Melrose Industries Plc · LSE:MRO
Melrose Industries — Investor Day (October 2013)
57 slides from Melrose Industries's investor day presentation, Oct 7, 2013
Slide 1: Melrose Investor Day: Elster one year in
Buy Improve Sell Strictly private and confidential Melrose Investor Day Elster one year in London, 7 October 2013
Slide 2: Disclaimer
Disclaimer By attending the meeting where this presentation is made, or by reading this document, you agree to be bound by the limitations set out below. This presentation is being communicated only to those persons falling within Article 19 or Article 49 of the Financial Services and Market Act 200
Slide 3: Speakers
Speakers 1 Chris Miller, Melrose Chairman Melrose track record 2 Jerry Lauzze, CEO Elster Water Establishing a higher quality business through restructuring 3 Frank Hyldmar, CEO Elster Electricity Creating value from smart metering 4 Martyn Vaughan, CEO Elster Gas A substantial industrial gas opport
Slide 4: Melrose
Buy Improve Sell Melrose Chris Miller Chairman, Melrose London, 7 October 2013
Slide 5: Melrose track record
Melrose Buy Improve Sell Track record AIM (£13m market cap) to FTSE 100 (£3.8bn market cap) in less than ten years Created £2.7 billion of shareholder value since the start of Melrose ten years ago Quadrupled shareholder equity Average annual return on equity investment of 27% since the firs
Slide 6: Elster performing well
Buy Elster performing well What we said at acquisition A good quality business underperforming its potential Strong end markets Good market share Strong cash generation Energy demand, energy Global number 1 in gas conservation and Turns profit into cash well gasification Global top 3 in both Low
Slide 7: Elster ahead of the acquisition plans
Improve Elster ahead of the acquisition plans Elster – ‘one year in’ achievements to date Elster showing the fastest improvement in Melrose history Profit increased by over a third in the first year Original margin targets increased Elster now run as three businesses Presentations from:
Slide 8: Elster Water
Elster Water Jerry Lauzze CEO, Water London, 7 October 2013
Slide 9: Contents
Contents 1. Elster Water at a glance 2. Product range 3. Product strategy 4. Location overview 5. Market share & competitive position 6. Financial performance summary 7. Medium term growth 8. Key developments under Melrose ownership 9. Key profit drivers 10. Conclusion 9
Slide 10: Elster Water – at a glance
Elster Water – at a glance Proven, trusted metering solutions for the water industry 19% of Elster revenue1 5% of Elster profit1 A global industry leader since 1883 Operations in all major regions, 1000+ employees Sales in 90+ markets covering all major technologies 80 million meters deployed in the
Slide 11: Product range
Product range Elster water division 2012 sales: £213m1 Residential Commercial Smart 28% Solutions 58% 14% 1 At 2012 actual exchange rates 11
Slide 12: Product strategy – driving margin growth
Product strategy – driving margin growth V200P S220 H5000 V210P Brass Polymer Polymer Accuracy Average Price Margin Electronic AMR/AMI evoQ4 M200 2013 2014 2015 2016 Poly units Q200 V200H 12
Slide 13: Location overview
Location overview £ sales revenues shown for 2012 Water Division HQ, Luton, UK Injection moulding of precision measuring components High precision Americas EMEA quality £67m £118m control Asia/Oceania £28m Main European manufacturing sites in Slovakia (above) & UK Multi-jet meter production in Brazi
Slide 14: Market share & competitive position
Market share & competitive position Global meter market shares 20121 Elster share by region 20121 North America EMEA 12% 18% Others Itron (5%) 1 (incl Elster 18% partners) 34% Elster 14% (13%)1 Latin America Asia-Pacific Badger 2% 16% 5% Sensus Neptune 11% 4% Zenner Diehl 6% 11% 1 Figures in bracket
Slide 15: Financial performance summary
Financial performance summary Revenue1 Headline2 operating H1 2013 cash conversion profit Headline2 operating margin £217m 131% 10.2% Average headline2 operating £10.5m 3.3% profit conversion to cash (pre £7.1m capex) in H1 2013 4.5% £118m £103m £5.2m -13% Working capital to +105% revenue FY 2012 H1
Slide 16: Medium term growth – driven by global challenges
Medium term growth – driven by global challenges Scarcity Conservation Quality Customers 16
Slide 17: Medium term growth – substantial demand
Medium term growth – substantial demand Global market North America 9% EMEA 4% £ CAGR 6% 7.9m 27m 6.8m units 24m units units units £274m 128million £204m units £659m 108 million £455m units £493m £507m £1009m £113m £74m 2013 2016 2013 2016 £703m Latin America 5% Asia-Pacific 6% 79m 64m units 12m uni
Slide 18: Key developments under Melrose ownership
Key developments under Melrose ownership Key changes post acquisition Productivity and profit improvement Sales Manufacturing footprint consolidated £10.5m Profit to drive efficiencies and serve key regional sites £7.3m Revised business model for high value £5.8m markets including North America
Slide 19: Water strategy – key profit drivers
Water strategy – key profit drivers Launch higher Focus on highest Drive operational margin product margin markets efficiency mix & customers globally Polymer Market Consolidated meters, C&I penetration large fully meters, Europe, Middle utilised electronic East, North continental meters & AMR/I Ame
