Senior Plc · LSE:SNR
Senior — H1 2020 Earnings Presentation
56 slides from Senior's earnings presentation, 2020
Slide 1: Interim Results 2020
INTERIM RESULTS 2020 Robust cash performance in the period Interim Results 2020
Slide 2: Agenda
AGENDA Introduction David Squires CEO 2020 Interim Results Bindi Foyle FD Markets, Strategy & Outlook David Squires CEO Cautionary Statement This document has been prepared solely to provide additional information to enable shareholders to assess the Group’s strategy and business objectives and the
Slide 3: H1 2020 Summary
H1 2020 SUMMARY • Significant impact from COVID-19 and 737 MAX • All our manufacturing sites are operational: appropriate Health & Safety measures in place • Robust free cash flow of £16.0m; net debt/EBITDA of 1.6x; headroom increased to £162m • The FAA and Boeing completed 737 MAX certification fli
Slide 4: Coronavirus (COVID-19) Update – Business Continuity
CORONAVIRUS (COVID-19) UPDATE – BUSINESS CONTINUITY • Health & wellbeing of employees our highest priority • All manufacturing sites operational with appropriate health and safety measures in place • Coronavirus Oversight Committee, chaired by CEO, continues to monitor employee welfare and business
Slide 5: Environmental, Social & Governance
ENVIRONMENTAL, SOCIAL & GOVERNANCE First worldwide in our sector to have Safety and Ethics, our highest priority Extensive focus on Covid- emissions reduction targets approved 19 actions to provide safe by the Science Based Targets initiative 62% reduction in Lost working environments (SBTi) Time In
Slide 6: 2020 Interim Results
2020 INTERIM RESULTS Interim Results 2020
Slide 7: Coronavirus (COVID-19) Update – End-Markets Disruption
CORONAVIRUS (COVID-19) UPDATE – END-MARKETS DISRUPTION Air Passenger Forecast North American Class 8 Truck Production Forecast (Thousands) 14 400 Thousands 9% 27% 6% (RPK) tn Scenario 1 350 12 Scenario 2 31% 21% 300 10 -29% 12% 27% Revenue passenger kilometre Scenario 3 250 -51% 8 200 6 150 100 4 50
Slide 8: Financial Highlights
FINANCIAL HIGHLIGHTS H1 2020 H1 2019 Change constant currency Revenue £409.0m £580.4m -30% -30% Adjusted Operating Profit £9.0m £46.2m -81% -81% Adjusted Operating Margin 2.2% 8.0% -580bps -580bps Adjusted Profit before Tax £3.6m £40.7m -91% Adjusted Earnings per Share 0.72p 7.84p -91% Interim Divid
Slide 9: H1 2020 at a Glance
H1 2020 AT A GLANCE £m 650 Revenue 600 580.4 5.7 (136.6) Aerospace(1) H1 2020 H1 2019 Change 550 £m £m $1.27(H1 19: 1.29) Revenue 300.2 436.8 -31.3% 500 Adj OP(2) 10.4 39.4 -73.6% (40.6) 450 Adj Margin(2) 3.5% 9.0% -5.5ppts 0.1 409.0 • Civil £(135.1)m - Coronavirus (COVID-19), 737 MAX 400 • Milita
Slide 10: Adjusted and Reported Profit
ADJUSTED AND REPORTED PROFIT H1 2020 H1 2019 Change £m £m Adjusted operating profit 9.0 46.2 -81% (-81% on constant currency basis) Net interest payable – borrowings and cash (5.8) (5.9) – retirement benefits 0.4 0.4 Adjusted profit before tax 3.6 40.7 -91% (-91% on constant currency basis) Tax (H1
Slide 11: Restructuring
RESTRUCTURING ▪ Restructuring plan actions initiated in 2019 have all been implemented ▪ Total adjusted charge c.£35m (2019 £12m; ▪ Restructuring plan actions initiated H1 2020 £20m; H2 2020 c.£3m) and are delivering the expected in 2019 are delivering the expected benefits ▪ Cash cost c.£20m (2019
Slide 12: Cash Flow and Use of Funds
CASH FLOW AND USE OF FUNDS £m 45 1.7 (14.6) 40 3.0 27.3 35 30 (2.8) 25 23.6 (5.4) 20 (2.2) 16.0 (12.7) 15 10 9.0 262% 5 conversion 3.3 - H1 2020 Adjusted Depreciation and Other items (2) Change in Net Capital Pensions in H1 2020 Net Interest Paid Tax Paid H1 2019 Free Restructuring and (5) H1 2020 O
Slide 13: Balance Sheet
BALANCE SHEET June Dec June 2020 2019 2019 FX Impact from Dec 2019 £m £m £m £m Goodwill and other intangible assets 206.2 310.0 334.0 Non current assets 29.5 Working capital 7.4 Investment in JV 3.5 3.3 3.2 Net debt (11.8) Property, plant and equipment 373.2 369.3 390.1 Other long-term assets 3.2 2.
