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2010 Half Year Financial Results2010 Half Year Financial Results
28th July 2010
Agenda
Introduction Tim Stevenson
2010 Half Year Financial Results Kevin Dangerfield
Group Performance Mark Robertshaw
Divisional Review Mark Robertshaw
Summary and Outlook Mark Robertshaw
2
2010 Half Year Financial Results
Kevin DangerfieldKevin Dangerfield
3
36% increase in EPS and 8% increase in dividend
HY10 HY09
Revenue £501.1m £492.0mRevenue £501.1m £492.0m
EBITA before restructuring and one‐off items £50.3m £45.3m
EBITAMargin % before restructuring and one‐off items 10.0% 9.2%EBITA Margin % before restructuring and one off items 10.0% 9.2%
EBITA after restructuring and one‐off items * £48.0m £38.2m
EBITAMargin % after restructuring and one‐off items * 9.6% 7.8%EBITA Margin % after restructuring and one off items 9.6% 7.8%
PBT before amortisation £35.9m £23.4m
Underlying earnings per share 8.7p 6.4p
Interim dividend per share 2.7p 2.5p
* EBITA after restructuring and one‐off items is defined as operating profit before amortisation of intangible assets
4
Profit before tax and amortisation up by 53%
HY10 HY09£m £m
Revenue 501.1 492.0
EBITA before restructuring and one‐off items * 50.3 45.3
Restructuring and one‐off items* (2.3) (7.1)
EBITA after restructuring and one‐off items * 48.0 38.2 Amortisation of intangible assets (3.9) (8.1)Operating profit 44.1 30.1
N t fi i t (12 1) (14 8)Net financing costs (12.1) (14.8)
Profit before tax 32.0 15.3
Profit before tax and amortisation 35.9 23.4
Tax (9 6) (4 3)Tax (9.6) (4.3)Profit for the period 22.4 11.0 Non‐controlling Interest (3.0) (2.0)Profit attributable to shareholders for the period 19.4 9.0
5
p* Restructuring and one‐off items include the costs of restructuring activity, profit/(loss) on disposal of property arising from restructuring activity and ongoing recovery associated with the settlement of prior period anti trust litigation.
Return to growth has not prevented good cash flow deliveryy
HY10 HY09£m £m
Net cash flow from operating activities 57.2 58.6 Net cash flow from operating activities 57.2 58.6
Net capital expenditure (4.5) (9.3)
Net interest paid (10.5) (11.2)
Tax paid on ordinary activities (12 5) (7 5)Tax paid on ordinary activities (12.5) (7.5)
FREE CASH FLOW 29.7 30.6
One‐off costs:d h ff (4 1) (5 1) ‐ Restructuring costs and other one‐off items (4.1) (5.1)
‐ Tax Settlement 0.0 (19.0)
Dividends paid (6.7) 0.0
Cash flows from other investing and financing activities (15 9) (31 2)Cash flows from other investing and financing activities (15.9) (31.2)
Exchange movement (11.0) 32.2
Opening net debt (252.7) (290.4)
( ) ( )
6
Closing net debt (260.7) (282.9)
Effective debt management
€60m private placement completed in first half, extending p p p gmaturity profile and locking in attractive long term rates
Improved cash pooling arrangements across Groupp p g g p
RCF facility reduced from £280m to £180m
Net debt/EBITDA maintained at 2.1 times, targeting < 2.0 times by year end (at current exchange rates)
7
A good set of results
Trading momentum improving margins and increased earningsTrading momentum, improving margins and increased earnings
Good cash generation and effective debt managementg g
Dividend up by 8%
8
Group Performance
Mark RobertshawMark Robertshaw
9
Good progress on operating margins vs both H1 and H2 of last year
10
Year‐on‐year revenue growth taking H1 sales to over half a billion pounds
The Group’s underlying order b k h h t d
600
Year‐on‐year revenue ‐ £ million
book has shown steady, month‐on‐month improvement since Q4 of last year...
95.562.9
500
year...
