Slide 1: Investor Presentation Half Year 2011 & Group Strategy
Filtrona plc Investor Presentation Half Year 2011 & Group Strategy 24 August 2011 1
Slide 2: Agenda
Agenda 1. Operational Review - Colin Day 2. Financial Review - Steve Crummett 3. Outlook - Colin Day 4. Group Strategy - Colin Day Bank Facilities - Steve Crummett Acquisition of Reid Supply - Colin Day 2
Slide 3: Operational Review - Colin Day, Chief Executive
Operational Review - Colin Day, Chief Executive 3
Slide 4: HY 2011: Summary
HY 2011: Summary Strong balanced revenue growth across the group Supported by increased gross and operating margins Cash flow generation remains strong Interim dividend per share increased by 10% to 3.3p FY 2011 outlook remains positive CEO transition accomplished 4
Slide 5: All divisions performing strongly
All divisions performing strongly Protection & Finishing Revenue 24% Op Margin 230bps Op Profit 36% Coated & Security GROUP Porous Technologies Revenue 8% Revenue 10% Revenue 7% Op Margin 100bps Op Margin 30bps Op Margin unchanged Op Profit 1% Op Profit 12% Op Profit 7% Filter Products Revenue 1% Op
Slide 6: Protection & Finishing Products
Protection & Finishing Products 90 30% 80 All operating units contributing 25% strongly 70 60 20% E-marketing gaining momentum 50 New site start-up programme 15% being accelerated 40 Distribution network 30 10% strengthened and expanded 20 5% Rising input costs successfully 10 mitigated 0
Slide 7: Porous Technologies
Porous Technologies 45 30% Printer Systems revenue up 63%, 40 25% driven by next generation platform 35 launch 30 20% Underlying Medical Diagnostics revenue up 7% 25 15% Writing Instruments level. 20 Household Products and Personal 15 10% Care up 13% 10 “Core” Porous Technology 5% divisional
Slide 8: Coated & Security Products
Coated & Security Products 60 18% Encouraging performance in tear tape, revenue up 6% 16% 50 14% Labels revenue up 17% Successful re-branding of BP 40 12% Labels to Payne 10% Continued success of Payne 30 Authentication System, up 48% 8% Queens Award: Innovation 20 6% Enitor extrusion ma
Slide 9: Filter Products
Filter Products 140 14.0% Underlying volumes level 120 12.0% Further growth in Asia, now 53% of volumes 100 10.0% Growth supported by Singapore 80 8.0% Head Office and new facility in Thailand 60 6.0% European volumes up by 2% MNCs and Independents 40 4.0% Continued investment in new pro
Slide 10: Key operational developments
Key operational developments Protection & Finishing Products Coated & Security Products Ongoing construction of new facility for MSI, Expansion of Taggant manufacturing, Banbury, UK Houston, Texas Porous Technologies Filter Products Hydrophilic foam pouring line, New state of the art manufacturing f
Slide 11: Key commercial developments
Key commercial developments Protection & Finishing Products Coated & Security Products Launch of Duraco Chinese Catalogue Wide width promotional tape solution for Kraft, Brazil Porous Technologies Filter Products “Porous Plastic” technology Supersoft woundcare foam Ochre™ - eco-friendly filter. – me
Slide 12: Financial Review - Steve Crummett, Group Finance Director
Financial Review - Steve Crummett, Group Finance Director 12
Slide 13: Income statement - summary
Income statement - summary HY 11 HY 10 Growth £m £m Actual Constant FX FX Revenue 268.6 247.6 +8% +10% Like-for-like1 +8% Gross margin 36.2% 35.3% +90 bps +90 bps Operating profit2 43.6 40.0 +9% +12% Operating margin 16.2% 16.2% - +30 bps Profit before tax2 39.5 34.6 +14% +17% Net income2,3 27.5 23.
