Morgan Advanced Materials Plc · LSE:MGAM
Morgan Advanced Materials — FY2019 Earnings Presentation
35 slides from Morgan Advanced Materials's earnings presentation, Feb 25, 2020
Slide 1: 2019 Year End Results Presentation
2019 Year End Results Presentation 25th February 2020
Slide 2: Agenda
Agenda • Introduction and key highlights – Pete Raby • 2019 year end results – Peter Turner • Operational and strategic update – Pete Raby © Morgan Advanced Materials 2
Slide 3: Key highlights
Key highlights • A year of further strategic and financial progress • Revenue growth of 0.8% on an organic constant-currency basis – our third year of successive organic growth • Strong growth in our semiconductor and electronics, chemical and petrochemical, healthcare and aerospace segments more th
Slide 4: 2019 year end results
2019 year end results Peter Turner © Morgan Advanced Materials 4
Slide 5: Group performance summary
Group performance summary % change from FY 2018 £m FY 2019 FY 2018 As reported At organic constant- currency Revenue 1,049.5 1,033.9 1.5% 0.8% Group headline operating profit1 134.2 124.8 7.5% 4.3% Group headline operating profit margin % 1 12.8% 12.1% ROIC (excluding IFRS 16 Leases) % 1 18.2% 18.1%
Slide 6: Cash flow summary
Cash flow summary £m FY 2019 FY 2018 EBITDA 176.6 156.1 • Improvement in working Change in working capital (0.1) (9.7) capital efficiency, especially Change in provisions and other (11.7) (15.1) debtors Cash generated from continuing operations 164.8 131.3 • Capex driven by investment Net capital ex
Slide 7: Pensions update
Pensions update • Triennial review of UK Deficit movement since 31 December 2018 (£m) Schemes completed with a Deficit at 31 December 2018 (190) combined deficit of £120.3m Return on assets 44 at 31 March 2019 Contributions (net of service/finance costs) 10 Actuarial losses on liabilities (24) • Agr
Slide 8: Our net leverage is improving
Our net leverage is improving We have made significant progress in reducing leverage over the last three years Net debt1 Defined benefit pensions deficit £m £m 1 1 2 1 Net debt is shown excluding lease liabilities. 2 EBITDA is presented on a pre-IFRS16 basis. © Morgan Advanced Materials 8
Slide 9: FY20 financial guidance
FY20 financial guidance Headline tax rate 27% Net finance charge: Interest charge (c. £7.0m) IAS 19 pensions net interest charge (c. £3.0m) c. £13.5m IFRS 16 lease interest (c. £3.5m) Funded pension scheme contributions c. £21.0m Foreign currency impacts see slide 33 Portfolio impacts © Morgan Advan
Slide 10: Operational and strategic update
Operational and strategic update Pete Raby © Morgan Advanced Materials 10
Slide 11: We have driven growth in our faster growing segments
We have driven growth in our faster growing segments offsetting declines in industrial and automotive markets Organic % change from FY 2018 at constant-currency % Group revenue 45% • Volumes down across all regions with largest declines in Europe 21% • Aerospace growth offset by decline in automotiv
Slide 12: Thermal Ceramics: performance summary
Thermal Ceramics: performance summary year-on-year margin improvements despite challenging end market conditions % change from FY 2018 £m FY 2019 FY 2018 As reported At organic constant- currency Revenue 418.4 433.6 (3.5%) (2.7%) Headline operating profit 52.2 52.9 (1.3%) (4.2%) Headline operating p
Slide 13: Molten Metal Systems: performance summary
Molten Metal Systems: performance summary third successive year of organic revenue growth % change from FY 2018 £m FY 2019 FY 2018 As reported At organic constant- currency Revenue 49.1 48.6 1.0% 0.6% Headline operating profit 5.9 6.6 (10.6%) (10.6%) Headline operating profit margin % 12.0% 13.6% Pe
Slide 14: Electrical Carbon: performance summary
Electrical Carbon: performance summary significant profit and margin growth offsetting challenging end market conditions % change from FY 2018 £m FY 2019 FY 2018 As reported At organic constant- currency Revenue 164.2 166.8 (1.6%) (2.4%) Headline operating profit 21.9 19.4 12.9% 12.9% Headline opera
Slide 15: Seals and Bearings: performance summary
Seals and Bearings: performance summary third successive year of organic revenue, profit and margin growth % change from FY 2018 £m FY 2019 FY 2018 As reported At organic constant- currency Revenue 144.3 132.7 8.7% 6.5% Headline operating profit 26.4 23.7 11.4% 7.8% Headline operating profit margin
Slide 16: Technical Ceramics: performance summary
Technical Ceramics: performance summary third successive year of organic revenue, profit and margin growth % change from FY 2018 £m FY 2019 FY 2018 As reported At organic constant- currency Revenue 273.5 252.2 8.4% 5.7% Headline operating profit 33.7 28.1 19.9% 13.9% Headline operating profit margin
Slide 17: Our purpose
Our purpose Our purpose is to use advanced materials to help make more efficient use of the world’s resources and to improve the quality of life UN sustainable development goals • We improve quality of life through medical applications • We enable greener electricity generation • We enable the digit
Slide 18: Our safety performance is improving, our environmental impact is reducing
Our safety performance is improving, our environmental impact is reducing Lost-time accident frequency rate – 74% improvement in 5 years CO2 intensity – 18% improvement in 5 years LTAs/100k hours worked Tonnes CO2 equivalent/£m revenue Energy intensity – 17% improvement in 5 years 1 Water intensity
