Headlam Group Plc · LSE:HEAD
Headlam — FY2019 Earnings Presentation
27 slides from Headlam's earnings presentation, March 2020
Slide 1: Final Results Presentation for the year ended 31 December 2019
Final Results Presentation For the year ended 31 December 2019
Slide 2: About Us
About Us 2019 Revenue Countries of operations Residential sector 63.7% UK 84.8% 4 Commercial sector Continental Europe 36.3% 15.2% 4 Supplier 1 Leading for countries 28 years 19 1. UK 2. France 3 3. Switzerland 2 Distribution hubs 4. Netherlands Employees and centres 2,575 23 Active customer Custome
Slide 3: Full Year 2019 Financial Track Record (5 years)
Full Year 2019¹ Financial Track Record (5 years) Revenue Underlying² operating profit Underlying² profit before tax Statutory profit before tax £719.2m +1.5% £42.2m -4.8% £39.5m -9.1% £35.2m -13.0% (2018: £708.4m) (2018: £44.3m, not restated*) (2018: £43.4m, not restated*) (2018: £40.4m, not restate
Slide 4: 2019 Financial Highlights
2019 Financial Highlights¹ Results in-line with January 2019 guidance • Revenue increased by 1.5% to £719.2 million (2018: £708.4 million) despite a soft market backdrop and weakness in the UK residential sector • Like-for-like² revenue increased by 0.3% and 3.2% in the UK and Continental Europe res
Slide 5: 2019 UK Distribution Businesses Daily Sales
2019 UK Distribution Businesses Daily Sales* £k Sales 2,800 2,600 2,400 2,200 2,000 2015 1,800 2016 2017 1,600 2018 2019 1,400 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec 4 * Calculated on a like-for-like basis, being based on activities and businesses that made a full contribution in both the
Slide 6: 2019 Income Statement
2019 Income Statement 2019 2018 Variance £000 £000 2019 v 2018 Revenue 719,237 100.0% 708,423 100.0% 1.5% Cost of sales (489,825) 68.1% (479,349) 67.7% 2.2% Gross Profit 229,412 31.9% 229,074 32.3% 0.1% Distribution costs (135,738) (18.9%) (134,316) (19%) 1.1% Administrative expenses (51,520) (7.1%)
Slide 7: 2019 Revenue Movement
2019 Revenue Movement £000 £000 £000 UK Europe Total Revenue for the year ended 31 December 2018 604,150 104,273 708,423 Split 85.3% 14.7% Incremental items during the 12-month period to 31 December 2019: Like for like organic growth 1,897 3,157 5,054 LFL 0.3% 3.2% 0.7% Acquisitions 6,591 2,562 9,15
Slide 8: 2019 Movement in Net Expenses
2019 Movement in Net Expenses Total Expenses Distribution Administration £000 £000 £000 Expenses for 2018 187,743 134,316 71.5% 53,427 28.5 Significant movements in 2019: People cost 136 3.9% 1,185 78.4% (1,049) (52.2)% Vehicle expenses (1,564) (44.4)% (1,651) (109.2)% 87 4.3% Legal and professional
Slide 9: 2019 Underlying Operating Profit Movement
2019 Underlying Operating Profit Movement £000 Underlying operating profit 2018 44,273 Gross margin improvement Volume benefit 532 Mix change (660) Pricing benefit (1,174) Anticipated trade creditor settlement discount (1,049) Effect of acquisitions 2,689 338 Expense movement Distribution (175) Admi
Slide 10: 2019 Non-Underlying Items
2019 Non-Underlying Items 2019 2018 £000 £000 Impairment of goodwill 2,100 - Amortisation of acquired intangibles 1,424 1,763 Acquisitions related fees 686 513 Release of contingent consideration (325) (1,384) Finance cost on deferred and contingent consideration 406 - Non-recurring people costs - 8
Slide 11: IFRS 16 and Adjustments Recognised on Adoption
IFRS 16 and Adjustments Recognised on Adoption Impact on the income Statement Financial year ended 31 December 2019 Under new standard Under previous standard £000 £000 Costs charged to operating profit 15,260 16,375 Interest expense 1,688 - Total costs charged to the income statement 16,948 16,375
Slide 12: 2019 Cashflow Movement
2019 Cashflow Movement 2019 2018 £000 £000 Net cash flow from operating activities Profit before taxation 35,169 40,447 Depreciation, amortisation and impairment 8,898 7,038 Depreciation of right-of-use asset 15,260 - Profit on sale of property, plant and equipment (60) (50) Net finance cost 3,100 8
Slide 13: Balance Sheet as at 31 December 2019
Balance Sheet as at 31 December 2019 2019 2018 £000 £000 Non-current assets PPE 114,573 102,048 Right of use assets 43,865 - Intangible assets 48,514 50,924 Deferred tax assets 692 516 207,644 153,488 Current assets Inventory 132,474 132,704 Receivable 123,705 119,007 Cash 33,385 44,005 289,564 295,
