Grafton Group PLC · LSE:GFTU
Grafton — H1 2006 Earnings Presentation
39 slides from Grafton's earnings presentation, 2006
Slide 1: Grafton Group Plc Interim Results 2006
GRAFTON GROUP PLC INTERIM RESULTS 2006
Slide 2: Profile
GRAFTON GROUP PLC INTERIM RESULTS 2006 Profile • UK and Ireland based Building Materials Group • Principal activities – Builders and Plumbers Merchanting – DIY Retailing – Dry Mortar Manufacturing • 2005 Turnover exceeded €2.6 billion, first half 2006 €1.43 billion (up 10%) • Market leader or strong
Slide 3: Development History - Summary
GRAFTON GROUP PLC INTERIM RESULTS 2006 Development History - Summary • 1987 Grafton Group became an independent plc. Turnover €62.8 million, operating profit €2.2 million, EPS 0.9 cent (full year) • 1987 First Woodie’s DIY superstore opened • 1994 Acquired first UK Plumbers Merchant • 1995 Entered U
Slide 4: Principal Brands - UK
GRAFTON GROUP PLC INTERIM RESULTS 2006 Principal Brands - UK Builders Merchanting - Significant Market Positions Plumbers Merchanting - Significant Market Position Silo Mortar Manufacturing - Market Leader 3
Slide 5: Principal Brands – Ireland
GRAFTON GROUP PLC INTERIM RESULTS 2006 Principal Brands – Ireland 4
Slide 6: Strategy
GRAFTON GROUP PLC INTERIM RESULTS 2006 Strategy • Consistent – Focused • 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
Slide 7: Consistently Moving Forward Profitability and Earnings
GRAFTON GROUP PLC INTERIM RESULTS 2006 Consistently Moving Forward Profitability and Earnings 1400 1200 EPS 1000 Percentage Change 800 Share Purchase/DPS 600 400 PBT 200 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 IRISH GAAP IFRS PBT 13.9 19.6 23.2 28.2 38.2 52.8 67.2 80.2 102.0 145.8 1
Slide 8: 2006 First Half Overview
GRAFTON GROUP PLC INTERIM RESULTS 2006 2006 First Half Overview • A period benefiting from strong trading in Ireland once again and as expected compensating for a softer but improving trading environment in the UK • Seven additional bolt on acquisitions and 10 new developments completed • A very pos
Slide 9: Group Financial Highlights
GRAFTON GROUP PLC INTERIM RESULTS 2006 Group Financial Highlights 2006 2005 % Change Turnover €1,427 m €1,293 m +10% Operating profit* €105.8 m €96.5 m +10% Pre-tax profit €118.3 m €87.4 m +35% EBITDA €159.8 m €126.5 m +26% Property profits €28.1 m €5.9 m Adjusted E.P.S.* 33.00 c 30.21 c +9% Share P
Slide 10: Consistently Strong Growth in Earnings
GRAFTON GROUP PLC INTERIM RESULTS 2006 Consistently Strong Growth in Earnings 70 60 +21 % +23 % 50 +22 % Earnings 40 Interim +15 % +24 % Final 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 9
Slide 11: Components of Profit Growth
GRAFTON GROUP PLC INTERIM RESULTS 2006 Components of Profit Growth Turnover Operating Profit* €’million €’million H1 2005 1,293 97.6 Organic growth - Ireland 33 8.8 Organic growth - UK (13) (6.4) 2005 acquisitions - UK 34 2.6 - Ireland 39 3.3 2006 acquisitions - UK 7 0.8 New branches 2005 & 2006 36
Slide 12: Financial Statistics
GRAFTON GROUP PLC INTERIM RESULTS 2006 Financial Statistics H1 2006 H1 2005 EBITDA margin* 9.2% 9.3% Operating profit margin # 7.5% 7.5% Total equity €907 m €740 m Net debt €544 m €540 m Gearing 60% 73% Debt to market capitalisation 22% 24 % Interest cover - EBITA 8.6 6.9 Tax Rate 14.0% 13.8% Annual
Slide 13: Cash Generation
