Slide 1: 2018 Interim Results
C MACFARLANE GROUP 2018 Interim Results -
Slide 2: Overview
Overview • Executive Summary • 2018 Interim Results/Cash flow • Business Review ▪ Packaging Distribution ▪ Manufacturing Operations • Pension Scheme Deficit • 2018 H2 Key Actions • Conclusions 2
Slide 3: Executive Summary
Executive Summary H1 2018 H1 2017 Profit before tax £3.5m £2.5m • Group sales £102m, 14% growth on 2017 • Distribution sales growth 14% of which 5% organic, 9% acquisition • Distribution profit growth of 39% in H1 2018 • Manufacturing Operations sales growth 11%, profits just below 2017 • Pension de
Slide 4: Financial Summary – H1 2018
Financial Summary – H1 2018 Revenue Profit before tax EBITDA Revenue and profit ▲ 14% ▲ 39% ▲ 35% Pre-tax ROCE H1 Bank debt Pension deficit Returns and balance sheet 12% ▲£10.9m ▲£9.4m Diluted EPS EPS Dividend per share EPS and dividend ▲ 19% ▲ 1.81p ▲ 0.65p 4
Slide 5: Results £m
Results £m H1 2018 H1 2017 H2 2017 Sales 102.0 89.8 106.2 Gross Profit 31.1 27.5 32.8 Overheads exc. DA 25.4 23.3 23.9 EBITDA 5.7 4.2 8.9 Depreciation/amortisation 1.8 1.3 1.7 Operating profit 3.9 2.9 7.2 Interest 0.4 0.4 0.4 Profit before tax 3.5 2.5 6.8 Diluted EPS 1.81p 1.52p 3.70p Dividend 0.65p
Slide 6: Cash Flow £m
Cash Flow £m H1 2018 H1 2017 H2 2017 EBIT 3.9 2.9 7.2 DA 1.8 1.3 1.7 EBITDA 5.7 4.2 8.9 Working Capital 3.6 3.2 (4.0) Interest (0.3) (0.4) (0.1) Acquisitions 0.0 (0.3) (8.0) Share placing 0.0 0.0 7.6 Tax (0.7) (0.7) (1.2) Capital expenditure (0.7) (0.8) (0.9) Pension (1.6) (1.8) (1.5) Dividend (2.4)
Slide 7: Profit Progression
Profit Progression Profit before tax EPS 10 5.5 9 5 8 4.5 4 7 3.5 6 3 5 2.5 4 2 3 1.5 2 1 1 0.5 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 Profit Earning per share 7
Slide 8: Packaging Distribution
Packaging Distribution £m H1 2018 H1 2017 Revenue 89.1 78.1 Gross margin 29.3% 29.0% Overheads 22.4 19.9 Operating profit 3.7 2.7 OP Margin 4.2% 3.5% • Sales increase 14%, 5% organic and 9% acquisition • Sales split 71% Industrial 29% Retail • Gross margin 29.3%, reflects 2017 acquisition benefit an
Slide 9: Packaging Distribution – raw material movements
Packaging Distribution – raw material movements £1,250 £600 £575 £1,225 £550 £1,200 £525 £1,175 £500 £475 £1,150 £450 £1,125 £425 £1,100 £400 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Polymer £/tonne £1,129 £1,203 £1,194 £1,227 £1,225 £1,242 £1,194 £1,233 £1,239
Slide 10: Packaging Distribution
Packaging Distribution • Revenue increases in H1 from internet retail upspend from Dixons/Carphone £0.2m, TK Maxx £0.2m • Internet retail ca. 20% of Distribution revenue • National Accounts growth up significantly with strong increase from Rittal £0.3m, Keter £300k and Thermofisher £0.3m • Acquisiti
Slide 11: Packaging Distribution – Acquisitions 2014 to 2017
Packaging Distribution – Acquisitions 2014 to 2017 EBITDA Placing Acquisition Location Sales Integrated multiple price Reading £3m 5-6 x N/A ✓ 5-6 x Wolverhampton £9m Sep-14 37.5p Q1 2019 ✓ Bingham £5m 5x N/A Teesside £3m 5x N/A ✓ Glasgow £3m 5x N/A ✓ Leicester £9m 5-6 x Jul-16 58.0p TBD Nottingham
Slide 12: Packaging Distribution – Acquisitions 2018
Packaging Distribution – Acquisitions 2018 Tyler Packaging (Leicester) Limited • Quality cash-generative packaging distributor • Access to good quality customer relationships • Same supplier base as Macfarlane Leicester • Net assets acquired ca £0.9m • Should integrate well Sales £2.5m EBITDA 5x Dec
Slide 13: Macfarlane Design and Manufacture
Macfarlane Design and Manufacture £m H1 2018 H1 2017 Revenue 7.0 6.0 Gross Margin 35.1% 36.8% Operating profit 0.1 0.1 Sales to Distribution 23% 24% • Strong sales demand from exporters • Amended shift system to reduce costs from Q2 to improve manufacturing workflows when absorbing new business wins
Slide 14: Macfarlane Labels
Macfarlane Labels £m H1 2018 H1 2017 Revenue 8.0 7.6 Gross margin 33.6% 38.1% Operating Profit 0.1 0.2 Self-Ad/Reseal-it % 53/47 56/44 Net Margin 1.2% 2.6% • Re-sealable labels sales/machines up 7% • Self-adhesive label sales up 6% • Adverse sales mix with reseal-it pre-applied / self-adhesive label
Slide 15: Pension Scheme Deficit £m
Pension Scheme Deficit £m H1 2018 2017 Opening deficit (11.8) (14.5) Ongoing accrual/Interest cost (0.2) (0.5) Contributions 1.6 3.4 Bond yield 0.1% to 2.6% (2017 0.2%) 1.4 (2.9) Investment returns (0.9) 3.7 Net effect of other assumptions 0.5 (1.0) Closing deficit (9.4) (11.8) • Continued decre
Slide 16: Pension Scheme Details £m
Pension Scheme Details £m Investments H1 2018 2017 Growth assets Disinvested H1 Diversified Growth Funds - £1.1m 19.9 21.5 Equities 17.9 17.7 European Loan Fund 6.6 6.6 Long-term Property Fund 6.8 6.6 Matching assets Liability-driven Investments 28.7 28.5 Cash 0.3 0.1 Total investments 80.2 81.0 Lia
Slide 17: Profitable Growth in Packaging Distribution
Profitable Growth in Packaging Distribution Growth Proposition Capability Reduce total cost of Expertise, 3PL partnerships Retail packaging and customer referrals Rationalise packaging UK national network Industrial supplier base to reduce costs IT capability Rationalise packaging Geographic expansi
Slide 18: Profitable Growth in Manufacturing
Profitable Growth in Manufacturing Growth Proposition Capability Aerospace, Medical, Unique protection for high Leading-edge MOD Electronics value, fragile Items approved Design, expertise Ease of opening, food waste Re-sealable Labels Proven Patented technology reduction and brand integrity Perform
Slide 19: Conclusions
Conclusions • H1 2018 demonstrates continuing progress in line with strategy • Trading agenda: ▪ Distribution focus on identified growth opportunities – Internet Retail, National Accounts (mainly industrial customers) and 3PL ▪ Manufacturing focus on higher added value products and services ▪ Ongoin
Slide 20: Macfarlane Business Case
Macfarlane Business Case Strong operating Good market Clear plans A simple and and a track companies positions with flexible record of with growth business model performance differentiated potential propositions 20