...driving good year‐on‐year growth in underlying 15.2
19.9
105.1
123.7
300
400
NPA
Base Carbon
MMSgrowth in underlying businesses, excluding NP Aerospace 165.6
170.2200
MMS
Thermal
Technical
110.6 124.4
0
100
11
H1 09 H1 10
Positive pricing delivered through a severe global downturn
12
Tight control maintained on headcount as revenues recover
13
Excludes NPA
Total employment costs maintained below 30% of sales
Total Employment Costs as % of Sales
30%
35%
40%
37.2% 35.9% 35.0% 31 5% 30 2% 31 0% 29 7%15%
20%
25%
31.5% 30.2% 31.0% 28.5% 29.7%
5%
10%
15%
0%
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 H1 2010
14
Divisional Review
Mark RobertshawMark Robertshaw
15
Improving profit margins across all divisions
£m Revenue EBITA Profit Margins %
HY10 HY09 HY10 HY09 HY10 HY09
Technical Ceramics 124.4 110.6 15.8 12.3 12.7% 11.1%
Insulating Ceramics 190.1 180.8 18.4 15.8 9.7% 8.7%g
Carbon 186.6 200.6 18.6 19.2 10.0% 9.6%
Unallocated Costs * (2.5) (2.0) ‐ ‐
EBITA pre one‐off items ** 501.1 492.0 50.3 45.3 10.0% 9.2%
One‐off items ** (2.3) (7.1)
EBITA post one‐off items ** 48.0 38.2 9.6% 7.8%
** O ff i i l d h f i i i fi /(l ) di l f d i i d i h h l f i i d i li i i
* Includes plc costs (e.g. Report & Accounts, AGM, Non‐Executives) and Group management costs (e.g. corporate head office rent, utilities, staff, etc.)
16
** One‐off items include the costs of restructuring activity, profit/(loss) on disposal of property and ongoing recovery associated with the settlement of prior period anti trust litigation.
Technical Ceramics: 13% year‐on‐year revenue growth driven by strong North American business
140
Technical Ceramics ‐ Sales by destination ‐ £ million
5.3
8 3
8.75.1
5.1
6.5
100
120
Rest of World
59.8
54.0
70.9
8.3
60
80 Emerging Markets
39.6 32 5 38 320
40
North America
E39.6 32.5 38.3
0
H1 2009 H2 2009 H1 2010
Europe
17
Emerging markets includes: China, Brazil, India, Russia, Middle East All at 2010 H1 Exchange ratesRest of World includes: Japan, Korea, Australia, South Africa
Thermal Ceramics: Emerging Markets performing strongly, Western world businesses picking up
180
Thermal Ceramics ‐ Sales by destination ‐ £ million
37 5 49.6
33.224.8
26.8
120
140
160
Rest of World
40.4 40.2
37.545.1
49.6
80
100Emerging Markets
56.1 46 8 53.7
39.4
40
60North America
46.8
0
20
H1 2009 H2 2009 H1 2010
Europe
18
Emerging markets includes: China, Brazil, India, Russia, Middle East All at 2010 H1 Exchange ratesRest of World includes: Japan, Korea, Australia, South Africa
Base Carbon: 16% year‐on‐year revenue growth with an encouragingly broad‐based recovery
140
Carbon (excl NP Aerospace) ‐ Sales by destination ‐ £ milion
21.714.7 15.0
15.2
100
120
Rest of World
42 3
49.3
18.4 18.3
60
80Emerging Markets
37 5
42.3 43.8
20
40
North America
31.4 28.637.5
0
H1 2009 H2 2009 H1 2010
Europe
19
Emerging markets includes: China, Brazil, India, Russia, Middle East All at 2010 H1 Exchange ratesRest of World includes: Japan, Korea, Australia, South Africa
NP Aerospace in line with management expectations: £63m H1 sales at mid‐teen margins
Vehicles £43m ‐Multiple programmes including ‐ Mastiff, Ridgback, Wolfhound,
MAN Trucks & BuffaloMAN Trucks & BuffaloLogistics & Spares £9m
Medical £2m
Other Composite Mouldings £1m
Personal Protection £8m ‐ Body Armour, Helmets, EoDSuits