Slide 14: Maturity Profile of Credit Facilities
MATURITY PROFILE OF CREDIT FACILITIES In July 2020, the $50m US RCF agreement was further extended to 30 June 2022 At the beginning of June 2020, the Group was confirmed as an eligible issuer under the Bank of England’s Covid Corporate Financing Facility (CCFF), under which the Group can draw up
Slide 15: Financial Summary
FINANCIAL SUMMARY Robust cash performance in the face of significant disruption to our end markets from the pandemic Generated £16m free cash flow – 178% conversion of adjusted operating profit £162m headroom on our committed borrowing facilities Agreed appropriate covenant relaxations to pr
Slide 16: Markets, Strategy & Outlook
MARKETS, STRATEGY & OUTLOOK Interim Results 2020
Slide 17: Our Markets
OUR MARKETS 27% Flexonics Division Aerospace Division 73% (26%) Power & Energy 17% (74%) (14%) Land Vehicles 10% (12%) 47% Civil Aerospace (55%) Other Aerospace 7% (6%) Military & Defence 19% (13%) End markets composition based on H1 2020 revenue % in brackets are H1 2019 comparatives Interim Result
Slide 18: Our Customers
OUR CUSTOMERS 27% Flexonics Division Other Power & Energy 14% Aerospace Division 73% 10% Rolls Royce (26%) (12%) (9%) (74%) all 1% of Group or less Schlumberger 3% (2%) 9% Boeing (12%) Other Land Vehicle 4% (6%) all 1% of Group or less Caterpillar 3% 6% Lockheed Martin (2%) (4%) Cummins 3% (4%) 6% R
Slide 19: Civil Aerospace Shape of Market Recovery
CIVIL AEROSPACE SHAPE OF MARKET RECOVERY (47% of Group) Group sales 42%(1) compared to H1 2019 IATA anticipates revenue passenger kilometre (RPKs) in 2020 to fall 63% year-on-year as a result of COVID-19, before growing by 75% in 2021 from 2020 levels. Airbus and Boeing announced cuts to their
Slide 20: 737 MAX
737 MAX Completion of FAA certification flight tests With assumed timing of regulatory approvals Boeing anticipates it will enable deliveries to resume during 4Q20 Boeing resumed production in May; expects to continue to produce at low rates for the remainder of 2020 Boeing expects to gradua
Slide 21: Military and Defence
MILITARY AND DEFENCE (19% of Group) US defence spend continues to grow The United States spends more on defence than the next 10 countries combined Source: US DoD FY21 "Green Book", Roland Berger, July 2020. OCO = Overseas Contingency Operations. RDT&E = Research Development Test & Evaluation. O&M =
Slide 22: Land Vehicles
LAND VEHICLES (10% of Group) North American Truck and Off-Highway (6% of Group) EU & ROW Truck and Off-Highway (2% of Group) North American Class 8 Truck Production Forecast (Thousands) Group EU & ROW sales 35%(1) over H1 2019 400 9% 27% 6% • Softening of truck and off-highway markets in Europe &
Slide 23: Power & Energy
POWER & ENERGY (17% of Group) Units $ Oil Price and Rig Count 4000 90 (1) Group H1 2020 sales compared to H1 2019 3500 80 3000 70 2500 60 Oil & Gas (7% of Group): 2000 50 Sales 9% (£2.8m) 40 1500 30 Upstream – mothballing of some capacity in 1000 20 North America 500 0 10 0 Downstream – activity s
Slide 24: Strategic Focus Remains Through Pandemic Crisis
STRATEGIC FOCUS REMAINS THROUGH PANDEMIC CRISIS Two key technology themes: • Fluid Conveyance and Thermal Management – Highly engineered products and sub-systems for a range of attractive end markets (case study to follow) – Rich in existing IP and investing in products and technologies for growing
