20 2019 Pr Prel eliminary Resu sults 27 th February 2020 1 - - PowerPoint PPT Presentation

Howdens 2019 Interim Results 1 Howdens 2019 Interim Results

20 2019 Pr Prel eliminary Resu sults 27th February 2020

Howdens 2019 Interim Results 2 Howdens 2019 Interim Results

Andr ndrew ew L Livi ving ngston

Chief Executive Officer

Howdens 2019 Interim Results 3 Howdens 2019 Interim Results

A A year o

• f progr

gres ess

• Operating Profit increased at a higher

rate than revenues

• Sales

4.8%

• Gross Profit

5.8%

• Operating Profit

8.3%

• Price increase in January
• More profitable balance between

volume and price

• Period 11 record sales
• Continued to make investments in

the business

Howdens 2019 Interim Results 4 Howdens 2019 Interim Results

INTERNATIONAL DIGITAL DEVELOPMENT RANGE AND SUPPLY MANAGEMENT DEPOT EVOLUTION

Ini nitiati tives t s to inc ncrease se volum umes a s and nd pr profits

My CE

O a nd Chie f F ina nc ia l Offic e r

Mark R k Rob

• bson
• n

Deputy CEO and Chief Financial Officer

Howdens 2019 Interim Results 6

Hi Highl hlight hts

2019 Preliminary Results

200 210 220 230 240 250 260 270 2018 2019

Operating profit, £m, and margin, %

1,477.3 1,550.3 34.0 33.3 1,250 1,300 1,350 1,400 1,450 1,500 1,550 1,600 1,650 2018 2019

Revenue, £m

HJ UK Cont Europe HJ UK: +4.9% 200 210 220 230 240 250 260 270 2018 2019

Profit before tax, £m

27.5 30.0 44.3 61.1 68.3 70.6 62.2 55.2 50 100 150 200 250 2018 2019

Uses of ‘cash’, £m

Pension def Cap ex Dividend Share rep 1,511.3 1,583.6 238.5 15.9% 16.4% 240.1 260.0 750 800 850 900 950 1,000 2018 2019

Gross profit, £m, and margin, %

61.7% 62.3% 932.2 986.2 260.7 231.3 267.4 200 210 220 230 240 250 260 270 2018 2019

Net cash, £m

130.5 125.8

Howdens 2019 Interim Results 7

2019 UK depot revenue £1,550.3m

• total +4.9% • LFL +2.5%

2019 Continental Europe depot revenue £33.3m

• France total (€) +3.8% • LFL +3.1%

Reven venue

2019 Preliminary Results

Howdens 2019 Interim Results 8

£m

932.2 Change £54.0m 986.2

2018 2019

Gross profit

• Currency

(3) Cost pressure/ savings, etc. (net) (11) Price (revenue) 61 Volume & mix (COGS) (4) Volume & mix (revenue) 11

2018

£m

Interest, etc. 2 Gross Profit 54

238.5

• 2019

Profit before tax

Operating Costs (34)

Change £22.2m 260.7

Pr Prof

• fit b

befor

• re t

tax

2019 Preliminary Results

Group gross profit margin

• 2018: 61.7% • 2019: 62.3%

Howdens 2019 Interim Results 9

Op Operat ating c g costs

2019 Preliminary Results

New depots 17

2019 Change £34.1m

Older depots 7

£m

726.2

Growth related 8 Closure Costs 6

2018

692.1

GMP equalisation 4

Howdens 2019 Interim Results 10

Revenue 1,583.6 1,511.3 Cost of goods sold (597.4) (579.1) Gross profit 986.2 932.2 Operating costs (before GMP equalisation charge) (72 726.2) (688.3) GMP equalisation charge

• (3.8)

Operating profit 260 60.0 240.1 Net interest 0. 0.7 (1.6) Profit before tax 260 60.7 238.5 Tax (51. 1.7) (48.1) Profit for the period 209 09.0 190.4

£m 201 019 2018

Inc ncome s state tement nt

2019 Preliminary Results

Howdens 2019 Interim Results 11

• Earnings per share

35. 5.0p 31.3p

• Dividend
• Final (recommended)

9. 9.1p 7.9p

• Full year

13. 3.0p 11.6p 2019 final dividend costing £54.9m Earni nings pe s per s sha hare & di dividend nds

