2004 preliminary results presentationfiles.investis.com/tomkins/pdfs/2004_prelims_pres.pdf · 4...
TRANSCRIPT
-
2004 Preliminary Results23 February 2005
-
2
Agenda
• Introduction – David Newlands
• Financial Review – Ken Lever
• Operational & Strategic Review – Jim Nicol
-
3
Agenda
• Introduction – David Newlands
• Financial Review – Ken Lever
• Operational & Strategic Review – Jim Nicol
-
4
Financial highlights
• Underlying* sales ahead by 5.7 per cent
• Underlying* operating profit** up by 12.8 per cent
• Reported operating profit† up by 10.5 per cent
• Group operating margin** 9.3 per cent (2003: 8.6 per cent)
• Basic earnings per share before non-operating exceptional items and goodwill amortisation grew by 20.1 per cent
• Full year dividend increased by 5.0 per cent to 12.6p (2003: 12.0p)
• Net debt lower at £244.5m
• US dollar operating income under US GAAP up by 23.7 per cent
* See results’ announcement for definition of underlying** before operating exceptional items and goodwill amortisation† before goodwill amortisation
from continuing operations
Financial review
-
5
Summary profit & loss
*includes associates and before goodwill amortisation
179.9
132.447.5
140.8(8.4)
152.7(11.9)
235.9(83.2)
271.8(35.9)
295.8
(24.0)
3,150.4
2003(£1=$1.63)
0.6%180.9Profit after tax
68.7%223.4(42.5)
Profit before taxTax at 19%
69.4%(79.8%)
238.5(15.1)
Profit before interestInterest
64.4%(5.0%)
251.0(12.5)
Profit before goodwill amortisationGoodwill amortisation
10.5%88.5%
260.6(9.6)
Operating profitNon-operating exceptional items
2.3%51.3%
278.1(17.5)Operating exceptional items
2.0%
1.3%
301.8
(23.7)
Operating profit before operating exceptional items*:Business groups
Central costs
(5.4%)2,980.3Sales
Change(%)
2004(£1=$1.83)
£m
Financial review
-
6
Sales bridge
3,150.4
(265.7)
(63.8) 79.4
21.1 58.9
2,980.3
2003 2004
Acquisitions & Disposals
Currency translation
Air Systems Components
Engineered & Construction
Products
Industrial & Automotive
Underlying sales change
+5.7%
£m
£=$1.63
£=$1.83
Underlying sales up 5.7%, but reported sales reduced by 5.4%
Financial review
(8.4%)
-
7
235.9
9.42.5
(25.0)
1.816.4
20.0
(0.4)
260.6
Operating profit* bridge
CentralCosts
Currency translation
Air SystemsComponents
Engineered &Construction
Products
Industrial &Automotive
2003
£m
Acquisitions &Disposals
+12.8%
Underlying operating profit change
£=$1.63
£=$1.83
2004
*before goodwill amortisation
Reported operating profit ahead by 10.5 per cent despite currency effect
Financial review
Restructuring
(10.6%)
-
8
Underlying growthGroup
Financial review
Underlying growth against prior year:
4.1%
5.7%
2.3%
12.8%
-
2%
4%
6%
8%
10%
12%
14%
2003 v 2002 2004 v 2003
Sales Operating Profit*
On an underlying basis, sales and operating profit significantly ahead* before operating exceptional items and goodwill amortisation
-
9
Underlying growthIndustrial & Automotive
Achieved higher operating profit growth in 2004
Financial review
6.3%
4.3%
9.9%
11.4%
-
2%
4%
6%
8%
10%
12%
14%
2003 v 2002 2004 v 2003
Sales Operating Profit*
Underlying growth against prior year:
* before operating exceptional items and goodwill amortisation
-
10
Underlying growthAir Systems Components
Financial review
Underlying growth against prior year:
( 1.8% )
5.3%
24.9%
( 9.6% )( 10% )
( 5% )
-
5%
10%
15%
20%
25%
30%
2003 v 2002 2004 v 2003
Sales Operating Profit*
Turnaround in sales and profit growth* before operating exceptional items and goodwill amortisation
-
11
Underlying growthEngineered & Construction Products
Financial review
Underlying growth against prior year:
2.3%
10.5%
2.6%
4.4%
-
2%
4%
6%
8%
10%
12%
14%
2003 v 2002 2004 v 2003
Sales Operating Profit*
Sales significantly ahead compared to last year* continuing operations, before operating exceptional items and goodwill amortisation
