Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — H1 2010 Earnings Presentation
30 slides from Howden Joinery's earnings presentation, Jul 21, 2010
Slide 1: 2010 Half Yearly Report
2010 Half Yearly Report 21 July 2010
Slide 2: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 3: Overview
Overview A good first half • Sales and margin up • Operating profit up • Strongly cash generative • Trading well A soundly based business Well placed to take advantage of many opportunities A robust platform for growth 2
Slide 4: Mark Robson, Chief Financial Officer
Mark Robson Chief Financial Officer
Slide 5: Context of financial results
Context of financial results Good performance in gross margin, operating profit and operating cash flow Cash flow finances legacy issues Legacy property portfolio diminishing No exceptional items or discontinued operations 4
Slide 6: Highlights
Highlights H1 H1 £m Continuing operations 2010 2009 Revenue Howden Joinery 319.2 310.1 Group 324.7 316.8 Gross profit margin 58.1% 54.1% Operating profit 24.5 10.0 Profit before tax 21.6 4.7 12 June 26 Dec 13 June £m 2010 2009 2009 Net (borrowings)/cash (2.7) 2.4 (50.3) • £5.1m net cash flow in H1 2
Slide 7: Howdens revenue
Howdens revenue H1 2010 revenue £319.2m • total +3.2% • LFL +2.5% P3 – 6 & 7 +6% % change 10 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2008 2009 2010 -5 -10 6
Slide 8: Profit before tax
Profit before tax Group gross profit margin ● 2010: 58.1% ● 2009: 54.1% £m Change Change £16.9m Gross £m £17.5m Interest, Depot profit Gross profit margin etc 17.5 11.0 188.8 2.4 21.6 Operating costs COGS (3.0) savings 7.5 4.7 171.3 Volume 1.0 H1 2009 H1 2010 2009 2010 7
Slide 9: Operating costs
Operating costs Operating costs £m Older depots Change 3.0 £3.0m New 164.3 depots 1.9 Other (1.9) 161.3 • 2009 2010 8
Slide 10: Income statement
Income statement H1 H1 £m 2010 2009 Continuing operations: Profit before tax 21.6 4.7 Tax (7.4) (1.7) Profit from continuing operations 14.2 3.0 Discontinued operations: Exceptional items before tax - (4.4) Tax - - Loss from discontinued operations - (4.4) Profit/(loss) for the period 14.2 (1.4) 9
Slide 11: Net cash/borrowings and cash flow
Net cash/borrowings and cash flow H1 H1 £m 2010 2009 Opening net cash/(borrowings) 2.4 (61.2) Operating cash flows before movements in working capital 33.8 19.9 Working capital 8.4 23.2 Capital expenditure (6.7) (3.8) Asset disposals - 1.0 Interest (net) (0.5) (1.8) Tax paid (5.2) - Legacy propertie
Slide 12: Working capital
Working capital Working capital down £8.4 m • stock down £3.0m • debtors up £7.0m • creditors up £12.4m 11
Slide 13: Reducing our legacy property liabilities
Reducing our legacy property liabilities £31m Number of properties 100 Number 1 and net annual rent & rates 2 of 80 £24.5m legacy properties 3 60 £18m £15m £14m 40 £8m 20 £6m £0.5 m 0 Oct-06 Dec-08 Dec-09 Jul-10 Dec-11 Dec-14 Dec-19 Dec-24 7 legacy property deals so far this year • £14.5 m exit co
Slide 14: Pension scheme deficit
Pension scheme deficit £m Finance Asset charge IAS19 basis returns 2 10 196 Deficit funding Change (13) £20m 176 Corporate bond rate & other assumptions (19) Dec June 2009 2010 13
Slide 15: Outlook for remainder of 2010
Outlook for remainder of 2010 Sales in first period of second half +5.7% Depot openings on track Expect market to remain challenging Will manage business prudently and take necessary actions Operating costs impacted by depot openings and 2009 one-off savings Cash flow to reflect further
Slide 16: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 17: Howdens mission
Howdens mission “To supply from local stock, nationwide, the small builder’s ever-changing routine joinery/kitchen requirements, assuring no call back quality and best local price” 16
Slide 18: The value of Howdens offer
The value of Howdens offer Terms Awareness Cashflow Viability Pricing Margin discount Planning = of the Complete small builder Stock Time efficiency Quality Range 17
Slide 19: A business built on recommendation
A business built on recommendation New build Repair Maintenance Improvement Big builders Landlords Retail 180,000 houses 8m houses 16m homes per annum Increasingly sophisticated Small builder kitchens that Local project manager Entrepreneur need a Expert fitter professional fit Manufacturers & merch
Slide 20: Building on solid foundations
Building on solid foundations New product and design Highly efficient systems Responsive manufacturing Expanding depot network Proven track record A strong platform for growth 19
Slide 21: Successfully growing our depot network
Successfully growing our depot network 478 depots • 16 new depots opened this year New depots performing significantly ahead of plan Revising potential total upwards Strong pipeline of new sites • Proven depot opening process • 10,000 sq ft @£5 / sq ft Long maturity profile of depots • Con
Slide 22: Opportunities to improve performance (1)
BDP: Best demonstrated practice Opportunities to improve performance (1) Criterion Opportunity Sales 2010 (est) £5.5m gap between best and worst Sales growth* by region* 10% gap between best and worst Sales growth* by area** 15% gap between best and worst Sales* per person per wk £6,000 gap between
Slide 23: Opportunities to improve performance (2)
BDP: Best demonstrated practice Opportunities to improve performance (2) Criterion Opportunity Cabinet sales* Best performing depot sells 10 x more cabinets** Door sales* Best performing depot sells 3 x average Appliance sales* Best performing depot sells 4.5 x average Range in areas with similar de
Slide 24: Opportunities to improve performance (3)
BDP: Best demonstrated practice Opportunities to improve performance (3) Total H1 09 H1 10 Credit accounts 181,000 196,000 Effective management of credit accounts • Continuous monitoring to maintain viable accounts • Opportunity to grow number of accounts per depot French trial continues: depots
Slide 25: Maximising the potential of best selling kitchens
Maximising the potential of best selling kitchens Light Dark Ranges Budget existing 1 new 2 3 for for 4 H2 H2 5 Premium New additions to product families performing well • Easier for our planners to plan and sell • Better choice, value and service as kitchens become more sophisticated 24
Slide 26: A focused and exclusive supply chain
A focused and exclusive supply chain Focused on: • Speed of response • Continuity of supply at lowest possible cost 27% • Consistency of quality Streamlined manufacturing and distribution Continuously improving 24% processes and logistics Underpins rollout of new product and expansion of dep
Slide 27: Robust, industry-leading systems
Robust, industry-leading systems Outstanding kitchen design system • Successfully installed across our depot network Tailored stock and27% sales system • Tight local stock control Successful rollout of SAP 24% locations • To all manufacturing New warehouse control system Systems in place to
Slide 28: Ongoing investment in growth
Ongoing investment in growth New depots • Property, stock, staff New product 27% • Work with product ‘families’ continues Enabled by • Supporting our offer to the small builder strongly cash generative Manufacturing and 24%systems model • Up to £10m p.a. for the next 5 years People • Critica
Slide 29: Focused on growth
HOW JOINERY CO. Making kitchens work for you Focused on growth
Slide 30: 2010 Half Yearly Report
2010 Half Yearly Report 21 July 2010