CORPORATE PRESENTATION MARCH 2015

Transcription

1 CORPORATE PRESENTATION MARCH 2015

2 Alent today A GLOBAL SUPPLIER OF SPECIALTY CHEMICALS AND ENGINEERED MATERIALS SEGMENT KEY PRODUCTS END-MARKET 2014 Net sales value (NSV) (1) Assembly Materials (ALPHA) Electronic interconnect materials, primarily solder in all forms: Printed circuit board assembly Semiconductor packaging Predominantly electronics market focused 50% 413m (1) 50% Surface Chemistries (ENTHONE) Specialty electroplating chemicals: Semiconductor fabrication Printed circuit board fabrication Corrosion and wear-resistant, and decorative coatings Serving mainly the electronics and automotive/ industrial markets Assembly Materials Surface Chemistries (1) Net sales value = Revenue less commodity metals that pass through to customers (tin, silver and gold) MARKET LEADING POSITIONS #1 OR #2 2

3 Alent products ASSEMBLY MATERIALS SURFACE CHEMISTRIES Bar Solder Wire Solder Chemistry Solder paste Preforms Copper Damascene EVERYTHING WITH AN ON/OFF SWITCH EVERY DAY, EVERYWHERE 3

4 Alent model A Global Market Leader + Competitive Advantage Outperformance of attractive end-markets + Financial Strength DELIVERING LONG-TERM GROWTH AND SUSTAINABLE MARGIN IMPROVEMENT 4

5 A global market leader: Competitive landscape Assembly Materials Surface Chemistries Alent (Alpha) Senju (Japan/Private) Tamura (Japan/Public) Indium (US/Private) Kester (ITW - US/Listed) Henkel (Europe/Listed) Shenmao (Taiwan/Private) Atotech (Total) Alent (Enthone) MacDermid (Platform) Dow (Rohm & Haas) OMG (US/Listed) Coventya (Europe/Private) Umicore (Europe/Listed) Top 7 suppliers = 80% of the Market Top 7 suppliers = 65% of the Market MARKET LEADING POSITIONS #1 AND #2 5

6 Strong global presence 2014 revenue by geography 2014 NSV by geography 43% 644.8m 28% 39% 413.0m 28% 29% 33% Americas Europe Asia Americas Europe Asia Present in over 100 countries Just in time supply chain Recent investments in high growth Asia region 6

7 Focus on high unit volume end-markets Auto/Industrial c30% of NSV 6 Auto Electroplating 7 Water Treatment 8 Other Electroplating Electronics c70% of NSV Personal Computers 2 Mobile & Infrastructure 3 Microelectronics & Semiconductors 4 Auto Electronics 5 Other Electronics MARKET LEADING POSITIONS INTO TARGETED END-MARKETS

8 What makes end-markets attractive for Alent HIGH UNIT VOLUME APPLICATIONS HIGH UNIT END-MARKETS HIGH GROWTH POTENTIAL GLOBAL CONSUMER BASE GLOBAL PRODUCTION BASE ALENT TARGETS HIGH UNIT VOLUME GROWTH APPLICATIONS 8

9 Alent s competitive advantage DELIVERING LONG-TERM GROWTH AND SUSTAINABLE MARGIN IMPROVEMENT Differentiated OEM customer model Customer-driven, fast cycle R&D Technical services Global footprint 9

10 Differentiated customer model Designs, Specifies, Manages Subcontractors (or In-House) Mandates Alent materials and processes Sometimes sole supplier Sometimes dual source supplier SUBCONTRACTORS CONTACT ALENT WITH PROBLEMS 10

11 Alent OEM competitive advantage Market leadership and globally recognised brands gets us to the table Global team of value-in-use technical sales personnel Customer-driven, fast cycle R&D, enabling innovation and new product pipeline R&D facilities to model customer processes and generate data to demonstrate increased efficiencies and yield Value-in-use strategy ensures long-term relationship and price stability Strategic proximity to subcontractors ( customers ) EXCELLENT EXECUTION PROVIDES HIGH BARRIERS TO ENTRY 11