Slide 14: Revenue growth – volume / mix / price
Revenue growth – volume / mix / price % Volume / mix 6.5 Price 1.5 Acquisitions 1.7 Constant FX growth 9.7 Exchange (1.2) Reported growth 8.5 14
Slide 15: Revenue growth – by division
Revenue growth – by division HY 11 Growth £m Constant FX Protection & Finishing Products 78.5 23.6% Porous Technologies 40.5 7.1% Coated & Security Products 50.1 8.0% Filter Products 101.7 0.7% Elims (2.2) Group 268.6 9.7% Group – at Actual FX 268.6 8.5% 15
Slide 16: Gross margin
Gross margin 36.2% 35.3% 90 bps GM improvement Mix effect benefit from higher growth in higher GM divisions Gross margin1 Sales pricing offsets raw 32.8% material increases 1:1 Operational leverage impact 32.0% 31.7% from higher volume Cost efficiencies Strategic focus on GM progression
Slide 17: Operating profit – key movements
Operating profit1 – key movements 1 : 1 offset 1.6 3.8 43.6 40.0 (1.0) 0.8 (3.8) 3.8 £m 1 Before intangible amortisation 17
Slide 18: Operating margin
Operating margin1 25.7 25.7 24.8 24.5 23.3 22.2 22.2 20.7 18.4 Operating margin1 % 17.0 17.0 15.2 16.0 15.9 16.2 15.0 14.8 13.1 12.2 12.7 12.4 12.2 12.0 11.7 11.7 2 ** Protection & Finishing Porous Technologies Coated & Security Products * Filter Products ** GROUP Products HY07 HY08 HY09 HY10 HY11 1
Slide 19: Divisional summary
Divisional summary Revenue Operating profit1 HY 11 Growth HY 11 Growth £m Constant £m Constant FX FX Protection & Finishing Products 78.5 23.6% 19.2 36.2% Porous Technologies 40.5 7.1% 10.4 7.2% Coated & Security Products 50.1 8.0% 8.0 1.3% Filter Products 101.7 0.7% 11.9 0.8% Central Services / Eli
Slide 20: Income statement - continued
Income statement - continued HY 11 Growth £m Actual Constant FX FX Operating profit1 43.6 +9% +12% Net finance charge (4.1) (24%) (23%) Lower interest charge driven by lower debt Profit before tax1 39.5 +14% +17% levels, lower fee amortisation and Taxation (12.0) higher pension credit - Underlying
Slide 21: Cash flow
Cash flow Operating cash flow of £43.1m 1.6 +72% vs 2010 12.1 (4.1) Cash conversion of 99% (8.5) Net capex of £8.5m 43.6 82% depreciation charge 43.1 (12.4) 4.5 £m (4.3) 0.6 (3.4) 23.0 Net debt down to £81.5m 1 Before intangible amortisation 21
Slide 22: Working capital
Working capital Working capital / revenue1 (WCR) Key metrics 17.0% 76 75 14.9% P&FP : 19% WCR 56 56 45 PT : 19% WCR 41 C&SP : 16% WCR FP : 12% WCR Inventory Debtor Creditor HY 10 days2 days3 days2 HY 11 Working capital / revenue1 ratio of 14.9%, down by 210 bps 1 Constant FX, based on last 12 month
Slide 23: Dividend per Share
Dividend +10% 3.30p 3.00p Dividend per share up 10% to 3.3p Dividend per Share 2.70p 2.70p 2.52p Progressive dividend policy, in line with profit growth HY07 HY08 HY09 HY10 HY11 23
Slide 24: Outlook - Colin Day, Chief Executive
Outlook - Colin Day, Chief Executive 24
Slide 25: 2011 outlook
2011 outlook Positive momentum continuing into H2 Supported by accelerated drive on balanced growth Continued strong cash flow Capex likely to increase in H2 Tax rate guidance for 2011 of 30% Well positioned for continued positive development 25
Slide 26: Group Strategy - Colin Day, Chief Executive
Group Strategy - Colin Day, Chief Executive 26
Slide 27: First five months review
First five months review Obtained good understanding of businesses Established a growth strategy agenda Encouraged investment to drive top line performance Challenged “profit protection” mind set Established priorities and “stretch” targets Refocused M&A activity/direction Addressing H
Slide 28: Initial conclusions
Initial conclusions Strengths Opportunities International reach Greater focus on balanced profitable Quality and service ethos growth Customer acquisition & retention Expanded geographic footprint, especially in emerging markets to Product innovation & technical enhance global infrastruc
