Howden Joinery Group Plc · LSE:HWDN
Howden Joinery — FY2022 Earnings Presentation
69 slides from Howden Joinery's earnings presentation, Feb 23, 2023
Slide 1: 2022 Full Year Results
2022 Full Year Results 23rd February 2023
Slide 2: Andrew Livingston, Chief Executive Officer
Andrew Livingston Chief Executive Officer
Slide 3: A successful year across the board
A successful year across the board Record Sales and Profit for the 52 weeks Group Sales c.+11% on 2021 and c.+46% on 2019 Gained more market share Consolidated last year’s step change in profits Gross profit margin similar to last year Progressed our strategic plans for the business Strong cashflow
Slide 4: Carbon neutral manufacturing with zero waste to landfill
Carbon neutral manufacturing with zero waste to landfill (UK depots 99.7%) UK depots switched to renewable energy 4
Slide 5: Committed to SBTi targets
Committed to SBTi targets Direct emissions halved by 2030 and net zero by 2050 5
Slide 6: Performance demonstrates strength of our in-stock model
Performance demonstrates strength of our in-stock model founded on local relationships Combination of strong product line-up, high stock availability, industry leading service levels and very engaged team Benefits of ongoing investment in customer focused strategic initiatives Record number of custo
Slide 7: Robust business model across changing market conditions
Robust business model across changing market conditions Prepared for a more challenging market 2023 Model capable of delivering sustainable market share gains across changing conditions Market opportunity is larger than we thought Investing in business commensurately
Slide 8: Initiatives to increase volumes and profits
Initiatives to increase volumes and profits Depot Evolution Range and Supply Management Digital Development International
Slide 9: Financial Review: Paul Hayes
FINANCIAL REVIEW Paul Hayes Chief Financial Officer
Slide 10: Financial highlights
Financial highlights Another strong year that positions Howdens for continued success Change vs Change vs Further market share gains highlights £m 2022 2021 2021 2019 attractive business model Revenue 2,319.0 2,093.7 +10.8% +46.4% Maintained sector leading margins in more inflationary market Gross p
Slide 11: Revenue growth
Revenue growth Balanced approach to pricing and volume generated strong growth Delivered another record peak UK (£m) 2022 2021 Growth trading performance in H2 Revenue 2,256.1 2,043.3 +10.4% Disciplined approach to pricing Same depot basis1 2,193.3 2,035.8 +7.7% UK volumes ahead of the market with N
Slide 12: Profit before tax
Profit before tax Profit growth despite higher inflation and investments for growth £m Volumes broadly similar to record Product cost prior year comparators Price pressure / (revenue) saving etc. Change Price rises more than recovered input Operating £16m cost and energy price increases Costs Intere
Slide 13: Operating expenses
Operating expenses Continued long-term investment in our strategic initiatives Investment includes: £m 61 new UK depots since start of Change FY 2020 £109m Other Digital International costs Warehousing and transportation growth Warehouse & IS includes part year impact of full roll & Transport out of
Slide 14: Tax – patent box claim
Tax – patent box claim Investment in innovation drives lower effective tax rate Patented cabinet leg is unique to the market and meets builders’ needs in three ways: Strength: will withstand a lifetime fully laden and cabinet can be moved around across uneven flooring on legs Speed: quick to install
Slide 15: Cashflow
Cashflow Strong cash generation supports investments and capital returns £m 2022 £365m returned to shareholders in £m 2022 2021 dividends and buy-backs Opening cash 515.3 430.7 Operating cash flows1 546.5 530.7 Working capital movements including inflationary increases: Working capital (increase) (5
Slide 16: Earnings per share and dividends
Earnings per share and dividends Delivering sustainable dividend growth and returning surplus capital 2022 2021 Change Earnings per share up 23.7% incudes impact of patent box claim and lower Basic earnings per share (p per share) 65.8p 53.2p +23.7% share count from buy-back £250m share buy-back com
Slide 17: Technical guidance for the year ending December 2023
Technical guidance for the year ending 30 December 2023 Income statement 53rd week in December when depot network is closed Impact of additional 53rd week on operating £(17)m expenses Expect 2023 ETR of around 22% including Patent box impact on Group effective tax rate (ETR) 3% lower 3% patent box b
Slide 18: Capital allocation
Capital allocation We have a strong balance sheet and clear capital allocation priorities Invest in organic expansion in Grow a progressive and sustainable line with the strategy ordinary dividend through the cycle 1 2 Significant shareholder value creation 4 3 Return surplus cash to shareholders In
Slide 19: Summary
