Morgan Advanced Materials Plc · LSE:MGAM
Morgan Advanced Materials — H1 2015 Earnings Presentation
37 slides from Morgan Advanced Materials's earnings presentation, Jul 22, 2015
Slide 1: 2015 half year Group results
2015 half year Group results 22nd July 2015 www.morganadvancedmaterials.com
Slide 2: Agenda
Agenda • 2015 half year Group results • Operational update • Summary 2
Slide 3: Key highlights
Key highlights • Group revenue at constant currency up 3.1% compared with H1 2014 • EBITA margins up to 13.0% (H1 2014: 12.6%) • No one-off and restructuring charges • Underlying EPS up 18.9% compared with H1 2014 • Continued progressive interim dividend increase to 4.0p 3
Slide 4: 2015 half year Group results
2015 half year Group results 4
Slide 5: Good revenue growth and margin improvement; underlying EPS up 18.9%
Good revenue growth and margin improvement; underlying EPS up 18.9% H1 2015* H1 2014* % change from H1 2014 At constant As reported currency £m £m % % Revenue 469.2 448.4 4.6% 3.1% EBITA before restructuring** 61.1 56.4 8.3% 5.3% EBITA margin % before restructuring** 13.0% 12.6% EBITA after restruct
Slide 6: Restructuring costs, financing costs and tax rate
Restructuring costs, financing costs and tax rate Before specific Specific Total adjusting items adjusting items Total H1 2015 H1 2014 H1 2014 H1 2014 £m £m £m £m Revenue 469.2 448.4 0.0 448.4 EBITA before restructuring* 61.1 56.4 0.0 56.4 Net restructuring* 0.0 (2.1) 0.0 (2.1) Amortisation (3.6) (4
Slide 7: Improving cash flow from operations; significant capital investment
Improving cash flow from operations; significant capital investment H1 2015 H1 2014 £m £m • Operating working capital/sales ratio of Cash from trading* 74.9 70.4 22.1% (H1 2014: Change in working capital (10.1) (21.4) 22.9%) Change in provisions (6.7) (6.5) Cash flow from operations 58.1 42.5 • Capi
Slide 8: Revenue growth at constant currency in all regions and margin improving in North America and Europe
Revenue growth at constant currency in all regions and margin improving in North America and Europe £ million Revenue EBITA* Profit Margins % H1 2015 H1 2014 H1 2015 H1 2014 H1 2015 H1 2014 North America 191.6 171.7 29.8 26.2 15.6% 15.3% Europe 157.2 159.4 19.3 17.8 12.3% 11.2% Asia/Rest of World 12
Slide 9: North America – revenue growth and further improvement in margins
North America – revenue growth and further improvement in margins • H1 2015 revenue 2.5% higher than H1 2014 at constant currency • Continued strong performance by Thermal Ceramics and growth in Electrical Carbon and Certech more than offsetting flat revenue in rest of Technical Ceramics and some so
Slide 10: Europe – revenue growth and margin improvement
Europe – revenue growth and margin improvement • Organic sales*** at constant currency increased 4.7% driven by growth in Thermal Ceramics and recovery in C&DS more than offsetting weaker Technical Ceramics business • Porextherm, acquired July 2014, progressing well • 110bps improvement in margin fr
Slide 11: Asia/RoW – good revenue growth except China
Asia/RoW – good revenue growth except China • Revenue marginally up by 0.6% at constant currency, reflecting good growth in South East Asia and India, particularly for Thermal Ceramics and Seals and Bearings, being offset by a 9.3% reduction in China, where major decline in large CPI projects and we
Slide 12: Current exchange rates are currently a headwind for H2 relative to H1
Current exchange rates are currently a headwind for H2 relative to H1 H1 2015 FX impact of H1 2015 Reported using H1 2015 at H1 2015 (average rates) closing rates closing rates £m £m £m Revenue 469.2 (14.0) 455.2 EBITA before restructuring* 61.1 (2.5) 58.6 EBITA margin % 13.0% 12.9% * Results before
Slide 13: Financial summary
Financial summary • Revenue growth at constant currency of 3.1% • EBITA margin at 13.0% • Underlying EPS up 18.9% • Improved operating cash flow • Interim dividend increase to 4.0p 13
Slide 14: Operational update
Operational update 14
Slide 15: H1 2015 revenue and EBITA margins by product/technology group
H1 2015 revenue and EBITA margins by product/technology group H1 EBITA margins 17.6% 13.1% 14.8% 5.2% 12.7% 13.0% 3.7% 15
Slide 16: Fibre – good revenue growth and maintained high-teen margins
Fibre – good revenue growth and maintained high- teen margins • Revenue up more than 10% compared with H1 2014 at constant currency • Margins maintained in the high-teens • Continued significant investment in R&D to further expand capability of fibre range * Results at reported rates before Unalloca
Slide 17: Technical Ceramics impacted by loss of some high margin business
Technical Ceramics impacted by loss of some high margin business • Revenue flat compared with H1 2014 at constant currency • Improvement in US ceramic cores but offset by decline in some high margin business (including oil and gas) and start up investment in ceramic cores JV in China and materials C
Slide 18: Electrical Carbon maintained its mid-teen margins
