Melrose Industries PLC · LSE:MRO
Melrose Industries — FY2007 Earnings Presentation
31 slides from Melrose Industries's earnings presentation, 2008
Slide 1: Full Year Results Announcement
Full Year Results Announcement Twelve months to 31 December 2007
Slide 2: Contents
Contents Introduction Melrose PLC summary financial performance Summary of operating divisions - Dynacast - Other businesses Questions Appendix 2
Slide 3: Introduction
| Introduction
Slide 4: Introduction
Introduction Good Melrose trading performance - Increased dividend Disposals and return of capital - Aerospace and PSM sold - £220 million capital returned - 95% of capital subscription returned Acquisitions - Good market conditions - FKI 4
Slide 5: Melrose PLC summary financial performance
Melrose PLC summary financial performance
Slide 6: Financial results: income statement, statutory format
Financial results Income statement – statutory format Year ended 31 December 2007 Year ended Year ended 31 Dec 2007 31 Dec 2006 £’m £’m Revenue 344.0 323.6 Headline operating profit¹ 24.5 19.2 Net exceptional costs and intangible amortisation (5.8) (7.3) Operating profit 18.7 11.9 Net finance income
Slide 7: Exceptional costs, exceptional income and intangible amortisation
Financial results Exceptional costs, exceptional income and intangible asset amortisation¹ Year ended 31 December 2007 Cash costs Non cash costs Total £’m £’m £’m Dynacast restructure (1.0) (0.5) (1.5) MVC old plater impairment - (1.5) (1.5) Crystallisation of original Melrose incentive scheme (0.8)
Slide 8: Income statement – Continuing Group
Financial results Income statement – Continuing Group Year ended 31 December 2007 Headline results¹ Other² Total £’m £’m £’m Sales 344.0 - 344.0 Operating profit 24.5 (5.8) 18.7 Net finance income 2.5 - 2.5 Profit before tax 27.0 (5.8) 21.2 Tax (7.2) 1.6 (5.6) Profit after tax 19.8 (4.2) 15.6 EPS 9.
Slide 9: Headline results for Continuing Group by division
Financial Results 2007 v 2006 headline results for Continuing Group – by division 2007 2006 £’m £’m Sales EBIT¹ ROS%¹ Sales EBIT¹ ROS%¹ Dynacast 235.9 28.9 12.3% 221.7 25.1 11.3% MVC 55.4 (0.5) (0.9%) 48.0 (2.3) (4.8%) MPC 52.7 3.9 7.4% 53.9 3.0 5.6% Central Costs - corporate (5.8) (5.5) Central Cos
Slide 10: Cash flow
Financial results Cash flow Year ended 31 December 2007 £’m Headline operating profit¹ 24.5 Depreciation and computer software amortisation 10.4 Working capital movement (2.9) Net capital expenditure² (15.6) Acquisitions of subsidiaries (8.7) Cash generated from disposals – businesses (net of costs)
Slide 11: Cash flow: net cash and profit conversion
Financial results Cash flow £32.4 million net cash at the end of 2007 - c.£25 million after full capital return – (£7.4 million deferred) Continuing Group now trades on only 14 days of net working capital Profit conversion to cash (headline operating profit & loss + depreciation – working capital –
Slide 12: Capital expenditure for Continuing Group
Financial results Capital expenditure for Continuing Group Capex Depreciation Multiple £m of £’m £’m depreciation Dynacast 5.4 6.8 0.8 x MVC 7.8 1.9 4.1 x MPC¹ 2.8 1.7 1.6 x Total 16.0 10.4 1.5 x Capex in 2007 at 1.5 x depreciation. Average during ownership 1.2 x depreciation. Exceptional investment
Slide 13: Pensions
Financial Results Pensions Agreed positions with trustees and Pension Regulator (formal clearance achieved). - Upfront cash payment of £20 million made in May 2007. - A further £18.3 million in total to be paid in quarterly instalments over 3 years, £15.2 million remaining to be paid. Deficit on all
Slide 14: Tax
Financial results Tax c.26% headline underlying profit and loss charge in 2007 for Continuing Group. 16% cash tax rate for Continuing Group, still significantly below P & L rate but gap is forecast to narrow. No tax due on the Aerospace and PSM disposals. £167 million of tax losses available in the
Slide 15: Exchange and commodity risk
