Low & Bonar PLC. Low & Bonar PLC. and Placing and Open Offer. Paul Forman, Group CEO Kevin Higginson, Group FD. February 2009

Transcription

1 Low & Bonar PLC Final Results for Year Ended d 30 November 2008 and Placing and Open Offer Low & Bonar PLC Paul Forman, Group CEO Kevin Higginson, Group FD February

2 Disclaimer This presentation does not constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security. This presentation does not constitute a prospectus or prospectus equivalent document. Nothing in this presentation should be interpreted as a term or condition of the proposed placing and open offer by Low & Bonar PLC (Low & Bonar or the Group) (the Placing and Open Offer). Any decision to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any security offered in connection with the Placing and Open Offer must be made only on the basis of the information contained in and incorporated by reference into the prospectus issued by Low & Bonar in respect of the Placing and Open Offer (the Prospectus). Copies of the Prospectus will be available on publication from Low & Bonar s registered office. Cautionary note regarding forward-looking statements This presentation includes statements that are, or may be deemed to be, forward looking statements. These forward looking statements can be identified by the use of forward looking terminology, including, but not limited to, the terms believes, estimates, anticipates, expects, intends, plans, goal, target, aim, may, will, would, could or should or, in each case, their negative or other variations or comparable terminology. These forward looking statements include all matters that are not historical facts. They appear in a number of places throughout this presentation and include statements regarding the intentions, beliefs or current expectations of the Group concerning, amongst other things, the results of operations, o financial a condition, o liquidity, prospects, growth, strategies es and dividend de d policy of the Group and the industries in which they operate. By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward looking statements are not guarantees of future performance. The Group s actual results of operations, financial condition, liquidity, dividend policy and the development of the industries in which it operates may differ materially from the impression created by the forward looking statements contained in this announcement. In addition, even if the results of operations, financial condition, liquidity and dividend policy of the Group, and the development of the industries in which it operates, are consistent with the forward looking statements contained in this presentation, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause these differences include, but are not limited to: the effect of the Placing and Open Offer on the Group; changes in the competitive framework in which the Group operates and its ability to retain market share; the Group s ability to generate growth or profitable growth; the Group s ability to generate sufficient cash to service its debt; the Group s ability to control its capital expenditure and other costs; significant changes in exchange rates, interest rates and tax rates; significant technological and market changes; future business combinations or dispositions; and general local and global economic, political, business, and market conditions. Other than in accordance with their legal or regulatory obligations, Low & Bonar does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise. 2

3 Key ypoints Encouraging set of results Funding strategy to ensure balance sheet flexibility Key operating metrics progressing Strategic realignment now complete: focus on attractive industrial technical textiles markets Organic profit growth levers identified to ensure further progress 3

4 Financial headlines (Restated excl Floors Division) Group revenue 335.2m 210.3m % Profit before tax* 16.0m 10.4m % Earnings per share* 7.37p 4.62p % Placing and Open Offer announced expected to generate net proceeds of c. 30m to improve the financial position significantly and allow additional investment in profit growth initiatives * Before amortisation and non-recurring items 4

5 Operational highlights g Floors disposal has transformed and refocused the Group Strategic emphasis on creating a leading global performance materials business MTX performed strongly Rate of product innovation increased through strong R&D focus Volatile raw material environment successfully mitigated Cost reductions and increases in operational productivity across the Group Divisional operating margin increased Leading positions maintained in wide range of attractive niche markets 5

6 Income statement summary 2008 Restated t 2007 * Var 'm 'm % Revenue % Operating profit** % Net financing costs (10.7) (3.7) Normalised profit** % * Restated following the disposal of Floors Division ** Continuing operations, before amortisation and non-recurring items 6

7 Income statement measures 2008 Restated 2007 * Var % Tax rate** 29.4% 28.8% Normalised EPS** p p +59.5% 5% * Restated following the disposal of Floors Division ** Continuing operations, before amortisation and non-recurring items 7

8 Revenue analysis Technical Textiles 'm FY MTX Underlying business 19.6 FY Future segmental reporting will be split between Technical Coated Fabrics and Performance Technical Textiles 8

9 Operating profit analysis** 2008 Restated 2007 * 'm m 'm m Technical Textiles Central costs (5.4) (3.8) * Restated following the disposal of Floors Division ** Continuing operations, before amortisation and non-recurring items 9

10 Impact of Floors disposal 'm 'm Revenue - Technical Textiles Floors* Operating profit** - Technical Textiles Floors* Central costs (5.4) (3.8) * 10 months to September 2008; 12 months to November ** Before amortisation and non-recurring items 10

11 Technical Textiles analysis Var 'm 'm % Revenue % Operating profit* % Margin 96% 9.6% 85% 8.5% * Before amortisation and non-recurring items 11

12 Normalised Profit Analysis* m FY Floors disposal (12.0) MTX 12.3 Other Technical Textiles 1.9 Net financing costs (7.0) Other (1.6) FY Others impacted by reduced central cost allocation to Floors; increased HO cost and central provisioning * Before tax, amortisation, non-recurring items and after interest 12

