Slide 1: 2016 Results Presentation
2016 Results Presentation 23rd February 2017 www.morganadvancedmaterials.com
Slide 2: Agenda
Agenda • Introduction and key highlights – Pete Raby • 2016 results – Peter Turner • Strategy and operational update – Pete Raby 2
Slide 3: Key highlights
Key highlights • Financial performance in line with management expectations • Strategy implementation is on track, with operational improvements and investment ahead of plan • Refinancing completed successfully, providing secure long- term capital structure • Two businesses divested, simplifying the
Slide 4: 2016 results
2016 results Peter Turner MMorgan Advanced Materials
Slide 5: Group performance summary
Group performance summary FY 20161 FY 20151 % change from FY 2015 At constant £m £m As reported currency Revenue 989.2 911.8 8.5% -1.5% Group headline operating profit2 116.9 106.0 10.3% -2.5% Group headline operating profit margin % 2 11.8% 11.6% Cash flow from operations3 128.3 139.4 -8.0% Free ca
Slide 6: Divisional performance
Divisional performance Revenue (£m) EBITA (£m) EBITA margin (%) FY 2016 FY 2015 FY 2016 FY 2015 FY 2016 FY 2015 Thermal Ceramics 413.3 372.4 55.0 55.2 13.3% 14.8% Molten Metal Systems 43.5 39.7 6.7 5.3 15.4% 13.4% Thermal Products 456.8 412.1 61.7 60.5 13.5% 14.7% Electrical Carbon 156.2 145.6 19.7
Slide 7: Cash flow summary
Cash flow summary FY 2016 FY 2015 £m £m EBITDA 147.4 136.7 • Working capital outflow Change in working capital (5.3) 15.9 following strong Change in provisions & other (13.8) (13.2) performance in H2 2015 Cash flow from operations 128.3 139.4 Net capital expenditure (38.4) (62.7) Net interest paid (
Slide 8: Pensions update
Pensions update Deficit movement since 31 Dec 2015 (£m) Deficit at 31 December 2015 (205) Foreign exchange (14) Return on assets 46 Contributions (net of service costs) 16 Settlements 7 Change in liabilities (121) Deficit at 31 December 2016 (271) £m 31 December 2016 30 June 2016 31 December 2015 As
Slide 9: Refinancing completed – strengthens balance sheet
Refinancing completed – strengthens balance sheet • New private placements completed Oct-16 as pre-financing ahead of 2017 maturities, extending maturity of debt at lower cost of finance Private Sterling Average Weighted average Net debt £m Placement debt equivalent (£m) coupon maturity Borrowings 3
Slide 10: FY17 Guidance – financial items
FY17 Guidance – financial items Headline tax rate c. 30% Interest charge (at year end FX rates) c. £16m* c. £23m IAS19 pensions charge c. £7m Funded pension scheme contributions c. £25m * Falls to c. £8m in FY18, following the effect of refinancing 10
Slide 11: Financial summary
Financial summary • Performance in line with management expectations • Group headline operating profit margin at 11.8% • Headline EPS at 22.7p • Dividend maintained at 11.0p • Refinancing completed securing long term capital structure 11
Slide 12: Strategy and operational update
Strategy and operational update Pete Raby 12
Slide 13: Thermal Ceramics: performance summary
Thermal Ceramics: performance summary £m FY 2016 FY 2015 % change from FY 2015 At constant As reported currency Revenue 413.3 372.4 11.0% 0.1% EBITA 55.0 55.2 -0.4% -11.4% EBITA margin % 13.3% 14.8% Performance commentary Strategic focus Main markets • European sales slightly up • Continued focus on
Slide 14: Molten Metal Systems: performance summary
Molten Metal Systems: performance summary £m FY 2016 FY 2015 % change from FY 2015 At constant As reported currency Revenue 43.5 39.7 9.6% -0.1% EBITA 6.7 5.3 26.4% 12.7% EBITA margin % 15.4% 13.4% Performance commentary Strategic focus Main markets • European market slightly • Ongoing operational •
Slide 15: Electrical Carbon: performance summary
Electrical Carbon: performance summary £m FY 2016 FY 2015 % change from FY 2015 At constant As reported currency Revenue 156.2 145.6 7.3% -2.4% EBITA 19.7 19.3 2.1% -9.1% EBITA margin % 12.6% 13.3% Performance commentary Strategic focus Main markets • Good growth in rail • Growth opportunities in ra
Slide 16: Seals and Bearings: performance summary
Seals and Bearings: performance summary £m FY 2016 FY 2015 % change from FY 2015 At constant As reported currency Revenue 97.7 88.6 10.3% 0.4% EBITA 14.2 9.9 43.4% 27.9% EBITA margin % 14.5% 11.2% Performance commentary Strategic focus Main markets • Growth in sales to • Growth opportunities in • Oi
Slide 17: Technical Ceramics: performance summary
