Slide 1: 2014 Preliminary Results
2014 Preliminary Results 26 February 2015
Slide 2: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 3: Delivering value to all concerned
Delivering value to all concerned £1bn sales, £190m operating profit > 7,000 full-time employees c.8m square feet 2 factories, 1 distribution centre 590 local depots 50 kitchen ranges 20 years > 6,500 SKUs > 350,000 account holders… 2014 Preliminary Results 3
Slide 4: A successful business with prospects
A successful business with prospects • Significant improvement in sales, profits and cash • A trade business, always in stock locally • Successfully managing scale complexity Delivering direct, personal service to the local builder Strategy has created opportunities for further growth 2014 Prelimina
Slide 5: Mark Robson, Deputy CEO and Chief Financial Officer
Mark Robson Deputy CEO and Chief Financial Officer
Slide 6: Business developments
Business developments • 30 new depots • Investment in product, including eighteen new kitchen ranges • Existing depots – ‘virtual showroom’ project; A3 printer roll-out • Supply – replaced ‘tractor’ units of lorry fleet – trailer replacement imminent • Howden site heating boilers • Central IT hardwa
Slide 7: Highlights
Highlights Revenue, £m Operating profit, £m, and margin, % Net cash, £m HJ UK France 200 225 1100 1090.8 17.4% 15.3 200 35.0 217.7 189.8 1050 175 795.1 175 1075.5 1000 150 150 956.5 14.7% 950 15.8 140.5 125 940.7 140.7 900 125 100 2013 2014 2013 2014 Dec-13 Dec-14 HJ UK: +14.3% +35% Gross profit, £m
Slide 8: Revenue
Revenue 2014 UK depot revenue £1075.5m • total +14.3% • LFL +10.8% 2014 French depot revenue £15.3m +2% LFL in €s 2014 Preliminary Results 8
Slide 9: Profit before tax (continuing operations)
Profit before tax (continuing operations) Group gross profit margin ● 2014: 63.7% ● 2013: 61.7% Gross Profit before tax Gross profit £m profit £m Volume 104.3 & mix (revenue) Change 102 £104.3m Cost savings, Change etc. Currency £53.8m (net) 8 694.5 Interest, 1 etc. Volume 4.7 188.8 & mix (COGS) (39
Slide 10: Operating costs
Operating costs Operating costs Change £m £55.2m Growth related Older 12 504.7 depots 29 New depots 14 449.5 • 2013 2014 2014 Preliminary Results 10
Slide 11: Income statement – pre exceptionals
Income statement – pre exceptionals * Continuing operations unless stated, £m 2014 2013 Revenue 1090.8 956.5 Cost of goods sold (396.3) (366.3) Gross profit 694.5 590.2 Operating costs (504.7) (449.5) Operating profit 189.8 140.7 Net interest (1.0) (5.7) Profit before tax 188.8 135.0 Tax (40.1) (33.
