Slide 1: 2017 Interim Results Presentation
2017 Interim Results Presentation 28th July 2017 www.morganadvancedmaterials.com
Slide 2: Agenda
Agenda • Introduction and key highlights – Pete Raby • 2017 interim results – Peter Turner • Operational and strategic update – Pete Raby 2
Slide 3: Key highlights
Key highlights • Financial performance in line with management expectations • Improving momentum with return to organic growth in 2Q 2017 • Strategy implementation progressing well with focus on increasing investment in technology and sales • Two divestments completed, reducing complexity and net de
Slide 4: 2017 interim results
2017 interim results Peter Turner 4
Slide 5: Group performance summary
Group performance summary Organic % 1 1 % change 1H 2017 1H 2016 change from from 1H 2016 1H 2016 At constant £m £m As reported currency Revenue 518.9 475.4 9.2% 0.2% Group headline operating profit2 61.6 55.1 11.8% 1.5% Group headline operating profit margin % 2 11.9% 11.6% Cash flow from operation
Slide 6: Divisional performance
Divisional performance Revenue (£m) Headline Operating Profit (£m) EBITA margin (%) 1H 2017 1H 2016 1H 2017 1H 2016 1H 2017 1H 2016 Thermal Ceramics 213.1 193.9 28.6 25.6 13.4% 13.2% Molten Metal Systems 23.8 20.6 3.6 2.9 15.1% 14.1% Thermal Products 236.9 214.5 32.2 28.5 13.6% 13.3% Electrical Carb
Slide 7: Cash flow summary
Cash flow summary 1H 2017 1H 2016 £m £m EBITDA 77.3 70.7 Change in working capital (18.4) (16.3) Change in provisions & other (7.3) (6.9) • Closing net debt Cash flow from operations 51.6 47.5 significantly lower Net capital expenditure (13.9) (17.7) than prior year due Net interest paid (8.3) (6.2)
Slide 8: Pensions update
Pensions update Deficit movement since 31 Dec 2016 (£m) Deficit at 31 December 2016 (271) Foreign exchange 1 Return on assets 12 Contributions (net of service costs) 4 Disposal of Rotary Transfer Systems liability 2 Actuarial losses on liabilities (7) Deficit at 30 June 2017 (259) £m 30 June 2017 31
Slide 9: FY17 Guidance – financial items
FY17 Guidance – financial items Headline tax rate c. 30% Interest charge (at half year 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 9
Slide 10: Operational and strategic update
Operational and strategic update Pete Raby 10
Slide 11: Thermal Ceramics: performance summary
Thermal Ceramics: performance summary % change from Organic % £m 1H 2017 1H 2016 1H 2016 change from 1H As reported At constant currency Revenue 213.1 193.9 9.9% -1.8% EBITA 28.6 25.6 11.7% -2.0% EBITA margin % 13.4% 13.2% Performance commentary Strategic focus Main markets • Strong growth in China
Slide 12: Molten Metal Systems: performance summary
Molten Metal Systems: performance summary % change from Organic % £m 1H 2017 1H 2016 1H 2016 change from 1H As reported At constant currency Revenue 23.8 20.6 15.5% 2.4% EBITA 3.6 2.9 24.1% 10.3% EBITA margin % 15.1% 14.1% Performance commentary Strategic focus Main markets • Modest growth across •
Slide 13: Electrical Carbon: performance summary
Electrical Carbon: performance summary % change from Organic % £m 1H 2017 1H 2016 1H 2016 change from 1H As reported At constant currency Revenue 81.3 75.6 7.5% 1.1% EBITA 8.7 10.3 -15.5% -21.4% EBITA margin % 10.7% 13.6% Performance commentary Strategic focus Main markets • Growth in China and Euro
Slide 14: Seals and Bearings: performance summary
Seals and Bearings: performance summary % change from Organic % £m 1H 2017 1H 2016 1H 2016 change from 1H As reported At constant currency Revenue 55.9 47.6 17.4% 7.6% EBITA 9.1 6.6 37.9% 25.8% EBITA margin % 16.3% 13.9% Performance commentary Strategic focus Main markets • Growth in sales to • Grow
Slide 15: Technical Ceramics: performance summary
Technical Ceramics: performance summary % change from Organic % £m 1H 2017 1H 2016 1H 2016 change from 1H As reported At constant currency Revenue 133.2 121.8 9.4% 3.3% EBITA 14.9 12.8 16.4% 13.3% EBITA margin % 11.2% 10.5% Performance commentary Strategic focus Main markets • Improving revenue in t
Slide 16: Composites and Defence Systems: performance summary
