Melrose Industries Plc · LSE:MRO
Melrose Industries — FY2008 Earnings Presentation
34 slides from Melrose Industries's earnings presentation, March 2009
Slide 1: Full Year Results Announcement
March 2009 Strictly private and confidential Full Year Results Announcement Twelve months to 31 December 2008
Slide 2: Contents
Contents Sections Title Title 1 Highlights 2 Melrose PLC summary financial performance 3 Summary of operating divisions Energy Lifting Dynacast Other Industrial Logistex Group Discontinued 4 Outlook and conclusion 5 Appendix 2
Slide 3: Highlights
| Highlights
Slide 4: Highlights
Highlights FKI acquired on 1 July 2008 for an enterprise value of c.£970m (acquired debt of c.£470m and equity of c.£500m – 6.7x FKI 2008¹ EBITDA² Debt matures 2013 – Approximately 50% of debt fixed interest cost FKI’s results consolidated from 1 July (i.e. second half only) Excellent cash g
Slide 5: Highlights – results
Highlights – results Trading 2008 headline¹ EPS at 16.8p (2007: Proforma² 14.6p) (15% up) is better than expectations 2008 annualised EBITDA³ for the current Melrose Group is £241m (at 2008 closing exchange rates) and £205m (at 2008 average exchange rates) Cash generation Cash generation is fa
Slide 6: Highlights – operational
Highlights – operational Energy New CEO for Turbogenerators Strong investment opportunities for improvement in all areas − Purchasing − Working capital management − After market − Better production efficiencies Market conditions still favourable − 70% of 2009 budgeted sales order book Switch
Slide 7: Highlights – operational
Highlights – operational Crosby Well run, high quality business with strong management Will be affected by US onshore oil and gas slowdown Already reduced workforce substantially − c.10% of US workforce Margins reduced but still satisfactory Dynacast Well run, high quality business with
Slide 8: Melrose PLC summary financial performance
Melrose PLC summary financial performance
Slide 9: Financial results: Income statement — statutory format
Financial results Income statement — statutory format Year ended 31 December 2007 Year ended (restated)² 31 December 2008 £’m £’m Revenue 288.6 938.3 Cost of sales and net operating expenses – Headline¹ (263.6) (838.7) – Exceptional and intangible asset amortisation (4.1) (26.5) Operating profit 20.
Slide 10: Financial results: Income statement — Continuing Group only
Financial results Income statement — Continuing Group only Year ended 31 December 2008 Headline¹ results Other² Total £’m £’m £’m Sales 938.3 — 938.3 Operating profit 99.6 (26.5) 73.1 Net finance income (24.2) (23.1) (47.3) Profit before tax 75.4 (49.6) 25.8 Tax (21.8) 11.7 (10.1) Profit after tax 5
Slide 11: Financial results: Balance sheet
Financial results Balance sheet 31 December 2007 31 December 2008 £’m £’m Fixed assets (including computer software) 61.2 298.9 Intangibles assets 23.4 456.0 Goodwill 183.5 821.5 Net working capital 18.8 213.9 Pension and retirement benefits (25.2) (143.3) Provisions (7.0) (153.0) Deferred tax and c
Slide 12: Financial results: Movement in net debt
Financial results Movement in net debt Full year Six months post FKI (since 1 January 2008) (Since 1 July 2008) Opening net debt 32.4 22.3 Acquired net debt (471.7) (471.7) Net cash flow of acquisitions (13.1) (11.2) Cash generation from trading 60.0 69.4 Foreign exchange movement (152.9) (154.1) Ot
Slide 13: Financial results: Cash flow from trading
Financial results Full year Six months post FKI Cash flow from trading (since 1 January 2008) £’m (since 1 July 2008) £’m Headline¹ operating profit 92.3 78.8 Depreciation and computer software amortisation 24.7 19.0 Working capital movement 70.9 79.2 Net capital expenditure (34.2) (26.5) Operating
Slide 14: Financial results: Cash flow, profit conversion by division
Financial results Cash flow Year ended 31 December 2008 Profit conversion to cash by division Other Total Dis- Energy Lifting Dynacast Industrial HO continuing continued Total Headline¹ operating profit 30.9 35.7 33.4 16.4 (16.8) 99.6 (7.3) 92.3 Headline¹ operating cash generation (post capex) 38.4
Slide 15: Financial results (continuing): Leverage
Financial results (continuing) Leverage Net debt to headline¹ EBITDA² Headline EBITDA average rates/ Both at closing Debt at closing rate exchange rate £’m £’m 2008 Net debt 543.1 543.1 2008 headline¹ EBITDA² (annualised for businesses owned at 31 December 2008) 204.7 241.3 Net debt to headline¹ EBI
Slide 16: Financial results: Currency exposure
Financial results Currency exposure Current split of gross debt is 66% US$, 28% Euro and 6% sterling. This is hedged against the net investments and profit by currency Exchange rates 2007 2008 US$ € US$ (12m avg) € (12m avg) US$ (6m avg) € (6m avg) Average rates 2.00 1.46 1.86 1.26 1.74 1.23 Closi
Slide 17: Financial results: Interest — cost of debt and tax
Financial results Interest — cost of debt Current weighted cost of debt is below 4% (including 200 bps of bank margin) 50% of gross debt ($546m) now has a fixed interest cost, four year fixed rate (Jan 2009 to Jan 2013) at 2.1% Tax % Income statement rate 29% Cash tax rate 21% Current income s
