Zumtobel Group Update on financial topics Karin Sonnenmoser CFO Zumtobel Group Capital Markets Day 2016 / March 15, 2016 / Frankfurt am Main
Nr. 2 AGENDA UK Pension funding obligation renegotiated Resetting working capital target range New credit agreement secures long-term liquidity R&D spending will remain at around 6.5% of revenues
Free cashflow will benefit from lower annual contributions Pension deficit funding obligation in UK renegotiated Nr. 3 Development Pension Deficit in EUR million 30 April 2015 30 April 2014 30 April 2013 Present value of pension obligations 317 253 241 Fair value of plan assets 217 176 166 Pension deficit 100 77 75 Thereof Thorn Lighting Pension Fund 54 41 40 Thorn Lighting Ltd is obliged to make annual contributions to cover the shortfall in pension fund assets. The payment terms of this obligation have been renegotiated: New (since 08/15) Old Annual cash payment 1.76 m GBP 6.4 m GBP Annual increase +3% +5% Corporate Guarantee Zumtobel Group AG 3.0 m GBP 7.5 m GBP
Resetting the Working Capital target to approx. 20% (prev. 16% 18%) Zumtobel Group Working Capital Nr. 4 20% 18% 16% Working capital 17.8% New Target 15.8% 16.0% Old Target Range FY 2012/13 FY 2013/14 FY 2014/15 Technology shift driven increase (long term): Transformation towards LED leads to an increase in working capital (inventories) because stocks of raw material, semi-finished and finished goods have a higher absolute value than comparable conventional products. Dynamic growth of LED continues. Restructuring driven increase (short term): Operations footprint optimisation leads to temporary inefficiencies in supply chain management & production as well as safety stock considerations. Peer group analysis indicates that we have overstretched the target. On average a peer group of 20 companies show a working capital ratio of approx. 25%. A new target of approx. 20% is still ambitious but balances reasonable day-to-day business needs and cashflow optimisation.
Nr. 5 New credit agreement secures long-term liquidity and financing capabilities Zumtobel Group Solid financial foundation Syndicated loan agreement with a max. line of EUR 300 m, step-up clause for additional EUR 200 m Five-year term ending on November 30th 2020, plus two one-year extension options (5+1+1 ruling) Usage of funds: refinance Zumtobel Group s existing EUR 350 million loan which would have expired in October 2016 and for general corporate purposes Agreement requires compliance with financial covenants (a debt coverage ratio of less than 3.5 and an equity ratio of 25%) Bank consortium with Commerzbank AG, Raiffeisenbank International AG, UniCredit Bank Austria AG, Bank für Tirol und Vorarlberg AG, HSBC Trinkaus & Burkhardt AG, SEB AG, Vorarlberger Landes- und Hypothekenbank AG
Nr. 6 Massively increasing expenditures for innovation in the last 10 years Zumtobel Group R&D spending Zumtobel Group R&D (in EUR million) in % of sales R&D Development 90.0* 69.1 71.8 79.0 25.5 28.4 34.5 3.0% 36.1 3.2% 48.6 4.0% 58.7 4.6% 5.6% 5.8% 6.0% 6.4% 2.1% 2.2% 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
Innovation leadership requires ongoing high level of investments Nr. 7 R&D activities Faster innovation cycles (time-to-market) as well as increasing product and system complexity Focus on energy efficiency, intelligent controls and light quality Capex plans Capex consist basically of tools for new products, building maintenance, machinery as well as capitalized R&D Future capex as % of revenues will remain at around 5.0% Expansion of capacity and expertise in the areas of system architecture, software development and data management Drive components standardization, complexity reduction, platforms solutions at the back end to realize cost synergies Ensure differentiation and innovation on the front end to target customer value add R&D spending (through P&L) will remain at around 6.5% of revenues
Nr. 8
Nr. 9 Backup WC benchmark analysis