Slide 1: Polypipe Group PLC Full Year Results
Polypipe Group PLC Full Year Results Year ended 31 December 2018 Sustainable water and climate management solutions for the built environment
Slide 2: Agenda
Agenda 1 INTRODUCTION 2 FINANCIAL SUMMARY 3 MARKET CONTEXT 4 BUSINESS REVIEW 5 STRATEGY 6 SUMMARY & OUTLOOK
Slide 3: Introduction
Introduction ▪ Another strong performance ▪ Revenue 5.2% higher, despite mixed conditions in the UK construction market ▪ Underlying basic earnings per share 4.4% higher ▪ Balance sheet strong with leverage of 1.7x EBITDA ▪ Permavoid acquired August 2018, followed by Manthorpe October 2018 – both pe
Slide 4: Agenda
Agenda 1 INTRODUCTION 2 FINANCIAL SUMMARY 3 MARKET CONTEXT 4 BUSINESS REVIEW 5 STRATEGY 6 SUMMARY & OUTLOOK
Slide 5: Financial highlights
Financial highlights ▪ Revenue growth of 5.2% despite mixed market conditions demonstrating strength of diversified business model ▪ Underlying operating profit 1.9% higher and underlying profit before tax 2.1% higher ▪ Resilient margin at 17.1% ▪ Underlying basic earnings per share 4.4% higher ▪ Ro
Slide 6: 2018 underlying results summary – continuing operations
2018 underlying results summary – continuing operations Year ended 31 Year ended 31 £m December 2018 December 2017 Change Change Revenue 433.2 411.7 21.5 5.2% Cost of sales (251.8) (236.0) (15.8) Gross profit 181.4 175.7 5.7 3.2% Gross margin 41.9% 42.7% Selling, distribution and administration cost
Slide 7: Revenue and underlying operating profit bridge
Revenue and underlying operating profit bridge Revenue (£m) ▪ Organic growth: normal drop- +4.1 +0.2 +5.2 through of 30-35% compares ++12.0 to 8% in 2018 429.1 433.2 423.7 423.9 411.7 411.7 ▪ Relative growth in housebuilders and capacity constraints causing increased 2017 Selling price Currency Orga
Slide 8: 2018 statutory results
2018 statutory results £m 31 December 2018 31 December 2017 Underlying profit after tax 56.6 53.9 Non-underlying items: - Acquisition costs and contingent consideration (2.3) (0.3) - Unamortised debt issue costs written off (0.6) - - Middle East closure and other costs (0.1) (4.3) - Amortisation of
Slide 9: Balance sheet summary
Balance sheet summary 31 December 31 December Permavoid / 2018 Change 2018 Manthorpe (excluding 31 December (excluding £m As reported acquisitions acquisitions) 2017 acquisitions) Non-current assets ▪ property, plant and equipment 118.4 10.8 107.6 98.6 9.0 ▪ goodwill 343.0 23.3 319.7 319.7 0.0 ▪ oth
Slide 10: Net working capital
Net working capital 31 December 31 December Permavoid / 2018 Change 2018 Manthorpe (excluding 31 December (excluding £m As reported acquisitions acquisitions) 2017 acquisitions) Inventories 58.1 1.2 56.9 53.5 3.4 Trade and other receivables 37.4 3.3 34.1 34.5 (0.4) Trade and other payables (99.6) (4
Slide 11: Cash flows
Cash flows £m 31 December 2018 31 December 2017 Change EBITDA (before non-underlying items) 1 89.6 90.1 (0.5) Capital expenditure, net of disposals of property, plant and equipment (23.2) (23.2) (0.0) Movement in net working capital 3.8 (10.0) 13.8 Share-based payments 1.0 0.8 0.2 Operating cash flo
Slide 12: Consistently strong cash conversion
Consistently strong cash conversion ▪ Cash conversion* typically over 90% 102% ▪ 2017 temporarily impacted by the need to 100% 97% 96% stock build after pre-price increase pull- forward demand at the end of 2016 79% 80% 60% 40% 20% 2015 2016 2017 2018 * Operating cash flows after capital expenditure
Slide 13: Banking facilities
Banking facilities Headroom at 31 December 2018: Drawn as at 31 £m December 2018 Facility Headroom Bank loan 212.0 300.0 88.0 Cash and cash equivalents (46.2) - 46.2 Net debt excluding unamortised debt issue costs 165.8 134.2 Unamortised debt issue costs (1.6) Net debt 164.2 ▪ Uncommitted “accordion
