Slide 1: Final Results for the Financial Year Ended 31 December 2016
Final Results for the Financial Year Ended 31 December 2016
Slide 2: Agenda
Agenda Introduction & Highlights Gavin Slark Financial Review David Arnold Strategic Progress & Outlook Gavin Slark Questions Cautionary Statement Certain statements made in this presentation are forward-looking statements. Such statements are based on current expectations and are subject to a numbe
Slide 3: Introduction & Highlights
Introduction & Highlights Gavin Slark, CEO 3
Slide 4: Grafton – What differentiates us?
Grafton – What differentiates us? Selco Tried and trusted format focused on RMI market Higher returns than traditional Merchanting model An increasing proportion of UK revenue Focus for continued investment Ireland Market leading positions in Merchanting and DIY Recovering economy – three years of d
Slide 5: Grafton – What differentiates us?
Grafton – What differentiates us? The Netherlands Strong platform to grow in a fragmented market Good management and strong returns Favourable outlook for economy and construction sector G&M acquisition brings market leadership position in Greater Amsterdam area Financial strength and track record S
Slide 6: Group Financial Highlights
Group Financial Highlights Revenue up 13% to £2.5bn (10% in constant currency) Adjusted EBITA up 12% to £142.0m Adjusted EPS up 16% and dividend up 10% Adjusted EBITA margin (pre property profits) constant at 5.5% ROCE up 30 basis points to 12.5% Please refer to Notes and Definitions in Appendix 1 a
Slide 7: Group Operational Highlights
Group Operational Highlights Selco continued to perform well – investment in new store openings gathered pace Restructuring completed in UK Plumbing & Heating and Contracts businesses Significant profit increase in Irish Merchanting and Woodie’s Isero performed strongly in first full year Strong gro
Slide 8: Financial Review
Financial Review David Arnold, CFO 8
Slide 9: Income Statement
Income Statement Movement £m Constant 2016 2015 Reported currency Revenue 2,507.3 2,212.0 13.4% +10.4% Adjusted EBITA pre property profits 137.1 120.6 +13.7% Property profits 4.9 6.7 Adjusted EBITA 142.0 127.3 +11.5% Exceptional charge (19.7) Amortisation and other (2.2) 0.9 Statutory operating Prof
Slide 10: Income Statement (cont’d)
Income Statement (cont’d) 2016 2015 Movement Adjusted EBITA margin pre property profit 5.5% 5.5% - Adjusted EBITA margin 5.7% 5.8% (10 bps) Underlying tax rate 19.0% 21.0% (200 bps) Adjusted earnings per share 47.7p 41.2p +15.8% Dividend per share 13.75p 12.50p +10.0% Dividend cover 3.5x 3.3x +0.2x
Slide 11: Exceptional Items
Exceptional Items 2016 exceptional charge of £19.7m in line with previous guidance £16.1m relates to restructuring in traditional UK Merchanting Moved quickly to address under performing areas of the business in Plumbing & Heating / Contracts with the closure of 47 branches in total £5.0m in annuali
Slide 12: Revenue Growth Analysis
Revenue Growth Analysis £’m 2,550 65 2,507 2,500 2,450 113 2,400 2,350 117 Revenue 2,300 2,250 2,212 2,200 2,150 2,100 2,050 2015 Organic growth Acquisitions FX 2016 12
Slide 13: Organic Revenue Growth Analysis
Organic Revenue Growth Analysis (Constant Currency) £’m 160 40.1 140 120 3.0 (23.7) 117.3 100 38.3 0.5 8.7 Revenue 80 (5.7) 60 40 56.1 20 0 UK Ireland Netherlands Belgium Retail Manufacturing Growth Branch Organic Merchanting Merchanting Merchanting Merchanting Initiatives Restructuring Growth LFL B
Slide 14: Adjusted EBITA Analysis
Adjusted EBITA Analysis £’m 145 11.0 1.6 140 142.0 (1.8) 135 5.5 Adjusted EBITA 0.7 130 (2.3) 125 127.3 120 115 2015 Like-for-Like Growth Branch Acquisitions Property FX 2016 Business Initiatives Restructuring Disposals 14
