Slide 1: 2017 Results Presentation
2017 Results Presentation 27th February 2018 www.morganadvancedmaterials.com
Slide 2: Agenda
Agenda • Introduction and key highlights – Pete Raby • 2017 results – Peter Turner • Operational and strategic update – Pete Raby 2
Slide 3: Key highlights
Key highlights • Strategy implementation firmly on track • Improving momentum with return to organic growth: ˗ FY organic growth of 1.4% ˗ 2H organic growth of 2.8% • EBITA margins at 11.7% with additional investment of £8m in technology, sales and wider business infrastructure • Two divestments com
Slide 4: 2017 results
2017 results Peter Turner MMorgan i< Advenced Materials:
Slide 5: Group performance summary
Group performance summary Organic % 1 1 % change FY 2017 FY 2016 change from from FY 2016 FY 2016 At constant £m £m As reported currency Revenue 1,021.5 989.2 3.3% 1.4% Group headline operating profit2 119.7 116.9 2.4% 3.5% Group headline operating profit margin % 2 11.7% 11.8% Free cash flow before
Slide 6: Divisional performance
Divisional performance Revenue (£m) Headline Operating Profit (£m) EBITA margin (%) FY 2017 FY 2016 FY 2017 FY 2016 FY 2017 FY 2016 Thermal Ceramics 426.2 413.3 56.9 55.0 13.4% 13.3% Molten Metal Systems 46.9 43.5 7.0 6.7 14.9% 15.4% Thermal Products 473.1 456.8 63.9 61.7 13.5% 13.5% Electrical Carb
Slide 7: Cash flow summary
Cash flow summary FY 2017 FY 2016 £m £m EBITDA 150.3 147.4 • Focus on working capital Change in working capital 1.3 (5.3) Change in provisions & other (22.1) (13.8) delivered benefits Additional pension payment to US scheme (28.0) - Cash flow from operations 101.5 128.3 • Closing net debt Cash flow
Slide 8: Pensions update – funding position improved
Pensions update – funding position improved and increased asset allocation to ‘matching’ assets Deficit movement since 31 Dec 2016 (£m) Deficit at 31 December 2016 (271) Foreign exchange 1 Return on assets 27 Contributions (net of service and finance costs) 40 Disposal of Rotary Transfer Systems lia
Slide 9: FY18 Guidance – financial items
FY18 Guidance – financial items Headline tax rate 28 - 29% Interest charge (at current FX rates) c. £8m c. £13m IAS19 pensions finance charge c. £5m Funded pension scheme contributions c. £16m 9
Slide 10: Operational and strategic update
Operational and strategic update Pete Raby 10
Slide 11: Thermal Ceramics: performance summary
Thermal Ceramics: performance summary % change from Organic % change £m FY 2017 FY 2016 FY 2016 from FY 2016 As reported At constant currency Revenue 426.2 413.3 3.1% -1.6% EBITA 56.9 55.0 3.5% -1.0% EBITA margin % 13.4% 13.3% Performance commentary Strategic focus • Growth in Asia driven by strong
Slide 12: Molten Metal Systems: performance summary
Molten Metal Systems: performance summary % change from Organic % change £m FY 2017 FY 2016 FY 2016 from FY 2016 As reported At constant currency Revenue 46.9 43.5 7.8% 0.9% EBITA 7.0 6.7 4.5% -2.8% EBITA margin % 14.9% 15.4% Performance commentary Strategic focus • Modest growth against prior year,
Slide 13: Electrical Carbon: performance summary
Electrical Carbon: performance summary % change from Organic % change £m FY 2017 FY 2016 FY 2016 from FY 2016 As reported At constant currency Revenue 157.1 156.2 0.6% 3.1% EBITA 16.7 19.7 -15.2% -6.2% EBITA margin % 10.6% 12.6% Performance commentary Strategic focus • Growth in China and Europe, wi
Slide 14: Seals and Bearings: performance summary
Seals and Bearings: performance summary % change from Organic % change £m FY 2017 FY 2016 FY 2016 from FY 2016 As reported At constant currency Revenue 113.2 97.7 15.9% 10.9% EBITA 17.5 14.2 23.2% 17.4% EBITA margin % 15.5% 14.5% Performance commentary Strategic focus • Strong organic growth driven
Slide 15: Technical Ceramics: performance summary
Technical Ceramics: performance summary % change from Organic % change £m FY 2017 FY 2016 FY 2016 from FY 2016 As reported At constant currency Revenue 257.1 248.1 3.6% 6.1% EBITA 28.3 26.6 6.4% 18.9% EBITA margin % 11.0% 10.7% Performance commentary Strategic focus • Good growth driven by the • Gro
Slide 16: Composites and Defence Systems: performance summary
Composites and Defence Systems: performance summary % change from Organic % change £m FY 2017 FY 2016 FY 2016 from FY 2016 As reported At constant currency Revenue 21.0 30.4 -30.9% -31.1% EBITA (1.1) 1.1 -200.0% -200.0% EBITA margin % -5.2% 3.6% Performance commentary Strategic focus • Revenue decli
