Grafton Group PLC · LSE:GFTU
Grafton — FY2006 Earnings Presentation
42 slides from Grafton's earnings presentation, 2007
Slide 1: Grafton Group plc Final Results 2006
Grafton Group ple He +h Final Results 2006 “4sg5BEBE
Slide 2: Profile
Profile • UK and Ireland based Building Materials Group • Principal activities – Builders and Plumbers Merchanting – DIY Retailing – Dry Mortar Manufacturing • 2006 Turnover exceeded €2.9 billion, up 12% on 2005 • Market leader or strong market positions • Trading from over 520 locations in the UK a
Slide 3: Principal Brands - UK and Northern Ireland
Principal Brands - UK and Northern Ireland 2
Slide 4: Principal Brands - Irish Merchanting and Manufacturing
Principal Brands - Irish Merchanting and Manufacturing 3
Slide 5: Irish Retail Brands
Grafton Group ple eaens Final Results 2006 Irish Retail Brands There’s no better buy in DIY ATLANTIC fnouse AT THE PANELLING CENTRE
Slide 6: Strategy
Strategy • Consistent – Focused • To continue to achieve above average long-term returns for shareholders by: – Building on strong market positions in businesses serving the UK and Irish construction markets – Developing in other Irish markets – Growing outside Ireland in businesses with which we ar
Slide 7: Consistently Moving Forward Profitability and Earnings
Consistently Moving Forward Profitability and Earnings 1400% 1200% PBT Percentage Change 1000% 800% EPS 600% 400% Share Purchase/DPS 200% 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Irish GAAP IFRS PBT 19.6 23.2 28.2 38.2 52.8 67.2 80.2 102 145.8 192.2 249.4 EPS 9 11.6 14.2 19.5 25.9 3
Slide 8: 2006 Highlights
2006 Highlights • Good results ahead of market expectations • Recovery to like for like sales and profit growth re-emerged in the UK in the second half • Buoyant trading conditions continue in Ireland • A significant €38 million in property profits realised during the period • Sixteen additional bol
Slide 9: Group Financial Highlights
Group Financial Highlights 2006 2005 % Change Turnover €2,934 m €2,630 m +12% Operating profit* €244.9 m €215.9 m +13% Pre-tax profit €249.4 m €192.2 m +30% EBITDA €336.1 m €273.8 m +23% Property profits €38.0 m €9.6 m Adjusted E.P.S.* 78.0 c 67.8 c +15% Share Purchase 18.75 c 15.75 c +19% * Before
Slide 10: Earnings
Continuation of Strong Double Digit Growth in Earnings 80 78.0 cent +15% 70 60 +21% 50 +23% Earnings +22% Interim 40 +15% Final 30 +24% 20 10 0 2000 2001 2002 2003 2004 2005 2006 9
Slide 11: Segmental Turnover Analysis
Segmental Turnover Analysis 2006 2005 Group €2.93 billion Group €2.63 billion 10% 5% 5% 28% 10% 26% Irish Merchanting 57% 59% UK Merchanting DIY Retail Irish & UK Manufacturing 10
Slide 12: UK & Irish Operating Margins
UK & Irish Operating Margins 47% UK Ireland 53% 2006 2005 UK operating margin 6.6% 6.8% ROI operating margin 10.9% 10.4% Group operating margin 8.3% 8.2% (2006 second half UK margin 7.2%, 2005 second half UK margin 6.7%) 6.7%) 11
Slide 13: Components of Growth
Components of Growth Turnover Operating Profit* €’million €’million 2005 2,630 215.9 Organic growth - Ireland 61 15.0 Organic growth - UK 2 1.0 2005 acquisitions - UK 49 5.2 - Ireland 72 6.2 2006 acquisitions - UK 50 2.7 New branches 2005 & 2006 and discontinued 65 (1.4) Exchange 5 0.3 2006 2,934 24
Slide 14: Very Positive Financial Statistics
Very Positive Financial Statistics 2006 2005 EBITDA margin* 10.2% 10.0% Operating profit margin # 8.3% 8.2% Total equity €1,014 m €814 m Net debt €551 m €584 m Gearing 54% 72% Debt to market capitalisation 18% 27% Interest cover - EBITA 9.0 7.2 Tax Rate 13% 13.6% Annualised return avg. cap employed
Slide 15: Cash Generation