Summary Strong financial results and good progress on our strategic initiatives Balance sheet and cash flow supports our investment in future growth and providing attractive shareholder returns Business is in great shape. We are confident in our business model and our ability to make good progress i
Slide 20: Andrew Livingston, Chief Executive Officer
Andrew Livingston Chief Executive Officer
Slide 21: Significant opportunity in large markets
Significant opportunity in large markets 21 2022 UK Market Sales £14.0bn £14.0b £12.0bn £12.0b £11.5bn £11.5b £10.0bn £10.0b £8.0bn £8.0b £7.0bn £7.0b £6.0bn £6.0b £4.5bn £4.5b £4.0bn £4.0b £2.0bn £2.0b £2.3bn £0.0bn £0.0b Kitchens Other Categories Combined Howdens 21
Slide 22: Initiatives to increase volumes and profits
Initiatives to increase volumes and profits Depot Evolution Range and Supply Management Digital Development International
Slide 23: Initiatives to increase volumes and profits
Initiatives to increase volumes and profits Depot Evolution Range and Supply Management Digital Development International
Slide 24: Extending the UK footprint
Extending the UK footprint High service levels valued by customers Modern working and trading environment Cost effective updated format 30 depots opened in 2022: 808 Total at year-end Scope for c.1,000 depots in the UK, plan to open c.30 in 2023 Including some in new smaller sized format (increase s
Slide 25: Converting more existing depots to the updated format
Converting more existing depots to the updated format Positive feedback from depot teams and customers Investment to be recouped in less than four years Depots motivated to deliver incremental sales (local P&L charged 185 depots reformatted for revamp costs) Now varying “standard by end of 2022 re-f
Slide 26: Initiatives to increase volumes and profits
Initiatives to increase volumes and profits Depot Evolution Range and Supply Management Digital Development International
Slide 27: Market leading and competitively priced product is a key feature of our model
Market leading and competitively priced product is a key feature of our model 21 new kitchen ranges in 2022 Emphasis on higher priced kitchens More popular styles accessible to all budgets Innovative product for other categories 27
Slide 28: Sales of new product (NPI) make a significant contribution
Sales of new product (“NPI”) make a significant contribution to our performance c. 22% Total sales of new product introduced in 2021/2022 represented around c.22% of UK sales + 69% Sales of product launched in 2021, +69% in 2022 11% Sales of 2022 NPI alone up 11% on 2021 NPI sales last year Higher p
Slide 29: 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 Improved balance between introductions and discontinuations More efficient NPI testing enables us to bring more proven colours and styles to market more quick
Slide 30: New colours for our entry level ranges
2023: New colours for our entry level ranges Greenwich Reed Green 30
Slide 31: New colours for our entry level ranges
2023: New colours for our entry level ranges Witney Pebble 31
Slide 32: New colours for our entry level ranges
2023: New colours for our entry level ranges Witney Navy 32
Slide 33: New colours for our entry level ranges
2023: New colours for our entry level ranges Allendale Dusk Blue 33
Slide 34: New frontals for our entry level ranges
2023: New frontals for our entry level ranges Greenwich Grey Croft Cabinet 34
Slide 35: New frontals for our entry level ranges
2023: New frontals for our entry level ranges Witney Grey Croft Cabinet 35
Slide 36: Refreshed look for best selling shaker family
2023: Refreshed look for best selling shaker family Halesworth Charcoal 36
Slide 37: New mid-priced beaded shaker family, Bridgemere
2023: New mid-priced beaded shaker family, Bridgemere Bridgemere Porcelain 37
Slide 38: New market leading colours for premium kitchens
2023: New market leading colours for premium kitchens Hockley Black 38
Slide 39: New market leading colours for premium kitchens
2023: New market leading colours for premium kitchens Hockley Fir Green 39
Slide 40: New market leading colours for premium kitchens
2023: New market leading colours for premium kitchens Chilcomb Marine Blue 40
Slide 41: Acquired Sheridan, a leading provider of solid surface worktops
2022: Acquired Sheridan, a leading provider of solid surface worktops Accelerated plan to develop Howdens Work Surfaces as market leading supply and fit business Growing market segment in which Howdens is under-represented More of solid surface capability in-house, with associated cost benefits 41 4
Slide 42: A market leading solid surface capability
2023: A market leading solid surface capability Our total solid surface manufacturing capacity is amongst the largest in UK Orders increased significantly across 2022 Six more solid surface decors for 2023 42
Slide 43: Reinvigorated line-up in other categories
2 00 2233 : Reinvigorated line-up in other categories Granite Composite Sink Dark Grey Herringbone Timeless Oak Howdens Lennox Glazed Door Lamona Built In Single Fan Oven and Grill Black/Clear Glaze Black 43
Slide 44: Reinforced focus on price and promotions