13 Non-recurring items MTX post-acquisition integration and restructuring Profit on fixed asset disposals Principally surplus land in Asheville, North Carolina (0.9) - 'm 1.4 'm Pension equalisation charge Profit from discontinued activities Floors Divisioni i will incur restructuring costs of 2.0m (Total cash costs of 3.1m) 13

14 Balance sheet 'm 'm Goodwill and intangibles Fixed assets Other net assets Net debt (104.5) (50.5)

15 Movement in debt m m Net debt - Nov 07 (50.5) Operating profit before amortisation (inc disc ops) 37.1 Operating non-recurring items (inc disc ops) (2.0) Depreciation Working capital movements 1.3 Pension / Tax (9.1) Net interest paid (8.7) Net capital expenditure (inc intangibles) (16.7) (33.2) Free cash flow 16.9 Acquisitions (132.9) Disposals* Dividends paid (7.7) Fx including net cashflow hedges (39.0) Other 0.2 Net debt - Nov 08 (104.5) * Adjusted for 8m pension payment 15

16 Bank covenants Net Debt / EBITDA x Compared to covenant of 3.25 x Covenant reduced to 3.0 x from May 2010 onwards Interest cover 37x 3.7 Compared to covenant of 3.0 x Facilities in place until December

17 Capital expenditure Property, Plant and Equipment 2008 'm Technical Textiles 12.1 Floors 4.6 Central 0.1 Total Group Depreciation estimated at 14.5m Capex 2009 estimate Ongoing 11m Abu Dhabi JV 6m 17m 17

18 Placing and Open Offer Placing and Open Offer (with clawback) to raise c. 30m net of expenses Six for seven issue at 25p per share Funds to be used, initially, to reduce net debt and enhance flexibility Invest in identified organic profit growth opportunities when appropriate 18

19 Dividend policy Final dividend to be passed saving 4.8m v 2007 Future policy to target minimum cover of 2x underlying EPS Intention to resume dividend payment in

20 Current trading - summary Trading at start of FY 2009 subdued Material year on year sales volume falls Clearer picture of underlying trading conditions is likely to take some time to emerge Significant cost actions already taken Benefiting from falls in prices of key raw materials Other cost options identified if necessary 20

21 Current trading positive factors Impact of lower sales mitigated Cost actions taken: Headcount reduction of > 10% globally (c. 250 FTEs) Flexed working practices in Belgium and Germany 2.4m annualised reduction in discretionary spend Current spend in sales, marketing, R&D ringfenced Cash cost of actions to date of 3.1m Additional options identified if needed Additional benefits from: Lower raw material costs Lower energy costs than budgeted Other purchasing benefits Pending additional business development initiatives being accelerated 21

22 Group cash conservation MTX reduction of working capital in 08 of 10m, ahead of acquisition plan Excluding JV, 09 capex limited to 75% of depreciation vs. trend of 125%+ Additional 09 working capital reduction targeted Actions taken to mitigate FX impact on debt Pensions deficit contributions of 3m p.a. not expected to increase materially Additional actions identified if needed in 09/10 22

23 Benefits of the proposed p funding The Board believes: The equity raising of around 30m net of costs will allow L&B to build further through known organic opportunities That better prospects are created in 2010 onwards through investments in reducing capacity constraints and further improving unit costs It will support upward trend in operating profit* margins and enhance strategic position: internal target of 12% local margins It enables the Group to take advantage of expected competitive opportunities arising from current macroeconomic difficulties It takes L&B to a level l of gearing that gives balance sheet flexibility appropriate for the current economic environment: pro forma balance sheet with c. 75m net debt and c. 200m net assets * Before amortisation and non-recurring items 23

24 Low & Bonar: Five years of transformation Timeline January 2003 Buy carpet division of Gaskell (floor tiles, UK) for 18m July 2004 Buy 50.1% Yihua Bonar (carpet backing and civil eng, China) for 3m December 2004 July 2005 July 2005 February 2006 July 2006 December 2007 January 2008 April 2008 Buy Adfil (civil eng, UK) for 12.9m Buy Xirion (artificial grass yarns, Belgium) for 16.5m Sell Bonar Plastics for 25.8m Buy Geo-Tipptex (civil eng, Hungary) for 14.9m Buy Colbond (carpet tile backing, civil eng, building products, Holland) for 106.9m Buy MTX (trailer, building products, print media, Germany) for 163.0m Buy Westbond (floor tiles, UK) for 10.9m Announcement of yarns joint venture in Abu Dhabi September 2008 Disposal of Bonar Floors for 123m 24

25 Snapshot of Low & Bonar Revenue (Technical Textiles) 210m 2007, 335m 2008 Products Customers Market Size* Performance fabrics, composites, yarns and fibres used for industrial applications Several 000 in civil engineering, carpet tile manufacturing, building and construction, sport and leisure, truck side manufacturing, agriculture 65-70bn (Global) Trend Growth Rate GDP x 1-2 Market Positions Competition Average Organic Sales Growth 5.8%, EBIT margin 9.6% Estimated Target EBIT Margin Up to 12% Leading positions, primarily Western Europe Varies by each product and market segment * Company estimate

