EUROCELL PLC 2018 Half Year Results AGENDA Manufacturer Business - PowerPoint PPT Presentation

EUROCELL PLC 2018 Half Year Results

AGENDA Manufacturer Business Review Mark Kelly Chief Executive Officer Financial Review Distributor Michael Scott Chief Financial Officer Summary and Outlook Mark Kelly Recycler 1

OVERVIEW Mark Kelly – Chief Executive Good progress with strategic priorities Revenue Further gains in market share £118.8m Optimising existing branch estate ▲ 10% (H1 2017: £108.1m) Increasing use of recycled material Acquisition of Ecoplas Adjusted EBITDA £14.2m Financial results in line with expectations ▼ 5% (H1 2017: £14.9m) Strong sales growth Gross profit in line Interim Dividend Gross margin % lower – short-term increase in manufacturing costs, 3.1p per share following sharp uplift in demand in Q2 ▲ 3% (H1 2017: 3.0p per share) EBITDA down as anticipated, reflecting timing of branch openings 2

Private Housing RMI Spend (£bn) MARKET BACKDROP 21.9 Mixed Economic Indicators 22.8 21.9 22.3 19.9 18.6 Driver Description '15a '16a '17e '18e '19e '20e UK GDP has slowed and is forecast to grow by 1.3% in GDP Lower scenario Central scenario Upper scenario 2018 and 1.4% in 2019 (2017: 1.7%) Dropped sharply after vote to leave the EU, but quickly Total Number of Housing Starts (thousands) Consumer recovered to pre-vote levels. Has recently been drifting confidence down again, with progress in the Brexit talks limited Central forecast  197k 196k 192k Interest First increase in UK interest rates for ten years in 2017, 189k rates with further increases forecast for 2018 179k 173k Private housing RMI (1) market CAGR (2) forecast 2018 - Housing market 2020 is 1% (previous forecast flat) '15a '16a '17e '18e '19e '20e Private housing starts are forecast to increase by 2% in Lower Scenario Central Forecast Upper Scenario 2018 and 2% in 2019 (no change to previous forecast) Construction Construction Output Growth (%) Housing construction activity remains below pre- recession peak, but is forecast to rise by 5% in 2018 10% and 2% in 2019 (previous forecast 3% and 2%) 9% 5% (1) RMI is Repair, Maintenance and Improvement 4% 3% 3% (2) CAGR is compound annual growth rate 3% 2% 1% Sources: CPA: Construction Industry Forecasts 2018-20 (published Spring 2018) (2%) Oxford Economic Data (via Factset) (July 2018) '16a '17a '18e '19e 20e Housing Non-housing 3 Source: CPA: Construction Industry Forecasts 2018-20 (published Spring 2018)

Total Window Units Supplied to SALES OVERVIEW Each Sector of the Market (%) Gaining Share in Flat RMI Market 13% 13% 7% Sales Growth (%) H1 2017 H2 2017 H1 2018 21% Group 46% Organic 9% 7% 10% Like-for-like (1) 6% 2% 5% First time replacements Extensions Profiles Second time replacements New Build Conservatories Organic / like-for-like (1) 6% 5% 9% Source: D&G Consulting – 2017 Annual PVC Window Industry Report Building Plastics Organic 11% 8% 10% Eurocell Revenue by Market (%) Like-for-like (1) 6% Flat 3% ► H1 2018: Strong sales growth vs H1 2017 - Improving trends vs H2 2017 - RMI > 80% New Build > 10% (1) Like-for-like excludes acquisitions and branches opened in 2017 and 2018 Public Sector (New Build and RMI) < 5% 4

DIVISIONAL REVIEW Profiles – Performance in H1 2018 ► Gaining share – 9% like-for-like growth Profiles Division P&L £m H1 H1 ► Benefit of new account wins 2018 2017 Change > 20 account wins in 2017 - 3 rd Party Revenue ▲ 9% 50.5 46.4 Good prospect pipeline, with 4 new accounts - so far in 2018 Inter-segmental ▲ 8% 23.6 21.8 Revenue (1) ► Continued strong sales to private new build Up 8% in H1 2018 (following > 15% growth in 2017) - ▲ 9% Total Revenue 74.1 68.2 Specification and business development teams - ▼ 2% Adjusted EBITDA 11.5 11.7 Comprehensive product range - ► Gross margin % and return on sales down Short-term increase in manufacturing costs, following - (1) Inter-segmental Revenue sharp uplift in demand in Q2 • Full manufacturing margin recorded in Profiles Incremental labour and distribution costs to maintain - • Division therefore benefits from pull through demand customer services generated by branch expansion (2) 4.3kt post-consumer recycled compound used in total Raw material cost inflation offset with selling price - consumption of 25.7kt (H1 2017: 3.7kt post-consumer increases, but dilutive to margin % recycled compound used in total consumption of 23.9kt) ► Increased use of recycled PVC 17% (2) in H1 2018 (H1 2017: 15%) - 5