Slide 25: Case Study – Senior Metal Bellows
CASE STUDY – SENIOR METAL BELLOWS Highly engineered products serving a range of attractive end markets Aerospace Industrial • Business strategy focused on continued Diversification across different markets: Military Aerospace, Commercial Aerospace, Semiconductor, Medical, and Industrial • Intellectu
Slide 26: Technology Developments
TECHNOLOGY DEVELOPMENTS Additive Manufacturing Electrification RT2iTM • Series production of 70kW battery cooler commences • RT2iTM is our composite • Established Advanced Additive 2020 thermoplastic aerospace Manufacturing Centre to design ducting product • Numerous development projects with a vari
Slide 27: Outlook
OUTLOOK • In civil aerospace: ‒ Civil aerospace OEMs significantly lowered production rates in the second quarter, with recent announcements confirming reduced rates across second half of 2020 and into 2021 ‒ While it is likely to take several years for air traffic to return to 2019 levels, the dema
Slide 28: Any Questions?
ANY QUESTIONS? Interim Results 2020
Slide 29: Appendices
APPENDICES Interim Results 2020
Slide 30: Group Evolution
GROUP EVOLUTION Revenue (£m) Adjusted Operating Profit (£m) Adjusted Operating Margin (%) 1200 120 16 Total after central costs 100 14 1000 12 800 80 Total after central costs 10 600 60 8 40 6 400 4 200 20 2 0 0 0 2015 2016 2017 2018 2019 H1 2020 2015 2016 2017 2018 2019 H1 2020 2015 2016 2017 2018
Slide 31: Trade Considerations
TRADE CONSIDERATIONS H1 2020 split Sales Employees Senior is an international manufacturing Group with 30 N. America 64% 2,803 operating businesses in 13 countries UK 16% 1,420 Rest of Europe 10% 906 Within Europe, Senior has 11 operations across 5 countries, including the UK Rest of World 10% 1
Slide 32: Currency Effect
CURRENCY EFFECT Translation Impact on HALF YEAR- H1 2019(1) (£m) Avg. H1 Avg. H1 Adj. 2019 Exchange Rates to GBP 2020 Revenue PBT(2) 1.29 US $ 1.27 5.7 0.4 1.15 Euro € 1.14 0.4 - 18.44 South African Rand 20.70 (0.5) - 40.96 Thai Baht 39.84 0.9 0.1 5.00 Brazilian Real 6.13 (0.5) 0.1 1.73 Canadian $ 1
Slide 33: Earnings Per Share
EARNINGS PER SHARE H1 2020 H1 2019 Change Average number of shares Basic 414.7 415.8m -1.1m Fully diluted 416.4 422.7m -6.3m Adjusted earnings per share (1) Basic 0.72p 7.84p -91% Fully diluted 0.72p 7.71p -91% (1) Based on adjusted profit for the period as defined on page 10 Interim Results 2020 Pa
Slide 34: Change in Net Debt
CHANGE IN NET DEBT H1 H1 FY 2020 2019 2019 £m £m £m Free cash flow (page 12) 16.0 13.2 58.3 Dividends - (21.7) (31.2) Proceeds on disposal of businesses net of costs and cash disposed (4.5) (2.4) (8.2) Restructuring cash outflows (5.7) - (2.9) US class action lawsuits (2.5) - - Purchase of shares by
Slide 35: Gross Capital Expenditure
GROSS CAPITAL EXPENDITURE H1 2020 H1 2019 Capex Depn (1) Capex Depn (1) £m £m £m £m Aerospace 10.3 20.2 29.0 18.9 Flexonics 4.4 6.8 5.9 7.3 Holding companies 0.1 0.3 0.1 0.3 Total 14.8 27.3 35.0 26.5 (1) Depreciation of £21.3m (H1 2019: £20.7m), IFRS 16 depreciation £5.1m (H1 2019: £4.8m) and amorti