Slide 17: Reliable problem solving
Our vision is to be renowned for world-class material science, application engineering and customer focus • Scalable global Material businesses science • In growing markets Reliable • Where technical problem differentiation is valued solving Ethically and safely Application engineering Customer focu
Slide 18: Six execution priorities
Six execution priorities 1. Move to a global structure 2. Extend our technology leadership 3. Improve operational execution 4. Drive sales effectiveness and market focus 5. Increase investment in people management and development 6. Simplify the business Execution priorities highlighted in blue will
Slide 19: 2. Technology investment on track
2. Technology investment on track R&D as a percentage of sales, 2014-2017 • Investment in R&D increased to 4.0% 3.4% of sales 3.5% 3.0% • The four Centres of Excellence 2.5% are driving a range of materials 2.0% and process developments 3.4% 1.5% 3.0% 2.8% 2.3% • We will continue incrementally 1.0%
Slide 20: 3. Operational improvements funding investment in technology and sales
3. Operational improvements funding investment in technology and sales Net operational efficiencies Key areas of focus Lean & Continuous Improvement: Lean programme in Thermal Ceramics and site by site Continuous Improvement programmes across the business Yield / Scrap: Technical Ceramics, Electrica
Slide 21: 4. Long term process and capability development in sales teams
4. We are focused on long term process and capability development in the sales teams • Completed three pilot projects launched in H2 in Thermal Ceramics, Electrical Carbon and Seals and Bearings focused on pricing, value selling, segmentation and sales process Process • Identified streamlining and a
Slide 22: Summary
Summary • Strategy implementation firmly on track • Improving momentum with return to organic growth: ˗ FY organic growth of 1.4% ˗ 2H organic growth of 2.8% • EBITA margins at 11.7% with additional investment of £8m in technology, sales and wider business infrastructure • Two divestments completed,
Slide 23: Appendix
Appendix MMorgan c Advenced Materials:
Slide 24: End market mix (as a % of revenue)
End market mix (as a % of revenue) Main markets by GBU Thermal Ceramics: Industrial, Chemical & Petrochemical, Industrial Metals, Automotive 5% 5% Transportation MMS: 6% Aluminium (automotive), Copper (construction), Precious Metals Petrochemical and Chemical 6% Electrical Carbon: 48% Energy Rail, I
Slide 25: Reported statutory figures
Reported statutory figures Results before specific Specific adjusting items Total adjusting items FY 2017 (£m) FY 2017 (£m) FY 2017 (£m) Revenue 1021.5 - 1021.5 Operating costs before restructuring costs, other one-off items and (901.8) - (901.8) amortisation / impairment of intangible assets Profit
Slide 26: Key exchange rates
Key exchange rates FY 2017 FY 2016 GBP to: Closing Average Closing Average rate rate rate rate USD 1.35 1.29 1.23 1.35 EUR 1.13 1.14 1.17 1.22 Key exchange rate sensitivities on results Revenue EBITA Increase in full year revenue / Group EBITA if: £m £m GBP weakens by 10c against the US dollar in is
Slide 27: Headline EPS
Headline EPS FY 2017 FY 2016 £m £m Profit for the period attributable to ordinary shareholders 107.6 52.3 Amortisation 7.3 7.9 Total specific adjusting items post-income tax (50.7) 4.5 Headline earnings 64.2 64.7 Weighted average number of shares in the period 285.0m 285.1m Headline earnings per sha
Slide 28: Group Funding
Group Funding • Net debt to EBITDA: 1.2x (2016: 1.6x) • €20m and $175m Private Placement Notes repaid in 2017 • £200m Revolving Credit Facility matures October 2019 300 250 Facilities Maturity Profile 200 £m 150 100 50 0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 USD PP EUR PP
Slide 29: Impacts of new accounting standards
Impacts of new accounting standards IFRS 15 Revenue from Contracts with Customers is effective for periods beginning on or after 1 January 2018 and introduces a new revenue recognition model that requires the transaction price receivable from customers to be allocated between the Group’s performance
Slide 30: 2017 Results Presentation
2017 Results Presentation 27th February 2018 www.morganadvancedmaterials.com