Low & Bonar PLC/media/Files/L/Low-And-Bonar-IR/company...Low & Bonar: Summary • Encouraging...
Transcript of Low & Bonar PLC/media/Files/L/Low-And-Bonar-IR/company...Low & Bonar: Summary • Encouraging...
Low & Bonar PLC
Preliminary Results Year Ended 30 November 2006
Today’s Agenda
• 2006 financial performance
• Divisional performance, strategy and prospects
Appendix
• Low & Bonar at a glance
Financial Overview
• Revenue up to £224.5m (+28.0%)
• PBT up to £14.7m* (+20.5%)
• Normalised EPS** 8.75p (2005: 9.50p)
• Final dividend of 2.80p – full year 4.38p (2005: 4.15p**)
• First full year announcement under IFRS
• Successful £41.1m rights issue (net of costs) and new debt
facility of £175m
* Before tax, non recurring items and amortisation** After bonus adjustment factor
• Acquisitions performing ahead of plan– Colbond (July 2006)– Geo-Tipptex (March 2006)
• Floors– Profit performance and margin improvement strong– Sales of branded products more than compensate for
expected MoD slowdown
• Technical Textiles– Strong sales growth following acquisitions and progress from
global activities in Fabrics business– Grass yarns (16% of our Technical Textiles Division)
experienced increased competitive activity in price and volume
– Raw material/energy increases of £5m+
Financial Overview
Income Statement Summary
+20.5%_ 12.2__14.7_Normalised profit*
(1.1)(2.3)Financing costs
+27.8%13.317.0Operating profit
+28.0%175.4224.5Revenue
2005£m
2006£m
*Before non-recurring items and amortisation
Income Statement Measures
10.57p12.38pPre tax EPS**
9.50p8.75pNormalised EPS*
(6.39)p5.80pBasic EPS/ (loss)
9.8%28.6%Tax rate
20052006
* Before non-recurring items and amortisation of non-current assets
** EPS before tax, non-recurring items and amortisation
Income Statement Measures
2.3x2.0xDividend cover**
12.1x7.4xNet interest cover
4.15p4.38pDividend per share**
20052006
** after bonus adjustment factor
Revenue Analysis
224.5127.2_97.3FY 2006
__7.4__5.2__2.2Underlying growth
(2.6)-(2.6)Reductions in MOD business
44.344.3-Acquisitions
175.477.797.7FY 2005
Total£m
Technical Textiles
£mFloors
£m
Normalised Profit Bridge*
*before tax, non-recurring items and amortisation
0.2Other
14.7FY 2006
____
(1.2)Financing costs
1.7Technical Textiles Division
1.8Floors Division
12.2FY 2005
£m
Non-recurring Items
0.79.9Cash spend
_9.5__2.5_
(0.1)__-__Other
-2.0Technical textiles reorganisation:-Colbond integration-Relocation of construction fibres-Rationalisation of specialist yarns
1.1-Floors restructuring
8.5-EU fine
-0.5Aborted transaction costs
2005£m
2006£m
Balance Sheet
_68.6_116.9Net assets
__10.9_(46.1)(Net debt) / cash
23.794.0Other net assets
34.069.0Goodwill and intangible assets
2005£m
2006£m
Cash Flow
0.1Repayment of loans (net)
(5.2)Other movements
16.2
(7.8)Working capital
(11.2)
41.6Rights issue and share purchase
(35.2)Acquisition of subsidiaries
(9.9)Non-recurring cash costs
(8.7)Capital expenditure (net)
(10.1)Interest, tax and dividends
7.0Depreciation
17.0Operating profit
£m
Movement in Net Debt
(1.9)IAS 32, IAS 39
(46.1)Net debt at 30 November 2006
_0.1_Exchange difference
(45.9)Debt acquired within acquisition
(0.3)
(11.2)Net cash flow for the year
12.8Net cash at 1 December 2005 (UK GAAP)
Capital Expenditure
_10.2_Total Group
_0.1_Group7.9Technical Textiles2.2Floors
2006£m
Impact of Acquisitions
9.7
2.9
(0.2)
2.8
4.2
Geo-Tipptex£m
72.3Net cash outflow*
19.1Goodwill arising
(6.6)Fair value adjustments
12.5Intangible recognised
47.3Assets Acquired
Colbond£m
5.9 2.6
* Includes cash consideration, costs and cash and debt acquired within business
Today’s Agenda
• 2006 financial performance
• Divisional performance, strategy and prospects
Appendix• Low & Bonar at a glance
• A portfolio of strong market positions
: Global leadership in flocked flooring
: Leading European entrance systems supplier
