Post on 19-Aug-2020
2015 Half yearly report
August 2015
AGENDA
Patrick BatemanChief Executive Officer
Matthew EdwardsChief Financial Officer
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Introduction and headlines Financial performance Group strategy and growth opportunities Current trading and outlook Eurocell at a glance
Introduction and headlinesPatrick Bateman, Chief Executive Officer
INTERIM FINANCIAL HIGHLIGHTS
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Adjusted EBITDA up 14% to £13.0m (2014: £11.4m)
Adjusted PBT up 35% to £9.6m (2014 £7.1m)
Adjusted EPS up 46% to 7.6pps (2014 5.2pps)
Revenue performance in-line with RMI Market and outperforming new build market Underlying operating cash flow up £3.1m, conversion 93% (+13.8 percentage points) Gross margin improvement (4.2 percentage points) from cost reduction
Interim dividend of 2.7 pence per share
Adjusted PBT represents profit before tax and non-recurring costsAdjusted EBITDA represents earnings before interest, tax, depreciation, amortisation and non-recurring costsAdjusted EPS excludes non-recurring costsOperating cash flow is before capital expenditure, taxation and non-recurring costs
Strong financial performance
OPERATIONAL HIGHLIGHTS
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New branch roll-out 10 new (6 in H1, 10 YTD), 25 refurbished
New products In progress
Cross-selling Branch sales +4% on manufactured
Resin contract Benefits being realised
Logistics outsourcing Results as expected
Acquisitions 1 bolt-on completed post period end
Operational factory performance Scrap down 6% and OEE up 2%
Operational improvements and initiatives are positive
MARKET BACKDROP Market forecasts indicate improved market conditions for the remainder of 2015
Eurocell revenue is derived primarily from the RMI and New Build markets
RMI (84% of total revenue)
– H1 down 0.7%: Private (-0.9%) and Public (-0.2%) – Full year forecast is growth of 5% and 1% for private / public
New build (12% of total revenue)
– H1 completions up 9.7%: Private (+11.4%) and Public (-1.9%) – Full year forecast is growth of 10% for private and 3% for public
Source: ONS, output in the construction industry, May 2015 - release: 10 July 2015Construction Products Association forecast for 2015
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Public Private
Financial performanceMatthew Edwards, Chief Financial Officer
SUMMARY INCOME STATEMENT
Improvements in gross margin % has been translated into higher operating profit due to control of overheads
Revenues reflect 0.9% fall in RMI market and timing between client losses and wins
Gross margin improvements during the period driven by – New resin contract and lower resin prices – Other raw material savings – Increased use of post consumer material in manufacturing – Formulation changes reducing material usage – Shift in mix towards products manufactured by Eurocell
Improved production has also supported the performance of the business with savings achieved in production labour
Overhead increase reflects investment in headcount and ongoing costs incurred post IPO
Improvements in gross margin % has been translated into higher operating profit due to control of overheads
Non-recurring costs in the current period relate to the IPO and re-financing in March 2015
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Source: Company information(1) Operating profit before non-recurring costs
Adjusted EBITDA increased by 17% (pre plc costs)EBITDA BRIDGE (£M)
Revenue in line with RMI market (-0.9%)
Resin contract savings in line with expectations supported by lower market prices
Other margin benefit from improved raw material procurement and use (see Profiles segment review)
Distribution savings from outsourcing. Savings remain on track and will increase in the second half of 2015
Headcount growth mainly due to investment in Building Plastics structure 8
13.8% margin
15.8% margin
SUMMARY CASH FLOW
Strong operating cash flow as a result of efficient working capital management and increased profitability
History of strong operating cash conversion, demonstrating ability to manage working capital – Better receivables management and stock optimisation – Improved payment terms with key supplier
Working capital increase in the first half of the year driven by payment of annual bonuses; working capital typically reduces during the second half of the year
Change in timing of tax payment from 2014 to 2015 (£2.2m), non-recurring costs being in respect of the IPO
Continued investment in new extruders and recycling capability and capacity (on track full year)
Cash flow available for debt service lower due to payment of corporation tax and IPO costs
Finance expense relates to the payment of rolled up interest on shareholder loans
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Source: Company information. (1) Disclosed as cash generated from operations in the half year report(2) Exceptional items removed from working capital (since they are not included within adjusted EBITDA)(3) Underlying operating cash conversion is operating cash flow as a % of adjusted EBITDA
SUMMARY BALANCE SHEET
Net asset increase (Dec 2014) due to: – Net profit of £4.5m – Issue of shares on IPO (£1.9m)
Working capital increase from new branches of £0.6m; underlying reduction therefore £1.4m
Cash required in July for acquisition (£2.3m), corporation tax payment on account (£0.9m) and VAT quarterly payment (£1.5m)
Current borrowings are under a £45m 5 year facility from Santander and Barclays
Facility headroom of £11.7m
Covenants in place: – Leverage: must be less than 3 – Interest cover: minimum level of 4
Interest currently charged at LIBOR plus 1.5% and varies depending on leverage
Source: Company information(1) Leverage is net debt divided by adjusted EBITDA for the preceding twelve months(2) Interest cover is adjusted EBITDA divided by net interest payable for the preceding twelve months
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SEGMENTAL REVIEW
L4L business up 3% v last year driven by new business with existing customers (moving to sole supplier arrangements)
Resin: Permanent savings due to new resin contract; lower market prices
