Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — H1 2015 Earnings Presentation
44 slides from Howden Joinery's earnings presentation, Jul 23, 2015
Slide 1: 2015 Half-Yearly Report
2015 HALF-YEARLY REPORT 23 July 2015
Slide 2: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 3: The market has moved our way
A working kitchen should be installed by a professional DIY DFY Sophisticating demand Changing lifestyles The professional builder needs real service The market has moved our way 2015 Half-Yearly Report 2
Slide 4: A proven, local business with history and vast horizons
A proven, local business with history and vast horizons Sales growth in 5-year Sales, depots & staff 1995 – 2015 periods since 1995, Sales £m / Depot £m Depots Sales £m Depots Depot FTEs FTEs 1,400 1,400 7,000 1,200 1,200 6,000 1,000 1,000 5,000 800 800 4,000 600 600 3,000 400 400 2,000 200 200 1,00
Slide 5: Strategic investment in growth opportunities
Strategic investment in growth opportunities 1995 2015 2030 Potential in time, scale and value Capacity of a different order Investing in clear values and behaviours: • Manufacturing that delivers • Systems that work • Staff who look after customers 2015 Half-Yearly Report 4
Slide 6: Mark Robson, Deputy CEO and Chief Financial Officer
Mark Robson Deputy CEO and Chief Financial Officer
Slide 7: Business developments
Business developments • 14 UK depots opened so far – on track for 30 • Investment in product, including thirteen new kitchen ranges • Granite and premium brand appliances roll-outs • Kitchen design process innovation • Supply – replacing ‘trailer’ units of lorry fleet • Three new depots opened in no
Slide 8: Highlights
Highlights Revenue, £m Operating profit continuing ops, £m Net cash, £m HJ UK Continental Europe 65 250.0 500 11.1 225.0 482.6 6.8 60 223.3 475 60.9 200.0 217.7 475.8 175.0 450 57.6 435.4 55 150.0 7.2 756.4 161.1 425 428.2 125.0 400 50 2014 2015 100.0 2014 2015 Jun-14 Dec-14 Jun-15 HJ UK: +11.1% Gro
Slide 9: Revenue
Revenue 2015 UK depot revenue £475.8m • total +11.1% • LFL +8.6% 2015 continental Europe revenue £6.8m • underlying sales in original French depots up slightly in €s 2015 Half-Yearly Report 8
Slide 10: Profit before tax
Profit before tax Group gross profit margin ● 2015: 63.7% ● 2014: 63.2% Profit before tax Gross profit £m £m Gross profit 32.1 Volume & mix (revenue) Change 38 £32.1m Currency Change 4 307.3 £2.0m Volume & Cost mix pressures, Price (COGS) 57.2 59.2 9 (17) cost savings, Operating etc. costs Interest,
Slide 11: Operating costs
Operating costs Operating costs Change £m £28.8m Growth Other related 2 246.4 11 Older depots 10 New depots 6 217.6 • 2014 2015 2015 Half-Yearly Report 10
Slide 12: Income statement
Income statement Continuing operations*, £m H1 2015 H1 2014 Revenue 482.6 435.4 Cost of goods sold (175.3) (160.2) Gross profit 307.3 275.2 Operating costs (246.4) (217.6) Operating profit 60.9 57.6 Net interest (1.7) (0.4) Profit before tax 59.2 57.2 Tax (13.2) (14.9) Profit for the period 46.0 42.
Slide 13: Earnings per share, continuing operations, and dividend
Earnings per share, continuing operations, and dividend H1 2015 H1 2014 Earnings per share 7.1p 6.6p Interim dividend per share 2.8p 1.9p 2015 Half-Yearly Report 12
Slide 14: Net cash and cash flow
Net cash and cash flow £m H1 2015 H1 2014 Opening net cash 217.7 140.5 Operating cash flows before movements in working capital 74.9 70.2 Working capital (18.0) (8.1) Capital expenditure (11.7) (17.2) Interest (net) 0.3 0.2 Tax paid (15.8) (13.9) Pension deficit contribution (20.8) (12.6) Share repu
Slide 15: Working capital
Working capital • Working capital up £18.0m – stock up £13.9m – debtors up £16.7m – creditors up £12.6m 2015 Half-Yearly Report 14
Slide 16: Pension scheme deficit
Pension scheme deficit £m 143 IAS19 basis Net discount rate Change 31 Asset £63m returns 11 80 Deficit Funding 21 • Dec Jun 2014 2015 2015 Half-Yearly Report 15
Slide 17: Recent trading and outlook for remainder of 2015
Recent trading and outlook for remainder of 2015 • Sales in first four week period of H2 up 13.1% – feedback from depot remains positive • Remainder of 2015 – tougher comps – period 11 still to come – investing in operations to support growth – capital expenditure increasing • Well placed to achieve
Slide 18: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 19: Kitchen installation is complex
Kitchen installation is complex Quality Availability Professional skill Choice Price 2015 Half-Yearly Report 18
Slide 20: The Howdens model is designed to address complexity
The Howdens model is designed to address complexity A proven model Local Stock manager autonomy absolute Operating at scale Pricing In complexity we find: Quality confidential discount no-call-back • Value • Margin Trade Supply • Service only guaranteed Range well-designed 2015 Half-Yearly Report 19
Slide 21: We already have a huge opportunity
We already have a huge opportunity In-stock, locally driven business Over 600 local depots, typically c.10,000 sq.ft • Each managing 100s of accounts, 1000s of SKUs Top 55 depots = average sales of £3.7m p.a. All depots = average sales of £1.8m p.a. Managing complexity is about replication, not disc
Slide 22: Increased demand requires increasing investment
Increased demand requires increasing investment Howdens is looking to a bigger future Investing in the things that have made us successful: People Capacity Design Expertise Availability Quality 2015 Half-Yearly Report 21
Slide 23: More new product to meet growing demand
More new product to meet growing demand 13 new kitchen ranges • Gloss finishes now represent 50% of all kitchen sales • 29 new kitchen ranges introduced since Jan 2014 • Sophisticating kitchens, at all price points Clerkenwell Gloss White Introduced in 2014, now in our top 5 bestsellers 2015 Half-Ye
