Full Year Results year ended 30 November February 2017

Transcription

1 Full Year Results year ended 30 November 2016 February 2017

2 Good progress despite CTT set backs Revenue increased 10.5% to 400.0m despite mixed market conditions PBTA increased 6.6% to 29.2m with strong growth from B&I, I&T and CE Margins remained stable at 8.7% (2015: 8.8%) held back by CTT issues Without CTT, we were close to a double-digit margin Capex spend totalled 22m, including 2.7m on a new Group-wide ERP system Post-year end, acquired Walflor Industries Inc, USA for $3.6m Transformation over last two years now a nimbler, tighter, customer focussed organisation Proposing a 7.9% increase in full year dividend 2

3 Transformational strategy delivering results Successfully reorganised the Group into an actively-managed portfolio of businesses delivering growth and high-quality earnings Divested the underperforming artificial Grass Yarns business for 22m On-track to exit our Saudi Arabia joint venture, Bonar Natpet Invested in areas with the scope for achieving the highest returns Opened the new Colback plant in Changzhou, China, and approved the next phase of development Upgraded production lines within our Civils plants in Hungary Addressed underlying historical issues in CTT Strategic marketing capability to drive innovation and development of new ventures Acquired Walflor Industries Inc, to strengthen position in the US building products market Strengthened our commercial approach and capability to become a more proactive and forward looking business 3

4 Financial Review

5 Financial summary Year ended 30 November 2016 Continuing operations 2016 m 2015* m Actual y-o-y Constant currency y-o-y Revenue 400.0m 362.1m 10.5% (0.2%) EBITA 34.7m 31.8m 9.1% (2.8%) Operating margin 8.7% 8.8% -10bps PBTA 29.2m 27.4m 6.6% (5.2%) ROCE (12 months trailing) 11.1% 12.5% -140bps EPS (adjusted) 6.01p 5.86p 2.6% (9.0%) Dividend 3.00p 2.78p 7.9% Mixed results, but a lot of progress Strong profit growth in B&I, I&T and CE Profit drivers: Market demand, US Value propositions Volume growth Profit drags: CTT production Lokeren site issues European markets *restated for discontinued operations 5

6 Revenue bridge m % Overall +0.1% Overall (5.9) (-1.5)% B&I CE I&T B&I CE I&T +1.3 (2.3) CTT CTT (0.9) FY 15 Translation FX Constant FX Volume Mix/Price RM pass-through FY 16 6

7 Profit Bridge m 3.7 (2.5) (3.0) (0.8) 29.2 B&I CE I&T B&I CE I&T CTT (0.6) CTT (3.4) FY 15 Translation FX Constant FX Price / mix RM pass-through Operational inefficiencies Inflation Other FY 16 7

8 Business Unit results Year ended 30 November 2016 Revenue Profit Operating Margin 2016 m 2015* (CER) m % YoY CER 2016 m 2015* (CER) m % YoY CER (CER) B&I % % 14.9% 13.6% Civil Eng % % 4.6% 3.6% CTT % % 6.7% 10.6% I&T % % 16.1% 14.2% Central (6.2) (5.9) +5.1% TOTAL % % 8.7% 8.8% Interest (5.5) (4.9) PBTA % *restated for discontinued operations and change in operating segments 8

9 Discontinued Operations Year ended 30 November HY 2016 FY m m m m Initial consideration Working capital adjustment Total consideration Net assets sold (33.1) (25.5) (36.8) (29.9) FX recycled from reserves Loss on disposal (1.6) (2.2) Tax on loss on disposal Transaction costs (0.2) (0.2) (0.6) (0.5) Warranty provision (1.0) (0.8) (1.0) (0.8) Redundancy costs - (0.7) Intangible assets written off - (0.4) Grass Yarns profit Share of Bonar Natpet (0.6) (1.3) Loss from discontinued operations (2.6) (3.2) 9