2023: Reinforced focus on price and promotions which demonstrate the value we offer and promote footfall 44
Slide 45: Protecting our in-stock offer
Protecting our in-stock offer Significant engagement with Supply base Inbound logistics for 75% of bought-in SKUs managed in-house – high visibility on stock flow Multi-modal freight routes used to minimise disruption and optimise delivery times In 2022, continued with 2021 policy of holding enhance
Slide 46: Using XDCs to facilitate high stock availability
Using XDCs to facilitate high stock availability 46
Slide 47: 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 Using
Slide 48: Making more frontals for more of our kitchen ranges
2023: Making more frontals for more of our kitchen ranges Initial investment to make Hockley kitchen doors in 2019 Frontal capability then broadened with investment in new lines at the Howden site Same quality as externally sourced product Lower cost and reduced lead time to delivery Ramping up towa
Slide 49: Increased architrave and skirting capability
2023: Increased architrave and skirting capability 49
Slide 50: Intention to extend our kitchen manufacturing facilities
Intention to extend our kitchen manufacturing facilities over the next few years (announced last year) Progressing investment plans to: Increase the kitchen manufacturing capacity at Howden site Make more kitchen furniture, including doors in more finishes Reconfigure some of the associated infrastr
Slide 51: Initiatives to increase volumes and profits
Initiatives to increase volumes and profits Depot Evolution Range and Supply Management Digital Development International
Slide 52: Increasing use of Online Trade Account Management
Increasing use of Online Trade Account Management 52
Slide 53: Online services valued by customers and depots
Online services valued by customers and depots 80,000 new account registrations in 2022 45% of customers have an online account Weekly trade platform logins +49% c.75% of users looking at price Online account holders trade more frequently Spend more across more categories 53
Slide 54: 2022: New capabilities added including app-based functionality
2022: New capabilities added including app-based functionality 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 20% of regular traders using the app 54
Slide 55: Showcasing our kitchens in people’s homes
Showcasing our kitchens in people’s homes SEE MORE @brysonhouse
Slide 56: Kitchen Visualiser helps end-users’ familiarity
Kitchen Visualiser helps end-users’ familiarity and our understanding of their priorities 56
Slide 57: Extended and more efficient search functionality
Extended and more efficient search functionality 57
Slide 58: 15% more search impressions a month, 21m site visits
15% more search impressions a month, 21m site visits 58
Slide 59: Page views/session up; time spent looking at pages +51%
Page views/session up; time spent looking at pages +51% 59
Slide 60: Increasing social media presence
Increasing social media presence c.455,000 follower base by end of 2022 14% increase on 2021 1.6m active users engaging monthly 60
Slide 61: Growing brand awareness amongst end-users
Growing brand awareness amongst end-users 61
Slide 62: Range of new services and capabilities for customers and depots
2023: Range of new services and capabilities for customers and depots 62
Slide 63: More digital content for end-users
2023: More digital content for end-users 63
Slide 64: Initiatives to increase volumes and profits
Initiatives to increase volumes and profits Depot Evolution Range and Supply Management Digital Development International
Slide 65: Operations based in France continued to make progress
Operations based in France continued to make progress €4.3bn kitchen market* City-based approach adopted from 2019 60 depots trading at end of 2022 (twice the 2020 total) Increased recognition of our model’s advantages Sales up c.24% on 2021 (+c.90% on 2019) Scale benefits as 90% of range is common
Slide 66: Open for business in the Republic of Ireland
Open for business in the Republic of Ireland Locations Similar location strategy to France 3 1. Sandyford 2. Ballyfermot Supported by UK infrastructure and 3. Swords group digital platform 4. Ballymount 5 5. Glasnevin Opened five depots around Dublin Plan to have c.10 depots trading by 2 end of 2023
Slide 67: Well planned on our strategic initiatives
Well planned on our strategic initiatives Continued use of stock policies to protect high availability Most new kitchen ranges, weighted towards entry and mid price points, on sale by end June Increased Rooster promotional activity and “Bang on the Money” price initiative Improvements to service and
Slide 68: Confident of our business model across changing market conditions
2023: Confident of our business model across changing market conditions Encouraging start to 2023 Aim to retain a profitable balance between price and volume Continuance of sales gains v comparable periods in each period Prepared for more challenging market conditions Trading against record comparat
Slide 69: Slide 69