EUROCELL PLC 2019 Half Year Results AGENDA Manufacturer Business - PowerPoint PPT Presentation

EUROCELL PLC 2019 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 Robust financial results Revenue £136.3m Strong sales growth ▲ 15% (H1 2018: £118.8m) Gross margin improvement EBITDA up EBITDA (1) £14.8m Good progress with plans to improve ▲ 4% (H1 2018: £14.2m) operating efficiency On track with investment in extrusion capacity Investment in recycling now well advanced Interim Dividend Strengthened operational teams 3.2p per share ▲ 3% (H1 2018: 3.1p per share) (1) Pre-IFRS 16 results exclude the impact of the new accounting standard for leases. 2

SALES OVERVIEW Eurocell Revenue Gaining Share in Subdued RMI Market by Market (%) ► Strong sales growth delivered across the whole business ► Weaker comparatives in H1 after bad weather in H1 2018 CPA construction output forecasts – small decline in 2019 (2) ► Sales Growth (%) H1 H2 FY H1 RMI > 80% 2018 2018 2018 2019 New Build > 10% Group Public Sector (New Build and RMI) < 5% Organic 10% 13% 12% 11% Like-for-like (1) 5% 10% 8% 10% Private Housing RMI Spend (£bn) (2) Profiles 23.0 Organic / like-for-like (1) 9% 15% 12% 9% 21.5 21.3 21.5 Building Plastics 21.0 21.3 20.9 Organic 10% 12% 11% 12% 19.6 Like-for-like (1) 3% 6% 5% 11% 19.0 16a 17a 18a 19f 20f 21f Lower Scenario Central Forecast (1) Like-for-like excludes acquisitions and new branches opened in 2018 and 2019 Upper Scenario (2) Source: CPA – Construction Industry Forecasts 2019-21 (published Spring 2019) 3

Profiles Division P&L DIVISIONAL REVIEW H1 H1 £m Change Profiles – Performance in H1 2019 2018 2019 3 rd Party Revenue ▲ 14% 50.5 57.6 ▲ 9% Organic 50.5 55.1 Gaining share – 9% like-for-like growth ► Ecoplas (1) - 2.5 n/a Includes benefit of selling price increases - Inter-segmental ▲ 13% 23.6 26.7 Revenue (2) ► Growth in new build, trade and commercial fabricators, and Vista ▲ 14% Total Revenue 74.1 84.3 Specification and business development teams - ▲ 1% EBITDA (3) 11.5 11.6 ► Benefit of new account wins and competitor weakness (1) Ecoplas acquired in August 2018 c.40 new accounts in 2017/18 - (2) Sales of foam profile to Building Plastics at transfer price 20 small new trade accounts added selectively in H1 2019 - (3) Pre-IFRS 16 ► Gross margin % up Impact of selling price increases - Overall Equipment Effectiveness (OEE) (4) Use of recycled material increased to 6.4kt (H1 2018: 4.3kt) - 85% 82% OEE (4) improved to 73% (FY 2018: 71%) - 80% 77% 76% ► EBITDA 73% 75% 71% 71% Increased overheads reflects impact on direct labour from - 70% higher production volumes 65% Implementing plans to deliver further improvements in - operating efficiency 60% 2014 2015 2016 2017 2018 H1 2019 Expect Ecoplas performance to improve in H2 - (4) OEE is a measure which takes into account machine availability, performance and yield 4

DIVISIONAL REVIEW 2017 - 2019 Extrusion Capacity Development Profiles – Capacity and Operating Efficiency Number of lines at 2019 2018 (1) 2017 Planned (2) 31 December Co-extrusion 12 17 22 ► Good progress with plans to expand capacity and Rigid PVC 15 12 12 improve operating efficiency Foam PVC 21 23 26 ► Investment to expand extrusion capacity on track Total 48 52 60 30% new co-extrusion capacity in 2019 (5 new lines) - 15% new foam capacity in 2019 (3 new lines) - (1) 2018: 4 new co-extrusion lines, plus conversion of 3 existing rigid PVC lines (1 to co-ex, 2 to foam) 4 new lines now in service, with remainder to be operational in Q3 - (2) 2019: 5 new co-extrusion lines, 3 new foam lines - Additional trained labour in foiling plant recruited in H1 2019 • H1 2019: 18 teams vs H1 2018: 10 teams ► Use of Recycled PVC in Manufacturing Investment to expand recycling capacity 9.5 Target incremental recycled material consumption of at least 3kt 10.0 - 8.3 Ilkeston and Ecoplas plants - 8.0 • Ilkeston on track 6.4 6.0 • After some initial delays, Ecoplas now well advanced 6.0 Tooling for key products – delivery Q2 to Q3 kt 4.3 - 4.1 4.0 ► Strengthened operational teams 14% 17% 9% 17% 17% 22% 2.0 Chief Operating Officer – Mark Hemming joins in August - Planning and Logistics - - 2015 2016 2017 2018 H1 2018 H1 2019 5