10 Net debt Net debt ( m) Nov-14 May-15 Nov-15 May-16 Nov-16 Gearing Net debt Net debt at constant currency At constant currency, net debt was 6m lower than last year Net debt circa 15m was higher than anticipated at mid year: FX m Grass yarns - 4.3m Lokeren - 2.3m Stock build - 5.8m Capex + 6.0m As anticipated, gearing below 2x comfortably inside covenants (<3x) Net debt expected to be unchanged c 115m at November 2017 ( 35m capex and 3m acq n) Nov-14 May-15 Nov-15 May-16 Nov-16 Gearing Covenant 10

11 Free cash flow * Year ended 30 November 2016 m m Operating profit continuing ops Depreciation / amortisation / impairment Non-cash pension charges EBITDA Working capital movements (15.1) (6.3) Disposal of discops (P+L) (0.2) 1.0 Other Operating cash inflow Capital expenditure (22.2) (33.7) Proceeds from disposal of discops Interest paid (5.3) (4.9) Non-recurring items 0.7 (1.9) Pension payments (4.6) (4.5) Tax paid (10.8) (7.5) Free cash flow 17.3 (10.5) *restated for discontinued operations Build for Q1/17 ( 5.8m) China ramp up ( 2.3m) Lokeren ( 2.3m) 2016 m 2015 m H&S Replacement Capability Capacity Software Other

12 Net cash flow Year ended 30 November m 2015 m Free cash flow 17.3 (10.5) Dividends (9.2) (9.0) Dividend to NCI (Carpet) (0.3) (1.0) Proceeds from share issues FX (16.9) 6.1 Movement in net debt (8.9) (14.1) Net debt brought forward (102.1) (88.0) Net debt carried forward (111.0) (102.1) Private placement loan note refinanced 45m (5.9%) repaid on 2 September 2016 New $100m facility agreed 60m drawn at 2.57% (8 years) Balance available till September 2018 Annual savings of c. 1.4m Available facilities total 208m 12

13 Geographic Sales naturally hedged Year ended 30 November 2016 Location of selling entity Location of customer UK Europe N America Middle East Asia / ROW Total UK 2% 1% % Europe 3% 58% 1% 2% 5% 69% N America % % Middle East Asia / ROW % - 1% % 6% Total 5% 59% 22% 3% 11% 100% Only 5% of Group sales are in the UK (3% imported from Europe) Most regions are naturally hedged Financial covenants based on: average FX rates 55% of average debt is Euro denominated vs 50% of cash generation 13

14 FX guidance Year ended 30 November 2016 Spot rates Rates Jan 17 Guidance Budget FY 16 spot July 16 average Euro USD CZK RMB Translation impact vs Jan 17 spot (2017) Budget July 2016 FY16 average (0.1) In broad terms, a 1 cent movement equates to c. 200k ($) and 130k ( ) change in reported profits on full year basis 14

15 Operational review

16 What we do We take plastics and convert them into yarns, fibres and coated fabrics. From these we produce a mixture of woven, non-woven and composite materials that we sell into many different end markets and applications that affect everyday life. We use our process technology and know-how to produce performance materials that provide our customers with enhanced functional value. 16

17 What drives our markets? Population growth Rapid urbanisation Increased transportation & infrastructure Clean air, water, food Drivers Exploiting technologies Durability Aesthetics & design High strength, low weights Healthier buildings B&I Supplies building, roofing, air & water filtration and agricultural markets CTT Stadia architecture, tents, truck tarpaulins, solar protection, industrial covers & solutions, flexible containers, print billboards, boats & pools Market drivers Drivers Civil Major infrastructure projects including road & rail building, land reclamation, waste management, coastal defence I&T Transportation Interior carpeting Resilient tiles Decorative products Limited resources Materials efficiency Re-manufacturing Renewables Drivers Quality of life Safety Lifestyle changes Quality Service 17

