Slide 1: HY 2019 Results
Investor Presentation HY 2019 RESULTS 2ND AUGUST 2019
Slide 2: Agenda
AGENDA 1. HY 2019 Summary & Performance Review - Paul Forman 2. HY 2019 Financial Review - Lily Liu 3. Stability Update - Paul Forman 4. Portfolio Simplification & FY 2019 Outlook - Paul Forman 5. Q&A 2
Slide 3: HY 2019 Summary & Performance Review
HY 2019 SUMMARY & PERFORMANCE REVIEW Paul Forman – Chief Executive 3
Slide 4: HY 2019: Summary
HY 2019: SUMMARY Encouraging financial progress and significant portfolio rationalisation, with three focused, global divisions set for continued growth – “Chapter 3” … • HY 2019 results build on the inflection point in FY 2018, with revenue and profit growth in each of the three global divisions ➢
Slide 5: HY 2019: Summary
HY 2019: SUMMARY Encouraging financial progress and significant portfolio rationalisation, with three focused, global divisions set for continued growth – “Chapter 3” … • HY 2019 results build on the inflection point in FY 2018 ➢ Like-for-like growth of +1.3% ▪ +3.7%, adjusting for the closure of th
Slide 6: Continued, but Accelerated Growth: Revenue Trends
CONTINUED, BUT ACCELERATED GROWTH Our revenue1 trends Group LFL revenue growth Packaging underlying revenue growth 4 3.7 12 9.4 1.3 1.5 7.7 8 0.1 0 4 0 % -4 % -1.0 -3.9 -4 -4.8 -8 -8 -7.5 -9.0 -9.2 -12 -12.1 -12 -10.6 -16 H1 '16 H2 '16 H1 '17 H2 '17 H1 '18* H2 '18* H1 '19* H1 '16 H2 '16 H1 '17 H2 '1
Slide 7: Continued, but Accelerated Growth: Profitability Trends
CONTINUED, BUT ACCELERATED GROWTH Our profitability trends Group – adj. operating margin1 14 12.9 12 11.1 10 9.5 9.2 % 8.5 8.2 8.2 8 6 4 2 0 H1 '16 H2 '16 H1 '17 H2 '17 H1 '18 H2 '18 H1 '19 1 Adjusted to exclude intangible amortisation and exceptional operating items 7
Slide 8: Components
COMPONENTS HY 2019 revenue: £136.2m, LFL +0.8%. OM* +40bps • Modest revenue and operating margin increase, reflecting successful pricing initiatives partially offset by softer end-market backdrop ➢ LFL +1.7%, adjusting for one fewer trading day • Continued strong growth in access hardware … • … supp
Slide 9: Packaging
PACKAGING HY 2019 revenue: £176.8m, LFL +3.2%. OM* +360bps • Strong underlying revenue and profitability momentum, building on return to growth in H2 2018 and boosted by new business wins ➢ Underlying revenue +9.4% (ex-Kilmarnock / Largo) Further Design Hub collaboration with customers, to provide •
Slide 10: Filters
FILTERS HY 2019 revenue: £130.5m, LFL +1.3%. OM* +50bps • Return to revenue growth, with further encouraging progress with independent customers • Continued product innovation in traditional combustible filters and Next Generation Products (“NGP”), to help Scientific Services expansion into Indonesi
Slide 11: Specialist Components
SPECIALIST COMPONENTS HY 2019 revenue: £64.5m, LFL -3.9%. OM* +110bps • Revenue and profit decline owing to divestment of PPT and Extrusion … • … but underlying operating performance benefiting from the previously-communicated operational improvement plans ➢ Underlying revenue -0.8% ex-cessation of
Slide 12: HY 2019 Financial Review
HY 2019 FINANCIAL REVIEW Lily Liu – Chief Financial Officer 12
Slide 13: Impact of Applying IFRS 16 – HY 2019
IMPACT OF APPLYING IFRS 16 – HY 2019 Metric Impact Profit & Loss Account Adjusted EBITDA +£6.2m Adjusted operating profit +£1.0m Net finance cost +£1.0m Profit before tax / net income / EPS No change Balance sheet Net debt* +£49.2m Total assets* +£40.7m Total liabilities* -£45.7m Net equity* -£5.0m
Slide 14: Income Statement
INCOME STATEMENT1 Summary HY 2019 HY 2018 Growth £m £m Actual FX Constant FX Revenue 506.6 513.1 -1.3% -2.7% Operating profit2 48.3 43.5 +11.0% +9.6% Operating margin2 9.5% 8.5% +100bps +100bps Profit before tax2 41.3 38.3 +7.8% +6.4% Earnings2 31.4 28.9 +8.6% +7.6% Earnings per share2 12.0p 11.0p +
Slide 15: Revenue by Division
REVENUE BY DIVISION HY 2019 HY growth £m Constant FX Components 136.2 +1.1% Components like-for-like1 +0.8% Packaging 176.8 +2.3% Packaging ex-Kilmarnock & Largo +9.4% Filters 130.5 +1.3% Specialist Components 64.5 -24.6% Specialist Components like-for-like2 & ex-ST Nottingham cessation -0.8% Elimin
Slide 16: Operating Profit by Division
OPERATING PROFIT1 BY DIVISION HY 2019 Growth Margin2 £m Constant FX HY 2019 HY 2018 Components 31.3 +3.0% 23.0% 22.6% Packaging 7.9 +397.1% 4.5% 0.9% Filters 16.8 +5.1% 12.9% 12.4% Specialist Components 5.9 -13.5% 9.1% 8.0% Central Services (13.6) Group 48.3 +9.6% 9.5% 8.5% Group – at actual FX +11.
