Slide 1: Results Presentation
RESULTS PRESENTATION Final results for the year ended 31 December 2021 Europe’s leading floorcoverings distributor
Slide 2: Agenda
AGENDA Chris Payne Chief Executive and Chief Financial Officer • About Us • Financial Overview • Strategy and Operations • 2021 Financial Performance • Surplus Capital Return • ESG Strategy • Post Period End and Current Trading 2
Slide 3: About Us
ABOUT US Europe’s leading floorcoverings distributor Market Leading • 30 years operating • 24,830 trade customer accounts • Most comprehensive service offering • 39,000 SKUs Nationwide Operations • 66 businesses • 21 distribution hubs and centres • 53 trade counters • Dedicated sales teams Strong Fo
Slide 4: 2021 Financial Highlights
2021 FINANCIAL HIGHLIGHTS Operated effectively throughout despite COVID-19 and industry issues Revenue • Revenue +15.4% at £667.2m, a strong rebound from 2020 which was materially impacted by COVID-19 related closures of operations in H1 20 (2020: £578.1m) • Gross margin increased to a record 33.0%
Slide 5: Financial Track Record
FINANCIAL TRACK RECORD Strong recovery from impact of COVID-19 Revenue Statutory basic (loss)/earnings per share Underlying operating profit £667.2m 719.2 667.2 23.5p £37.3m 42.2 37.3 578.1 +15.4% +213.5% +114.4% (2020: £578.1m) (2020: (20.7)p) (2020: £17.4m) 17.4 Statutory operating profit £29.1m 2
Slide 6: UK Distribution Daily Sales
UK DISTRIBUTION DAILY SALES* 3,000k 2,500k 2,000k 1,500k 1,000k 500k - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 2018 2019 2020 2021 2022 *Calculated on a like-for-like basis, being based on activities and businesses that made a full contribution in both the current and previous year, and
Slide 7: Strategy and Operations
STRATEGY AND OPERATIONS 7
Slide 8: 2021 Operational Highlights
2021 OPERATIONAL HIGHLIGHTS Significant progress made in implementing the business change strategy Industry wide issues Simplification of able to be largely operations, including mitigated disposal of Belcolor Inventory and product Network and delivery availability maintained consolidations enacted
Slide 9: Business Change Strategy
BUSINESS CHANGE STRATEGY Meaningful organic revenue growth from an efficient operating base • Operational efficiency through simplification, cost control and digitalisation • Actively targeting a larger share of the £3 billion* UK market • Improved service propositions to customer segments £3 billio
Slide 10: Strategy in Action
STRATEGY IN ACTION Benefits flowing through both operationally and financially Operating Product and Suppliers and ESG Efficiency Brands Buying Strategy Network and delivery Refocusing of some Increased engagement and First full-form report consolidations (reductions in recognised product brands str
Slide 11: Trade Counters
TRADE COUNTERS Accelerating roll-out of new and improved sites nationwide New ‘blueprint’ sites performing well 11 sites now operating under the new ‘blueprint’ Positive feedback from customers and employees Encouraging early performances: • Higher revenue • New account openings • Accelerating roll-
Slide 12: Multiple Retailers
MULTIPLE RETAILERS Substantial scope to develop the revenue opportunity New Customer: Oak Furnitureland Specialist British furniture retailer with 70 stores across the UK New customer since Q4 2021 Partnered with Headlam to launch their new engineered wood flooring proposition • Headlam significantl
Slide 13: Digital and Ecommerce Applications
DIGITAL AND ECOMMERCE APPLICATIONS Increasing revenue opportunities and efficiency Industry-leading fully transactional mobile app launched in November 2021 Enabling customers to trade with Headlam in a quick and easy way • Access to all Headlam accounts ‘on the go’ • Curated suite of digital produc
Slide 14: Product and Brand Development
