Grafton Group Plc · LSE:GFTU
Grafton — H1 2023 Earnings Presentation
39 slides from Grafton's earnings presentation, August 2023
Slide 1: Grafton Group plc Half Year Results
Grafton Group plc Half Year Results For The Six Months Ended 30 June 2023
Slide 2: Cautionary statement & notes
Cautionary statement & notes Cautionary statement Notes Certain statements made in this presentation are forward-looking The term “Adjusted” means before exceptional items and acquisition statements. Such statements are based on current expectations and related items (see Appendix 1). are subject to
Slide 3: Eric Born, CEO and David Arnold, CFO
Eric Born David Arnold Chief Executive Officer Chief Financial Officer Grafton Group plc – Interim Results 2023 3
Slide 4: Introduction & highlights
Introduction & highlights ERIC BORN, CEO
Slide 5: 2023 First half review
2023 First half review Resilient H1 performance in challenging distribution markets First half trading and adjusted operating profit as anticipated Full year adjusted operating profit expectations re-affirmed Excellent cashflow supported return of £132.7m to shareholders Net cash at 30 June 23 almos
Slide 6: Financial highlights
2023 Financial highlights £m H1 2023 H1 2022 Change Revenue £1,189m £1,153m 3.2% Adjusted operating profit £105.1m £151.1m (30.5%) Adjusted earnings per share 38.1p 49.5p (23.1%) Dividend 10.0p 9.25p 8.1% Adjusted operating profit margin pre property profit 8.7% 11.5% (280bps) Adjusted return on cap
Slide 7: Financial review
Financial review DAVID ARNOLD, CFO
Slide 8: Income statement
Income statement £m H1 2023 H1 2022 Change Revenue 1,189.3 1,152.8 +3.2% Adjusted operating profit pre property profit 103.9 132.6 (21.6%) Property profit 1.1 18.5 Adjusted operating profit 105.1 151.1 (30.5%) Amortisation1 and acquisition related items (10.7) (11.0) Statutory operating profit 94.3
Slide 9: Income statement
Income statement £m H1 2023 H1 2022 Change Revenue 1,189.3 1,152.8 +3.2% Adjusted operating profit pre property profit 103.9 132.6 (21.6%) Property profit 1.1 18.5 No significant property profits expected in H2 Adjusted operating profit 105.1 151.1 (30.5%) Amortisation1 and acquisition related items
Slide 10: Revenue bridge
Revenue bridge 1,189 1,153 2,110 Grafton Group plc – Interim Results 2023 10
Slide 11: Analysis of organic movement in revenue (constant currency)
Analysis of organic movement in revenue (constant currency) Distribution Grafton Group plc – Interim Results 2023 11
Slide 12: Adjusted operating profit – bridge H1 2022 to H1 2023
Adjusted operating profit – bridge H1 2022 to H1 2023 151.1 105.1 Grafton Group plc – Interim Results 2023 12
Slide 13: Analysis of movement in operating profit in like-for-like business
Analysis of movement in operating profit in like-for-like business Distribution Grafton Group plc – Interim Results 2023 13
Slide 14: Irish Distribution
Irish Distribution Revenue £m H1 2023 H1 2022 Change 400.0 318.1 309.1 Revenue 318.1 309.1 +2.9% £’m 200.0 Adjusted operating profit pre property 28.9 38.5 (24.8%) 0.0 Adjusted operating margin pre property 9.1% 12.4% (330bps) 2023 2022 Adjusted operating profit before property • Strong demand funda
Slide 15: UK Distribution
UK Distribution Revenue 429.0 £m H1 2023 H1 2022 Change 419.3 400.0 Revenue 419.3 429.0 (2.2%) £’m 200.0 Adjusted operating profit pre property 23.9 47.2 (49.4%) 0.0 Adjusted operating margin pre property 5.7% 11.0% (530bps) 2023 2022 Adjusted operating profit before property • Inflation in Selco ea
Slide 16: Netherlands Distribution