Slide 36: Usage of Credit Facilities – June 2020
USAGE OF CREDIT FACILITIES – June 2020 Usage by Currency Interest Facility Usage £ $ € Other % £m £m US Private placements: $30.0m (Sep 2028) 4.18% 24.2 24.2 - 24.2 - - €28.0m (Feb 2027) 1.51% 25.5 25.5 - - 25.5 - $60.0m (Oct 2025) 3.75% 48.4 48.4 - 48.4 - - £27.0m (Jan 2025) 2.35% 27.0 27.0 27.0 -
Slide 37: Covenants at Frozen GAAP
COVENANTS at FROZEN GAAP(1) Jun 2020 Dec 2019 Jun 2019 Dec 2018 Net debt - restated at average exchange rates £152.6m £150.3m £171.4m £147.8m Net interest - rolling 12 months £8.3m £8.0m £8.4m £8.8m EBITDA - rolling 12 months £98.0m(2) £135.3m(3) £138.1m(4) £133.7m Interest cover(5) 11.8 x 16.9 x 16
Slide 38: Pensions
PENSIONS 6 months 2020 2019 UK USA Various IAS 19 Retirement Benefit Funded Funded Unfunded Total Total £m £m £m £m £m Scheme assets 334.7 52.6 1.1 388.4 357.7 Scheme liabilities (285.8) (54.6) (6.9) (347.3) (339.2) Scheme asset/(deficit) at opening 48.9 (2.0) (5.8) 41.1 18.5 Current service cost -
Slide 39: Our Business Model
OUR BUSINESS MODEL Our purpose is to provide safe and innovative products for demanding thermal management and fluid conveyance applications Long-Term Sustainable What We Do How We Do It Value Design and manufacture of highly Create value for all our engineered, technology rich Our Values Our Streng
Slide 40: Strategic Priorities
STRATEGIC PRIORITIES Autonomous and Autonomous and Considered and High Performance Competitive Cost High Performance Collaborative Business Focus on Growth Collaborative Business Focus on Capital Effective Growth Talent Development Operating System Country Strategy Operating System Model Model Deplo
Slide 41: Acquisition Framework
ACQUISITION FRAMEWORK More Likely Less Likely Aerospace & Defence Semi-conductor Equipment Market Power & Energy (clean energy) Volume Automotive Land Vehicles (electrification) Medical Fluid Conveyance Products Structures / Machining Product Thermal Management Products Own design / IP products Comm
Slide 42: Senior's Locations
SENIOR’S LOCATIONS UK Rickmansworth H.O H1 2020 split Sales Employees Massachusetts Crumlin N. America 64% 2,803 Metal Bellows Lymington Canada BWT UK 16% 1,420 SF Canada Bird Bellows Thermal Rest of Europe 10% 906 Wisconsin Weston EU Rest of World 10% 1,562 GA Germany Washington SF GmbH AMT Czech R
Slide 43: Senior's Products – H1 2020
SENIOR’S PRODUCTS – H1 2020 27% Flexonics Division Other machined parts 6% Aerospace Division 73% (3%) (26%) (74%) Industrial flexible parts 11% (11%) 20% High pressure ducting Off-highway hydraulics (LV) 1% (17%) (1%) Fuel distribution (LV) 1% (1%) Exhaust flexes (LV) 2% (3%) Emission control (LV)
Slide 44: Technology Theme One: Fluid Conveyance
TECHNOLOGY THEME ONE: FLUID CONVEYANCE Aircraft Low Pressure Ducting High Pressure Ducting Aerospace Control Products Non-Aerospace Control Products Gas Turbine Engines Complex Ducts, Tubes & Pipes Bellows Seals & Controls Aerospace Controlling the flow of fluids within systems Extending the technol
Slide 45: Technology Theme Two: Structures
TECHNOLOGY THEME TWO: STRUCTURES Airframe Structures & Assemblies Airframe Structures Airframe Assemblies Helicopter Transmission Structures Hard & Soft Metal Machined Parts Engine Structures & Mountings Nacelle Rings Engine Casings Aerospace Aerofoils Precision Machined Components and Assemblies La