PRODUCT AND BRAND DEVELOPMENT Refocusing of some recognised product brands Refocus • Investment in a dedicated team to support product and brand development • Refocusing of some recognised product brands to keep them fresh and increase sales opportunity • More brands to follow Launch of sustainable
Slide 15: Suppliers and Buying
SUPPLIERS AND BUYING Long-established relationships, with many opportunities Inventory Management Sustainability • Able to maintain inventory levels • Supply Risk Assessment underway despite industry wide supply issues • Further sustainable product • Testament to long-established launches planned in
Slide 16: Financials
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Slide 17: Income Statement
INCOME STATEMENT Income Statement 2021 2020 re‐presented Continuing Operations £M % £M % Revenue 667.2 100.0% 578.1 100.0% Cost of sales (446.7) (67.0)% (400.0) (69.2)% Gross profit 220.5 33.0% 178.1 30.8% Distribution costs (125.9) (18.9)% (113.9) (19.7)% Administrative expenses (57.3) (8.6)% (46.8
Slide 18: Revenue Movement
REVENUE MOVEMENT Revenue Continuing Operations £M % £M % 2020 revenue: UK 504.7 87.3 Continental Europe 73.4 12.7 578.1 100.0 UK incremental items: Like‐for‐like 82.5 16.3 Change in working days (2.0) (0.4) Acquisitions 0.6 0.1 81.1 16.0 Continental Europe incremental items: Like‐for‐like 11.0 15.0
Slide 19: Underlying Operating Profit Movement
UNDERLYING OPERATING PROFIT MOVEMENT Operating Profit Underlying Non‐underlying Total Continuing Operations £M £M £M 2020 Operating profit 17.4 (29.6) (12.2) Gross margin changes: 42.4 ‐ 42.4 Expense changes: Volume (3.1) ‐ (3.1) Furlough grants (11.0) ‐ (11.0) Bad debt provision 6.7 ‐ 6.7 People co
Slide 20: Non-Underlying Items
NON-UNDERLYING ITEMS Non‐underlying items 2021 2020 Continuing Operations £M £M Impairment of goodwill and intangibles 2.1 24.7 Amortisation of intangibles 1.6 1.6 Impairment of PPE and inventory (following fire) 7.3 ‐ Non‐underlying non‐cash items 11.0 26.3 Property disposal profit (5.1) ‐ Business
Slide 21: Cash Flow Movement
CASH FLOW MOVEMENT Cash Flow 2021 2020 £M £M Underlying EBITDA 56.4 40.4 Change in inventories (26.6) 15.3 Change in receivables (16.6) 23.2 Change in payables 5.4 (4.8) Other 1.0 ‐ Cash generated from operations (underlying) 19.6 74.1 Interest and tax (3.5) (8.2) Disposal proceeds (inc non‐underlyi
Slide 22: Balance Sheet
BALANCE SHEET Balance Sheet Dec 2021 Dec 2020 £M £M Property, plant and equipment 113.3 122.9 Intangibles 18.1 21.1 Inventories 130.9 118.5 Trade and other receivables 114.0 101.6 Cash 61.2 60.8 Trade and other payables (178.0) (178.4) Borrowings (7.5) (9.2) Other assets and liabilities (19.9) (17.3
Slide 23: UK Sterling Net Debt Daily Balances
UK STERLING NET DEBT DAILY BALANCES 23
Slide 24: Dividends and Surplus Capital Return
DIVIDENDS AND SURPLUS CAPITAL RETURN 24
Slide 25: Shareholder Returns
SHAREHOLDER RETURNS Surplus return providing income and value creation Capital Allocation Priorities* Maintain strong balance sheet Increased Investment • Trade counter roll-out • Replacing / upgrading warehouse Investment in the business equipment and MHE Ordinary Dividends • Total of 16.4p** in re
Slide 26: ESG Update
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Slide 27: ESG Strategy
ESG STRATEGY Tangible progress since initial report in 2021 Core focuses • Reducing contribution to Greenhouse Gas (‘GHG’) emissions and climate change • Becoming a more sustainable business, including through cultural development and increased oversight • Increasing the sustainability of the overal
Slide 28: Post Year-End and Current Trading
POST YEAR-END AND CURRENT TRADING 28
Slide 29: Post Period-End and Outlook
POST PERIOD-END AND OUTLOOK Confident in current expectations and delivery of strategy Board Changes • Chris Payne appointed permanent Chief Executive on 8 March 2022 • Search for new Chief Financial Officer underway • Keith Edelman, SID, becoming Non-Exec Chairman at AGM in May 22, Philip Lawrence
Slide 30: Q&A
Q&A headlamgroup@headlam.com 30