2019 Interim results July 2019 1
Agenda Welcome Stuart Chambers p3 Financial review Alan Williams p4 Operational review & strategic update John Carter p18 Appendices p32 2019 Interim results July 2019 2
WELCOME STUART CHAMBERS 2019 Interim results July 2019 3
FINANCIAL REVIEW ALAN WILLIAMS 2019 Interim results July 2019 4
H1 overview Good progress towards Underpinned by strong H1 strategic goals trading performance ● Focus on advantaged trade ● 8% LFL growth driven by volume businesses ● Positive trading in Merchanting - ● Simplifying the Group to reduce businesses gaining market share complexity and costs ● Excellent Toolstation growth ● Separation of P&H - disposal continued process under way ● Strengthened performance in ● Intention to demerge Wickes Wickes with 49% EBITA growth 2019 Interim results July 2019 5
Basis of results ● New reporting segments as defined in the FY2018 results presentation ● Plumbing & Heating classified as a discontinuing operation: - Excluded from Group results - Recognised as asset held for sale ● First application of IFRS16 - Leases: - Not required to fully restate 2018 results on an IFRS16 basis - Have provided illustrative comparatives of 2018 results ● Free cash flow : excludes freehold transactions, includes all capex 2019 Interim results July 2019 6
Key financial highlights H1 2018 H1 2018 IFRS16 illustrative Year-on-year Six months ended 30 June 2019 H1 2019 Restated* comparative change** Revenue £2,771m £2,591m 6.9% Like-for-like sales growth 8.0% 0.2% +7.8ppts Adjusted EBITA excluding property profits £189m £142m £160m 18.1% Adjusted EBITA £195m £156m £170m 14.7% Adjusted earnings per share 50.1p 46.3p 41.8p 19.9% Adjusting items £(127)m £(257)m ROCE 9.8% 10.5% 9.0% +0.8ppts (5) Covenant net debt £(414)m £(409)m Dividends per share 15.5p 15.5p - *All figures except for profit after tax restated to exclude the Plumbing & Heating division, which has been presented as a discontinuing operation **Changes calculated versus H1 2018 illustrative comparatives including the impact of IFRS 16 as previously disclosed 2019 Interim results July 2019 7
Strong volume growth driving revenue ● Like-for-like sales growth of 8.0% £31m £(12)m ● Merchanting volume growth of 4.6% £(15)m demonstrates market share gains £176m £2,771m ● Strong growth in Toolstation through £2,591m LFL and network expansion H1 2018 Volume Price / Mix Net space Trading H1 2019 changes* days ● Encouraging recovery in Wickes LFL Q1 Q2 H1 Q3 Q4 H2 FY trading in core DIY and K&B (1.7)% 2.7% 0.2% 1.6% 5.3% 3.6% 2.0% 2018 11.0% 5.2% 8.0% 2019 ● Cost of goods inflation passed 2yr LFL Q1 Q2 H1 Q3 Q4 H2 FY through in trade businesses 2.1% 6.7% 4.0% 5.5% 7.8% 6.8% 5.7% 2018 9.1% 8.0% 8.2% 2019 *Net space changes includes acquisitions and disposals 2019 Interim results July 2019 8
EBITA growth driven by volume and self help £(26)m £21m £(21)m £(4)m £55m £195m £170m H1 2018 adjusted Gross profit Cost inflation Cost reduction Investment Difference in H1 2019 adjusted EBITA growth property profit EBITA Overall change in overhead cost base 2019 Interim results July 2019 9
Overhead costs as a proportion of sales ● Good progress towards annualised savings Group overhead to sales ratio target of £20m-£30m by mid-2020: 25.0% Simplification of the Group enabling 24.5% - structural savings 24.0% Streamlining central functions - better - 23.5% branch support with improved efficiency 23.0% ● Cost reduction partly offset by inflation in 22.5% rent, rates and salaries 22.0% 2012 2013 2014 2015 2016 2017 2018 2019* ● Significant ongoing investment in proposition, especially Toolstation network *Estimated result for 2019 based on achieved figure for H1 2019 2019 Interim results July 2019 10
Merchanting - market outperformance H1 2019 H1 2018* Change ● Positive volume growth reflects Total revenue £1,869m £1,783m 4.8% encouraging market share gains Like-for-like growth 6.4% 2.4% 4.0ppt ● Continued strong revenue growth in Adjusted operating profit** £140m £133m 5.3% specialists with focus on efficiency Adjusted operating margin** 7.5% 7.5% - ● COGS inflation of around 2% ROCE 12% 11% 1ppt recovered through pricing Branch network*** 996 1001 (5) ● Profit growth driven by volume with extra investment in TP branch teams ● Cost reduction benefits offsetting overhead cost inflation *H1 2018 figures used are illustrative comparatives including the impact of IFRS 16 as previously disclosed **Divisional adjusted operating profit figures are presented excluding property profits ***2018 branch network figures for comparison are taken at 31 December 2018 2019 Interim results July 2019 11
