Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — FY2009 Earnings Presentation
38 slides from Howden Joinery's earnings presentation, Mar 4, 2010
Slide 1: 2009 Preliminary Results
2009 Preliminary Results 4 March 2010
Slide 2: Matthew Ingle, Chief Executive
Matthew Ingle Chief Executive
Slide 3: Overview
Overview The new world = a real test of the Howdens model • Margin continued to increase • Stock levels reduced • Costs decreased across the business • Strong cash generation • Effective management of legacy commitments A resilient performance Positioned for value creation and further growth 2
Slide 4: Mark Robson, Finance Director
Mark Robson Finance Director
Slide 5: Context of financial results
Context of financial results Resilient performance by Howdens business seen in gross margin, operating profit and operating cash flow Cash flow would have been even stronger except for impact of legacy issues Legacy property portfolio diminishing and pension funding agreed until April 2012 4
Slide 6: Highlights
Highlights £m * Continuing operations before exceptionals 2009 2008 Revenue Howden Joinery 756.4 782.9 Group 769.5 805.7 Gross profit margin 56.2% 53.1% Operating profit* 79.5 75.9 Profit before tax* 68.7 74.3 26 Dec 27 Dec £m 2009 2008 Net cash/(borrowings) 2.4 (61.2) • net cash inflow of £131m exc
Slide 7: Howdens revenue
Howdens revenue 2009 revenue £756.4m % change ● total - 3.4% ● LFL - 4.6% 2008 2009 6
Slide 8: Profit before tax and exceptional items
Profit before tax and exceptional items £m Group gross profit margin ● 2009: 56.2% ● 2008: 53.1% Gross profit Change Gross £4.6m Revenue profit £m gains 4.6 46 432.1 427.5 Other Operating 2 costs 74.3 (0.9) Change £5.6m COGS savings 68.7 18 Interest, etc Volume (9.3) 46 Currency 12 2008 2009 2008 20
Slide 9: Operating costs
Operating costs Operating costs £m 2008/9 Change depots £0.9m 3.6 2008 Pre-2008 one-off Other depots benefit 0.6 352.6 351.7 0.3 6.5 Logistics (10.1) 2008 2009 8
Slide 10: Income statement
Income statement £m 2009 2008 Continuing operations: Profit before tax and exceptional items 68.7 74.3 Tax (18.5) (23.3) Profit after tax before exceptional items 50.2 51.0 Exceptional items before tax (0.1) 4.8 Tax - (0.8) Profit from continuing operations 50.1 55.0 Discontinued operations: Excepti
Slide 11: Net cash/borrowings and cash flow
Net cash/borrowings and cash flow £m 2009 2008 Opening net borrowings (61.2) (3.3) Operating cash flows before movements in working capital 97.2 98.5 Working capital 46.8 (43.9) Other ‘exceptional’ creditors - (10.8) Other exceptional items (0.4) (11.7) Capital expenditure (8.1) (19.4) Asset disposa
Slide 12: Working capital
Working capital Working capital down £47m • stock down £35m • debtors down £4m • trade/other creditors up £8m 11
Slide 13: Bank facility
Bank facility Terms renegotiated • extended to May 2014 • £160m maximum amount available • modest increase in interest rate 12
Slide 14: Reducing our legacy property liabilities
Reducing our legacy property liabilities Number of properties £31m 100 Number 1 and net annual rent & rates 2 of 80 £24½m legacy properties 60 £18m £17½m £16½m 40 £8½m 20 £6½m £½ m 0 Oct-06 Dec-08 Dec-09 Mar-10 Dec-11 Dec-14 Dec-19 Dec-24 £46.3m cash payments in 2009 • £16.5m lease exit cost – 21
Slide 15: Pension scheme deficit
Pension scheme deficit £m IAS19 basis Corporate bond rate & Finance other charge assumptions Change 8 £74m 149 Deficit funding 196 (21) Asset returns (62) 122 Dec Dec 2009 2008 14
Slide 16: Outlook for 2010
Outlook for 2010 Sales in first two periods1 of 2010 affected by weather (total: -3.7%, LFL: -4.1%) Expect market to remain challenging Plan to open 20 – 30 new depots Will manage business prudently and take necessary actions 1. To 20 February 2010 15
Slide 17: Matthew Ingle, Chief Executive
Matthew Ingle Chief Executive
Slide 18: A resilient business with a proven model
A resilient business with a proven model • Adaptable • Cash-generative • Wholly focussed • Growth-oriented 17