Electrical Carbon maintained its mid-teen margins • Strong margin improvement has been maintained • Revenue flat, with North America growth offsetting decline in China • Materials plants consolidation and grade rationalisation project progressing well, margin benefits expected * Results at reported
Slide 19: IFB/castables margin impacted by lower volumes due to decline in project work
IFB**/castables margin impacted by lower volumes due to decline in project work, mainly in Asia • IFB is one of the most volume sensitive product lines due to the continuous manufacturing process and the 6.1% reduction in sales, due to the decline in large project work, particularly in China, has ha
Slide 20: Significant improvement continues in Seals and Bearings
Significant improvement continues in Seals and Bearings • EBITA margin improvement from positive mix change, increased volumes and operational initiatives • Initial benefits of material plants consolidation and grade rationalisation beginning to be seen * Results at reported rates before Unallocated
Slide 21: MMS – revenue growth of 6% despite weaker China market
MMS – revenue growth of 6% despite weaker China market • Revenue growth of 6% in total with most regions contributing to this. Exception is China, where demand is weak and competition increasing • Margin decline due to c.£0.2 million of one-off operating costs in China * Results at reported rates be
Slide 22: C&DS – continuing to transition away from traditional UK MoD contracts
C&DS – continuing to transition away from traditional UK MoD contracts • Revenue of £16.4 million running at similar level to 2014 and expect close to £40 million for full year • UK MoD still an important customer but increasingly looking to develop international defence and commercial markets; some
Slide 23: R&D investment increased to 2.7% of revenue
R&D investment increased to 2.7% of revenue • Increasing investment in R&D – 2.7% of revenue in H1 2015 (2014: 2.3%, 2013: 2.1%) • Global Materials Centre of Excellence for Structural Ceramics (Stourport, UK) established and additional Centres planned • R&D investment focused on main technologies wh
Slide 24: Significant capital expenditure
Significant capital expenditure • Total capex is >2x depreciation in H1 2015 – including c.£12m of spend buying out the long lease on the Swansea site – adjusting for this “base” capex is c.1.4x depreciation • Key projects: • Expansion of South Korea carbon site • Ceramic cores JV in China • Ongoing
Slide 25: Summary
Summary 25
Slide 26: Summary
Summary • EBITA margins of 13.0% despite mixed market conditions • No one-off restructuring charges in the period; improved EBITA and reduced finance charges leads to 18.9% increase in underlying EPS supporting progressive increase in dividend to 4.0p • Net debt maintained at 1.4x EBITDA and solid b
Slide 27: 2015 half year Group Results
2015 half year Group Results 22nd July 2015 www.morganadvancedmaterials.com
Slide 28: Appendix
Appendix 28
Slide 29: Revenue and EBITA as historically presented – margin progression driven by AM&T business
Revenue and EBITA as historically presented – margin progression driven by AM&T business £ million Revenue EBITA* Profit Margins % H1 2015 H1 2014 H1 2015 H1 2014 H1 2015 H1 2014 Technical Ceramics 124.0 118.9 16.3 17.2 13.1% 14.5% Thermal Ceramics 187.4 177.4 26.8 24.4 14.3% 13.8% Ceramics 311.4 29
Slide 30: Key exchange rates
Key exchange rates H1 2015 FY 2014 H1 2014 Closing Average Closing Average Closing Average GBP to: rate rate rate rate rate rate USD 1.57 1.52 1.56 1.65 1.71 1.67 EUR 1.41 1.37 1.29 1.24 1.25 1.22 CNY 9.74 9.47 9.67 10.15 10.61 10.30 30
Slide 31: EBITA margins before restructuring and one-off items
EBITA margins before restructuring and one-off items Results before specific adjusting items 31
Slide 32: EBITA margins after restructuring and one-off items
EBITA margins after restructuring and one-off items Results before specific adjusting items 32
Slide 33: End-market mix across regions – H1 2015 revenue by market
End-market mix across regions – H1 2015 revenue by market 33
Slide 34: Operating ROCE
Operating ROCE All £ million 2015 2014 At reported rates Half Year Half Year LTM Underlying EBITA 119.2 111.3 Change -v- 2014 Half Year 7.1% Operating Capital Land & Building - NBV 94.1 90.5 Plant & Equipment - NBV 146.3 138.8 Third Party Working Capital 160.7 167.1 401.1 396.4 Change -v- 2014 Half
Slide 35: Net financing costs
Net financing costs H1 2015 H1 2014 £m £m Bank interest charge 7.0 8.3 Bank interest income (0.9) (0.8) Net interest on IAS19 obligations 3.4 3.0 Amounts derived from financial instruments (1.0) - 8.5 10.5 35
Slide 36: Underlying EPS
Underlying EPS H1 2015 H1 2014 £m £m Basic earnings from continuing operations 32.4 23.9 Amortisation 3.6 4.3 Specific adjusting items 0.0 2.0 Underlying earnings 36.0 30.2 Weighted average number of shares in the period 285.1m 285.2m Underlying earnings per share from continuing operations 12.6p 10
Slide 37: 2015 half year Group results
2015 half year Group results 22nd July 2015 www.morganadvancedmaterials.com
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