-
12
Underlying growthAftermarket
Financial review
11.5%1.9%5.3%100.0%Group
9.1%13.6%11.5%5.0%Rest of World
£338.2m£558.1m£896.3m
IndustrialAutomotiveTotal
7.2%
19.1%
68.7%
Proportion of 2004 Aftermarket
Sales
3.6%0.9%1.7%Europe
21.6%
12.5%
Industrial Aftermarket
Growth2003 to 2004
Automotive Aftermarket
Growth2003 to 2004
Total Aftermarket
Growth2003 to 2004
Region
44.1%33.3%Asia
(1.2%)3.7%North America
Strong growth in China and other emerging markets
-
13
Full year operating margins*
10.1%
11.2%
9.3%8.8%
9.8%9.4%
9.6% 9.6%
7%
8%
9%
10%
11%
Industrial &Automotive
Air SystemsComponents
Engineered &Construction
Products
Group
2003 2004
I&A and ASC maintained double digit margins through the year
Financial review
* continuing operations, before operating exceptional items and goodwill amortisation
-
14
Raw materials
6.14.2
7.7
18.0
0
5
10
15
20
Industrial &Automotive
Air SystemsComponents
Engineered &Construction
Products
Group
£m
Effective management of increased costs
Net impact of raw material cost increases for the year:
Financial review
-
15
Financial review
Strategic manufacturing initiatives
46.1
35.9
17.5
25.4
34.3
20.1
0
5
10
15
20
25
30
35
40
45
50
2002 2003 2004
Operating Exceptional Items Charge Operating Exceptional Items Cash Spend
Cash cost exceeding charge as SMI projects move to conclusion
£m
-
16
Non-operating exceptional items
(9.6)
-
(9.6)
-29.6
(39.2)
(13.1)-
(3.7)(4.1)
(18.3)
2004
(32.6)33.1
Other items relating to disposals:- Provision for exit from non-core businesses- Reversal of provisions relating to business disposals
(91.4)
(90.9)
7.7Profit on asset disposals
(29.9)(51.4)
Goodwill relating to disposals:- Sold during the year- Sold after the year end
11.4(21.5)
-
Book (loss)/ profit on the disposal of businesses:- Sold during the year- Sold after the year end- Cost of exit of business
(83.2)Total
2003£m
Financial review
-
17
TaxFinancial review
223.4
-
223.4
(9.6)
(12.5)
245.5
Profit
19.0%(42.5)As reported
-15.0Tax contingency release
22.4%2.8Goodwill amortisation
25.7%(57.5)Profit before tax
26.0%
25.6%
EffectiveRate
Tax (charge)/credit£m
2.5Non-operating exceptional items
(62.8)Tax on profit before non-operating exceptional items and goodwill amortisation
Tax rate of 19.0% after tax contingency release
-
18
(384.5)-Redemption of preference shares
(105.1)(2.7)Acquisitions and disposals
20.2
6.9
16.0
(165.7)
181.7
394.0
(20.1)(18.0)
-
(10.0)(142.2)(25.9)
3.9
278.1115.9
2004
16.6Currency and other
50.7Cash flow after tax, interest and dividends(167.3)Tax, interest and dividends
(422.3)Change in net debt
218.0Cash flow from operations after exceptional items
397.3
(34.3)-
13.7
(29.9)(97.8)(26.8)(4.2)
EBITDACash effect of exceptional items:- Strategic manufacturing initiatives- Exit from businesses- Asset proceedsCapital expenditure:- Strategic manufacturing initiatives- Business operations Working capital, excluding the effect of operating exceptional itemsOther operating cash flows
271.8125.5
Operating profit before operating exceptional items and goodwill amortisationDepreciation and amortisation before operating exceptional items
2003£mAverage exchange rate $/£: 2004 - 1.83, 2003 - 1.63
Cash flow
Net debt lower at £244.5 million
Financial review
-
19
Capital investment
Capital Expenditure Depreciation
Industrial & Automotive
119.0111.0
134.7
85.6 90.8 86.6
020406080
100120140160
2002 2003 2004
£mGroup152.9
141.1157.7
128.8 128.6115.9
020406080
100120140160
2002 2003 2004
£m
Investments in Stackpole, China expansion and systems development
Financial review
-
20
Capital investmentFinancial review
Capital Expenditure Depreciation
Engineered & Construction Products
19.620.7
14.6