Slide 14: Refinancing
Refinancing ▪ Renewal of the Group’s secured Revolving Credit Facility (RCF) brought forward from mid-2019 ▪ RCF increased from £290m to £300m, and renewed for a period of five years to November 2023 ▪ Two further uncommitted annual renewals through to November 2025 possible ▪ New uncommitted “accor
Slide 15: IFRS 16 (Leases)
IFRS 16 (Leases) ▪ Adoption of “simplified approach” will be applied to 2019 interim and full year results ▪ Group holds circa 290 leases, including cars, forklift trucks and some property ▪ No change to cash flow delivery or investing decisions ▪ Capitalisation of so-called “Right-of-use” assets ▪
Slide 16: IFRS 16 (Leases)
IFRS 16 (Leases) ▪ Immaterial impact on reporting and covenants IFRS 16 – balance sheet impact 31 December 31 December 2018 IFRS 16 2018 £m As reported adjustments including IFRS 16 Total assets 662.0 12.0-14.0 674.0 – 676.0 Total liabilities (330.8) (12.0) – (14.0) (342.8) – (344.8) Net assets 331.
Slide 17: Agenda
Agenda 1 INTRODUCTION 2 FINANCIAL SUMMARY 3 MARKET CONTEXT 4 BUSINESS REVIEW 5 STRATEGY 6 SUMMARY & OUTLOOK
Slide 18: UK Construction Market
UK Construction Market Total Output % change on y-1 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2015 2016 2017 2018 (f) 2019 (p) 2020 (p) -1.0% Source: Construction Products Association (CPA) Winter forecast January 2019 POLYPIPE © 2019 | 18
Slide 19: UK Construction Market
UK Construction Market New housebuild Commercial Total Housing % change on y-1 Commercial % change on y-1 Total New housebuild % change on y-1 10.0% 14.0% 8.0% 12.0% 6.0% 10.0% 4.0% 8.0% 2.0% 6.0% 0.0% 2015 2016 2017 2018 (f) 2019 (p) 2020 (p) -2.0% 4.0% -4.0% 2.0% -6.0% 0.0% -8.0% 2015 2016 2017 20
Slide 20: Agenda
Agenda 1 INTRODUCTION 2 FINANCIAL SUMMARY 3 MARKET CONTEXT 4 BUSINESS REVIEW 5 STRATEGY 6 SUMMARY & OUTLOOK
Slide 21: Balanced portfolio across UK construction market
Balanced portfolio across UK construction market 2018 Demand drivers RoW Europe 6% 5% UK RMI 26% UK Infrastructure 5% UK Commercial - Public 10% UK 89% UK Commercial - Private 11% UK New Build 37% Revenue as reported (including Permavoid and Manthorpe under the periods of ownership) POLYPIPE © 2019
Slide 22: Strong performance in UK
Strong performance in UK £m +5.9% 400.0 350.0 50.0 +13.8% -9.2% As reported revenue from continuing operations (i.e., excluding Polypipe France for 2016 and 2017, but including Permavoid and Manthorpe under the periods of ownership) POLYPIPE © 2019 | 22
Slide 23: Operating segment review – Residential Systems
Operating segment review – Residential Systems Residential Systems 2018 2017 % Growth Segmental revenue £249.9m £228.8m Inter segment revenue (£4.6m) (£5.3m) 2018 Geographic revenue split Revenue £245.3m £223.5m 9.8% Europe 3% Underlying operating profit £46.3m £44.3m 4.5% Underlying operating margi
Slide 24: Operating segment review – Commercial & Infrastructure Systems
Operating segment review – Commercial & Infrastructure Systems Commercial and Infrastructure Systems 2018 2017 % Growth Segmental revenue £197.2m £196.0m Inter segment revenue (£9.3m) (£7.8m) 2018 Geographic revenue split Revenue £187.9m £188.2m (0.2)% Underlying operating profit £27.7m £28.3m (2.1)
Slide 25: Sustainability – increasing use of recycled materials
Sustainability – increasing use of recycled materials ▪ Recycled plastic now represents 40% of all material consumption compared to 34% in 2017 POLYPIPE © 2019 | 25
Slide 26: Agenda
Agenda 1 INTRODUCTION 2 FINANCIAL SUMMARY 3 MARKET CONTEXT 4 BUSINESS REVIEW 5 STRATEGY 6 SUMMARY & OUTLOOK
Slide 27: Vision