GRAFTON GROUP PLC INTERIM RESULTS 2006 Cash Generation H1 2006 H1 2005 € million € million Operating profit 105.8 96.5 Depreciation, amortisation & other 27.6 24.9 Property disposals, interest/investment income 63.0 18.5 Total cash inflow 196.4 139.9 Replacement capital expenditure (23.4) (30.7) Int
Slide 14: Group Development Spend
GRAFTON GROUP PLC INTERIM RESULTS 2006 Group Development Spend €’ m Heitons 600 Acquisition & Investment Spend 500 Development Asset Purchases 400 Jacksons Replacement Asset Purchases 300 200 First half only 100 2006 0 2000 2001 2002 2003 2004 2005 2006 13
Slide 15: Analysis of UK and Ireland Turnover & Operating Profit
GRAFTON GROUP PLC INTERIM RESULTS 2006 Analysis of UK and Ireland Turnover & Operating Profit H1 2006 H1 2005 Change € 'million € 'million % Turnover Ireland 590.7 500.0 +18% UK 836.5 793.3 +5% 1,427.2 1,293.3 +10% Operating profit* Ireland 57.1 43.5 +31% UK 49.8 54.1 -8% 106.9 97.6 +10% *Before int
Slide 16: Enlarged Group Locations
GRAFTON GROUP PLC INTERIM RESULTS 2006 Enlarged Group Locations 505 Trading Locations Builders Merchanting g Plumbers Merchanting Manufacturing DIY Retailing 15
Slide 17: UK Performance 2000/2005
GRAFTON GROUP PLC INTERIM RESULTS 2006 UK Performance 2000/2005 300% Operating Profit 271% 250% Turnover & Operating Profit Turnover % Increase since 2000 207% 200% Turnover & Operating Profit % Increase since 2000 150% 100% 50% 0% 2000 2001 2002 2003 2004 2005 Turnover 520.0 657.2 808.5 1,111.5 1,4
Slide 18: History of UK H1 and H2 Margins 2001-2006
GRAFTON GROUP PLC INTERIM RESULTS 2006 History of UK H1 and H2 Margins 2001-2006 9 8 7 6 5 4 3 2 1 0 2001 2002 2003 2004 2005 2006 First Half Second Half 17
Slide 19: Quarterly UK Like for Like Merchanting Sales Changes
GRAFTON GROUP PLC INTERIM RESULTS 2006 Quarterly Percentage UK Like for Like Merchanting Sales Changes Adjusted for Trading Days 8. 00% Quarter 3 2006 is 6. 00% assumed equal to the average of July & August 4. 00% 2. 00% 0 0. 00% - 2. 00% - 4. 00% - 6. 00% Qtr 1 2005 Qtr 2 2005 Qtr 3 2005 Qtr 4 2005
Slide 20: Heiton Group plc
GRAFTON GROUP PLC INTERIM RESULTS 2006 Heiton Group plc • THE HEITON BUSINESS POST ACQUISITION – Stillorgan property and others sold realising €42 million cash since acquisition – Net investment by Grafton now reduced to €364 million – On target to achieve 17.5% return on investment in 2007 – Turnov
Slide 21: Group Strengths
GRAFTON GROUP PLC INTERIM RESULTS 2006 Group Strengths • Highly cash generative and profitable businesses • Strong balance sheet • Prominent market positions in the UK and Ireland • Motivated management teams • Proven strategic record • Unique acquisition / integration skills • Buoyant trading condi
Slide 22: Grafton Group Plc
GRAFTON GROUP PLC INTERIM RESULTS 2006 21
Slide 23: Irish Merchanting First Half 2006
GRAFTON GROUP PLC INTERIM RESULTS 2006 Irish Merchanting First Half 2006 Overview of the Period: 2006 +/- vs’05 % Group Sales €’m 408 +21% 29% • Strong sales & PBIT growth – Buoyant construction sector – Over 86,000 new homes built in 2005 • Merchanting sales up 21% N o. 1 • Like for like sales up 9
Slide 24: Grafton Group Plc
GRAFTON GROUP PLC INTERIM RESULTS 2006 23
Slide 25: Irish Retailing First Half 2006
GRAFTON GROUP PLC INTERIM RESULTS 2006 Irish Retailing First Half 2006 Overview of the Period: • More competition from new stores 2006 +/- vs’05 % Group – Sq. ft. occupied by DIY superstores increased by 5% in 2006 Sales €’m 147 +15% 10% – less cannibalisation – returning to growth • Continued PBIT
