Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — H1 2022 Earnings Presentation
63 slides from Howden Joinery's earnings presentation, Jul 21, 2022
Slide 1: 2022 Interim Results
2022 Interim Results 21 July 2022
Slide 2: Andrew Livingston, Chief Executive Officer
Andrew Livingston Chief Executive Officer
Slide 3: A strong first half performance
A strong first half performance Record Sales & Profit for the 24 weeks • Group Sales c.+16% on 2021 and c.+40% on 2019 • Profit increased at a higher rate than revenues • Gross profit margin ahead of 2021 Progressed our strategic plans for the business and our ESG agenda Strong cashflow generation a
Slide 4: Strength of our in-stock model founded on local relationships
Strength of our in-stock model founded on local relationships Performance reflects: • Combination of strong product line-up, high stock availability & very engaged team • Plus ongoing investment in customer focussed strategic initiatives • Raised prices helped combat cost increases • Increased volum
Slide 5: Robust business model across changing market conditions
Robust business model across changing market conditions • UK sales in P7 +8% on 2021, +44% on 2019 • Prevailing macro economic conditions may mean more demanding trading conditions overall than in 2nd Half of 2021 (H2 2021 sales +21%) • Model capable of delivering sustainable market share gains acro
Slide 6: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 6
Slide 7: Paul Hayes, Chief Financial Officer
Paul Hayes Chief Financial Officer
Slide 8: Strong performance in the first half
Strong performance in the first half £m HY 2022 HY 2021 HY 2019 • Strong financial performance ahead of pre-COVID levels Revenue 913.1 784.9 652.6 Gross Profit 565.0 481.0 404.2 • Continued market share gains Gross margin % 61.9% 61.3% 61.9% • Gross margin reflects pricing Operating costs (415.9) (3
Slide 9: Revenue growth
Revenue growth UK (£m) H1 2022 H1 2021 Growth • UK underlying volume growth, benefit of new and revamped Revenue 889.3 764.1 +16.4% depots Same depot basis 866.9 763.5 +13.5% • Sales growth includes Howdens Number of depots 788 754 Work Surfaces and further progress on higher priced ranges Internati
Slide 10: Profit before tax
Profit before tax £m • Continued volume growth Price (revenue) • Early implementation of price increases benefited H1 Change performance Volume +£26m Product cost / mix increases / • Higher input costs include saving etc. commodities, freight, transport Interest and energy Operating etc. Costs • Ong
Slide 11: Operating costs
Operating costs Change £m Other +£59m International growth costs Digital / Commercial Operating costs include: Warehouse & Transport • 10 new depots in the UK Existing depots • Higher activity levels in existing depot network New UK • Additional warehousing and depots transportation investment for f
Slide 12: Cashflow
Cashflow • Working capital movements: £m H1 2022 H1 2021 Inventory £(112)m Opening net cash 515.3 430.7 Receivables £(14)m Operating cash flows* 209.2 177.8 Payables £23m Working capital (104.0) (27.5) • Investment in stock to de-risk Capital expenditure our in-stock model ahead of H2 (46.0) (23.8)
Slide 13: Other financial matters
Other financial matters H1 2022 H1 2021 Change Basic earnings per share 19.6p 16.4p +19.5% Interim dividend per share 4.7p 4.3p +9.3% Pension scheme: - £1.2bn pension scheme with £144m surplus (IAS 19) - No contributions to date as scheme is in a small technical surplus - £2.5m per month scheme cont
Slide 14: Sales and PBT over last 5 years
Sales and PBT over last 5 years Sales PBT £bn £m • Sales and PBT 400 significantly ahead of 2 pre-COVID levels +41% 2020 and 2021 had vs 2019 300 • 1.5 high levels of H2 phased trading 200 • Pre-COVID H1/H2 1 £851m £892m £931m £1,083m £1,309m phasing of c. 40%:60% +40% +£619m vs 2019 +20% vs 2019 10
Slide 15: Summary
Summary ‐ Strong financial results ‐ Continued investment in our strategic initiatives ‐ Good momentum into H2 and confident in our business model for the future 15
Slide 16: Andrew Livingston, Chief Executive Officer
Andrew Livingston Chief Executive Officer
Slide 17: Significant opportunity in large markets
Significant opportunity in large markets 17
Slide 18: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 18
Slide 19: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 19
Slide 20: Extending the UK footprint – High service levels valued by customers
Extending the UK footprint – High service levels valued by customers • Cost effective updated format • Testing new smaller sized format (increase site options & for local infills) • Scope for c.1,000 depots in the UK, plan to open c.30 in 2022 20
Slide 21: Converting more existing depots to the updated format
