2007 annual results - techtronic industries · 2007 annual results for the year ended december 31,...
TRANSCRIPT
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2006 annual results announcement
17th April 2008
2007Annual Results
For the year ended December 31, 2007
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Horst PudwillChairman
Introduction
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Joe GalliCEO
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isOutperforming the
Market
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2007 Financial ResultsNot Reflective of the Future
Profit
Cash Flow
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Short Term
Restructuring + Transition Impact:
Hoover Restructuring
Milwaukee Restructuring
New PRC Facility
Strategic SG&A Investment• New Products
• New Businesses
• Geographic Expansion
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2007 Financial Results
Sales
EBIT(Before one time benefit, restructuring and transition costs)
Restructuring and Transition Costs
Net Profit(After one time benefit, restructuring and transition costs)
Gross Profit Margin%
One Time Benefit
+13.5%
(41.0%)
(88.3%)
(769.0%)
21,823
1,513
0
1,072
31.6%
43
24,775
892
743
125
31.5%
377
2007HK$m
2006HK$m
Changes
N/A
EBIT(After one time benefit before restructuring and transition costs)
1,269 1,556 (18.4%)
EPS (HK cents)(After one time benefit, restructuring and transition costs)
8.41 73.18 (88.5%)
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2007 One-Time Impact Items
(60.0)
(32.4)(9.6)
+48.5
(53.5)
2007US$m
2007HK$m
(95.5)
(467)
(252)(75)
+377
(416)
(743)
Hoover Operating Loss
Restructuring and Transition Costs
Cash
One-Time Benefits
Non Cash
Transition Costs
Total
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Restructuring Overview
Cash
Non cash
Subtotal
Transition Cost
Total
Savings
2007 Total
53.5
32.4
85.9
9.6
95.5
95.3
54.9
150.2
22.0
172.2
(US$m) 2008 2009
41.8
22.5
64.3
8.1
72.4
-
-
-
4.3
4.3
2010
-
-
-
-
-
- 25.0 45.0 70.0
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Frank Chan
Chief Financial Officer
Financial Review
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2007 Financial Performance – Consolidated (incl. Hoover)For the 12 months period ended December 31, 2007
Sales
EBITDA (Before restructuring and transition costs)
Restructuring and Transition Cost
Gross Profit
Operating Profit (Before restructuring and transition costs)
Operating Expenses (Before restructuring and transition costs)
Profit Attributable to Equity Holders of the parent
Taxation
Basic EPS (HK cents) (Before restructuring and transition costs)
Finance Costs
21,823
5,372
0
6,893
1,656
2,098
1,072
184
73.18
392
13.5
(6.5)
N/A
13.3
(17.1)
28.7
(78.8)
(88.3)
17.3
(14.9)
2007HK$m
2006HK$m
%Change
Basic EPS (HK cents)
24,775
6,912
743
7,809
1,372
1,962
125
39
58.27
460
8.41 73.18 (88.5)
27.9%
3.0%
31.5%
5.5%
7.9%
0.5%
1.9%
% of sales
% of sales
24.6%
31.6%
7.6%
9.6%
4.9%
1.8%
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2007 Financial Performance – Core (excl. Hoover)For the 12 months period ended December 31, 2007
Sales
EBITDA (Before restructuring and transition costs)
Restructuring and Transition Cost
Gross Profit
Operating Profit (Before restructuring and transition costs)
Operating Expenses (Before restructuring and transition costs)
Profit Attributable to Equity Holders of the parent
Taxation
Basic EPS (HK cents) (Before restructuring and transition costs)
Finance Costs
21,823
5,372
0
6,893
1,656
2,098
1,072
184
73.18
392
(0.1)
(8.6)
N/A
1.0
(15.2)
7.5
(67.7)
(45.7)
14.7
(13.4)
2007HK$m
2006HK$m
%Change
Basic EPS (HK cents)
21,796
5,774
308
6,963
1,404
1,917
582
59
59.74
449
39.06 73.18 (46.6)
26.5%
1.4%
31.9%
6.4%
8.8%
2.7%
2.1%
% of sales
% of sales
24.6%
31.6%
7.6%
9.6%
4.9%
1.8%
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Financial PositionAs of December 31 (HK$m)
Non-current Assets
Long-term Liabilities
Current Liabilities
Current Ratio (CA / CL)
Current Assets
Net Current Assets
Shareholders’ Funds
Quick Ratio (CA-inventories / CL)
2007HK$m
2006HK$m
Changes%
Factors
Hoover Acquisition
CB Bonds redeemed
10,015
5,975
11,983
1.25
14,954
2,971
6,920
0.75
8,464
7,028
7,214
1.78
12,856
5,642
6,997
1.22
18.3
(15.0)
66.1
16.3
(47.3)
(1.1) Share repurchase andCB redemption
