Slide 1: 2012 Preliminary Results
2012 Preliminary Results 28 February 2013
Slide 2: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 3: A resilient and well-invested business
A resilient and well-invested business Over the last five years, we have invested in: depots products design manufacturing systems service people MFI property legacy virtually eliminated Margin improved by over 8 percentage points since 2008 We have transformed Howdens and its prospects 2012 Prelimi
Slide 4: Howdens continues to outperform
Howdens continues to outperform • New product with Increased manager focus on: • Better quality less stock cash, profit, costs, margin • Improved availability A cash generative business Continuing to invest in growth opportunities Recommending increased dividend: FY 2012 total of 3p 2012 Preliminary
Slide 5: Mark Robson, Chief Financial Officer
Mark Robson Chief Financial Officer
Slide 6: Highlights
Highlights Revenue, £m Operating profit Net cash, £m HJ UK France 13.5% 900 120 100 887.1 £119.8m 35.0 96.4 14.6 90 875 11.1 853.8 13.5% 80 795.1 872.5 850 115 15.1 £115.3m 70 825 838.7 60 57.1 800 110 50 2011 2012 2011 2012 Dec-11 Dec-12 HJ UK: +4.0% Gross profit Profit before tax, £m Uses of ‘cash
Slide 7: Revenue
Revenue 2012 UK depot revenue £872.5m • total +4.0% • LFL +1.9% 2012 French depot revenue £14.6m +5.4% LFL in €s 2012 Preliminary Results 7
Slide 8: Profit before tax (continuing operations)
Profit before tax (continuing operations) Group gross profit margin Profit before tax ● 2012: 61.5% ● 2011: 59.7% £m £m Gross Gross profit profit 36.0 Change Price Volume Currency £36.0m * Pensions finance 43 & mix 5 expense will (COGS) decrease by £4m in 4 545.3 2013 Cost Volume pressures, & mix et
Slide 9: Operating costs
Operating costs Operating Change costs £31.5m £m 2012 week 53 5 425.5 Other - Other growth 2 420.5 6 Older depots 6 New depots 7 2011 one-off benefits 5 399.0 394.0 • 20111 20112 Notes: 1 Reported 2 Underlying 20122 20121 2012 Preliminary Results 9
Slide 10: Income statement (continuing operations except *)
Income statement (continuing operations except *) £m 2012 2011 Revenue 887.1 853.8 Cost of goods sold (341.8) (344.5) Gross profit 545.3 509.3 Operating costs (425.5) (394.0) Operating profit 119.8 115.3 Net interest (7.7) (4.3) Profit before tax 112.1 111.0 Tax (24.1) (29.2) Profit for the period 8
Slide 11: Earnings per share and dividend
Earnings per share and dividend £m 2012 2011 Earnings per share • from continuing operations 14.0p 13.5p • from continuing and discontinued op’s 13.4p 12.1p Dividend • Full year dividend of 3p per share recommended (2011: 0.5p) – total payment of £19m 2012 Preliminary Results 11
Slide 12: Net cash and cash flow
Net cash and cash flow £m 2012 2011 Opening net cash 57.1 35.0 Operating cash flows before movements in working capital 138.3 134.8 Working capital 2.1 (9.4) Capital expenditure (24.2) (19.6) Interest (net) (0.4) (1.0) Tax paid (16.9) (22.5) Dividends (5.0) - Legacy properties (16.4) (29.4) Pension
Slide 13: Investing in growth and performance
Investing in growth and performance • Capital expenditure: £24m – depots and related areas: £9m – supply operations: £11m – IS and other: £4m • Operating costs: £16m – new depots: £7m – existing depots: £3m – other (marketing, regional/area management): £6m 2012 Preliminary Results 13
Slide 14: Reducing our legacy property liabilities
Reducing our legacy property liabilities • Five leases terminated in 2012 – £11.7m cost – £27m of future costs mitigated • Two ‘early’ exits in 2013 – £1.4m cost • Fourteen properties remain – <£4m net annual rent and rates – halved by end of 2014 2012 Preliminary Results 14
Slide 15: Pension scheme deficit
Pension scheme deficit £m Finance Discount charge rate & other 7 IAS19 basis assumptions 67 Asset returns 15 Change £17m 154 Deficit funding* 137 (42) * £35m in 2013 and 2104 • Dec Dec 2011 2012 2012 Preliminary Results 15
Slide 16: Current trading and outlook for 2013
Current trading and outlook for 2013 • Sales in first period two periods up 17% – additional trading week in P1 – earlier implementation of price increase • No indication of any change in market conditions • Outlook for rest of year: – market to remain challenging, so cautious about outlook at this
