Slide 1: 2015 full year Group results
2015 full year Group results 23rd February 2016 www.morganadvancedmaterials.com
Slide 2: Agenda
Agenda • Introduction and key highlights – Pete Raby • 2015 full year Group results – Kevin Dangerfield • Strategy and operational update – Pete Raby 2
Slide 3: Key highlights
Key highlights • A solid set of results in very challenging market conditions • Review of strategy performed and overall vision and direction established • Execution priorities set to deliver resilient financial performance and faster growth 3
Slide 4: 2015 full year Group results – Kevin Dangerfield
2015 full year Group results Kevin Dangerfield 4
Slide 5: A solid set of results in a very challenging market
A solid set of results in a very challenging market 5
Slide 6: Restructuring costs, net financing costs and tax
Restructuring costs, net financing costs and tax • Restructuring costs relate to overhead reduction and site rationalisation projects • Net financing costs include IAS 19 (revised) charge of £6.9m (2014: £5.7m) • Tax charge of £24.2m, effective tax rate of 29.8% (2014: 29.6%) 6
Slide 7: Specific adjusting items – 2015 items all non-cash
Specific adjusting items – 2015 items all non-cash (except £0.5 million) FY15 FY14 £m £m Restructuring costs (1) 1.5 16.3 Business exit costs (2) 2.8 1.9 Impairment of property plant and equipment (3) 5.9 0.0 Transaction related costs 0.0 1.2 Settlement of prior period anti-trust litigation 0.0 3.6
Slide 8: Strong operating cash flow, with significant investment
Strong operating cash flow, with significant investment • Operating working FY15 FY14 £m £m capital/sales reduced Cash from trading* 136.8 146.1 to 20.7% (2014: Change in working capital 12.1 (10.4) 22.3%) Change in provisions (13.3) (15.7) Cash flow from operations 135.6 120.0 • Capex includes £12m
Slide 9: Second half performance impacted by deteriorating markets
Second half performance impacted by deteriorating markets, particularly in North America £ million Revenue EBITA* Profit Margins % FY15 FY14 FY15 FY14 FY15 FY14 North America 368.4 353.1 51.5 52.5 14.0% 14.9% Europe 305.7 325.7 35.8 39.8 11.7% 12.2% Asia/Rest of World 237.7 242.9 27.5 31.2 11.6% 12.
Slide 10: North America – maintaining mid-teen margins
North America – maintaining mid-teen margins despite a difficult second half FY 2015 FY 2014 Reported Like-for-like change % change %*** Revenue* 368.4 353.1 +4.3% -2.3% EBITA** 51.5 52.5 14.0% 14.9% • 2.3% decrease in revenue on a like-for-like basis; H2 revenue 6.7% down on H1 • H2 performance acr
Slide 11: Europe – like-for-like revenue growth of 1.7%
Europe – like-for-like revenue growth of 1.7% FY 2015 FY 2014 Reported Like-for-like change % change %*** Revenue* 305.7 325.7 -6.1% +1.7% EBITA** 35.8 39.8 11.7% 12.2% • Growth in Europe impacted by a more difficult H2 • Thermal Ceramics outstanding revenue increase of 10.7% offset by other busines
Slide 12: Asia/RoW – mixed trading conditions in 2015
Asia/RoW – mixed trading conditions in 2015 FY 2015 FY 2014 Reported Like-for-like change % change %*** Revenue* 237.7 242.9 -2.1% -1.5% EBITA** 27.5 31.2 11.6% 12.8% • Like-for-like revenue down 1.5% - very mixed trading conditions across the region in 2015 • China revenue down 11.2%, India down 3.
Slide 13: Financial summary
Financial summary • Full year like-for-like revenue 0.8% lower than 2014 following weaker market demand in H2 • 12.0% EBITA margins achieved in 2015 • Strong operating cash flow of £135.6 million, 13.0% increase versus 2014 • Full-year dividend of 11.0 pence 13
Slide 14: Strategy and operational update
Strategy and operational update Pete Raby 14
Slide 15: First impressions
First impressions Opportunities Strengths to improve • Leading technology and • Complexity of the business material science capability and process know-how • Global coordination of the business • Application engineering • Operational execution • Customer focus, reputation and brand • Sales effective
Slide 16: Reliable problem solving
Our vision is to be renowned for world-class material science, application engineering and customer focus Material • Scalable global science businesses • In growing markets Reliable • Where technical problem differentiation is solving valued Ethically and safely Application engineering Customer focu
Slide 17: Our markets and historic growth
Our markets and historic growth 3.9% Market range 2.0% 1.5 -1.3% Market growth, Global Industrial Output, Morgan organic sales CAGR 2012-14 CAGR 2012-14 CAGR 2012-14 ➔ key priority is to close the gap 1) Market figures have been prepared using a combination of global market reports and a bottom up m
Slide 18: 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 18
Slide 19: Move to a global structure
Move to a global structure … Organisational structure development 1 "One Morgan" New organisational structure 3 regional divisions: 2 global divisions with 6 product based Global Business Units • Europe • North America • Thermal Products Division • Asia and Rest of World • Carbon and Technical Ceram
Slide 20: Two divisions and six Global Business Units
… two divisions and 6 Global Business Units 1 CEO Thermal Products Carbon and Technical Composites and • Simplified approach to Division Ceramics Division Defence Systems global customers and Ian Robb Alain Kirchmeyer Duncan Eldridge market opportunities • Improving operational Thermal Ceramics Elec
