2014 Interim Results For the six months ended 30 June 2014 Continued market share gains through organic growth and strategic acquisitions
Agenda • Overview • Financial highlights • Market drivers • Growth Strategy – Key Accounts – Insites TM – Product range extension – Market segmentation • Current trading and outlook 2
Overview • Group revenue up 10.9% to £364.1 million with an improving trend • Gross margin up 60 basis points on H1 2013 to 31.3% • Operating profit* up 19.8% to £20.6 million • Organic growth strategy delivering market share gains • Seven acquisitions completed to June with pipeline remaining strong • Successful share placing raising net £52.4 million to support acquisition strategy • Strong presence established in Scandinavian markets • Interim dividend up 5.9% 3 *Before amortisation of acquired intangibles, acquisition related costs and exceptional items
Growth continues Business area at constant currency rates ( € 1.25:£1) • Organic group SPWD growth Q1 Q2 HY Revenue rate now improving for six 2014 2014 2014 H1 2014 Growth rates (%) £m consecutive quarters SPWD • Bearing sales growth of 0.7% 13.1 15.4 Total group 14.1 360.6 Organic + 5.0 6.7 5.4 335.4 in H1 Revenue • Non-bearing sales showing 2.9 -1.5 0.7 74.3 Bearings Non-bearings 15.9 17.9 16.9 286.3 significant growth T&GM – Total 8.1 1.5 4.7 86.9 • Continental T&GM growth at – Continental 47.0 54.4 50.9 17.4 50.9% Key Accounts 10.7 8.6 9.6 190.7 • 15.4 19.5 17.4 169.9 Continuing market uncertainty Base business - Total Base business - excl. Lönne -3.7 2.5 -0.7 143.7 4 + Including incremental growth of Lönne
Financial highlights
Highlights Total sales Operating profit Working capital days 364 80.9 69.5 67.0 328 324 22.6 20.6 17.2 H1 2013 H2 2013 H1 2014 H1 2013 H2 2013 H1 2014 H1 2013 H2 2013 H1 2014 H1 2013 H1 2014 Statutory 19.8% Statutory 10.9% Receivables 51.7 55.3 Constant currency 21.6% Constant currency 13.1% Inventories 70.0 84.0 FX -1.8% FX -2.2% Payables (54.7) (58.4) Organic + 5.4% Total 67.0 80.9 Operating margin Earnings Dividend EPS +10.2% DPS +5.9% 7.0% 12.3 6.8 5.7% 10.8 5.2% 9.8 3.6 3.4 H1 2013 H2 2013 H1 2014 H1 2013 H2 2013 H1 2014 H1 2013 H2 2013 H1 2014 Note: Results are stated before amortisation of acquired intangibles, acquisition related costs and exceptional items. + Including incremental growth of Lönne
Profit & Loss H1 2013 H1 2013 H1 2014 H1 2014 Lönne Organic Change H1 2013 2013FX Change Reported Reported Turnover Turnover 364.1 364.1 328.4 25.8 338.3 10.9% 322.2 (6.2) 328.4 10.9% Gross margin Gross margin 114.0 114.0 100.8 8.7 105.3 - 99.1 (1.7) 100.8 - Gross % Gross % 31.3% 31.3% 33.7% 30.7% 31.1% - 30.7% - 30.7% - Sales, Distribution and Sales, Distribution and (93.4) (93.4) (83.6) (7.1) (86.3) - (82.1) 1.5 (83.6) - Administrative Costs Administrative Costs Underlying operating Underlying operating 20.6 20.6 17.2 1.6 19.8% 19.0 17.0 (0.2) 17.2 19.8% profit profit 5.2% - % % 5.7% 5.7% 6.2% 5.6% 5.3% - 5.2% - (2.0) - Interest Interest (3.1) (3.1) (0.6) (2.5) (2.0) - (2.0) - Underlying profit after Underlying profit after 15.2 15.1% 17.5 17.5 1.0 16.5 15.0 (0.2) 15.2 15.1% interest interest £m Note: Results are stated before amortisation of acquired intangibles, acquisition related costs and exceptional items.