Technical Ceramics: performance summary £m FY 2016 FY 2015 % change from FY 2015 At constant As reported currency Revenue 248.1 237.8 4.3% -5.6% EBITA 26.6 26.1 1.9% -9.3% EBITA margin % 10.7% 11.0% Performance commentary Strategic focus Main markets • Revenue and margin • Growth opportunities in •
Slide 18: Composites and Defence Systems: performance summary
Composites and Defence Systems: performance summary £m FY 2016 FY 2015 % change from FY 2015 At constant As reported currency Revenue 30.4 27.7 9.7% 9.7% EBITA 1.1 (1.0) EBITA margin % 3.6% -3.6% Performance commentary Strategic focus Main markets • Defence markets remain • Growth opportunities in •
Slide 19: Reliable problem solving
Our vision is to be renowned for world-class material science, application engineering and customer focus • Scalable global Material science businesses • In growing markets Reliable • Where technical problem differentiation is solving valued Ethically and safely Application engineering Customer focu
Slide 20: Six execution priorities
Six execution priorities 1. Move to a global structure 2. Extend our technology leadership 3. Improve operational execution 4. Drive sales effectiveness and market focus 5. Increase investment in people management and development 6. Simplify the business 20
Slide 21: 2. Technology investment on track
2. Technology investment on track R&D as a percentage of sales, 2013-2016 • Investment in R&D increased to 3% of sales • Materials development activity now focused through four centres of excellence: • Fibre • Structural Ceramics • Carbon Science • Metals & Joining • We are planning to invest a furt
Slide 22: 3. Operational improvements ahead of plan
3. Operational improvements ahead of plan, funding £3m investment in technology & £3m in sales Expected FY17 operational efficiencies, net of inflation: Key areas of focus: Lean & Continuous Improvement: improving efficiency across all processes and manufacturing sites globally Yield / Scrap: Techni
Slide 23: 3. Operational efficiency: LEAN manufacturing in Thermal Ceramics (case study)
3. Operational efficiency: LEAN manufacturing in Thermal Ceramics (case study) Process flow for Engineered Fibre line at St. Marcellin: Pre-production Production Final quality control Group Improvements (ordering) & warehousing • Automation of manual processes Lean Improvements • Reconfiguration of
Slide 24: 4. We are investing £3m in sales resources
4. We are investing £3m in sales resources, capability building and process improvements • Two pilot projects underway in Thermal, and a further pilot to be launched in Electrical Process Carbon: • Daily / weekly sales process improvement • Account management • Performance management • Assessments c
Slide 25: 6. Portfolio simplification: two divestments announced
6. Portfolio simplification: two divestments announced with gross consideration c.£80m 1. Rotary Transfer Systems (Electrical Carbon GBU) 1. Reduces portfolio breadth and complexity • small player, not scalable • no synergy with Electrical Carbon • limited material science content 2. Enables streaml
Slide 26: Summary
Summary • Financial performance in line with management expectations • Strategy implementation on track with two divestments completed and re-investment ahead of plan, good progress on operational improvements • Refinancing successfully completed • We continue to take a cautious view on market condi
Slide 27: Appendix
Appendix MMorgan i< Advanced Materials
Slide 28: End market mix (as a % of revenue)
End market mix (as a % of revenue) 28
Slide 29: Reported statutory figures
Reported statutory figures Results before specific Specific adjusting items Total adjusting items FY 2016 (£m) FY 2016 (£m) FY 2016 (£m) Revenue 989.2 - 989.2 Operating costs before restructuring costs, other one-off items and (871.3) - (871.3) amortisation / impairment of intangible assets Profit f
Slide 30: Key exchange rates
Key exchange rates FY 2016 FY 2015 Closing Average Closing Average GBP to: rate rate rate rate USD 1.23 1.35 1.47 1.53 EUR 1.17 1.22 1.36 1.38 Key exchange rate sensitivities on FY results Revenue EBITA Increase in FY revenue / Group EBITA if: £m £m GBP weakens by 10c against the US dollar in isolat
Slide 31: Headline EPS
Headline EPS FY 2016 FY 2015 £m £m Basic earnings from continuing operations 52.3 33.9 Amortisation 7.9 7.1 Specific adjusting items 1.7 22.1 Other 2.8 (3.7) Headline earnings 64.7 59.4 Weighted average number of shares in the period 284.9m 285.1m Headline earnings per share from continuing operatio
Slide 32: 2016 Results Presentation
2016 Results Presentation 23rd February 2017 www.morganadvancedmaterials.com