Slide 21: Six Global Business Units
Six Global Business Units Our business units Revenue EBITA margin Position £m 1 Thermal Ceramics 372 14.7% Leader Molten Metal Systems 40 13.9% Leader Electrical Carbon 146 12.8% Top 3 Seals and Bearings 88 11.2% Leader Technical Ceramics 238 11.4% Niche Composites and 28 (3.6%) Niche Defence System
Slide 22: Extend our technology leadership by increasing R&D investment
Extend our technology leadership by increasing R&D investment 2 R&D as a percentage of sales, 2012-15 2.8% 1 Increase and redirect R&D spend To accelerate current technology projects and enable new R&D priorities 2.3% 2 2.1% Create two new global Centres of 1.9% Excellence Carbon science Brazing and
Slide 23: Improve operational execution
Improve operational execution 3 Capital allocation and productivity Delivery Quality Efficiency Thermal Ceramics Global procurement, manufacturing strategy and plant utilisation Molten Metal Systems Global sourcing and streamlined global manufacturing strategy Electrical Carbon Focus on increasing u
Slide 24: Case study: Thermal Ceramics
Case study: Thermal Ceramics 3 Improvement category Description Key outlined levers Global sourcing Move from local to regional or • Price renegotiations global sourcing for raw materials • Increase sourcing from low cost countries • Process optimisation Lean transformation Identify and eliminate wa
Slide 25: Driving sales effectiveness and market focus
Driving sales effectiveness and market focus 4 Existing products, New products We will focus on existing customer Accelerate new product introduction ➔ Build on ➔ Sales process, structure and strong foundation efficiency ➔ Key account management New customers Understand our end markets better ➔ Chan
Slide 26: Increasing investment in people management
Increasing investment in people management and developing Morgan's future leaders 5 • Strengthen senior management talent pool • Grow our graduate programme • Strengthen talent pool in sales and engineering functions 26
Slide 27: Simplifying the business to do fewer things better
Ultimately we are focused on simplifying the business to do fewer things better 1. Move to a global structure 6 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 t
Slide 28: Characteristics of a Morgan business
Characteristics of a Morgan business • Scale and scalable global businesses 6 • Attractive growing markets • Ability to add value - fit with our core capabilities • Synergies with the rest of the portfolio • Organisationally robust • Delivering, or capable of delivering, strong financial performance
Slide 29: Focus on three core strengths and simplify the business
We will focus on our three core strengths and simplify the business to do fewer things better Summary of Morgan's strategy • Morgan is in attractive Material markets and should science grow in the mid-term Reliable • Solid foundation with a technology and problem customer portfolio to solving build
Slide 30: Summary
Summary • A solid set of results in very challenging market conditions • Review of strategy performed and overall vision and direction established • Execution priorities set to deliver resilient financial performance and faster growth • We take a cautious view of market conditions, focusing on incre
Slide 31: Appendix
Appendix MMorgan c Advenced Materials:
Slide 32: Revenue and EBITA for the new organisation structure
Revenue and EBITA for the new organisation structure £ million Revenue EBITA* Profit Margins % FY15 FY14 FY15 FY14 FY15 FY14 Thermal Ceramics 372.4 373.1 54.8 51.4 14.7% 13.8% Molten Metal Systems 39.7 41.2 5.5 5.9 13.9% 14.3% Thermal Products 412.1 414.3 60.3 57.3 14.6% 13.8% Electrical Carbon 145.
Slide 33: Key exchange rates
Key exchange rates FY 2015 H1 2015 FY 2014 Closing Average Closing Average Closing Average GBP to: rate rate rate rate rate rate USD 1.47 1.53 1.57 1.52 1.56 1.65 EUR 1.36 1.38 1.41 1.37 1.29 1.24 CNY 9.57 9.60 9.74 9.47 9.67 10.15 33
Slide 34: EBITA margins before restructuring and one-off items
EBITA margins before restructuring and one-off items * Results before specific adjusting items 34
Slide 35: End-market mix across regions – 2015 revenue
End-market mix across regions – 2015 revenue by market 35
Slide 36: Operating ROCE
Operating ROCE All £ million 2015 2014 At reported rates Year End Year End LTM Underlying EBITA 106.0 112.4 Change -v- 2014 Year End -5.7% Operating Capital Land & Building - NBV 97.9 93.1 Plant & Equipment - NBV 158.8 147.9 Third Party Working Capital 134.2 164.7 390.9 405.7 Change -v- 2014 Year En
Slide 37: Net financing costs
Net financing costs FY15 FY14 £m £m Bank interest charge 13.7 17.2 Bank interest income (1.5) (1.4) Amounts derived from financial instruments (1.0) (0.7) Net interest on IAS19 obligations 6.9 5.7 18.1 20.8 37
Slide 38: Underlying EPS
Underlying EPS FY15 FY14 £m £m Basic earnings from continuing operations 33.9 7.8 Amortisation 7.1 8.2 Specific adjusting items 18.4 47.0 Underlying earnings 59.4 63.0 Weighted average number of shares in the period 285.1m 285.1m Underlying earnings per share from continuing operations 20.8p 22.1p 3
Slide 39: 2015 full year Group results
2015 full year Group results 23rd February 2016 www.morganadvancedmaterials.com