Converting more existing depots to the updated format • Focus on older depots with most incremental sales potential • Positive feedback from depot teams and customers • 103 depots reformatted by end of 2021 • Average cost per depot of £275k going forward • Investment to be recouped in less than 4 ye
Slide 22: Depots trading in updated format and re-racked depots
Depots trading in updated format and re-racked depots End 2021 : Total UK Depots in Updated Format &/or Re‐racked 350 350 325 300 300 275 250 250 210 225 200 200 175 150 150 125 98 100 100 75 50 107 103 50 25 0 0 New Depots Existing Depots Depots in updated Re‐Rack Only * format End 2022 : Total UK
Slide 23: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 23
Slide 24: Disciplined range management for best availability and profitability
Disciplined range management for best availability and profitability • Re-organised range architecture and removed duplications in recent years • Plus improved balance between introductions and discontinuations • More efficient way of testing new kitchen colours and finishes adopted • 2022 line-up i
Slide 25: NPI is a significant contributor to our competitive position
“NPI“ is a significant contributor to our competitive position • Customers value and expect new product from us • 19 new kitchen ranges in 2022 to date • More emphasis on higher priced kitchens • Making most popular styles accessible to all budgets • Innovative product for other categories 25
Slide 26: New entry priced Shaker family, Witney
New entry priced Shaker family, Witney Witney Dove Grey 26
Slide 27: New colours for timber Shaker families
New colours for timber Shaker families Chilcomb In-Frame Reed Green 27
Slide 28: New colours for timber Shaker families
New colours for timber Shaker families Chilcomb Charcoal 28
Slide 29: New colours for timber Shaker families
New colours for timber Shaker families Elmbridge Sage Green & Porcelain mix 29
Slide 30: New In-Frame solution
New In-Frame solution Hockley In-Frame Reed Green 30
Slide 31: Refreshed look for our most successful families
Refreshed look for our most successful families 31
Slide 32: Acquired Sheridan, a leading provider of solid surface worktops
Acquired Sheridan, a leading provider of solid surface worktops • Helps develop Howdens Work Surfaces as market leading supply and fit business • Growing market segment in which Howdens was under-represented • Supports plan to sell more higher priced kitchens 32
Slide 33: Developing a market leading solid surface capability
Developing a market leading solid surface capability • More of solid surface capability in-house, with associated margin benefits • HWS now available in all regions • Orders increased significantly period on period in 1st Half 33
Slide 34: Market-leading product introductions in other categories
Market-leading product introductions in other categories 34
Slide 35: Sales of new product a significant contributor to H1 Sales
Sales of new product (“NPI”) a significant contributor to H1 Sales • Total sales of new product introduced in 2021/2022 represented around c.17% of UK sales in the 1st Half • Sales of product launched in H1 2021 c.+200% • Sales of 2022 NPI alone up some 48% on NPI for the same period in 2021 • Highe
Slide 36: Protecting our in-stock offer against supply chain disruption
Protecting our in-stock offer against supply chain disruption • Continued with 2021 policy of holding enhanced levels of safety stock • Heightened emphasis on stock manufactured in-house • Significant engagement with Supply base • Inbound logistics for 75% of bought-in SKUs managed in-house – high v
Slide 37: Using XDCs to facilitate high stock availability
Using XDCs to facilitate high stock availability 37
Slide 38: XDC: Rebalancing stock levels and delivery pattern
XDC: Rebalancing stock levels and delivery pattern of some lines for best availability • Depots can hold deeper stocks of faster selling lines • Simpler and more efficient for depots to: deliver superior service improve product availability • Frees up time and resources spent on stock management
Slide 39: Make or buy to improve cost, supply chain resilience and flexibility
Make or buy to improve cost, supply chain resilience and flexibility Runcorn – 25 acres Howden – 75 acres 39
Slide 40: Making more doors for our kitchen ranges in 2022
Making more doors for our kitchen ranges in 2022 • Investment to make Hockley kitchen doors in 2019 • Frontal capability broadened with investment in a new facility at Howden site • Operational by end of 2022 40
Slide 41: Increased architrave & skirting capability in 2022
Increased architrave & skirting capability in 2022 41
Slide 42: Dedicated manufacturing: A key part of our in-stock offer