Slide 14: UK Sterling Net Debt Daily Balances
0 10,000 20,000 30,000 40,000 50,000 (60,000) (50,000) (40,000) (30,000) (20,000) (10,000) 01-Jan 08-Jan £ Thousands 15-Jan 22-Jan 29-Jan 05-Feb 12-Feb 19-Feb 26-Feb 04-Mar Daily Balances 11-Mar 18-Mar 25-Mar 01-Apr 08-Apr 15-Apr 22-Apr UK sterling bank balance 2018 UK Sterling Net Debt 29-Apr 06-Ma
Slide 15: Our Marketplace and Customer Base
Our Marketplace and Customer Base UK Market Value* End-consumer £2.1 billion Independent Corporate retailer End-consumer Housebuilder Larger Flooring retailer contractor Developer Residential Sector Housebuilder (63.7% of Commercial revenue) Sector Corporate (36.3% of Flooring contractor revenue) De
Slide 16: Our Strategy
Our Strategy Our strategy is to build a successful company, positively impacting all stakeholders, and delivering sustainable long-term value Mission Provide our customers with a market leading service with unparalleled product knowledge and solutions across the broadest range of floorcoverings by w
Slide 17: Our Strategic Objectives
Our Strategic Objectives Strategic Area Strategic Objectives • Grow leading position through • Broaden presence in the industry • Ongoing investment in the network Industry improved performance and through growing in underweight and people to support future growth position increased sales across all
Slide 18: 2019 Operational Highlights
2019 Operational Highlights Strategic focus on improving, growing and broadening position within the floorcoverings industry • Scope of ongoing operational improvement programme enlarged, with the constituent projects designed to grow revenue and improve the customer service proposition, operating p
Slide 19: Operational Improvement Programme
Operational Improvement Programme Designed to grow revenue and improve the customer service proposition, operating performance and margin • Scope of ongoing operational • 2019: Earlier stage contributions of improvement programme enlarged over £1 million able to offset general non-employee related y
Slide 20: Operational Improvement Programme continued
Operational Improvement Programme continued Group procurement approach • Including in the area of GNFR and extension of commercial and motor vehicle leasing contracts Inventory management and automated stock-reordering • Benefits of improved product availability, stock-turn, warehouse capacity and i
Slide 21: New Ipswich Regional Distribution Centre
New Ipswich Regional Distribution Centre Operational in April 2020 • On-track in terms of both cost and timing • Total capital investment of £26 million, including land cost of £4 million • Brownfield site • 190,000 square feet • State-of-the-art, with 10.6 million cubic feet of capacity • Creating
Slide 22: Corporate Responsibility and ESG
Corporate Responsibility and ESG Activities Overview Independent Health and Safety audit commissioned An independent Health and Safety audit commissioned, with the resulting recommendations being actioned to strengthen the provision of a safe working environment which positively impacts not only our
Slide 23: Strategy, Investments and Acquisitions
Strategy, Investments and Acquisitions Strategy to improve, grow and broaden our position within the floorcoverings industry • Remain underweight in certain product categories, customer groups and market segments • Presents revenue and margin growth opportunities Ongoing investment to support future
Slide 24: Dividend, Current Trading and Outlook
Dividend, Current Trading and Outlook Dividend • 2019 full year dividend maintained in-line with Board’s previously stated intention • Final ordinary dividend of 17.45 pence (2018: 17.45 pence), giving a full year dividend of 25.0 pence (2018: 25.0 pence) Current Trading and Outlook • No direct impa
Slide 25: Appendices
Appendices B1eSC | 309A mu 61098 on)
Slide 26: Investment Case
Investment Case Significant scale and longevity of operations underpinned by capital efficiency, progressive dividend policy, and operational improvement programme to improve performance. Exposure to future UK economic growth. Market • 28 years of operations, with market- • Significant scale and mar
Slide 27: Headlam Group plc
Headlam Group plc PO Box 1 Gorsey Lane Coleshill Birmingham B46 1LW Tel: 01675 433000 Fax: 01675 433030 E-mail: headlamgroup@headlam.com Sat Nav: B46 1JU To find out more visit us online at www.headlam.com