Meggitt — H1 2020 Earnings Presentation
28 slides from Meggitt's earnings presentation, Sep 8, 2020
Slide 1: 2020 Half Year Results
Enabling the Extraordinary To Fly To Power To Live 2020 HALF YEAR RESULTS 8 September 2020 presented by Tony Wood, Chief Executive Louisa Burdett, Chief Financial Officer
Slide 2: Disclaimer
Disclaimer Cautionary statement This presentation is not for release, publication or distribution, directly or indirectly, in or looking statements”. These forward-looking statements can be identified by the use of into any jurisdiction in which such publication or distribution is unlawful. forward-
Slide 3: Introduction
INTRODUCTION Tony Wood Chief Executive
Slide 4: Response to Covid-19 and our priorities in H1
Response to Covid-19 and our priorities in H1 We responded quickly and decisively to the crisis 1 Customer aligned and • Employee safety People • Support the community engaged organisation • Majority of sites remained open Business continuity • Support supply chain 2 Crisis management • Target cash
Slide 5: Market dynamics in H1 2020
Market dynamics in H1 2020 Significant reduction in civil air traffic Civil aerospace significantly impacted with Defence robust 900 FY 2019: +4% Source: IATA 20% 800 0% 700 -20% 600 Civil OE • Lower demand from OEMs as new build rates lowered 500 -40% (20% of revenue) • Deliveries by Airbus and Boe
Slide 6: Overview of the first half
Overview of the first half Defence robust as Group responds to civil aerospace downturn Book to bill of 0.9x with defence book to bill of 1.2x Organic revenue 13% lower (Q2: -30%): – Civil OE -29% (Q2: -53%) – Civil AM -25% (Q2: -47%) – Defence +7% (Q2: -3%) – Energy -6% (Q2: -8%) Strong progr
Slide 7: H1 2020 Strategic highlights
H1 2020 Strategic highlights Continued progress in strategy execution Strategic priority Portfolio Strategy Customers Competitiveness Culture TBU H1 2020 Sale of Training Systems New contract wins Footprint reduction to 39 HPC and strong progress for £110m totalling over £100m sites with opp
Slide 8: Financials
FINANCIALS Louisa Burdett Chief Financial Officer
Slide 9: Income statement
Income statement Defence robust as Group responds to downturn in civil aerospace Underlying1 HY20 HY19 Growth Strong defence more than offset by lower revenue in civil aerospace and £m £m Reported Organic2 energy Orders 882 1,193 (26%) (31%) Revenue 917 1,071 (14%) (13%) Reflects fixed element withi
Slide 10: Exceptional costs and H1 impairment
Exceptional costs and H1 impairment Non-cash accounting write down due to downturn in civil aerospace Reconciliation between underlying profit and • Non-cash impairment losses / asset write downs of £373m statutory operating loss £m including goodwill Of which • Cash expenditure on exceptional opera
Slide 11: Revenue by end market
Revenue by end market Robust defence growth helps offset lower civil revenue H1 2020 Revenue Growth LJ down 33% RJ down 37% H1 2020 Revenue by market (Reported) Reported Organic BJ down 11% Civil OE (29%) (29%) Other LJ down 27% Energy RJ down 33% 3% Civil OE Civil AM (25%) (25%) 7% BJ down 10% 20%
Slide 12: Divisional performance
Divisional performance Summary Operating Operating Underlying Revenue profit margin Organic Growth 2020 2019 £m % £m % % Operating margin declines in Airframes and Engines reflect lower civil aerospace demand and under-recovery of fixed overheads Airframe Systems 430.8 (12) 70.3 16.3 21.0 Engine Sys
Slide 13: Acted early to boost liquidity, protect cash and position for 2021
Acted early to boost liquidity, protect cash and position for 2021 Strong execution in those areas within our control Internal measures • Sale of Training Systems • Reduction in absolute inventory levels Ongoing Protect profit and • Substantial reduction in operating costs Slides 14-15 cash • Ca
Slide 14: Protecting profit and preserving cash
