Grafton Group Plc · LSE:GFTU
Grafton — FY2013 Earnings Presentation
50 slides from Grafton's earnings presentation, Mar 5, 2014
Slide 1: Final Results Presentation, Year ended 31 December 2013
Final Results Presentation Year ended 31 December 2013 5 March 2014
Slide 2: Cautionary Statement
Cautionary Statement Certain statements made in this presentation are forward- looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied b
Slide 3: Gavin Slark, Group Chief Executive Officer
Gavin Slark Group Chief Executive Officer
Slide 4: Group Performance Highlights
Group Performance Highlights Revenue up 8% to £1.9bn Operating profit up 27% to £77.2m Profit before tax up 35% to £64.9m Group operating margin increased by 60 basis points to 4.1% UK merchanting operating margin increased by 60 basis points to 5.5% Ireland – economy stabilises and underlying impro
Slide 5: David Arnold, Group Chief Financial Officer
David Arnold Group Chief Financial Officer
Slide 6: Financial Highlights
Financial Highlights 2013 2012 Change Revenue (£m) 1,899.8 1,760.8 +7.9% Operating profit (£m) 77.2 61.0 +26.6% Statutory profit before tax (£m) 67.7 25.1 +169.7% Profit before tax (£m) 64.9 48.1 +34.9% Earnings per share (pence) 22.3 15.1 +47.7% Dividend (pence) 8.5 7.0 +21.4% Dividend cover (times
Slide 7: Financial Highlights
Financial Highlights 2013 2012 Change Revenue (£m) 1,899.8 1,760.8 +7.9% Operating profit (£m) 77.2 61.0 +26.6% Statutory profit before tax (£m) 67.7 25.1 +169.7% Profit before tax (£m) 64.9 48.1 +34.9% Earnings per share (pence) 22.3 15.1 +47.7% Dividend (pence) 8.5 7.0 +21.4% Dividend cover (times
Slide 8: Financial Highlights
Financial Highlights 2013 2012 Change Revenue (£m) 1,899.8 1,760.8 +7.9% Operating profit (£m) 77.2 61.0 +26.6% Statutory profit before tax (£m) 67.7 25.1 +169.7% Profit before tax (£m) 64.9 48.1 +34.9% Earnings per share (pence) 22.3 15.1 +47.7% Dividend (pence) 8.5 7.0 +21.4% Dividend cover (times
Slide 9: Financial Highlights
Financial Highlights 2013 2012 Change Revenue (£m) 1,899.8 1,760.8 +7.9% Operating profit (£m) 77.2 61.0 +26.6% Statutory profit before tax (£m) 67.7 25.1 +169.7% Profit before tax (£m) 64.9 48.1 +34.9% Earnings per share (pence) 22.3 15.1 +47.7% Dividend (pence) 8.5 7.0 +21.4% Dividend cover (times
Slide 10: Financial Highlights
Financial Highlights 2013 2012 Change Revenue (£m) 1,899.8 1,760.8 +7.9% Operating profit (£m) 77.2 61.0 +26.6% Statutory profit before tax (£m) 67.7 25.1 +169.7% Profit before tax (£m) 64.9 48.1 +34.9% Earnings per share (pence) 22.3 15.1 +47.7% Dividend (pence) 8.5 7.0 +21.4% Dividend cover (times
Slide 11: Revenue Growth
Revenue Growth Average Daily Like for Like Revenue Growth Total Q1 Q2 Q3 Q4 FY Revenue UK Merchanting (0.6%) +4.2% +5.4% +3.9% +3.2% +6.7% Irish Merchanting +2.4% (0.6%) +5.8% +6.7% +3.6% +1.9% Irish Retailing (12.3%) +8.5% +4.7% +2.7% 1.5% (0.9%) Manufacturing (10.3%) +8.0% +22.2% +44.3% +14.5% +7.
Slide 12: Revenue Growth
Revenue Growth Average Daily Like for Like Revenue Growth Total Q1 Q2 Q3 Q4 FY Revenue UK Merchanting (0.6%) +4.2% +5.4% +3.9% +3.2% +6.7% Irish Merchanting +2.4% (0.6%) +5.8% +6.7% +3.6% +1.9% Irish Retailing (12.3%) +8.5% +4.7% +2.7% 1.5% (0.9%) Manufacturing (10.3%) +8.0% +22.2% +44.3% +14.5% +7.