Slide 24: Continuing investment in Lamona
Continuing investment in Lamona New Lamona appliances • 5-zone ceramic hob • More new extractors - Touch-control chimney - 70cm stainless steel - Black curved glass • Several new products for H2, including touch-control double ovens Lamona 5-zone touch-control ceramic hob Two year guarantee as stand
Slide 25: Further investment in product testing
Further investment in product testing Trialling a range of branded appliances alongside Lamona • AEG • Neff • Miele • Beko • Rangemaster • Wider range of Bosch 2015 Half-Yearly Report 24
Slide 26: Development of a premium cabinet
Development of a premium cabinet Sink Pre-fitted LED sensor lighting liner Deeper wall units Acoustic edges Concealed hanging brackets Discreet shelf pegs Internal Modular drawer dividers drawer Sink base liner Premium accessories 2015 Half-Yearly Report 25
Slide 27: Testing opens up new opportunities
Testing opens up new opportunities Selling granite from stock • Workable for the builder • Affordable for the end-user • Allows us access to further sales opportunities Builders cutting Howdens granite on site 2015 Half-Yearly Report 26
Slide 28: Howdens serves all parts of a sophisticating market
Howdens serves all parts of a sophisticating market Howdens’ focus is on going to market quickly with new Online Online products that meet increasing demand LANDLORDS HOMEOWNERS at all price points PUBLIC PRIVATE Small Retail builder store Large Small Small Retail contractor builder builder store Mi
Slide 29: I want to be involved
Increasing expectations Same price Increased functionality Less energy consumption I want to Longer guarantee be involved Greater convenience More engagement 2015 Half-Yearly Report 28
Slide 30: Keeping our promises to the builder
Increasing investment in service Keeping our promises to the builder 2015 Half-Yearly Report 29
Slide 31: Expanding our depot network
Expanding our depot network Currently 603 depots • 14 depots opened in H1 2015 • On track to open a further 16 depots in H2 2015 Low breakeven point • c.£650,000 361,000 credit accounts • Net increase of 31,000 accounts in H1 Opened in H1 2015 2015 Half-Yearly Report 30
Slide 32: More skilled staff in our depots
More skilled staff in our depots More builders with more work = more accounts Our aim is to offer constantly improving service Highly incentivised, entrepreneurial depot teams Thurmaston depot counter, June 2015 Reliable, knowlegeable, local 2015 Half-Yearly Report 31
Slide 33: Increasing scale and sophistication
Increasing scale and sophistication Faster product lifecycles Better service More frequent deliveries Better use of space More space requirements Investing in capacity to ensure continuity of supply 2015 Half-Yearly Report 32
Slide 34: Howdens is a low-cost manufacturer
Howdens is a low-cost manufacturer Long-term supply agreements Efficient production methods and working practices Manufacturing solely for the depot Increased investment in line with increasing scale Howdens’ Runcorn factory 2015 Half-Yearly Report 33
Slide 35: Investing in design and innovation
Investing in design and innovation Always good design Smart appliances Connected systems My Account My Account is exclusive to Howdens Digital communication Joinery Trade Account Customers Online services 2015 Half-Yearly Report 34
Slide 36: The Howdens model is increasingly relevant
The Howdens model is increasingly relevant Ready to serve the builder, every day Helping to turn complexity into order Howdens is about people and development Continuing focus on reliable, personal service Some Recruiting thingssenior neverpeople change 2015 Half-Yearly Report 35
Slide 37: Ongoing tests in continental Europe
Ongoing tests in continental Europe Continuing progress in France • Breakeven point c.£700,000 • 3 further depots opened in H1, 4 more to open in H2 • Testing larger format (Lyon) • Will shortly open another (Marseille) Further trials under way • 2 depots opened in Belgium Existing depots • 1 depot
Slide 38: Preparing our organisation for a bigger future
Preparing our organisation for a bigger future 2015 Half-Yearly Report 37
Slide 39: Investing in depots to meet increased demand
Investing in depots to meet increased demand More accounts = more surveys More frequent revisions to plans • Greater involvement of end-users • Faster, easier digital communication • People want more for their money at all price points • Successfully bringing new products to market Increased demands
Slide 40: Investing in supply to support continuous availability
Investing in supply to support continuous availability More space required • Many new products are space-hungry – optimise warehousing • Capital investment in new facilities to cope with demand Production methods configured for flexibility • Strong supplier relationships • Investing in supply chain
Slide 41: Investing in stock to meet increasing demand
Investing in stock to meet increasing demand Renewing and replacing stock • 7,600 SKUs • Guaranteed availability from stock Greater choice of product • Protects our margin Real • Competitive advantage customer service • Better planning tools • Improved forecasting Keeping our promises to the builder
Slide 42: Delivering value for the future
Delivering value for the future Clear business proposition Investing in Unique, proven model growth and Embedded high margin development 20 years Highly cash-generative Builders want to pay for Howdens service 2015 Half-Yearly Report 41
Slide 43: 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 Half-Yearly Report 42
Slide 44: 2015 Half-Yearly Report
2015 HALF-YEARLY REPORT 23 July 2015