Slide 18: Financial results: Pension and post retirement benefit
Financial results Pension and post retirement benefit Year ended 31 December 2008 Asset not recognised Asset £’m £’m Liabilities £’m Deficit £’m FKI UK defined benefit pension scheme 494.5 — (555.2) (60.7) Mckechnie UK defined benefit pension scheme 116.2 (14.1) (110.7) (8.6) Total UK defined benefi
Slide 19: Summary of Operating Divisions
Summary of Operating Divisions − Energy − Lifting − Dynacast − Other Industrial − Logistex Group − Discontinued
Slide 20: Ongoing Divisions
Ongoing Divisions Based on July to December 2008 results Other Lifting Energy Dynacast Industrial Truth, Turbogenerators, Bridon, Crosby, Dynacast Logistex Europe, Harris, Switchgear, Acco Weber Knapp, MPC, Transformers Traction Revenue (£m) 232.3 229.4 120.1 201.4 Headline¹ operating profit (£m) 35
Slide 21: Energy — Financial highlights
Energy — Financial highlights Energy Sales by company — six months to December 2008 9% Year to Six months to 11% £m March 2008 Dec 2008* Turbogenerators Revenue 366.7 229.4 Switchgear Transformers Headline¹ EBITDA 41.5 34.7 80% Headline¹ EBITDA margin 11.3% 15.1% Total £229.4m Headline¹ Operating pr
Slide 22: Energy — Operational highlights
Energy — Operational highlights New CEO of Turbogenerators Strong investment opportunities for improvement in all areas – Purchasing – Working capital management — Continuing process, still room for improvement – Servicing — More focused approach, dedicated team – Better production efficiencies
Slide 23: Lifting — Financial highlights
Lifting — Financial highlights Lifting Sales by company — six months to December 2008 Year to Six months to 4% £m March 2008 Dec 2008* Bridon Revenue 394.5 232.3 43% 53% Crosby Headline EBITDA 68.4 40.2 Acco Headline EBITDA margin 17.3% 17.3% Total £232.3m Headline Operating profit 60.5 35.7 Sales b
Slide 24: Lifting — Operational highlights
Lifting — Operational highlights Bridon Opportunities taken to invest to improve business – Approved significant investment since ownership – Efficiency improvements at Doncaster Mill (3yr project) – Capacity investment in Multistrand rope globally – Willington Quay large strand machine investment
Slide 25: Dynacast — Financial highlights
Dynacast — Financial highlights Dynacast Sales by geography—year to December 2008 Year to Year to £m Dec 2007 Dec 2008 24% Revenue 235.9 246.3 41% Europe Headline EBITDA 35.7 41.1 North America Asia Headline EBITDA margin 15.1% 16.7% 35% Headline Operating profit 28.9 33.4 Headline Operating margin
Slide 26: Dynacast — Operational highlights
Dynacast — Operational highlights Well run, high quality business with strong management Affected by automobile slowdown in final quarter of the year and into 2009 Reduced workforce by over 22% since October 2008 Successful acquisition of Fishercast in Canada and UK New plant in Southern C
Slide 27: Other Industrial — Financial highlights
Other Industrial — Financial highlights Other Industrial MPC FKI MPC FKI* Year to Year to Year to six months to Total £m Dec 2007 Mar 2008 Total Dec 2008 Dec 2008 as reported Revenue 52.7 342.5 395.2 54.4 175.9 230.3 Headline EBITDA 5.5 37.6 43.1 5.9 15.3 21.2 Headline EBITDA margin 10.4% 11.0% 10.9
Slide 28: Other Industrial — Operational highlights
Other Industrial — Operational highlights Performance varies by market sector Overall division profitable so far in 2009 after restructuring costs Cost reduction measures already in place Estimate overall workforce reductions of over 10% Truth — Grown market share in declining market — Man
Slide 29: Logistex Group — Financial highlights
Logistex Group — Financial highlights Logistex Group Year to March 2008 Six months to December 2008 £m N. America Europe Total N. America Europe Total Revenue 174.2 140.9 315.1 82.6 66.1 148.7 Headline EBITDA 7.8 3.8 11.6 2.1 3.1 5.2 Headline EBITDA margin 4.5% 2.7% 3.7% 2.5% 4.7% 3.5% Headline Oper
Slide 30: Discontinued — Financial highlights
Discontinued — Financial highlights Discontinued MVC FKI MVC FKI £m Year to Year to Year to six months to Dec 2007 Mar 2008 Total Dec 2008 Dec 2008 Total Revenue 55.4 259.5 314.9 37.1 113.4 150.5 Headline EBITDA 1.4 2.5 3.9 (5.9) 2.1 (3.8) Headline EBITDA margin 2.5% 1.0% 1.2% (15.9)% 1.9% (2.5)% He
Slide 31: Outlook and conclusion
| Outlook and conclusion
Slide 32: Outlook and conclusion
Outlook and conclusion Difficult economy but excellent businesses with strong management Good spread of business activities Cost reductions in place and ongoing where necessary Expect strong cash generation of at least £50million from trading in 2009 We expect 2009 to be a tough but still
Slide 33: Appendix
l Appendix
Slide 34: Net exceptional costs and intangible asset amortisation
Financial results Net exceptional costs and intangible asset amortisation Year ended 31 December 2008 Cash costs Non-cash costs Total Continuing operating costs FKI office head office closure 5.6 2.4 8.0 Fishercast reorganisation 1.1 1.3 2.4 Realisation of loss on captive insurance investments — 1.7