REJECT Standard Industries Offer of EUR 25 per share

Transcription

1 REJECT Standard Industries Offer of EUR 25 per share

2 Agenda Summary of Standard Industries offer Reasons to reject the offer Change of Dividend Policy and Dividend for 2016 Trading Update Q Outlook Page 2

3 1. SUMMARY OF STANDARD INDUSTRIES OFFER

4 Offer summary All cash offer of EUR per share Voluntary public tender offer SI have irrevocable undertakings for 39.8% 40 North and Monier Holdings (Apollo, TowerBrook, York and others) No minimum acceptance level Offer subject to numerous Closing Conditions Antitrust (EU, Russia, South Africa) Capital increase and dividend restrictions M&A / divestment thresholds Restrictions on amendments to Articles MAC condition Acceptance Period End of Acceptance Period 23 rd December 2016 End of Additional Acceptance Period 12 th January 2017 (expected) Page 4

5 Independent analysts and investors support rejection of EUR 25 offer This price significantly undervalues the company and the current prospects The company has an unrivalled Pan-European footprint that will be virtually impossible to replicate. Lucerne (5% shareholder), newsletter to investors, Sept 2016 proposed 25 per share offer undervalues Braas Monier in our view. Our unchanged standalone mid-cycle based valuation is 27.5 per share...using Braas Monier s synergy estimate, which in our view is realistic, and assuming half the benefit goes to the Braas Monier shareholders, there would be an additional 2.3 of value per share. A more conservative view on the company s pension liabilities could add a further 2-3 per share.. Jefferies analyst, Sept 2016 However, with respect to the offer, we believe that 29 per share is the minimum shareholders should accept, especially as the group is still near trough earnings. Berenberg analyst, Oct 2016 In our view the offer price of 25 per share grossly undervalues Braas Monier. We view this as an opportunistic bid towards the bottom of the cycle, which if successful will deny current shareholders the economic benefits that will come from the combination of an improving cycle and the successful implementation of Braas Monier s strategy. We strongly support your rejection of the offer. Wellington (5% shareholder), letter to Braas Monier, Oct 2016 Page 5

6 2. REASONS TO REJECT THE CURRENT OFFER

7 Five clear reasons to reject the current offer 1 No customary premium for control 2 Unrecognised value for synergies 3 Discount to most recent comparable transaction 4 Unrecognised value in German pension schemes 5 Significant future shareholder value as an independent company Note It is expressly noted that only the Reasoned Opinion is binding. The information provided in this presentation is not an explanation or supplement to the statements in the Reasoned Opinion. Page 7

8 No customary premium for control Analyst TRADING target prices 36% average customary control premia paid for European companies over the last 20 years EUR 25 per share is at a discount to current market price EUR Offer Price EUR 25 40North paid EUR 25 per share for a non-controlling shareholding Offer at a discount to current analyst trading prices Trading price range indicated by Exane Page 8

9 % target sales Expected synergies not reflected in offer price Material value will accrue to SI from a combination with Icopal Comparable industry transactions synergies average: 5.1% target sales Estimated Braas Monier / Icopal synergies of EUR c.30-40m: c.3% of Braas Monier sales; c.2% combined sales Precedent synergies comparison (EUR million) 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% % % 7.5% % % 4.3% 3.8% 3.7% % 2.3% Avg. 5.1% Source: Leading international consulting firm Note 1 1 st announcement Page 9