Slide 15: Like for Like Business EBITA Analysis
Like for Like Business EBITA Analysis £’m 135 67% 133 (0.5) 132.8 131 2.0 129 Adjusted EBITA 127 127.3 0.6 (0.1) 3.5 125 123 121 119 (6.1) 6.1 117 115 2015 UK Merchanting Irish Netherlands Belgium Retail Manufacturing Central 2016 Merchanting Merchanting Merchanting 15
Slide 16: Like for Like Business EBITA Analysis
Like for Like Business EBITA Analysis £’m 135 67% 133 40% (0.5) 132.8 131 2.0 5.5 129 16% Adjusted EBITA 127 127.3 0.6 (0.1) 3.5 125 123 121 119 (6.1) 6.1 117 115 2015 UK Merchanting Irish Netherlands Belgium Retail Manufacturing Central 2016 Merchanting Merchanting Merchanting 16
Slide 17: UK Merchanting
UK Merchanting £m 2016 2015 Movement Revenue 1,771.7 1,662.0 +6.6% Adjusted EBITA pre property profits 94.8 99.2 (4.5%) Adjusted EBITA 99.7 105.9 (5.9%) Adjusted EBITA margin pre-property profits 5.4% 6.0% (60bps) Adjusted EBITA margin 5.6% 6.4% (80bps) Growth in average daily like-for-like revenue
Slide 18: Irish Merchanting
Irish Merchanting Movement Constant £m 2016 2015 Reported Currency Revenue 347.7 274.5 +26.7% +11.9% EBITA 27.1 18.7 +44.6% +27.0% EBITA margin 7.8% 6.8% 100bps Market share gains in a recovering market 3rd successive year of double digit like for like organic growth Recovery more broadly based acro
Slide 19: Netherlands Merchanting
Netherlands Merchanting £m 2016 2015 Revenue 87.7 8.5 EBITA 9.1 0.5 EBITA margin 10.4% 5.4% Excellent first full year of trading from Isero under Grafton ownership New branch opened in North Amsterdam with further branch opening planned in Q2 Gunters en Meuser acquisition completed in January 2017 –
Slide 20: Belgium Merchanting
Belgium Merchanting Movement Constant £m 2016 2015 Reported Currency Revenue 83.5 82.8 +0.9% (10.6%) Adjusted EBITA (0.7) (0.3 ) (130.9%) (149.9%) Adjusted EBITA margin (0.8%) (0.4%) (40bps) Trading adversely affected by weakness in construction sector Cost reductions and efficiencies implemented Fo
Slide 21: Retailing
Retailing Movement Constant £m 2016 2015 Reported currency Revenue 157.1 131.4 +19.5% +5.6% Adjusted EBITA 7.3 3.3 +119.2% +90.9% Adjusted EBITA margin 4.6% 2.5% +210 bps Continuing improvements in sourcing, merchandising and supply chain management Gross margin increased and overheads tightly contr
Slide 22: Manufacturing
Manufacturing £m Movement 2016 2015 Revenue 59.6 52.8 12.8% EBITA 12.2 9.8 24.6% EBITA margin 20.4% 18.5% 190 bps Good volume growth in CPI Euromix, our UK mortar business Investment in commercial initiatives contributed to margin gains In Ireland, MFP performed strongly – growth in housing and new
Slide 23: Balance Sheet
Balance Sheet £m Dec Dec 2016 2015 Intangible assets 610.8 554.2 Tangible assets 491.8 458.7 Working capital 166.7 166.1 Other assets/(liabilities) (76.5) (59.8) Pension deficit (31.3) (16.6) 1,161.5 1,102.6 Net debt (96.3) (113.6) Equity 1,065.2 989.0 Adjusted ROCE 12.5% 12.2% Net debt/Adjusted EBI
Slide 24: Balance Sheet
Balance Sheet £m Dec Dec 2016 2015 Intangible assets 610.8 554.2 Tangible assets 491.8 458.7 Working Working capital 166.7 166.1 capital Other assets/(liabilities) (76.5) (59.8) reduction ex FX Pension deficit (31.3) (16.6) 1,161.5 1,102.6 Net debt (96.3) (113.6) Equity 1,065.2 989.0 Adjusted ROCE 1
Slide 25: Working Capital
Working Capital £m Dec Dec 2016 2015 Working capital at 1 January 166.1 127.1 FX translation, interest accrual and other 5.1 0.7 Acquisitions and disposals (1.5) 24.5 Working capital reduction (3.0) 13.8 Trading working capital at 31 December 166.7 166.1 Revenue 2,507.3 2,212.0 Trading working capit