24.121.4
14.4
0
5
10
15
20
25
2002 2003 2004
Air Systems Components
14.2
8.6 8.0
19.1
16.214.6
0
5
10
15
20
25
2002 2003 2004
£m£m
Investments in Dexter, Bathware and Fittings to improve efficiency
-
21
Working capital
Continue to effectively manage investment in working capital
Financial review
18.017.9Industrial & Automotive
8.29.0Air Systems Components
6.54.0Engineered & Construction Products
13.4
2003%
2004%Working capital as percentage of total sales
13.5Group
-
22
Financial summaryFinancial review
• Good underlying growth in sales and operating profits
• Improved operating margins
• Strong cash generation
• Continuing to invest for profitable growth
• SMI programme largely complete
• Good dividend
• Strong financial position
Strong financial position going into 2005
-
23
Agenda
• Introduction – David Newlands
• Financial Review – Ken Lever
• Operational & Strategic Review – Jim Nicol
-
24
Value building strategy
Dynamic growth in value:
Operational & Strategic Review
Dynamic growth in value:
• Organic growth– business efficiency – business development– product and process innovation
• Geographic expansion– higher growth markets
• Strategic acquisitions– Value enhancing– Complementary product lines– Growth prospects
Moving up the tempo
-
25
Business excellenceOperational & Strategic Review
CREATING VALUE
DisciplinedCapital Allocation
Value CreatingAcquisitions
Attractive Markets
Innovation / Technology
Manufacturing Excellence
Incentive Scheme
-
26
Business efficiency
• Plant rationalisations, closed 10 facilities
• £25.4m lean savings across the Group
• 20% of manufacturing in low-cost jurisdictions
Mexicali – Holland Produced Parts Kan Ban Mexicali - TDCAA Cell Design
Operational & Strategic Review
-
27
Business development – Powertrain
Gates
• $101m in new business• 30% non traditional markets• 65% non “Big 3”
Stackpole
• C$98m new business • DCX 62TE Carrier - $6m
31.8 30.4
20.0
12.0
7.0
0
5
10
15
20
25
30
35
NA EU Korea China Japan
Mill
ions
Operational & Strategic Review
$
-
28
Business development – Air SystemsOperational & Strategic Review
• Order backlog continues to improve
• Key orders Q4 2004 $5.4m ($4.2m in Q3 2004)
• New product sales of $20m
-
29
Business development – Aftermarket
Trico Beam Blade Transmission Oil Cooler
• Launched in Q4 2004
• New customers launch 2005
• Popular Mechanic Editor’s Choice
Operational & Strategic Review
• Previously only sourced through auto dealer network
-
30
Product innovationOperational & Strategic Review
Quick-Lok™ coupling
9.3 per cent of 2004 sales from new products
GEM10®
• 1st program in Europe
• 1st program in N. America• 4.0 litre engine module
• $78 content per engine
• Strong Citroen C3 volumes
• 30 programmes under development
• 1st program in N. America• $56 content per engine
• Facilitates port-to-port
• Reduces after sales service
• Reduces assembly time
-
31
Expand in higher growth marketsOperational & Strategic Review
Gates, Suzhou 2
Lu Hai, Joint Venture
Ideal, Suzhou, Scheduled Q4 2005
Trico, Suzhou, Scheduled Q4 2005
-
32
Stackpole progress
• Business development activity remains strong– Expected CAGR of 15 - 20% (2004 – 2009)
• Variable displacement oil pumps• Carrier systems & modules
– Diverse customers
• Successful launch of 3 facilities
• Near term results impacted by– GM car volumes down 20%– Customer launch delays
• On-track to achieve strategic objectives
Operational & Strategic Review
-
33
Acquisition process – ASC case studyOperational & Strategic Review
Hart & CooleyAir Diffusion
American Metal Products/
Superior Rex
WardJohnson
Milcor
Combined business
Original business
1999 2000 2001 2002 2005 Current
Enterprise value
Residential market
UK presence
Low cost Mexico facility