Slide 20: Conclusion
Conclusion 1 Large global supplier – an industry leader Presence in all major water markets with revenues from all continents Broad product portfolio to meet global market requirements 2 Long term customer relationships & strategic partnerships Strong contracted revenues in key markets Signi
Slide 21: Thank you
Thank you Jerry Lauzze CEO, Water
Slide 22: Elster Electricity
Elster Electricity Frank Hyldmar CEO, Electricity London, 7 October 2013
Slide 23: Contents
Contents 1. Elster Electricity at a glance 2. Product range the smart opportunity 3. Revenue by product, end market and geography 4. Location overview 5. Market share & competitive position 6. Financial performance summary 7. Medium term growth 8. Key developments under Melrose ownership 9. Glob
Slide 24: Elster Electricity – at a glance
Elster Electricity – at a glance 24% of Elster revenue1 10% of Elster profit1 ? Sales and assembly in all major regions ?Smart projects and trusted partner with most key utilities globally ? Market leading position in Smart Metering and Grid Solutions ? More than 3.5 Million deployed Smart Meter end
Slide 25: Product range – the smart opportunity
Product range the smart opportunity Single and polyphase electronic meters 1 2 3 4 5 Meters Networks Value added Meter data Open software smart secure For 3rd party services collection applications streamlined Interoperable by design 25
Slide 26: Product range – the smart opportunity
Product range the smart opportunity Complete infrastructure with end-points, repeaters and data concentrators/gateways 1 2 3 4 5 Meters Networks Value added Meter data Open software smart secure For 3rd party services collection applications streamlined Interoperable by design 26
Slide 27: Product range – the smart opportunity
Product range the smart opportunity Planning, logistics and installation services 1 2 3 4 5 Meters Networks Value added Meter data Open software smart secure For 3rd party services collection applications streamlined Interoperable by design 27
Slide 28: Product range – the smart opportunity
Product range the smart opportunity Interoperability for multiple vendors 1 2 3 4 5 Meters Networks Value added Meter data Open software smart secure For 3rd party services collection applications streamlined Interoperable by design 28
Slide 29: Product range – the smart opportunity
Product range the smart opportunity Intelligent handling of actionable information 1 2 3 4 5 Meters Networks Value added Meter data Open software smart secure For 3rd party services collection applications streamlined Interoperable by design 29
Slide 30: Product overview – the smart opportunity
Product overview the smart opportunity Intelligence in every step of the energy value chain 1 2 3 4 5 Meters Networks Value added Meter data Open software smart secure For 3rd party services collection applications streamlined Interoperable by design 30
Slide 31: Revenue by product, market and geography
Revenue by product, market and geography By product type Networks Meter data collection Metering & services 70% 20% 10% Commercial & residential By market type By geography 9% 50% Smart North America 23% metering Europe 16% 77% Non-smart Latin America metering RoW 25% 31
Slide 32: Location overview
Location overview Elster Metering Ltd., Elster Metronica Stafford (UK) Moscow (RUS) Elster Solutions Elster GmbH, Raleigh (USA) Mainz-Kastel (GER) Elster Meditores S.A. Buenos Aires (ARG) Elster Electricity site with assembly Elster Electricity office Elster Medicao de Energia Cachoerinha (BRA) 32
Slide 33: Market share & competitive position
Market share & competitive position Metering business £3bn worldwide 1 Sector suppliers1 2% 10% 12% 11% 19% 46% 9% 69% 7% 5% 5% 2% 3% Landis+Gyr Itron Residential Metering C & I Metering Elster Silver Spring Networks Networks other Sensus PRI Secure Aclara Chinese Manufacturers Other competitors Ke
Slide 34: Financial performance summary
Financial performance summary Revenue1 Headline2 operating H1 2013 cash conversion profit growth Headline1 operating margin £275m 5.7% 174% £15.6m Average headline2 operating profit conversion to cash (pre capex) in H1 2013 £134m 5.3% £118m 2.8% £6.2m -12% £3.8m Working capital to +63% revenue FY 20
Slide 35: Medium term growth: electricity meters
Medium term growth Electricity meters global growth Global total electricity meter demand1 2 forecasted 100,000 Two-way Global electricity meters demand 90,000 smart meter Global market volumes are forecast to grow 80,000 Unit Shipments (k) 70,000 substantially from 2013 until the end of 2017 60,0
Slide 36: Medium term growth: meter data software
Medium term growth Meter data software market will continue to grow and is essential for the continuous sales process Observations Outlook Most utilities have yet to effectively integrate Having meter data collection and meter data the data provided by AMI systems beyond management is important
Slide 37: Key developments under Melrose ownership
Key developments under Melrose ownership Production and supply chain Technology leadership Investment in new software generation to meet Consolidated assembly and supply chain market demand for open interfaces for NA into Mexico Strategy in place to migrate legacy software Investment in auto