20
Molten Metal Systems – 27% year‐on‐year growth with a strong performance in Emerging Markets
25
Molten Metal Systems ‐ Sales by destination ‐ £ million
3.4
20
Rest of World
5.1 6.0
7.9
2.7 2.4
10
15
Emerging Markets
2.5 2.63.1
5
North America
5.3 4.7 5.5
0
H1 2009 H2 2009 H1 2010
Europe
21
Emerging markets includes: China, Brazil, India, Russia, Middle East All at 2010 H1 Exchange ratesRest of World includes: Japan, Korea, Australia, South Africa
New Divisional Structure
Mark Robertshaw
22
Streamlined and simplified two divisional structure now in place
The Morgan Crucible Company plc
Morgan Ceramics Morgan Engineered Materials
Morgan Technical Ceramics
Morgan Thermal Ceramics
Morgan Advanced Materials and
Technologies (AM&T)*NPA* Molten Metal Systems
23
* Formerly the Carbon division
Thermal’s strong presence in emerging markets provides growth opportunity for Technical Ceramics
45% of Thermal Ceramics’ sales by destination are to higher12 2%
100%
Sales by Destination ‐ H1 2010
by destination are to higher growth Emerging and Rest of World Markets
T h i l C i ith 12% f
44.9%
12.2%
31.1%
70%
80%
90% Emerging Markets and RoW
Technical Ceramics with c.12% of sales to Emerging and Rest of World, historically has been significantly under‐represented in these markets23.6%
57.0%
37.7%
40%
50%
60%North America
in these markets
New Morgan Ceramics division has a much more balanced global spread31.5% 30.8% 31.2%
20%
30%
40%
Europe
spread
0%
10%
Thermal Technical Morgan Ceramics
24
Investment casting a good example of complementary end markets
25
Carbon provides NP Aerospace and MMS with a global footprint with a low cost manufacturing base
Carbon MMS NPA Low cost manufacturing
NP Aerospace : continuing to build the capability and range of the business
Integrated and enhanced R&D UK
Actions New Business Opportunities
Integrated and enhanced R&D capability in UK bringing together NPA integration expertise and Carbon materials skills and technology
UK– Mastiff III and other variants (Counter IED)
– LPPVPECOC new personal
Establishment of NPA USA sales and marketing office
– PECOC – new personal protection programme for MoD (helmets, armour etc.)
Overseas Dedicated armour resource now in
place in both Canada and Australia
Overseas– HMMWV Recap – USA– JLTV – USA– Canadian body and vehicle armour opportunities
– Soldier Survivability ‐ Australia
27
Pro‐forma financials of the two new divisions
Morgan Ceramics
Revenue EBITA Profit Margins %
HY10 HY09 HY10 HY09 HY10 HY09124.4 110.6 15.8 12.3 12.7% 11.1%170.2 165.6 15.5 15.7 9.1% 9.5%
Technical CeramicsThermal Ceramics
£m £m £m£m
Morgan Engineered Materials
294.6 276.2 31.3 28.0 10.6% 10.1%
* Divisional EBITA and EBITA margins are quoted before the costs of restructuring activity and profit/(loss) on disposal of property arising from restructuring activity
Ceramics
HY10 HY09 HY10 HY09 HY10 HY09
Revenue EBITA Profit Margins %
£m £m £m £m
123.7 105.1 9.7 5.4 7.9% 5.2%62.9 95.5 8.9 13.8 14.1% 14.4%19.9 15.2 2.9 0.1 14.6% 0.7%
206.5 215.8 21.5 19.3 10.4% 8.9%
Base CarbonNP AerospaceMolten Metal Systems
Engineered Materials
28
* Divisional EBITA and EBITA margins are quoted before the costs of restructuring activity and profit/(loss) on disposal of property arising from restructuring activity
Summary and Outlooky
