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Final Results Year Ended 31 December 2012. 2 Financial Highlights Revenue up 6% to €2.2 billion and by 0.6% in constant currency Underlying operating.

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Presentation on theme: "Final Results Year Ended 31 December 2012. 2 Financial Highlights Revenue up 6% to €2.2 billion and by 0.6% in constant currency Underlying operating."— Presentation transcript:

1 Final Results Year Ended 31 December 2012

2 2 Financial Highlights Revenue up 6% to €2.2 billion and by 0.6% in constant currency Underlying operating profit up 32% to €75.2 million from €56.9 million (before exceptional items and amortisation) Group operating profit margin increased by 70 basis points to 3.5% from 2.8% Underlying profit before taxation up 39% to €61.9 million from €44.5 million (before exceptional items and amortisation) Underlying adjusted basic earnings per share up 27% to 19.5 cent from 15.4 cent Dividend up by 13% for year to 8.5 cent including second interim dividend of 5.5 cent Strong cash generation from operations of €106 million, up from €97 million EBITDA was €114.7 million (2011: €97.4 million) Shareholders’ equity of €1 billion and year-end gearing of 20%

3 3 Operating Highlights Profit increase driven by UK merchanting business which outperformed in a weak market UK merchanting operating margin increased by 75 basis points to 4.85% from 4.10% Lower costs mainly offset impact of revenue decline in merchanting branches in Ireland Second half profit recovery in Retailing business in Ireland Manufacturing business returned to profit following restructuring All three divisions of Group profitable

4 Revenue by Geographic Area Revenue by Business Segment €2.17bn Revenue by Business Segment and Geography Manufacturing 2% Retailing 9% UK 76% Ireland 22% Belgium 2% Merchanting 89% 4

5 UK Merchanting Revenue1,610,4621,458,82610.4%3.1% Operating profit78,14159,88330.5%21.9% Operating margin4.85%4.1% 2012 2011 €’000 €’000 % Change ReportedConstant Currency % Change ReportedConstant Currency Economy flat over the past two years Housing transactions increased Trading Merchanting volume decline estimated at 2% Growth in average daily like for like turnover of 1.7% Business traded ahead of the market Increased turnover and profit in Buildbase, Selco, Jacksons, Plumbase and Macnaughton Blair Civils & Lintels business exposed to housing and infrastructure markets performed strongly Market 5

6 Self-help Measures 6 UK Merchanting Cost reductions and development of the hire division in Buildbase Sales campaigns in Plumbase to increase market position Turnover growth in more recently opened Selco stores Integration of three specialist businesses engaged in the distribution of drywall and insulation products Two bathroom distribution businesses merged Gross margin increased by 76 basis points Operating margin increased by 75 basis points to 4.85% from 4.10%

7 7 UK Merchanting Selco opened new branches in Hanworth, South East London in July and Tottenham, North London in October Buildbase acquired Electricbase and added a number of branch implants for electrical products Two branches acquired by Civils & Lintels division Macnaughton Blair acquired Brooks, a two branch merchanting business in Northern Ireland Two merchanting branches were opened under the Jacksons and Plumbase brands NDI opened a drywall and insulation branch in Newport Hirebase centres added to a number of UK builders merchanting branches Acquisitions and Developments

8 Irish Merchanting Revenue280,844306,849(8.5%) Operating profit3,2674,127(20.8%) Operating margin1.2%1.3% 2012 2011 €’000 €’000 % Change Modest export driven growth in 2012 Domestic demand weak as household spending continued to decline Housing market has declined to an unsustainable level - completions estimated at 4,500 units for 2012 RMI market down due to fall in discretionary spending Decline in housing investment estimated at 16% Turnover declined by 8.5% Improved market position – a number of competitors reduced capacity or exited market Gross margin maintained despite competitive pressure and overheads cut by 10% (€7.8m) Cost savings offset most of the impact on profit of the decline in turnover Branch consolidations in Dublin, Cork and Limerick Upgrade of branch showrooms/self-select areas completed Plumbing and heating ranges extended using branch implants Relocation of Gorey branch New Plumb Centre in Glasnevin, Dublin Trading Market 8

9 Belgium Merchanting Revenue37,98020,926 81.5% Operating profit875914 (4.3%) 2012 2011 €’000 €’000 % Change Marginal contraction in economic growth in 2012 Economy affected by slow down in neighbouring export markets, especially Germany Demographic pressure to increase housing stock 2012 housing completions down but housing starts recovered Trading Turnover of JV €59 million in 2012 Acquisition of Holvoet increased annualised turnover to €75 million JV trades from 11 branches in South West Belgium Group’s shareholding increased to 65% from 53% Investment of €30 million to date in Belgium Merchanting market Market 9

10 Retailing Revenue199,510219,709(9.2%) Operating profit2562,120 – 2012 2011 €’000 €’000 % Change Downward trend in consumer spending continued in 2012 Decline in disposable incomes, a weak labour market and high savings ratio Trading Turnover down by 9.2% Trading affected by decline in consumer spending and adverse weather in second quarter which reduced demand for outdoor products Fall in transactions by 6.2% - average transaction values down by 2.1% - change in mix Glasnevin and Blanchardtown stores extended Tallaght store upgraded Successful outcome to Atlantic Home Care Ltd examinership – two store closures and rents reduced to open market levels Market 10