Slide 29: Objective
Objective To build on our “3 S’s” to maximise shareholder value by delivering balanced profitable growth in both our existing and future opportunity markets and technologies 29
Slide 30: Business objectives
Business objectives Above industry Continued margin Disciplined use of Unified culture average revenue improvement capital growth Focus on volume Operational gearing Net Working Capital Leverage talent across Improve go-to-market Gross and Operating prioritisation divisions Pipeline in
Slide 31: Vision 2015
Vision 2015 Progressive dividend >100% profit conversion to cash Volume leverage to drive GM expansion 50% conversion to OM LFL revenue growth: mid single-digit CAGR Aim to be “best in class” 31
Slide 32: Key challenges
Key challenges ORGANISATION - depth - mobility - multicultural - “challenge” culture GO-TO-MARKET (GTM) - resources - e-marketing - sales versus marketing RISK PROFILE - cautious/risk adverse - balanced/risk opportunity M&A - large opportunity pool - integration risk - avoid “deal fever” 32
Slide 33: Key tasks
Key tasks Drive baseline revenue Identify key geographic and product white space opportunities Focus on faster growing markets/economies Invest in improving operational excellence and execution Supply/distribution/logistics Go To Market (GTM) / commercial Back office Tax efficiency i
Slide 34: Progress to date
Progress to date We have: Rekindled appetite for growth Clear objectives Clear growth strategy Clear targets Simple/focused KPI’s We are: Identifying new talent to support progress Intending to deliver in a sensible/pragmatic timeframe …..whilst not forgetting our commitment to CSR
Slide 35: Bank facilities
Bank facilities Refinanced main bank facilities Key terms: £330m facility € and £ 5 year term c£20m drawn Facilities are in addition to US$160m USPP loan notes No anticipated impact on finance charge as a result Larger facility higher fees Lower margin offset by fee amortisation
Slide 36: Acquisition of Reid Supply
Acquisition of Reid Supply Background 2010 Revenue by Product Range Leading distributor of standard industrial Pictures components to a broad range of markets and customers via a catalogue Services North America and export markets from a single site in Muskegon, Michigan Key Metrics Products R
Slide 37: Acquisition of Reid Supply
Acquisition of Reid Supply Strategic Rationale Synergies Strong fit with Protection & Finishing Cross sell product range to Reid and Pictures Products (PFP) principles PFP customer base Introduce Reid Products to PFP Global Catalogue based, industrial distribution product range business Stre
Slide 38: Appendices
Appendices 38
Slide 39: Exchange rates
Appendix 1 Exchange rates 6 months ended 30 June 2011 Average Closing US $/£ 1.61 1.61 Euro €/£ 1.14 1.11 Indonesia IDR/£ 14,100 13,800 Impact of a one cent (or 100 IDR) change per annum Op. Profit US $/£ c. £0.25m Euro €/£ c. £0.15m Indonesia IDR/£ c. £0.10m 6 months ended 30 June 2010 Average Clos
Slide 40: Revenue by destination – H1 2011
Appendix 2 Revenue by destination – H1 2011 £74.8m 28% £93.8m 35% Europe UK North America Rest of World £74.4m £25.6m 28% 9% 40
Slide 41: Disclaimer
Disclaimer IMPORTANT LEGAL NOTICE THIS DOCUMENT IS STRICTLY CONFIDENTIAL TO THE RECIPIENT AND HAS BEEN SUBMITTED TO YOU SOLELY FOR YOUR INFORMATION. THE RECIPIENT MAY NOT REPRODUCE OR REDISTRIBUTE ANY PART OF THIS DOCUMENT TO ANY PERSON IN ANY FORM. THIS DOCUMENT AND THE PRESENTATION TO WHICH IT REL
Slide 42: Filtrona plc Investor Presentation Half Year 2011 & Group Strategy
Filtrona plc Investor Presentation Half Year 2011 & Group Strategy 24 August 2011 42