initiatives
Well planned on our strategic initiatives • Increased stock cover in place to protect high availability • 20 new kitchen ranges on sale by end June • Howdens Work Surfaces available to all depots, backed by further investment • Improvements to service & availability by utilising XDCs • Increased ran
Slide 61: 2022 outlook
2022 • Encouraging start to 2022 • Price rises implemented at end 2021 • Continuance of sales gains v comparable periods in P1 & P2 • Surveys and Lead Bank suggest customers remain busy • Macro economic and other uncertainties may impact performance as year progresses • Trading against record compar
Slide 62: Appendix
bs HOWDENS Appendix
Slide 63: 1 year comparison of profit before tax for 2021 vs 2020
1 year comparison of profit before tax for 2021 vs 2020 Group gross profit margin • 2020: 60.1% • 2021: 61.6% £m Price (revenue) Volume Sales Change / mix increase £205m +107 Cost pressure / savings etc (net) Operating interest Costs Sales etc increase +439 Gross Margin +359 63
Slide 64: 1 year comparison of Operating Costs of 2021 vs 2020
1 year comparison of Operating Costs of 2021 vs 2020 Change £153m Other £m costs International growth Digital / Commercial Warehouse & Transport Existing depots New UK depots 64
Slide 65: Pension Scheme moves into surplus
Pension Scheme moves into surplus IAS19 basis Change £m £189m Asset returns Contribution Net discount rate Current service charge + admin cost + interest 65
Slide 66: 2021 Full Year Results
2021 Full Year Results 24 February 2022