SP Group1. half year 2007
Presentation by CEO Frank Gad
August 2007
2Presentation August 2007 / SP Group
AGENDA
1. SP Group – an overview
2. Results 1. half year 2007• Group• Injection moulding• Polyurethane• Vacuum forming• Coating• Share price and liquidity
3. Strategic focus areas• Increasing sales and globalization• Growth industries and own brands• Higher efficiency in the Danish
production• Expansion in low-cost areas
4. Financial objectives
Frank Gad (born 1960, M. Sc.)
Career:
Nov. 2004: CEO, SP Group A/S
1999-2004: CEO, FLSmidth A/S
1996-99: President, Mærsk
Container Industri A/S
1985-99: Odense Steel Shipyard A/S latest as EVP
3Presentation August 2007 / SP Group
SP Group A/S
INJECTION MOULDING POLYURETHANE VACUUM COATINGS
SP Moulding A/S Tinby A/S
Ergomat A/S
Gibo Plast A/S Accoat A/S
TPI Polytechniek bv
SP Medical A/S
SP GROUP – AN OVERVIEW
• Manufacturer of moulded plastic components and coatings
• Supplier of customer specified solutions for manufacturing industries
• Increasing exports from Denmark; increasing production in China and Poland
• Strong international niche positions – also within own brands
Revenue split in the business units of the Group
H1 2007 and 2006:
64,7
27342,7
82,5
51,9
219,7
53,1
73,9
Polyurethane Vacuum formingCoating Injection moulding
2007
2006
82.5
42.7
64.7
273
73.9
53.1
51.9
219.7
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RESULTS 1. HALF YEAR 2007
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GROUP HIGHLIGHTS
• Results in H1 better than expected in spite of increasing prices in raw material and energies
• Growth in 3 of 4 business units
• Higher efficiency throughout the Group
• Continuing rationalisation of Danish production
• Two new Polish manufacturing units run on schedule
• Outlook 2007 is upgraded in spite of costs for the close-down of Sønderborg
200
250
300
350
400
450
500
H1 2004 H1 2005 H1 2006 H1 2007
Revenue in DKKm
+15%
Operating profit (EBITDA) i DKK m
0
5
10
15
20
25
30
35
40
45
50
H1 2004 H1 2005 H1 2006 H1 2007
+30%
6Presentation August 2007 / SP Group
GROUP HIGHLIGHTS 1. HALF YEAR 2007
DKKm H1 2007 H1 2006
Revenue 454.1 395.9
EBITDA 45.3 34.9
EBIT 26.5 17.7
Result before tax and minorities
20.7 10.0
Net profit 15.7 5.4
Equity incl. minorities 182.4 159.0
Cash flows from:
Operations 31.9 13.0
Investments -28.0 -26.4
Financing -4.8 15.4
0
5
10
15
H1 2004 H1 2005 H1 2006 H1 2007
Net profit ratio (EBITDA) in %
+1,2pp
7Presentation August 2007 / SP Group
SP Moulding A/S manufactures injection moulded advanced plastic components for a wide range of industries.
SP Medical A/S produces for customers in the medical appliance industry, including finished articles such as medical guide-wires. The production takes place in clean rooms.
SP Moulding is the leading manufacturer in Denmark and among the largest in Scandinavia. SP Medical ranks 3-4 in Scandinavia.
Locations: Juelsminde (DK), Stoholm (DK), Karise (DK), Sønderborg (DK), Suzhou (China), Sieradz (Poland) and Zdunska Wola (Poland).