Protecting profit and preserving cash Measures to protect 2020 and also position for 2021 P&L Cash • > 20 % headcount reduction • Cash conversion of P&L measures • Material purchases • Working capital – inventory • Operating costs + • Capex and pension deferrals • Pension • Dividend We expect to del
Slide 15: Cost and cash run rate actions in 2020
Cost and cash run rate actions in 2020 Management action to offset revenue reduction, protect profit and resize cost base • Decisive action to deliver cost and cash CASH ONLY actions in response to anticipated reduction in FY20 revenue 93 • Savings represent cash costs that would have otherwise been
Slide 16: Free cash flow
Free cash flow Free cash outflow expected to reverse in H2 £m H1 2020 H1 2019 Change % Working capital outflow driven by reduction in Underlying EBITDA 156 212 payables balances Working capital movement (128) (77) Capex (57) (37) Higher capex as expected driven by investment in Ansty Park and carbon
Slide 17: Balance sheet and liquidity
Balance sheet and liquidity Covenant H1 2020 FY 2019 H1 2019 Net debt:EBITDA at 1.8x well within covenant of 3.5x Net debt:EBITDA ≤3.5x 1.8x 1.5x 1.8x Interest cover ≥3.0x 14.1x 16.3x 15.0x 2,200 Fixed rate Floating rate CCFF headroom Net debt £m Additional 2,000 £470m 1124 available under 1,800 CCF
Slide 18: Well placed for the recovery
WELL PLACED FOR THE RECOVERY Tony Wood Chief Executive
Slide 19: Strength of our portfolio
Strength of our portfolio A number of core characteristics will help us benefit as the market recovers Diverse end Broad-based market exposure aftermarket A younger, Strong in refreshed fleet defence 2020 Interim Results 19
Slide 20: Diverse end market exposure
Diverse end market exposure Broad revenue base across civil, defence and select energy markets Civil portfolio Diverse end market exposure • Meggitt content on nearly every civil jet across large, regional and business FY19 • Civil fleet of ~51,000 aircraft 9% • Increased content on new platforms 16
Slide 21: Strong aftermarket annuity across both civil and defence
Strong aftermarket annuity across both civil and defence Recurring revenue stream underpinned by sole source positions and increased content Group aftermarket (2019) • Dedicated Services & Support Division delivering AM Large Jet 33% Regional Jet • Exposure across both civil and defence markets 38%
Slide 22: Meggitt civil aftermarket well positioned for the recovery
Meggitt civil aftermarket well positioned for the recovery Good exposure to narrow body, business jets and a young fleet Diverse civil AM exposure Exposure to a young civil fleet Sustainable AM growth drivers Substantial proportion Narrow body Wide body Regional Business of fleet yet to have 1st/2nd
Slide 23: Strong in defence
Strong in defence 43% of H1 2020 revenue; 70% of revenue derived from US market Defence exposures1 • Robust defence performance maintained in H1; outlays remain strong OE • Strong content on new platforms 40% AM • Underpinned by a number of multi-year contracts 60% • Opportunity to grow our market s
Slide 24: Business jet exposure
Business jet exposure Broad fleet exposure across all major business jet OEMs Key customers Key Platforms Content Heat exchangers Tyre pressure Carbon brakes G100/150, G280, G350/450, G500/550, monitoring G650 Phenom 100, Phenom 300, Praetor/Legacy 450/500, Praetor 600, Embraer Lineage 1000E Global
Slide 25: Summary
SUMMARY Tony Wood Chief Executive
Slide 26: Group assumptions for full year 2020
Group assumptions for full year 2020 Group well placed for recovery against a backdrop of uncertain sector and market macros Market and sector context Base case assumptions for H2 Full year 2020 • H2 underpinned by robust defence and • New build rates at or near current levels • Improvement in civil
Slide 27: Summary
Summary Rapid and decisive action to navigate the crisis • The first half has been challenging • The response of our people has been outstanding • Quick and decisive action taken to mitigate the impact of the downturn • Continued to execute and accelerate our strategy and preserved options for futur
Slide 28: Questions
QUESTIONS