Melrose Industries Plc · LSE:MRO
Melrose Industries — FY2010 Earnings Presentation
39 slides from Melrose Industries's earnings presentation, March 2011
Slide 1: Full Year Results Announcement
March 2011 Strictly private and confidential Full Year Results Announcement Twelve months to 31 December 2010
Slide 2: Contents
Contents Sections 1 Highlights 2 Summary financial results 3 Summary of operating divisions 4 Energy 5 Lifting 6 Dynacast 7 Other Industrial 8 Conclusion 9 Questions 10 Appendices 2
Slide 3: Highlights
| Highlights
Slide 4: Highlights – strong recovery continuing, more to come
Highlights – strong recovery continuing, more to come Key highlights in performance: revenue growth, headline¹ operating margin % and headline¹ EPS Revenue growth on prior year (%) Headline¹ operating margin (%) Headline¹ earnings per share (p) 14.1p 15% 14.9% (13.2p) 11.3p (10.9p) 13.6% 9.1p (8.8p)
Slide 5: Highlights in 2010
Highlights in 2010 Investment in all divisions in process − Opportunities for improvement by investment in all key businesses − 1.4x depreciation H2 2010 − Key focus for 2011 as well Operating margins − Target reached ahead of schedule − More opportunities for improvement − Operational leverage
Slide 6: Summary financial results
| Summary financial results
Slide 7: Consolidated Income Statement
Consolidated Income Statement Income Statement – statutory format Year ended Year ended 31 December 2009 31 December 2010 (£m) (£m) Revenue 1,298.5 1,379.5 Cost of sales (970.3) (988.5) Net operating expenses – Headline¹ (178.5) (194.1) – Exceptional items and intangible asset amortisation (36.6) (1
Slide 8: Headline earnings per share of 25.4p (diluted EPS 24.1p)
1 Headline earnings per share of 25.4p (diluted EPS 24.1p) Income Statement – headline¹ results twelve months ended 31 December 2010 Headline¹ Net exceptional Intangible asset results credits² amortisation Total (£m) (£m) (£m) (£m) Revenue 1,379.5 - - 1,379.5 Operating profit/(loss) 196.9 11.1 (26.6
Slide 9: Significant improvement in revenue, margin, EPS and net debt
Significant improvement in revenue, margin, EPS and net debt Summary performance – half yearly trends Headline¹ operating profit Revenue (£m) Headline¹ EPS (p) Leverage² and net debt (£m) 14.1p 2.13x £105.0m (13.2p) £703.8m 11.3p 1.76x £684.7m £675.7m 9.1p (10.9p) £416.4m 1.61x £91.9m 14.9% 7.5p (8.
Slide 10: Full year performance: headline EPS up 53%
Full year performance: headline¹ EPS up 53% Summary performance – comparison with 2009 (full year 2010 v full year 2009) Headline¹ operating profit Revenue increased by 6% year on year Revenue (£m) Headline¹ EPS (p) including a 15% growth in H2 2010. (£m) Exchange rates had little effect 25.4p £1,
Slide 11: Second half performance: headline EPS up 55%
Second half performance: headline¹ EPS up 55% Summary performance – comparison with 2009 (H2 2010 v H2 2009) Headline¹ operating profit Revenue growth of 15% in H2 2010. Revenue (£m) Headline¹ EPS (p) Exchange rates had little effect (£m) 14.1p (13.2p) Headline¹ operating margin of 14.9% in H2 £
Slide 12: Revenue growth achieved in all divisions in H2 2010
Revenue growth achieved in all divisions in H2 2010 Revenue growth trends over the last three half years (year on year at constant currency) Energy Lifting Dynacast Other Industrial 42% 21% 17% 8% 4% (5%) (8%) (12%) (13%) (22%) (23%) (23%) H2 09 H1 10 H2 10 Other Group Energy Lifting Dynacast Indust