Vision ◼ To be the leading provider of sustainable water and climate management solutions for the built environment ◼ We will do this by: − Building a world class sustainable business − Developing cost efficient solutions to substitute legacy materials − Leveraging our core UK competencies across ke
Slide 28: Our strategy
Our strategy ▪ Fill gaps to provide “One Leading Provider Stop Shop” solutions (not Of Sustainable Solutions just plastic) Customer-focused Complete Offer ▪ Water and Climate solutions ahead of legislation (e.g. Roof to Management Solutions Management Solutions Sustainable Climate River) Geographic
Slide 29: Fuze soil stack
▪ Substitution Fuze soil stack ▪ Fuze HDPE soil stack system, with fabrication service ▪ Substitution of cast iron soil stack systems ▪ Offsite fabrication takes complexity away from site POLYPIPE © 2019 | 29
Slide 30: Large diameter continuous corrugator
▪ Substitution Large diameter continuous corrugator ▪ Production technology : Drossbach continuous corrugator ▪ Reduced cost per unit length than existing Krah technology ▪ Enables a competitive proposition against concrete for 750mm and 900mm diameter ▪ Legacy material substitution ▪ Sustainability
Slide 31: Our strategic priorities – focus for M&A
▪ Complete offer Our strategic priorities – focus for M&A ◼ Plastic is our primary objective − Continue with legacy material substitution − Limited UK consolidation opportunity ◼ Need to provide the “full” offer to our UK customers, as a “one stop shop” − Some elements where plastic may not be the b
Slide 32: Acquisitions - Manthorpe Building Products
Acquisitions - Manthorpe Building Products ▪ Leading UK producer of a range of moulded and extruded plastic and metal DRY FIX ROOFING LOFT DOOR ROOF VENTILATION products ▪ Attractive product portfolio and strong cultural fit, with emphasis on innovation and superior solutions for customers CAVITY CL
Slide 33: Acquisitions - Manthorpe strategic fit
Acquisitions - Manthorpe strategic fit Target Product 1 Sustainable Water Management Solutions P Sector 2 Sustainable Climate Management Solutions P 3 Legacy Material Substitution P 4 Legislative Tailwinds P Strategic Growth 5 Geographic Reach Drivers 6 Customer “One Stop Shop” P 7 Continuous Proces
Slide 34: Acquisitions - Permavoid
Acquisitions - Permavoid ▪ Permavoid system of modular cells, of 85mm or 150mm, that clip together to form a raft structure suitable for sub-base replacement - Plus components that incorporate silt / oil treatment, shallow flow controls, and irrigation through capillary wicking ▪ Serving various sec
Slide 35: Acquisitions - Permavoid strategic fit
Acquisitions - Permavoid strategic fit Target Product 1 Sustainable Water Management Solutions P Sector 2 Sustainable Climate Management Solutions P 3 Legacy Material Substitution 4 Legislative Tailwinds P P Strategic Growth 5 Geographic Reach Drivers 6 Customer “One Stop Shop” P 7 Continuous Proces
Slide 36: Agenda
Agenda 1 INTRODUCTION 2 FINANCIAL SUMMARY 3 MARKET CONTEXT 4 BUSINESS REVIEW 5 STRATEGY 6 SUMMARY & OUTLOOK
Slide 37: Summary & outlook
Summary & outlook ▪ Strong performance despite adverse weather in Q1 ▪ Good momentum in second half in both segments ▪ Cost inflation successfully passed through in price increases ▪ Alternative Middle East manufacturing strategy successfully implemented ▪ Significant strategic progress ▪ Continued
Slide 38: Questions & Answers
Questions & Answers © Polypipe
Slide 39: Disclaimer
Disclaimer The information contained in this presentation has not been independently verified and this presentation contains various forward-looking statements that reflect management’s current views with respect to future events and financial and operational performance. The words “growing”, “scope