2019 Preliminary Results

£m 201 019 2018

Howdens 2019 Interim Results 12

Opening net cash 23 231. 1.3 241.1 Operating cash flows before movements in working capital 300. 00.8 274.6 Working capital (6 (6.3) 3) (49.7) Capital expenditure (61. 1.1) 1) (44.3) Tax paid (46. 6.2) (45.4) Dividends (70. 0.6) 6) (68.3) Share repurchases (55. 55.2) 2) (62.2) Pension contribution (26. 6.9) 9) (16.3) Other 1. 1.6 1.8 Closing net cash 26 267. 7.4 231.3

Net cash and cash flow

2019 Preliminary Results

£m 201 019 2018

Howdens 2019 Interim Results 13

• Working capital increased £6.3m

– stock up £5m – debtors up £7m – creditors up £6m

Wo Working ng c capi pital

2019 Preliminary Results

Howdens 2019 Interim Results 14

• Two year share repurchase programmes:
• February 2017: £80m
• March 2018: £60m
• February 2019: £50m
• February 2020: £85m

Shareholder Returns 2018 2019 2020 Total

Feb 2017 programme

32

• 80

March 2018 programme

30 30 60

Feb 2019 programme

• 25

25 50

Feb 2020 programme

• 45

85

Total share repurchases

62 55 70

Dividends

69 71

Total shareholder returns

131 126

Retur urn o n of excess ss c cash h to sha hareho holders

2019 Preliminary Results

Howdens 2019 Interim Results 15

Dec 2018 Change £20.6m

Net discount rate 197

Dec 2019

IAS19 basis

36.0 56.6

Asset returns (150) Current service charge + admin cost + interest 21 Contribution (47)

£m

Pen Pension

• n s

scheme def eficit

2019 Preliminary Results

Howdens 2019 Interim Results 16

Cur urrent nt t trading a and nd out utlook f for 202 020

2019 Preliminary Results

• UK sales in first two periods up 1.6%, LFL down 0.2%

Excluding week 1 +3.5%, LFL +1.6%

• Operating expenditure

– Cost benefit £6m

• Europe

– Cost investment £20m

• phase 2 Raunds transfer (dual running)
• digital development
• pension increases
• depreciation

– Cost pressures

• growth & inflation
• additional depots inc. France
• Capital expenditure c.£80m

Howdens 2019 Interim Results 17 Howdens 2019 Interim Results

Andr ndrew ew L Livi ving ngston

Chief Executive Officer

Howdens 2019 Interim Results 18 Howdens 2019 Interim Results

INTERNATIONAL DIGITAL DEVELOPMENT RANGE AND SUPPLY MANAGEMENT DEPOT EVOLUTION

Ini nitiati tives t s to inc ncrease se volum umes a s and nd pr profits

Howdens 2019 Interim Results 19 Howdens 2019 Interim Results

Cus ustomers s s spe pend nding m more w with us h us, more f freque uent ntly

• 470,000 Credit and Cash Trade

Accounts

• Sales per customer increased
• More transactions per customer
• New customer spend up
• Profit per new account up
• Lower acquisition costs

Howdens 2019 Interim Results 20 Howdens 2019 Interim Results

Our Our mod

• del

el: locally em empow

• wered d

depot t tea eams … …

Local Recruitment Local Relationships Local Stock Local Pricing

Howdens 2019 Interim Results 21 Howdens 2019 Interim Results

... s ser erved ed by by dedi edica cated s suppl ply y chain

700+ customers Size 2x Peak Trading Scale Changing requirements

Howdens 2019 Interim Results 22 Howdens 2019 Interim Results

A key y featur ure o

• f Ho

Howdens ns suc uccess ss is tha hat w we a are trade o

• nl

nly

Builder forums held regularly across the country

Howdens 2019 Interim Results 23 Howdens 2019 Interim Results

INTERNATIONAL DIGITAL DEVELOPMENT RANGE AND SUPPLY MANAGEMENT DEPOT EVOLUTION

Howdens 2019 Interim Results 24 Howdens 2019 Interim Results

INTERNATIONAL DIGITAL DEVELOPMENT RANGE AND SUPPLY MANAGEMENT DEPOT EVOLUTION

Howdens 2019 Interim Results 25 Howdens 2019 Interim Results

Ne New de depot f format t to create be best st bus business e ss env nvironm nment nt

