Transcript 2012 Interim Results

Interim Results
6 months to June 30th, 2012
Highlights
Group revenues up 5% to €1.05bn
Exchange rate benefit
Underlying operating profit up 19% to €31.3 million
Underlying profit before tax up 18% to €23.8 million
UK merchanting revenues up 4%
Irish merchanting revenues fall by 9%
Self-help measures improve profitability
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Revenue by Business Segment and Geography
Revenue by Business Segment
Merchanting
89%
Revenue by Geographic Area
UK
76%
€1.05bn
Retailing
9%
Manufacturing
2%
€1.05bn
Ireland
23%
Belgium
1%
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Operating Environment
Uneven recovery
Merchanting
UKin economy
Economy in mild recession
Consumer spending weak due to pressure on take-home pay
RMI Market reasonably stable despite macro economic weakness
Merchanting Ireland
Modest economic growth driven by exports
Further contraction in merchanting volumes to
historically low levels
Retailing
Weakness in DIY Market due to the austerity programme,
deleveraging by consumers and adverse weather conditions
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Self-Help Measures
Merchanting UK
Cost reductions and development
of the hire division in Buildbase
Sales initiatives in Plumbase to
increase market share
Developing turnover in more
recently opened Selco stores
Integration of specialist
businesses engaged in the
distribution of indoor
construction products and
bathroom products
Merchanting Ireland
Significant cost reductions
Branch consolidations
Retailing
Examinership - Atlantic Home Care
Manufacturing
Closure of CPI
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UK Merchanting
2012
€’000
Revenue
Operating profit
2011
€’000
% Change
Reported Constant Currency
780,547
712,648
9.5%
3.8%
37,532
31,859
17.8%
11.6%
4.8%
4.5%
Operating margin
Market
Trading
Economy has slipped back into a mild
recession
Merchanting market declines by an estimated 4%
Lending to households has tightened and
interest costs have moved higher
Business traded ahead of the market
Labour market resilient – private sector
employment up
Housing transactions increased
Growth in average daily like for like turnover of 1.4%
Increased turnover and profit in Buildbase, Selco,
Plumbase and Macnaughton Blair
Specialist brands exposed to housing and
infrastructure markets performed strongly
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Irish Merchanting
2012
€’000
2011
€’000
% Change
136,369
149,399
(8.7%)
Operating profit
897
1,060
(15.4%)
Operating margin
0.7%
0.7%
Revenue
Market
Economy forecast to show modest growth
in 2012
Domestic demand weak as household
spending continued to decline
Housing market has declined to an
unsustainable level - completions
forecast at 5,000 units this year
RMI market down due to fall in
discretionary spending
Trading
Turnover declined by 8.7%
Improved market position – a number of
competitors reduce capacity and exit market
Gross margin maintained despite competitive
pressure and overheads cut by 10% (€4m)
Profitability close to last year’s level despite
sharp fall in turnover
Branch consolidations in Dublin, Cork and
Limerick
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Retailing
2012
€’000
2011
€’000
% Change
Revenue
98,223
112,085
(12.4%)
Operating loss
(3,523)
(431)
Market
Retail spending continued to decline
Weak labour market and falling
disposable incomes weigh on demand
Improvement in consumer confidence not
translating into increased spending
–
Trading
Turnover down by 12.4%
Trading affected by decline in consumer spending
and heavy rainfall in April and June which reduced
demand for outdoor products
Fall in transactions by 10% - average transaction
values down by 2.4% - change in mix
Glasnevin and Blanchardstown stores extended
Examiner appointed to Atlantic Home Care
Atlantic Home Care operating loss of €2.2m
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Belgium & Manufacturing
Belgium
Economy to flat line in 2012 – performing
ahead of other European economies
New housing and RMI markets weaken
Turnover growth from two acquisitions
completed in the second half of 2011
Other acquisition opportunities under
review in consolidating market
Manufacturing
Division returned to profitability
Volumes lower in UK mortar market due to
fall in housing starts and adverse weather
conditions in the second quarter
CPI closed
Continuing manufacturing business in
Ireland operated at close to breakeven
Current annualised turnover of JV is €55m
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Half-Year Results Pre - Exceptional Items & Amortisation
2012
€m
2011
€m
% Change on prior period
Reported Constant Currency
1,054.5
1,008.1
4.6%
0.6%
Operating profit
31.3
26.2
19.3%
11.5%
Operating margin
3.0%
2.6%
–
7.4
6.0
23.3%
23.8
20.2
18.1%
Adjusted earnings per share
8.1 cent
7.2 cent
11.6%
Dividend
3.0 cent
2.75 cent
9.1%
Revenue
Finance expense (net)
Profit before tax