INJECTION MOULDING (1)
Technical plastics
Technical plastics Medico Medico 2K and 3K moulding
8Presentation August 2007 / SP Group
INJECTION MOULDING (2)
1. half year 2007: 6.1% organic growth; increasing sales to
all industries on the whole 24.3% growth in total New Polish sites run on schedule, but still
have negative impact on earnings Earnings in Sønderborg not satisfactory;
others Danish sites and site in China are generating profits
DKKm H1 2007 H1 2006
Revenue 273.0 219.7
EBITDA 17.6 14.1
EBIT 6.2 5.4
Result before tax and minorities
0.7 2.0
Employees (average) 593 474
Net profit ratio (EBIT) in %
2.3 2.4
DKKm 2006 2005
Revenue 462.0 398.6
EBITDA 27.2 18.9
EBIT 9.0 1.6
Full-year result 0.6 -2.5
Outlook 2007: Growth in SP Moulding and SP Medical Modest positive contribution from Poland
in H2 Improved revenue and earnings before
close down of Sønderborg
9Presentation August 2007 / SP Group
3 activities: Tinby A/S, Ergomat A/S and TPI Polytechniek BV
Locations: Søndersø (DK), Zdunska Wola (POL), Vught and MK Teuge (NL), Cleveland (US), Montreal (CAN), Zeil am Main (DE) and Helsingborg (SE)
Tinby is one of the leading suppler in Northern Europe of moulded products in solid foamed and flexible polyurethane (PUR). Global market leader within hard rollers.
Rollers Solid foamed PUR
TPI Polytechniek produces and sells light-foamed ventilation equipment for industrial buildings and poultry and pig houses. Market leader in the EU.
POLYURETHANE (1)
Ergomat produces and sells ergonomic solutions under own brands: Primarily mats (Ergomat), chairs (ErgoPerfect), tables and DuraStripe striping tape. Market leader in the EU. Mats DuraStripe
10Presentation August 2007 / SP Group
POLYURETHANE (2)
1. half year 2007: 11.5% growth – higher than expected Growth in TPI, especially in Eastern Europe Growth in Tinby, e.g. wind mill industry Ergomat: Flat growth, strongly improved
earnings Increasing net profit ratio due to better
product mix and growing activities
DKKm 2006 2005
Revenue 148.7 156.6
EBITDA 30.4 24.7
EBIT 23.3 17.8
Full-year result 14.0 10.9
Outlook 2007: Growth in all activities Improved efficiency and tight cost
management will result in higher earnings than in 2006
DKKm H1 2007 H1 2006
Revenue 82.4 73.9
EBITDA 19.1 15.2
EBIT 15.6 11.8
Result before tax and minorities
14.5 9.3
Employees (average) 216 184
Net profit ratio (EBIT) in %
19.0 16.0
11Presentation August 2007 / SP Group
Gibo Plast develops and manufactures thermo-formed plastic products in different materials and colours. The products are mainly used in refrigerators and freezers, caravans as well as within transportation, medical equipment, lighting industries, wind turbines etc.
Market leader in Denmark and Scandinavia, among the 10 largest suppliers in the EU as regards traditional vacuum forming. Strong position within the new High-pressure and Twinsheet technologies.
Location: Skjern (DK)
Vacuum forming CNC milling High pressure Twinsheet
VACUUM FORMING (1)
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VACUUM FORMING (2)
1. half year 2007: Expected drop in sales to the
refrigerator and freezer sector New activities in transportation
equipment, the medico industry and parts for wind turbines etc.
Finding new customer segments takes longer than expected
Capacity utilisation too low
DKKm 2006 2005
Revenue 101.0 104.2
EBITDA 8.4 8.7
EBIT 5.3 6.3
Full-year result 2.5 3.4
Outlook 2007: Drop in sales to the refrigerator
and freezer sector. Therefore new customer segments to be found
Drop in revenue; lower earnings
DKKm H1 2007 H1 2006
Revenue 42.7 53.1
EBITDA 1.0 5.3
EBIT -0.4 3.6
Result before tax and minorities
-1.3 2.7
Employees (average) 66 72
Net profit ratio (EBIT) in %
-0.9 6.8
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Accoat develops and manufactures high-build corrosion protection, non-stick and low-friction coatings in Teflon, PTFE, and other refined materials for a wide range of industries. Accoat engages in coating of both industrial products and production equipment.
Within industrial teflon coating Accoat is among the 5 largest suppliers in the EU.