10 Discount to most recent comparable transaction BM has superior financial metrics compared to Icopal BM s EBITDA margins are substantially higher 16.8% vs 9.8% (FY15) BM generates c.2.5x the annual operating cash flow of Icopal Multiple at a discount despite net debt being at a seasonal mid-year high point SI acquisition Jan-16 Based on H1 Based on Q3 Equity value 270m 1 979m 2 979m 2 Net debt 700m 3 464m 4 416m 4 Pension liability 41m 3 370m 4 374m 4 Enterprise value 1,011m 1,814m 1,769m LTM EBITDA 95m 5 209m 6 204m 7 EV/EBITDA multiple: - Including pension 10.6x - Excluding pension x 8.7x 7.2x 8.7x 7.2x Notes 1 Calculated as EUR220m cash price plus EUR50m deferred earn out (as per note 12 of the Icopal Holdings Sarl Annual Report for the year ended 31 December 2014) 2 Offer price (EUR25) multiplied by the number of Braas Monier shares outstanding (39,166,667) 3 Per the Icopal Holding a/s Annual Report Per the Braas Monier Q Interim Financial Report (for H1) and the Q Trading Update (for Q3). Pension liability is net of deferred tax asset 5 Calculated as operating profit plus depreciation, amortisation and impairment losses (as per Icopal Holding a/s Annual Report 2015) 6 Calculated as EBIT plus depreciation and amortisation (as per the Braas Monier results presentations for Q3 2015, Q and H1 2016) 7 Calculated as EBIT plus depreciation and amortisation (as per the Braas Monier results presentations for Q and the Q Trading Update) 8 Includes an add back for annual cash cost of pension for non-current employees (EUR1m for Icopal, EUR10m for BM) Page 10

11 Unrecognised value in German pension schemes Increase due to financial assumptions (discount rate) The German pension schemes are unfunded and there is currently no legal requirement to fund. Pensioners are paid directly from Company s FCF Cash payments relatively stable (c.eur 15m p.a) despite significant increases in the net accounting liability of around EUR 200 million Deferred Tax Asset position of EUR 72 million at 30 September 2016 to be considered as an offset to the liability EUR million Impact of pension on offer valuation 8.7x Germany Others M 2016 Discount rates on pension liabilities have distorting impact on offer price EBITDA multiple 7.2x Jefferies state that a more conservative view on pension could add further EUR 2-3 per share Including pension Pension on cash cost basis Note 1 Net pension deficit excluded from EV; full cash cost of the pensions reflected in EBITDA 1 Page 11

12 Significant future value as an independent company Key standalone strengths Sector leading equity free cashflow yield Sector leading equity free cash flow yield of over 8% Strong cash generation % - FY16E Further de-leveraging expected High operational leverage Strong pricing power and sector leading sustainable EBITDA margins High quality platform for growth; well positioned in all its key markets (1.5) Successful ongoing M&A strategy with a well-developed pipeline of future opportunities Source: JPM broker note (27/9/2016) Page 12

13 Signs of a nascent European recovery Signs of a European recovery emerging Low mortgage rates; credit availability Reflected in architect order book rises in most countries French housing market is bottoming out and showing signs of improvement (house sale rises of 18% in LTM March and 8% in LTM July 2016) Residential output forecast to increase across most of Europe Near term outlook for Brexit more moderate than initially expected Limited recovery built in to analyst forecasts Western Europe output growth by sector (ex-uk) % growth 6% 4% 2% - (2)% (4)% (6)% (8)% Western Europe new residential construction output (ex- UK) % CAGR % 6% 3% - (3)% Resi Private non-resi Public buildings Civil CAGR CAGR Total Source HSBC estimates, Oct-16 Page 13

14 Braas Monier is well positioned to benefit from a European recovery Owns many of the most recognised and trusted brands in the industry Market leading brands Strongly positioned in all major European markets No. 1 position in the European market Clearly defined growth strategy Recently outperformed 75% of our Top European Markets Clearly defined growth strategy of organic and inorganic growth Proven track record of delivering value enhancing M&A Strong management team with extensive understanding of Braas Monier s markets High operating leverage of c.35-40% on additional volumes Proven delivery of value enhancing M&A Muto & Tegolaia Technicrete Page 14

15 Other considerations Offer lacks commitments and clarity around critical matters No clarity regarding how a combination would be effected No firm commitment for employees Financing providers CoC issues acknowledged but no firm commitments given No details on future intentions Strategy, use of assets, de-listing, future of the business, Board composition Extended period of uncertainty Acceptance period until 12 January 2017 Antitrust approvals until 14 October 2017 Page 15

