Slide 1: 2013 Full Year Financial Results
2013 Full Year Financial Results 13th February 2014 www.morganadvancedmaterials.com
Slide 2: Agenda
Agenda Overview Mark Robertshaw 2013 Full year Group results Kevin Dangerfield Strategy update and key themes Mark Robertshaw for 2014 Summary and outlook Mark Robertshaw 2
Slide 3: Overview
Overview • Trading conditions in H2 2013 similar to those experienced in H1 2013 with revenue stable at constant currency • EBITA margins improved across all three regions in H2 2013, with Group EBITA margin increasing by 90 basis points to 12.9% compared with H1 2013 • New organisational model well
Slide 4: 2013 Full year Group results
2013 Full year Group results Kevin Dangerfield 4
Slide 5: EBITA margin improved year-on-year and full-year dividend up 5%
EBITA margin improved year-on-year and full-year dividend up 5% FY13* FY12 % Change Restated £m £m Revenue 957.8 1,007.5 -4.9% EBITA before restructuring** 119.0 120.9 -1.6% EBITA margin % before restructuring** 12.4% 12.0% EBITA after restructuring*** 108.5 107.7 +0.7% EBITA margin % after restruct
Slide 6: Restructuring costs, portfolio management, net financing costs, tax
Restructuring costs, portfolio management, net financing costs, tax Before specific Specific adjusting items adjusting items Total Restated FY13 FY13 FY13 FY12 £m £m £m £m Revenue 957.8 0.0 957.8 1,007.5 EBITA before restructuring* 119.0 0.0 119.0 120.9 Net restructuring* v (10.5) (7.3) (17.8) (13.2
Slide 7: Good progress made on exiting loss-making/low margin businesses
Good progress made on exiting loss-making/low margin businesses FY13 FY12 £m £m Business exit costs 7.3 0.0 Impairment of intangible assets 3.3 0.0 Loss on disposal of business 2.3 0.0 Specific adjusting items before tax 12.9 0.0 Tax in relation to specific adjusting items (1.8) 0.0 Specific adjusti
Slide 8: Strong operating cash flow with significant investment in growth capex
Strong operating cash flow with significant investment in growth capex FY13 FY12 £m £m • Cash from Cash from trading 148.3 151.9 operations in line Change in working capital (4.4) (12.6) with 2012 Change in provisions (16.9) (12.5) • Operating working Cash flow from operations 127.0 126.8 capital/sa
Slide 9: Improving margins in Europe and North America; Asia/RoW impacted by drop in volume in H1 2013
Improving margins in Europe and North America; Asia/RoW impacted by drop in volume in H1 2013 £ million Revenue EBITA* Profit Margins % FY13 FY12 FY13 FY12 FY13 FY12 North America 359.9 376.3 55.5 55.7 15.4% 14.8% Europe 357.3 361.7 42.0 37.5 11.8% 10.4% Asia/Rest of World 240.6 269.5 26.4 32.8 11.0
Slide 10: North America – delivering improvement on already mid-teen margins through 2013
North America – delivering improvement on already mid-teen margins through 2013 200.0 17.0% 15.0% 150.0 Revenue** £m 13.0% EBITA* % 11.0% 100.0 9.0% 50.0 7.0% H1 2012 H2 2012 H1 2013 H2 2013 • Strong Thermal Ceramics performance offset in part by reductions in HDD, semicon and H2 revenue in aerospac
Slide 11: Europe – continued margin improvement as businesses benefit from One Morgan initiatives
Europe – continued margin improvement as businesses benefit from One Morgan initiatives 200.0 17.0% 15.0% 150.0 Revenue** £m 13.0% EBITA* % 11.0% 100.0 9.0% 50.0 7.0% H1 2012 H2 2012 H1 2013 H2 2013 • Growth in medical business and market share gains in electrical carbon offset by reduction in large
Slide 12: Asia/RoW – challenging markets in 2013; some signs of improvement entering 2014
Asia/RoW – challenging markets in 2013; some signs of improvement entering 2014 150.0 14.0% 125.0 13.0% Revenue** £m EBITA* % 100.0 12.0% 75.0 11.0% 50.0 10.0% H1 2012 H2 2012 H1 2013 H2 2013 • Growth in niche businesses such as automotive offset by challenging trading in industrial, steel and petro
Slide 13: Exchange rates: £ sterling has strengthened against all major currencies during H2 2013
Exchange rates: £ sterling has strengthened against all major currencies during H2 2013 FY 2013 FX impact of FY 2013 H2 2013 Reported using 2013 at 2013 at 2013 (average rates) closing rates closing rates closing rates £m £m £m £m Revenue 957.8 (44.2) 913.6 456.5 EBITA before restructuring** 119.0 (
Slide 14: Summary
Summary • Stable revenue H2 v H1 at constant currency • EBITA margins improved by 90bps to 12.9% in H2 • Strong operating cash flow and net debt at 1.3 times net debt:EBITDA ratio • Full-year dividend increased by 5% 14
