Building progress together Final Results 2019 Financial Year Ended 31 December 2019
Cautionary Statement & Notes Cautionary Statement Certain statements made in this presentation are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied by these forward looking statements. They appear in a number of places throughout this presentation and include statements regarding the intentions, beliefs or current expectations of Directors concerning, amongst other things, the results of the operations, financial condition, liquidity, prospects, growth, strategies and the businesses operated by the Group. The Directors do not undertake any obligation to update or revise any forward-looking statements whether as a result of new information future developments or otherwise. Notes All references to 'Adjusted' mean before amortisation of intangible assets arising on acquisitions (see Appendix 1). Please refer to Notes and Definitions in Appendix 1 and the bridge of statutory operating profit to adjusted operating profit in Appendix 2. As amounts are reflected in £ ’m some non-material rounding differences may arise. Plumbase and the Belgium Merchanting business and the are now classified as discontinued operations. The revenue and operating profit of both businesses are excluded from the Group. Revenue and the operating result is reflected in the (loss)/profit after tax from discontinued operations. The prior year comparatives have been updated to conform to the current year presentation . Any references to Change within the presentation relate to 2019 v 2018 pre any IFRS 16 “Leases” impact. Grafton Group plc – Final Results 2019 2
Gavin Slark David Arnold Chief Executive Chief Financial Officer Officer Grafton Group plc – Final Results 2019 3
Introduction & Highlights Gavin Slark, CEO Final Results Financial Year Ended 31 December 2019
2019 Overview • Softer trading in UK merchanting – weak economy and RMI market, particularly in H2 • Strong organic growth in Irish Merchanting and Retailing • Important strategic and operational initiatives completed • Transformational acquisition of Polvo in The Netherlands • Divestment of Plumbase and Belgium Merchanting Grafton Group plc – Final Results 2019 5
Group Financial Highlights – Continuing Operations Revenue Adjusted operating profit up 3% to £2.67bn up 4% to £194.3m Adjusted operating margin ROCE up 10bps to 7.3% down 30bps at 14.4% Adjusted EPS Dividend up 4% to 66.0p up 6% to 19.0p Strong cash generation Net cash of £7.8m Grafton Group plc – Final Results 2019 6
Financial Review David Arnold, CFO Final Results Financial Year Ended 31 December 2019
Income Statement – Continuing Operations Pre IFRS 16 2018 £m Change 2019 2019 Restated Revenue 2,672.3 2,672.3 2,603.1 +3% Adjusted operating profit pre property profit 197.9 187.4 182.7 +3% Property profit 6.9 6.9 4.9 Adjusted operating profit 204.8 194.3 187.6 +4% Amortisation & other (7.0) (7.0) (7.0) Statutory operating profit 197.8 187.3 180.5 Net finance cost (25.1) (5.6) (6.1) Statutory profit before tax 172.6 181.8 174.4 Adjusted profit before tax 179.6 188.8 181.4 +4% Grafton Group plc – Final Results 2019 8
Revenue Growth Analysis £’m Grafton Group plc – Final Results 2019 9
Incremental Revenue from Organic Growth (Constant Currency) £’m LFL Business Ireland Retail Manufacturing NL New Branches Disposal of UK Selco Hire Organic Boole’s & Plumbworld Growth Merchanting Grafton Group plc – Final Results 2019 10
Adjusted Operating Profit Analysis £’m New Branches 2018 Like-for-Like Branch Acquisitions Property FX 2019 Selco Hire/ Business opening costs Disposals Disposals Grafton Group plc – Final Results 2019 11
Like-for-Like Business Incremental Operating Profit Movement £’m UK Ireland NL Retail Manufacturing Central Like-for-like Business Grafton Group plc – Final Results 2019 12
UK Merchanting Pre IFRS 16 £m 2019 2019 2018 Change 1,710.8 1,710.8 1,729.5 (1.1%) Revenue 105.1 98.0 104.0 (5.7%) Operating profit pre property profit 6.1% 5.7% 6.0% (30bps) Operating margin pre property profit UK economy and merchanting market impacted by uncertainty as year progressed • • Average FY daily like-for-like revenue growth of 0.5%. Q4: -4.0% • Decline in volume and gross margin pressure contributed to lower profit • Focused on productivity improvement and efficiencies - cost reduction plan executed in UK Merchanting Grafton Group plc – Final Results 2019 13