16 3. NEW DIVIDEND POLICY AND DIVIDEND 2016

17 Change of Dividend Policy and Dividend for 2016 Updated dividend policy as part of review of capital allocation Revised policy in line with peers and retains freedom to invest in organic and M&A growth Revised annual dividend policy will be implemented as follows: Braas Monier s total annual dividend payout ratio will be in the range of 30% - 50% of its adjusted free cash flow Adjusted free cash flow is defined as net cash from operating and investing activities excluding growth capital expenditure (such as M&A) and significant one-off items incurred in the relevant period Board will propose a total dividend in respect of 2016 of EUR 0.70 per share Braas Monier retains its commitment to a net debt / Operating EBITDA ratio of no greater than 2.0x Page 17

18 4. TRADING UPDATE Q3 2016

19 Revenues stable despite lower volumes Following volume declines in July/August, trend in European tile volumes (like-for-like) slightly improved in September Analyst Presentation Page 19

20 Operating EBITDA margin reflects lower volumes and UK operating issues Operating EBITDA margin kept at sustainable high level Net income in the third quarter increased marginally Analyst Presentation Page 20

21 Operating EBITDA bridge Revenue bridge Revenue and Operating EBITDA development Q EUR m Like-for-like -1.8% Q FX Q (lfl) Volume (Tiles + Chimneys) ASP (Tiles + Chimneys) Other Q (lfl) Scope Q EUR m Like-for-like -6.8% Q FX Q (lfl) Volume (Tiles + Chimneys) ASP (Tiles + Chimneys) Variable Costs (Tiles + Chimneys) Other Q (lfl) Scope Q Analyst Presentation Page 21

22 Operating EBITDA bridge Revenue bridge Revenue and Operating EBITDA development 9M 2016 EUR m Like-for-like -0.8% M 2015 FX 9M 2015 (lfl) Volume (Tiles + Chimneys) ASP (Tiles + Chimneys) Other 9M 2016 (lfl) Scope 9M 2016 EUR m Like-for-like -1.5% M 2015 FX 9M 2015 (lfl) Volume (Tiles + Chimneys) ASP (Tiles + Chimneys) Variable Costs (Tiles + Chimneys) Other 9M 2016 (lfl) Scope 9M 2016 Analyst Presentation Page 22

23 Financial leverage reflects seasonality and refinancing Net Debt (in EUR m) Improving Net Debt in line with seasonal working capital development Financial leverage of 2.1x at previous year s level (2.0x) despite growth investments and one-time costs in connection with the refinancing Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 GROSS DEBT Financial Leverage: Net Debt / EBITDA (LTM) 3.0 EUR 435 Million Senior Secured Fixed Rate Notes x 2.4 x 2.3 x 2.0 x 1.7 x 2.3 x 2.3 x 2.1 x EUR 55 Million Revolving Credit Facility drawn at 30 September 2016 RATINGS 1.5 Moody s: B1 (positive) S&P: BB- (stable) 1.0 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Analyst Presentation Page 23

24 Strong operational LTM Cash Flow EUR 76 million generated from operating business EUR m (1) EUR 71 million spent on growth and shareholder returns EUR 55 million on others -55 (2) Cash 30 Sep 2015 Operating Cash flow Sustaining Capex Interest / Pensions Tax Dividend Growth Capex M&A Other Legacy/Other Finance Provisions and Special Projects FX Cash 30 Sep 2016 (1) Including EUR 10 m additional factoring agreements in UK, Spain and Portugal (2) Including EUR 10 m legal settlement Page 24

25 5. OUTLOOK

26 Stable development in 2016 Revenues (reported and like-for-like) expected on last year s level Volume growth expectation dampened by market development in the UK, Scandinavia, Italy, Malaysia and China ASP to increase slightly to cover increasing input costs First-time inclusion of acquisitions in Malaysia, Denmark, Italy, South Africa, the Netherlands and Romania to contribute around 3% to revenue and approx. 4% to Operating EBITDA Full-year Operating EBITDA expected to increase slightly over last year (2015: EUR million) Sustaining Capex of approx. EUR 65 million Approx. EUR 5 million to be invested in growth projects in FY 2016 Expected legacy and non-recurring cash-outs in 2016 of approx. EUR 10 million* * Not reflecting additional costs in relation to the takeover offer Analyst Presentation Page 26