18 Our applications in everyday life 18

19 Group strategy Four pillars of strategic focus for growth Commercial Execution Geographic Expansion Technology Differentiation Operational Excellence Customer focus Improved control of channels Focus on higher quality earnings Forward looking, responsive and proactive approach Leverage strong European base, experience and knowledge Build footprint in key geographies US and China Target global industries supported by long-term growth trends: CE, flooring products and niche building products Enhance customer insight and identify unmet needs Work closely with customers to improve existing and create new value-add products Shift to more strategic marketing approach to innovation Bolt-on acquisitions in existing and adjacent markets and technologies Leverage global functions Invest in one ERP platform to enhance performance Sharing of best practice Standardise work processes Manage asset health at sustainable levels 19

20 Significant progress achieved Commercial Execution Reorganised the organisation into four actively-managed GBUs targeting margins of +10% Divesting assets unable to support 10% margins Geographic Expansion Opened Changzhou, China, ahead of schedule and delivered first year performance ahead of expectations Leveraged assets to capture growth opportunities in our core European markets Strengthened presence in North America acquired Walflor Inc in January 2017 Technological Differentiation Invested in areas with the highest growth opportunities Developed our Geosynthetic products in order to meet revised regulatory standards Operational Excellence Established new sales and marketing teams to drive sales in our higher-margin products Strategic marketing capability driving innovation and development of new ventures in adjacent markets and technologies Developing technology roadmaps to retain and improve manufacturing competitive advantage Invested 2.7m in a new ERP system ( 9m project in total) first roll out commencing Q Renewed Hungary Civil Engineering manufacturing capability Largely resolved the underlying issues in CTT Launched operational efficiency program (Project GEMBA) 20

21 Coated Technical Textiles Disappointing overall performance as a result of a more stringent regulatory environment and manufacturing problems Loss in production capability resulted in profit reduction of 37.9% Focus in H2 on addressing the underlying issues and improving operational processes now largely resolved Refocused sales team on the higher margin, flexible containers and tensile architecture products Significant contract wins in Q4 including 2018 World Soccer Tournament stadium Expect to see a return to more normal margins in

22 Building & Industrial Revenues increased 6.4% with sales up across all markets Profit growth with operating margin improvement to 14.9% (2015: 13.6%) Performance driven by a particularly strong US roofing market in H2 Benefitted from a number of new account wins Lokeren issues continued to adversely impact European performance in H2 Post year end, acquired Walflor for $3.6m, immediately earnings enhancing Favourable outlook for 2017 and looking to further expand in North America 22

23 Civil Engineering Profits increased 27.3% at constant currency Improved sales mix Market share gains Favourable raw material pricing Margin progressed to 4.6%, benefitting from an increase in sales of highermargin, differentiated products Looking forward, growth opportunities emerging in US and Asia but European markets remain subdued Confident of further progression towards 10% operating margins 23

24 Interiors & Transportation Strong profit growth, up 14.8%, and improved margin performance to 16.1% Sales for the year up by 1.7% with the second half impacted by the pass through of lower raw material pricing Opened new Colback facility in China, achieving first year sales and margins ahead of expectations Demand in China remains strong and further investment in capacity being made Serving a number of nascent markets, we are confident that we can sustain solid margins Working on technology to expand into adjacent markets 24

25 Outlook

26 Strategic priorities for 2017 Commercial Execution Complete exit of Saudi joint venture Re-establish market confidence and reputation for service delivery in CTT Address legacy issues at Lokeren Improve sales mix towards higher margin specification products Geographic Expansion Commence construction of second production line at Changzhou, China Successfully integrate Walflor and commit to further strengthen presence in North America Technology Differentiation Strengthen the quality and size of product development pipelines Continue to develop and implement technology roadmaps Support corporate incubator activities to develop new ventures Operational Excellence Start roll out of new Group-wide ERP system Drive operational efficiencies and asset health 26

27 Outlook Well positioned in Europe, despite markets remaining challenging North American and Chinese markets remain supportive Expect margins in CTT to recover in 2017 Confident in achieving further improvement in the quality of the Group s earnings Now poised to reap the benefits following a period of significant investment Continue to focus investment in those areas we see the best growth opportunities whilst maximising returns for investors Portfolio management approach to continue 27