Cash Generation 2006 2005 € million € million Operating profit 242.7 213.8 Depreciation, amortisation & other 58.9 52.6 Property disposals, interest/investment income 86.5 38.0 Total cash inflow 388.1 304.4 Replacement capital expenditure (51.6) (44.3) Interest & tax (57.8) (54.4) Working capital mo
Slide 16: Group Development Spend
Group Development Spend 600 Heitons Acquisition & Investment Spend €87.1 Million 500 Development Asset Purchases 400 €72.8 Million Jacksons Replacement Asset Purchases 300 €51.6 Million 200 100 0 2000 2001 2002 2003 2004 2005 2006 15
Slide 17: Analysis of UK and Ireland Turnover & Operating Profit
Analysis of UK and Ireland Turnover & Operating Profit 2006 2005 Change € 'million € 'million % Turnover Ireland 1,201 1,033 +16% UK* 1,733 1,597 +9% 2,934 2,630 +12% Operating profit # Ireland 130.3 107.7 +21% UK* 114.6 108.2 +6% 244.9 215.9 +13% Operating margin Ireland 10.9% 10.4% UK 6. 6% 6.8% G
Slide 18: Enlarged Group Locations
Enlarged Group Locations 520 Trading Locations Builders Merchanting g Plumbers Merchanting Manufacturing DIY Retailing 17
Slide 19: UK Performance 2000 to 2006
UK Performance 2000 to 2006 300% +292% Percentage increase since 2000 250% +233% 200% 150% 100% 50% 0% 2000 2001 2002 2003 2004 2005 2006 Turnover 520.0 657.2 808.5 1,111.5 1,420.6 1,596.6 1,733.3 Operating Profit 29.2 40 53.7 78.6 108.2 108.2 114.6 Operating Profit Margin 5.6% 6.1% 6.6% 7.1% 7.6% 6
Slide 20: Recovery in UK Operating Profit Margin
Recovery in UK Operating Profit Margin A return to positive like for like % sales growth is reflected in margin 9 recovery and profit growth 8 7 Second Half 6 First Half 5 4 3 2 1 0 2001 2002 2003 2004 2005 2006 First Half Margin 2005 Second Half Margin 2005 First Half Margin 2006 Second Half Margin
Slide 21: Quarterly Percentage UK Like for Like Merchanting Sales Changes
Quarterly Percentage UK Like for Like Merchanting Sales Changes Adjusted for Trading Days – Well out of the trough! UK returned to low single digit like for like sales growth during the second half of 2006 0 Qtr 1 2005 Qtr 2 2005 Qtr 3 2005 Qtr 4 2005 Qtr 1 2006 Qtr 2 2006 Qtr 3 2006 Qtr 4 2006 UK M
Slide 22: Heiton Group plc
Heiton Group plc • THE HEITON BUSINESS POST ACQUISITION – Another record year for Heiton – Stillorgan and other properties sold realising €43 million cash since acquisition – Net investment by Grafton now reduced to €363 million (before free cash flow effect) – 16% return achieved on investment in 2
Slide 23: Group Strengths
Group Strengths • Highly cash generative and profitable businesses - free cash flow €253 million • Strong balance sheet - gearing 54% • Prominent market positions in the UK and Ireland – market share circa 10% and 20% respectively • Motivated management teams • Proven strategic record • Unique acqui
Slide 24: Irish Economic Background
Irish Economic Background Housing, RMI and DIY drivers • €16 billion maturing from SSIA accounts to be complete by May 07 (almost €10 billion flowing back to investors in 2nd quarter 2007) • €2.5 billion per annum invested in these accounts now available as disposable income • Population is growing
Slide 25: Outlook Ireland
Outlook Ireland • Residential new build market continues strongly with a softening expected in the second half • RMI sector will show single digit like for like growth • DIY remains a competitive market but like for like sales and profits are improving consistently • Continued employment growth, net
Slide 26: Outlook - UK
Outlook - UK • Back into sustainable like for like sales and profit growth since July 2006 • Grafton view of the UK economy is positive • Strong demographics and mortgage approvals • Population growth exceeding 300,000 per annum • Grafton’s UK merchanting exposure is to RMI market • Demand in RMI ma