Toolstation - sector leading growth H1 2019 H1 2018* Change ● Strong total sales growth with 21 Total revenue £208m £169m 23.1% branches added to the network Like-for-like growth 17.3% 10.7% 6.6ppt ● Excellent LFL growth of 17.3% from Adjusted operating profit** £13m £10m 30.0% store maturity and wider online range Adjusted operating margin** 6.3% 5.9% 40bps ● EBITA margins increasing with volume ROCE 10% 10% - growth partially offset by investment Branch network (UK)*** 356 335 21 Branch network (Europe)*** 53 40 13 ● All planned new sites for H2 identified - 60 openings altogether in 2019 ● Dutch network expansion continues with 10 new branches *H1 2018 figures used are illustrative comparatives including the impact of IFRS 16 as previously disclosed **Divisional adjusted operating profit figures are presented excluding property profits ***2018 branch network figures for comparison are taken at 31 December 2018 2019 Interim results July 2019 12
Retail - Encouraging Wickes recovery ● Strengthening trading performance: H1 2019 H1 2018* Change Total revenue £695m £638m 8.9% - Core DIY sales benefitting from Like-for-like growth 9.7% (7.4)% 17.1ppt strong trading plan and new ranges Adjusted operating profit** £52m £35m 48.6% - K&B order intake encouraging Adjusted operating margin** 7.5% 5.5% 200bps ROCE 7% 5% 2ppts ● Significant profit improvement from Branch network (Wickes)*** 241 241 - trading and tight overhead cost control Branch network (Tile Giant)*** 95 96 (1) ● Adjusted EBITA margin benefitting from strong operating leverage ● Early progress to create a more *H1 2018 figures used are illustrative comparatives including the impact of IFRS 16 as previously disclosed standalone business **Divisional adjusted operating profit figures are presented excluding property profits ***2018 branch network figures for comparison are taken at 31 December 2018 2019 Interim results July 2019 13
New definition of free cash flow Free cash flow (£m) 40 Investments in freehold property (9) Disposal proceeds in excess of property profits 24 £70m Acquisitions / disposals (20) Dividends (78) £134m Pensions payments (10) Purchase of own shares (14) Cash payments on adjusting items (33) Other (16) Change in cash/cash equivalents (116) £64m £214m ● c.£50m inventory build ahead of Brexit £51m £5m ● Plan to maintain stock levels short-term £40m to protect customer access to materials Adj. EBITA Depreciation Change in Interest* Capex Disposals Free cash ● Higher debtors in line with growth in exc. property and working and Tax (exc. (exc. flow non-cash capital freehold) freehold) (before items freehold) Merchanting credit sales *Interest cost includes £30m ‘Interest on leased assets’ recognised under the implementation of IFRS16 - Leases 2019 Interim results July 2019 14
Capital expenditure reducing from peak (£m) H1 2019 H1 2018 ● Maintenance capex modestly lower due to phasing of fleet requirements Maintenance (22) (25) ● Growth capex focused on Toolstation IT (12) (24) network expansion Growth capex (17) (34) ● Recycling of freehold assets realised net Base capital expenditure (51) (83) £15m of cash and £6m of profit Freehold property (9) (41) ● Continuing to develop sites for new Gross capital expenditure (60) (124) merchant branches and relocations Disposals* 29 51 ● Maintaining guidance for FY2019 base capex of £110m-£130m Net capital expenditure (31) (73) *Proceeds from disposals includes £24m of proceeds from freehold disposals and £5m proceeds from other asset disposals 2019 Interim results July 2019 15
Balance sheet remains strong Medium Term Guidance H1 2019 H1 2018 Change Covenant net debt £414m £409m £5m IFRS16 net debt £1,739m n/a Lease adjusted net debt £2,001m n/a Gearing* 40.9% 47.6% n/a Fixed charge cover 3.5x 3.0x 2.7x 0.3x Net debt : Adjusted EBITDA* 2.5x 2.8x 3.0x (0.2)x Strong balance sheet underpins Group strategic direction *H1 2018 comparative figure calculated as a Lease Adjusted measure with a lease adjustment based on 8x the annual net rent charge. Whilst not directly comparable the two methods are broadly consistent. 2019 Interim results July 2019 16
Outlook and guidance ● Long term fundamental drivers remain robust ● Uncertainty makes market conditions difficult to forecast in the near term ● The Group demonstrated encouraging outperformance in H1 ● Confident of making progress across 2019 as a whole 2019 Interim results July 2019 17
Recommend
More recommend