28 Supplementary schedules Year ended 30 November 2016

29 Restatement of prior period for Grass Yarns disposal Year ended 30 November 2015 Revenue Profit Restatement for: Restatement for: 2015 as reported ( m) Discops ( m) Segment change ( m) 2015 restated ( m) 2015 as reported ( m) Discops ( m) Segment change ( m) 2015 restated ( m) B&I CE CTT I&T S&L 38.3 (33.7) (4.6) (1.0) (0.2) - Central (5.9) - - (5.9) TOTAL (33.7) (1.0)

30 Polymer prices 18 months Year ended 30 November 2016 /t 1,800 1,600 1,400 1,200 1,000 Polymer prices - 18m trend PA6 /t Increase in most polymers during H2, following crude oil price trend Demonstrated record of pass-through Net retained benefit in 2016 of 3.7m Continuing to manage pricing impact 600 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct LLDPE (Butene C4) EUR/t S-PVC Base EUR/t PP Raffia EUR/t PET Chips EUR/t PA 6 EUR/t 30

31 Balance sheet Year ended 30 November m 2015 m Property, plant and equipment Trade working capital Prepayments and accruals (12.5) (11.6) 1 Operating capital employed Other working capital 1.4 (4.8) Intangible assets Pension deficit (15.0) (4.7) Net debt (111.0) (102.1) Net assets held for sale (1.3) - Other (17.6) (19.8) Net assets Actuarial loss on pension schemes of 11.8m Other working capital includes 4.3m of deferred consideration for grass yarns Available facilities of 208m LCY m RCF (July 2019) 165m 140 PP (Sept ) RMB loans (June 2020) 60m 51 RMB150m 17 Core funding 208 Comfortably inside covenants: Interest Cover 6.8 (> 3.0) Net debt / EBITDA 1.98 (< 3.0) 31

32 DB Pension schemes Year ended 30 November 2016 UK m Overseas m Total m Liabilities (190.4) (24.6) (215.0) Assets Net deficit (2.2) (12.8) (15.0) Movement in year: Actuarial loss (11.1) (0.7) (11.8) Net interest 0.2 (0.3) (0.1) Current service cost - (0.4) (0.4) Contributions Administration costs (0.5) - (0.5) FX - (2.1) (2.1) Net change (7.4) (2.9) (10.3) UK scheme deficit driven by changes in financial assumptions which reflect increased bond prices mitigated by better than anticipated return on assets Composition of UK scheme assets: Equities 13% DGF 24% LDI funds 15% Property 11% Annuity policy 19% Private credit 5% Cash 13% Net overseas deficit: US 3.4m; Germany 9.2m; Others 0.2m Six schemes; all closed except one German and one Belgian scheme 32

33 Non-recurring costs relating to continuing operations Year ended 30 November m 2015 m China start-up Reorganisation costs Profit from land sale (1.1) - Pension - MUBI Data cleanse Other (0.7) 1.9 Profit from the sale of unused land at our NA manufacturing site in Asheville. De-risking UK pension scheme 33

34 Return on capital employed Year ended 30 November YoY m m % Net assets * 33.3 Net debt Capital employed Operating profit before NRI ROCE 11.1% 12.5% -140bps * - Net assets from the continuing business ROCE TOTAL BASIS HY 2014 FY 2014 HY 2015 FY 2015 HY 2016 FY % 10.00% 10.50% 11.00% 11.50% 12.00% Target is 12% plus; ROCE impacted by higher than usual stock build and net debt 34

35 Earnings per share continuing Year ended 30 November m 2015* m YoY % YoY CER PBTA % (5.2)% Tax (8.8) (7.6) +15.8% 3.5% PAT (8.5)% NCI (0.6) (0.5) - - Earnings (9.0)% NCI relates to 40% minority stake in Yihua Bonar Dilution relates to share options Tax Rate 30.4% 27.8% 260bps Number of shares: - basic % - diluted (46.8%) EPS - basic % (9.0)% - diluted % (8.3)% *restated for discontinued operations 35

