2012 HALF YE ARLY REPORT 19 Jul 19 Jul ly 2012 ly 2012
Matthe ew Ingle Chief Exec Chief Exec cutive Officer cutive Officer
Howdens continues to perfo orm well H1 2012: • Solid trading: sales up by 6.8% • Operating profit up to £29. .1m (2011: £25.5m) • Gross margin up to 60.1% % (2011: 59.3%) • Cash position improved vs s. H1 2011 Sustained focus on proven m model 0.3p interim dividend declare d A robust business in a an uncertain environment 2012 Half Yearly Report 3
Mark R Robson Chief Finan Chief Finan ncial Officer ncial Officer
Context of financial results • Increased turnover and profit • Cash flow finances legacy issu ues and growth of the business • Legacy property portfolio conti inues to diminish 2012 Half Yearly Report 5
Highlights Revenue, £m Operating g profit, £m Net cash, £m HJ UK France 60 370 30 364.6 57.1 50 11.1 6.9 360 29.1 29.1 28 40 357.7 11.7 350 37.4 30 341.7 26 340 6.8 25.5 20 24 330 334.9 756.4 10 5.1 5 1 320 22 0 2011 2012 2011 2012 Jun-11 Dec-11 Jun-12 HJ UK: +6.8% Profit befor re tax, £m Uses of ‘cash’, £m Gross profit margin, % 26 61 Property Pension def Cap ex 50 25.4 40 8 60 7 60.1 18 30 24 24 20 20 59.3 20 59 23.5 17 10 14 58 22 0 2011 2012 2011 2012 2011 2012 2012 Half Yearly Report 6
Revenue 2012 UK depot re evenue £357.7m • total +6.8% t t l 6 8% • LFL +5.0% LFL 5 0% 2012 French depo ot revenue £6.9m + 5% 5% in €s in €s 2012 Half Yearly Report 7
Profit before tax Group gros ss profit margin ● 2012: 60.1% % ● 2011: 59.3% Profit before tax Profit before tax £m Gross Gross profit £m profit 16.5 Mix and Mix and Change volume £16.5m 3.0 Price Chang e 18.0 £1.9m m 219.3 Cost Cost pressures, etc. 25.4 Operating (4.5) 23.5 costs Interest, (12.9) (12 9) etc etc 1.7 202.8 • • • • 2011 2012 2011 2012 2012 Half Yearly Report 8
Operating costs Operating Change costs £12.9m £m £m Other 190.2 Other - 2.2 growth 2.2 2.2 Olde Olde er er depo ots 5.5 5 New depots 3.0 177.3 • • 2011 2012 2012 Half Yearly Report 9
Income statement £m H1 2011 H1 2012 Revenue 341.7 364.6 Cost of goods sold (138.9) (145.3) Gross profit 202.8 219.3 O Operating costs ti t (177 3) (177.3) (190 2) (190.2) Operating profit 25.5 29.1 Net interest Net interest (2 0) (2.0) (3 7) (3.7) Profit before tax 23.5 25.4 Tax (6.5) (5.6) Profit for the period 17.0 19.8 2012 Half Yearly Report 10
Earnings per share and divid dend H1 2012 H1 2011 Earnings per share 3.2p 2.8p Interim dividend per shar re nil 0.3p 2012 Half Yearly Report 11
Net cash and cash flow £m H1 2011 H1 2012 Opening net cash 35.0 57.1 Operating cash flows before movements in work king capital 35.9 37.9 Working capital (10.7) (10.4) Capital expenditure (7.9) (6.5) Interest (net) (0.5) (0.1) Tax paid (11.6) (9.0) Legacy properties (17.2) (13.9) Pension deficit contribution (17.9) (20.1) Other - 2.4 Closing net cash 5.1 37.4 Net cash inflow excluding legacy property and pension deficit costs: £14.3m pension deficit costs: £14 3m 2012 Half Yearly Report 12
Working capital • Working capital up £10.4m – stock down £6.0m t k d £6 0 – debtors up £24.6m – creditors up £8.2m 2012 Half Yearly Report 13
Reducing our legacy propert ty liabilities Number of £33m 2 properties 1 80 £24m 60 £18m £12m 40 £7m 20 20 £5m 3 £5m £2m £2m £0.2m 0 Oct-08 Dec-08 Dec-09 Dec-10 Dec-1 1 Dec-12 Dec-14 Dec-19 Dec-24 Jul -12 • 5 legacy property deals in so far 2012: £11 .7m exit cost → £27m liability extinguished 1 Vacant and tenanted. 2 Gross rent & rates less payments by tenants 2 Gross rent & rates less payments by tenants. 3 Figures for Dec 2012 and beyond are before any further mitigating action tha at may be taken. 2012 Half Yearly Report 14
Pension scheme deficit £m IAS19 basis Finance Finance charge 3 Asset returns Triennial review Discou unt 3 rate & o rate & o other other completed in June - completed in June 137 137 assump tions £35m p.a. funding 1 agreed for 3 years commencing April 2012 Change £15m 122 Deficit Funding (20) • Dec Dec Jun Jun 2011 2012 2012 Half Yearly Report 15
Outlook for remainder of 201 12 • Sales in first four weeks of sec cond half down 0.9% – reflects strong comparator fro g p m same period in 2011 p • Rest of year: – no change in expectations no change in expectations – cautious about the outlook – continue to invest in growth • Will take timely actions, as req quired 2012 Half Yearly Report 16