Slide 26: Balance Sheet
Balance Sheet £m Dec Dec 2016 2015 Intangible assets 610.8 554.2 Tangible assets 491.8 458.7 Working capital 166.7 166.1 Other assets/(liabilities) (76.5) (59.8) Impact of Pension deficit (31.3) (16.6) reduction in 1,161.5 1,102.6 discount rates Net debt (96.3) (113.6) Equity 1,065.2 989.0 Adjusted
Slide 27: Balance Sheet
Balance Sheet £m Dec Dec 2016 2015 Intangible assets 610.8 554.2 Tangible assets 491.8 458.7 Working capital 166.7 166.1 Other assets/(liabilities) (76.5) (59.8) Pension deficit (31.3) (16.6) 1,161.5 1,102.6 Net debt (96.3) (113.6) Low financial Equity 1,065.2 989.0 leverage despite impact of Adjust
Slide 28: Cash Flow
Cash Flow £m Dec Dec 2016 2015 Cash from operations 168.6 139.3 Interest and tax (21.9) (25.7) Replacement capex net of disposals (12.9) (8.9) Free cash flow 133.8 104.7 Investment capex (37.6) (31.4) Dividends (30.0) (26.8) Share issue 0.5 3.3 Acquisitions (11.9) (98.6) Net cash flow before FX tran
Slide 29: Cash Flow
Cash Flow £m Dec Dec 2016 2015 Cash from operations 168.6 139.3 +£29.3m +21% Interest and tax (21.9) (25.7) Replacement capex net of disposals (12.9) (8.9) Over the last 5 Free cash flow 133.8 104.7 years cash from Investment capex (37.6) (31.4) operations has Dividends (30.0) (26.8) represented 125
Slide 30: Cash Flow
Cash Flow £m Dec Dec 2016 2015 Cash from operations 168.6 139.3 Interest and tax (21.9) (25.7) Replacement capex net of disposals (12.9) (8.9) Net capex – 1.4x Free cash flow 133.8 104.7 depreciation Investment capex (37.6) (31.4) Dividends (30.0) (26.8) Share issue 0.5 3.3 Acquisitions (11.9) (98.6
Slide 31: Cash Flow
Cash Flow £m Dec Dec 2016 2015 Cash from operations 168.6 139.3 Interest and tax (21.9) (25.7) Replacement capex net of disposals (12.9) (8.9) Free cash flow 133.8 104.7 +£29.1m +28% Investment capex (37.6) (31.4) Dividends (30.0) (26.8) Share issue 0.5 3.3 Acquisitions (11.9) (98.6) Net cash flow b
Slide 32: Strategic Progress & Outlook
Strategic Progress & Outlook Gavin Slark, CEO 32
Slide 33: Selco – Investment in New Stores
Selco – Investment in New Stores Stores Opened and Scheduled to Open in 2017 18 FORECAST 16 10 14 12 10 8 7 6 5 4 2 1 0 2014 2015 2016 2017 Number of Branches 35 40 47 57 33
Slide 34: Selco Investment
Selco Investment Selco delivers strong operating margins and ROCE – key growth focus for Grafton 48 branches currently - 2017 openings on track with at least 10 new branches planned. New Beckton branch opened last week Expanding our geographic base Investment will create significant value in the med
Slide 35: UK Traditional Merchanting Market
UK Traditional Merchanting Market Intense focus on gross margin improvement programme A number of initiatives in train - there is no single solution Service innovations, for example guaranteed same day delivery Electricbase generated sales of £42m and incremental contribution of £2.2m in 2016 – now
Slide 36: Development of Merchanting Business in the Netherlands
Development of Merchanting Business in the Netherlands Delighted with first year performance - EBITA of £9.1m at 10.4% margin Positive news flow on Dutch economy and housing market Organic growth and market consolidation opportunities Excellent management team Gunters en Meuser acquisition completed
Slide 37: Current Trading – Two months to end February 2017
Current Trading – Two months to end February 2017 Like-for-like daily revenue Q4 2016 2 months to Feb 2017 Merchanting UK 4.6% 4.0% Ireland 11.4% 13.9% Netherlands N/a 2.9% Belgium (6.9%) (12.3%) Retailing 5.4% 5.7% Manufacturing 9.5% (3.5%) Total Group 5.3% 4.7% 37