36 Tax rate reconciliation Year ended 30 November % 2015* % Prior year underlying rate Profit mix effect Current year underlying rate Innovation box (1.8) (0.8) Effective rate Prior year adjustments (0.9) (0.3) Reported rate Underlying rate from continuing operations reflects removal of Grass Yarn profits (nil rate) Mix effect from higher proportion of US and Belgian profits (39% and 34% rates respectively) *restated for discontinued operations 36

37 Supplementary schedules Non-holders

38 What we do We take plastics and convert them into yarns, fibres and coated fabrics. From these we produce a mixture of woven, non-woven and composite materials that we sell into many different end markets and applications that affect everyday life. We use our process technology and know-how to produce performance materials that provide our customers with enhanced functional value. 38

39 Group overview A global leading high performance materials business Designs and manufacturers polymer based products which are sold for their functional value in niche markets Highly diversified portfolio with industry leading products, supplying a broad spread of end markets Well positioned to capitalise on growth opportunities following a period of significant investment Clear and defined strategic focus to deliver profitable, cash generative growth Ambitious and active management team, determined to grow the business and generate returns for investors 39

40 Four Global Business Units With our leading proprietary technologies, we design and manufacture a wide range of polymer products which add value to, and improve the performance of, our customers products. Revenue split Building & Industrial Civil Engineering Interiors & Transportation 27% Building & Industrial 18% Civil Engineering 22% Coated Technical Textiles 33% Coated Technical Textiles Interiors & Transportation 40

41 Optimised organisational structure Group Management Group Chief Executive Brett Simpson Chief Financial Officer Mike Holt Global Business Unit s Global Business Director, Building & Industrial Clark Halladay Global Business Director, Civil Engineering Neil Ryan Global Business Director, Coated Technical Textiles Marc Krauth Global Business Director, Interiors & Transportation Gareth Kaminski Cook Global Functions Group Director Operations & Supply Chain Wayne Currie Group Director of Innovation Hans Kolnaar Group Director of Special Projects Jan van Boldrik HR Director Francis Bird General Counsel Matthew Joy Nurture existing business & asset base Pursue sustainable, profitable growth Enhanced customer intimacy Improved commercial execution 41

42 Proprietary technology capabilities Overview Brands Markets Locations Building & Industrial Produce and supply highquality non-wovens, woven, three-dimensional polymeric mats and composites BonarAgro, BonarBuilt, BonarPure, Xeroflor Building & Roofing products, Agriculture & Horticulture and Industrial applications (e.g air and water filtration) Netherlands, Belgium, Germany, USA and China* Civil Engineering Produce and supply highquality non-wovens, woven, grids, knitted fabrics, 3D polymeric mats, construction fibres and composites Coated Technical Textiles Supply a range of technical coated fabrics with aesthetic & design capabilities and performance & protection properties Adfil, EnkaSolutions Mehgies Colback Geosynthetics and Construction Fibres Netherlands, Belgium, Germany, Hungary, Slovakia, USA, China and Saudi Arabia* Building products (e.g. architecture and tent applications), Sport & Leisure markets, Transport and Industrial applications Germany and Czech Republic, plus distribution companies across 11 countries Interiors & Transportation Produce and supply clients with a unique, non-woven technical fleece fabric for the manufacture of premium flooring and carpeting products Interiors (e.g carpet tiles and mats), Transportation (e.g. moulded car carpets) Netherlands, North Carolina, USA and China *Joint venture partnerships 42

43 Fundamental growth drivers Carpet tile backing Building and Roofing Transport Industrial 22% Civil 22% Engineering 24% 18% 16% 11% Economic and environmental requirements driving high strength, low weight flooring solutions Design preference for Modular Tiles with unlimited aesthetics that are easy to install and change Urbanisation and need for better infrastructure Demands for infrastructure in areas of economic development Improved durability of construction Growth in renewable energy sector Design of healthier buildings with better air flow, moisture control and acoustic performance Faster, safer construction and improved durability Higher disposable income and emerging middle class drives demand for luxury cars Carbon-emission driving towards lighter weights and electric engines Food safety and water conservation in agriculture Outdoor advertising trends Increased quality control in performance and safety WELL POSITIONED TO BENEFIT Market leading positions Superior product offerings Diverse geographic footprint Infrastructure to support facility expansion Robust operating platform Customer service and logistics platform in place Filtration 2% Demand for cleaner air and water requiring more filtration solutions Demand for home and automotive filtration 43