Slide 12: Earnings per share and dividend
Earnings per share and dividend £m 2014 2013 Earnings per share before exceptional items • from continuing operations 23.2p 15.9p Dividend • final (recommended) 6.5p 4.5p full year 8.4p 5.5p • 2014 final dividend costing £41.6m 2014 Preliminary Results 12
Slide 13: Net cash and cash flow
Net cash and cash flow £m 2014 2013 Opening net cash 140.5 96.4 Operating cash flows before movements in working capital 217.4 167.8 Working capital (1.2) (11.8) Capital expenditure (32.8) (24.7) Tax paid (30.3) (21.0) Dividends (41.0) (23.3) Legacy properties (5.3) (10.4) Pension deficit contributi
Slide 14: Working capital
Working capital • Working capital up £1.2m – stock up £19.7m – debtors up £10.7m – creditors up £29.2m 2014 Preliminary Results 14
Slide 15: Return of cash to shareholders
Return of cash to shareholders • £70m of cash to be returned to shareholders • Share repurchase programme to be implemented over course of next two years 2014 Preliminary Results 15
Slide 16: Pension scheme deficit
Pension scheme deficit £m Net discount rate 203 IAS19 basis Change £89m Asset returns (81) 143 Deficit funding (33) 54 • Dec Dec 2013 2014 2014 Preliminary Results 16
Slide 17: Current trading and outlook for 2015
Current trading and outlook for 2015 • Sales in first period two periods up 9.9%* • Expectations unchanged • Things to note: – additional operating costs (French depots, interim warehousing, pension charge) – increased capital expenditure • Will take timely actions * Excludes first week, which had o
Slide 18: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 19: The importance of being in stock
The importance of being in stock Nothing to pay for up to 60 days – Builder saves time Howdens credit account and money Builder collects Gets paid by from local stock customer Pays Howdens Total cost of credit control, including bad debts = c.1% 2014 Preliminary Results 19
Slide 20: Experiments open up opportunities
Experiments open up opportunities Granite from stock • Testing began in H2 • Valuable learning • Sophisticating kitchens, at all price points • Leads to ideas and opportunities for the future Black granite worktop and upstand 2014 Preliminary Results 20
Slide 21: The Howdens customer proposition
The Howdens customer proposition Direct, Lowest cost personal of supply service Sustainable margin Significant cash flow High barriers to entry 2014 Preliminary Results 21
Slide 22: The depot manager holds critical relationships
The depot manager holds critical relationships Actual and potential customers Depot staff Local suppliers Design and manufacturing Logistics and distribution End-users Local communities Constantly changing lives 2014 Preliminary Results 22
Slide 23: Efficient supply and distribution
Efficient supply and distribution Manufacturing relevant, robust products • Large volumes • Long runs • No waste • Accountability • Motivated staff Scale and complexity The “I” line at our Runcorn factory 2014 Preliminary Results 23
Slide 24: Managing scale and complexity
Managing scale and complexity Period 11, 2014 1,000 product lines 7 million 200+ suppliers items delivered to 6,500 589 depots SKUs
Slide 25: Many opportunities for organic growth
Many opportunities for organic growth More depots • More accounts Improved performance • Incentivisation More products • New designs More staff • Better service 2014 Preliminary Results 25
Slide 26: A typical French trade depot
A typical French trade depot 26
Slide 27: Further tests in continental Europe
Further tests in continental Europe Continuing progress in France • 11 profitable trade depots • Plan to open 7 more in H2 Ongoing testing • New format near Lyon and Marseille • 2 trade depots in southern Belgium • Trial in Holland Houdan format • Exploring possibilities in Germany Alternative forma
Slide 28: Stepping up investment to address more opportunities
Stepping up investment to address more opportunities Product design Innovation Supply Trade guaranteed only Manufacturing efficiency Pricing Local Warehousing & distribution confidential discount manager autonomy Systems Quality Stock absolute Skilled people Range Robust organisation The Howdens mod
Slide 29: The importance of incentives in the Howdens model
The importance of incentives in the Howdens model A business with prospects and credibility, where people at all levels can engage with senior management Pay and local, profit-related commission 5½ day working week, bank holidays, long service awards Specific incentives: • Account openings, product
Slide 30: Investing in scale + complexity
Investing in scale + complexity Access to lowest cost supply is key Commercial approach to make vs. buy A flexible, adaptive supply chain with the capacity to handle significant growth and continuous change Investing time and effort in relationships with suppliers Managing the increasing complexity
Slide 31: A model for effective stock management
A model for effective stock management “In stock” is a real differentiator for Howdens Depot managers play a critical role in stock management • Bonus based on local depot profitability • Product roadshows • Accurate forecasting • Frequent deliveries tailored to each depot’s requirements Local empow
Slide 32: Delivering value for the future
Delivering value for the future Clear business proposition Continued Unique, proven model growth and Embedded high margin development 20 years Highly cash-generative Builders want to pay for Howdens service 2014 Preliminary Results 32
Slide 33: 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 2014 Preliminary Results 33
Slide 34: 2014 Preliminary Results
2014 Preliminary Results 26 February 2015