Ratios H1 2013 H1 2013 H1 2014 Lönne Change Organic H1 2013 2013FX Change H1 2014 Reported Reported Turnover Turnover 364.1 364.1 328.4 25.8 10.9% 338.3 322.2 (6.2) 328.4 10.9% Underlying operating Underlying operating 20.6 20.6 17.2 1.6 20.0% 19.0 17.0 (0.2) 17.2 19.8% profit profit Return on Sales Return on Sales 5.7% 5.7% 5.2% 6.2% 5.6% - 5.3% - 5.2% - Closing operating Closing operating 294.9 294.9 222.0 - 243.9 - 217.8 (4.2) 222.0 - capital^ capital^ Return on operating Return on operating - 26.6% 26.6% 28.9% 26.0% - 26.6% - 28.9% - capital employed** capital employed** Return on investment*** Return on investment*** 14.0% 14.0% 15.5% - 15.6% - 15.6% - 15.5% - ^Segmental assets including goodwill less liabilities, before current and deferred tax, dividends, cash, loans, deferred consideration & pension liability at constant currency **Underlying operating profit as a percentage of operating capital as defined in ^ but excluding goodwill and acquired intangibles ***Underlying operating profit as a percentage of operating capital as defined in ^
Sales* contribution by growth driver 500.0 450.0 400.0 (42.7) 31.2 350.0 10.4 Market Eliminations + 16.7 segmentation Insites TM & Base Key & Product business Accounts 26.3 extension 300.0 360.6 Lönne 318.7 Base business (1.0) Eliminations (41.7) 250.0 H1 2013 H1 2014 *At constant currency – management rates € 1.25: £1 9 + Eliminating sales included in more than one category
Cash generation Working Capital 45.0 Days H1 2013 H1 2014 40.0 55.3 Receivables 51.7 84.0 Inventories 70.0 35.0 (58.4) Payables (54.7) 7.5 80.9 Total 67.0 1.2 30.0 Inventories Share option Cash flow 7.8 charges 25.0 4.4 Depreciation and H2 2013 20.0 -8.0 amortisation (20.8) H1 2013 15.0 Receivables -29.8 H1 2014 10.0 5.0 20.6 (16.5) 0.0 Operating profit (3.4) (7.0) (before amortisation, Payables Exceptional and acquisition costs and Operating Cash acquisition costs exceptionals) Outflow 10 £m
Movement in net debt Movement in net debt 70.0 Opening (52.9) Exchange 2.0 60.0 Movement (18.3) Closing (69.2) 50.0 40.0 30.0 20.0 10.0 (7.0) (46.8) 52.4 (8.1) Proceeds from (3.6) Acquisitions 0.0 Operating Capital share placing (4.5) (18.3) (0.7) Cash Outflow Interest and expenditure pension Net cash (net) Tax Purchase of funding outflow own shares (net) 11 £m
Capital expenditure • Continued IT investment • Continued investment in growth drivers, notably Tools & General Maintenance Land & Intangible Equipment Total Buildings assets Tools & General Maintenance Division 2.7 0.9 3.6 0.3 1.5 1.8 Information Technology Vehicles 0.1 0.1 Branch investment and other 0.1 2.8 2.9 Capital expenditure 0.1 5.9 2.4 8.4 12 £m
Growth strategy
Growth Strategy Growth Capability Costs Synergies Geographical development Business Skills Key Accounts development European Buying Systems Integration Development Distributed Learning IT and Other Cost Insites TM expansion Brand Development Programme Development Reductions Internal Communications Capital Employed Supplier Relationship Product range extension Management Management and Involvement Country organic growth People Development Supplier Rationalisation Business Best Practice Bearings MPT Fluid Power Tools & General 3% share of 1% share of Maintenance c.10% share of € 2bn market € 5 bn market € 10 bn market 1% share of € 50 bn market 14
Key Accounts Case study Update • Global leader in Food and Ingredients, • Key Accounts grew by 9.6% with > 24,000 people worldwide • Now represents 53% of group sales, • Successful implementation and roll out in 57% excluding Lönne Ireland and UK in 2013 • Pan-European Key Accounts growth • Pan-European rollout in June 2014 with accelerated, up 28.2% expectations of revenue > £5m in Year 1 • Some national Key Accounts have • 30 locations across 9 Brammer delayed maintenance programmes in H1 geographies • 4 new pan-European contracts won • Senior sponsorship to deliver full range • Pipeline remains strong of Brammer products and services • Opportunity to deliver stores management solutions 15
Key Accounts Key Account Sales Performance Multi-site Status Scope Sales Growth € 67.0m Tier 1 EU contract Part EU Group 28.2% € 85.9m € 81.5m Tier 2 National contract Part EU Group -0.6% € 81.0m € 23.5m Tier 3 No contract Part EU Group 4.8% € 24.6m € 45.4m Tier 4 National contract National Group 3.1% € 46.8m € 217.4m 9.6% € 238.3m 16
Pan-European Supply Agreements Experience at scale 60 100 • More than 500 people serving 60 Pan-EU Key Accounts • Key Account support provided in 16 countries • 14 Key Accounts are in the Global Fortune 500 list 40 80 No. of key Accounts EU KA Revenues (M € ) 30 60 20 40 10 20 0 0 2013 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Key Milestones & Investments First ever EKAM Investment in Central support KA Tools Sector Focus on Account Major Employed European KA team established Management resilient Development Investments in Team established established sectors Managers KA infrastructure 17
Insites TM Update Case study • Total 396 Insites TM • Global tobacco manufacturer adopts – 165 full time; 231 part time pan-European Insite TM programme • Increased by 13 overall • Turnover growth of 105% in the period • Continued strong sales growth of • 7 Insites ™ in 5 countries 12.3% • Insite ™ sales of £0.6m account for 96% • Insite TM sales 48.7% of total Key of total sales Accounts business • • Growth potential approaching £4.5m EU Insite TM pipeline strong with 366 supporting future Insite TM growth opportunities • Currently in direct negotiation with 94 customer locations 18
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