Slide 1: 2017 Interim Results
C MACFARLANE GROUP 2017 Interim Results -
Slide 2: Agenda
• Executive Summary • 2017 Interim Results/Cash flow • Business Review • Packaging Distribution • Manufacturing Operations • Pension Scheme Deficit • 2017 H2 Key Actions • Conclusions 2
Slide 3: Executive Summary
Executive Summary H1 2017 H1 2016 Profit before tax £2.5m £2.0m • Group sales £89.8m, 10% growth on 2016 • Distribution sales growth 12% of which 3% organic, 9% acquisition • All acquisitions performing to plan, four of the six acquisitions made since 2014, now have people, IT and processes integrat
Slide 4: Financial Summary – H1 2017
Financial Summary – H1 2017 Revenue Profit before tax EBITDA Revenue and profit ▲ 10% ▲ 27% ▲ 18% Pre-tax ROCE H1 Bank debt Pension Deficit Returns and balance sheet ▲ 13% ▲£14.0m ▲£13.4m Diluted EPS EPS Dividend per share EPS and dividend ▲ 13% ▲ 1.52p ▲ 0.60p 4
Slide 5: Results £m
Results £m H1 2017 H1 2016 H2 2016 Sales 89.8 81.5 98.3 Gross Profit 30.6% 27.5 32.0% 26.1 30.1% 29.6 Overheads exc. DA 23.3 22.5 22.1 EBITDA 4.2 3.6 7.5 Depreciation/amortisation 1.3 1.1 1.3 Operating profit 2.9 2.5 6.2 Interest 0.4 0.5 0.4 Profit before tax 2.5 2.0 5.8 Diluted EPS 1.52p 1.34p 3.30
Slide 6: Cash Flow £m
Cash Flow £m H1 2017 H1 2016 H2 2016 EBIT 2.9 2.5 6.2 DA 1.3 1.1 1.3 EBITDA 4.2 3.6 7.5 Working Capital 3.2 (0.1) (2.7) Interest (0.4) (0.5) (0.4) Acquisitions (0.3) (2.7) (6.0) Share placing 0.0 0.0 5.6 Tax (0.7) (0.6) (0.7) Capital expenditure (0.8) (0.8) (0.3) Pension (1.8) (1.4) (1.5) Dividend (
Slide 7: Profit Progression
Profit Progression Profit £m Earnings per share 9 5.00 8 4.50 4.00 7 3.50 6 3.00 5 2.50 4 2.00 3 1.50 2 1.00 1 0.50 0 0.00 2009 2010 2011 2012 2013 2014 2015 2016 7
Slide 8: Packaging Distribution
Packaging Distribution £m H1 2017 H1 2016 Revenue 78.1 70.0 Gross margin 29.0% 29.2% Overheads 19.9 18.2 Operating profit 2.7 2.3 OP Margin 5.0% 4.8% • Sales increase 12%, 3% organic and 9% acquisition • H2 organic sales growth remains at 3% • Gross margins 29.0%, down 0.2% reflecting purchase price
Slide 9: Packaging Distribution
Packaging Distribution • Revenue increases in H1 from internet retail wins of Bertrams Books £0.7m and Selfridges £0.3m • Internet retail ca. 25% of Distribution revenue • National Accounts growth up significantly with strong increase from Thermofisher £0.3m • Acquisitions performing well and to pla
Slide 10: Packaging Distribution - upward trend in input costs
Packaging Distribution - upward trend in input costs £1,275 £500 £1,250 £1,225 £1,200 £475 £1,175 £1,150 £1,125 £1,100 £450 £1,075 £1,050 £1,025 £425 £1,000 £975 £950 £400 £925 £900 £875 £850 £375 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Polymer £/tonne £1,129 £1,203 £1,194 £1,227 £1,225 £1,2
Slide 11: Recent Acquisitions in Packaging Distribution
Recent Acquisitions in Packaging Distribution Acquisition of Lane, May 2014 Acquisition of One, Aug 2015 Nelsons – July 2016 • Location: Reading • Location: Nottingham • Location: Leicester • Sales: £3m • Sales: £5m • Sales: £9m, Price: £6.75m • Price: £1.4m • Price: £2.7m • Earn out: £1.5m, Year 1
Slide 12: Macfarlane Design and Manufacture
Macfarlane Design and Manufacture £m H1 2017 H1 2016 Revenue 6.0 6.1 Gross Margin 35.3% 35.2% Operating profit 0.1 0.1 Sales to Distribution 24% 27% ⚫ Weak demand from certain UK sectors in H1 ⚫ Operational issues in 2016 now resolved ⚫ Strong new business pipeline will benefit H2 2017 ⚫ Focus on va
Slide 13: Macfarlane Labels
Macfarlane Labels £m H1 2017 H1 2016 Revenue 7.6 7.6 Gross margin 38.5% 37.9% Operating Profit 0.2 0.2 Self-Ad/Reseal-it % 56/44 60/40 Net Margin 2.6% 2.6% ⚫ Re-sealable labels sales/machines up 9% ⚫ Self-adhesive label sales down 8% ⚫ Improved margin through better sales mix and operating efficienc
Slide 14: Pension Scheme Deficit £m
Pension Scheme Deficit £m H1 2016 2017 Opening deficit (14.5) (11.5) Ongoing accrual/Interest cost (0.3) (0.5) Contributions 1.9 3.0 Bond yield 0.1% to 2.6% (2016 1.0%) (1.6) (14.8) Investment returns 1.0 9.6 Net effect of other assumptions 0.1 (0.3) Closing deficit (13.4) (14.5) ⚫ Continued dec
Slide 15: Pension Scheme details £m
Pension Scheme details £m Investments H1 2017 2016 Growth assets Invested H1 Diversified Growth Funds 21.9 21.5 Equities - £1.0m 17.5 17.1 European Loan Fund 6.5 6.4 Long-term Property Fund + £6.2m 6.3 Matching assets Liability-driven investments 26.5 26.5 Cash -£5.2m 0.3 6.3 Total investments 79.0