• Vertical racking of product in the

warehouse

• Space utilisation improvements
• Potential for productivity gains

Howdens 2019 Interim Results 26 Howdens 2019 Interim Results

Ne New de depot f format t to create be best st bus business e ss env nvironm nment nt

• Open front area connecting depot staff

and customers

• Visibility and standard of design area

improved

• Doubling the display space for kitchens
• Small items picking area behind the

counter

• Improved format at no extra cost
• Adopted for all UK depots opened in 2019
• Also for those to be opened in 2020

Howdens 2019 Interim Results 27 Howdens 2019 Interim Results

Impr proved de densi nsities: s: o

• pt

ption t n to ope pen s n smaller de depots

• Sm

Smal aller er depo depots of

• f c. 6,000 s

squ quare e feet eet

• 8 smaller f

for

• rmat depo

depots open

• pened i

in 2019

• Gives

s pot potential for

• r 850 depo

depots in the e UK UK

Howdens 2019 Interim Results 28 Howdens 2019 Interim Results

Num Number o

• f ne

new w de depot o

• pe

peni nings i s inc ncrease sed i in n 201 019

• 39 ne

new U UK d depots inc nclud uding ng 5 i in No n Nort rthe hern rn Irelan and, al all in ne n new f format

• Plan to open
• open ar

arou

• und 30 UK

UK dep depots this s yea ear

Howdens 2019 Interim Results 29 Howdens 2019 Interim Results

Ro Roll-back op

• ppor
• rtunity of
• f new depot
• t f

for

• rmat
• Initially converted 3 older depots
• Park Royal, Swansea & Guilford
• Trading for 8 months
• Encouraging performance
• A further 8 older depots completed prior to

P11

• Deployed several capital spends

Howdens 2019 Interim Results 30 Howdens 2019 Interim Results

Learn rnings fro from re refo form rmats to date

Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8

Commence Re-racking Commence demolition Commence counter, hardware room and

• ffices

Complete counter, hardware room and

• ffices

Complete toast racking Complete all staff areas Shopfitting all areas External signage and completion all areas

• Improved our skill base and understanding of when to implement reformats during the year
• Developed our thinking about how to scope, structure and execute a reformat
• Now able to complete in 8 weeks, at lower cost
• Refined the format, reducing refurbishment and ongoing running costs

Howdens 2019 Interim Results 31 Howdens 2019 Interim Results

More r reformats pl s plann nned in n 202 020

• Positive feedback from depots and

customers at the converted depots

• Encouraged by performance to date and

expectations for 2020

• Plan to convert 30 more in 2020
• Budgeting for a average re-format cost
• f £225k

Howdens 2019 Interim Results 32 Howdens 2019 Interim Results

Ne New f format de t depots s and r nd re-rac acked ed d depot

• ts

60 60 62 62 11 11 71 71

10 20 30 40 50 60 70 80

10 10 20 20 30 30 40 40 50 50 60 60 70 70 80 80 Ne New D Depot

• ts

Existin ing D g Depo pots New Fo Format at D Depo pots Re Re-Ra Rack Onl Only

En End 2 201 019 : : Tot

• tal De

Depots in New F For

• rmat &

t &/or R Re-ra rack cked

90 90 112 112 41 41 131 131

20 40 60 80 100 120 140

25 25 50 50 75 75 100 00 125 125 150 50 Ne New D Depot

• ts

Existin ing D g Depo pots New Fo Format at D Depo pots Re Re-Ra Rack Onl Only

End 2 202 020 : 0 : Tota tal D Depots ts in New F Format & t &/or R Re-ra rack cked

