Results for the year ended 30 November 2014

Transcription

1 Results for the year ended 30 November 2014

2 Good progress but results impacted by weak Civil sales Good results in TCF and Yarns, more improvement expected After a good start, poor Civil sales in H2 impacted Bonar results Some progress in Saudi JV, but slow hard yards New factory build in Changzhou, China and other ongoing investments Final dividend maintained, full year dividend up 4% Capital Markets Day scheduled for 20 May 1

3 Financial Highlights 2

4 Income Statement highlights * Headline y-o-y Constant Currency y-o-y Revenue % +7% Operating Profit % +8% Operating Margin 7.7% 7.8% Profit before tax, amortisation and non-recurring items - before JV % +12% - including JV % Non-recurring items (3.3) (3.0) Adjusted EPS 5.5p 6.0p -9% -1% Dividend per share 2.7p 2.6p +4% +4% Dividend cover 2.0x 2.3x * Adjusted for IAS19 changes in accounting for pensions 3

5 Good start but H2 impacted by weak Civil sales H1 H * Constant currency y-o-y * Constant currency y-o-y Revenue % % Operating Profit % % Operating margin 5.9% 5.5% +40bps 9.4% 9.7% (30)bps Net Interest (2.7) (3.1) (11.3)% (2.7) (3.0) (4.1)% Profit before tax, amortisation and non-recurring items before JV % % after JV % (2.7)% * Adjusted for IAS19 changes in accounting for pensions 4

6 Earnings per share * Profit before tax, amortisation and non-recurring items Tax (7.0) (6.7) Profit after tax Minority interests (0.3) (0.5) Profit attributable to shareholders Average shares EPS 5.46p 5.98p Impact of FX drag c pence; underlying EPS broadly flat insufficient sales growth in FY14 Decrease in minority interests reflects acquisition of non-controlling interest in Yarns Weighted average number of shares for FY15 will be c. 328m * Adjusted for IAS19 changes in accounting for pensions 5

7 Underlying revenue growth (+7%) Bonar (2.3)m TCF (0.4)m Yarns 0.5m 23.5 (2.2) (20.2) Texiplast +1.6% Bonar +4% TCF +9% Yarns +12% Group +6% 2013 FX Constant FX Acquisition Volume Price/Mix

8 Sales growing but slow-down in European construction % Sales H1 H2 Full Year Y-o-Y CER % Sales Y-o-Y CER % Sales Y-o-Y CER Civil Engineering 23% 14% 23% 1% 23% 6% Flooring 19% 2% 19% 10% 19% 6% Building Products 17% 18% 16% (2)% 16% 7% Transport 14% 2% 14% 7% 14% 4% Leisure 11% 25% 11% 1% 11% 12% Industrial / Other 16% 7% 17% 12% 17% 10% TOTAL 100% 10% 100% 5% 100% 7% Civil excluding Texiplast 21% 5% 21% (5)% 21% 0% 7

9 Sales slow-down in Europe but strong elsewhere % Sales H1 H2 Full Year Y-o-Y CER % Sales Y-o-Y CER % Sales Y-o-Y CER Europe 67% 10% 66% 3% 67% 6% North America 17% 3% 19% 9% 18% 6% Asia Pacific 8% 9% 9% 24% 8% 17% Middle East 6% 65% 4% (8)% 5% 24% Rest of World 2% (26)% 2% (15)% 2% (21)% TOTAL 100% 10% 100% 5% 100% 7% Europe excluding Texiplast 65% 7% 64% 1% 65% 4% 8

10 Underlying profit growth (+7%) 25.3 (1.8) 22% drop through 5.1 (1.3) Includes seeding China market (1.7) Texiplast 0.7m Saudi JV (1.1)m (0.4) Capability (1.9)m Inflation (2.0)m Efficiency 2.2m 2013* FX Constant FX Volume Net price/mix Costs Acquisition/JV 2014 * Adjusted for IAS19 changes in accounting for pensions 9

11 Business Unit Performance 2014 Revenue 2013 CER Y-O-Y 2014 EBITA 2013* CER Y-O-Y Bonar % % Technical Coated Fabrics % % Yarns % % Central (4.3) (4.1) +3% Total % % Operating margin 7.7% 7.8% -10bps * Restated for amendment to IAS19 10

12 Bonar: mixed results (strong USA, weaker Europe) 2014 Y-o-Y H1 H2 Revenue 246.2m +6% +7% +4% Operating profit 21.0m -4% +15% -12% Operating margin 8.5% -90bps +40bps -190bps % Sales Civil 38% 6.5% 13.9% 0.7% Flooring 29% 6.7% 1.8% 11.6% Building Products 16% 4.4% 12.8% (2.3)% Transport 7% (1.6)% (10.6)% 8.5% Industrial/Other 10% 7.2% 6.2% 8% Like-for-like sales up 2.8% (H1: 3.6%; H2: 2.1%) Like-for-like Civil sales down 0.8% (H1: +4.7%, H2-5.1%) Texiplast sales were 8.8m (H1: 3.6m; H2: 5.2m), some 3m lower than expected Strong growth outside Europe USA (+6%) China (+32%) Western Europe (-3%) 11