Slide 13: Further strong cash generation (leverage down to 1.25x)
Further strong cash generation (leverage¹ down to 1.25x) Cash generation and net debt Net debt reduced in 2010 by £34.3 million (11%) despite a £7.2 million adverse Net debt (£m) and leverage¹ exchange movement. Since the acquisition of FKI net debt has now reduced by 60% 2.65x at constant currenc
Slide 14: Profit conversion to cash (post capex) above 100% again
Profit conversion to cash (post capex) above 100% again Headline¹ operating cash flow Net working capital (£m) Capex v depreciation in 2010 (%) (post capex) (£m) (constant currency) and as a % of revenue £267m £599m 137% 15.4% £116m £203m 60% 8.4% Last 12 months Since FKI acquisition Start of FKI 31
Slide 15: All divisions producing strong cash flows
All divisions producing strong cash flows Operating cash generation (post capex)¹ since FKI (£m) All divisions have generated more cash 129% 112% 132% 117% than profit during Melrose ownership, £213.2m average 136% since FKI £185.0m £165.6m £164.9m Working capital ratios improved further, £105.3
Slide 16: Recovery of commodity costs from customers
Recovery of commodity costs from customers Material costs and as a percentage of revenue Group Energy Lifting Dynacast Other Industrial % of % of % of % of % of (£m) revenue (£m) revenue (£m) revenue (£m) revenue (£m) revenue Revenue 1,379.5 427.5 422.7 275.7 253.6 Key commodity Copper 21.0 1.5% 21.
Slide 17: Pensions being managed - Group
Pensions being managed - Group Pension, post retirement, life and medical benefits 31 December 2010 Annual cash Asset Liabilities Deficit Status payments (£m) (£m) (£m) FKI UK defined benefit plan Closed in Feb 2011 18.5 549 (628) (79) McKechnie UK defined benefit plan Closed 4.6 144 (142) 2 FKI US
Slide 18: Pensions being managed – FKI UK DB Plan
Pensions being managed – FKI UK DB Plan FKI UK defined benefit pension plan Annual cash Liabilities Deficit Asset split – FKI UK DB plan Status payments (£m) (£m) 3% FKI UK defined benefit plan Now closed 18.5 (628) (79)* 35% Equities 31% Corporate bonds Percentage of market cap gross of tax 41% 5%
Slide 19: Income Statement tax rate at 26%, cash tax again lower
Income Statement tax rate at 26%, cash tax again lower Tax 2009 2010 Headline¹ Income Statement rate 30% 26% Headline¹ cash tax rate 3% 16% NB. 2009 cash tax includes a £9.8 million cash refund Current Income Statement tax rate – Headline¹ rate equal to 26% as expected (2009: 30%) – Reduced in 201
Slide 20: Summary of operating divisions
Summary of operating divisions Energy Lifting Dynacast Other Industrial
Slide 21: Operating divisions
Operating divisions Other Energy Lifting Dynacast Industrial Turbogenerators (incl Truth, Harris, Weber Transformers), Bridon, Crosby, Acco Dynacast Knapp, Madico¹, MPC, Marelli, Switchgear Traction¹, Logistex UK¹ 12 months to 31 December 2010 Revenue (£m) 427.5 422.7 275.7 253.6 Headline² operating
Slide 22: Energy
| Energy
Slide 23: Energy — highlights
Energy — highlights Energy – headline¹ results Full year Full Year H2 H2 HY2 2010 v Full year 2010 v (£m) 2010 2009 2010 2009 HY2 2009 Full year 2009 Revenue 427.5 418.3 223.3 186.7 20% 2% Headline¹ EBITDA² 81.7 68.5 43.8 33.9 29% 19% Headline¹ EBITDA² margin 19.1% 16.4% 19.6% 18.2% + 1.4pps + 2.7pp
Slide 24: Lifting
| Lifting