Slide 38: Global technology leadership
Global technology leadership Non technical losses – South America Distribution automation – Russia / CIS Multi utility - Europe Smart grid solutions – North America Significant investment for the future: Project Jupiter Align software offering across all Interoperability with all main smart enti
Slide 39: Conclusion
Conclusion 1 Continued investment under Melrose ownership 2 Clear strategy: become the global leader in smart metering and grid solutions 3 Assembly and supply chain improved 4 Increase service revenue across all product categories 39
Slide 40: Thank you
Thank you Frank Hyldmar CEO, Electricity
Slide 41: Elster Gas
Elster Gas Martyn Vaughan CEO, Gas London, 7 October 2013
Slide 42: Contents
Contents 1. Elster Gas at a glance 2. Product range 3. Revenue by end market and geography 4. Location overview 5. Market share & competitive position 6. Financial performance summary 7. Medium term growth 8. Key developments under Melrose ownership 9. Focusing on Industrial & Commercial 10. Concl
Slide 43: Elster Gas – at a glance
Elster Gas – at a glance 57% of Elster revenue1 85% of Elster profit1 The global leader in gas metering Extensive product portfolio across the gas value chain Highly profitable Excellent growth prospects 1 Results for the year ended 31 December 2012 43
Slide 44: Product range - the Gas value chain
Product range - the Gas value chain Upstream Midstream Downstream Liquid natural gas Conventional Gas Liquid natural gas Transport and Storage Residential (On and Off-shore) Liquefaction Shipping Receiving Local Commercial Distribution NG Vehicles Extraction Processing Unconventional Gas Pipelines U
Slide 45: Product range - metering and related products
Product range - metering and related products 71% of Gas revenue Upstream Midstream Downstream Extraction, pipelines, gas stations Industrial, commercial, residential Europe/ROW Rotary piston meter USA meter meter Ultrasonic meter Turbine meter Volume Gas Regulator Turbine meter corrector chromatogr
Slide 46: Product range - gas utilisation products
Product range - gas utilisation products 29% of Gas revenue Industrial process heat Residential heating Single burner Heat generation (low temperature (combustion) applications) Multi burner Heat management (high temperature (comfort controls) applications) 46
Slide 47: Revenue by end market and geography
Revenue by end market and geography Revenue by end market Revenue by geography 4% 4% 5% Mid/ Upstream, 4% 11% 1% Residential meter & related, 33% 48% Commercial & Industrial, 40% Other non- meter, 29% 16% 5% Commercial & Industrial: Residential meter & related: Standard commercial meter – 6% Standar
Slide 48: Location overview
Location overview Lotte, Germany Lotte, Germany Worldwide locations 856 employees Established 65 years Residential & Commercial meters Residential Heating Industrial process heat Mainz, Germany Lotte Moscow 454 Employees Stafford/Melton Hjorring Arzamas Founded 1848 Burlington Mainz
Slide 49: Market share & competitive position
Market share & competitive position Metering and related products Gas Utilisation products 2012 global market £2.1bn 2012 global market £1.0bn 22% 21% Elster Honeywell Itron 42% Elster 55% Emerson Siemens 13% Honeywell Dungs Sensus 18% Eclipse 6% Others 3% Others 1% 9% 4% 6% Elster number 1 global
Slide 50: Financial performance summary
Financial performance summary Revenue1 Headline2 operating H1 2013 cash conversion profit 20.7% Headline2 operating margin £669m £138.5m 72% Average headline2 operating 21.9% profit conversion to cash (pre 20.8% capex) in H1 2013 £76.1m £348m £69.6m £334m +9% +4% Working capital to revenue FY 2012 H
Slide 51: Medium term growth: The golden age of gas
Medium term growth The golden age of gas 51
Slide 52: Key developments under Melrose ownership
Key developments under Melrose ownership Elster Gas – the first 12 months Key developments A “joined up” company One Global Gas business Strategic plan (hope is not a strategy!) Top to bottom culture change An empowered management team running the business From top line to bottom line driv
Slide 53: Focusing on Commercial and Industrial
Focusing on Commercial and Industrial Why? How? Take advantage of the upstream Significant investment in new product gasification demand increase research and development (64% of total) Good downstream “smart” business case also driving demand Four significant new products launched in 2013
Slide 54: Elster Gas – the next 4 years
Elster Gas – the next 4 years Strategy Drive Sales Growth Execute Commercial and Industrial product strategy Take bigger share of US non residential market Get fair share of European residential smart meter market Increased Productivity Further improve sales/profit per employee (+8%/+14% res
Slide 55: Conclusion
Conclusion 1 Strong and respected brand with a quality product Supplying to over 130 countries worldwide 75 million gas metering devices deployed in last ten years 2 Good forecast market growth in next five years Strong upstream and downstream gas market exposure Leading European smart meter
Slide 56: Thank you
Thank you Martyn Vaughan CEO, Gas
Slide 57: Q&A
Q&A 57