11 Manufacturing Revenue42,59247,523(10.4%) Operating profit/(loss)2,045(535) – 2012 2011 €’000 €’000 % Change Volumes lower in UK mortar market due to fall in housing starts Mortgage availability a constraint on demand for new housing Trading Division returned to profitability UK mortar business increased profit on flat turnover MFP, the PVC drainage and roofline products business, operated at breakeven Wrights Windows business was divested to senior management CPI, the concrete products business, closed Market 11

12 Full-Year Results Pre - Exceptional Items & Amortisation Revenue 2,171 2,054 5.7%0.6% Operating profit* 75.2 56.9 32.1%22.7% Operating margin 3.46% 2.77% – Finance expense (net) (13.3) (12.4) 6.8% Profit before tax* 61.9 44.5 39.1% Adjusted earnings per share (cent) 19.5 15.4 26.8% Dividend (cent) 8.5 7.5 13.3% 2012 2011 €m €m % Change on prior period ReportedConstant Currency % Change on prior period ReportedConstant Currency 12 * Pre amortisation

13 Revenue Analysis 2,054 2,171 Merchanting UK Merchanting €m 13

14 Operating Profit Analysis 56,931 75,177 Merchanting €’000 14

15 Cash Flow 75 106 74 €m 15

16 Free Cash Flow and Net Debt 226 202 16

17 Net Debt & Shareholders’ Equity Gearing 52%50%35% 26% 23%20% 2007200820092010 2011 2012 17

18 Total Group debt facilities amount to €457m of which €98m was undrawn at 31 December 2012 Weighted average maturity profile of almost three years Debt Facilities Maturity Profile 18

19 Debt Covenants EBITDA - 12 month adjusted€114.7m€97.4m EBITDA interest cover8.6 times7.2 times Minimum interest cover3.5 times3.0 times Shareholders’ equity (as defined)€1,087m€1,094m Minimum shareholders’ equity€804m€783m Debt to equity ratio19%21% Debt to equity ratio limit85% Significant headroom on covenants Net debt reduced to €202m at 31 December 2012 (31 December 2011: €225.9m) Net debt in the Belgium business now fully consolidated Cash deposits/balances were €156.9m at 31 December 2012 (31 December 2011: €134.6m) Undrawn committed revolving term bank facilities were €98m at 31 December 2012 (31 December 2011: €120m) 2012 2011 19

20 Summary Balance Sheet Property, plant and equipment579.3581.1(1.8) Intangibles583.5568.614.9 Financial assets0.20.1 1,163.01,149.813.2 Working capital168.4172.6(4.2) Income and deferred tax(24.8)(37.8)13.0 Retirement benefit obligations(63.0)(33.6)(29.4) Provisions(39.7)(42.3)2.6 1,203.91,208. 7(4.8) Net debt(202.0)(225.9)23.9 Shareholders’ Funds1,001.9982.819.1 31 December31 December 20122011Change €m€m€m Change €m 20

21 Operating Margin History (Core – Before Central Costs) 20077.3%10.8%8.7% 20084.5%5.5%4.9% 20093.2%-1.7%1.6% 20104.1%0.4%3.0% 20114.1%0.7%3.2% 20124.9%0.7%3.9% *Includes Belgium from 2011 YearUKROIGroup* 21

22 22 Outlook Slow but sustained recovery forecast for UK economy Near term growth expected to remain weak Declining real incomes likely to put consumer spending under pressure Increase in housing transactions and mortgage approvals supportive of volume growth in RMI market Survey evidence indicates pent-up demand for RMI projects New phase of measures to increase profit in Merchanting business UK

23 23 Outlook Domestic economy starting to stabilise – after contracting for five years Small decline in consumer spending forecast for 2013 House price stabilisation expected to become more broadly based geographically Housing transactions and mortgage approvals increasing from a very low base Ireland

24 24 Strategic Focus Major restructuring programmes of recent years now complete Margin growth in UK merchanting branches from current level of 4.85% Development of Selco branch network – new London stores to open in Wimbledon and Old Kent Road Participate selectively in further consolidation in UK merchanting market Protect profit in Ireland until the domestic economy stabilises Continue strategic review of possible development opportunities outside of the UK, Ireland and Belgium Maintaining strong cash generation and strong balance sheet

25 25 Summary and Conclusion Strong operating profit improvement in difficult markets on flat turnover Portfolio of resilient businesses in UK that improved their market positions Irish brands traded ahead of a weak market High operating cash flow, reduced cost base and spare capacity in branch network Good platform to benefit from any recovery in market conditions from current cyclical lows

26 Locations Merchanting UK Merchanting Ireland DIY Belgium Manufacturing 26

27 Supplementary Information

28 28 * Quarterly Seasonally Adjusted

29 29

30 30

31 Historic Lows House Completions – Ireland 1990 - 2012 Current activity is at an unsustainably low level 31

32 32

33 Estimated UK Merchanting League Table Sector Turnover £12 billion plus Independents £4.6 billion plus 3rd Largest Builders Merchant Circa 2,000 independents 33

34 34 For Further Information Gavin Slark Chief Executive Officer Colm Ó NualláinFinance Director Charles RinnGroup 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

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