Slide 17: Matthew Ingle, Chief Executive Officer
Matthew Ingle Chief Executive Officer
Slide 18: Proven business model focused on one customer
Proven business model focused on one customer “To supply from local stock, nationwide, the small builder’s ever-changing, routine, integrated joinery/kitchen requirements, assuring no call back quality and best local price” 2012 Preliminary Results 18
Slide 19: Understanding the builder's world
Understanding the builder’s world surfaces kitchen design measurement cabinets plumbing corners integrated appliances edges lighting finishing waste disposal regulation time people £££ weather budget 2012 Preliminary Results 19
Slide 20: Understanding the builder's world
Understanding the builder’s world buy-to-let new build time landlord refurbishment people (private and public) house prices house moves weather £££ budget available credit have all declined 2012 Preliminary Results 20
Slide 21: Understanding the end-user's world
Understanding the end-user’s world cook eat restricted work £££ space learn budget teach people need more functionality bank easier price comparison chat time in a hurry cinema repair less tolerant… surgery weather vet plan laugh cry 2012 Preliminary Results 21
Slide 22: Making the builder more competitive
Making the builder more competitive Finish the job on time and on budget • Everything in stock all the time • Truly local depot • Good design and quality at all price points • Rigid cabinets • Confidential discount – builder’s margin • Good credit terms with nett monthly account – builder’s cash flo
Slide 23: Starting with a good plan
Starting with a good plan Professional kitchen planning service • Over 1,000 experienced designers • Industry-leading CAD planning software • Detailed visualisation of kitchen • Accessible to builder and end-user 2012 Preliminary Results 23
Slide 24: Howdens' reputation
Howdens’ reputation A brand built on reliability and service 2012 Preliminary Results 24
Slide 25: Continuity in a changing world
Continuity in a changing world Howdens promise to 270,000 credit account holders: • Design • Quality • Availability Service • Price • Convenience • Reliability • Essential business support None of this happened by accident 2012 Preliminary Results 25
Slide 26: What makes a depot work well
What makes a depot work well 10,000 square feet • Trade only • In stock • Easy for the builder Low cost • Fit-out c.£170,000 • Rent < £5.50 per sq ft Entrepreneurial team The Swansea depot team, September 2012 • Responsible for depot P&L • Incentivised on local profit • Aligned with business objecti
Slide 27: What makes a depot work well
What makes a depot work well Depots must be supported by: A stable, focussed supply chain • Dedicated factories Control of quality, quantity, • Continuous flow of new product availability • Robust yet flexible infrastructure and cost Effective credit management • Over 20,000 net new accounts in 2012
Slide 28: Our growing network of local depots
Our growing network of local depots 529 depots • 20 opened in 2012 The value of “local” is increasing • Less time • More traffic Scope for at least 700 depots in the UK French pilot continues Opened in 2012 2012 Preliminary Results 28
Slide 29: New depots tap into local sales potential
New depots tap into local sales potential New depots performing well B New depots in towns where we are already present are growing our total sales, profit & accounts Watford (1995) + North Watford (2011) • Sales +44% 2012 vs. A • Trading profit +26% 2010 Investing in service A: Howdens Watford B: H
Slide 30: The value of best demonstrated practice (BDP)
The value of best demonstrated practice (BDP) Regular scrutiny of individual depot performance Opportunities for growth within each depot’s P&L account • Sales • Profit • Sales per head • Sales per account • Appliance penetration • Cost recovery • Stock management • etc…. 2012 Preliminary Results 30
Slide 31: New product is critical to Howdens' growth
New product is critical to Howdens’ growth More product with less stock • Successful product design Managing • Efficient sales monitoring complexity • Increased focus on margin = a source of • Active product discontinuation significant • Fast decision-making competitive advantage • Flexible supply c