Slide 26: Comparison of DIY Store Sizes in the Republic of Ireland
GRAFTON GROUP PLC INTERIM RESULTS 2006 Comparison of DIY Store Sizes in the Republic of Ireland Total 2.3 m sq. ft. 1,600,000 Total 2.2 m sq. ft. 1,400,000 +83% +5% Woodie's & Atlantic Total 1.5 m sq. ft. 1,200,000 Total 1.2 m sq. ft. B&Q 1,000,000 800,000 Homebase 600,000 400,000 200,000 0 2003 200
Slide 27: Grafton Group Plc
GRAFTON GROUP PLC INTERIM RESULTS 2006 26
Slide 28: Grafton Group Plc
GRAFTON GROUP PLC INTERIM RESULTS 2006 27
Slide 29: UK Merchanting First Half 2006
GRAFTON GROUP PLC INTERIM RESULTS 2006 UK Merchanting First Half 2006 Overview of the Period: 2006 +/- vs’05 % Group • Increased sales through acquisition • Small decline in like for like sales - 1.7% Sales €’m 803 +5% 56% versus a very strong first half in 2005 • Cost cutting contributed • Further
Slide 30: Grafton Group Plc
GRAFTON GROUP PLC INTERIM RESULTS 2006 29
Slide 31: UK & Irish Manufacturing First Half 2006
GRAFTON GROUP PLC INTERIM RESULTS 2006 UK & Irish Manufacturing First Half 2006 Overview of the Period: 2006 +/- vs’05 % Group Sales €’m 69 +4% 5% • 9th dry mortar plant commissioned in Leeds in July 2006 • Increased competition and price pressure Dry Mortar Plants N o .1 as expected in UK Mortar ma
Slide 32: Irish Economic Background
GRAFTON GROUP PLC INTERIM RESULTS 2006 Irish Economic Background Housing, RMI and DIY drivers • €16 billion maturing from SSIA between May 06 and May 07 • €2.5 billion per annum was being invested in these accounts • Population is growing by over 2% per annum • Large increase in net inward migration
Slide 33: Outlook Ireland
GRAFTON GROUP PLC INTERIM RESULTS 2006 Outlook Ireland • Residential new build market continues strongly heading towards 90,000 new homes in 2006 • RMI sector will show single digit like for like growth • DIY remains a competitive market but like for like sales are improving • Release of SSIA funds
Slide 34: Outlook - UK
GRAFTON GROUP PLC INTERIM RESULTS 2006 Outlook - UK • Grafton view of the UK economy is positive • Strong demographics and mortgage approvals • Population growth exceeding 300,000 per annum • Softer first half 2006 returning to like for like sales growth in the second half • Main UK merchanting expo
Slide 35: UK Merchanting League Table
GRAFTON GROUP PLC INTERIM RESULTS 2006 UK Merchanting League Table Circa 2,000 Grafton Independents to 9% be consolidated 39% 18% Jewson 15% 19% Wolseley Travis Perkins Sector Turnover £12 billion plus (excluding Wickes) Unconsolidated £4.6 billion plus 34
Slide 36: Group Performance to December 2005
GRAFTON GROUP PLC INTERIM RESULTS 2006 Group Performance to December 2005 Average Per Annum Compound Growth 5 Year 10 Year Since 1987 Turnover 26% 30% 23% Adjusted EPS 21% 27% 27% Share purchase/ 21% 27% 23% dividend per share 35
Slide 37: Group Properties
GRAFTON GROUP PLC INTERIM RESULTS 2006 Group Properties History of realised capital profits from relocations and sale of surplus properties 2001 2002 2003 2004 2005 First Half 2006 €2.3 m €3.7 m €3.4 m €7.5 m €9.6 m €28.1 m 505 locations 172 freehold 333 leasehold Last valuation December 1998 (Graft
Slide 38: Research Coverage
GRAFTON GROUP PLC INTERIM RESULTS 2006 Research Coverage John Messenger Joe Gill Mark Hake 0044 207 425 8000 +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 0
Slide 39: For Further Information
GRAFTON GROUP PLC INTERIM RESULTS 2006 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