: Leading UK carpet tile suppler
: Growing position in specialist vinyl flooring
: Unique global contract with MoD
Floors Division
22.6%26.8%ROCE
9.1%11.0%Margin
£8.9m£10.7mOperating profit*
£97.7m£97.3mRevenue
20052006
*Before non-recurring items and amortisation
Bonar Floors 2006 highlights
• Continued margin progress and growth in branded product sales
• Increased product launch activity continues; growth across all
contract brands
• Productivity and pricing offset raw material energy increases
• Service levels support market share gains, especially in Tessera
• Channel/ bundling strategy proving successful, especially in
France and Benelux
• New technology platform for Flotex: increased design capability
• MoD contract extended until at least 2009
Bonar Floors 2007 and beyond…
• Focus on contract flooring: “the easiest and most complete
business partner for installers/ specifiers”
• Build on bundling strategy to satisfy customer preference
and leverage sales force
• Expansion across Europe and, via distribution, Asia and
North America
• Continued “raising of the game” in new product introduction
and service offerings
• Acquisitions, where appropriate, to be pursued
“Performance fabrics, yarns or fibres where functionality, not aesthetics, is key”
Technical Textiles
Technical Textiles: the market
• £50bn global market with volume growing at c. 2x GDP
• Two major segments: industrial and consumer products. Low &
Bonar focuses on industrial
• Multiple production technologies and raw material types
• Highly fragmented, with many specialist niches sustaining
double-digit margins.
• Some shift from product-led to customer–led approach
developing
Technical TextilesOur Market Presence
Leading positions in concrete additive fibres, polymeric mats for buildings and industrial wovens.
Other
Leading global supplier of grass and carpet yarns
Grass yarns
Leading global position in greenhouse screens and in ground covers
Agro textiles
Leading European, North American and Chinese supplier: woven/ non-woven
Carpet backing
Leading European and Chinese supplier of woven/ non-woven fabrics
Geotextiles
Technical TextilesOur Market Presence
Geotextiles
Carpet backing
Agro textiles
Grass yarns
Other
Source: Management Estimate; Annualised Basis
Technical Textiles Division
13.5%5.7%ROCE
9.5%7.2%Margin
£7.4m£9.1mOperating profit*
£77.7m£127.2mRevenue
20052006
*Before non-recurring items and amortisation
Technical Textiles 2006 highlights
• Colbond acquisition in July, doubling the size of the TT business
• Geo-Tipptex acquisition in March, consolidating our leading
geotextile position in Europe
• Business realigned to exploit cost and customer synergies
• Woven and non-woven textiles businesses globally grew sales
and profit
• Issues in grass yarns market impacted sales and profit, but are
being addressed
• Raw material and energy cost escalation continued: £5m+ y.o.y
Colbond: Rationale and subsequent performance
The acquisition:
– Brought us leading niche positions in Europe/US in non-woven textiles
and polymeric mats
– Materially enhanced the innovation capability within Technical Textiles
– Diversified our raw material purchases away from PP/PE
– Offered market and product synergies in civil engineering
– Had clear cost-saving opportunities through capital spend
– A good quality management team
So far…
– The collaboration has been good
– The performance has been ahead of plan
– The post merger integration programme is on track
Technical Textiles Division: Organised for synergies and growth
Low & Bonar
Europe and North America Asia
Fabrics Specialist Yarns Colbond
Geo-Tipptex BTF/ Adfil Xirion
Bonar Yarns, Dundee
Yihua Bonar
• Commercial coordination
• Supply chain benefits
• Single face to customer
• Sharing innovation, infrastructure/ capabilities across T.T.