Irish Merchanting Pre IFRS 16 Change Reported Constant £m 2019 2019 2018 Currency 464.8 464.8 441.1 +5.4% +6.2% Revenue 43.1 42.8 41.3 +3.7% +4.8% Operating profit pre property profit 9.3% 9.2% 9.4% (20bps) Operating margin pre property profit Average daily like-for-like revenue growth moderated to 6.2% • • Increase in house building but continuing shortfall in supply relative to strong demand • Small contraction in gross margin related to higher volume delivered revenue Grafton Group plc – Final Results 2019 14
Netherlands Merchanting Pre IFRS 16 Change Reported Constant £m 2019 2019 2018 Currency 211.8 211.8 155.5 +36.2% +37.3% Revenue 19.9 19.6 16.0 +23.0% +24.3% Adjusted operating profit 9.4% 9.3% 10.3% (100bps) Adjusted operating margin Significant growth in scale of business as a result of Polvo acquisition • • Average daily like-for-like revenue grew by 0.6% - uneven trading with softer conditions in H2 • Strong growth in gross margins in Isero due to procurement gains • Operating margin in 2019 diluted, as expected, by Polvo Grafton Group plc – Final Results 2019 15
Retailing Pre IFRS 16 Change Reported Constant £m 2019 2019 2018 Currency 205.5 205.5 198.2 +3.7% +4.7% Revenue 22.6 19.9 16.8 +18.8% +20.5% Operating profit 11.0% 9.7% 8.5% +120bps Operating margin Like-for-like revenue growth of 4.7% across the 35 store estate • • Transactions up 1.5% with average transaction value up by 3.2% as a result of continued range improvement • Growth delivered across a number of product categories • Store upgrade programme almost complete - one freehold Dublin store to undergo major refurbishment works in 2020 Grafton Group plc – Final Results 2019 16
Manufacturing Pre IFRS 16 Change Reported Constant £m 2019 2019 2018 Currency 79.4 79.4 78.8 +0.7% Revenue +0.8% 18.6 18.6 19.2 (3.4%) Operating profit (3.3%) 23.4% 23.4% 24.4% (100bps) Operating margin Strong performance following exceptional growth in prior year • • Marginal growth in volumes supplied to house builders • Market fundamentals continue to be attractive • CPI Euromix production facilities well invested Grafton Group plc – Final Results 2019 17
Balance sheet Pre IFRS 16 £m 2019 2019 2018 Intangible assets 761.1 761.1 726.0 Right-of-use assets 522.2 0.0 0.0 Tangible assets 529.7 531.9 548.3 Working capital 196.5 190.6 192.6 Other assets/(liabilities) (91.9) (100.6) (97.1) Pension deficit (21.2) (21.2) (20.2) 1,896.5 1,361.8 1,349.6 Net (debt)/cash (533.8) 7.8 (53.1) Equity 1,362.7 1,369.6 1,296.5 ROCE 12.7% 14.4% 14.7% Net debt/EBITDA 1.7x - 0.2x Grafton Group plc – Final Results 2019 18
Cash flow Pre IFRS 16 £m 2019 2019 2018 Cash from operations 291.1 219.1 209.2 Interest and tax (56.6) (37.0) (30.0) Replacement capex net of asset disposals (9.9) (9.9) (21.8) Free cash flow 224.6 172.2 157.4 Development capex (25.2) (25.2) (40.9) Dividends (44.0) (44.0) (38.6) Share issue/(repurchase) (5.8) (5.8) 1.3 Acquisitions & business disposals (incl. debt acquired) (52.3) (52.3) (68.3) Net cash flow before FX translation 97.4 44.9 10.9 IFRS 16 / FX translation (578.1) 16.0 (1.1) Movement in net debt (480.7) 60.9 9.8 Opening net (debt) (53.1) (53.1) (62.9) Closing net (debt)/cash (533.8) 7.8 (53.1) Free cash flow as % of adjusted operating profit 110% 89% 81% Grafton Group plc – Final Results 2019 19
2020 Technical Guidance • Full year property profits expected to be circa.£2m-£3m • Depreciation expected to be circa.£110m post IFRS 16 or circa. £50m pre IFRS 16 • Capex spend of circa. £70m split roughly 60/40 between replacement/development • Finance costs circa.£8m • Increase in tax rate to circa.19.5% as a result of anticipated one-off deferred tax impact in 2020 from UK rate remaining at 19% Grafton Group plc – Final Results 2019 20
Strategic Update & Outlook Gavin Slark, CEO Final Results Financial Year Ended 31 December 2019
Strategic Focus • Continue to pursue focused growth strategy • Focus remains on investing in higher margin, growth businesses with strong market positions and development potential • Disciplined approach to allocation of capital Grafton Group plc – Final Results 2019 22
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