Mark Robertshaw
29
Summary and Outlook
Delivered increased revenues, profits and margins in H1
Order book and Q2 trading provide good momentum for the second half
Global outlook still hard to forecast but our focus remains on actions that we ourselves take to improve the level and quality of our earnings
Simplification and streamlining of the divisional structure positions the Group for further margin improvement
30
2010 Half Year Financial Results2010 Half Year Financial Results
28th July 2010
AppendixAppendix
32
Further margin progression for EBITA pre one‐offs
33
Segmental details on new divisional structure
£m Revenue EBITA Profit Margins %
HY10 HY09 HY10 HY09 HY10 HY09Technical Ceramics 124.4 110.6 15.8 12.3 12.7% 11.1%Thermal Ceramics 170.2 165.6 15.5 15.7 9.1% 9.5%
Ceramics 294.6 276.2 31.3 28.0 10.6% 10.1%
Base Carbon 123.7 105.1 9.7 5.4 7.9% 5.2%
NP Aerospace 62.9 95.5 8.9 13.8 14.1% 14.4%
Molten Metal Systems 19.9 15.2 2.9 0.1 14.6% 0.7%
Engineered Materials 206.5 215.8 21.5 19.3 10.4% 8.9%
Unallocated Costs * (2.5) (2.0) ‐ ‐
EBITA pre one‐off items ** 501.1 492.0 50.3 45.3 10.0% 9.2%
One‐off items ** (2.3) (7.1)
EBITA post one‐off items ** 48.0 38.2 9.6% 7.8%
34
* Includes plc costs (e.g. Report & Accounts, AGM, Non‐Executives) and Group management costs (e.g. corporate head office rent, utilities, staff, etc.)
** One‐off items include the costs of restructuring activity, profit/(loss) on disposal of property and ongoing recovery/(costs) associated with the settlement of prior period anti trust litigation.
Group regional sales by geographic destination –excluding NP Aerospace
450
500
Group Sales by Destination (excl NPA) ‐ £ million
87.955.7
47.2
51.9
350
400
450
Rest of World
145.0 163.4
66.377.7
200
250
300
Emerging Markets
132 4 135 0
139.8
100
150North America
132.4 112.7 135.0
0
50
H1 2009 H2 2009 H1 2010
Europe
35
Emerging markets includes: China, Brazil, India, Russia, Middle East All at 2010 H1 Exchange ratesRest of World includes: Japan, Korea, Australia, South Africa
Group revenues by end‐market for H1 2010
36
Net Finance Charge
HY10 HY09£m £m
12.9 12.3
(0.6) (0.9)
Bank interest charge
Bank interest income
0.7 1.1Interest expense on unwinding of discount on deferred consideration
(2.0) ‐
IAS19 Interest cost on liability 14 0 13 3
Gain on foreign exchange derivatives in respect of financial indebtedness
IAS19 ‐ Interest cost on liability 14.0 13.3
‐ Expected return on assets (12.9) (11.0)
37
12.1 14.8
Underlying EPS
HY10 HY09£m £m£m £m
19.4 9.0
3 9 8 1
Basic earnings
Amortisation 3.9 8.1
23.3 17.1
Amortisation
Underlying earnings
268.7m 267.9mWeighted average number of shares in the period
8.7p 6.4pUnderlying earnings per share
38
Pensions ‐ IAS 19 ‘Income Statement’ Charges
FY10 HY10 HY09FY10 HY10 HY09Estimate* Actual Actual
Approx£m £m £m£m £m £m
3.7 2.1 2.1 Service Charge (within Operating costs)
1.9 1.1 2.3
5.6 3.2 4.4
Net Finance Charge
* Full year estimate was made at the beginning of 2010; likely to increase due to changes in assumptions and exchange rates
39
Amortisation Charge
FY10 HY10 HY09Estimate Actual Actual
£m £m £m
7.8 3.9 3.5 Ongoing amortisation
Amortisation in 2009 arising from the acquisition‐ ‐ 4.6
7.8 3.9 8.1
Amortisation in 2009 arising from the acquisition of the NP Aerospace Order Book at 5.1.09
40