Slide 15: Strategy update and key themes for 2014
Strategy update and key themes for 2014 Mark Robertshaw 15
Slide 16: Strategy update – key themes
Strategy update – key themes • Building sustainable competitive advantage in attractive markets… • …with truly, differentiated products underpinned by world- leading technology • Our goal is for all of our businesses and technologies to have the potential to deliver mid-teen EBITA margins… • …target
Slide 17: Focus remains on continuing to drive positive mix shift towards attractive end-markets
Focus remains on continuing to drive positive mix shift towards attractive end-markets Sales by market 2013 100% • North America 90% region currently has 80% greatest proportion 70% of higher margin Healthcare end-markets e.g. 60% Security & Def ence Electronics aerospace and 50% Energy healthcare 4
Slide 18: Portfolio reshaping a key priority for 2014
Portfolio reshaping a key priority for 2014 • Electrical carbon • Seals and bearings • IFB/castables • C&DS advanced composites 60% 35% • Fibre • Piezo ceramics 5% • Brazed alloys and assemblies • Ceramic cores • C&DS – logistics support • Structural ceramics • Lithium ion • MMS • Other small busine
Slide 19: Good progress made on resolving loss-making/low margin businesses
Good progress made on resolving loss-making/low margin businesses Additional sales or exits Nov 13 Feb 14 being actively pursued for 5% 3% the remaining c.£30m of revenue • Exit of the UK MoD vehicles logistics and spares contract (2013 revenue - £12.0m) • Disposal of loss-making Indian carbon busin
Slide 20: Enhancing margins of businesses currently below mid-teen margin target range
Enhancing margins of businesses currently below mid-teen margin target range Change in 2013 EBITA margin % Electrical carbon 35% Seals and bearings C&DS advanced composites IFB/castables • Margin progress made on three of the four businesses in this high single digit to double digit margin category
Slide 21: Targeting both revenue growth and further margin increase in differentiated businesses
Targeting both revenue growth and further margin increase in differentiated businesses Thermal Ceramics EBITA margin % 16.0% 15.2% 13.0% 12.0% 60% 8.0% 4.0% 0.0% H2 2012 H2 2013 • Positive mix shift with ongoing rollout of Superwool® fibre: overall fibre business margins now into high-teens • Good g
Slide 22: One Morgan organisational structure aims to accelerate profitable growth
One Morgan organisational structure aims to accelerate profitable growth • Increasingly higher levels of investment in R&D • New Global Materials Centre of Excellence announced today for structural ceramics • 23% increase in year-on-year gross capex to drive profitable growth • Significant step-up i
Slide 23: Investing in innovation and profitable growth
Investing in innovation and profitable growth R&D investment £m • R&D investment now c.2.5 25.0 times higher than it was in 2006 20.0 • R&D investment increased once more in 2013 both in 15.0 absolute terms and as a % of revenue (2013: 2.1%, 2012: 1.9%) 10.0 • New Group Chief Technology Officer (CTO
Slide 24: Technology families (examples)
We aim to leverage innovation and differentiation across the full breadth of our geographies and end-markets Geographies and end-markets Technology families (examples) High-temperature fibre Structural ceramics Advanced composites and ballistics 24
Slide 25: New Global Materials Centre of Excellence for structural ceramics
Announcement today of a new Global Materials Centre of Excellence for structural ceramics • Aims to emulate in structural ceramics the world-leading breakthroughs we have already made in chemistries and processes in our Superwool® fibre range • This will be the Group’s third Global Materials Centre
Slide 26: 23% increase in capex to drive profitable growth
23% increase in capex to drive profitable growth Capex £m • Capex c.1.25x depreciation in 2013 40.0 36.3 • Key projects • Conversion of fibre lines to be Superwool® 29.4 enabled (c.£12.6m) 30.0 • Greenfield site Dalian, China (c.£4.2m) • Ongoing investment in growth 20.0 capex in our 2014 plans (c.£
Slide 27: Significant increase in engineering and future leadership talent