Slide 13: Revenue Growth
Revenue Growth Average Daily Like for Like Revenue Growth Total Q1 Q2 Q3 Q4 FY Revenue UK Merchanting (0.6%) +4.2% +5.4% +3.9% +3.2% +6.7% Irish Merchanting +2.4% (0.6%) +5.8% +6.7% +3.6% +1.9% Irish Retailing (12.3%) +8.5% +4.7% +2.7% 1.5% (0.9%) Manufacturing (10.3%) +8.0% +22.2% +44.3% +14.5% +7.
Slide 14: Revenue Growth
Revenue Growth Average Daily Like for Like Revenue Growth Total Q1 Q2 Q3 Q4 FY Revenue UK Merchanting (0.6%) +4.2% +5.4% +3.9% +3.2% +6.7% Irish Merchanting +2.4% (0.6%) +5.8% +6.7% +3.6% +1.9% Irish Retailing (12.3%) +8.5% +4.7% +2.7% 1.5% (0.9%) Manufacturing (10.3%) +8.0% +22.2% +44.3% +14.5% +7.
Slide 15: Revenue Analysis
Revenue Analysis £’m 1,900 Merchanting 2 20 1,900 (1) 27 5 1,850 43 (4) 1,800 47 1,750 1,761 1,700 Like- Acq / Branch Ireland Belgium Retailing Currency 2012 2013 For-Like New Consl. Manufacturing Branches 2013 Preliminary Results UK Merchanting 15
Slide 16: Operating Profit Analysis
Operating Profit Analysis £’000 80,000 0.1 Merchanting 0.9 2.3 (2.0) 75,000 2.4 (0.1) 77.2 12.6 70,000 65,000 60,000 61.0 55,000 50,000 2012 UK Ireland Belgium Retailing Manuf’ing FX Central/Other 2013 2013 Preliminary Results 16
Slide 17: Operating Profit Analysis
Operating Profit Analysis £’000 80,000 0.1 Merchanting 0.9 2.3 (2.0) 75,000 2.4 (0.1) 77.2 12.6 70,000 £10.1m LFL 65,000 60,000 61.0 55,000 50,000 2012 UK Ireland Belgium Retailing Manuf’ing FX Central/Other 2013 2013 Preliminary Results 17
Slide 18: UK Merchanting
UK Merchanting 2013 2012 % Change £m £m Revenue 1,393.0 1,305.9 +6.7% Operating profit 75.9 63.4 +19.8% Operating margin 5.5% 4.9% Market Trading Recovery in UK economy gained Growth in average daily like-for-like turnover of 3.2% momentum in recent quarters Merchanting volumes increased by 1.4% Sig
Slide 19: Irish Merchanting
Irish Merchanting 2013 2012 % Change . £m £m Reported Constant Currency Revenue 243.0 227.7 +6.7% +1.9% Operating profit 5.2 2.7 +95.4% +86.5% Operating margin 2.1% 1.2% Market Trading Modest GDP growth for third consecutive year Like-for-like turnover growth of 3.6% Mild recovery in domestic demand
Slide 20: Belgian Merchanting
Belgian Merchanting 2013 2012 % Change . £m £m Reported Constant Currency Revenue 58.8 30.8 +91.1% +82.4% Operating profit 0.6 0.7 -9.6% -13.6% Market Trading Belgian economy broadly flat Acquisition and a change of accounting treatment from JV to a subsidiary accounted for revenue Weak residential
Slide 21: Retailing
Retailing 2013 2012 % Change . £m £m Reported Constant Currency Revenue 167.9 161.8 +3.8% -0.9% Operating profit 1.2 0.2 +460.1% +435.9% Market Trading Segment turnover up by 1.5% in the like-for-like branches Irish retail sales recovered in the Significant benefit from the restructuring completed i
Slide 22: Manufacturing
Manufacturing 2013 2012 % Change £m £m Revenue 37.0 34.5 +7.1% Operating profit 3.9 1.7 +137.9% Market Trading Strong recovery in UK housing market EuroMix is market leader in the silo based mortar market with significant spare capacity in 9 mortar plants Housing registrations up 28% to 134,000 Trad
Slide 23: Pensions
Pensions Pensions → New arrangements based on sharing the cost of funding the deficits → Future benefits now more sustainable and at a more affordable cost → Reduced the level of financial risk and volatility related to operating the schemes → Active members continue to accrue benefits No changes to
Slide 24: Non trading property