Location: Kvistgård (DK)
COATINGS (1)
Coating Coating Medico
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COATINGS (2)
1. half year2007:
60.3% growth adjusted for transfer of Accoat Medical to SP Medical
High growth in the chemical industry, medico and oil/gas industry
EBIT margin rose from 10.4% to 20.8% due to better mix and capacity utilisation
Lower growth in Q2 due to speed up of projects to Q1
Trial production with nano coating
DKKm 2006 2005
Revenue 121.2 92.0
EBITDA 17.8 7.2
EBIT 11.5 2.3
Full-year result 6.5 -0.2
Outlook 2007: Higher revenue and earnings, even
after the transfer of Accoat Medical
DKKm H1 2007 H1 2006
Revenue 64.7 51.9
EBITDA 15.5 7.9
EBIT 13.5 5.4
Result before tax and minorities
13.0 4.5
Employees (average) 64 98
Net profit ratio (EBIT) in %
20.8 10.4
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90
120
150
180
210
240
270
02-01-0
6
02-04-0
6
02-07-0
6
02-10-0
6
02-01-0
7
02-04-0
7
02-07-0
7
ADDED VALUE TO THE SHAREHOLDERS
Share price development 2 January 2006 to 31 July 2007
SP Group
Total index
2.1.2006 2.7.2006 2.10.20062.4.2006 2.1.2007 2.4.2007 2.7.2007
Approx. 50% return in 2007
42.9% return in 2006
29% return in 2005
Source: Copenhagen Stock Exchange and Danske Markets
28,6%
71,4%
200794,0%
6,0%
2005
Major shareholders’ ownership
Major shareholders
Others46,4%53,6% 2006
94.0%
53.6%46.4%
71.4%
28.6%6.0%
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SMALL-CAP+ AND MID-CAP+ COMPLIANCE
Order frequency
99,8%
80% 90% 100%
Begge indeks
SP Group
Source Copenhagen Stock Exchange - Gudme Raaschou Bank
Market value, EURm
66
0 20 40 60 80 100 120 140 160 180 200
SP Group
SmallCap+ MidCap+
1,8%
0% 2% 4% 6% 8%
SmallCap+
SP Group
MidCap+
Spread
Day-to-day revenue (average), DKKm
0,15
0,75
1,3
0 1 2 3 4 5
SmallCap+
SP Group
MidCap+
Both index
17Presentation August 2007 / SP Group
Action Who Number Exercise price
Warrants 2005 Frank Gad 54,000 warrants DKK 81 + 7.5% p.a.
Options 2006 Frank Gad 13,975 optioner DKK 109 + 7.5% p.a.
Warrants 2007 22 managers 80,000 warrants DKK 160 + 7.5% p.a.
INCREASED USE OF WAGES BASED ON SHARES
• New wage instruments to keep key employees in the Group
• Agreements based on shares underline common interest in added value
• The Annual General Meeting has adopted a new warrant programme
• All programmes are muti-annual to promote longterm behaviour
• The new warrant programme expires on 31 March 2011
• The programmes will be of value to the managers, when the shareholders have realized an increase in value – therefore a 7.5% annual adjustment of the share price
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STRATEGIC FOCUS AREAS
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INCREASED SALES AND INTERNATIONALISATION
• Strengthened sales and marketing in all units
• Focus on both present and new customers
• Increased export from the Danish production sites
• Increasing sales from units in Poland and China
• International revenue rose by 21% i 1. half year
• Goal to win market shares in Northern Europe
• Differentiation on processes, design and knowledge of raw material
0
20
40
60
80
100
120
140
160
180
200
H1 2004 H1 2005 H1 2006 H1 2007
International sales in DKKm
+21%
0
10
20
30
40
50
H1 2004 H1 2005 H1 2006 H1 2007
International sales in %
+2,2pp
-5
0
5
10
15
H1 2004 H1 2005 H1 2006 H1 2007
Organic growth in % (group revenue)
-5pp
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GROWTH INDUSTRIES AND OWN BRANDS
• Stronger engagement in growth industries and new customers, e.g. medico and wind mills
• Medico revenue rose by 33% since 2005
• Competencies gathered in SP Medical with FDA-certified production in Denmark and Poland
• Globalization of high-margin products under own brands (TPI og Ergomat)
• Potential in other product niches must be utilized