Financial results Exchange and commodity risk c.86% of sales in the Continuing Group are denominated in a foreign currency (29% in US$ and 31% in Euro). Exchange effect in 2007 - £0.5 million translation loss v 2006. - £1.0 million transaction cost. For guidance on translation risk a 10 cent strengt
Slide 16: Summary of operating divisions
Summary of operating divisions
Slide 17: Dynacast
| Dynacast
Slide 18: Dynacast
Dynacast Proprietary Die-Casting process Sales by Sector Sales by Geography 16% 24% 7% 40% 43% 11% 26% 33% Automotive Electronics Europe Healthcare Hardware North America Far East Other Products Connectors Telecommunications Automotive Consumer Computing Industrial products 18
Slide 19: Dynacast trading results
Dynacast Trading results Year ended 31 December 2007 2007 Headline Results¹ 2006 Headline Results¹ Sales EBIT¹ ROS¹ Sales EBIT¹ ROS¹ £’m £’m % £’m £’m % North America 76.9 7.8 10.1% 79.0 7.4 9.4% Europe 102.6 14.6 14.2% 92.4 12.1 13.1% Far East 56.4 6.5 11.5% 50.3 5.6 11.1% Total 235.9 28.9 12.3% 22
Slide 20: Dynacast trading results – zinc adjusted
Dynacast Trading results – zinc adjusted 2007 2007 @ 2004 Actual Zinc price Sales 235.9 195.5 c.£40m more zinc now recovered from customers EBIT¹ 28.9 28.9 Full pass through so no profit effect Return on Sales %¹ 12.3% 14.8% Return on sales improvement being delivered as expected. Added 2.7 percenta
Slide 21: Dynacast 2007 actual sales growth
Dynacast 2007 Actual sales growth Sales increased by £14.2 million, 6.4% from £221.7 million in 2006 to £235.9 million in 2007. Underlying sales growth Underlying performance £’m Small acquisitions 5.0 Higher raw material recovery 8.4 Foreign exchange (translational and transactional) (7.5) Underlyi
Slide 22: MVC
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Slide 23: MVC locations and customers
MVC Locations Percentage revenue by key customer (2007) Rank Company Percentage Cum. Percentage 1 Ford 17% 17% 2 Toyota 15% 32% Staples 3 Hayes 14% 46% Troy 4 Superior 11% 57% 5 Prime 9% 66% 6 General Motors 7% 73% Nicholasville 7 Chrysler 6% 79% Newberry 8 Other 21% 100% Products Source McKechnie m
Slide 24: MVC year ended December 2007
MVC Year ended 31 December 2007 2007 Headline Results¹ 2006 Headline Results¹ Sales EBIT¹ ROS¹ Sales EBIT¹ ROS¹ £’m £’m % £’m £’m % Newberry 16.7 3.7 22.2% 13.3 2.8 21.1% Nicholasville 38.3 (0.5) (1.3)% 34.3 (1.0) (2.9%) MT&E (Tooling) 0.4 0.1 25% 0.4 0.1 25% Head Office (Engineering) - (3.8) - - (4
Slide 25: MVC improving in difficult marketplace
MVC Improving in difficult marketplace New plating line successfully installed. - Capable of full production - Introduction costs in 2007 P & L Sales - Volume growth - 2007 sales increase for better margin plastic clads from $4 million (2006) to $16 million (2007) - Important launch for GM in June 2
Slide 26: MPC
' MPC
Slide 27: MPC locations, sales by sector and customers
MPC Locations Sales by sector 10% 11% 3% 59% 17% Pickering Stamford Bridge Prelok Automotive Food/Beverage/Healthcare Canning Brett Electronics Construction/DIY Other 2 year Key customers share price performance Products Automotive Consumer Ford PAG Diageo Intier Honda Scotco Toyota Makita Manufactu
Slide 28: MPC year ended December 2007
MPC Year ended 31 December 2007 2007 Headline Results¹ 2006 Headline Results¹ Sales EBIT¹ ROS¹ Sales EBIT¹ ROS¹ £’m £’m % £’m £’m % Stamford Bridge 17.9 2.0 11.2% 21.9 1.9 8.7% Pickering 25.4 1.1 4.3% 24.2 0.5 2.1% Canning Brett 2.0 0.2 10.0% 1.7 0.1 5.9% Prelok 7.4 0.6 8.1% 6.1 0.5 8.2% Total 52.7
Slide 29: Questions
| Questions
Slide 30: Appendix
| Appendix
Slide 31: Disposals and Return of capital
Disposals and Return of capital Disposals May 2007 McKechnie Aerospace sold for $850 million (£428 million). - Exit multiple of c.12 x 2006 Ebitda - c.2.5 x investment (including net cash generated during ownership) - IRR of c.65% - Cash profit of over $500 million (including net cash generated duri