• Skill sharing with BTF/ Adfil
• Selective outsourcing by BTF
Technical Textiles: Progress in Fabrics/ Yihua Bonar
• Good growth in sales and profit due to:
– New product launches
– Underlying market growth
– Market share gain from cost/quality proposition
– Ability to imitate material cost growth with pricing
• Integration of Adfil’s manufacturing into BTF proving successful
• Investment in capacity in Central Europe and China happening to sustain
growth in 2007
• Changes to organisation, collaboration with Colbond and continued focus
on new product development will sustain this progress
Grass Yarns: Situation and Solutions
• Profit/ volume pressure in ’06 due to:
– Competitive price pressure– Raw material cost escalation– Customer-specific accelerated moves from fibrillated to monofilament
• Recent announcements on structural changes with TenCate buying Mattex
(supplier) and allying with Fieldturf/Tarkett (a leading customer)
• Xirion and Bonar Yarns combined in a single management structure
• Actions on cost in Dundee and production capacity at Xirion have had an
impact.
• Well positioned to capitalise on strong forecast market growth.
Raw Materials
• Significant price rises during the year (£5m +)
• Average price for 2007 expected marginally higher
than average 2006
• Visibility of new capacity leads to expectation of price
fall for 2008
PET, PP and LLDPE historic market prices
Jan-
01
Jul-0
1
Jan-
02
Jul-0
2
Jan-
03
Jul-0
3
Jan-
04
Jul-0
4
Jan-
05
Jul-0
5
Jan-
06
Jul-0
6
Jan-
07
0
500
1,000
€1,500
Price per Ton
PolyethyleneLinearLow Density
PolypropyleneRaffia
PET,PolyethyleneTerephthalate,Bottle Resin
Source: CMAI
Significant new production of PP entering from Middle East from 2007/8
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
1.3 1.5 1.51.9 2.2
2.5
3.33.8
6.3
7.8
8.7
0
2
4
6
8
10M T
Polypropylene Production in Middle East
Note: 2006 Global production capacity ~ 46MT: New capacity in ME represents 2% growth alone and 10% by 2009Source: CMAI
PE capacity increases from Middle East and China
2006 2007 2008 2009 2010 2011
1.61.8
1.3
2.42.3
2.4
0
1
2
3M T
Increase in HDPE Capacity
PercentageIncreasein Capacity
7% 7% 5% 8% 7% 7%
Note: 2006 Global production capacity HDPE 24MT, LLDPE 11MTSource: CMAI
2006 2007 2008 2009 2010 2011
1.1
0.60.7
2.42.2
1.3
0
1
2
3M T
Increase in LLDPE Capacity
MiddleEast
NortheastAsia
Other
10% 5% 6% 17% 14% 7%
Technical Textiles:The Benefits of Scale
Create scale
Fund innovation
Drive product
development
Gain market share
Improve margins
Growth
Technical Textiles: 2007 and Beyond
• Scale to drive innovation-led differentiation
• Focus primarily on industrial segment to underpin margins and
play to our strengths
• Take advantage of market, costs and skill synergies in existing
portfolio
• Continue to drive grass yarn improvements to take advantage of
strong market growth
• Assess long-term supply chain opportunities – purchasing and
manufacturing
• Expansion using M&A in existing or new segments with similar
profiles
Low & Bonar: Summary
• Encouraging results in 2006 – a year of major, positive
change and underlying progress
• 2007 has started as expected
• Well positioned in our chosen markets which will sustain
good margins
• Clarity of strategy and strong base for continued profitable
organic growth; with strong management teams to drive it
• Some prospective relief in raw material environment
• Material opportunities for value-adding M&A in both divisions.
Low & Bonar at a glance
• Global advanced materials business, focusing on technical textiles and specialist flooring products/services
• 16 manufacturing sites across Europe, the US and Asia, selling into 50+ countries
• Market capitalisation c. £210m
• 2100 employees
• FTSE Small Cap, Construction & Building (Code: LWB)
Appendix