Netherlands Distribution Revenue £m H1 2023 H1 2022 Change 400.0 Revenue 184.6 168.7 +9.4% 184.6 £’m 200.0 168.7 Adjusted operating profit pre property 20.4 21.2 (3.6%) 0.0 Adjusted operating margin pre property 11.1% 12.5% (140bps) 2023 2022 Adjusted operating profit before property • Strong perfor
Slide 17: Finland Distribution
Finland Distribution Revenue £m H1 2023 H1 2022 Change 400.0 Revenue 70.4 67.7 +4.1% £’m 200.0 70.4 67.7 Adjusted operating profit pre property 7.1 8.9 (20.6%) 0.0 Adjusted operating margin pre property 10.0% 13.2% (320bps) 2023 2022 Adjusted operating profit before property • Higher sales in Estoni
Slide 18: Retailing
Retailing Revenue 400.00 £’m 200.00 131.2 118.9 - 2023 2022 Operating profit before property profit • Stronger Q2 vs Q1 as weather influenced demand for seasonal categories • Volume and value growth: H1 transactions +2.0% and ATV +4.3% 60.0 • Improved margin: Gross margin benefited from product mix
Slide 19: Manufacturing
Manufacturing Revenue £m H1 2023 H1 2022 Change 400.0 Revenue 65.6 59.4 +10.4% £’m 200.0 65.6 Adjusted operating profit pre property 15.3 12.1 +26.1% 59.4 0.0 Adjusted operating margin pre property 23.3% 20.4% +290bps 2023 2022 CPI EuroMix StairBox Operating profit before property profit • Strong pe
Slide 20: Balance Sheet
Balance Sheet 30 June 31 December 2023 2022 Goodwill and intangible assets 767.3 789.5 Right-of-use assets 406.9 420.1 Tangible assets 384.1 384.8 Working capital 207.0 246.6 Other (liabilities)/assets (91.5) (93.9) Pension (deficit) (2.2) (10.5) Capital employed 1,671.6 1,736.7 Net cash excluding l
Slide 21: Balance Sheet
Balance Sheet 30-Jun 31-Dec 30-Jun 2023 2022 2022 Inventories 391.5 399.6 399.2 30 June 31 December Trade debtors 293.0 267.7 287.1 2023 2022 Trade payables (477.6) (420.7) (480.2) Working capital 207.0 246.6 206.2 Goodwill and intangible assets 767.3 789.5 Right-of-use assets 406.9 420.1 Tangibl
Slide 22: Cash from operations
Cash from operations £m H1 2023 H1 2022 Profit before taxation 93.6 132.4 Addback Net finance costs 0.8 7.7 Operating profit 94.3 140.1 Depreciation & amortisation of software 51.8 45.9 Amortisation of intangible assets arising on acquisitions 9.9 9.7 Property profits (total) (1.1) (18.5) Other move
Slide 23: Cash flow
Cash flow £m H1 2023 H1 2022 Cash from operations 191.3 137.9 Interest and tax (19.7) (29.9) Replacement capex net of asset disposals (12.2) 13.7 Free cash flow 159.4 121.7 Development capex (11.4) (12.0) Dividends (51.6) (52.7) Net share (repurchase) incl. fees (81.3) (51.5) Total capital returned
Slide 24: Cash flow
Cash flow £m H1 2023 H1 2022 FY gross replacement Cash from operations 191.3 137.9 capex expected to be Interest and tax (19.7) (29.9) c.£30m and gross development c.£35m Replacement capex net of asset disposals (12.2) 13.7 Free cash flow 159.4 121.7 Development capex (11.4) (12.0) Dividends (51.6)
Slide 25: Cash flow
Cash flow £m H1 2023 H1 2022 Cash from operations 191.3 137.9 Interest and tax (19.7) (29.9) Replacement capex net of asset disposals (12.2) 13.7 Free cash flow 159.4 121.7 Development capex (11.4) (12.0) Dividends (51.6) (52.7) Net share (repurchase) incl. fees (81.3) (51.5) Total capital returned
Slide 26: Strategy, current trading & outlook
Strategy, current trading & outlook ERIC BORN, CEO
Slide 27: Strategy update – Grafton today
Strategy update – Grafton today H1 2019 H1 2023 • The portfolio re-shape since 2019 created a very Revenue 1,437.3 1,189.3 resilient business – 60% of revenue outside UK Adjusted operating profit pre property 99.2 103.9 • Despite challenging macro-economic conditions in H1 2023, Grafton delivered st
