Grafton Group Plc · LSE:GFTU
Grafton — H1 2021 Earnings Presentation
40 slides from Grafton's earnings presentation, August 2021
Slide 1: Grafton Group plc Half Year Results
Building Progress Together Grafton Group plc Half Year Results For the Six Months Ended 30 June 2021
Slide 2: Cautionary Statement & Notes
Cautionary Statement & Notes Cautionary Statement Certain statements made in this presentation are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from
Slide 3: Gavin Slark, CEO and David Arnold, CFO
Gavin Slark David Arnold Chief Executive Officer Chief Financial Officer Grafton Group plc – Interim Results 2021 3
Slide 4: Introduction & Highlights
Introduction & Highlights Gavin Slark, CEO Half Year Results For the Six Months Ended 30 June 2021
Slide 5: 2021 First Half Review – Significant Progress Implementing our Strategy
2021 First Half Review – Significant Progress Implementing our Strategy • Outstanding contribution from colleagues across the Group • Record operating profit in half year • Double digit operating profit margin in continuing businesses • Acquisition of IKH in Finland on 1 July 2021 • Agreement to div
Slide 6: June 2021 - Financial Highlights
June 2021 - Financial Highlights H1 2020 H1 2019 H1 2021 Change (Restated) (Restated) Revenue £1,028m £704m +46.1% £792m Adjusted operating profit pre property profit £142.4m £46.9m +203.9% £74.8m Adjusted operating profit £157.8m £46.9m +236.2% £74.8m Adjusted operating margin pre property profit 1
Slide 7: Financial Review
Financial Review David Arnold, CFO Half Year Results For the Six Months Ended 30 June 2021
Slide 8: Divestment of GB Traditional Merchanting Business
Divestment of GB Traditional Merchanting Business • Enterprise value of £520m plus four freeholds retained with a market value of £25m • Freeholds shown as investment properties and recognised at fair value – uplift of £10m to book value is shown within property profits • Retained DB pension scheme
Slide 9: Income Statement – Continuing Operations
Income Statement – Continuing Operations H1 2020 H1 2019 £m H1 2021 Restated Change Restated Revenue 1,027.8 703.7 +46% 792.2 Adjusted operating profit pre property profit 142.4 46.9 +204% 74.8 Property profit 15.4 0.1 3.8 Adjusted operating profit 157.8 46.9 +236% 78.6 Amortisation* (5.7) (4.3) +33
Slide 10: Revenue Bridge
Revenue Bridge £’m Grafton Group plc – Interim Results 2021 10
Slide 11: Analysis of Organic Movement in Revenue (Constant Currency)
Analysis of Organic Movement in Revenue (Constant Currency) LFL Business £’m UK Ireland NL Retail Manufacturing Organic Organic Growth Movement Distribution Initiatives Grafton Group plc – Interim Results 2021 11
Slide 12: Adjusted Operating Profit – Bridge H1 20 to H1 21 (IFRS 16)
Adjusted Operating Profit – Bridge H1 20 to H1 21 (IFRS 16) £’m H1 2020 GB Trad H1 2020 Like-for Like New Branches Acquisitions Property FX H1 2021 Reported Merch Restated Business Profit Disposal Grafton Group plc – Interim Results 2021 12
Slide 13: Analysis of Movement in Operating Profit in Like-for-Like Business
Analysis of Movement in Operating Profit in Like-for-Like Business £’m UK Ireland NL Retail Manufacturing Central Like-for-like Business Distribution Grafton Group plc – Interim Results 2021 13
Slide 14: UK Distribution
UK Distribution H1 H1 £m 2021 2020 Change Revenue (restated) £414.1 Revenue 414.1 250.7 +65.2% £344.4 £250.7m Operating profit pre property 55.1 10.1 +445.5% Operating margin pre property 13.3% 4.0% +930bps H1 2021 H1 2020 H1 2019 • Strong demand in housing RMI market • Average daily like-for-like r
Slide 15: Irish Distribution
Irish Distribution H1 H1 £m Change 2021 2020 Revenue Revenue 258.7 190.2 +36.1% £258.7m £226.2 £190.2m Operating profit pre property 30.1 15.2 +97.6% Operating margin pre property 11.6% 8.0% +360bps H1 2021 H1 2020 H1 2019 • H1 trading impacted by partial lockdown of construction sector • Demand dri
