2014 HALF-YEARLY REPORT 24 July 2014 Matthew Ingle Chief Executive - - PowerPoint PPT Presentation

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2014 half yearly report
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2014 HALF-YEARLY REPORT 24 July 2014 Matthew Ingle Chief Executive - - PowerPoint PPT Presentation

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2014 HALF-YEARLY REPORT 24 July 2014 Matthew Ingle Chief Executive Officer A successful business with prospects Significant improvement in sales, profits and cash Interim dividend increased to 1.9p (H1 2013: 1.0p) Product Property Better

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2014 HALF-YEARLY REPORT

24 July 2014

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Matthew Ingle

Chief Executive Officer

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Significant improvement in sales, profits and cash Interim dividend increased to 1.9p (H1 2013: 1.0p)

Continuing to invest in: Better service for the local builder

A successful business with prospects

Product Property Processes People

2

2014 Half-Yearly Report

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Mark Robson

Deputy CEO and Chief Financial Officer

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Business developments

  • 17 depots opened so far – on track for 30
  • Investment in product, including eleven new kitchen ranges
  • Existing depots

– ‘virtual showroom’ project complete – A3 printer roll-out

  • Supply

– replacing ‘tractor’ units of lorry fleet

  • Central IT hardware refreshed

5

2014 Half-Yearly Report

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350 375 400 425 450 2013 2014

Revenue, £m

HJ UK France

Highlights

HJ UK: +11.6% 61.5 63.2 59 60 61 62 63 64 2013 2014

Gross profit margin, %

44.2 57.6 10 20 30 40 50 60 2013 2014

Operating profit pre except’ls, £m

41.6 57.2 10 20 30 40 50 60 2013 2014

Profit before tax pre except’ls, £m

5 13 13 9 17 10 20 30 40 2013 2014

Uses of ‘cash’, £m

Property Pension def Cap ex 383.7 756.4 428.2 7.2 11.1 390.8 435.4 7.1 50.0 75.0 100.0 125.0 150.0 175.0 Jun-13 Dec-13 Jun-14

Net cash, £m

140.5 102.0 102.0 161.1

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2014 Half-Yearly Report

1

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Revenue

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2014 UK depot revenue £428.2m

  • total +11.6% • LFL +8.7%

2014 French depot revenue £7.2m > +5% in €s

2014 Half-Yearly Report

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Profit before tax

2013

£m Interest, etc 2.2 Change £15.6m Gross profit 34.8

41.6

£m

240.4 Change £34.8m

Price 14

275.2 2013 2014

Gross profit

Operating costs (21.4)

57.2 Group gross profit margin

  • 2014: 63.2% ● 2013: 61.5%
  • 2014

Volume & mix (revenue) 31 Cost savings, cost pressures, etc. (1)

Profit before tax

8

2014 Half-Yearly Report

Volume & mix (COGS) (12) Currency 3

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Operating costs

New depots 5.8

2013 2014 Change £21.4m

Older depots 4.4

£m Operating costs

196.2 217.6

Growth related 11.0

  • 9

2014 Half-Yearly Report

Other 0.2

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Revenue 435.4 390.8 Cost of goods sold (160.2) (150.4) Gross profit 275.2 240.4 Operating costs (217.6) (196.2) Operating profit 57.6 44.2 Net interest (0.4) (2.6) Profit before tax 57.2 41.6 Tax (14.9) (10.8) Profit for the period 42.3 30.8 Profit after tax on discontinued operations 9.8

Income statement – pre exceptionals *

Continuing operations unless stated, £m H1 2014 H1 2013

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2014 Half-Yearly Report

* An exceptional pre tax operating cost of £4.5m was incurred in 2013. There were no exceptional items in 2014.

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Earnings per share, continuing operations, and dividend

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Earnings per share 6.6p 4.8p Interim dividend per share 1.9p 1.0p

H1 2014 H1 2013 2014 Half-Yearly Report

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Net cash and cash flow

£m H1 2014 H1 2013

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2014 Half-Yearly Report Opening net cash 140.5 96.4 Operating cash flows before movements in working capital 70.2 54.7 Working capital (6.9) (11.3) Capital expenditure (17.2) (8.8) Interest (net) 0.2 0.1 Tax paid (13.9) (11.3) Legacy properties (1.2) (5.3) Pension deficit contribution (12.6) (12.7) Exceptional items

  • (3.9)

Other 2.0 4.1 Closing net cash 161.1 102.0

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Working capital

  • Working capital up £6.9m

– stock up £11.4m – debtors up £17.1m – creditors up £21.6m

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2014 Half-Yearly Report

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Pension scheme deficit

Dec 2013 £m Change £18m

Discount rate & other assumptions 49 Deficit Funding (13)

Jun 2014

IAS19 basis

Asset returns (19) 14

  • 54

72

Finance charge 1

Triennial review of scheme underway – will set deficit payments for three years from April 2015

2014 Half-Yearly Report

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Recent trading and outlook for remainder of 2014

  • Sales in first four week period of H2 up 14.0%

– feedback from depot remains positive

  • Well placed to achieve our expectations

– tougher comps – important period 11 still to come

  • Continue to invest in growth – 30 new depots this year

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2014 Half-Yearly Report

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Matthew Ingle

Chief Executive Officer

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Things have changed since 1995 …