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Revenue Analysis
€m
1,055
Merchanting
1,008
UK Merchanting
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Operating Profit Analysis
€’000
Merchanting
31,262
26,213
* % movements are against H1 2011
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Cash Flow
55
€m
44
31
13
Free Cash Flow and Net Debt
226
201
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Net Debt & Shareholders’ Equity
Gearing
2007
2008
2009
2010
2011
2012
52%
50%
35%
26%
23%
20%
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Debt Facilities Maturity Profile
Total Group debt facilities amount to €452m of which €112m was undrawn at
30 June 2012
Weighted average maturity profile of 3.4 years
Offer to roll €85m to 2015*
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Debt Covenants
First Half
2012
First Half
2011
FY
2011
EBITDA - 12 month rolling adjusted
€101.2m
€101.5m
€97.4m
EBITDA interest cover
7.1 times
7.7 times
7.2 times
Minimum interest cover
3.0 times
1.0 times
3.0 times
Shareholders’ equity (as defined)
€1,071m
€1,131m
€1,094m
€789m
€788m
€783m
Debt to equity ratio
19%
22%
21%
Debt to equity ratio limit
85%
85%
85%
Minimum shareholders’ equity
Significant headroom on covenants
Net debt reduced to €200.6m at 30 June 2012 (31 December 2011: €225.9m)
Cash deposits were €138.5m at 30 June 2012 (31 December 2011: €134.6m)
Undrawn committed revolving term bank facilities were €112m at 30 June 2012
(31 December 2011: €120m)
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Summary Balance Sheet
30 June
2012
€m
31 Dec
2011
€m
Change
Change
€m
€m
Property, plant and equipment
583.2
581.1
2.1
Intangibles
578.4
568.6
9.8
0.1
0.1
1,161.7
1,149.8
11.9
Working capital
166.4
172.6
(6.2)
Income and deferred tax
(38.3)
(37.8)
(0.5)
Retirement benefit obligations
(57.7)
(33.6)
(24.1)
Provisions
(40.6)
(42.3)
1.7
1,191.5
1,208. 7
(17.2)
(200.6)
(225.9)
25.3
990.9
982.8
8.1
Financial assets
Net debt
Shareholders’ Funds
–
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Acquisitions and Developments
Macnaughton Blair acquired Brooks two branch merchanting
business in Northern Ireland
The Belgian JV benefitted from two single branch acquisitions
completed in second half of 2011
Two merchanting branches were opened under the Jacksons and
Plumbase brands
Selco opened a new branch in Hanworth, South East London in July
and further branch openings are planned
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Strategic Focus
Continued margin growth in UK merchanting branches
Development of Selco branch network
Selectively participate in further consolidation in UK merchanting
market
Responding to challenging market conditions in Ireland
Development of merchanting business in third geography
Maintaining strong cash generation and balance sheet
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Second Half Outlook
Outlook for the UK economy is uncertain
Consumers to benefit from low inflation and interest rates
UK RMI market conditions to remain challenging
Demand is expected to remain weak in Irish merchanting and
DIY markets
Emphasis on self-help measures to increase operating profit
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Summary and Conclusion
Continued operating profit improvement in difficult markets
Portfolio of resilient businesses with improving market positions
High operating cash flow, reduced cost base and spare capacity in
branch network
Good platform to benefit from any recovery in market conditions
from cyclical lows
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Locations
Merchanting Ireland
Merchanting UK
.co.uk
Manufacturing
DIY Ireland
Belgium
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Supplementary
Information
Housing Starts & Completions – GB 2002 - 2011
220,810
182,390
211,910
168,120
134,980
129,260
129,350
106,660
Significant pent-up demand
Historic Lows
25
House Completions – Ireland 1990 - 2012
Current activity is at an unsustainably low level
Historic Lows
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Estimated UK Merchanting League Table
Circa 2,000 independents
3rd Largest Builders Merchant
Sector Turnover £12 billion plus
Independents £4.6 billion plus
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Operating Margin History
(Core – Before Central Costs)
Year
UK
ROI
Group*
2007
7.3%
10.8%
8.7%
2008
4.5%
5.5%
4.9%
2009
3.2%
-1.7%
1.6%
2010
4.1%
0.4%
3.0%
2011
4.1%
0.7%
3.2%
2012 (H1)
4.8%
-1.3%
3.4%
2011 (H1)
4.5%
-0.4%
3.2%
*Includes Belgium from 2011
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For Further Information
Gavin Slark
Chief Executive Officer
Colm Ó Nualláin
Finance Director
Charles Rinn
Group Financial Controller / Secretary
Address:
Grafton Group plc,
Heron House, Corrig Road,
Sandyford Industrial Estate, Dublin 18
Telephone:
+353 1 216 0600
Fax:
+353 1 295 4470
Email:
[email protected]
Web:
www.graftonplc.com
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