INTERIM RESULTS Half year ended 30 September 2016 29 th November - PowerPoint PPT Presentation

INTERIM RESULTS Half year ended 30 September 2016 29 th November 2016

Overview  A good set of results in difficult conditions Further EPS growth, up >70% last 3 years   Focused on:  Building new project business to drive future organic growth  Managing costs and working capital  Acquisitions  Upward revision to medium term strategic targets  Underlying operating profit up 14% (+1% CER)  Underlying EPS up 10%  Organic revenue down 7% CER  Reported sales up 10% AER  Cost reductions across both divisions (saving £4m pa)  Interim dividend up 5% (1) Underlying measures exclude exceptional items, amortisation of acquired intangible assets and IAS19 legacy pension cost (see Appendices III and IV). INTERIM RESULTS│29 TH November 2016 2

A business transformed – with much more to go for Revenue (1) Design & £330m Manufacturing £280m <5% FY10 £230m £180m £130m H1 H1 £80m £30m FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Custom Consensus (3) Distribution 95% EBIT & EPS (2) £25m 25p Underlying EBIT EPS £20m 20p £15m 15p £10m 10p 86% of Group H1 17 profit contribution £5m 5p H1 H1 is now generated £0m 0p by D&M division -£5m (5p) Custom Design & Distribution FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Manufacturing 48% (3) Consensus 52% (1) Ongoing Group revenue, excluding disposed businesses. (2) EBIT & EPS are underlying measures. (3) Analyst consensus - does not constitute a profit forecast. INTERIM RESULTS│29 TH November 2016 3

Financial review INTERIM RESULTS│29 TH November 2016 4

Revenue, gross profit and gross margin Revenue (£m) and gross margin (%) +10% +18% Revenue (£156.7m) 157 +20% 142  Reported revenue up 10% 121 33.0% 100  +1% CER  -7% organic 31.6% 30.9% 29.9% H1 14 H1 15 H1 16 H1 17 Gross margin (33.0%) – highest yet  Gross margin up 1.4ppts  Up c.7ppts in last 6 yrs Gross profit (£m) +15%  Highlights continuing delivery of strategy 51.7 +20% 44.9 +25% Gross profit (£51.7m) 37.4 30.0  Gross profit up 15%  +5% CER  -5% organic H1 14 H1 15 H1 16 H1 17 INTERIM RESULTS│29 TH November 2016 5

Increased operating profit Underlying Underlying operating operating profit £m margin % 9.0 6.5%  Underlying operating profit (1) of £8.8m 6.0%  Up £1.1m (+14%) 5.5%  Up 1% CER 6.0 5.0%  Underlying operating margin (1) of 5.6% 4.5%  Up 0.2ppts 4.0% 3.0 3.5% 3.0% 0.0 2.5% H1 14 H1 15 H1 16 H1 17 Underlying Underlying operating profit operating margin (1) Underlying measures exclude exceptional items, amortisation of acquired intangible assets and IAS19 legacy pension cost (see Appendices III and IV). INTERIM RESULTS│29 TH November 2016 6

Divisional performance driven by D&M £m H1 17 H1 16 (CER) Sales Growth Underlying Underlying Organic (1) Revenue Operating % Revenue Operating % CER Reported profit profit Design & Manufacturing 81.8 10.0 12.2% 72.4 8.5 11.7% 13% 24% (4%) Custom Distribution 74.9 1.6 2.1% 83.5 2.8 3.4% (10%) (2%) (10%) Unallocated (2.6) (2.8) Total (CER) 155.9 8.7 5.6% 1% 10% (7%) 156.7 8.8 5.6% FX (13.7) (1.0) (0.2%) Total (reported) 156.7 8.8 5.6% 142.2 7.7 5.4%  Design & Manufacturing – profit up £1.5m  Organic revenue 4% lower on softer Nordic  Custom Distribution – profit down £1.2m  Organic revenue 10% lower (strong comparatives, market slowdown)  Customer demand influenced by economic uncertainty  Group efficiency programme underway (1) Organic sales include pre-acquisition sales of Flux, Contour and Plitron (D&M). INTERIM RESULTS│29 TH November 2016 7

Operating profit analysis 1.0 1.6 (3.9) 1.2 8.8 7.7 1.2 H1 16 Revenue GM Opex Acqs FX H1 17  Organic revenue impact offset by organic improvements in gross margin, tight control of operating costs and last year’s acquisitions INTERIM RESULTS│29 TH November 2016 8

Foreign exchange impact on Acal Translation effects Operational effects  Sterling strengthened over the previous  Sterling weakened significantly against US$ in 2 yrs but weakened significantly in H1 17 H1 falling 12% (H1 17 ave v H1 16 ave) £ / Nordic (1) £ / € FY16 rate  Approximately 90% of UK cost of goods are non- Sterling, so impacts on purchase pricing v FY14 rate -13% -20% v FY15 rate -7% -9%  UK companies largely sell to UK customers v H1 17 rate 11% 10% rather than export  The Group hedges material transactional  c80% of Group revenues are non-UK exposures from order through to payment (mainly € and Nordic)  Protects GM at FX rate at time of order  Sales benefit for H1 17 of £13.7m  Post Referendum orders therefore hedged at higher sterling equivalent pricing. (1) Nordic rate is a weighted average combination of £/NOK, £/SEK and £/DKK rates based on Group sales in each territory. INTERIM RESULTS│29 TH November 2016 9