Matthe ew Ingle Chief Exec Chief Exec cutive Officer cutive Officer
A proven and adaptable bus siness model “To supply from loca o supp y o oca al stock, nationwide, a s oc , a o de, the small builder’s ev ver-changing routine kitchen and joinery re quirements, assuring no-call-back quality a and best local price” 2012 Half Yearly Report 18
A proven and adaptable bus siness model Trade only In stock all the time Very local depot Ability to swap things im mmediately Opening hours to suit b builders Confidential discount – builder’s margin Nett monthly account – – builder’s cash flow No retail pricing = no co onfusion 2012 Half Yearly Report 19
A proven and adaptable bus siness model Focus on one customer Sell Product that Product that M Make money helps the builder to: Gr row reputation p Business geared to needs of builde er = greater efficiency at least cost 2012 Half Yearly Report 20
A proven and adaptable bus siness model Considered range of kitchens s and joinery Up-to-date designs, traditi onal and modern Product “families” Matching joinery, accesso ories and hardware Range of price points 2012 Half Yearly Report 21
A proven and adaptable bus siness model Supporting the builder’s sale Industry-leading catalogue es Cookbooks, lookbooks, et c Selective lifestyle advertis ing Hardware and flooring van ns Excellent kitchen planning g service 2012 Half Yearly Report 22
A proven and adaptable bus siness model Reliable product Easy and quick to fit Rigid box Does not break Manufactured to consisten nt standards Meets legislation Environmentally sound Enhancing the builder’s repu tation with his customers 2012 Half Yearly Report 23
A proven and adaptable bus siness model Stable, focussed supply chain n Ownership and control of manufacturing process Well-invested, bespoke e facilities Specialised products ex xclusive to Howdens Quality + availability Integrated systems sup pporting business processes • Manufacturing, ware ehousing, distribution, depot sales, marketing, ma anagement information, etc 2012 Half Yearly Report 24
A proven and adaptable bus siness model Manufacturing efficiently at le east cost Improving productiv vity and reducing waste Supporting margin Ensuring security of f supply End Small Depot Distribution Manufacture Sourcing customer builder our own organisation 2012 Half Yearly Report 25
A proven and adaptable bus siness model Efficient and effective depot m model Warehouse Trade counter Floorplan of a typical depot Staff outside Cleethorpes depot, 10,500 sq ft Rent c.£5 per square foot Opened January 2012 2012 Half Yearly Report 26
A proven and adaptable bus siness model Local accountability Depot managers responsible for: • Local sales and margin • Hiring local staff Hiring local staff • Local stock levels • • Local marketing Local marketing Manager and staff incentivised on local profit Focus on opening and trading new accounts Kettering depot 2012 Half Yearly Report 27
Adapting to changing circum mstances Established mo odel, rolled out to 300+ depots 1995 – 2004 2004 2004 - 2006 2006 MFI i MFI in crisis i i Corporate reco onstruction 2005 - 2008 Disposal of Disposal of f MFI f MFI “Rough Dia amond” Unlocked ro Unlocked ro oute to profit and value oute to profit and value • Re-engi ineered supply chain • • Renewe Renewe ed systems ed systems • Resume ed active product development 2012 Half Yearly Report 28
Adapting to changing circum mstances Economic crisi s 2008 MFI MFI collaps ll ses Legacy obl igations R Rapid and con id d tinuing development of Howdens ti i d l t f H d Meanwhile, from 2006 Product “fa amilies”, quality and design onwards Lamona br L b and launched d l h d New system ms implemented U Use of BDP f BDP P t P to drive improved performance d i i d f Continually searching for r growth opportunities 2012 Half Yearly Report 29
Adapting to survive and thriv ve Accelerating pace of change Continuous Constantly Constantly New w product development sophisticating market investment Ongoing product developm ment is critical to growth 2012 Half Yearly Report 30
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