Slide 38: Outlook
Outlook UK Recent UK macro indicators suggest modest increase in volume Competitive conditions likely to remain against inflationary backdrop Ireland Irish economy forecast to remain strong Market leading positions should continue to support market outperformance The Netherlands Outlook for Dutch ec
Slide 39: Summary
Summary Exposure to the faster growing economies of Ireland and the Netherlands are a distinct advantage Continuing to invest in Selco – strong returns and good growth potential Decisive action taken to address performance in more uncertain UK market Financial strength and spread of businesses over
Slide 40: Questions
Questions 40
Slide 41: Appendices
Appendices Grafton Group ple
Slide 42: Appendix 1 Notes & Definitions
Appendix 1 Notes & Definitions Notes With effect from 1 January 2016, In-House Kitchens has been reclassified from the Retail to Merchanting segment. It is now shown within Irish Merchanting. Prior year comparatives have been restated, where applicable, to reflect this change. No like-for-like analy
Slide 43: Appendix 2 Operating Profit Bridge – Statutory to Adjusted
Appendix 2 Operating Profit Bridge – Statutory to Adjusted 2016 2015 Change £’m £’m £’m Revenue 2,507.3 2,212.0 +295.3 Statutory operating profit 120.1 128.2 (8.1) Exceptional items 19.7 - +19.7 Amortisation of acquired intangible assets 2.2 0.5 +1.7 Defined benefit pension scheme past service credi
Slide 44: Appendix 3 Revenue Growth
Appendix 3 Revenue Growth 2016 Like-for-Like 2016 Q1 Q2 Q3 Q4 FY Total Revenue Constant Merchanting Reported currency UK 5.3% 1.6% 0.5% 4.6% 2.9% 6.6% 6.6% Ireland 12.3% 10.9% 11.8% 11.4% 11.6% 11.9% 26.7% Belgium (5.4%) (9.5%) (3.2%) (6.9%) (6.4%) (10.6%) 0.9% Retailing 10.0% 4.2% 4.1% 5.4% 5.6% 5.
Slide 45: Appendix 4 Operating Margin Analysis
Appendix 4 Operating Margin Analysis* H2 H1 H2 H1 H2 H1 2016 2016 2015 2015 2014 2014 UK Merchanting 5.5% 5.7%) 6.2%) 6.5%) 6.1%) 6.1%) Irish Merchanting 8.6% 6.8%) 7.9%) 5.7%) 7.4%) 4.1%) Netherlands Merchanting 9.5% 11.3%) 3.8%) - - - Belgium Merchanting (1.3%) (0.3%) (1.7%) 0.8%) 0.4%) 1.5%) Tota
Slide 46: Appendix 5 UK Housing Transactions 2007 - 2016
Appendix 5 UK Housing Transactions 2007 - 2016 ‘000 500 450 400 350 300 250 200 150 100 50 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 •Quarterly Seasonally Adjusted Source: HM Revenue & Customs UK Property Transactions Count 46
Slide 47: Appendix 6 Housing Starts & Completions – England
Appendix 6 Housing Starts & Completions – England: 1999 - 2016 ‘000 Starts Completions 200 180 160 140 120 100 80 60 40 20 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: UK Department for Communities & Local Government on a rolling 12 month basis
Slide 48: Appendix 7 UK Mortgage Approvals: 2008 - 2016
0 10 80 20 30 40 50 60 70 90 '000 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Appendix 7 Source: Bank of England Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 UK Mortgage Approvals: 2008 - 2016 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15
Slide 49: Appendix 8 House Completions – Ireland 1994 - 2016
Appendix 8 House Completions – Ireland 1994 - 2016 100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: Department of Housing, Planning, Community and Local Government - on a rolling 12 month basis 49
Slide 50: Appendix 9 Mortgages Approvals in Ireland: 2002 - 2016
Appendix 9 Mortgages Approvals in Ireland: 2002 - 2016 Value Value Volume Volume €bn ‘000 45 250 40 35 200 30 150 25 20 100 15 10 50 5 - - 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: BPFI on a rolling 12 month basis 50