Howdens 2019 Interim Results 33 Howdens 2019 Interim Results

RANGE AND SUPPLY MANAGEMENT INTERNATIONAL DIGITAL DEVELOPMENT DEPOT EVOLUTION

Howdens 2019 Interim Results 34

12 ne new k w kitchen r n ranges s launc unche hed i in n 201 019

Howdens 2019 Interim Results 35

Kitche hen t n trend nds

Howdens 2019 Interim Results 36

Cont ntrast sting colour urs a and nd cleane ner s sha haker l look

Howdens 2019 Interim Results 37

Matt t techno hnologies s

Howdens 2019 Interim Results 38

201 019: T Tradi ditional cabine net upda updated

Howdens 2019 Interim Results 39

201 019: Ant nthr hracite c colour ur s storage sys ystems i s int ntroduc uced

Howdens 2019 Interim Results 40

2019: 19: Ex Exten ended r range of

• f wor
• rktops

Howdens 2019 Interim Results 41

20 2019: 25 25 Lamo mona appliance ces

Howdens 2019 Interim Results 42

201 019: 9: Key ey j joiner ner’s pr prod

• duct

ucts a add dded, ironm nmong ngery range e ext extend nded

Howdens 2019 Interim Results 43

2019: 19: Pr Pre-Fini nishe shed D Doors – savi ving f g fitting t g time

Howdens 2019 Interim Results 44

201 019: Ne New t techno hnology y vinyl nyl f flooring, qui quicker a and e nd easi sier t to fit

Howdens 2019 Interim Results 45

202 020: 0: 13 ne new k kitche hen n rang nges i s in n first ha half, 2 2 ne new styl yles

Howdens 2019 Interim Results 46

202 020: 0: Chilc ilcomb, n new t timb mber er range e

Howdens 2019 Interim Results 47

202 020: 0: More c colour urs i s in n ne new r ranges, s, F Fairford Gr Green

Howdens 2019 Interim Results 48

202 020: 0: Gr Greenwich, h, P Pebble

Howdens 2019 Interim Results 49

202 020: 0: New New h handl dlel eless p platform t to meet d dem emand nd f for

• r t

the he linea near style

Howdens 2019 Interim Results 50

202 020: 0: New New h handl dlel eless p platform t to meet d dem emand nd f for

• r t

the he linea near style

Howdens 2019 Interim Results 51

202 020: 0: Ne New ha handl ndleless pl ss platform, m many ny more s styl yle o

• pt

ptions ns

Kitchen ranges

Howdens 2019 Interim Results 52

202 020: 0: Ne New ha handl ndleless pl ss platform: m more a affordable pr price po point nts

Howdens 2019 Interim Results 53

20 2020 20: Cl Clearer Ran Range Arch chitecture, cl clearer cu customer ch choice ce

Modern Linear Shaker

Howdens 2019 Interim Results 54

202 020: 0: Ne New w worktops, light hter s sha hades a s and t nd thi hinne nner pr profiles s

Howdens 2019 Interim Results 55

202 020: 0: Ne New t techno hnology y Lamo mona at lower pr price po point nts s

Howdens 2019 Interim Results 56

Di Disciplined ed range m ge manag agem ement

• 19 ranges cleared during the year
• End of 2019, 67 current ranges, including

some 2020 pre-launch stock

• Around 65 current ranges is appropriate

for our market at present

• In 2020, we are aiming to remove at least

the number of ranges we add

Howdens 2019 Interim Results 57

Ne New Commercial St Struc uctur ure

• Clearer accountabilities for ranging

decisions

• Accessing of supply chain benefits
• Improve communication across the

business and suppliers

• New kitchen and trade book launched

week 3

• Strengthened promotional programme
• All new products in stock prior to launch
• Supplier support for 2020 plans for

improved range, availability and price

Howdens 2019 Interim Results 58

Making mor

• re i

e in the U UK

Howdens 2019 Interim Results 59

Reduc ducing c costs, s, i inc ncreasi sing flexibility y and s nd secur urity y of suppl upply

• Making doors for 5 of our new kitchen

ranges

• Reducing costs of these doors
• Increasing supply chain flexibility
• Installed a small batch production line
• Makes low volume, important SKUs
• Which third party vendors cannot

supply at competitive prices

• Awarded Manufacturing Guild Mark
• Royal Warrant re-awarded

Howdens 2019 Interim Results 60

Digital r rei einfor

• rces ou
• ur stron
• ng l

loc

• cal mod
• del

Increa rease a awa ware reness ss Improv

• ve com

communicati tions Streamline p e proces esses ses

Howdens 2019 Interim Results 61

Our ur responsi sive pl platform i is inc ncreasi sing bui builder a and nd cons nsum umer awa warene ness

61

Howdens 2019 Interim Results 62

1.5m 5m more s search i h impr pressi ssions pe ns per mont nth h

62

Howdens 2019 Interim Results 63

Site e vi visits + +22% 22% year ear o

• n year

ear

63

Howdens 2019 Interim Results 64

Depo pot leads v s via t the he we websi site up up 35% 5% ye year o

• n

n ye year

64

Howdens 2019 Interim Results 65

Ne New hi hierarchy e hy ena nables s swi wifter a access t ss to relevant nt pa pages s 80% 0% of visi sits l s land nd o