27 Growth expected in 2017 Based on positive lead indicators for residential new-build and renovation markets, management expects: Overall like-for-like revenue to increase in our European markets, in spite of some declines in the UK Earnings and operating cash flow to improve Growth to be further boosted by first-time contribution of recent acquisitions and lower interest payments following the refinancing in 2016 Aerlox, WrapTec and an improving penetration of profitable renovation markets provide additional future revenue and earnings potential Analyst Presentation Page 27

28 5.1 UPDATE ON WRAPTEC

29 WrapTec roll-out 2016 and 2017 Existing geographies Scope for Q Scope for 2017 Expansion into new countries under constant investigation Slide 29

30 5.2 UPDATE ON AERLOX

31 Metal and fibre cement markets in main European countries amount to approx. 115 million m² p.a. Germany, UK, France, Italy Nordics, Poland, 10% of Russia Austria, main countries South- Eastern Europa, 50% Turkey ~ 45 m sqm ~ 50 m sqm ~ 20 m sqm > 60 such roofer interviews conducted Handling, Installing and Scratch with good/very good marks Breakage perceived at least as average Absolutely no doubt about buying again! Handling: 5.0 Installing: 4.3 Break. trans.: 3.8 Break. walk.: 3.0 Scratch: 4.0 Buy again: 5.0 median, scale: 1=poor, 5=very good Primary focus of lighter concrete tiles with Aerlox technology is to address new market segments (metal and fibre cement). First feedback indicating opportunity to also significantly strengthen existing position in the tiles business Slide 31

32 5.3 INCREASING FOCUS ON B2C

33 Leveraging our strengths to improve penetration of profitable renovation markets ROOF RENOVATION OF INCREASING IMPORTANCE Less cyclical than New-build Higher profitability per roof More complex roofs; system know-how gains further relevance END CONSUMERS EXERT MORE INFLUENCE ON PRODUCT DECISION Increasingly doing their own research online Changing behavior in terms of energy consciousness Aesthetics often play an important role in renovation projects MARKET REQUIRES CHANGE TOWARDS DIGITAL OFFERINGS Adjacent industries are developed further Roofing starts to be more inclined towards online offerings Slide 33

34 Braas Monier with significant USPs to address RMI Strong portfolio of brands and highest proximity to customers provides us with competitive strength Western Europe ~226 S&M FTEs Focus on residential (1+2 family houses) market Central, Northern & Eastern Europe ~406 S&M FTEs Large portfolio of roofing products, including concrete and clay tiles as well as components Southern Europe ~335 S&M FTEs Most comprehensive system know-how Asia & Africa ~218 S&M FTEs Dedicated services for end consumers (e.g., photo plus in Germany) Chimneys & Energy Systems ~328 S&M FTEs 1,500 employees in sales, distribution and marketing at end of 2015 Slide 34

35 Specialized digital offer for B2C renovation segment Solve inefficiencies in roofing market Solve pain points of house owners Support roofers to generate stronger business Continue to sell through merchants Provide key services to home owner Request: roof renovation made easy Compare: get price estimates Relax: be supported on the way to your new roof Slide 35

36 6. SUMMARY

37 Summary Reject the Standard Industries offer No customary premium for control Unrecognised value for synergies Discount to most recent comparable transaction Unrecognised value in German pension schemes Significant future shareholder value as an independent company New dividend policy more appropriate for a well-balanced capital allocation FY earnings growth and cash flow improvements despite soft Q Positive lead indicators and promising growth projects Page 37

38 Timetable of events 14 October 2016 Offer Document published and Acceptance Period begins 28 October 2016 Reasoned Opinion and Investor Presentation 23 December 2016 Acceptance Period ends 30 December 2016 Additional Acceptance Period begins (expected) 12 January 2017 Additional Acceptance Period ends (expected) 14 October 2017 Latest date offer could lapse due to anti-trust clearance not obtained Page 38

