Grafton Group PLC · LSE:GFTU
Grafton — H1 2013 Earnings Presentation
34 slides from Grafton's earnings presentation, August 2013
Slide 1: Interim Results
Interim Results 6 months to June 30th, 2013
Slide 2: Financial Highlights
Financial Highlights Revenue up 1.7% to €1.07 billion and by 4.3% in constant currency Operating profit increased from €24.5 million in 2012 to €68.4 million, including pensions scheme credit of €31.8 million, in 2013 Operating profit up 17% from €31.3 million to €36.6 million* Group operating profi
Slide 3: Operating Highlights
Operating Highlights Positive trends developing for UK economy and in the housing market UK merchanting operating margin increased by 15 basis points from 4.81% to 4.96% Revenue in merchanting business in Ireland stabilised and profitability improved Retailing business in Ireland profitable followin
Slide 4: Revenue by Business Segment and Geography
Revenue by Business Segment and Geography Revenue by Business Segment Revenue by Geographic Area Merchanting UK 89% 75% €1.07bn €1.07bn Ireland Retailing 22% Manufacturing 9% Belgium 2% 3% 4
Slide 5: UK Merchanting
UK Merchanting 2013 2012 % Change €’000 €’000 Reported Constant Currency Revenue 788,180 780,547 1.0% 4.5% Operating profit 39,060 37,532 4.1% 7.7% Operating margin 4.96% 4.81% Market Trading Merchanting market volumes increase estimated at Recovery underway in UK Economy 2% Housing transactions and
Slide 6: UK Merchanting - Developments
UK Merchanting - Developments Selco opened branches on Old Kent Road and in Wimbledon Buildbase extended coverage into the North East of England with the acquisition of Thompsons Buildbase successfully trialled Electricbase implants in five branches Continued development of tool, plant and equipment
Slide 7: Irish Merchanting
Irish Merchanting 2013 2012 % Change €’000 €’000 Revenue 135,072 136,369 (1.0%) Operating profit 1,780 897 98.4% Operating margin 1.3% 0.7% Market Trading Modest GDP growth for third consecutive year – Like-for-like turnover growth of 1% driven by exports Market remains fragile Domestic demand is st
Slide 8: Belgium Merchanting
Belgium Merchanting 2013 2012 €’000 €’000 % Change Revenue 34,407 15,851 117.1% Operating profit 293 499 (41.3%) Market Trading Belgium economy broadly flat Acquisition of Holvoet in 2012 increased annualised turnover to over €70 million Fundamentals of housing market are sound Trades from 11 branch
Slide 9: Retailing
Retailing 2013 2012 €’000 €’000 % Change Revenue 94,856 98,223 (3.4%) Operating profit 284 (3,523) – Market Trading Decline in domestic demand Turnover flat in like-for-like stores forecast to bottom out this year Strong demand for seasonal products in May and June Consumer sentiment on an improving
Slide 10: Manufacturing
Manufacturing 2013 2012 €’000 €’000 % Change Revenue 19,648 23,533 (16.5%) Operating profit/(loss) 996 501 98.8% Market Trading Recovery in housing market under EuroMix is market leader in silo based mortar way market Sharp increase in housing starts Significant spare capacity in 9 mortar plants Str
Slide 11: Finance Developments: Pensions and Term Loan Facilities
Finance Developments Pensions • New arrangements based on sharing the cost of funding the deficits • Future benefits more sustainable and at a more affordable cost • Reduced level of financial risk and volatility • 800 active members continue to accrue benefits and no changes to arrangements for exi
Slide 12: Half-Year Results
Half-Year Results 2013 2012 % Change on prior period €m €m Reported Constant Currency Revenue 1,072.2 1,054.5 1.7% 4.3% Operating profit 68.4 24.5 Operating profit* 36.6 31.3 17.1% 22.2% Operating margin* 3.42% 2.96% Finance expense (net) (7.9) (8.7) (9.6%) Profit before tax* 28.7 22.5 27.5% Earning
Slide 13: Revenue Analysis
Revenue Analysis €m 1,110 Merchanting 18 (3) 1,100 (3.4%) 117.1% (3) 1,090 (1) 22 (2) (1.0%) 1,080 3.0% (27) 1,070 1,072 1,060 13 1.7% 1,050 1,055 1,040 1,030 Like- Acq / Branch Ireland Retailing Currency 2012 Belgium 2013 For-Like New Consl. Manufacturing Branches UK Merchanting 13
Slide 14: Operating Profit Analysis
Operating Profit Analysis €’000 40,000 3,807 39,000 525 (1,280) 38,000 3,807 37,000 Merchanting (1,146) 36,000 36,623 35,000 883 (206) 34,000 2,778 33,000 32,000 31,262 31,000 30,000 2012 UK Ireland Belgium Retailing Currency 2013 Manufacturing Central / Other 14
Slide 15: Cash Flow
Cash Flow 80 70 (5) 16 - 2 67 (6) 60 (13) €m 19 50 50 40 37 30 20 Adjusted Working Pension Replacement Asset Interest Free Operating Capital Contributions Capital (net) Cash Disposals Profit Cash Release & Claims Paid Operating Expenditure & Tax Flow Depreciation Restructuring Cash & Other Costs Inf
Slide 16: Free Cash Flow and Net Debt