Increase in assets and liabilities from Hoover AcquisitionIncrease in assets and liabilities from Hoover Acquisition
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(691)(2,985)
(2,639)
(2,653)(1,825)
(1,588)(1,106)
3,719 3,293
(98)
Debt Profile
Turnover days 2007
Net Debt increased due to Hoover Acquisition and restructuringNet Debt increased due to Hoover Acquisition and restructuring
2006Cash
Short Term Debt
Long Term Debt - Fixed
Long Term Debt - Floating
Long Term Debt - CB
As of December 31 (HK$m)
Long Term Debt / Total Debt 62.5% 41.3%
Interest Coverage (X)*
Gearing (Net Debt / Shareholders’ Funds)
4.5x
104.3%
5.6x
74.1%
*Interest Coverage = EBITDA/Interest expense
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Financial Targets
GM %
SG&A %
EBIT%
2007 2011
31.5%
27.9%
3.6%
34%+
10%+
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Tax Rate
Interest
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Strategic Roadmap1. Gross Margin
2. Sales Growth
3. Free Cash Flow
4. Organization Development
5. Operating Cycle
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1. Gross Margin2. Sales Growth
3. Free Cash Flow
4. Organization Development
5. Operating Cycle
Strategic Roadmap
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Gross Margin Challenges
Impacting All CompetitorsImpacting All Competitors
PRC Inflation• Labor• Labor Law• RMB• VAT
Commodity Inflation
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Offset Inflation
Plan
Improve Gross Margin+
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Challenges offset by Plan
1. High Margin New Products
2. Hoover Restructuring
3. Milwaukee Restructuring
4. New PRC Facility
5. Comprehensive TTI Productivity Initiative
6. “Global” Operations Plan
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Gross Margin Improvement
Key New Product
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Hoover Restructuring
North Canton, Ohio closed
• Production transferred to Mexico and PRC
DC Restructuring completed
• 3 1 sites
Global R&D Center - Ohio
Restructuring Program on TrackRestructuring Program on Track
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Milwaukee Restructuring
Transfer Team in Place
2 US Facilities closed by year end
New PRC Facility and test labs in place
Equipment Transfer underway
Inventory build to cover transition period
Savings will flow in 2009 and beyondSavings will flow in 2009 and beyond
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Restructuring Summary
Cash
Non cash
Subtotal
Transition Cost
Total
Savings
2007 Total
53.5
32.4
85.9
9.6
95.5
95.3
54.9
150.2
22.0
172.2
(US$m) 2008 2009
41.8
22.5
64.3
8.1
72.4
-
-
-
4.3
4.3
2010
-
-
-
-
-
- 25.0 45.0 70.0
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PRC TTI Core Business Facilities
2008 2009 - 2011 Target
Transition starts 2nd Half 2008Transition starts 2nd Half 2008
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Campus
Innovation Center
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Operational ExcellenceBroad Based Productivity Drive
Reduce cost
Reduce scrap/waste/rework
Reduce floor space
Significant Cost Reduction PotentialSignificant Cost Reduction Potential
Improve quality – PPM’s
Reduce Inventory
How Implement Lean Manufacturing• Cellular
• Kaizen
Improve Supplier Management
Introduce SOP Process
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Global Manufacturing Platform
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Strategic Roadmap1. Gross Margin
2. Sales Growth3. Free Cash Flow
4. Organization Development
5. Operating Cycle
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but…
Challenging economic environment
is Driving Sales Growth
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2007 Sales -0.1%
Outperformed the Market
US Outdoor
OEM
US Ryobi
US RIDGID
US Milwaukee
Canada
Europe
Australia
Floor Care
-25.0%
-11.8%
(As planned)
+22.0%
+23.8%
+28.3%
+4.5%
Flat
Capturing Market Share
Down
Flat
Up
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2008 Target
Double DigitSales Growth
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A New ProductMachine
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R&D Investment
2006
R&D as a %
of sales2.0% 2.2%
2007
Innovation Center
