interim results 6 months to june 30 th, 2012. highlights group revenues up 5% to €1.05bn exchange...
TRANSCRIPT
Interim Results6 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 Geographic Area Revenue by Business Segment
€1.05bn €1.05bn
Revenue by Business Segment and Geography
Manufacturing2%
Retailing9%
UK76%
Ireland 23%
Belgium1%
Merchanting 89%
3
Operating Environment
Uneven recovery in economy
Economy in mild recession
Consumer spending weak due to pressure on take-home pay
RMI Market reasonably stable despite macro economic weakness
Merchanting UK
Merchanting Ireland
Retailing
Modest economic growth driven by exports
Further contraction in merchanting volumes to historically low levels
Weakness in DIY Market due to the austerity programme, deleveraging by consumers and adverse weather conditions
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Merchanting UK Merchanting Ireland
Retailing
Self-Help Measures
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
Significant cost reductions
Branch consolidations
Examinership - Atlantic Home Care
Manufacturing
Closure of CPI
5
UK Merchanting
Revenue 780,547 712,648 9.5% 3.8%
Operating profit 37,532 31,859 17.8% 11.6%
Operating margin 4.8% 4.5%
2012 2011€’000 €’000
% Change
ReportedConstant Currency
Economy has slipped back into a mild recession
Lending to households has tightened and interest costs have moved higher
Labour market resilient – private sector employment up
Housing transactions increased
Trading
Merchanting market declines by an estimated 4%
Growth in average daily like for like turnover of 1.4%
Business traded ahead of the market
Increased turnover and profit in Buildbase, Selco, Plumbase and Macnaughton Blair
Specialist brands exposed to housing and infrastructure markets performed strongly
Market
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Irish Merchanting
Revenue 136,369 149,399 (8.7%)
Operating profit 897 1,060 (15.4%)
Operating margin 0.7% 0.7%
2012 2011€’000 €’000
% Change
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
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
TradingMarket
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Retailing
Revenue 98,223 112,085 (12.4%)
Operating loss (3,523) (431)
–
2012 2011€’000 €’000
% Change
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 productsFall in transactions by 10% - average transaction values down by 2.4% - change in mixGlasnevin and Blanchardstown stores extendedExaminer appointed to Atlantic Home CareAtlantic Home Care operating loss of €2.2m
Market
8
Belgium & Manufacturing
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
Current annualised turnover of JV is €55m
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
Belgium
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Half-Year Results Pre - Exceptional Items & Amortisation
Revenue 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% –
Finance expense (net) 7.4 6.0 23.3%
Profit before tax 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%
2012 2011 €m €m
% Change on prior period
Reported Constant Currency
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Revenue Analysis
1,008
1,055
Merchanting
UK Merchanting
€m
11
Operating Profit Analysis
26,213
31,262
Merchanting
€’000
* % movements are against H1 2011 12
Cash Flow
31
55
44
€m
13
Free Cash Flow and Net Debt
226
201
14
Net Debt & Shareholders’ Equity
Gearing 52% 50% 35% 26% 23% 20%
2007 2008 2009 2010 2011 2012
15
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*
Debt Facilities Maturity Profile
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Debt Covenants
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
Minimum shareholders’ equity €789m €788m €783m
Debt to equity ratio 19% 22% 21%
Debt to equity ratio limit 85% 85% 85%
Significant headroom on covenantsNet 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)
First Half First Half FY2012 2011 2011
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Summary Balance Sheet
Property, plant and equipment 583.2 581.1 2.1
Intangibles 578.4 568.6 9.8
Financial assets 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)
Net debt (200.6) (225.9) 25.3
Shareholders’ Funds 990.9 982.8 8.1
30 June 31 Dec 2012 2011 Change€m €m €m
Change€m
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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
20
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
21
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 UKMerchanting Ireland
DIY Ireland
.co.uk
Belgium
Manufacturing
23
Supplementary Information
Historic Lows
Housing Starts & Completions – GB 2002 - 2011
Significant pent-up demand
182,390
220,810
168,120
211,910
129,260
106,660
129,350
134,980
25
Historic Lows
House Completions – Ireland 1990 - 2012
Current activity is at an unsustainably low level
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Estimated UK Merchanting League Table
Sector Turnover £12 billion plusIndependents £4.6 billion plus
3rd Largest Builders Merchant
Circa 2,000 independents
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Operating Margin History (Core – Before Central Costs)
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
Year UK ROI Group*
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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