Howdens 2018 Preliminary Results 2018 Preliminary Results 28 February 2019
Howdens 2018 Preliminary Results
2018 Preliminary Results28 February 2019
Howdens 2018 Preliminary Results
Andrew LivingstonChief Executive Officer
Howdens 2018 Preliminary Results
Sales £1,511m, +7.7%, profit before tax £242.3m*
Gross margin developed in H2 with sales momentum
Period 11 Success
• Incentives and focus• Lead generation build• Availability (Raunds' distribution)
33 new depots (2017: 19 depots)
New digital platform launched to raise consumer brand awareness
New format trade book
*(exc. GMP equalisation charge)
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Howdens 2018 Preliminary Results
Depot network
In stock
Trade focussed
Planning support
Trade account facility
Design
Quality products
UK manufacturing base
Range leadership
Local prices Rigid cabinets
Empowered teams Dedicated supply chain
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Howdens 2018 Preliminary Results
Ensure high local stock availability – a key part of our service
Provide online accessibility
Speed up our picking times
Improve our display environment for their customers
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Howdens 2018 Preliminary Results
Interactive
Input on new product
Operational priorities
Sales and margin tracking
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Howdens 2018 Preliminary Results
INTERNATIONAL
DIGITAL DEVELOPMENT
RANGE MANAGEMENT
DEPOT EVOLUTION
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Mark RobsonDeputy CEO and Chief Financial Officer
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Howdens 2018 Preliminary Results
Highlights
(3.8)*
200
225
250
2017 2018
Operating profit, £m, and margin, %
1250
1300
1350
1400
1450
1500
1550
2017 2018
Revenue, £m
HJ UK Cont Europe
HJ UK: +7.7%
(3.8)*
200
225
250
2017 2018
Profit before tax, £m
30.0 27.5
48.5 44.3
68.4 68.3
47.9 62.2
0
50
100
150
200
250
2017 2018
Uses of ‘cash’, £m
Pension def Cap ex Dividend Share rep
1,372.0
1,477.3
34.0
1,403.8
1,511.3
31.8
241.1231.3
200
225
250
Dec-17 Dec-18
Net cash, £m
35.0
232.2
242.3
16.7%
15.9%
234.4240.1
750
800
850
900
950
2017 2018
Gross profit, £m, and margin, %
63.3%
61.7%
888.4
932.2
243.9
238.5
* GMP equalisation chargeProfit before tax
* GMP equalisation chargeOperating profit
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Howdens 2018 Preliminary Results
Revenue
2018 UK depot revenue £1,477.3m• total +7.7% • LFL +6.3%
2018 Continental Europe depot revenue £34.0m• France total (€) +4.4% • LFL +4.4%
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Howdens 2018 Preliminary Results
Profit before tax
£m
888.4
Change£43.8m
932.2
2017 2018
Gross profit
•
Currency1
Cost pressure/savings,
etc.(net)(10)
Price(revenue)
(10)
Volume& mix(COGS)(55)
Volume & mix
(revenue)117
2017
£m
Interest,etc.1
Change£6.3m
GrossProfit
44
232.2238.5
•2018
Profit before tax
OperatingCosts*
(34)
*includes £8m impact of 53rd week
Group gross profit margin• 2017: 63.3% • 2018: 61.7%
GMP Equalisation
Charge(4)
Change£10.1m
242.3
10
Howdens 2018 Preliminary Results
Operating costs
New depots9
2017(1) 2018(1)
Change£38.1m
Olderdepots
20
£mOperating
costs
654.0
692.1Growth related
9
•
Other4
2017
646.5
53rd week8
GMP equalisation
charge4688.3
2018(1) Reported
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Howdens 2018 Preliminary Results
Income statement
Revenue 1,511.3 1,403.8
Cost of goods sold (579.1) (515.4)
Gross profit 932.2 888.4
Operating costs (before GMP equalisation charge) (688.3) (654.0)
GMP equalisation charge (3.8) -
Operating profit 240.1 234.4
Net interest (1.6) (2.2)
Profit before tax 238.5 232.2
Tax (48.1) (47.2)
Profit for the period 190.4 185.0
£m 2018 2017
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Howdens 2018 Preliminary Results
Earnings per share and dividends
• Earnings per share 31.3p 29.9p
• Dividend
- Final (recommended) 7.9p 7.5p
- Full year 11.6p 11.1p
2018 final dividend costing £47.6m
£m 2018 2017
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Howdens 2018 Preliminary Results
Net cash and cash flow
£m 2018 2017
Opening net cash 241.1 226.6
Operating cash flows before movements in working capital 274.6 266.6
Working capital (49.7) (26.9)
Capital expenditure (44.3) (48.5)
Tax paid (45.4) (41.8)
Dividends (68.3) (68.4)
Share repurchases (62.2) (47.9)
Pension contribution (16.3) (21.2)
Other 1.8 2.6
Closing net cash 231.3 241.1
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Howdens 2018 Preliminary Results
Working capital
• Working capital increased £49.7m
– stock up £18m
– debtors up £48m
– creditors up £16m
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Howdens 2018 Preliminary Results
Shareholder Returns 2017 2018 2019 Total
Feb 2017 programme 48 32 - 80
March 2018 programme - 30 30 60
Feb 2019 programme - - 50* 50
Total share repurchases 48 62
Dividends 68 68
Total shareholder returns 116 131
Return of excess cash to shareholders
• Two year share repurchase programmes:
- February 2017: £80m
- March 2018: £60m
- February 2019: £50m
*£50m overtwo years
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Howdens 2018 Preliminary Results