Slide 28: Strategy update
Strategy update The management team conducted a strategy review in H1 • Geographic focus on existing and new European markets with structural long-term growth due to shortage of housing and the need to improve existing housing stock; including measures to reduce carbon emissions • Our core customer
Slide 29: Strategy update – M&A
Strategy update – M&A Bolt-on acquisitions • Solid pipeline of bolt-on targets in existing markets Platform acquisitions • Engaged in active discussions with select number of vendors in new European markets • Timing dependent on vendor as many are founder owned • Focus on deal quality Widening M&A p
Slide 30: Capital Returns
Capital Returns Dividend • Interim dividend increased by 8.1% to 10.0p per share • In line with our progressive dividend policy • Supported by strong balance sheet position and confidence in long term • Maintains cash payment made for 2022 interim dividend but with lower level of shares in issue we
Slide 31: ESG Actions and Update
ESG Actions and Update Climate Change • Aiming to submit net zero targets to SBTi by end Dec 23, ahead of plan. Net zero target not later than 2050 • Scope 3 data represents an estimated 98% of emissions for a distributor in our industry • Compilation of this data is well advanced for the Group and
Slide 32: Current trading
Current trading Average daily like-for-like revenue growth 1 July 2023 – H1 2023 20 August 2023 Distribution Ireland (2.6%) +3.2% Positive revenue growth since 30 June UK (2.3%) (0.3%) Netherlands +3.7% +2.5% Product inflation and pace of volume decline continues to ease Finland (0.8%) (5.9%) Retail
Slide 33: Outlook
Outlook • Ireland - the outlook has improved somewhat with stronger growth in employment and incomes which supports consumer spending in the RMI and DIY markets. House completions this year expected to be similar to last year • UK - further challenges expected in the housing RMI market for the remai
Slide 34: Summary
Summary • Group delivered a resilient performance in challenging markets and against strong comparators • H1 traded as anticipated and we re-affirm full year expectations • Reducing inflation and greater price stability will create a more predictable trading backdrop • Well positioned for recovery •
Slide 35: CEO quote on resilient performance
“The strength of the Group’s market positions and our experienced management teams have underpinned a resilient performance in the face of challenging conditions during the first half. Grafton’s robust cash generation has enabled us to return £132.7 million to shareholders in the half year by way of
Slide 36: Questions
Grafton Group plc
Slide 37: Appendices
Grafton Group plc Appendices
Slide 38: Appendix 1 Notes & Definitions
Appendix 1 Notes & Definitions Notes Definitions • Adjusted earnings per share is earnings before exceptional items, As amounts are reflected in £’m some non- acquisition related items, intangible asset amortisation arising material rounding differences may arise. on acquisitions and before profit/l
Slide 39: Appendix 2 Revenue Growth – H1 2023 v H1 2022
Appendix 2 Revenue Growth – H1 2023 v H1 2022 Average Daily Like-for-Like Revenue Growth Six months to 30 June Total Revenue Q1 Q2 2023 1 Jan – 30 June 2023 Constant Distribution Sterling Currency Ireland (0.5%) (4.5%) (2.6%) (1.0%) 2.9% UK (3.8%) (0.9%) (2.3%) (2.3%) (2.3%) Netherlands 4.8% 2.6% 3.