12 Customer-driven R&D Approximate Allocation Strategy CORE PRODUCT DEVELOPMENT 70% ADJACENT MARKETS 20% NEXT GENERATION PRODUCTS & TECHNOLOGIES 10% Customer focused product development Gain market share by continuous stream of innovative products Strategic Technology Initiatives for adjacent markets Key Customer engagements to feed Innovation Pipeline Explore, select and nurture Emerging / Breakthrough / Disruptive Technologies Learn Programs to demonstrate feasibility Approximately 60 R&D projects per year Results in c30-40 new products per year DISCIPLINED ALLOCATION OF R&D RESOURCES ENSURES A SUSTAINABLE & ROBUST ROI 12

13 Fast cycle R&D Mobile requires rapid/continuous development In only months Alent technology can reach volume manufacturing Automotive requires intensive material characterisation to demanding segment specific reliability testing Greater than a year for Alent technology to reach volume manufacturing Fast/long cycle YEARS Mobile Automotive Product approval Product lifecycle ABILITY TO SERVE BOTH MODELS DEMONSTRATES THE STRENGTH OF OUR INTEGRATED OEM/VOC R&D STRATEGY 13

14 Technical services Global team of experienced engineers Deep understanding of customers processes Walking the floor, solving problems in real time Not every problem requires a new product Fast cycle R&D develop, test and improve ON THE FRONT LINE, SOLVING PROBLEMS 14

15 Global footprint Global presence, enabling access to all key growth markets Strategically positioned manufacturing and R&D presence close to industry defining customers Longstanding and collaborative customer relationships Leading position in innovation and product development Strong presence in Asia, particularly China GLOBAL PRESENCE WITH CLOSE PROXIMITY TO OUR GLOBAL CUSTOMERS LOCAL SITES 15 15

16 Financial strength - strong cash generation Working Capital/Sales % Working capital 6m cash inflow during 2013 Continued improvement from 13% in 2010 to 19% of sales in 2014 Continuous improvement through Improved supply chain Reduced overdue receivables Continued SKU consolidation Supplier partnership and term extension Cash Generation % Strong cash conversion 90% of EBITDA in 2014 Inventory build to support plant rationalisation and commissioning STRONG CASH GENERATION TO SUPPORT GROWTH 16

17 Solid platform for growth Operational CAPEX m / % of depreciation Asset light Capex of 1.3x depreciation in 2014 Manufacturing footprint largely complete Continued focus on R&D facilities 189% 184% 152% 129% 16.1m 16.4m 13.7m Net Debt/EBITDA (times) Net debt Net Debt at 108.3m or 1x EBITDA Significant headroom from existing facilities Return on capital employed Returns in excess of 20% 50.6 RoCE % Inc. goodwill Exc. goodwill BALANCE SHEET STRENGTHENED PROVIDING SOLID PLATFORM FOR GROWTH 17

18 Growth platform - capital allocation Reinvest for organic growth Progressive dividend policy Acquisitions in line with strategy Return excess to shareholders DISCIPLINED BALANCE BETWEEN INVESTMENT FOR GROWTH AND RETURNS TO SHAREHOLDERS 18 18

19 Alent s performance vs end-markets FY 2014 World production of electronic equipment % growth rates Converted at 2013 exchange rates Automotive production growth in units (m) Source: Henderson, January Source: Prismark Partners, November 2014; IHS Automotive, January 2015 Alent s exposure to end-market Alent s Growth (2014) Alent vs Market (2014) Surface Chemistries (50% automotive/industrial-focused) 4.7% Performance Coatings 3% Plating on Plastics 4% Assembly Materials (100% electronics-focused) 4.4% Surface Mount Assembly 13% Paste 10% Wire 7% Surface Chemistries (50% electronics-focused) 4.7% Electronics Chemistries 7% Printed Circuit Board Chemistry 6% Copper Damascene 8% Microelectronics Plating Chemistry 9% 19