26 Low & Bonar revenue breakdown Technical textiles 2008: 335.2m revenue 9.6% EBIT margin Revenue by end market segment - Pro forma Revenue by geography Transport, 14.0% Sport and Leisure, 12.0% Civil Engineering, 22.0% USA, 15.7% Other, 8.3% UK, 5.5% Industrial, 20.0% Carpet Tile Manufacturers, 16.0% Building Products, 16.0% Europe Excl UK, 70.5% Residential building and automotive are less than 10% of sales 26

27 Leading market positions in most segments Civil engineering Building products Carpet tile manufacture Sport and Leisure Transport Industrial and others A leading European supplier of geotextile and geosynthetic products Attractive niche European positions in commercial buildings with non-wovens, polymeric mats, and coated fabrics for architectural awnings A leading European and US non-woven supplier of carpet tile backings A leading Chinese woven backing supplier A leading global supplier of artificial grass yarns and technical coated fabrics including for boat, pool, and sunshading A leading position in coated fabrics for truck sides and also non-wovens for automotive carpets A leading position in a number of niche markets including print media, greenhouse screens, composites, and storage 27

28 Structural growth drivers diversity and resilience Civil engineering g Building products Carpet tile manufacture Sport and Leisure Global infrastructure investment Benefits of stimulus packages Global new build and refurbishment Benefits of stimulus packages Use of architectural fabrics for cost and aesthetics Carpet tile growth at expense of broadloom in Europe and US and China market demand Demand for artificial i sports pitches Landscape legislation Transport European freight haulage volumes: WE/CEE Industrial and others Adoption of large scale digital printing in outdoor media Yield improvement and energy reduction in agriculture Increased use of greener products throughout industry 28

29 L&B plays at several points along the industry value chain L&B focus Raw Yarn Fabric Coating and materials production production composites Customers PE/ PP/ PET resin Monofilament yarns Needlepunched non- wovens Artificial grass producers Growers & installers Other materials: (Nylon, PVC, PA6, PU) Tapes Fibrillated yarns Spunbonded nonwovens Woven fabrics PVC/ PU coated woven PET fabrics Truck tarpaulin manufacturers Carpet manufacturers Construction companies Additives for specific performance & colour Bi-component yarns Thermal bonded 3D profiles & grids Composites formed from non-wovens, 3D profiles and grids Outdoor screen printers Architects and builders 29

30 Some recent examples es of our customer focused innovation o Enka -Moss Colback SMR Colback F2F EnkaRetain & Drain Cherry cloth Phormidrain Movie screen 30

31 The L&B strategic model The Company believes its strategy will bring benefits: B2B2B market Ability to use scale to Continuous operational understanding provide competitive and process Enhancing customer advantage in: improvements to: processes & products purchasing & operations drive down costs Supporting with new products/services commercial infrastructure and R&D sustain/improve quality levels Distinct and sustained value added for our customers generating Our higher returns and above-market growth rates 31

32 Technical Textiles Significant historic growth ( m) Revenues Revenues ( m) 77.7 EBIT* ( m) EBIT* ( m m) Margin 90% 9.0% 94% 9.4% 72% 7.2% 85% 8.5% 96% 9.6% * Note: figures before amortisation and non-recurring items 32

33 Summary Strategic repositioning The Board believes: 08 M&A activity has focused L&B on the industry with the greater growth potential and stronger positions: Bonar Floors disposal reduced exposure to the UK building sector Geographic and end-market diversity reduces exposure to any specific country/sector t Chosen end markets have structural growth potential Strong market positions can help sustain margins and offer opportunities to increase market share during 09 and 10 33

34 Fund-raising to support organic growth There are revenue and cost initiatives which require significant investment Company s self-help plan will not generate sufficient financial flexibility Current capacity constraints will impact revenue growth in 2010 and onwards (12-18 months build time): Supplying growth markets like civil engineering and grass Enabling share gain in Colbond Geographic expansion, especially Asia Removing specific capacity constraints in weaving R&D expenditure on NPD in woven and yarn products Need to fund working capital impact of growth Additional investment should also lower average unit cost Management foresees opportunities to take market share as the downturn continues We will be targeting 3 to 4 year cash payback projects for organic growth And.. 34

35 Fund-raising to support organic growth Investment opportunities to reduce cost/increase cash generation including: MTX working capital reductions MTX manufacturing productivity enhancements Colbond automation Typical target 1 to 3 year cash payback projects for cost reduction Accelerates progress to target operating margins 35

36 Conclusion The Board believes: Good performance for 2008 given economic backdrop Equity raising will provide greater financial flexibility for investment in our organic opportunities Additional funding will enable a higher growth trajectory from 2010 onwards Current trading is subdued but cost controls and raw material prices mitigating volume declines 36