Non trading property Non cash impairment charge of £27.2m recognised, largely against Irish property Properties held for resale → 26 properties in the UK and one in Ireland are held for resale → All properties are being actively marketed → Carrying value of £11.4 million Investment Properties → 16 p
Slide 25: Finance and Tax
Finance and Tax 2013 2012 Net debt: EBITDA 1.2x 1.8x Gearing 15% 20% EBITDA Interest cover* 10.7x 8.6x *As defined for bank covenant purposes Finance charge reduced by £0.6m to £12.3m Interest on net debt down by £1.1 million Improving market for bank funding New and refinanced term loan facilities:
Slide 26: Free Cash Flow
Free Cash Flow £’m 140 120 31.5 (6.8) 108.7 (6.6) 100 (17.6) 80.0 (2.8) (11.4) 80 66.3 60 40 20 0 Statutory Non cash non Depreciation EBITDA Pensions, claims Working Capital Interest and tax Replacement Free cash flow Operating Profit recurring items and paid & other capex (net of amortisation non c
Slide 27: Capital Expenditure
Capital Expenditure 50 40 30 £’m Depreciation 20 Replacement Capex 10 0 2009 2010 2011 2012 2013 Cash flow focus during recession saw a necessary reduction in replacement capex Improving markets will see a normal process of cyclical reinvestment 2014 organic investment levels (both replacement and d
Slide 28: Movement in Net Debt
Movement in Net Debt £’m 200 180 164.9 (66.3) 160 0.4 133.7 140 17.7 17.0 120 100 80 60 40 20 0 Net Debt Dec Free Cash flow Acquisitions and Dividend Shares issued / Net Debt Dec 2012 development F/x etc 2013 capex 2013 Preliminary Results 28
Slide 29: Gavin Slark, Group Chief Executive Officer
Gavin Slark Group Chief Executive Officer
Slide 30: Grafton's Strategic Pillars
Grafton’s Strategic Pillars Economic Growth Operating Capital Revenue Margin Turn Organic Growth 30
Slide 31: Grafton's Strategic Pillars: 2013 Progress
Grafton’s Strategic Pillars 2013 Progress Economic Growth Operating Capital Revenue Margin Turn Organic Growth +7.9% +0.6%pts +0.1x 31
Slide 32: 2013 – Delivering on Growth Objectives
2013 – Delivering on Growth Objectives Implants → Hirebase and Selco Hire: continued development of tool, plant and equipment hire implants • 15 new Hirebase implants opened taking total to 93 at end Dec 13 • 2 new Selco Hire implants trialled → Electricbase: Implants in 20 Buildbase branches Greenf
Slide 33: 2014 Growth Update
2014 Growth Update Implants → Hirebase implants: c.110 forecast in existing branches by end Q1 (Dec 13: 93) → Selco Hire: further expansion of branches planned for H2 2014 → Electricbase: c.35 implants in existing branches by end Q1 (Dec 13: 20) Greenfield developments → Agreement to lease signed fo
Slide 34: Current Trading to End of February 2014
Current Trading to End of February 2014 UK merchanting daily like-for-like revenue up by 9.8% Irish merchanting like-for-like revenue up 7.1% Retailing like-for-like revenue up 1.6% 2013 Preliminary Results 34
Slide 35: Outlook: UK
Outlook UK Growth in economy gained momentum in recent quarters Clear signs that the revival in the housing market has strengthened Improving trend in housing starts, housing transactions and mortgage approvals Economic and housing market backdrop supportive of increased volumes in merchanting marke
Slide 36: Outlook: Ireland
Outlook Ireland Moderate improvement in economy expected in 2014 A very gradual pick-up in house building in Dublin and regional cities is expected RMI market is expected to return to growth Housing transactions and mortgage approvals increasing from a very low base Pressure on disposable incomes an
Slide 37: Summary and Conclusion