20 INVESTING FOR GROWTH 20

21 Investing for Growth Routes to Market OEM, Technical Support, R&D teams + Product Development New products and new markets + Capital Expenditure Manufacturing and R&D facilities The Benefits Accelerate growth Increase market share New high growth markets High margin products TARGETED INVESTMENT PROGRAMME ALIGNED TO OUR COMPETITIVE ADVANTAGES 21 21

22 APPENDICES 22

23 Alent history TODAY A MARKET-LEADING SPECIALTY CHEMICALS AND ENGINEERED MATERIALS COMPANY Consistently outperformed end-markets Delivered strong cash generation 2012 Alent plc listed on the London Stock Exchange in December 2012 Constituent of the FTSE250 - Specialty Chemicals Sector Significant period of growth Net sales value +21.9% / Return on net sales value from 13.0% to 21.8% Disposal of several non-core businesses (equipment, laminates, EMC) 1999 Acquisition of Enthone Inc., the #2 global supplier of electroplating chemicals 1990s The electronics boom in the early 1990s provided opportunities to acquire further electronics companies 1985 Alpha expansion into Asia 1984 Acquisition of Alpha Metals Inc., a supplier of interconnect materials to the electronics business 1944 Cookson acquired Fry Metals ALPHA & ENTHONE - #1 or #2 GLOBALLY RECOGNISED BRANDS 23

24 Assembly Materials Product lines Surface Mount Assembly Products for use in electronic equipment Solder paste - Using a stencil to place small deposits of solder onto a printed circuit board Wire solder - Used in touch-up and rework applications Preforms - Solder components engineered into specific shapes/forms Stencils - Used to apply adhesive and solder paste onto a printed circuit board Wave Solder Assembly Products for use in electronic equipment Bar solder and flux Used in mature wave soldering process Microlectronics Products for use in semiconductors Electronic polymers Used for packaging, sealing and conductive adhesives Solder spheres Used for integrated circuit and printed circuit board connections Die attach Used to attach the semiconductor chip to the package PV ready ribbon A pre-fluxed solder coated copper ribbon used for connecting solar cells within a solar panel Other Reclaim Metal recycling business reclaim of waste solder, reused in solder processes Water treatment Produces chemicals for industrial end-markets 24

25 Surface Chemistries Product lines Performance Coatings Products for use in industrial/automotive end-markets Decorative coatings - Decorative electroplating chemistries developed to enable plating directly onto plastic in industrial and automotive markets Wear resistant coatings - Chromium electroplating chemistries used in industrial applications and for use on auto parts such as engine valves and shock absorber cylinders Corrosion resistant coatings - Zinc alloy electroplating chemistries used in industrial, building and auto markets (e.g. on brake calipers and fasteners) Electronics Copper damascene - Electroplating chemistry used to create the wires within a semiconductor integrated circuit chip Wafer bumping chemistries - Electroplating for connections within the integrated circuit Interconnect materials - Electroplating chemistries for fabrication of printed circuit boards 25

26 Automotive Auto Electronics Head lamp Reflectors Emblems Shifter Knob Steering Wheel Trim Interior Console, Bezel Trim, Knobs Side View Mirror Interior, Exterior Door Handles Body Side Moulding Critical safety systems (ABS, airbag) External lighting Cabin electronics Communications system Front Grilles Electronics Underhood controllers Entry/exit security Climate control Bumper Performance Coatings External Lighting Underhood Controllers Cabin Electronics Communications System Aluminium Wheels, Plastic Clad Wheels Entry/Exit Security Decorative - Internal and external Anti-wear Critical Safety Systems (ABS, airbag) Climate Control Corrosion resistance 26