Slide 16: Netherlands Distribution
Netherlands Distribution H1 H1 £m Change 2021 2020 Revenue Revenue 147.5 138.1 +6.8% £147.5m £138.1m Operating profit pre property 16.0 14.1 +13.9% £80.9m Operating margin pre property 10.8% 10.2% +60bps H1 2021 H1 2020 H1 2019 • Netherlands distribution business continued to trade as an essential b
Slide 17: Retailing
Retailing H1 H1 £m Change 2021 2020 Revenue Revenue 158.4 99.3 +59.4% £158.4m Operating profit pre property 34.2 9.7 +252.4% £99.3m £99.9m Operating margin pre property 21.6% 9.8% +1,180bps • Woodie’s is a unique DIY, Home and Garden proposition in Ireland H1 2021 H1 2020 H1 2019 • Surge in demand i
Slide 18: Manufacturing
Manufacturing H1 H1 £m Change 2021 2020 Revenue Revenue 49.1 25.4 +93.5% £49.1m £40.7m Operating profit pre property 12.7 3.6 +256.4% £25.4m Operating margin pre property 25.9% 14.1% +1,180bps CPI EuroMix • Mortar volumes recovered gradually in line with house building – H1 2021 H1 2020 H1 2019 13.1
Slide 19: Balance Sheet
Balance Sheet £m 30 June 30 June 2021 2020 Intangible assets 651.6 776.2 Right-of-use assets 419.7 504.0 Tangible assets 332.8 530.9 Lease receivable 0.3 2.4 Working capital 6.1 173.5 Other assets/(liabilities) (75.1) (86.4) Amounts receivable re disposal of GB Trad Merchanting 581.7 0.0 Pension def
Slide 20: Cash from Operations
Cash from Operations £m H1 2020 H1 2021 Restated Profit before taxation from continuing operations 142.9 29.6 Profit/(loss) before taxation from discontinued operations 124.8 (9.1) Finance costs 10.5 14.6 Operating profit 278.2 35.1 Depreciation & amortisation of intangible assets 61.7 60.1 Property
Slide 21: Cash Flow
Cash Flow £m H1 2021 H1 2020 Cash from operations 255.3 121.5 Interest and tax (35.1) (24.5) Replacement capex net of asset disposals 5.1 (5.4) Free cash flow 225.4 91.6 Development capex (5.7) (6.8) Dividends (64.6) (0.0) Share issue/(repurchase) 1.5 0.1 Acquisitions & business disposals (incl. deb
Slide 22: 2021 Technical Guidance
2021 Technical Guidance • Full year property profit expected to be c.£17m • Depreciation currently forecast at c.£80m - £85m in total (c.£30m on a pre IFRS 16 basis – continuing only) • Working capital expected to increase in H2 2021 as trading normalises • 2021 gross capex spend (ex acquisitions) –
Slide 23: Strategic Update & Outlook
Strategic Update & Outlook Gavin Slark, CEO Half Year Results For the Six Months Ended 30 June 2021
Slide 24: Continued Growth Agenda
Continued Growth Agenda • Selco will open three new stores in 2021: Liverpool (open), Canning Town (October) and Rochester (December) • StairBox is delivering ahead of plan: purchase consideration was £44m and H1 operating profit was £4.7m • Proline in Ireland has expanded our architectural ironmong
Slide 25: Completed Acquisition of IKH
Completed Acquisition of IKH • One of Finland’s largest workwear, PPE, tools, spare parts and accessories wholesalers and distributors • Experienced management team led by Matti Vainionpää • Consideration paid on 1 July was €199.3m on a cash and debt free basis • Year ended Feb 2021 revenue €158.8m
Slide 26: Continued Progress on Sustainability Agenda
Continued Progress on Sustainability Agenda • Sustainability agenda aligned with UN goals • Focus areas are Customers and Products, People, Resources, Communities and Ethics • Targets set in each of our businesses • Good examples of progress in measures designed to reduce carbon impact: • Selco Sust
Slide 27: Capital Markets Event
Capital Markets Event • Intend to hold a Capital Markets event in November 2021 • Agenda will address: • Progress of the Group and our future ambitions • Strategy for growth • Capital allocation model • Sustainability strategy Grafton Group plc – Interim Results 2021 27