25% increase in R&D spending25% increase in R&D spending
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New Product FocusNew Product Focus
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Geographic Expansion
Canada
Europe• Middle East
• Russia
• Eastern Europe
Australia
Latin America
China China –– on the wayon the way
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Strategic Roadmap1. Gross Margin
2. Sales Growth
3. Free Cash Flow4. Organization Development
5. Operating Cycle
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Free Cash Flow
2007 Impacted by:
1. Restructuring2. Inventory Build up for Restructuring3. New PRC Facility4. Hoover Losses
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Free Cash Flow
Long Term Target:
TTI will convert ~ 100% of Net Profit into Free Cash Flow
and…
Net Profit will grow
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Free Cash Flow Plan
Improve through:1. Completing Restructuring
2. Increase EBIT
3. Reducing Working Capital as a % of Sales
4. Completing PRC New Facility
5. Reduce Fixed Capital as a % of Sales
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Inventory
$514m
67days
2006
$641m
73days
2007 Target
64days
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Working Capital
2007Target
2009-2011
Inventory Days
Receivables DSO
Payables DPO
Working Capital As a % of Sales
73
57
59
19.5%
64
57
59
17.0%
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Fixed Capital
2007Target
2009-2011
CAPEX% of sales
Depreciation% of sales
< 2.5%
Capex < Depreciation
$111m3.5%
$72m2.3%
2006
$61m2.2%
58m2.1%
_
_
(US$)
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Free Cash Flowa
Focus
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Strategic Roadmap1. Gross Margin
2. Sales Growth
3. Free Cash Flow
4. Organization Development5. Operating Cycle
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Strengthen / UpgradeOrganization
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+Strong TTI Veterans
Management Team
Outstanding New Hires
TTI = Exceptional PeopleTTI = Exceptional People
+
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Key New Hires
President - Milwaukee
Position
President - Floor Care
President - Power Tools
President - Canada
President - Europe
President - Latin America
SVP - Global Operations
1/07
Date
1/07
10/07
10/07
11/07
3/08
6/07
Plus 56 Additional Senior ExecutivesPlus 56 Additional Senior Executives
President - Australia 3/08
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Strategic Roadmap1. Gross Margin
2. Sales Growth
3. Free Cash Flow
4. Organization Development
5. Operating Cycle
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Operating CycleStrategic Planning
Global Product Summits
Operations Reviews
Organization Review
BudgetAnnually
Semi-Annually
Quarterly
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DisclaimerThis presentation includes forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Changes in the following important factors, among others, could cause Techtronic Industries Co. Ltd.’s actual results to differ materially from those expressed in the forward-looking statements: competitive products and pricing; production costs; fluctuations in demand; governmental policies and regulations affecting the environment; interest rates; currency translation movements; and other risks that are detailed from time to time in reports filed by the Company with the Securities and Exchange Commission.
This presentation speaks only as of the date of this presentation and Techtronic Industries Co. Ltd assumes no obligation to update the presentation. Users of the presentation are encouraged to review public disclosure by Techtronic Industries Co. Ltd. subsequent to the date of this presentation.
Trademarks:
All trademarks are intellectual property of their respective owners and are protected under trademark law.
The use of the mark RYOBI® is pursuant to a license granted by Ryobi Limited.
RIDGID® is a registered trademark of Ridgid, Inc., part of Emerson Professional Tools, a business of St. Louis-based Emerson (NYSE:EMR). The orange color used on these products and the combination of orange and grey are trademarks for RIDGID® brand power tools.
Sear®, Craftsman® and Kenmore® brands are registered trademarks of Sears Brands, LLC.