Slide 17: Income Statement (cont.)
INCOME STATEMENT (CONT.) HY 2019 Growth £m Actual FX Constant FX Operating profit1 48.3 +11.0% +9.6% Net finance charge (7.0) Profit before tax1 41.3 7.8% 6.4% Taxation (8.2) Underlying tax rate 20.0% Net income1 33.1 8.1% 7.0% Minority interests (1.7) Earnings1 31.4 +8.6% +7.6% EPS1 12.0p +9.1% +7.
Slide 18: Exceptional & Other Adjusting Items
EXCEPTIONAL & OTHER ADJUSTING ITEMS £m £m Gains / (losses) and transaction costs from business acquisitions 18.8 and disposals Of which: PPT 7.1 Speciality Tapes 15.5 Extrusion (3.0) Transaction costs from other business acquisitions and disposals (0.8) Acquisition integration and restructuring cost
Slide 19: Cash Flow
CASH FLOW 80.0 26.2 (14.9) Operating cash conversion = 76% 70.0 (23.0) 60.0 50.0 48.3 £m 40.0 36.6 (7.4) 30.0 (6.2) (0.4) 22.6 20.0 10.0 0.0 Operating profit 1 Non-cash Working capital Net capex 3 Operating Tax Interest paid Pensions Free items 2 cash flow 1 cash flow 1 1 Adjusted to exclude intangi
Slide 20: Net Debt Reconciliation
NET DEBT RECONCILIATION Net debt / EBITDA ratio reduced to 1.6x (1.4x pre-IFRS 16) £m As at 1 January 2019 (before applying IFRS 16) 240.1 IFRS 16 adjustment 60.0 FX 0.3 As at 30 June 2019 242.0 As at 30 June 2019 (before applying IFRS 16) 192.8 Change in net debt after FX (after applying IFRS 16) (
Slide 21: Return on Invested Capital
RETURN ON INVESTED CAPITAL Steady improvement in ROIC 12.0 10.8 10.2 9.6 8.6 8.0 % 4.0 0.0 FY 16 FY 17 FY 18 LTM 19* * After applying IFRS 16 21
Slide 22: Dividend
DIVIDEND Half year dividend held unchanged 7.0 6.3 6.3 6.3 6.3 6.3 6.0 5.0 pence 4.0 3.0 2.0 1.0 0.0 HY 15 HY 16 HY 17 HY 18 HY 19 22
Slide 23: Stability Update
STABILITY UPDATE Paul Forman – Chief Executive 23
Slide 24: Continued Growth from Stability: Our Stability Agenda Recap
CONTINUED GROWTH FROM STABILITY Our stability agenda: recap 1. Our people • HSE • Employee engagement • Sustainability 2. Our customers • Service • Quality 3. Our processes • IT • Business Process Redesign 4. Our finances 24
Slide 25: Our HSE (Cumulative Lost Time Incidents)
CONTINUED GROWTH FROM STABILITY Our HSE (cumulative Lost Time Incidents) 56% reduction in lost hours / severity versus HY Cumulative Lost Time Incidents 2018 70 60 50 40 30 20 10 0 January February March April May June July August September October November December Reporting period 2017 - Group 201
Slide 26: Our Employee Engagement
CONTINUED GROWTH FROM STABILITY Our employee engagement • Key areas of opportunity identified for 2019 ➢ Demonstrating development and career progression ➢ Enhancing our contribution to local communities • New Group Human Resources Director in role since January ➢ Strategic plan in place, focusing o
Slide 27: Our Sustainability – Alignment with UN Sustainable Development Goals
CONTINUED GROWTH FROM STABILITY Our sustainability – strategy alignment with the UN Sustainable Development Goals • Biodegradable material development Responsible • Recycling/recapture business model trials resource usage • Zero waste-to-landfill initiatives • Roll out of LED lighting • First solar
Slide 28: Our Delivery (On Time In Full)
CONTINUED GROWTH FROM STABILITY Our delivery (On Time In Full) Components Packaging 95% 98% 93.3% 92.4% 95.9% 96.2% 93% 95.6% 96% 91% 90.4% 89.8% 94% 89% 92.9% 92% 87% 85% 90% 2016 2017 2018 HY19 2016 2017 2018 HY19 Filters Specialist Components 100% 98.5% 98.5% 97% 98% 95.3% 95% 96% 95.2% 92.8% 92.
