Q Interim Report

Transcription

1 Q Interim Report David Woolley (CEO) & David Bessant (CFO) 1

2 Agenda Half year and Q Highlights DW Summary of financial results DB Q Outlook DW Q&A DW & DB 2

3 Highlights for H1 & Q H was a combination of continued positive market developments in some sectors and some increasing headwinds from others, particularly Ag and Construction, more noticeable in the Americas than in Europe/Rest of World. We continued to see very positive translational currency gain benefits based on the relative weakness of the Swedish Krona. Sector activity the heavy duty trucks in both the US and now in Europe, helped to support the results of the business. The midrange and lighter trucks have shown slight softening. Our customers in the Ag market continued to reduce forecasts for This was visible in our order book. Construction was relatively flat (slightly lower in the US). Industrial Applications remained comparatively level. 3

4 Highlights for H1 & Q (continued) H1 sales, excluding Alfdex, were MSEK 1243 (1023), down 2% y-o-y after currency (+19%) and the acquisition of GKN Pumps (4%). H1 operating income was MSEK 205 (161) including MSEK 15 negative goodwill and one-off expenses of MSEK 14 related to the acquisition of GKN Pumps. Underlying operating margin 16.4% (15.8%). Q2 sales, excluding Alfdex, were MSEK 620 (527), down 5% y-o-y after adjusting for currency (+18%) and the acquisition of GKN Pumps (5%). Q2 operating income in Q2 was MSEK 88 (84) including one-off expenses of MSEK 14 from the acquisition of GKN Pumps. Underlying operating margin was 16.5% (16.0%). Q2 cash flow from operating activities was strong at MSEK 114 (94). Gearing ratio was 49% (56). Following dividend payout of MSEK 127 (121) and own share buy-backs of MSEK 42 (50) in Q2. 4

5 Summary of financial results 5

6 Q2 & H Results MSEK Apr-Jun Jan-Jun Change Change Net Sales ,243 1, Δ in constant currency (1) -5% 2% -2% 5% Gross income Underlying operating income (2) Reported operating income Reported operating margin 14.2% 16.0% 16.5% 15.8% Earnings before tax Net income Underlying basic EPS (SEK) (2) Basic EPS (SEK) Underlying ROCE (2) 28.9% 26.0% ROCE 29.0% 26.0% ROE 33.8% 28.8% Net debt Gearing (Debt/Equity) 49% 56% (1) Adjusted for sales derived from acquisitions (2) Adjusted for MSEK 14 of one-off expenses in Q and MSEK 15 of negative goodwill in Q re: GKN Pumps 6

7 Q Market Data End-markets & Regions >+5%>+2%>0%>-2%>-5%> Agricultural machinery Diesel engines Construction equipment Diesel engines Hydraulic equipment Q2-15 vs. Q2-14 North Europe China/ America India n/a Truck Light vehicles n/a n/a Medium/Heavy vehicles Industrial applications Other Off-highway Market development 1.Weak global demand in Agricultural machinery market persisted in Q NA outlook for Construction equipment, Light trucks and Industrial Applications have all softened during Q Strongest end-market still Medium/Heavy trucks; growth now evident in both NA and Europe Hydraulic lift trucks n/a Source: Power Systems Research, Off-Highway Research and ITA Q updates 4.All end-markets in China and India remain down in Q April 2015

8 H1 & FY Market development Key messages Overall, latest market indices indicated demand was flat* y-o-y for H1, consistent with Concentric s actual H1 sales, including Alfdex sales and after adjusting for currency and GKN Pumps. At a regional level Concentric s performance in Europe was better than the latest market indices, up 3% y-o-y. This has compensated for the continued weak demand in North America for hydraulic products, linked to Concentric s reliance on Caterpillar and John Deere. Market forecasts for the full year 2015 anticipate that the current trend experienced in H1 will continue (i.e. FY 2015 flat* y-o-y). * Blended growth rate using Concentric s sales mix by end-market and customer location 8