Slide 28: Current Trading v 2020 & 2019
Current Trading v 2020 & 2019 Average Daily Like-for-Like Average Daily Like-for-Like Revenue Growth – Continuing v 2020 Revenue Growth – Continuing v 2019 1 July 2021 – 1 July 2021 – H1 2021 15 August 2021 H1 2021 15 August 2021 Distribution Distribution UK – continuing 63.5% 6.9% UK – continuing 1
Slide 29: Outlook
Outlook • Confident of delivering a 2021 trading performance in line with previous guidance • Overall outlook is positive following vaccine rollout and we are hopeful that new restrictions won’t be imposed • Continuation in ongoing supply chain pressures expected over coming months • In the UK, rece
Slide 30: Summary
Summary “2021 marks a key phase of a very considered strategic transformation we have executed at Grafton over recent years, which today comprises a portfolio of high returning, differentiated businesses with the capacity to grow and outperform in our chosen markets” Grafton Group plc – Interim Resu
Slide 31: Questions
Questions Half Year Results For the Six Months Ended 30 June 2021
Slide 32: Appendices
Appendices Half Year Results For the Six Months Ended 30 June 2021
Slide 33: Appendix 1 - Notes & Definitions
Appendix 1 - Notes & Definitions Notes As amounts are reflected in £’m some non-material rounding differences may arise. The deemed disposal of the Traditional Merchanting Business in the UK means that it is now classified as discontinued operations in accordance with IFRS. The operating result for
Slide 34: Appendix 2 - Operating Margin Analysis
Appendix 2 - Operating Margin Analysis* H1 H2 H1 2021 2020 2019 UK Distribution 13.3% 4.0% 10.2% Irish Distribution 11.6% 8.0% 8.5% Netherlands Distribution 10.8% 10.2% 11.1% Total Distribution 12.3% 6.8% 9.7% Retailing 21.6% 9.8% 9.5% Manufacturing 25.9% 14.1% 22.5% 14.5% 7.3% 10.3% Central Activit
Slide 35: Appendix 3 - Revenue Growth – H1 2021 v H1 2020
Appendix 3 - Revenue Growth – H1 2021 v H1 2020 Average Daily Like-for-Like Revenue Growth - Continuing Total Revenue 1 Year to 30 Jan – 30 Qtr 1 Qtr 2 June 2021 June 2021 Actual Distribution (Sterling) UK – continuing 21.3% 114.3% 63.5% 64.9% Ireland (7.9%) 95.2% 33.8% 36.0% Netherlands 3.5% 7.9% 5
Slide 36: Appendix 4 - Revenue Growth – H1 2021 v H1 2019
Appendix 4 - Revenue Growth – H1 2021 v H1 2019 Average Daily Like-for-Like Revenue Growth - Continuing Total Revenue 1 Jan – Year to 30 30 Qtr 1 Qtr 2 June 2021 June 2021 Actual Distribution (Sterling) UK – continuing 12.3% 20.5% 16.7% 20.0% Ireland (6.7%) 29.1% 11.7% 14.3% Netherlands 0.5% 5.8% 3.
Slide 37: Appendix 5 - Revenue Bridge (v H1 2019)
Appendix 5 - Revenue Bridge (v H1 2019) £’m Grafton Group plc – Interim Results 2021 37
Slide 38: Appendix 6 - Analysis of Organic Movement in Revenue (v H1 2019)
Appendix 6 - Analysis of Organic Movement in Revenue (v H1 2019) (Constant Currency) LFL Business £’m Organic Organic UK Ireland NL Retail Manufacturing Movement Growth Distribution Initiatives Grafton Group plc – Interim Results 2021 38
Slide 39: Appendix 7 - Adjusted Operating Profit Bridge H1 19 to H1 21
Appendix 7 - Adjusted Operating Profit – Bridge H1 19 to H1 21 (including IFRS 16) £’m H1 2019 Discontinued H1 2019 Like-for Like New Branches Acquisitions Property FX H1 2021 Reported Restated Business Profit Grafton Group plc – Interim Results 2021 39
Slide 40: Appendix 8 - Analysis of Movement in Operating Profit in Like-for-Like Business
Appendix 8 - Analysis of Movement in Operating Profit in Like-for-Like Business (v H1 2019) £’m UK Ireland NL Retail Manufacturing Central Like-for-like Business Distribution Grafton Group plc – Interim Results 2021 40