Slide 16: Growth Proposition Capability
Growth Proposition Capability Retail Reduce total cost of Expertise, 3PL partnerships packaging and customer referrals Rationalise packaging UK national network Industrial supplier base to reduce costs IT capability Rationalise packaging Geographic expansion NovuPak Organisation supplier base to red
Slide 17: Profitable Growth in Manufacturing
Profitable Growth in Manufacturing Growth Proposition Capability Leading-edge MOD Aerospace, Medical, Unique protection for high approved Packaging Design, Electronics value, fragile Items expertise Ease of opening, food waste Re-sealable Labels Proven Patented technology reduction and brand integri
Slide 18: Conclusions
Conclusions • H1 2017 demonstrates continuing progress in line with strategy • Trading agenda: • Distribution focus on identified growth opportunities – Internet Retail, National Accounts and 3PL • Manufacturing focus on higher added value products and services • Ongoing focus on cost reduction • Fu
Slide 19: Macfarlane Business Case
Macfarlane Business Case Strong Clear plans operating Good market and a track A simple and companies positions with record of flexible with growth performance business model differentiated potential propositions 19
Slide 20: Appendices
Appendices Ce MAC RANE a ST SS 20
Slide 21: Macfarlane Group Structure
Macfarlane Group Structure Macfarlane Group 87% of Group 6% of Group 7% of Group Packaging Packaging Design Macfarlane Distribution and Manufacture Labels Nationwide distribution Design/manufacture of Design and printing of of protective packaging packaging products for Self-adhesive & re- materials
Slide 22: Packaging Distribution
Packaging Distribution • Supply of protective packaging materials in the UK • UK Market leader with c 20% market share in fragmented market • Nationwide coverage through • 20 Regional Distribution Centres/3 satellite sites • 20,000+ customers • Concentration on growth areas • Internet Retail – highe
Slide 23: The Total Cost of Packaging
The Total Cost of Packaging The significant six Like an iceberg hidden costs Storage Transport costs costs Damages Administration & returns costs Customer Productivity experience 23
Slide 24: Key Competitive Advantages
Key Competitive Advantages 18 Nationwide Strategically Multi –channel Located Distribution Centres approach to market Independent expertise in Packaging and the Experience in a wide Packing Process range of industries Key Competitive Advantages Strategic Supplier Internet Retail and Relationships 3P
Slide 25: Packaging Distribution RDCs
Packaging Distribution RDCs Margin 2016 2015 2014 2013 2012 >7.5% 10 8 9 6 6 5.0% - 7.5% 5 7 4 5 7 2.5% - 5.0% 2 0 3 3 1 0.0% - 2.5% 2 2 1 0 0 Loss-making 1 1 1 2 2 20 18 18 16 16 * Before exceptional items 25
Slide 26: Macfarlane Packaging Distribution Customers
Macfarlane Packaging Distribution Customers Key Customers 26
Slide 27: Net Promoter Score
Net Promoter Score NPS versus Traditional Customer Satisfaction Surveys 27
Slide 28: Labels
Labels • Specialises in the design, printing and supply of high quality self-adhesive and re-sealable labels for FMCG manufacturers in the UK, Europe and USA • Printing more than 2 billion labels each year • Research & development facilities in Scotland and Sweden • Manufacturing centres in Scotland
Slide 29: Labels Customers
Labels Customers > : e ag inh sain PeG (McBride CHetais Gaur) Keenc WA fee osm BAKKAWR «= “CS Co MACFARLANE ¥ GROUP Se ee es 29
Slide 30: Packaging Design and Manufacture
Packaging Design and Manufacture • Design, manufacture and assembly of bespoke, custom-designed packaging to protect high value or fragile products in shipping and storage • Target customers are in defence, aerospace, medical, electronic and industrial markets • Design lead sales approach to major c
Slide 31: Design and Manufacturing Customers
Design and Manufacturing Customers 31
Slide 32: Strategic Focus - Operational
Strategic Focus - Operational • Packaging Distribution focus on key growth sectors • Improve quality of earnings through internal actions • Use acquisitions to fill geographic gaps or under-utilised RDCs • Build market share from 20% towards 25% • Medium-term potential for geographic expansion • Lab
Slide 33: C MACFARLANE
C MACFARLANE GROUP