13 Technical Coated Fabrics: good progress continues Strong sales and profit growth across all key sectors 2014 Y-o-Y H1 H2 Revenue 128.2m +9% +12% +6% Operating profit 14.2m +28% +36% +21% Operating margin 11.1% +140bps +160bps +130bps Significant growth in targeted high margin niches Architectural membranes Industrial products Market share gains Customer service Product quality Additional sales offices established 12

14 Yarns: gaining momentum Significant progress, albeit still below target level 2014 Y-o-Y Revenue 36.2m +14% Operating profit 0.8m +58% Operating margin 2.2% +70bps Fibrillated yarn production being moved to Abu Dhabi (c. 1.2m annualised saving; 0.6m in FY 15) Market share gains Customer service Product quality On-going innovation 13

15 Investing further to support growth * EBITDA Changes in working capital (6.5) (4.6) Share option charge/other Operating cash flow Growth capex (16.2) (5.3) Replacement capex (2.7) (4.2) Health & Safety capex (1.3) (3.9) Net interest (5.1) (5.3) Non-recurring (3.3) (2.4) Pension deficit contributions (4.0) (4.0) Tax paid (7.7) (6.8) Free cash flow TWC/Sales broadly unchanged (23.5% vs. 22.5%) Increased capex includes 5m new factory build in China (total cost 26m) Higher tax payments principally reflect lower capital allowances in USA Non-recurring costs largely relate to Texiplast and reorganisation costs * Adjusted for IAS19 changes in accounting for pensions 14

16 Net debt broadly unchanged, in line with guidance * Free cash flow Short term loan to JV 4.4 (9.1) Acquisition of subsidiaries - (15.9) Dividends (8.8) (7.2) Proceeds of share issues (1.4) - Purchase of non-controlling interest FX 3.4 (2.3) Movement in net debt (1.2) (4.2) Net debt b/fwd (86.8) (82.6) Net debt c/fwd (88.0) (86.8) Net debt/ebitda 1.9x 1.9x 4.4m of the short-term loan to JV was repaid in the year. The current balance is 5.2m, repayment is expected in H1 FY15 Increased dividend Re-financing of bank facilities completed in July: 165m RCF (July 2019) 45m PP (September 2016) * Adjusted for IAS19 changes in accounting for pensions 15

17 FX guidance for 2015 December Impact on FXR Profit FY 14 FY 15 FY 14 FY 15 Euro (0.3) (0.4) USD CZK (0.2) (0.1) RMB Now Spot Ave Euro (1.0) (0.9) USD CZK (0.5) (0.3) RMB (0.5) (0.5) Market expectations rebased in December US dollar has continued to strengthen and Euro is weaker; delta impact of c. (0.5)m for FY15 Impact on PY comparatives would be (0.5)m from 25.2m to 24.7m 16

18 Strategic update & future prospects 17

19 Initial observations from a new CEO A business with good market positions Opportunity to improve commercial effectiveness Customer intimacy Value selling Organisational realignment Scope to differentiate technology and be more global Saudi JV fundamentals still solid but need to penetrate local markets Capital Markets Day scheduled for May 18

20 Opportunity now in execution phase Phase 1 Phase 2 Transition Phase 3 Execution PBT Lokeren Restructuring TCF Growth and Efficiency Projects Group Reorganisation Texiplast Acqn & Placing Colback Asia Yarns Restructuring KSA JV Xeroflor Acqn

21 Investment in China remains compelling Global value proposition The global industry leader Creating unique, innovative, sustainable and cost effective carrier products Committed to be the best in quality & product performance Creating and delivering regionally tailored solutions Asking and being awarded a premium for the delivered performance Winning in China Local manufacturing and servicing replicating successful North American and European model Capability to perform better on all factors which customers judge critical Technical know how and product performance Unique technology for tailored customer solutions Extensive sales and technical service support Supportive market developments Tile market is at the early stage of its life cycle Tile performance in the local market is rapidly developing, driven by North American tile companies and large market driven local players Rapid conversion of local low-end market tiles towards mid-end tiles driven by more professional utilization of floor-space Vision of flowers by Desso Deconstruct by Patcraft Our most competitive cost position globally; compelling alternative to a dominant player 20

22 Bonar Natpet making progress Production facility is running well Product quality better than Europe Product and vendor approvals starting to come through Need to leverage more support from local partner Saudi government seems committed to continue infrastructure spend despite oil price Returns expected to be achieved, albeit slower than initially expected 21

23 Ambition and resolve to build a more global business strategy refresh underway Financial Strengths GDP+ growth capability Margin improvement through technical differentiation Capability and growth investment benefits to be leveraged Market Strengths Specialist, high value product offering and services Broad spread of end markets Market leading positions Continuous innovation of products and services Accelerating development outside of Europe Management Strengths Experienced and knowledgeable management team Augmented by new hires Ambition and resolve to build a more global business 22