Free Cash Flow and Net Debt €m 210 Free Cash Flow 200 202 Development 190 50 Capital Expenditure 180 Other Acquisitions (4) 170 Dividend (7) 1 175 160 (13) 150 140 130 Net Debt at 31 Net Debt at 30 December 2012 June 2013 16
Slide 17: Net Debt & Shareholders’ Equity
Net Debt & Shareholders’ Equity at 31 December except 30 June 2013 1,200 1,068 990 983 997 999 1,000 912 869 800 €m 600 550 436 400 323 255 226 202 175 200 0 2007 2008 2009 2010 2011 2012 2013 Shareholders’ Equity Net Debt 2007 2008 2009 2010 2011 2012 2013 Gearing 52% 50% 35% 26% 23% 20% 17% 17
Slide 18: Debt Facilities Maturity Profile
Debt Facilities Maturity Profile €m 300 292 280 260 240 209 220 177 (30 June) 200 180 160 111 140 (30 June) 120 100 80 60 40 28 16 11 5 20 0 Cash 2013 2014 2015 2016 2017+ Total Group debt facilities amount to €438m of which €87m was undrawn at 30 June 2013. Undrawn facilities increased to €137m in
Slide 19: Debt Covenants
Debt Covenants 30 June 2013 30 June 2012 EBITDA - 12 month rolling* €119.1m €101.2m EBITDA interest cover 9.7 times 7.1 times Minimum interest cover 3.5 times 3.0 times Shareholders’ equity (as defined) €1,129m €1,071m Minimum shareholders’ equity €828m €789m Debt to equity ratio 15% 19% Debt to equ
Slide 20: Summary Balance Sheet
Summary Balance Sheet 30 June 31 December 2013 2012 Change Change €m €m €m €m Property, plant and equipment 556.1 579.3 (23.2) Intangibles 568.7 583.5 (14.8) Financial assets 0.2 0.2 - 1,125.0 1,163.0 (38.0) Working capital 144.6 168.4 (23.8) Income and deferred tax (33.5) (24.8) (8.7) Retirement be
Slide 21: Operating Margin History (Core – Before Central Costs)
Operating Margin History (Core – Before Central Costs) Year UK ROI Group* 2007 7.3% 10.8% 8.7% 2008 4.5% 5.5% 4.9% 2009 3.2% -1.7% 1.6% 2010 4.1% 0.4% 3.0% 2011 4.1% 0.7% 3.2% 2012 4.9% 0.7% 3.9% 2013 (H1) 5.0% 0.8% 4.0% 2012 (H1) 4.8% -1.3% 3.4% *Includes Belgium from 2011 21
Slide 22: Outlook: UK
Outlook UK Economy growing at moderate rate as recovery takes hold Clear signs that the housing market has strengthened Improving trend in housing transactions and mortgage approvals Declining real incomes – pressure on consumer spending Economic and housing market backdrop supportive of increase in
Slide 23: Outlook: Ireland
Outlook Ireland Domestic economy starting to stabilise – after contracting for five years Small decline in consumer spending forecast for 2013 as consumer confidence improves Downturn in housing construction bottoming out House price stabilisation expected to become more broadly based geographically
Slide 24: Strategic Focus
Strategic Focus Margin growth in UK merchanting branches from current level of 5.0% Development of Selco branch network – new London stores opened in half year and other locations at the planning stage Participate selectively in further consolidation in UK merchanting market as opportunities present
Slide 25: Summary and Conclusion
Summary and Conclusion Good profit growth despite relatively flat turnover UK merchanting business improved profit, operating margin and market position Irish brands showed a significant improvement in profit in weak markets High operating cash flow, strong balance sheet and efficient cost base with
Slide 26: Locations
Locations Merchanting Ireland Merchanting UK .co.uk Manufacturing Belgium DIY Ireland 26
Slide 27: Supplementary Information
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Slide 28: UK Housing Transactions 2006 – 2013 (H1)
UK Housing Transactions 2006 – 2013 (H1)* ‘000 500 450 400 350 300 250 200 150 100 50 0 2006 2007 2008 2009 2010 2011 2012 2013 28 * Quarterly Seasonally Adjusted
Slide 29: UK Housing Starts & Completions: 1998 – 2012
UK Housing Starts & Completions: 1998 – 2012 ‘000 Starts Completions 250 200 150 100 50 0 1998 2000 2002 2004 2006 2008 2010 2012 29
Slide 30: UK Mortgage Approvals 2008 – 2013 (H1)
UK Mortgage Approvals UK: 2008 – 2013 (H1) '000 80 70 60 50 40 30 20 10 0 30
Slide 31: House Completions – Ireland 1990 - 2012
House Completions – Ireland 1990 - 2012 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 Current activity is at an unsustainably low level Historic Lows 31
Slide 32: Mortgages Issued in Ireland: 2002 – 2012
Mortgages Issued in Ireland: 2002 – 2012 Volume €’bn Value Volume ‘000 40 120 35 100 30 80 25 20 60 15 40 10 20 5 - - 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 32
Slide 33: Estimated UK Merchanting League Table
Estimated UK Merchanting League Table Circa 2,000 independents Travis Perkins (excluding Wickes) Independents 23% 29% Wolseley 19% Grafton 11% Jewson 18% 3rd Largest Builders Merchant Sector Turnover £12 billion plus Independents £4.6 billion plus 33
Slide 34: For Further Information
For Further Information Gavin Slark Chief Executive Officer Colm Ó Nualláin Finance Director 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: email@g