39 Contact information Contact information Achim Schreck Director Group Communications / Investor Relations Andrea Kögler-Ihler Manager Investor Relations Phone: +49 (0) Phone: +49 (0) Mobile: +49 (0) Mobile: +49 (0) achim.schreck@monier.com andrea.koegler-ihler@monier.com John Deans Alice Squires Rothschild Scott Harris Phone: +44 (0) Phone: +44 (0) john.deans@rothschild.com A.Squires@scott-harris.co.uk Harald Kinzler CNC Communications Phone: Harald.Kinzler@cnc-communications.com Page 39

40 APPENDIX Q3 TRADING UPDATE

41 Western Europe (EUR million) Q Q Change Change like-for-like 9M M 2015 Change Change like-for-like Revenues % -1.7% % -0.2% Operating EBITDA % -21.0% % -6.4% in % of revenues 11.2% 14.4% 13.9% 15.0% EBIT % % Q Q Change 9M M 2015 Change Volumes sold tiles (in million m 2 ) % % Employees as of period ended 1,327 1, % 1,327 1, % Revenue decline in the third quarter and nine months period largely driven by negative currency effects Strong growth in the Netherlands was not able to compensate for declines in the UK and France Positive ASP development in Q3 in all countries Operating issues in the UK and negative transactional effects from fx in the components business impacted Operating EBITDA by approximately EUR 2 million in Q3 Analyst Presentation Page 41

42 Central, Northern & Eastern Europe (EUR million) Q Q Change Change like-for-like 9M M 2015 Change Change like-for-like Revenues % 0.2% % 2.1% Operating EBITDA % -4.4% % 2.0% in % of revenues 20.9% 21.9% 16.9% 16.8% EBIT % % Q Q Change 9M M 2015 Change Volumes sold tiles (in million m 2 ) % % Employees as of period ended 1,542 1, % 1,542 1, % Strong growth in Poland and a moderate one in Germany were offset by a shrinking of revenues in Nordic countries Average selling prices increased in both periods Components showed an encouraging performance in particular in Germany Operating EBITDA decline in Q3 mostly due to negative currency effects and the absence of asset disposals Analyst Presentation Page 42

43 Southern Europe (EUR million) Q Q Change Change like-for-like 9M M 2015 Change Change like-for-like Revenues % -1.7% % -1.5% Operating EBITDA % -7.7% % -5.5% in % of revenues 21.9% 22.8% 16.0% 16.7% EBIT % % Q Q Change 9M M 2015 Change Volumes sold tiles (in million m 2 ) % -1.7% % -1.2% Employees as of period ended 1,297 1, % 1,297 1, % Like-for-like revenues in Q3 slightly down (-1.7%), with high growth rates in South-Eastern Europe being offset by unimproved market environment in Italy Operating EBITDA decline of EUR 0.3 m driven by lower like-for-like volumes Positive pricing and strict cost measures, in particular in Italy Analyst Presentation Page 43

44 Asia & Africa (EUR million) Q Q Change Change like-for-like 9M M 2015 Change Change like-for-like Revenues % -7.6% % -11.5% Operating EBITDA % -4.3% % -4.8% in % of revenues 16.0% 14.2% 16.4% 14.8% EBIT % % Q Q Change 9M M 2015 Change Volumes sold tiles (in million m 2 ) % -5.9% % -10.7% Employees as of period ended 1,884 1, % 1,884 1, % Like-for-like revenue decline in Q3 of -7.6% less pronounced than in Q1 (-18.3%) and Q2 (-12.2%) Rates of volume reduction in Malaysia significantly improved with almost stable volumes in September Operating EBITDA increased in Q3 by 8.4%, driven by positive contribution of EUR 0.6 million of GCI and South African plant Analyst Presentation Page 44

45 Chimneys & Energy Systems (EUR million) Q Q Change Change like-for-like 9M M 2015 Change Change like-for-like Revenues % -3.4% % 0.6% Operating EBITDA % -0.6% % 6.5% in % of revenues 20.0% 20.5% 14.6% 14.0% EBIT % % Q Q Change 9M M 2015 Change Chimneys sold (in million m) % % Employees as of period ended 1,397 1, % 1,397 1, % Positive mix und pricing effects overcompensating volume decreases in 9M, but not fully in Q3 Operating EBITDA in Q3 on previous year s level of EUR 10.1 million, with average selling price increases and cost improvements almost completely compensating for lower volumes From January to September, Operating EBITDA and Operating EBITDA margin ahead of previous year Analyst Presentation Page 45