Summary and Conclusion Strong 2013 performance, especially in UK merchanting H2 return to growth for Irish merchanting Irish DIY market stablised but still challenging Good progress made implementing strategy Overall outlook more favourable Current trading encouraging Gradual recovery anticipated 20
Slide 38: Brands
Brands Merchanting Ireland Merchanting UK Manufacturing Belgium DIY Ireland 2013 Preliminary Results 38
Slide 39: Supplementary Information
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Slide 41: Group trading locations
Group trading locations Over 600 Trading Locations Builders Merchanting Plumbers Merchanting DIY Retailing Manufacturing UK ROI BE Total 273 40 17 330 224 2 - 226 - 45 - 45 9 1 - 10 Total 506 88 17 611
Slide 42: Summary Balance Sheet
Summary Balance Sheet 31 December 31 December Change 2013 2012 Change £m £m £m € Property, plant and equipment 424.7 472.8 (48.1) Investment property 19.9 - 19.9 Intangibles 481.0 476.2 4.8 Financial assets 0.1 0.1 - 925.7 949.1 (23.4) Working capital 144.0 137.4 6.6 Income and deferred tax (21.3) (
Slide 43: Operating Margin Analysis
Operating Margin Analysis H1 H2 2013 2012 2013 2012 2013 2012 UK Merchanting 5.5% 4.9% 5.0% 4.8% 5.9% 4.9% Irish Merchanting 2.1% 1.2% 1.3% 0.7% 2.9% 1.7% Belgium Merchanting 1.1% 2.3% 0.9% 3.1% 1.3% 1.7% Total Merchanting 4.8% 4.3% 4.3% 4.2% 5.3% 4.4% Retailing 0.7% 0.1% 0.3% -3.6% 1.1% 3.8% Manufa
Slide 44: Funding Maturity Profile
Funding Maturity Profile 400 Committed bank 300 facilities £’m US loan Notes 200 100 Finance Leases 0 Cash 2014 2015 2016 2017 2018 Total Group debt facilities amount to £368m of which £112m was undrawn at 31 Dec 13 Weighted average maturity profile of circa 2.5 years 2013 Preliminary Results 44
Slide 45: UK Housing Transactions 2006 – 2013
UK Housing Transactions 2006 – 2013 ‘000 500 450 400 350 300 250 200 150 100 50 0 2006 2007 2008 2009 2010 2011 2012 2013 •Quarterly Seasonally Adjusted 2013 Preliminary Results Source: HM Revenue & Customs UK Property Transactions Count 45
Slide 46: Housing Starts & Completions - England: 1998 - 2013
Housing Starts & Completions - England: 1998 - 2013 ‘000 Starts Completions 200 180 160 140 120 100 80 60 40 20 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: UK Department for Communities & Local Goverment 2013 Preliminary Results 46
Slide 47: UK Mortgage Approvals UK: 2008 – 2013
0 10 20 30 40 50 60 70 80 '000 Jan-08 2013 Apr-08 Jul-08 Oct-08 Jan-09 Source: Preliminary Apr-09 Jul-09 Oct-09 Bank of England Statistics Results Jan-10 Apr-10 Jul-10 Oct-10 UK Mortgage Approvals UK: 2008 – 2013 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 47
Slide 48: House Completions – Ireland 1990 – 2012
House Completions – Ireland 1990 – 2012 (Grafton Estimate 2011-2013) 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source: Department of the Environment, Community & Local Government - (DoELG) 2013 Preliminary Res
Slide 49: Mortgages Issued in Ireland: 2002 - 2012
Mortgages Issued in Ireland: 2002 - 2012 Volume Value Volume €’bn ‘000 30 120 25 100 20 80 15 60 10 40 5 20 - - 2013 Preliminary Results 2002 2003 Source: Goodbody’s: (IBF, DoELG) 2004 2005 2006 2007 2008 2009 2010 2011 2012 49
Slide 50: For Further Information
For Further Information Gavin Slark Chief Executive Officer David Arnold Chief Financial Officer Charles Rinn Group Financial Controller / Secretary Address: Grafton Group plc, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18 Telephone: +353 1 216 0600 Fax: +353 1 295 4470 Email: ema