Slide 32: Moving fast to maximise new product potential
Moving fast to maximise new product potential Greenwich Gloss • New gloss technologies • Competitively priced • Launched for P11 • Strengthen entry-level offer • Grow market share • Sustain margin growth Greenwich Gloss White 2012 Preliminary Results 32
Slide 33: Moving fast to maximise new product potential
Moving fast to maximise new product potential Integrated Handle • Fastest growing range of 2012 • No.5 seller after only 18 months Integrated Handle Gloss White 2012 Preliminary Results 33
Slide 34: Moving fast to maximise new product potential
Moving fast to maximise new product potential Trend to solid colours • White, cream, grey = >70% of sales • Grey = 9% of sales (vs. 3% in 2011) Tewkesbury Skye 2012 Preliminary Results 34
Slide 35: Extending our range of joinery doors
Extending our range of joinery doors Full range of sizes in best-selling styles • Making Howdens an essential supplier of the builder’s routine needs 6-panel grained glazed door 2012 Preliminary Results 35
Slide 36: Addressing new trends in worktops
Addressing new trends in worktops 20 new worktops in 2012 • New materials and technologies • New, narrow-radius matt laminate • New upstands and backboards • 14 new square-edged models • More in development Black mirror-chip square-edged worktop 2012 Preliminary Results 36
Slide 37: Growing share of appliance market
Growing share of appliance market Building the Lamona brand • 1m units sold in 2012 No.1 UK sellers: • Single oven • Dishwasher • Fridge-freezer • Built-under fridge New black and white glass finishes for 2013 Our best-selling Lamona single oven 2012 Preliminary Results 37
Slide 38: Ensuring security of supply
Ensuring security of supply Moulded-skin joinery doors are very important to our business • Supply secured for next 5 years • Continuous access to key product • Price visibility • Doors are a judgement point for price, quality and availability Chipboard supply also guaranteed for next 5 years Our be
Slide 39: Investing in an efficient, responsive supply chain
Investing in an efficient, responsive supply chain Howden & Runcorn • £20m investment • Installation on schedule • New lines in production in 2013 • Full disaster recovery capability Control of our own manufacturing at significant scale New edgebanding equipment 2012 Preliminary Results 39
Slide 40: Manufacturing designed for flexibility
Manufacturing designed for flexibility Short assembly lines and flexible working arrangements • Minimising cost and risk Long assembly line New procedures to improve stock Howden availability = better service Runcorn to depots 2012 Preliminary Results 40
Slide 41: Manufacturing underpinned by robust systems
Manufacturing underpinned by robust systems No limits on our systems capacity in respect of: • Manufacturing processes • Number of depots requiring support • Stock management A growing business in a • Warehousing complex and • Logistics sophisticating market • Point of sale • Management information
Slide 42: "Rough Diamond" has worked
“Rough Diamond” has worked The project has delivered: • sales The Howdens concept • profit + Rough Diamond • cash • jobs • growth opportunities A resilient business • despite recession Time to polish the diamond… 2012 Preliminary Results 42
Slide 43: More opportunities ahead
More opportunities ahead More depot openings • Target 20 – 30 new depots in 2013 • Infill opportunities identified More new product • Continuous testing • Over 60 new introductions in H1 alone More performance improvement • Continuing focus on BDP Adapting quickly to changing circumstances 2012 Prel
Slide 44: Clear strategy for growth
Clear strategy for growth Clear strategy The true Wholly focussed on Proven model value of growing trade Cash generative Howdens customer base offer Many opportunities A robust business suited to an uncertain environment 2012 Preliminary Results 44
Slide 45: Howdens Q&A
HOWDENS JOINERY CO. Making kitchens work for you Q&A
Slide 46: 2012 Preliminary Results
2012 Preliminary Results 28 February 2013