Significant increase in engineering and future leadership talent • Increasing investment in graduates as part of the Graduate Leadership Programme Global graduate intake 40 31 30 26 20 20 10 0 2012 2013 2014 planned • Advanced Development Programme for future management – regional winner of 2013 “In
Slide 28: Outcome of our self-help actions: 190bps margin improvement over the last 12 months
Outcome of our self-help actions: 190bps margin improvement over the last 12 months 14.0% Key drivers: • Positive mix shift and 13.0% 12.9% 12.9% overhead and footprint 13.0% streamlining • Biggest step-up in EBITA* % 12.0% 12.0% margin came from electrical carbon and 11.0% seals and bearings 11.0%
Slide 29: Summary and outlook
Summary and outlook Mark Robertshaw 29
Slide 30: Summary
Summary • 190bps margin progression over the past 12 months • The new streamlined Group organisation structure announced last year now well embedded and driving an accelerated pace of change and increased level of ambition • Continued investment in world-leading technology and innovation to enhance
Slide 31: Outlook
Outlook • Our expectation for H1 2014 is that end-market conditions overall remain similar to recent months • Key areas of focus for 2014: • positive mix shift • active portfolio reshaping • operational improvements • continued investment in innovation and differentiation to drive profitable growth
Slide 32: 2013 Full Year Financial Results
2013 Full Year Financial Results 13th February 2014 www.morganadvancedmaterials.com
Slide 33: Appendix
Appendix 33
Slide 34: Significant margin improvement on stable top line
Significant margin improvement on stable top line 550.0 14.0% 13.0% 500.0 Revenue** £m EBITA* % 12.0% 450.0 11.0% 400.0 10.0% H1 2012 H2 2012 H1 2013 H2 2013 * Results before specific adjusting items ** Revenue is stated at constant 2013 full-year average rates 34
Slide 35: EBITA margins before restructuring
EBITA margins before restructuring 14.0% 13.0% 13.0% 12.9% 12.7% 12.0% 12.0% 12.0% 11.1% 10.8% 10.0% 9.4% 8.8% 8.0% 6.7% 6.0% 5.3% 4.0% 2.0% 0.0% FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 H1 2013 H2 2013 * Results before specific adjusting items 35
Slide 36: Revenue and EBITA as historically presented
Revenue and EBITA as historically presented – margin progression in most businesses £ million Revenue EBITA* Profit Margins % FY13 FY12 FY13 FY12 FY13 FY12 Technical Ceramics 258.6 273.3 40.2 42.1 15.5% 15.4% Thermal Ceramics 359.5 387.2 49.2 51.7 13.7% 13.4% Ceramics 618.1 660.5 89.4 93.8 14.5% 14.
Slide 37: During H2 2013 £ sterling strengthened substantially against most currencies
During H2 2013 £ sterling strengthened substantially against most currencies that Morgan trades in • By year end the closing rates of exchange were materially different from the average rates used in the Income Statement • The impact of 2013 year end foreign exchange rates on the Groups 2013 revenue
Slide 38: Continued positive pricing through differentiation and focus on attractive end-markets
Continued positive pricing through differentiation and focus on attractive end-markets 38
Slide 39: Pensions IAS19 Revised – Restatement of 2012 comparatives
Pensions IAS19 Revised – Restatement of 2012 comparatives Previously IAS 19 reported revised Restated FY12 FY12 FY12 £m £m £m Revenue 1,007.5 1,007.5 EBITA before restructuring* 122.0 (1.1) 120.9 Net restructuring* (13.2) (13.2) EBITA after restructuring* 108.8 107.7 Amortisation and impairment of i
Slide 40: Operating ROCE
Operating ROCE All £ million 2013 2012 At reported rates Year End Year End Restated LTM Underlying EBITA 108.5 107.7 Change -v- 2012 Year End 0.7% Operating Capital Land & Building - NBV 97.9 98.9 Plant & Equipment - NBV 143.5 146.6 Third Party Working Capital 153.0 164.4 394.4 409.9 Change -v- 2012
Slide 41: Net financing costs
Net financing costs FY13 FY12 Restated £m £m Bank interest charge 18.3 18.5 Bank interest income (1.3) (1.6) Interest expense on unwinding of discount on 0.0 0.2 deferred consideration Net interest on IAS19 obligations 6.3 5.6 23.3 22.7 41
Slide 42: Underlying EPS
Underlying EPS FY13 FY12 Restated £m £m Basic earnings from continuing operations 41.8 51.8 Amortisation 8.3 8.3 Specific adjusting items 10.6 0.0 Underlying earnings 60.7 60.1 Weighted average number of shares in the period 282.9m 277.0m Underlying earnings per share from continuing 21.5p 21.7p ope
Slide 43: 2013 Full Year Financial Results
2013 Full Year Financial Results 13th February 2014 www.morganadvancedmaterials.com