Dedicated manufacturing: A key part of our in-stock offer UK MANUFACTURED UK MANUFACTURED 42
Slide 43: 3 year plan to increase scale & scope of manufacturing at Howden site
3 year plan to increase scale & scope of manufacturing at Howden site • Acquiring land adjacent to Howdens’ site • Space to increase cabinet making capacity • Capability to make more kitchen door styles • Ability to make doors for majority of kitchen ranges • Benefits of external sourcing retained (
Slide 44: Investing in new warehouse & distribution centre at Capitol Park
Investing in new warehouse & distribution centre at Capitol Park near Howden • Capitol Park will be PDC for Howden Manufactured product • Howden site to become primarily dedicated to manufacturing Site efficiencies and room to expand further • More efficient use of space, reduced exposure to third
Slide 45: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 45
Slide 46: Online Trade Account Management
Online Trade Account Management 46
Slide 47: 40,000+ new account registrations so far in 2022
40,000+ new account registrations so far in 2022 Manage accounts and View credit details and Download invoices and relationship with depot make payments information 47
Slide 48: Online services valued by customers & depots
Online services valued by customers & depots • 40% of customers trading logged onto trade platform • Weekly trade platform logins +88% vs H1 2021 • C.69% of users looking at price • Online account holders trade more frequently • Spend more across more categories 48
Slide 49: New app-based functionality for 2022
New app-based functionality for 2022 • Trade app live February 2022 • Manage account details and see credit status • View open order summaries • Rapid check-in at all depots • Immediate notification of order updates • Easy collection using QR codes 49
Slide 50: Showcasing our kitchens in people's homes
Showcasing our kitchens in people’s homes SEE MORE @brysonhouse 10m image views in 1st Half 50
Slide 51: Kitchen Visualiser helps end-users familiarity
Kitchen Visualiser helps end-users familiarity and our understanding of their priorities 51
Slide 52: Extended and more efficient search functionality
Extended and more efficient search functionality 52
Slide 53: 19% more search impressions a month, 10.1m site visits
19% more search impressions a month, 10.1m site visits 53
Slide 54: Page views/session up; time spent looking at pages +84%
Page views/session up; time spent looking at pages +84% 54
Slide 55: Increasing social media presence
Increasing social media presence • C.432,000 follow base by end June 2022 • 24% increase on previous year • 1.3m active users engaging monthly 55
Slide 56: Initiatives to increase volumes & profits
Initiatives to increase volumes & profits DEPOT EVOLUTION RANGE AND SUPPLY MANAGEMENT DIGITAL DEVELOPMENT INTERNATIONAL 56
Slide 57: Continental European operations continue to make progress
Continental European operations continue to make progress • €4bn kitchen market* (France) • City-based approach adopted from 2019 • 40 depots at end of 2021 • Increased recognition of our model’s advantages • Number of accounts +31% • H1 sales up c.19% on 2021 • C.60 depots trading by end 2022 • 7 o
Slide 58: Opening for business in the Republic of Ireland
Opening for business in the Republic of Ireland Target locations 3 1. Sandyford • Similar location strategy to 2. Ballyfermot France 3. Swords 4. Ballymount • Supported by UK infrastructure 5. Glasnevin and Group digital platform 5 • Initially c.5 depots around Dublin 2 Dublin • One opened in April,
Slide 59: Well planned on our strategic initiatives
Well planned on our strategic initiatives • Enhanced stock cover retained to protect high availability • 19 new kitchen ranges on sale by end June • Howdens Work Surfaces available to all depots, backed by further investment • Improvements to service & availability by utilising XDCs • Increased rang
Slide 60: 2022 outlook
2022 • Strong 1st Half performance • Aim to retain a profitable balance between price and volume • Implemented price rises, underpinned by our differentiated and service orientated offer • Continuance of sales gains v comparable periods in each period • Trading against record comparators • Momentum,
Slide 61: Appendix
HOWDENS Appendix
Slide 62: Capital allocation
Capital allocation Investing in organic expansion in line with Progressive and sustainable ordinary the strategy dividend growth through the cycle 1 2 Significant shareholder value creation 4 3 Return surplus cash to shareholders Modest investment in adjacencies e.g. solid work surfaces - Distribute
Slide 63: Pension Scheme
Pension Scheme IAS19 basis £m Net discount rate Change +£3m Current service charge + admin cost + interest Asset returns 63