Slide 19: Thermal insulation saves energy and reduces carbon emissions
Thermal insulation saves energy and reduces carbon emissions • We help customers improve efficiencies in their ethylene cracking units over the expected life of the unit • Partnering with our customers on material selection and furnace design, savings can range from approximately 27 to 60 times1 the
Slide 20: Our strategy for growth
Our strategy for growth We have a strategy to ensure we are the leaders in our field, with the customer and materials insight to apply our capabilities quickly and effectively We apply these skills to a portfolio of businesses where: • Our technical expertise and differentiation is valued • We can o
Slide 21: Execution priorities
Execution priorities Drive sales effectiveness and Continue the deployment of our tools, processes and training to build our capabilities and market market focus insight and drive sales growth. Extend our technology Accelerate the development of new materials and manufacturing processes, and strengt
Slide 22: Our investment in research and development is starting to deliver
Our investment in research and development is starting to deliver Our increased investment in R&D is starting deliver, with a new product development pipeline targeting key growth opportunities: • Semiconductor applications • Thermal management solutions • Electric vehicle and rechargeable battery o
Slide 23: We are growing faster than our markets
We are growing faster than our markets We have delivered our third successive year of organic growth, outperforming our end markets Organic growth vs industrial production1 • Portfolio simplification • Simplification of our internal structure • Sales force effectiveness • Investment in our faster gr
Slide 24: We are expanding our operating margins
We are expanding our operating margins Our operating profit margins are improving, now we have reached our targeted levels of reinvestment, driven by efficiency savings and volume leverage Headline operating profit margins Margin progression 2016 - 2019 © Morgan Advanced Materials 24
Slide 25: Operating outlook
Operating outlook • In 2020 we are expecting similar market conditions to 2019 with weak industrial and automotive markets persisting and geo-political uncertainties remaining. However we expect revenue growth in our faster growing market segments to more than offset these market weaknesses. • We ex
Slide 26: Summary
Summary • A year of further strategic and financial progress • Revenue growth of 0.8% on an organic constant-currency basis – our third year of successive organic growth • Strong growth in our semiconductor and electronics, chemical and petrochemical, healthcare and aerospace segments more than offs
Slide 27: Appendix
Appendix © Morgan Advanced Materials 27
Slide 28: End market mix (as a % of revenue)
End market mix (as a % of revenue) Main markets by GBU Thermal Ceramics: Industrial, Chemical and petrochemical, Metals, Automotive MMS: Aluminium (automotive), Copper (construction), Precious metals Electrical Carbon: Rail, Industrial equipment, Power generation, Electronics and semiconductor Seals
Slide 29: Divisional performance
Divisional performance Revenue Headline operating profit Headline operating profit margin £m £m % FY 2019 FY 2018 FY 2019 FY 2018 FY 2019 FY 2018 Thermal Ceramics 418.4 433.6 52.2 52.9 12.5% 12.2% Molten Metal Systems 49.1 48.6 5.9 6.6 12.0% 13.6% Thermal Products division 467.5 482.2 58.1 59.5 12.4
Slide 30: Reported statutory figures
Reported statutory figures Year ended 31 December 2019 Year ended 31 December 2018 £m Results before Results before Specific Specific specific Total specific Total adjusting items adjusting items adjusting items adjusting items Revenue 1,049.5 - 1,049.5 1,033.9 - 1,033.9 Operating costs before amort
Slide 31: Strong maturity profile of debt at low cost of funding
Strong maturity profile of debt at low cost of funding Facilities maturity profile Net debt £m Borrowings 225.5 Cash (68.7) Net debt excluding lease liabilities 156.8 • Net debt to EBITDA excluding the impact of IFRS 16: 1.0x (FY2018: 1.2x) • £200m Revolving Credit Facility extended one year to matu
Slide 32: Impact of new accounting standards
Impact of new accounting standards IFRS 16 Leases had the following impact on opening balances in 2019: Prior lease After application £m Net impact accounting of IFRS 16 Revenue - - - Depreciation - (9) (9) Other operating costs (12) - 12 Income statement Headline operating profit1 (12) (9) 3 Financ
Slide 33: Foreign currency impacts
Foreign currency impacts The principal exchange rates used in the translation of the results of overseas subsidiaries were as follows: 2019 2018 GBP to: Closing rate Average rate Closing rate Average rate US dollar 1.33 1.28 1.28 1.33 Euro 1.18 1.14 1.11 1.13 For illustrative purposes, the table bel
Slide 34: Headline earnings per share
Headline earnings per share £m FY 2019 FY 2018 Profit for the period attributable to Ordinary shareholders 73.1 46.3 (Profit) / loss from discontinued operations (1.5) 10.7 Profit from continuing operations 71.6 57.0 Specific adjusting items - 9.5 Amortisation 8.1 8.0 Tax effect of the above - 1.7 H
Slide 35: 2019 Year End Results Presentation
2019 Year End Results Presentation 25th February 2020
Morgan Advanced Materials — FY2019 Earnings Presentation on 6ix