2019 Full Year Results March 2020 1
Agenda Welcome Stuart Chambers p3 Introduction Nick Roberts p4 Financial review Alan Williams p6 Operational review & strategic update Nick Roberts p22 Appendices p35 2019 Full Year Results March 2020 2
WELCOME STUART CHAMBERS 2019 Full Year Results March 2020 3
INTRODUCTION NICK ROBERTS 2019 Full Year Results March 2020 4
2019 - a year of significant progress Making good progress Underpinned by positive towards strategic goals trading performance ● Focusing on advantaged trade ● Like-for-like growth of 3.8% businesses ● Market outperformance in Travis Perkins and specialist merchants ● Simplifying the Group to reduce complexity and costs ● Another fantastic year for Toolstation ● Demerger of Wickes well advanced ● Improving profitability in P&H ● Disposal of PF&P wholesale ● Strong recovery in Wickes 2019 Full Year Results March 2020 5
FINANCIAL REVIEW ALAN WILLIAMS 2019 Full Year Results March 2020 6
Context: difficult market conditions MAT Property Transactions & Consumer Confidence Positive RMI market fundamentals... 115,000 5 Property transactions MAT 110,000 Consumer confidence ● Fundamental long-term growth drivers Consumer Confidence Property Transactions 0 105,000 remain robust -5 100,000 ● Shortage of housing in the UK and -10 underinvestment in existing housing stock 95,000 90,000 -15 Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17 Oct 17 Jan 18 Apr 18 Jul 18 Oct 18 Jan 19 Apr 19 Jul 19 Oct 19 Jan 20 Average 270k ...but challenges remain in the short-term property demand age: for new ● Significant uncertainty causing weakness in 70 yrs homes c.180k consumer confidence, especially on big- homes ticket items built in ● Early positive signs in lead indicators, but 6- 2019 9 month lag to RMI spending 2019 Full Year Results March 2020 7
Basis of results ● Reporting segments as defined in the 2018 results presentation: Merchants, Toolstation, Plumbing & Heating, Retail - ● Toolstation Europe consolidated from 01 October 2019 ● 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 base capex 2019 Full Year Results March 2020 8
Key financial highlights FY2018 FY 2018 IFRS16 illustrative Year-on-year Year ended 31 December 2019 FY 2019 as reported comparative change* Revenue £6,956m £6,741m 3.2% Like-for-like sales growth 3.8% 4.9% (1.1)ppt Adjusted EBITA excluding property profits £421m £348m £393m 7.1% Adjusted EBITA £442m £375m £410m 7.8% Adjusted earnings per share (pence) 112.7p 114.5p 106.0p 6.3% Adjusting items - operating £(200)m £(387)m 9.6% +0.5ppts ROCE 10.1% 10.5% Covenant net debt £344m £300m +£44m Dividends per share 48.5p 47.0p 3.2% *Changes calculated versus 2018 illustrative comparatives including the impact of IFRS 16 as previously disclosed 2019 Full Year Results March 2020 9
Growing revenues in a challenging market Group revenue growth ● Like-for-like volume growth of 2.3% £100m £(38)m ● Pricing inflation of c.1.5% driven by £153m Merchants and P&H £6,956m £6,741m ● H1 stronger than H2 2018 Volume Price and mix Net space 2019 ● Continued network expansion in changes* Toolstation UK and Europe LFL Q1 Q2 H1 Q3 Q4 H2 FY 2018 3.0% 5.9% 4.2% 4.1% 6.9% 5.5% 4.9% 7.3% 3.4% 5.3% 3.4% 1.2% 2.3% 3.8% 2019 ● Net closures across Merchanting primarily from consolidation of 2yr LFL Q1 Q2 H1 Q3 Q4 H2 FY 5.8% 8.8% 7.0% 8.4% 10.3% 9.4% 8.4% 2018 smaller branches in Travis Perkins 10.5% 9.5% 9.7% 7.7% 8.2% 7.9% 8.9% 2019 *Net space changes includes acquisitions and disposals 2019 Full Year Results March 2020 10
Good adjusted operating profit performance £(57)m £34m £(56)m £107m £4m £442m £410m 2018 adjusted Gross profit growth Cost inflation Cost reduction Investment Difference in 2019 adjusted EBITA initiatives property profit EBITA 2019 Full Year Results March 2020 11
Overhead costs declining as a proportion of sales Group overhead to sales ratio ● Cost reduction actions have modestly exceeded the 25.0% mid-2020 target of £20-30m: Removal of above-branch costs, including - 24.5% Merchanting divisional structure 24.0% Closure of heavyside range centres - ● Cost reduction actions offsetting overhead cost 23.5% inflation in rent, rates and salaries 23.0% ● Ratio declining despite ongoing investment in advantaged businesses: 22.5% Toolstation network expansion - 22.0% Front-line sales resources in Merchanting - 2012 2013 2014 2015 2016 2017 2018 2019 Continued focus on cost management *Overhead cost to sales ratio per Note 2a in the Annual Report 2019 Full Year Results March 2020 12