Materials Technologies Trends Expectations Internet Regulation Housing market Less time Less tolerance

  • f

mistakes

2014 Half-Yearly Report

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… but some things don’t change

Howdens is a trade-only business Offering good, personal service in an increasingly complex world

2014 Half-Yearly Report

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Our mission is our model

“To supply from local stock, nationwide, the small builder’s ever-changing, routine, integrated joinery/kitchen requirements, assuring no call back quality and best local price”

2014 Half-Yearly Report

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Very local depots

  • Free planning service
  • Relevant product range
  • Everything in stock, always
  • Best local price
  • Won’t break
  • Easy to fit
  • Can swap any item

Offering a complete service to the small builder

Confidential discount, nett monthly credit account

2014 Half-Yearly Report

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Successfully combining all the critical elements Based on personal relationships and solid values

Uniquely able to deliver value to the builder

Trade

  • nly

Stock

absolute

Range Quality Pricing

confidential discount

Supply

guaranteed

2014 Half-Yearly Report

Local manager

autonomy

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More local accounts, more local depots

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317,000 active credit accounts

  • 58,600 accounts opened

in H1 2014

  • Total credit accounts up from

278,000 at end of H1 2013

576 depots

  • 17 opened in H1 2014
  • A further 13 planned in H2

Opened in H1 2014

2014 Half-Yearly Report

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The typical Howdens depot

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10,000 sq.ft Trade parks

  • Average rent c. £5.50 per sq.ft

Low fit-out costs

  • One-off, c. £180k - £300k

Low breakeven point

  • At sales of c.£650,000 p.a.

6 – 10 staff Open 5½ days a week Repeating what works

2014 Half-Yearly Report

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From our interim results, July 2009

Time is money

2014 Half-Yearly Report

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c.£130m of stock in the business at any one time… c.£200m of debt to collect at peak… The builder is more likely to pay us promptly

The builder is prepared to pay for Howdens’ offer

Time is money

A compelling, integrated

  • ffer

Design / range Local stock Quality Price Local decisions Confidential discount Free expert planning Credit 2014 Half-Yearly Report

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Manufacturing capacity

  • High volumes, long runs, no waste

External suppliers Efficient warehousing Industrial product design and development Reliable systems to support growth

Continuing to invest in our supply chain

New equipment installed at Howden in 2013 2014 Half-Yearly Report

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Progress with our French pilot

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Improvements in depot margin and profitability

  • More understanding required
  • A very different market

Ongoing testing

  • 2 depots in southern Belgium,

close to our Lille HQ

  • 1 test format near Lyon

2014 Half-Yearly Report

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Organisational development

Mark Robson, Deputy CEO and CFO Andy Witts, COO Trade Rob Fenwick, COO Supply Theresa Keating, FD

Positioning ourselves to take advantage

  • f further growth opportunities

2014 Half-Yearly Report

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Local means really local Builders don’t like travelling New depots continue to perform well

  • Adding locations helps us increase sales in specific areas,

e.g. Lincoln + North Lincoln = 100% improvement

  • Some customer movement based on convenience and

relationships, as expected, but no cannibalisation

New depot performance

Time is money

Plenty of opportunity to continue to grow sales

2014 Half-Yearly Report

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Bringing it all together

  • 576 depots, 5,700 SKUs, 200+ suppliers

Control of our own cabinet manufacturing, supported by:

  • 5-year chipboard supply agreements
  • Two sites, flexible working arrangements

Flexibility built in to agreements with suppliers

  • Multiple sourcing, shorter lead times, close to home

Capability and knowledge constantly improving

Supply chain flexibility

2014 Half-Yearly Report

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385,000 total accounts

  • 317,000 credit accounts: allowing 4 - 8 weeks’ credit

Peak trade debt c.£200m Centrally managed credit control, c.150 people Total cost of credit control (including bad debts) less than 1% of sales

  • In-stock model
  • Rigorous procedures, consistently applied

Effective account management

2014 Half-Yearly Report

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A young and successful business with prospects

Relevant, imaginative, strong Clear business proposition Unique, proven model Delivers profit and cash

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Doing what we do well, and doing it even better

Continued growth and development

20 years

2014 Half-Yearly Report

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Appendix

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11 new kitchens

  • Including 8 new
  • ptions in Greenwich,
  • ur successful

entry-level range

  • New worktop and

backboard designs

New product introductions, H1 2014

Greenwich Gloss Navy & White

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Lamona is the UK’s No. 1 integrated appliance brand, and continues to grow

  • Domino hobs & compact
  • vens for smaller kitchens
  • New range of contemporary

sinks and taps

New product introductions, H1 2014

Lamona Ceramic Domino Hob Lamona Dorney 1.5 bowl sink

2014 Half-Yearly Report

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New external doors

  • Including pre-glazed

versions of successful designs

New hardware

  • Focus on handle

development

New flooring options

  • Fast fit, easier for the

builder

New product introductions, H1 2014

External Dordogne Oak Glazed Door Professional Fast Fit V Groove Light Grey Oak Laminate Flooring

2014 Half-Yearly Report

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2014 HALF-YEARLY REPORT

24 July 2014