Product diversification
Product diversification
China cost base
Synergy value
Higher growth
Increasing margin
Rationalise production Lean manufacturing Value creation
-
34
Acquisitions – Milcor
• Acquired Jan 2005• Product line extension• Product and customer synergies• Expands distribution capability• Manufacturing capability in China• Annual sales of $47m
Operational & Strategic Review
-
35
Acquisitions – Mectrol
• Acquired Dec 2004• Product line extension to Gates• Access to new markets and customers• Asia expansion opportunity• Integration progressing smoothly• Annual sales of $25m
Operational & Strategic Review
-
36
Acquisitions – L E TechnologiesOperational & Strategic Review
• Acquired Feb 2005• RV buyer age group (55-64) to grow
45% between 2001 and 2010• Modular frame capability (Frame + Axle)• Purchasing / Manufacturing synergies• Access to a new customer base• Potential for additional frame content• Annual sales of $86m
-
37
2004 recap
Good performance– underlying sales 5.7%– underlying operating profit 12.8%– operating margin 9.3% vs 8.6%
Performance driven by:– organic growth:
• new product and process development• manufacturing excellence
– geographic expansion– acquisitions
Operational & Strategic Review
-
38
End market outlook
Outlook
Automotive OE
Automotive Aftermarket
Industrial OE
Industrial Aftermarket
Residential Construction
Non-Residential Construction
Forecast to grow slightly
Should grow by 4%
Positive forecast
Positive forecast
Small decline
Forecast to grow 5%
Market 2005
Operational & Strategic Review
-
39
2005 outlook
• Coming into the year we have:– Some continuing effect of raw material costs– Weak Q1 N. American automotive volumes
• Build momentum throughout the year– Dynamic growth– Culture of business excellence
• Expect underlying progress
Moving up the tempo
Operational & Strategic Review
-
40
• Questions & Answers
-
41
• Appendices
-
42
Q4 operating profit*
After operating
exceptional items
Operating exceptional
items
Before operating
exceptional items
After operating
exceptional items
Operating exceptional
items
Before operating
exceptional items
£m
53.0(8.4)61.458.5(5.1)63.6Total before goodwill amortisation
(6.1)-(6.1)(4.9)-(4.9)Central costs
59.1(8.4)67.563.4(5.1)68.5Total of business groups
10.7(0.6)11.311.10.210.9Engineered & Construction Products
9.4(1.2)10.610.1(0.7)10.8Air Systems Components
39.0(6.6)45.642.2(4.6)46.8Industrial & Automotive
Q4 2003Q4 2004
*before goodwill amortisation
Appendices
Group Q4 reported operating profits ahead despite translation impact
-
43
Full year operating profit*
After operating
exceptional items
Operating exceptional
items
Before operating
exceptional items
After operating
exceptional items
Operating exceptional
items
Before operating
exceptional items
£m
239.9(35.9)271.8260.6(17.5)278.1Total before goodwill amortisation
(24.0)-(24.0)(23.7)-(23.7)Central costs
259.9(35.9)295.8284.3(17.5)301.8Total of business groups
52.5(11.1)63.657.6(1.7)59.3Engineered & Construction Products
38.2(4.1)42.346.2(1.0)47.2Air Systems Components
169.2(20.7)189.9180.5(14.8)195.3Industrial & Automotive
20032004
Reported operating profits ahead for the group despite translation impact*before goodwill amortisation
Appendices
-
44
US GAAP highlights
Currency translation hides strong performance in sales and operating income
(12.5)-Goodwill Impairment
13.4%(45.5)(39.4)Central Costs
6.0%104.2110.5Engineered & Construction Products
37.2%61.183.8Air Systems Components
15.8%278.3322.2Industrial & Automotive
23.7%385.6477.1Operating Income
11.0%988.11,097.1Engineered & Construction Products
5.8%730.3772.3Air Systems Components
11.4%3,129.03,486.7Industrial & Automotive
10.5%4,847.45,356.1Net Sales
% change20032004$m
Appendices