Slide 1: Full Year Results Announcement
March 2010 Strictly private and confidential Full Year Results Announcement Twelve months to 31 December 2009
Slide 2: Contents
Contents Sections 1 Highlights 2 Summary financial results 3 Summary of operating divisions 4 Energy 5 Lifting 6 Dynacast 7 Other Industrial 8 Questions 9 Appendix 2
Slide 3: Highlights
) Highlights
Slide 4: Highlights
Highlights First full year of FKI exceeded expectations − High quality businesses − FKI presented significant opportunity to grow margins − Cash generation excellent - working capital rebasing achieved − Restructuring to date successful and investment opportunities to improve further Pre FKI Group p
Slide 5: Highlights – margin growth and strong cash
Highlights – margin growth and strong cash Headline¹ operating profit (£m) - excellent progress in headline¹ operating margin (%) 2009 headline¹ EPS at 16.6p (2008²: 16.1p) 80.7 79.9 69.8 2009 headline¹ profit margin increased to 13.0% in H2 2009 H2 2009 headline¹ operating profit virtually back to
Slide 6: Summary financial results
) Summary financial results
Slide 7: First full year of FKI results
First full year of FKI results Income statement – statutory format Restated² year ended Year ended 31 Dec 2008 31 Dec 2009 (£m) (£m) Revenue 895.3 1,298.5 Cost of sales (677.9) (970.3) Net operating expenses – Headline¹ (120.8) (178.5) Net operating expenses – Exceptional items and intangible asset
Slide 8: Headline earnings per share 16.6p
Headline earnings per share 16.6p 1 Income statement – headline¹ results twelve months ended 31 December 2009 Headline¹ results Other² Total (£m) (£m) (£m) Revenue 1,298.5 - 1,298.5 Operating profit 149.7 (36.6) 113.1 Net finance costs (31.1) - (31.1) Profit before tax 118.6 (36.6) 82.0 Tax (36.1) 8
Slide 9: Improving margin trends and EPS growth
Improving margin trends and EPS growth Summary performance – half yearly trend Headline¹ operating profit H2 2009 headline¹ operating profit Revenue (£m) Headline¹ EPS (p) recovered to almost H2 2008 level. (£m) (14% up on H1 2009) 740 685 9.2 614 80.7 79.9 7.9 Headline¹ EPS increased due to 69.8 7.
Slide 10: Comparison with six months ago: EPS up 24%
Comparison with six months ago: EPS up 24% Summary performance – comparison with six months ago (H2 2009 v H1 2009) Headline¹ operating profit Stronger headline¹ operating profit Revenue (£m) Headline¹ EPS (p) (£m) despite 10% revenue fall Headline¹ EPS up by 24% 685 9.2 614 79.9 7.4 (10)% 69.8 24%
Slide 11: Comparison with a year ago: EPS up 16%
Comparison with a year ago: EPS up 16% Summary performance – comparison with a year ago (H2 2009 v H2 2008) Headline¹ operating profit Similar headline¹ operating profit Revenue (£m) Headline¹ EPS (p) despite 17% revenue fall (£m) 740 Headline¹ EPS up by 16% 9.2 614 80.7 79.9 7.9 (17)% 16% (1)% 10.9
Slide 12: Continued cost reduction
Continued cost reduction Cost reductions achieved since 1 July 2008 Other Energy Lifting Dynacast Industrial Total Labour cost reduction (since 1 July 2008) £20.2m £24.6m £15.4m £22.4m £82.6m Percentage of total labour costs 18% 21% 25% 28% 21% Total cash cost incurred to achieve reduction £5.5m £2.
Slide 13: H2 2009 highest period of cash generation
H2 2009 highest period of cash generation Cash generation and net debt Strong cash generation after all costs Cash generation from trading Net debt reduction (£m) including tax (£m) continued to be strong 90.5 92.7 31 Dec 08 30 Jun 09 31 Dec 09 H2 2009 was the strongest period since FKI ownership 61
Slide 14: Net debt & working capital halved in 18 months
Net debt & working capital halved in 18 months 3 Net working capital (£m) Operating cashflow (post capex) (£m) Profit conversion to cash (constant currency) 397 163% 263 % of revenue 246 154% 15.4% 183 130 149% 114 13.4% 8.8% Last 6 months Last 12 months Last 18 months Last 6 months Last 12 months L
Slide 15: All divisions producing strong cashflows
All divisions producing strong cashflows Operating cashflow (post capex) (£m) 151% 148% 181% 137% All continuing divisions show strong cash 92.2 92.6 generation (post capex)² Longer term Melrose average cash 61.0 62.5 generation significantly above profit at 38.6 132% 21.3 28.3 20.6 Energy Lifting D
Slide 16: Pensions being managed
Pensions being managed Pension, post retirement, life and medical benefits 31 December 2009 31 December 2008 Asset Liabilities Deficit Asset Liabilities Deficit (£m) (£m) (£m) (£m) (£m) (£m) FKI UK defined benefit pension plans 543.5 (660.6) (117.1) 494.5 (555.2) (60.7) McKechnie UK defined benefit
Slide 17: Income statement tax rate should reduce to 28%
Income statement tax rate should reduce to 28% Tax 2008 2009 Headline¹ income statement rate 30% 2 30% Headline¹ cash tax rate 22% 3% NB. 2009 cash tax includes a £9.8 million cash refund Current income statement tax rate – equal to 30% as expected (2008: 30% post FKI acquisition) – expected to redu
Slide 18: Summary of operating divisions
Summary of operating divisions − Energy − Lifting − Dynacast − Other Industrial
Slide 19: Ongoing divisions
Ongoing divisions Other Energy Lifting Dynacast Industrial Turbogenerators, Truth, Harris, Weber Marelli, Switchgear, Bridon, Crosby, Acco Dynacast Knapp, Madico, MPC, Transformers Traction, Logistex UK 12 months to 31 Dec 2009 Revenue (£m) 418.3 419.0 208.7 252.5 Headline¹ operating profit (£m) 61.
