Grafton Group plc Investor Day London Thursday, 7 November 2013
Gavin Slark Chief Executive Officer
Cautionary Statement Certain statements made in this presentation are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied by these forward looking statements. They appear in a number of places throughout this presentation and include statements regarding the intentions, beliefs or current expectations of Directors and senior management concerning, amongst other things, the results of operations, financial condition, liquidity, prospects, growth, strategies and the businesses operated by the Group. The Directors and senior management do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.
Agenda • Welcome and Overview Gavin Slark, Group CEO • Strategic Financial Overview David Arnold, Group CFO • Irish Merchanting Eddie Kelly, CEO Grafton Merchanting ROI • Selco Chris Cunliffe, CEO Selco Video presentation • Development Strategy Joe Sowton, Group Strategic Development Director • Gavin Slark Summary • Gavin Slark, David Arnold Questions and Answers Lunch with Management Team
Executive Management Team Gavin Slark CEO Joe Sowton Jolyon Ingham Jonathan Jennings Charles Rinn Group Strategic David Arnold Group IT Group Property Group Financial Development Group CFO Director Director Controller/ Secretary Director Peter Kearney CEO Chris Cunliffe Declan Ronayne Eddie Kelly CEO Mark Kelly CEO Grafton Grafton Grafton Chief Executive Chief Executive Merchanting NI Selco Woodie’s DIY Merchanting ROI Merchanting GB
Management Team in attendance Steve Thompstone Peter Kearney Declan Ronayne Managing Director Chief Executive Chief Executive Buildbase Grafton Merchanting NI Woodie’s DIY Andy Williams Kate Tinsley Chris Cunliffe Managing Director Finance Director Chief Executive Plumbase Grafton Merchanting GB Selco Charles Rinn Joe Sowton Eddie Kelly CEO Group Financial Group Strategic Grafton Controller / Secretary Merchanting ROI Development Director Larry Dale Chief Executive EuroMix
1909 - 2013 • 1909 Established in Dublin • 1965 PLC - Listed on Dublin Stock exchange • 1985 Michael Chadwick appointed Executive Chairman • 1990 Northern Ireland – Builders Merchanting • 1994 England – Plumbers Merchanting • 1995 England – Builders Merchanting • 1998 British Dredging plc • 2003 Jacksons • 2005 Heiton Group plc • 2006 Online retail - Plumbworld • 2009 Belgium – Joint Venture • 2011 Appointment of Gavin Slark as CEO • 2013 Change of Listing Arrangements and Reporting Currency
Existing Group structure Merchanting Ireland DIY Retailing Builders Merchanting Grafton Group plc UK Plumbers Merchanting Mortar Manufacturing Belgium JV Builders Merchanting JV Manufacturing
Our current market positions • Builders Merchanting UK No 3 ROI No 1 Belgium No 3 (No 1 - 2014) • Plumbers Merchanting UK No 4 ROI No 1 • DIY Retailing ROI No 1 • Dry Mortar Manufacturing UK No 1
2012 revenue by business segment and geography Revenue by Business Segment Revenue by Geographic Area Merchanting UK 89% 76% € 2.17bn £1.76bn € 2.17bn £1.76bn Ireland 22% Retailing 9% Belgium Manufacturing 2% 2%
Group trading locations Circa 600 Trading Locations Builders Merchanting Plumbers Merchanting DIY Retailing Manufacturing UK ROI BE Total 260 43 11 314 227 4 - 231 - 45 - 45 9 1 - 10 Total 496 93 11 600
David Arnold Chief Financial Officer
Interim Management Statement Revenue for the 10 months to 31 October was up 7.4% to £1.6 bn (Oct 2012: £1.49bn) Average Daily Like for Like Revenue Growth – 2013* Total Revenue Four months to Ten months to 31 October 31 October Q1 Q2 2013 2013* UK Merchanting (0.6%) 4.2% 4.1% 6.2% Irish Merchanting 2.4% (0.6%) 5.6% 1.1% Irish Retailing (12.3%) 8.5% 4.1% (1.7%) Manufacturing (10.3%) 8.0% 25.5% 0.7% *Constant currency
Interim Management Statement UK • Housing market is benefitting from Government backed initiatives • Confidence slowly but surely returning • Positive, though lagged, effect on Grafton as housing transactions and household spending on RMI increases Ireland • Consumer confidence has improved and the Merchanting and DIY markets have stabilised at very low levels of activity