46 Central Products & Services (EUR million) Q Q Change Change like-for-like 9M M 2015 Change Change like-for-like Revenues % -8.1% % -2.0% Operating EBITDA n.a. n.a n.a. n.a. in % of revenues 3.4% -1.8% 0.2% -3.2% EBIT % >-100% Q Q Change 9M M 2015 Change Volumes sold tiles (in million m 2 ) n/a n/a n/a n/a n/a n/a Employees as of period ended % % Revenues in this segment only include part of the components business majority of components sales were accounted for in the other reporting segments Components KPI in first nine months 2016 of EUR 2.28 per m 2 up 1.3% like-for-like Revenue growth and Operating EBITDA improvement driven by first time inclusion of J.A. Plastindustri PICTURE (Factory) Analyst Presentation Page 46

47 P&L Summary consolidated income statement (EUR million) Q Q M M 2015 Revenues Operating EBITDA in % of revenue 18.7% 19.5% 15.7% 15.6% Depreciation and amortisation Result from associates Operating income Non-operating result Earnings before interest and taxes (EBIT) Finance result Earnings before taxes (EBT) Income taxes Profit (loss) for the period Minorities Group share of profit Basic earnings per share (in ) Diluted earnings per share (in ) Analyst Presentation Page 47

48 Balance sheet Summary Group balance sheet (EUR million) Assets 30 Sep Dec 2015 Intangible assets Property, plant and equipment Financial assets Fixed assets Deferred tax assets Receivables Inventories Cash and cash equivalents Assets held for sale Total assets 1, ,517.5 Equity and liabilities Total equity attributable to the shareholders Non-controlling interests Equity Debt Provisions Deferred tax liabilities Operating liabilities Total liabilities 1, ,517.5 Analyst Presentation Page 48

49 Cash flow Summary consolidated cash flow statement (EUR million) Q Q M M 2015 Cash flow before change in provisions and working capital Change in provisions Change in working capital Net cash used in operating activities Total investments Proceeds from fixed assets disposals Net cash used in investing activities Free cash flow Net change in bond and loans Proceeds from capital increases Dividends paid Net cash from financing activities Net change in cash and cash equivalents Effect of exchange rate fluctuations on cash and cash equivalents Change in cash and cash equivalents Analyst Presentation Page 49

50 Disclaimer This presentation contains forward-looking statements relating to the business, financial performance and results of Braas Monier Building Group S.A. (the Company ) and/or the industry in which the Company operates. The words "anticipate", "assume", "believe", "estimate", "expect", foresee, "intend", "may", "plan", "project", "should" and similar expressions are used to identify forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about the Company s beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates and projections as they are currently available to the management of the Company. Forward-looking statements therefore speak only as of the date they are made, and the Company undertakes no obligation to update any of them in light of new information or future events. By their very nature, forward-looking statements involve risks and uncertainties. These statements are based on the Company s management's current expectations and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Actual results may differ from those set forth in the forward-looking statements as a result of various factors (including, but not limited to, future global economic conditions, changed market conditions affecting the building material industry, intense competition in the markets in which we operate and costs of compliance with applicable laws, regulations and standards, diverse political, legal, economic and other conditions affecting our markets, and other factors beyond our control). This presentation is intended to provide a general overview of the Company s business and does not purport to deal with all aspects and details regarding the Company. Accordingly, neither the Company nor any of its directors, officers, employees or advisers nor any other person makes any representation or warranty, express or implied, as to, and accordingly no reliance should be placed on, the accuracy or completeness of the information contained in the presentation or of the views given or implied. Neither the Company nor any of its directors, officers, employees or advisors nor any other person shall have any liability whatsoever for any errors or omissions or any loss howsoever arising, directly or indirectly, from any use of this information or its contents or otherwise arising in connection therewith. This presentation speaks as of its date and the material contained in this presentation reflects current legislation and the business and financial affairs of the Company which are subject to change and audit. Page 50