44 Global footprint Extending market reach Currently 62% of production capacity Targeting growth Civil Engineering and Building & Industrial Most recent investment Changzhou Plants where our customers are, with sites allowing further capacity expansion 44

45 Customers at the centre 1. New product development Innovative design: enhanced efficiencies, increased functionality and improved sustainability Dedicated R&D team focused on engineering products for specific applications Focused resource to identify transformational growth opportunities 2. Customer insight Businesses aligned to the global markets we serve Closer to our customers to understand and anticipate their needs 3. Applied technology Proprietary polymer formulations with superior performance characteristics Diverse portfolio of end products including speciality yarns, fabrics, coated and composite high performance materials 4. Operational capability and efficiency Group wide efficiency improvement programmes Enhanced customer and market intimacy 45

46 Case study: Colback, China Significant competitive advantage Market backdrop China very fast growing domestic markets driven by mega trends Global Carpet tile market foreseen to grow at 3.7% CAGR with China closer to 5% CAGR L&B has 70% and 65% market share in modular tile markets in US and EU respectively International customers increasingly moving manufacturing to China and want to source locally Superior in-house technology Proprietary textile solutions for the flooring markets and building and automotive industries Weight / strength ratio providing benefits over alternative solutions Design flexibility to suit specific customer process requirements and product needs Cost efficiency through the value chain Strategic appproach 26m investment following project approval in March 2014 Amalgamation of best practices with regards to processes and products Project completed on time and on budget with Grand opening celebrated on 19 April m investment to double capacity just launched, start-up early 2018 Benefits Strong value proposition, better serving our customers Base to penetrate higher margin APAC countries Local infrastructure supports all L&B businesses Facilitates faster commercial execution Capacity aligned with global growth ambitions 46

47 Group strategy Four pillars of strategic focus for growth Commercial Execution Geographic Expansion Technology Differentiation Operational Excellence One L&B approach Customer focus Improved control of channels Focus on higher quality earnings Forward looking, responsive and proactive approach Leverage strong European base, experience and knowledge Build footprint in key geographies US and China Target global industries supported by long-term growth trends: Civils, flooring products and niche building products Enhance customer insight and identify unmet needs Work closely with customers to improve existing and create new value-add products Shift to more strategic marketing approach Bolt-on acquisitions for access to adjacent market and/or technologies Leverage global functions Invest in one ERP platform to enhance performance Sharing of best practices Standardise work processes Manage asset health at sustainable levels 47

48 Business priorities Aggressive implementation Portfolio management Focus on fast-growing segments Five year growth plans for each GBU and Group function Strengthen the quality and size of product development pipelines Performance Sales mix improvement towards higher specification products Clean up legacy issues Complete exit of Saudi joint venture Address Lokeren site Identify transformational development projects People Upskilling internal teams Invest in organisational capability and talent management Maintain high levels of Health, Safety and Environmental Performance 48

49 Financial position Effective use of capital ( m) Group Revenue Building & Industrial Civil Engineering Coated Technical Textiles Interiors & Transport EBITA Operating Margin (%) 7.8% 7.7% 8.3% 8.7% PBTA Free cash flow (10.6) 17.3 ROCE (%) 11.2% 11.4% 12.0% 11.1% Adjusted earnings per share (p) 5.98p 5.46p 5.61p 6.01p Dividend per share (p) 2.60p 2.70p 2.78p 3.00p Net Debt/EBITDA 1.9x 1.9x 2.2x 2.0x 49

50 Growth opportunities Ambition Profit ( ) M&A Technology/ Innovation Execution Current trajectory Time 50