Composites and Defence Systems: performance summary % change from Organic % £m 1H 2017 1H 2016 1H 2016 change from 1H As reported At constant currency Revenue 11.6 15.9 -27.0% -27.7% EBITA (0.4) 1.1 -136.4% EBITA margin % -3.4% 6.9% Performance commentary Strategic focus Main markets • Defence marke
Slide 17: Reliable problem solving
Our vision is to be renowned for world-class material science, application engineering and customer focus • Scalable global Material businesses science • In growing markets Reliable • Where technical problem differentiation is valued solving Ethically and safely Application engineering Customer focu
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 Execution priorities highlighted in blue will
Slide 19: 2. Technology investment on track
2. Technology investment on track R&D as a percentage of sales, 2013-2017 1H • Investment in R&D increased to 3.2% of sales • Materials development activity now focused through four centres of excellence: • Fibre • Structural Ceramics • Carbon Science • Metals & Joining • We are on track with the in
Slide 20: 3. Operational improvements funding investment in technology and sales
3. Operational improvements funding investment in technology and sales Net operational efficiencies Key areas of focus Lean & Continuous Improvement: Lean programme in Thermal Ceramics and site by site Continuous Improvement programmes across the business Yield / Scrap: Technical Ceramics and Seals
Slide 21: 3. Significant Savings Potential Identified Through Procurement of Packaging
3. Significant Savings Potential Identified Through Procurement of Packaging Current state Key Improvement Levers Total spend £10m p.a. Re-tender existing packaging requirements >120 suppliers globally Forecast Packaging specified by savings 15% individual sites with delivered over limited standardi
Slide 22: 4. We are focused on long term capability building in the sales teams
4. We are focused on long term capability building in the sales teams • Sales teams being reconfigured following assessment activity Capability building • Right people in right roles • Right mix of sales & business development • Two pilot projects complete in Thermal, long term implementation under
Slide 23: 5. We are strengthening our talent management
5. We are strengthening our talent management • Head of talent recruited to focus on capability, development and succession • HR capability being strengthened across the business • Leadership behaviours defined, and implementation started, to support strategy implementation • Development activity un
Slide 24: Summary
Summary • Financial performance in line with management expectations • Improving momentum, return to organic growth in 2Q 2017 • Strategy implementation progressing well with focus on investment in technology and sales • Balance sheet strengthened following the divestments 24
Slide 25: Appendix
Appendix MMorgan i< Advanced Materials
Slide 26: End market mix (as a % of revenue)
End market mix (as a % of revenue) 26
Slide 27: Reported statutory figures
Reported statutory figures Results before specific Specific adjusting items Total adjusting items 1H 2017 (£m) 1H 2017 (£m) 1H 2017 (£m) Revenue 518.9 518.9 Operating costs before restructuring costs, other one-off items and (457.3) - (457.3) amortisation / impairment of intangible assets Profit fro
Slide 28: Key exchange rates
Key exchange rates 1H 2017 1H 2016 GBP to: Closing Average Closing Average rate rate rate rate USD 1.30 1.26 1.33 1.43 EUR 1.14 1.16 1.20 1.28 Key exchange rate sensitivities on interim results Revenue EBITA Increase in half year revenue / Group EBITA if: £m £m GBP weakens by 10c against the US doll
Slide 29: Headline EPS
Headline EPS 1H 2017 1H 2016 £m £m Basic earnings from continuing operations 76.9 29.0 Amortisation 3.6 3.3 Specific adjusting items (46.1) (3.8) Other (1.3) 1.5 Headline earnings 33.1 30.0 Weighted average number of shares in the period 284.9m 284.8m Headline earnings per share from continuing oper
Slide 30: 2017 Interim Results Presentation
2017 Interim Results Presentation 28th July 2017 www.morganadvancedmaterials.com