In production use of post-consumer materials up 45%, scrap 6% lower and improved OEE of 2%
Bolt-on acquisitions: Injection moulding business acquired in July 2015. Growth in existing business and limited insourcing provides return above WACC
Equinox tiled roof system successfully manufactured in-house with continually increasing sales
Capital expenditure up £1.2m to £3.2m – continued investment in tooling and production
Profiles
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SEGMENTAL REVIEW Building Plastics
Eurocell manufactured products up 4% including 11% increase in made-to-order products (such as Skypod and Equinox)
L4L Business (121 branches): 1.1% decline on a per trading day basis, includes no price increase
– Similar to RMI market decline
– Greater initial sales dilution from increased Branch openings
Continued investment in branch network:
– 10 new branches open and trading YTD (6 in H1)
– 141 branches expected by December 2015
(13 new in total)
– 25 branch refurbishments
– Potential acquisitions of independent branches
Further investments in people to support branch network expansion
– Two new Divisional Directors (splitting the country)
– Introduction of relief managers
– Focus on improved recruitment
Specific management development programmes introduced and ‘e’ based Branch learning
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Group strategy and growth opportunitiesPatrick Bateman, Chief Executive Officer
GROUP STRATEGY & GROWTH OPPORTUNITIES
The overall strategy remains unchanged, to continue to grow sales and profits above market growth through leadership in products, operations, sales, marketing and distribution. With focus on:
Sales growth Key targeting of new profile customers
Improving the support for branch operations
Continuing to roll out branches in the UK (organic and acquisition)
Positive outlook for private new build
Margin enhancing operational improvements Further use of recycled product
Continual improvement in scrap and OEE
Increase mix in high value own produced items
Improved portfolio selling
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Current trading and outlookPatrick Bateman, Chief Executive Officer
CURRENT TRADING & OUTLOOK
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Performance in the first seven weeks of H2 2015 (compared to 2014)
Total sales up 1.8%
Year on year growth in the first seven weeks is improved over H1
Resin price stable in July and August
Outlook
Launch of a new product planned for September
Total branches of 141 by December 2015
Acquisition of S&S Plastics
Current year profitability and dividend in line with expectation
SUMMARY
On track to deliver against expectations
Strong single brand, B2B-focused
Strategically invested,
experienced management, clear growth
strategy
Proven, self-funded, branch
roll-out strategy
Profitable growth, strong
cash generation, high ROCE,
robust margins
Vertically integrated
business model
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Eurocell at a glancePatrick Bateman, Chief Executive Officer
EUROCELL AT A GLANCE
Leading B2B, single brand supplier of PVC building
products with own distribution network
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EUROCELL AT A GLANCE
Profiles – £72.7m(1)
c. 12%
MARKET SHARE 2013
Ranked #3 in the market (window profiles)
Manufactures and sells: Window, door and conservatory profiles to fabricators
Network of 300 fabricators: Fabricators supply final products to installers, retail outlets and house-builders
Main customers: fabricators
Source: D&G, company information (unaudited)Note (1): FY14A revenue
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EUROCELL AT A GLANCE
Building Plastics – £100.4m(1)
Ranked #1 PVC building products specialist outlet
Sells and distributes A range of Eurocell branded roofline and third-party related products
Nationwide network of 138 branches
Main customers: Installers, small builders and roofing contractors
c. 20%
MARKET SHARE 2013
Source: D&G, company information (unaudited)Note (1): FY14A revenue
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DIFFERENTIATION
Single brand B2B supplier of innovative PVC building products
Vertically integrated business model
Recycling, manufacturing and own branch network
Clear strategyBranch roll-out, new
product development, operational efficiency, bolt-on acquisitions
2015 flotationFresh focus,
with new horizons
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A COMPLETE PRODUCT RANGE
modus windows and doors skypod pitched skylights aspect bi-folding doors
Conservatories & equinox tiled roofs Fascias, soffits and guttering Traded goods
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ROUTES TO MARKET Focus on creating pull-through demand from end-users through multiple channels
FABRICATOR INSTALLER CONSUMER INFLUENCER
Private homeowner
SMEsProvide windows and installation services to
homeowners
SMEsFabricators cut profiles to size, add glass, locks etc
to create end product
DISTRIBUTOR
BuildersProvide windows, roofline products and installation
services
KEY SALES INFLUENCE BRANCH SALES PROFILES SALES TEAM BUSINESS DEVELOPMENT TEAM
PROFILES£72.7m(1)
Window products
BUILDING PLASTICS£100.4m(1)
Roofline products
Third-party products
Building merchants & independent stockists
C. 90%
C.10%
KEY Direct customer Indirect customer
Entity | Focus
branch network
Recycling and manufacturing
Note (1): FY14A revenue
Government / Local Authorities
– Recycling– Service
Architects
– Construction– Energy efficiency
New house builders
– Construction– Energy efficiency
Facilities management companies
– Energy efficiency
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LOCATIONS Recycling and manufacturing
Extrusion centre140,000 sq ft45 extruders
Secondary operations
120,000 sq ft6 extruders
Recycling factory
55,000 sq ft12 extruders
Warehousing260,000 sq ft
Centrally locatedHQ, Manufacturing, Warehousing and
Recycling
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LOCATIONS
138 branches nationwide
+ 3 more for 2015
Nationwide branch network
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