Slide 20: Energy — highlights
Energy — highlights Energy – headline¹ results H2 H1 H2 Full year Last six month Year over year (£m) 2008 2009 2009 2009 trend trend Revenue 229.4 231.6 186.7 418.3 (19%) (19%) Headline¹ EBITDA² 34.7 34.6 33.9 68.5 (2%) (2%) Headline¹ EBITDA² margin 15.1% 14.9% 18.2% 16.4% +3.3pps +3.1pps Headline¹
Slide 21: Lifting — highlights
Lifting — highlights Lifting – headline¹ results H2 H1 H2 Full year Last six month Year over year (£m) 2008 2009 2009 2009 trend trend Revenue 232.3 230.2 188.8 419.0 (18%) (19%) Headline¹ EBITDA² 40.2 36.6 35.1 71.7 (4%) (13%) Headline¹ EBITDA² margin 17.3% 15.9% 18.6% 17.1% +2.7pps +1.3pps Headlin
Slide 22: Dynacast — highlights
Dynacast — highlights Dynacast – headline¹ results H2 H1 H2 Full year Last six month Year over year (£m) 2008 2009 2009 2009 trend trend Revenue 120.1 95.7 113.0 208.7 18% (6%) Headline¹ EBITDA² 19.3 13.5 16.6 30.1 23% (14%) Headline¹ EBITDA² margin 16.1% 14.1% 14.7% 14.4% +0.6pps -1.4pps Headline¹
Slide 23: Other Industrial — highlights
Other Industrial — highlights Other Industrial – headline¹ results H2³ H1³ H2 Full year Last six month Year over year (£m) 2008 2009 2009 2009 trend trend Revenue 158.4 127.2 125.3 252.5 (1%) (21%) Headline¹ EBITDA² 13.8 9.7 18.3 28.0 89% 33% Headline¹ EBITDA² margin 8.7% 7.6% 14.6% 11.1% +7.0bps +5
Slide 24: Questions
! Questions
Slide 25: Appendix
| Appendix
Slide 26: Net exceptional costs and intangible asset amortisation
Financial results Appendix 1 Net exceptional costs and intangible asset amortisation Continuing Discontinued Non cash Non cash Full year 2009 (£m) Cash costs costs Total Cash costs costs Total Labour related one-off costs 15.4 - 15.4 1.9 - 1.9 Restructuring costs 8.5 - 8.5 - - - US retiree benefit p
Slide 27: Balance sheet
Financial results Appendix 2 Balance sheet Dec 2008¹ Dec 2009 FX movement (£m) (£m) (£m) Fixed assets, intangible assets and goodwill 1,579.3 1,436.6 (93.2) Net working capital 216.9 114.3 (13.2) Pension and retirement benefits (143.3) (169.1) 6.5 Provisions (158.9) (144.2) 5.5 Deferred tax and corp
Slide 28: Exchange rates
Financial results Appendix 3 Exchange rates 2008 (6 month average post FKI) 2009 US Dollar Euro US Dollar Euro Average rates 1.74 1.23 1.57 1.12 Closing rates 1.46 1.05 1.62 1.13 ¹ Before exceptional costs, exceptional income and intangible asset amortisation ² Operating profit before depreciation a
Slide 29: Leverage and credit bank facility
Financial results Appendix 4 Leverage ³ Net debt to headline¹ EBITDA² Jul 2008 Dec 2008 Jun 2009 Dec 2009 Net debt to headline¹ EBITDA² 2.70x 2.65x 2.13x 1.76x Credit bank facility Available £750 million committed loan facility Repaid (at current exchange rates) Drawn Undrawn Revolving credit facili
Slide 30: Net working capital reduction – total Group
Financial results Appendix 5 Net working capital reduction – total Group 01 July 2008 31 December 2008 31 December 2009 (£m) (£m) (£m) Net working capital - existing businesses¹ at balance sheet rates 209 214 114 Net working capital - constant currency (31 December 2009 exchange rates) 263 183 114 P
Slide 31: Remaining invested capital in FKI
Financial results Appendix 6 Remaining invested capital in FKI (£m) FKI acquisition price 970.4 Cash generated (after all costs including tax): - from trading (201.5) - from disposals (48.6) Remaining invested capital in FKI 720.3 2009 EBITDA¹ of remaining FKI businesses 165.4 Multiple of EBITDA¹ 4.