Building Plastics Division P&L DIVISIONAL REVIEW £m H1 H1 2018 2019 Change Building Plastics – Performance in H1 2019 3 rd Party Revenue ▲ 15% 68.3 78.7 ▲ 12% Organic 68.3 76.6 Gaining share – 12% organic growth ► Acquisitions (2) - 2.1 n/a Includes benefit of selling price increases - Inter-segmental Like-for-like (1) sales up 11% ► 0.7 0.7 Flat Revenue Maturing of branches opened pre 2018 - ▲ 15% Total Revenue 69.0 79.4 Increased stock holding at branches - • Improving availability key to growth EBITDA (3) ▲ 19% 2.7 3.2 Driving improvements in operating standards - (1) Like-for-like excludes branches opened in 2018 and 2019 Network expansion – now 207 branches ► (2) Kent Building Plastics acquired December 2018 and Trimseal acquired March 2019 43 branches added in 2017/18 - (3) Pre-IFRS 16 3 new sites opened in H1 2019 (H1 2018: 5) - Indicative Branch Economics (Rounded) • 2018/19 branches added c.£1m to organic sales • No incremental EBITDA drag in H1 2019 Branches Opened 2 branches added via acquisition of Trimseal - < 2 2-4 >4 years years years ► Gross margin % and EBITDA up No. of Branches (4) 27 42 132 Impact of selling price increases - Average Sales per Benefit of profit improvement initiatives - 350 500 900 Branch (£000) • More rigid pricing architecture Return on Sales per Break Up to Mid- • Improving stock availability Branch (%) (5) even 10% teen % • More consistent offering through training (4) Excluding Kent Building Plastics and Trimseal • Improvement plan for lowest performing branches (5) EBITDA as % of sales, before regional and central costs 6

DIVISIONAL REVIEW Building Plastics – Trial Format (Leeds) Trial Format – New Leeds Branch Opened in April – new 6k sq ft site, double average branch size ► Trade counter area – double average branch size ► Showroom displays – large MTOs (1) and interactive video wall to engage customers and drive big-ticket items ► ► Retail conversions being trialled through installers Significantly extended range – with wide range of stock to service the region ► 2 new markets targeted – outdoor living and splash panels ► (1) MTOs is made-to-order products. 7

FINANCIAL HIGHLIGHTS Michael Scott – Chief Financial Officer EBITDA (1) Revenue Gross Margin £136.3m 51.1% £14.8m ▲ 15% (H1 2018: £118.8m) ▲ 1.1% (H1 2018: 50.0%) ▲ 4% (H1 2018: £14.2m) Basic EPS (1) Net Debt (1) Interim Dividend 8.8p 3.2p per share £36.7m ▲ 3% (H1 2018: 3.1p per share) ▲ £13.2m (December 2018: £23.5m) Flat (H1 2018: 8.8p) Strong sales growth – like-for-like (2) ▲ 10% EBITDA (1) up 4% ► ► Interim dividend of 3.2p per share ▲ 3% ► ► Gross margin improvement - Impact of selling price increases ► Net debt increase (1) - Increased use of recycled material Acquisitions and major capex programme - ► Overheads up 14% on a like-for-like basis (1)(2) Stock build ahead of Brexit and investment in branch inventory - Impact on direct labour from higher production volume Impact of growth on working capital - - (1) Pre-IFRS 16 (2) Like-for-like sales and operating costs exclude acquisitions and branches opened in 2018 and 2019 8

FINANCIAL PERFORMANCE Group Income Statement H1 2018 H1 2019 Change H1 2019 £m (Reported) (pre-IFRS 16) ▲ 15% Revenue 118.8 136.3 136.3 69.7 Gross Profit 59.4 69.7 51.1% Gross Margin % 50.0% 51.1% Overheads (45.2) (54.9) (49.8) ▲ 4% EBITDA 14.2 14.8 19.9 Depreciation and Amortisation (3.4) (3.7) (8.6) Finance Costs (0.3) (0.5) (0.9) Profit Before Tax 10.5 10.6 10.4 Tax on Adjusted Profit (1.7) (1.7) (1.7) ▲ 1% Profit After Tax 8.8 8.9 8.7 Basic EPS (pence) 8.8 8.8 8.7 ▲ 3% Dividends per Share (pence) 3.1 3.2 3.2 9

SALES PERFORMANCE Strong Sales Growth 140 Like-for-like (1) 4.6 sales ▲ 10% 136.3 135 1.1 130.6 7.2 130 £m 125 4.6 118.8 120 115 110 H1 2018 Profiles LFL Building Plastics Group LFL 2018 / 2019 Acquisitions H1 2019 LFL branches Sales ▲ 15% (or 11% excluding acquisitions) Building Plastics ▲ £1.1m from 11 new branches ► ► opened in 2018/19 Group like-for-like (1) sales ▲ 10% - Profiles like-for-like (1) ▲ 9% - Acquisitions – Ecoplas (Aug 2018), Kent Building Plastics ► Building Plastics like-for-like (1) ▲ 11% (Dec 2018) and Trimseal (Mar 19) - 10 (1) Like-for-like sales exclude acquisitions and branches opened in 2018 and 2019