Pension scheme deficit
Dec2017
Change£(73.3)m
Net discount rate
(105)
Dec 2018
IAS19 basis
•
109.3
36.0Asset
returns46
Current service
charge + admin cost+ interest
24
Contribution(42)
£mGMP
equalisation charge
4
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Howdens 2018 Preliminary Results
Current trading & outlook for 2019
• UK sales in first two periods up 4.0%, LFL +2.4%‒ Adjusted for one fewer trading day up 5.1%, LFL +3.5%
• Cost pressures ‒ exit of Dutch & German businesses
– digital development
– depreciation
– growth & inflation
– additional depots
• Capital expenditure: c.£60m 2019
• Banking arrangements
• Brexit planning
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DEPOT EVOLUTION
INTERNATIONAL
DIGITAL DEVELOPMENT
RANGE MANAGEMENT
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Depot format and layout broadly
unchanged since 1995
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Responding to changing requirements
Space maximisation
18 depot test
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Responding to different requirements
Space maximisation
18 depot test
Howdens 2018 Preliminary Results
Howdens 2018 Preliminary Results
Creating the best environment
Space maximisation
18 depot test
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Howdens 2018 Preliminary Results
Two model formats
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Improved display environment
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Open, accessible offices for improved conversations
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Testing a broader hardware offer
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Service visibility
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Improved design and presentation facilities
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Warehouse – restructured the space, improved picking times
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Conversion of 3 older depots
6 more depots converted by August
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New 10,000 sq.ft. and 6,000 sq.ft. formats
Both can support full Howdens offer
Opens up access to new locations to create opportunity for around c. 850 depots
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Howdens 2018 Preliminary Results
RANGE MANAGEMENT
INTERNATIONAL
DIGITAL DEVELOPMENT
DEPOT EVOLUTION
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Howdens 2018 Preliminary Results
Howdens design centre
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Howdens 2018 Preliminary Results
Industrial influences
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Emerging linear trend
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Grey and Navy remain popular
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New charcoal
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Howdens 2018 Preliminary Results
Increased new product sales on fewer new kitchen ranges
Rebalancing our stocking points over time
Timely discontinuation of under performing ranges
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Howdens 2018 Preliminary Results
DIGITAL DEVELOPMENT
RANGE MANAGEMENT
DEPOT EVOLUTION
INTERNATIONAL
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Howdens 2018 Preliminary Results
Building digital capability
• Improve interface for customers
• Increase awareness
• Streamlined operating processes
New platform
• Mobile friendly
• Traffic growth
• Improved lead quality
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Increasing consumer awareness
• Greater visibility in search
• Easier access to products, styles and colours
• Stronger social media presence
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Better connectivity and operating processes
• Mobile first
• Depot in pocket
• Trade login area
• Account management
• Information access
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Howdens 2018 Preliminary Results
INTERNATIONAL
DIGITAL DEVELOPMENT
RANGE MANAGEMENT
DEPOT EVOLUTION
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Howdens 2018 Preliminary Results
2018: 24 depots in 4 countries
Freestanding market estimateFR €1.6bn v UK €2.1bn
DIY kitchen sales - FR 91% v UK 50%
Mature French depots sales - €2.1m (similar to comparable UK depots)
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INTERNATIONAL
Howdens 2018 Preliminary Results
Howdens 2018 Preliminary Results
Local cluster benefits
City based :
• Reach local scale
• Establish accounts
• Build Howdens ‘ know-how and culture
Target Areas
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Howdens 2018 Preliminary Results
Rebranding to gain advantages from :
• UK brand equity
• Online search reputation
• Business efficiencies
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Howdens 2018 Preliminary Results
Price increase in January
Open 40 UK depots
Brexit planning
5.1% Sales growth on a same day basis – P1 & P2
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2019
Howdens 2018 Preliminary Results
Howdens 2018 Preliminary Results
Expo Visit – 4th April 2019
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2018 Preliminary Results28 February 2019