Slide 25: Lifting — highlights
Lifting — highlights Lifting – headline¹ results Full year Full Year H2 H2 HY2 2010 v Full year 2010 v (£m) 2010 2009 2010 2009 HY2 2009 Full year 2009 Revenue 422.7 419.0 210.5 188.8 11% 1% Headline¹ EBITDA² 76.1 71.7 36.5 35.1 4% 6% Headline¹ EBITDA² margin 18.0% 17.1% 17.3% 18.6% - 1.3pps + 0.9pp
Slide 26: Dynacast
| Dynacast
Slide 27: Dynacast — highlights
Dynacast — highlights Dynacast – headline¹ results Full year Full Year H2 H2 HY2 2010 v Full year 2010 v (£m) 2010 2009 2010 2009 HY2 2009 Full year 2009 Revenue 275.7 208.7 136.3 113.0 21% 32% Headline¹ EBITDA² 50.7 30.1 27.0 16.6 63% 68% Headline¹ EBITDA² margin 18.4% 14.4% 19.8% 14.7% + 5.1pps +
Slide 28: Other Industrial
| Other Industrial
Slide 29: Other Industrial — highlights
Other Industrial — highlights Other Industrial – headline¹ results Full year Full Year H2 H2 HY2 2010 v Full year 2010 v (£m) 2010 2009 2010 2009 HY2 2009 Full year 2009 Revenue 253.6 252.5 133.7 125.3 7% - Headline¹ EBITDA² 35.8 28.0 18.6 18.3 2% 28% Headline¹ EBITDA² margin 14.1% 11.1% 13.9% 14.6%
Slide 30: Conclusion
| Conclusion
Slide 31: Conclusion
Conclusion Melrose companies well positioned for sales growth Further margin improvement opportunities Good capex opportunities We are confident of a successful 2011 Like to do another acquisition and dispose of Dynacast but only on right basis 31
Slide 32: Questions
| Questions
Slide 33: Appendices
| Appendices
Slide 34: Balance Sheet and related currency effect
Balance Sheet and related currency effect Appendix 1 Balance Sheet 31 December 2009 31 December 2010 FX movement (£m) (£m) (£m) Fixed assets, intangible assets and goodwill 1,436.6 1,435.3 18.4 Net working capital 114.3 115.9 3.2 Pension and retirement benefits (169.1) (119.6) (0.8) Provisions (144.
Slide 35: Exchange rates used in the periods
Exchange rates used in the periods Appendix 2 Exchange rates 2009 2010 US Dollar Euro US Dollar Euro Average rates 1.57 1.12 1.55 1.17 Closing rates 1.62 1.13 1.56 1.16 35
Slide 36: Bank facility and leverage
Bank facility and leverage¹ Appendix 3 Leverage¹ Net debt to headline² EBITDA³ Jul 2008 Dec 2008 Jun 2009 Dec 2009 Jun 2010 Dec 2010 Net debt to headline² EBITDA³ 2.70x 2.65x 2.13x 1.76x 1.61x 1.25x Credit bank facility Available Repaid (at current £750 million committed loan facility to date exchan
Slide 37: FKI investment performance
FKI investment performance Appendix 4 Remaining invested capital in FKI (£m) FKI acquisition price 970.4 Cash generated (after all costs including tax): - from trading (272.2) - from acquisitions and disposals (39.4) Remaining invested capital in FKI 658.8 12 month EBITDA¹ of FKI businesses as at 31
Slide 38: Net exceptional credits
Net exceptional credits Appendix 5 Net exceptional credits and intangible asset amortisation Non cash Full year 2010 (£m) Cash costs costs Total Restructuring costs (4.2) (1.7) (5.9) Bridon Group Senior Executive Pension Plan buyout (5.5) 1.5 (4.0) Acquisition of businesses (0.2) - (0.2) Disposal of
Slide 39: Disposal of businesses – post 31 December 2010
Disposal of businesses – post 31 December 2010 Appendix 6 Disposed businesses 2010 Profit Business Proceeds revenue multiple Comments Also sold over £100 million of parent company guarantees and bonds and a £7 million Traction £19.0m £35m 4x warranty provision. Rented premises to Wabtec for 25 years