9 Q2 & H Results Americas Region Amounts in MSEK Q2 H External net sales Underlying operating income Reported operating income Reported operating margin % Reported ROCE % North American end-markets weakened in Q2 Sales in constant currency were down 8% for Q2 and down 5% for H1 y-o-y. Softening demand in Agriculture, Construction and Light trucks has particularly affected NA sales of hydraulic product. However, with the translational benefits derived from currency, average sales on a working day basis actually increased to MSEK 4.9 (4.1) for Q2 and MSEK 5.0 (4.1) for H1. Like-for-like operating margins maintained for H1 Adjusting for one-off items and the margin dilution affect of GKN pumps, like-for-like operating margins were actually up to 15.7% for Q2, and maintained at 15.2% for H

10 Q2 & H Results Europe & RoW Region Amounts in MSEK Q2 H External net sales (including Alfdex sales) Operating income Operating margin % Return on capital employed % European demand remained stable Sales were up 1% in Q2 and 3% in H1 y-o-y, including our 50% share of Alfdex sales, after adjusting for the impact of currency and the acquisition of GKN pumps. Average sales on a working day basis were MSEK 5.4 (4.7) for Q2 and MSEK 5.3 (4.4) for H1. Operating margins continued to improve The operating margin improved to 17.3% for Q2 and 17.1% for H1, reflecting a drop-through rate of 43% and 38% respectively on the y-o-y additional sales in Q2 and H1. The additional benefits from the consolidation of the European hydraulics business have continued to be realised in Q

11 Robust Financial Position 30 June Amounts in MSEK Balance Sheet Working Capital As % of annualised sales 3.9% 4.3% Capital Employed 1,344 1,230 Net Debt Shareholders equity Gearing ratio 49% 56% Cash Flow H1-15 H1-14 Underlying EBITDA Cash inflow from op activities Net investments Cash outflow from financing Net cash flow for period Comments Working capital management solid. Net debt and equity include MSEK 244 (nil) of actuarial gains recognised in Q2. Including MSEK 127 (121) dividends paid and MSEK 42 (50) own share buy-backs. 11

12 Q Outlook 12

13 Q Outlook Orders received during the second quarter 2015 were lower than sales, taking into account the fewer working days and assuming constant currency. Additional market headwinds experienced in North America during Q are expected to persist for the remainder of the year and will not be fully compensated by the relative strength of the medium/heavy truck markets in both North America and Europe. Latest published indices predict that FY 2015 will be flat y-o-y, blended across our end-markets and regions. The latest proposals for Phase 2 of GHG legislation just reinforce the importance of our ongoing customer development programmes for our variable flow pump technology. Despite the market headwinds, Concentric remains well positioned, both financially and operationally, to fully leverage our market opportunities. 13

14 Any Questions? 14

15 Appendix Market Data 15

16 Q2 & H Market Data End-markets & Regions Q2-15 vs. Q2-14 H1-15 vs. H1-14 North Europe China/ North Europe China/ America India America India Agricultural machinery Diesel engines -11% -16% -4% -10% -13% -7% Construction equipment Diesel engines -13% 4% -13% -4% 1% -11% Hydraulic equipment 3% 3% n/a 4% 3% n/a Truck Light vehicles -21% n/a n/a -9% n/a n/a Medium/Heavy vehicles 9% 6% -8% 9% 3% -8% Industrial applications Other Off-highway -2% 1% -5% -2% 1% -6% Hydraulic lift trucks 1% 1% n/a 0% 1% n/a Source: Based on Power Systems Research, Off-Highway Research and International Truck Association Q update 16

17 Q2 & H Market Data Applied to Concentric Q2-15 vs. Q2-14 H1-15 vs. H1-14 North Europe Group North Europe Group America & RoW America & RoW Blended market rates -2% 2% 0% 0% 0% 0% Concentric actual rates -8% 1% -3% -5% 3% 0% Source: Based on Power Systems Research, Off-Highway Research and International Truck Association Q update Applying our sales mix by end-market and customer location to these indices, the blended market growth rate for Q2 and H1 was flat. In comparison, Concentric s actual sales were down 3% in Q2 and flat in H1 y-o-y including the sales from Alfdex, adjusted for currency and the acquisition of GKN Pumps. The latest market indices suggest the full year 2015 will be flat y-o-y, blended across our end-markets. As noted in previous quarters, movements in the market indices tend to lag our order intake experience by 3-6 months. 17