Merchanting - actions driving outperformance ● Focus on outstanding customer service FY 2019 FY 2018* Change driving consistent market Total revenue £3,703m £3,609m 2.6% outperformance Like-for-like growth 3.3% 3.6% (0.3)ppt Adjusted operating profit** £284m £279m 1.8% ● End-markets weakened through H2 following strong H1 Adjusted operating margin** 7.7% 7.7% - ROCE 12% 12% - ● Operating margin stable despite Branch network 984 1001 (17) stronger growth with larger customers and increase in direct deliveries ● Cost reduction and efficiency improvements offsetting cost inflation *2018 figures used are illustrative comparatives including the impact of IFRS 16 as previously disclosed **Segmental adjusted operating profit figures are presented excluding property profits 2019 Full Year Results March 2020 13
Toolstation - sector leading growth ● Double-digit like-for-like sales growth FY 2019 FY 2018* Change throughout 2019 - revenue more than Total revenue £445m £354m 25.7% doubled since 2014 Like-for-like growth 16.3% 11.4% 4.9ppt Adjusted operating profit** £25m £24m 4.2% ● Accelerated branch network growth, Adjusted operating margin** 5.6% 6.8% (120)bps extended trade proposition and improved ROCE 7% 10% (3)ppt digital platforms Branch network (UK) 400 335 65 ● Acquisition of Toolstation Europe Branch network (Europe) 66 40 26 controlling share in September 2019 Memo: Adjusted operating profit - UK £29m £24m 20.8% ● Toolstation UK profits up over 20% to £29m ● Change in operating margin and ROCE reflects £4m TSE loss in Q4 - expect annualised loss in 2020 of c. £20m *2018 figures used are illustrative comparatives including the impact of IFRS 16 as previously disclosed **Segmental adjusted operating profit figures are presented excluding property profits 2019 Full Year Results March 2020 14
P&H - transformation driving improvement ● Reduction in sales primarily through FY 2019 FY 2018* Change low-margin wholesale business Total revenue £1,465m £1,528m (4.1)% ● Good like-for-like growth of 3.3% in Like-for-like growth (1.7)% 16.1% (17.8)ppt Adjusted operating profit** £48m £44m 9.1% the branch-based business Adjusted operating margin** 3.3% 2.9% 40bps ● Transformation programme driving ROCE 13% 11% 2ppt earnings performance through cost Branch network 375 373 2 reductions and improving efficiency ● Improvement in ROCE by 2ppts ● Completed sale of PF&P Wholesale in Jan 2020 *2018 figures used are illustrative comparatives including the impact of IFRS 16 as previously disclosed **Segmental adjusted operating profit figures are presented excluding property profits 2019 Full Year Results March 2020 15
Retail - strong recovery in Wickes performance ● Strong Wickes recovery in 2019 across FY 2019 FY 2018* Change Core and DIFM categories Total revenue £1,342m £1,250m 7.4% Like-for-like growth 8.6% (4.3)% 12.9ppt ● Wickes LFL sales growth of 8.7% (2- Adjusted operating profit** £97m £77m 26.0% year LFL of 4.0%) Adjusted operating margin** 7.2% 6.2% 100bps ● Earnings improvement through ROCE 7% 5% 2ppt operating leverage Store network - Wickes 235 241 (6) ● Increasing proportion of showroom Store network - Tile Giant 94 96 (2) sales installed - extended into tiling ● Over half of Wickes stores now in modern format *2018 figures used are illustrative comparatives including the impact of IFRS 16 as previously disclosed **Segmental adjusted operating profit figures are presented excluding property profits 2019 Full Year Results March 2020 16
Good free cash flow generation ● Free cash flow of £195m, up £38m on a 2018 comparative figure - £(129)m £141m mainly driven by higher EBITA ● Cash conversion of 54%** (2018: £(136)m 46%) despite higher working capital due to £60m ‘Brexit’ inventory build £421m £(121)m ● Some unwind in stock expected in £19m 2020, but uncertainty remains £195m ● Capex £22m lower than 2018 Adjusted Depreciation Change in Interest* Capex Disposals Free cash flow EBITA and non-cash working capital and Tax (ex. freehold) (ex. freehold) ex freehold excluding Property *Interest cost includes £57m ‘Interest on leased assets’ recognised under the implementation of IFRS16 - Leases **Cash conversion is calculated excluding the ‘Interest on leased assets’ recognised under the implementation of IFRS16 - Leases 2019 Full Year Results March 2020 17
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