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Beacon Unveils Three-Year Growth Plan to Hit $9bln in Sales, $1bln in EBITDA

Beacon President and CEO Julian Francis speaks at the company's Investor Day

Beacon unveiled this week a set of operational, technological, staffing, and financial strategies intended to accelerate sales and profit growth by 2025.

The strategic plan unveiled Feb. 23-24 to analysts and investors seeks to boost net sales 32%, from $6.82 billion in 2021 to $9 billion in 2025. It also aims to increase adjusted EBITDA 46%, from $685.9 million in 2021 to $1 billion in 2025, and push up the gross margin over that period by 1.2 percentage points.

How? Beacon President and CEO Julian Francis said those goals, dubbed "Ambition 2025," are achievable because the company has spent the past two years transforming itself to the point where it's now in a position to unlock latent potential. One thing it already has accomplished was a first-ever annual EBITDA margin over 10%, which it did in 2021.

Now come a slew of new and expanded initiatives:

  • Beacon once again is buying companies. Sales from acquired businesses will produce $1 billion of its planned $2.2 billion sales growth over the next three years.

  • The company aims to open about 10 greenfield sites per year. Those facilities will boost overall sales by about $200 million in 2025 from 2021 levels.

  • Digital transactions--both over Beacon's websites as well as through IT integrations it has set up--currently figure in 13.5% of sales. Beacon thinks it can push that share to 25% by 2025. Sales made digitally yield gross margins 150 basis points higher than non-digital sales, and the dollar value of the basket of goods purchased is 3% bigger, Beacon said.

  • Beacon will push more sales of its house brand, TriBuilt. The fatter margins provided buy such sales will contribute as much as 10% of the company's EBITDA growth, Beacon believes.

  • The company is hiring 100 new outside sales reps and is moving oversight of them from branch manager level to area sales leaders. "Sales reps will report to sales professionals," said Jonathan Bennett, Beacon's EVP and Chief Commercial Officer.

  • Taken together, the customer experience and go-to-market initiatives will increase sales by $700 million, Beacon predicts.

  • Then there's organic market growth, which Beacon believes can yield $400 million in sales growth by utilizing its size, scale, and services. For instance, improved pricing technology could add an extra half percentage point to the gross margin. It expects half of the $400 million growth will come from commercial sales.

The profit-building side features several moves to reduce costs, in part by making branches operate more efficiently and coordinate with each other better. Much of the company's 450-branch network is being organized into OTC ("On Time and Complete') centers.

Working together can cut costs, such as when a sale made in a branch on the North side of a city is fulfilled by a branch on the South side because it's closer to the job site. Small differences can be profound; doing an additional half-turn of the inventory can cut holding costs by $50 million to $100 million.

"We don't see our competitors making the changes that we have to attack the market in this way," said Munroe Best, president of Beacon's South Division.

Additionally, the Company announced that its board of directors has authorized the repurchase of up to $500 million of its common shares.

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