Revenue 2,500 • Ireland revenue peaked at € 1,227m (£840m) in 2007. 2,000 2012 revenue € 487m (£395m) 1,500 Revenue (£ms) • 2012 UK revenue broadly Belgium back to 2007 level Ireland (£1.335bn vs £1.353bn) 1,000 UK • Selco more than doubled revenue over this period (£230m v £112m) 500 • 2012 Belgium revenue 0 € 38m (£31m) 2007 2008 2009 2010 2011 2012
Group Operating Profit 200 9.0% 8.2% • Group operating margin 180 8.0% peaked at 8.3% (2006) 160 7.0% Operating profit (£m’s) • 140 Operating margin gradually Operating Margin (%) 6.0% rebuilt since 2009, largely 120 through self help measures 5.0% 4.4% 100 180.4 4.0% 3.4% 80 2.7% 3.0% 2.4% 60 92.7 2.0% 40 1.2% 59.1 47.5 1.0% 20 41.5 21.3 0 0.0% 2007 2008 2009 2010 2011 2012
ROCE / Capital Turn 2.5 16.1% 16.0% • Increasing focus going forwards 2.0 14.0% 2.0 1.8 1.8 • ROCE at 16.1% in 1.7 12.0% 1.6 2007 1.5 1.5 10.0% Capital Turn ROCE (%) • Gradual 7.6% 8.0% improvement since 2009 1.0 5.9% 6.0% 4.6% 3.8% 4.0% 0.5 1.8% 2.0% 0.0% 0.0 2007 2008 2009 2010 2011 2012 Capital Turn ROCE
Net Debt / Gearing 450.0 60% • 52% Significant reduction in 400.0 50% financial leverage 50% 350.0 • Debt reduced by £250m 300.0 40% over 5 years 35% Net debt (£m’s) Gearing (%) 250.0 403.6 414.9 30% • No recourse to 26% 200.0 23% shareholders 20% 286.4 150.0 20% • 219.6 Gearing 17% at June 2013 100.0 188.7 10% 164.9 50.0 0.0 0% 2007 2008 2009 2010 2011 2012
Dividend / Dividend Cover 16 4.0 3.8 • Dividends paid throughout 14 3.5 the recession 12 3.0 • 2.6 Progressive dividend policy to be maintained 10 2.5 2.3 Dividend cover (x) Dividend (p) 2.1 2.1 8 2.0 • 2013 interim dividend 15.1 increased by 17% 1.5 6 11.9 1.1 4 1.0 6.9 6.5 6.0 4.5 2 0.5 0 0.0 2007 2008 2009 2010 2011 2012
Grafton’s Strategic Pillars Strategic Pillars Economic Growth Operating Capital Revenue Margin Turn Organic Growth
Revenue Growth Revenue Growth Points Economic Economic - Exposure to early cycle upturn Growth Growth - Multi-specialist Implants Organic - Product extension New Formats Growth Greenfield - Selco - UK infill and consideration of further overseas Geography markets Acquisitions Added Value - Extending capabilities
Margin Growth Operating Margin Growth Points Operating Operating - Inherent operating leverage across our brands Leverage Leverage - Across branches Pricing Consistency Pricing - Sensitive and responsive to customer Customer Insight Initiatives - Good value, service-led proposition Benchmarking - Driving higher margin business and core product Product range Mix By Customer - Focus on highest returns - Driving contribution to fixed cost Implants Self Help - Rich vein of opportunity Cost efficiencies (Part 2) Purchasing - Leveraging across the Group
Increasing Capital Turn Capital Turn Growth Points Revenue Revenue - Capital turn benefits from economic and organic Growth Growth growth plus operating leverage Focus - Dedicated property team Property - Maximising opportunities within the property Optimise portfolio Woodie’s - Progressively improve stock turn towards best in class Working - Seasonal stock improvement opportunities Plumbase Capital - Maximise terms from expanded footprint Belgium Selco - c.85% cash Cash Collect - Greater proportion of our customers’ spend Implants - Supporting our trade customers with retail Showrooms proposition
Revenue Growth Grafton Grafton Revenue Belgium NI RoI Economic a a a a a a a a uplift Organic Implants a a a a Growth New Formats a Greenfield a Acquisitions Geography a a Added Value a • All brands early cycle beneficiaries • Multi-specialist – Hirebase, Plumbase and Electricbase implants are key tools for driving revenue growth • Plumbase Industrial – new format, experienced team • New sites and trial formats for Selco • Selective M&A activity will increase market share of Buildbase and our Belgium business
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