• New niche products with control of brands and distribution
0
10
20
30
40
50
60
70
80
90
100
H1 2004 H1 2005 H1 2006 H1 2007
Medico revenue in DKKm
+6%
Revenue in own brands in DKKm
0
10
20
30
40
50
60
70
H1 2004 H1 2005 H1 2006 H1 2007
+6%
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RATIONALISATION OF DANISH PRODUCTION (1)
Sites closed since 2004
Existing sites
1. Skjern2. Kvistgaard3. Søndersø4. Karise5. Juelsminde6. Stoholm7. Sønderborg
1
34
5
6
7
2
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RATIONALISATION OF DANISH PRODUCTION (2)
Polen
Poland
Denmark Negotiations concerning the close-
down of Sønderborg Production transferred to
Juelsminde, Stoholm and Poland in H2 2007
Transfer in close co-operation with the customers
50 jobs affected Close-down will strengthen SP
Moulding’s earnings as of 2008 Restructuring costs included in new
outlook for 2007
Production transfer to Stoholm, Juelsminde and
Poland
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EXPANSION IN POLAND AND CHINA
New PUR factory in Poland to be built during 2007-08
Investment of approx. DKKm 30 Need for a 100% expansion of
capacity due to expected growth Polish injection moulding factory
from 2006 on break-even in June Polish medico factory from 2006 on
break-even in Q2 Continuing expansion of capacity
at SP Moulding in China SP Group will follow the customers’
transfer of production to low-cost countries
Sites in Poland
1. Zdunska Wola2. Sieradz
Poland
12
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FINANCIAL OBJECTIVES AND OUTLOOK
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LONG-TERM FINANCIAL OBJECTIVES
• Result before tax and minorities of 5% of revenue within 3 years
• Group revenue in the range of DKK 1bn i 2009
• EBITDA margin to exceed 10% • Lower net interest-bearing debt • Increased cash flows from
operations• NIBD/EBITDA ratio at 3-4 in 2009
– 11.5 in 2004; 4.6 in 2006
• Solidity (incl. equity of minorities) in the range of 20-35%
• Competitive return to shareholders from rising share price
0
1
2
3
4
5
6
H1 2004 H1 2005 H1 2006 H1 2007
Result before tax and minorities in % of revenue
+2pp
Equity (solidity)incl. minorities in %
0
5
10
15
20
25
30
H1 2004 H1 2005 H1 2006 H1 2007
+1,8pp
26Presentation August 2007 / SP Group
New outlook Previous outlook 2006
Revenue Growth of 6-10% = DKKm 875-908
Growth of 4-8% = DKKm 860-890
DKKm 825.4
Result before tax and minorities
Approx. DKKm 30 after restructuring costs
DKKm 25-30 excl. restructuring costs
DKKm 20.7
OUTLOOK FOR 2007
• Growth in 3 business units, shortfall of revenue in Gibo Plast
• Modest positive contribution from new Polish factories in H2 2007
• Based on present activities, prices in raw material and energies, exchange rates and macro economic activities
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FORWARD-LOOKING STATEMENTS
This presentation reflects the management’s expectations of future events and financial results.
The statements as regards 2007 and the years to come are subject to certain uncertainties and actual results may therefore deviate
materially from the outlook and the financial objectives. Circumstances that could cause changes are among others – but
not exclusively – price changes in raw material and energies, changes in exchange rates, changes in the macro economic and
political conditions, changes in the customers’ demands and production ways and other circumstances on which we do not have
any influence.
This presentation is not a request for buying or selling shares in SP Group A/S.
28Presentation August 2007 / SP Group
Q&A SESSION
Thank you for your attention
For more information:
Frank Gad, Chief Executive OfficerSP Group A/SSnavevej 6-105471 Søndersø
Phone: 7023 2379 / 3042 1460E-mail: [email protected]
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