• n

n pa pages l s link nked t to spe pecific s searches

Howdens 2019 Interim Results 66

Product c categ egory view ews have i ve increas eased sign gnifican antly

Howdens 2019 Interim Results 67

Riche her c cont ntent nt i is ena nabling m more s suc uccessf ssful ul s search r h retur urns ns

Exterior door External door Exterior door External doors Interior doors Interior door Internal door Internal doors Dordogne oak Dordogne door Genoa doors Genoa oak Holdenby doors Internal fire doors Fire doors Fire door Glazed fire door FD30 Glazed door Glazed doors Glazed internal doors Internal glass doors Cottage door Worcester panelling Linear doors Linear oak Internal oak door White doors White internal doors Internal white doors Internal oak doors Oak door Oak veneer doors Oak internal door door Grey doors Pine doors Bi fold Bi fold doors Bifold door Bifold doors 6 panel door 6 panel doors 4 panel doors Front doors Front door External door frame

Howdens 2019 Interim Results 68

Se Search h refine nement nts s can n be be t tailored by by us users t s to match t h the heir requi quirement nts

Howdens 2019 Interim Results 69

New ew, s secure e trad ade o e only plat atfor

• rm

Howdens 2019 Interim Results 70

Co Co-bui built func unctiona nality wi y with o h our ur trade c cus ustomers

Uses clear language Simple tile based design Mobile friendly user experience

Howdens 2019 Interim Results 71

Key us y user ne needs a s add ddresse ssed

Manage their accounts and relationship with depot View credit details and make payments Download invoices and information

Howdens 2019 Interim Results 72

Trial a assi siste sted unde underst stand nding o

• f us

usage be behaviour urs

60% of users made a payment 50% of users downloaded documents

Monday Tuesday Wednesday Thursday Friday Saturday Sunday

In hours use Out of hours use

44% 44% 56% 6% Above average payments Significant out of hours use

Howdens 2019 Interim Results 73

Si Sinc nce r roll-out ut f feedback favour urable, us usage m muc uch h hi higher tha han o n on n pr previous f us facility

“Good, clear system, easy access to all bills” “Very clear, easy to navigate and all- important info is there at a glance” “It’s very user friendly” “Quite easy system for a novice at computer like me” “Utterly superb, especially bringing up invoice and see

• details. Best one by a country
• mile. Well done”

Howdens 2019 Interim Results 74

In n 202 020, 0, we we w will c cont ntinue nue to impr prove c cont ntent nt a and nd add dd m more capabilities t s to our ur pl platform

Howdens 2019 Interim Results 75 Howdens 2019 Interim Results

RANGE MANAGEMENT DEPOT EVOLUTION DIGITAL DEVELOPMENT INTERNATIONAL

Howdens 2019 Interim Results 76

Development nt o

• f Frenc

nch bus h business ss

• 5 depots opened in 2019
• New branding and leadership
• Business Leader appointed
• Germany & Holland closures

completed

Howdens 2019 Interim Results 77

New ew De Depot

• ts i

in Fran ance e

• Depots opened before 2019 now

cover all central costs

• Further suitable sites identified
• Howden trained teams available to

staff more depots in 2020

• Five depot openings planned subject

to business performing in line with expectations

Noisy le sec Massy

Howdens 2019 Interim Results 78

Summa mmary

20 2019 - A yea ear of

• f pr

progress

• Improved profitability
• Invested in people, infrastructure, depots and product
• Pleased with the response to the initiatives

In 2020 n 2020

• Aim to retain a profitable balance between price and volume
• Continue depot openings and test roll back opportunity further
• Well executed NPI plans and stronger promotions should benefit sales during 2020
• Making more in the UK
• The digital trade platform being promoted to all account holders, further content and

capabilities to be added Cur urre rent T Trading ng

• P1 + P2 Sales +3.5% , LFL 1.6% (excl. week 1)
• We remain cautious on market conditions
• Brexit trade negotiations
• Coronavirus

Howdens 2019 Interim Results 79

Expo po 2 202 020

Thursday 16th April 2020

Howdens 2019 Interim Results 1 Howdens 2019 Interim Results

20 2019 Pr Prel eliminary Resu sults 27th February 2020