Growth in profit and earnings  Underlying PBT up 7% £m H1 17 H1 16 Underlying operating profit (1) 8.8 7.7  Underlying EPS of 8.5p, up 10% Finance costs (1.5) (0.9)  Up 77% in 3 yrs Underlying PBT (1) 6.8 7.3 Effective tax rate 24% 22% Underlying EPS Underlying PAT 5.7 5.2 Fully diluted shares (m) 67.3 67.1 Underlying EPS (p) 8.5p 7.7p 8.5p 7.7p 6.5p 4.8p H1 14 H1 15 H1 16 H1 17 (1) Underlying measures exclude exceptional items, amortisation of acquired intangible assets and IAS19 legacy pension cost (see Appendices III and IV). INTERIM RESULTS│29 TH November 2016 10

Efficiency programme  Efficiency programme in both D&M and CD £m H1 17 H1 16  D&M – production closures (and transfers to lower cost Underlying PBT (1) 7.3 6.8 facilities), Spanish closure Exceptional - restructuring (2.6) -  CD – management headcount reduction, Spanish closure, Exceptional - acquisition purchasing integration Integration (0.5) (0.1) Earn-outs (0.3) (0.3)  £4m ongoing savings Amortisation (1.8) (1.3) IAS 19 charge (0.2) (0.3)  Total cash cost of project £8m Reported PBT 1.9 4.8 Reported diluted EPS 1.8p 5.4p (1) Underlying PBT excludes exceptional items, amortisation of acquired intangible assets and IAS 19 legacy pension cost (see Appendices III and IV). INTERIM RESULTS│29 TH November 2016 11

Financing and cash flow Operating cash flow in last 12 months (1) (£m)  Operating cash flow (1) :  H1: £8.6m, up 37%, 98% of operating profit 107% 106%  Last 12m: £18.6m, up 13%, 107% of operating profit 104%  Free cash flow:  Last 12m: £13.5m, up 31%, 90% of PBT 100%  Net debt at 30 Sep 16 of £41.1m 18.6 16.5  Net debt up £3.0m – earn-outs, restructuring  Gearing ratio (2) of 1.9x 9.9 6.1  Revolving credit facility increased to £120m  Plus £30m accordion H1 14 H1 15 H1 16 H1 17  Term extended from July 2019 to July 2021 Operating cash flow % underlying operating profit Operating cash flow is defined as free cash flow before financing and tax – see Appendix VI. (1) (2) Net debt at 30 September 2016 as a ratio of adjusted EBITDA (being Group underlying EBITDA annualised for acquisitions). INTERIM RESULTS│29 TH November 2016 12

Dividend 8.05p 7.60p  Interim dividend up 5% 6.80p 6.18p 5.81p 5.43p  Delivered 58% growth in 6yrs 5.09p 5.72p 5.40p 4.98p 4.36p  Maintaining progressive policy 3.99p 3.74p 3.40p  2-3x cover (underlying basis) 2.45p 2.33p 2.20p 1.82p 1.82p 1.82p 1.69p 1.69p FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 INTERIM RESULTS│29 TH November 2016 13

Operating review INTERIM RESULTS│29 TH November 2016 14

Design & Manufacturing division Revenue (1)  Revenue up 24% AER, 13% CER Sales % group total £82m £73m  Operating profit up 18% CER 52% 34% 46% Acquisitions of Flux, Plitron, Contour  20% £39m  Organic revenue down 4% CER 10% £17m £8m  Operating margin 12.2% (up 0.5 ppts) H1 13 H1 14 H1 15 H1 16 H1 17  Efficiencies Consolidation of smaller European factories  Operating Profit (1) Operating profit 86% Revenue by destination % Group profit contribution 75% £10.0m 59% £8.5m Southern Europe 44% USA 7% 9% Nordic £4.5m Other 35% 17% Europe 10% £2.0m £0.7m UK H1 13 H1 14 H1 15 H1 16 H1 17 15% Germany 11% Asia 13% (1) At constant exchange rates (CER). INTERIM RESULTS│29 TH November 2016 15

Custom Distribution division  Revenue -10% CER Revenue (1) Broad based slowdown  (2) Ongoing Discontinued £0.6m £8m  Orders flat excluding Spain (to be closed in H2) £83m £4m £6m £75m £74m £73m £72m  Operating profit down £1.2m CER  Cost reductions Spain closure  Management ‘de - layering’  H1 13 H1 14 H1 15 H1 16 H1 17  SG&A costs Revenue by destination Operating Profit (1) Asia & £3.6m Africa Nordic 3% £3.1m 8% £2.8m £2.6m Central Europe 37% £1.6m UK 24% H1 13 H1 14 H1 15 H1 16 H1 17 Southern Europe 28% (1) At constant exchange rates (CER). (2) Ongoing sales exclude large non-repeating sales and sales of the final major non-specialist, low margin supplier, which was discontinued last year. INTERIM RESULTS│29 TH November 2016 16