DIVISIONAL REVIEW Profiles – Co-extrusion Capacity Estimated Capacity Utilisation Levels 120% ► Sharp uplift in demand and significant mix change in Q2 100% Co-extruded products well ahead of expectations - 80% Sales demand met partially via safety stocks - 60% ► Shortage of co-extrusion capacity in Q2 40% Exacerbated by 2 co-extrusion lines out of service for - Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 extended period Overall capacity (excl. new lines) Co-ex capacity (excl. new lines) ► Short-term increase in manufacturing costs Revised co-ex capacity (incl. new line) Target Making products with 100% virgin resin that would - ordinarily include recycled material Manufacturing Capacity: Extrusion Machines in H1 Outages and tool changes – increased levels of scrap - ► Actions in progress to address capacity constraint and improve plant performance 13 2 new co-extrusion lines operational in July - Further 2 co-extrusion lines operational by end September 34 - - Increases capacity by c.25% Also facilitates increase in planned maintenance - Co-extrusion Lines 100% Virgin Resin Lines 6

DIVISIONAL REVIEW Building Plastics – Performance in H1 2018 ► Gaining share – 10% organic growth Building Plastics Division P&L ► Like-for-like (1) sales up 3% £m H1 H1 2018 2017 Change Driven by maturing branches – opened 2016 - 3 rd Party Revenue ▲ 11% and prior 68.3 61.8 ▲ 10% One-stop shop: traded goods up 9% - Organic 66.7 60.7 ▲ 45% Acquisitions (2) 1.6 1.1 ► Gross margin flat year on year Cost inflation mitigated with selling price increases - Inter-segmental ▲ 133% 0.7 0.3 Revenue ► Continued investment in branch network ▲ 11% expansion Total Revenue 69.0 62.1 31 new branches in 2017 - ▼ 16% Adjusted EBITDA 2.7 3.2 Up to 15 new branches this year (including - acquisitions), with 6 sites so far in 2018 (1) Like-for-like excludes branches opened in 2017 and 2018 Significant investment – incremental EBITDA drag - (2) Security Hardware acquired February 2017 vs H1 2017 of c.£0.5m New management team driving operating - standards 7

DIVISIONAL REVIEW Building Plastics – Focus for 2018 Indicative Branch Economics (Rounded) Branch Open ► 2018 focus on optimising existing estate < 2 2-4 >4 years years years Historically 2 years to break-even and 4 years - to maturity No. of Branches 37 33 126 37 branches < 2 years old Average Sales per - 150 500 800 Branch (£000) Good improvement in performance for the - Return on Sales per Small Mid- division when new branches mature >10% Branch (%) (1) loss teen % ► Progress with initiatives to shorten time (1) EBITDA as % of sales, before regional infrastructure and to break-even and maturity central costs Sharing resources to leverage existing - infrastructure where practical More focused direct marketing campaigns - Number of branches Driving more consistent offering across the - 196 200 190 network 180 • Sales of made-to-order value added products up 9% to 159 £14.9 million 160 • Improved participation in group-wide promotions 141 140 128 ► Medium-term target remains 250 branches 123 120 Long-term aspiration of c.350 branches - 100 2013 2014 2015 2016 2017 H1 2018 8

FINANCIAL HIGHLIGHTS Michael Scott – Chief Financial Officer Adjusted (2) EBITDA Revenue Gross Margin £118.8m 50.0% £14.2m ▲ 10% (H1 2017: £108.1m) ▼ 1.4% (H1 2017: 51.4%) ▼ 5% (H1 2017: £14.9m) Adjusted (2) Basic EPS Interim Dividend Net Debt 8.8p 3.1p per share £16.4m ▼ 6% (H1 2017: 9.4p) ▲ 3% (H1 2017: 3.0p per share) ▲ £1.9m (December 2017: £14.5m) Strong sales growth – like-for-like (1) ▲ 5% Adjusted (2) EBITDA down as anticipated ► ► Timing of branch opening programme - ► Gross profit in line, but gross margin % lower ► Greater phasing of EBITDA to H2 Short-term increase in manufacturing costs - Timing of branch openings and selling price increases - ► Overheads ► Net debt £4.4m lower than June 2017 Impact of acquisitions and investment in new branches - Incremental costs to maintain customer service Net cash generated from operating activities £7.6m - - (H1 2017: £10.3m) Like-for-like (1) operating cost increase ▲ 4% - (1) Like-for-like sales and operating costs exclude acquisitions and branches opened in 2017 and 2018 (2) Non-underlying costs of £nil (H1 2017: £0.5m) 9