Slide 27: Group Performance to December 2006
Group Performance to December 2006 Average Per Annum Compound Growth 5 Year 10 Year Since 1987 Turnover 24% 28% 22% Adjusted EPS 19% 24% 26% Share purchase/ 20% 25% 23% dividend per share 26
Slide 28: Group Properties
Group Properties History of realised capital profits from relocations and sale of surplus properties 2001 2002 2003 2004 2005 2006 €2.3 m €3.7 m €3.4 m €7.5 m €9.6 m €38.0 m 520 locations 185 freehold 335 leasehold Last valuation December 1998 (Grafton Irish properties) and April 2004 for Heiton pro
Slide 29: Heiton Buckley
7 Heiton Buckley, BUILDERSEMERCHANTS
Slide 30: Irish Merchanting 2006
Irish Merchanting 2006 Overview of the Period: 2006 +/- vs’05 % Group Sales €’m 816 +18% 28% • Strong sales & PBIT growth – Buoyant construction sector – Over 88,000 new homes built in 2006 • Merchanting sales up 18% No.1 • Like for like sales up 8% 23 Locations 29 Locations – Positive outlook for 2
Slide 31: Woodie's DIY / Atlantic
VJoodie’s DIY EY ATLANTIC ano GARDEN CENTRES LY HOMECARE
Slide 32: Irish Retailing
Irish Retailing Overview of the Period: 2006 +/- vs’05 % Group • Continued PBIT growth despite increased competition Sales €’m 312 +14% 10% • More competition from new stores – Sq. ft. occupied by DIY superstores increased by 9% in 2006 Total Retailing Locations 46 – less cannibalisation – returning
Slide 33: Comparison of DIY Store Sizes in the Republic of Ireland
Comparison of DIY Store Sizes in the Republic of Ireland Total 2.5 m sq. ft. Total 2.4 m sq. ft. 1,600,000 +100% Total 2.2 m sq. ft. 1,400,000 Total 1.5 m sq. ft. 1,200,000 t ecas For 1,000,000 Total 1.2 m sq. ft. +9 % +4% 800,000 600,000 400,000 200,000 0 2003 2004 2005 2006 Forecast 2007 Woodie’s
Slide 34: Buildbase
Slide 35: Plumbbase
Slide 36: UK Merchanting 2006
UK Merchanting 2006 Overview of the Period: 2006 +/- vs’05 % Group • Increased sales through acquisition • Like for like sales flat for the year but return to Sales €’m 1,665 +9% 57% growth in second half circa 2% • Cost cutting contributed Total UK Merchanting Locations: 384 • Further signs of impr
Slide 37: Mortar
it Mortar you need it!
Slide 38: UK & Irish Manufacturing 2006
UK & Irish Manufacturing 2006 Overview of the Period: 2006 +/- vs’05 % Group Sales €’m 141 +6% 5% • 9th dry mortar plant commissioned in Leeds in July 2006 • Increased competition and price pressure as expected in UK Mortar market - UK like for No.1 Dry Mortar like sales returned to modest growth in
Slide 39: UK Merchanting League Table
UK Merchanting League Table Circa 2,000 Grafton Independents to 10% be consolidated 18% 39% Jewson 15% 19% Wolseley Travis Perkins Sector Turnover £12 billion plus (excluding Wickes) Unconsolidated £4.6 billion plus 38
Slide 40: Principal Developments
Principal Developments • 1987 Grafton Group became an independent plc. Turnover €62.8 million, operating profit €2.2 million, EPS 0.9 cent (full year) • 1994 Acquired first UK Merchanting business • 1995 Entered UK Dry Mortar market • 1998 Acquired British Dredging plc (chain of builders and plumber
Slide 41: Research Coverage
Research Coverage Robert Muir Joe Gill Mark Hake 0044 207 425 1838 +353 1 641 9462 0044 207 966 1194 Florence O’Donoghue John Mattimoe John Sheehan +353 1 614 8997 +353 1 240 4256 +353 1 6115912 Aynsley Lammin Howard Seymour Stuart Draper 0044 207 986 4092 0044 207 003 3501 +353 1 633 3800 40
Slide 42: For Further Information
For Further Information Michael Chadwick Executive Chairman Colm ó Nualláin Finance Director Leo Martin Chief Operating 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 F