Slide 46: Aerospace Division
AEROSPACE DIVISION Interim Results 2020
Slide 47: Aerospace Division: A Summary
AEROSPACE DIVISION: A SUMMARY H1 2020 H1 2019(1) Change 18 Operations Revenue £300.2m £436.8m -31.3% NAFTA 9 Europe 3 Adjusted Operating Profit (2) £10.4m £39.4m -73.6% UK 4 Adjusted Operating Margin(2) 3.5% 9.0% -550bps ROW 2 Markets Customers Other 10% Rolls-Royce 13% Civil Aerospace 63% Other 27%
Slide 48: Civil Aerospace (47% of Group)
CIVIL AEROSPACE (47% of Group) Boeing, Airbus and independent forecasters predicting air traffic will continue to grow over the long term Long-term drivers for traffic demand remain with emerging markets still likely to want more air services, according to IATA The lower operating cost and bet
Slide 49: Civil Aircraft (47% of Group)
CIVIL AIRCRAFT (47% of Group) Shipset Value ($k) Avg.(1) shipset Airframe Var. in avg.(1) Deliveries x Avg.(1) Shipset Value ($m) value shipset value 0 200 400 600 800 1000 H1 2020 deliveries Order book 12/19 to 06/20 0 10 20 30 40 ($k) (number) ($k) A320neo 220 151 6,108 A320neo -13 737 MAX 260 Nil
Slide 50: Military Aerospace (19% of Group)
MILITARY AEROSPACE (19% of Group) Global defence spending expected to grow at 3% CAGR 2019-2023 and to exceed $2 trillion in 2023(1) The US continues to spend more on defence than the next ten countries combined Senior is well placed with good content on F-35, CH-53K and T-7A Red Hawk (formerl
Slide 51: Military and Defence (19% of Group)
MILITARY AND DEFENCE (19% of Group) Avg. Airframe Var. in avg. shipset (1) shipset value H1 2020 Shipset Value ($k) value deliveries Deliveries x Average Shipset Value ($m) 12/19 to (1) 06/20 ($k) ($k) (number) 0 200 400 600 800 1000 1200 0 5 10 15 F-35 (JSF) 246 47 -5 F-35 (JSF) C-130J 1,085 8 -12
Slide 52: Flexonics Division
FLEXONICS DIVISION Interim Results 2020
Slide 53: Flexonics Division: A Summary
FLEXONICS DIVISION: A SUMMARY H1 2020 H1 2019(1) Change 11 Operations & JV NAFTA 4 Revenue £109.1m £149.7m -27.1% Europe 2 Adjusted Operating Profit(2) £4.9m £14.6m -66.4% UK 2 ROW 3 Adjusted Operating Margin (2) 4.5% 9.8% -530bps China JV 1 Markets Customers Cummins 11% Other markets 19% Truck & Of
Slide 54: Land Vehicles (10% of Group)
LAND VEHICLES (10% of Group) Commercial vehicles grow at 4% p.a. and passenger vehicles grow at 2% p.a. through the cycle Recovery in GDP growth, government stimulus programmes and tighter emissions regulations create demand for Senior’s land vehicle products Senior is addressing the changing
Slide 55: Power & Energy (17% of Group)
POWER & ENERGY (17% of Group) Projected increases in global energy usage, tightening emission control regulations and emerging changes in power generation will drive increased demand for Senior’s power & energy products Senior’s product portfolio supports solutions for oil & gas, solar, wind and
Slide 56: Index
INDEX Presentation Appendices H1 2020 summary 3 Group evolution 30 Coronavirus (COVID-19) update – business continuity 4 Trade considerations 31 Environmental, social & governance 5 Currency effect 32 Coronavirus (COVID-19) update – end-markets disruption 7 Earnings per share 33 Financial highlights