Slide 19: Howdens mission
Adaptable Howdens mission “To supply from local stock, nationwide, the small builder’s routine joinery/kitchen requirements, assuring no call back quality and best local price” 18
Slide 20: A business built on recommendation
Adaptable A business built on recommendation New build Repair Maintenance Improvement Big builders Landlords Retail 180,000 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
Slide 21: Diverse customer base focused on RMI
Adaptable Diverse customer base focused on RMI 185,000 credit accounts • 250,000 registered customers including cash accounts Average spend per credit account = £3,500 Very few large accounts • Top 25 represent only 4% of credit account sales • Top customer spent £3.5m with us in 2009 No signi
Slide 22: An adaptable local depot model
Adaptable An adaptable local depot model Low cost • 10,000 sq ft (90% of which is stock storage) • Rent £5 per sq ft • Typical fit-out capex £180,000 Local management responsible for: • Stock levels • Pricing • Staffing • Margin and profit Local accountability and incentivisation • Staff bonus
Slide 23: An adaptable sourcing model
Adaptable An adaptable sourcing model Make vs. buy: a commercial decision Significant purchasing savings across all product categories Re-sourcing for lowest cost and security of supply In 2009, our UK factories produced: • 3.5m cabinets • 800k worktops • 2.1m frontals 22
Slide 24: Anticipating the need for cash
Cash-generative Anticipating the need for cash May 08 Paused depot opening programme July Renewed banking arrangements 08 Q3 08 Improved logistics, reduced stock levels onwards Q4 08 onwards Higher margin, less stock, better service 23
Slide 25: The power of BDP*
Cash-generative The power of BDP* Sustained margin growth has many interlocking drivers Focused Stock range management • Better planning Right • Lower stock levels Right price architecture staff levels • Better service • Sales per head Disciplined Motivated discounting staff * Best Demonstrated Pr
Slide 26: A wholly focussed business
Wholly focussed A wholly focussed business The virtuous circle: • One route to market Logistics Depots • Accurate forecasting of trends and volumes Manu- An facturing • Full range always integrated available from stock Builders business • No call-back quality Sourcing • Credit control End users 25
Slide 27: Underpinned by resilient systems
Wholly focussed Underpinned by resilient systems Trade-specific K8 depot system = reduced lead times + better customer service New Warehouse Management System (WMS) in Howden, Runcorn and Northampton Implementation of SAP manufacturing applications Faster, more user-friendly depot informatio
Slide 28: Growth
Growth-oriented Growth “To supply from local stock, nationwide, the small builder’s routine joinery/kitchen requirements, assuring no call back quality and best local price” 27
Slide 29: Depot development
Growth-oriented Depot development Over 40% of 462-strong depot portfolio is less than 7 years old 8 new depots opened in December 09 Between 20 and 30 planned for 2010 600+ depots in prospect New depots opened in 2009 28
Slide 30: New product development
Growth-oriented New product development Better quality cabinets and joinery doors Improved accessories Wider range of Lamona branded appliances Developing relevant solutions, e.g. waste management 29
Slide 31: Magazine advertising
Growth-oriented Magazine advertising 30
Slide 32: Range development
Growth-oriented Range development New ranges to be introduced in H1 Light Dark Ranges Budget 1 2 3 4 5 Premium existing planned 31
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Slide 37: A consistent past, present and future
A consistent past, present and future • Adaptable • Cash-generative Substantial growth • Wholly focussed prospects • Growth-oriented
Slide 38: 2009 Preliminary Results
2009 Preliminary Results 4 March 2010