Melrose Industries Plc · LSE:MRO
Melrose Industries — FY2017 Earnings Presentation
21 slides from Melrose Industries's earnings presentation, Feb 20, 2018
Slide 1: Melrose Industries PLC Full Year Results
Buy Improve Sell Strictly private and confidential Melrose Industries PLC Full Year Results Twelve months to 31 December 2017 20 February 2018
Slide 2: Contents
Contents Sections 1 Highlights 2 Summary financial results 3 Nortek & Brush 4 Questions Buy Improve Sell 2
Slide 3: Highlights
Buy Improve Sell Highlights 3
Slide 4: Highlights in 2017
Highlights in 2017 Underlying1 Statutory £m results results Revenue 2,092.2 2,092.2 Operating profit/(loss) 278.4 (6.9) Profit/(loss) before tax 257.7 (27.6) Diluted earnings per share 9.8p (1.2)p Nortek underlying1 results are better on all measures; revenue growth is 2%2 with increased momentum
Slide 5: Summary financial results
Buy Improve Sell Summary financial results 5
Slide 6: Income Statement
Income Statement Full year to 31 December 2017 Continuing operations £m Revenue 2,092.2 Operating loss (6.9) Loss before tax (27.6) Tax 3.7 Loss after tax (23.9) Underlying1 operating profit 278.4 Underlying1 profit before tax 257.7 Underlying1 profit after tax 190.9 Underlying1 diluted earnings per
Slide 7: Reconciliation of statutory results to underlying performance
Reconciliation of statutory results to underlying performance A reconciliation of the statutory results to the underlying performance £m 2017 statutory loss before tax (27.6) Impairment of Brush assets 144.7 Amortisation of intangible assets 81.4 Restructuring costs 35.0 Acquisition and disposal c
Slide 8: 2017 underlying operating results by division
2017 underlying1 operating results by division Air Security & Smart £m Management Technology Ergonomics Energy Revenue 1,159.6 440.7 272.9 219.0 Underlying1 operating profit 146.1 70.7 69.6 17.5 Underlying1 operating margin 12.6% 16.0% 25.5% 8.0% Revenue growth2,3 +3% +2% -3% -14% Underlying1 operat
Slide 9: Foreign exchange forward looking
Foreign exchange forward looking 2017 2016 USD CNY USD CNY 12 month average rates 1.29 8.71 1.36 8.99 4 month average rates (Sep – Dec) n/a n/a 1.26 8.56 Closing rates 1.35 8.80 1.23 8.57 On-going sensitivity of profit to translation and unhedged transaction exchange risk Increase/(decrease) in un
Slide 10: Summary financial results Cash performance
Buy Improve Sell Summary financial results Cash performance 10
Slide 11: Strong cash generation, significant investment
Strong cash generation, significant investment Group Underlying1 profit £m FY 2017 Nortek Brush conversion to cash Underlying1 operating profit 278.4 284.3 17.5 Air Depreciation 34.7 25.5 9.2 Management 97% Working capital movement (16.1) (17.4) 1.8 Operating cash flow (pre capex) 297.0 292.4 28.5 S
Slide 12: Balance Sheet – working capital, capital expenditure, tax
Balance Sheet – working capital, capital expenditure, tax 31 Dec Working capital Working capital £m 2017 Fixed assets, intangible assets and goodwill 2,456.5 Net working capital 241.0 £241.0m Pensions and retirement benefits (17.6) Working capital is 12% Provisions (209.8) of revenue Deferred tax an
Slide 13: Summary of operating divisions
Buy Improve Sell Summary of operating divisions Nortek Revenue by end market Brush 5 1 Nortek – Home 56% 4 2 Nortek – Work 22% 3 3 Nortek – Health 8% 1 4 Nortek – Education 4% 2 5 Brush 10% 13
Slide 14: Nortek
Nortek 90% of Melrose1 Nortek is a global, diversified group which manufactures innovative air management, security, home automation and ergonomic and productivity solutions 14 1. Based on 2017 revenue for all continuing businesses
Slide 15: Nortek
Nortek Nortek trading has been transformed more comprehensively and faster than envisaged at the time of acquisition Second half performance stronger than the first half Underlying1 operating margins in excess of 15%, being the original three to five year aim at the time of acquisition Under
Slide 16: Nortek – underlying results
Nortek Nortek – underlying1 results Security & Smart Nortek Group5 Air Management Ergonomics Technology £m FY 2017 Growth3,4 FY 2017 Growth3,4 FY 2017 Growth3,4 FY 2017 Growth3,4 Revenue 1,873.2 +2% 1,159.6 +3% 440.7 +2% 272.9 -3% Underlying1 EBITDA2 309.8 +40% 165.0 +41% 73.8 +41% 72.4 -6% Underlyi
Slide 17: Nortek – actions achieved and underway
Nortek – actions achieved and underway Security & Smart Air Management Ergonomics Technology Management changes Management changes Investment for Consolidation of Security & Smart growth Further consolidation of the two HVAC businesses into one management team Technology under one Investment for App
Slide 18: Brush
Brush 10% of Melrose1 Brush Turbogenerators is a market leading independent manufacturer of electricity generating equipment for the power generation, industrial, oil & gas and offshore sectors 18 1. Based on 2017 revenue for all continuing businesses
Slide 19: Brush – underlying results
Brush Brush – underlying1 results Brush £m FY 2017 Growth3 Revenue 219.0 -14% Underlying1 EBITDA2 26.7 -37% Underlying1 EBITDA2 margin % 12.2% -4.5ppts Underlying1 operating profit 17.5 -47% Underlying1 operating margin % 8.0% -5.0ppts Order intake 220.9 -3% Book to bill % 101% Structural decline
Slide 20: Brush restructuring for new market conditions
Brush restructuring for new market conditions Previously announced structural market changes caused by global environmental policy Fall in gas turbine market volumes of >60% from 2011 peak ‒ Brush’s turbogenerator sales fallen from 122 units in 2016 to c.50 expected in 2018 Entered into a cons
Slide 21: Questions
Buy Improve Sell Questions 21