Slide 29: Our Quality (Incident Rate)
CONTINUED GROWTH FROM STABILITY Our quality (incident rate) Components Packaging 100 100 100 100 90 90 80 75 80 74 72 70 70 60 57 60 58 55 50 50 2016 2017 2018 HY19 2016 2017 2018 HY19 Filters Specialist Components 100 100 100 100 96 80 90 83 58 80 60 70 40 34 27 60 20 50 2016 2017 2018 HY19 2017 20
Slide 30: Our Systems (Major Incident Rate)
CONTINUED GROWTH FROM STABILITY Our systems (major incident rate) 120% 100% 80% 60% 40% 20% 0% 2017 2018 2019* Investment in IT infrastructure is having the desired impact * Annualised for 2019 30
Slide 31: Our Systems (Lost Hours from IT Major Incidents)
CONTINUED GROWTH FROM STABILITY Our systems (lost hours from IT major incidents) 1,200 1,036 1,000 800 600 400 348 200 176 0 H1 2018 H2 2018 H1 2019 Increased operational productivity and customer service 31
Slide 32: Our Business Process Redesign
CONTINUED GROWTH FROM STABILITY Our Business Process Redesign – process transformation to create new capabilities and benefits • Improved financial controls Critical issues • Obsolescence of current systems • Integrate acquired businesses quickly Enabling future business • Centralise supply chain ma
Slide 33: Our Finances
CONTINUED GROWTH FROM STABILITY Our finances • Rigorous capital allocation applied to portfolio of businesses ➢ Board-agreed return parameters on M&A activity and structured post-investment review process • Net debt / EBITDA ratio reduced to 1.4x from 1.9x in HY 2018 (before applying IFRS 16) • Trie
Slide 34: Portfolio Simplification & FY 2019 Outlook
PORTFOLIO SIMPLIFICATION & FY 2019 OUTLOOK Paul Forman – Chief Executive 34
Slide 35: Portfolio Simplification
PORTFOLIO SIMPLIFICATION Significant capital reallocation year to date, with firepower for further potential acquisitions Rounded figures* Disposals Filters JV Acquisitions Gross proceeds / (outlay) £115m £(12)m £(18)m Revenue £(105)m - £9m Trading profit £(15)m - £1.5m EPS (4)p 1p 0.5p * Rounded fi
Slide 36: Portfolio Simplification: Four Divisions to Three
PORTFOLIO SIMPLIFICATION A strategic opportunity to simplify our divisional structure from four to three • Further to the divestment of PPT, Extrusion, Speciality Tapes and Card Solutions, Specialist Components division to be dissolved by the end of Q3 2019 ➢ Tear Tapes → Filters ➢ Industrial Supply
Slide 37: From Portfolio Rationalisation ...
FROM PORTFOLIO RATIONALISATION ... FY 2018, as reported COMPONENTS PACKAGING Components Revenue: c. £271m ST Express sites Revenue: c. £342m Adj. OP: £60.0m Adj. OP: £5.4m FILTERS SPECIALIST COMPONENTS Revenue: c. £260m Revenue: c. £159m PPT Adj. OP: £12.2m Adj. OP: £34.8m Extrusion Speciality Tapes
Slide 38: ... to Portfolio Simplification
… TO PORTFOLIO SIMPLIFICATION FY 2018, pro forma adjusted COMPONENTS PACKAGING Revenue: c. £280m Components Packaging Revenue: c. £342m Adj. OP: c. £61m Components Industrial Supply Adj. OP: £5.4m - Components - Industrial Supply FILTERS Filters Tear Tapes Filters - Filters - Tear Tapes Revenue: c.
Slide 39: 2019 Considerations / Outlook
2019 CONSIDERATIONS / OUTLOOK Further strategic progress in FY 2019 Strategy and progress are on track … • Components ➢ Continue to drive above-market organic growth through continued improvements in “hassle-free” customer proposition ➢ Further pursue value-enhancing bolt-on acquisitions • Packaging
Slide 40: HY 2019: Reprise
HY 2019: REPRISE Encouraging financial progress and significant portfolio rationalisation, with three focused, global divisions set for continued growth – “Chapter 3” … • HY 2019 results build on the inflection point in FY 2018, with revenue and profit growth in each of the three global divisions ➢
Slide 41: Q&A
Q&A 41
Slide 42: Appendices
APPENDICES 42
Slide 43: Income Statement
INCOME STATEMENT Reported basis HY 2019 Growth £m Actual FX Constant FX Adjusted operating profit 48.3 +11.0% +9.6% Intangible amortisation (11.1) Exceptional operating items 22.9 Reported operating profit 60.1 +131.2% +127.8% Net finance charge (7.0) Profit before tax 53.1 +155.3% +151.4% Taxation
Slide 44: Exchange Rates
EXCHANGE RATES Six months ended 30 June 2019 Average Closing US$/£ 1.29 1.27 Euro €/£ 1.14 1.12 Impact of a one cent reduction in rate Op. profit (£m) US$/£ 0.3 Euro €/£ 0.2 Six months ended 30 June 2018 Average Closing US$/£ 1.36 1.32 Euro €/£ 1.13 1.13 44
Slide 45: 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 46: HY 2019 Results
Investor Presentation HY 2019 RESULTS 2ND AUGUST 2019