24 Outlook 23

25 Expectations remain positive for all our businesses Civils demand is stabilising Further progress in TCF and Yarns Reduced JV losses Extending reach beyond Europe Some benefit from lower polymer prices 24

26 Supplementary schedules 25

27 Five year financial performance Pre-tax profits (constant FX) Operating margin (%) % 7.9% 8.0% 7.8% 7.7% Underlying profit growth 4 year CAGR 10.5% 5 year CAGR 13.0% * 2014 ROCE** 15.2% 16.8% 17.2% 16.3% 15.7% * * 2014 EPS (constant FX) / Dividends EPS Dividends * 2014 Opportunities to improve returns and margins, leveraging recent investments (opex and capex) Progressive dividend * Adjusted for IAS19 changes in accounting for pensions ** Based on operating capital employed 26

28 Five years of significant investment (self-funded) Capex by Type Total Debt Growth capex spend FY10 FY14 of 44m est est Replacement H&S Growth Bank debt Swap liability 27

29 European Construction Outlook Source:Euroconstruct 2013) 28

30 Polymer Prices recent trends H1 H2 13 H1 14 H2 14 Q /t 1200 PA6 /t Nov 12 May 13 Nov 13 May 14 Nov LLDPE (Butene C4) EUR/t S PVC Base EUR/t PP Raffia EUR/t PET Chips EUR/t PA 6 EUR/t 29

31 IAS 19 restatement As reported Admin costs NRI/ OCI Asset returns Restated EBITA 32.2 (1.1) Bank interest (5.3) (5.3) Pension interest cost (7.4) (7.4) Expected return on pension assets (1.1) 6.6 PBTA (1.1) 25.3 Tax (6.8) (6.7) PATA (1.0) 18.6 Minority interests (0.5) (0.5) Earnings (1.0) 18.1 Operating margin 8.0% 7.8% Earnings per share 6.23p 5.98p 30

32 Balance sheet Property, plant and equipment Trade working capital Prepayments and accruals (13.3) (12.8) Operating capital employed Other working capital Intangible assets Pension deficit (10.8) (12.7) Net debt (88.0) (86.8) Other (19.6) (20.5) Net assets Other working capital includes 4.7m (2013: 9.1m) JV receivable Actuarial loss on pension schemes of 0.8m Committed facilities of 210m (c. 167m) Comfortably inside covenants: Net debt / EBITDA 1.9 (< 3.0) Interest Cover 6.7 (> 3.0) 31

33 DB Pension Schemes UK Overseas Total Liabilities (176.3) (21.0) (197.3) Assets Net surplus / (deficit) 0.2 (11.0) (10.8) Movement in year: Actuarial gain / (loss) 1.6 (2.4) (0.8) Net interest (0.1) (0.3) (0.4) Current service cost - (0.3) (0.3) Contributions Administration costs (0.8) - (0.8) Past service cost FX Net change 4.0 (2.1) 1.9 The 2014 valuation is still in progress. The revised schedule of contributions will be agreed with the Trustee by the end of June UK scheme surplus driven by outperformance of assets against expected returns Composition of UK scheme assets: Equities 23% DGF 41% LDI funds 20% Property 10% Cash 6% Net overseas deficit: US 3.0m; Germany 7.6m; Others 0.4m Six schemes; all closed except one German and one Belgian scheme 32

34 Tax rate 2014 % 2013 % Prior year Mix 0.9 (4.7) Underlying rate Innovation box (1.4) - Effective rate Prior year adjustments Reported rate Mix impact driven by increased losses in Belgium (Yarns) Innovation box re-negotiated in 2014, next renewal in 2017 Reported rate is expected to be circa 26.5% in

35 Non-recurring items Acquisition expenses (0.1) (1.0) Saudi set-up - Own costs - 50% JV costs - - (0.6) (0.6) Reorganisation costs (1.6) (0.2) Pension administration costs (0.3) (0.3) Bonar Changzhou costs (0.2) - Site clean up costs (0.5) - Redundancy costs (0.6) - China office set up costs - (0.3) Total non-recurring (3.3) (3.0) FY14 Reorganisation costs within Bonar, to accelerate globalisation and integration programme Pension administration costs incurred on one-off project Redundancy costs on restructuring of Yarns site in Dundee (c. 68 jobs) 0.5m spend on post-acquisition HSE improvement exercise within Texiplast (+ 0.4m capex) Initial expenses associated with Bonar Changzhou development FY15 (anticipated) Pre-operating expenses of c. 0.6m for Bonar Changzhou Pension administration costs c. 0.2m 34

36 Five year total shareholder return TSR (rebased to 100) Nov Nov Nov Nov Nov Nov-14 Low & Bonar PLC FTSE Small Cap Index 35