27 Electronics Assembly Materials Camera Modules Accelerameters Microprocessors Solder paste Solder spheres Preforms Wire Die attach adhesives Printed Circuit Board Surface Chemistries Molded Antennas Copper damascene Semiconductor wafer level packaging Printed circuit board metallisation Printed circuit board final finishes Molded interconnect devices 27

28 Growth markets - Automotive World production of electronic equipment % growth rates Converted at 2013 exchange rates Automotive production growth in units (m) Source: Henderson, January Source: Prismark Partners, November 2014; IHS Automotive, January 2015 Global automotive production expected to grow above historic rates driven by emerging markets Electronics content within a vehicle growing at an even higher rate The electronics content within a vehicle is growing at a rate that significantly exceeds the underlying automotive unit growth rate Electronics value is on average ~US$2,000 per automobile today Electronics content as a percentage of the total vehicle cost is expected to rise significantly as market penetration of hybrid and electric vehicles increases 28

29 Growth markets - Electronics 2013 Total: $1.7b 2018F Total: $2.0b Smartphones $288b/17.2% Smartphones $341b/17.0% Rest of the Electronics Industry $885b/52.8% Tablets $78b/4.6% Servers/Storage/ Comms.Infra $249b/14.8% 3.7% CAAGR Rest of the Electronics Industry $1,019b/50.8% Tablets $111b/5.5% Servers/Storage/ Comms.Infra $305b/15.2% Automotive Electronics $177b/10.6% Automotive Electronics $231b/11.5% CAAGR Smartphones 3.4% Tablets 7.4% Servers/Storage/Comms.Infra 4.1% Auto Electronics 5.5% Rest of Electronics Industry 2.9% TOTAL 3.7% Source: Prismark Partners, March

30 Investing for Growth Routes to Market OEM, Technical Support, R&D teams + Product Development New products and new markets + Capital Expenditure Manufacturing and R&D facilities The Benefits Accelerate growth Increase market share New high growth markets High margin products TARGETED INVESTMENT PROGRAMME ALIGNED TO OUR COMPETITIVE ADVANTAGES 30 30

31 Routes to Market and Product Development 7m investment/increase headcount by around 100 people Additional OEM headcount with focus on Asia Additional R&D headcount with focus on India and US Solder paste for new packaging applications Engineered polymers for die-attach Performance coatings for enhanced processing in wear and corrosion resistant products Copper damascene for latest nodes Copper development for functional decorative coatings The Benefits Additional technical support in all regions + Capital Expenditure TARGETED INVESTMENT PROGRAMME TO SECURE PROXIMITY TO CUSTOMERS 31 31

32 Capital Expenditure 2015 CAPEX of x depreciation Invest in manufacturing capability US Wafer level packaging Copper damascene process line Asia Powder manufacturing capability The Benefits Invest in R&D equipment with a focus on high margin products Die-attach, LED and nano silver in India Wafer fabrication research in the US Coating development equipment in Europe + Routes to Market and Product Development TARGETED INVESTMENT PROGRAMME ALIGNED TO OUR COMPETITIVE ADVANTAGES 32 32

33 The Benefits Routes to Market + Product Development + Capital Expenditure The Benefits Accelerate growth Increase market share New high growth markets High margin products Continued outperformance of end-markets The Timing Expect benefits to start in 2016 Full NSV growth benefit in 2017 TARGETED INVESTMENT PROGRAMME ALIGNED TO OUR COMPETITIVE ADVANTAGES 33 33

34 Group financial highlights Reported Change % Reported Constant Net sales value (NSV) ( m) (1.7) 4.6 Manufacturing and raw material costs ( m) (162.0) (168.7) 4.0 (2.9) Gross margin ( m) (0.2) 5.7 Gross margin (%) pts 0.7 pts Overheads ( m) (155.9) (157.3) 0.9 (4.6) Adjusted operating profit ( m) NSV margin (%) pts 0.6 pts Adjusted profit before tax ( m) Adjusted earnings per share (pence) Adjusted cash generated from operations ( m) (8.6) Net debt ( m) (12.2) Leverage (x EBITDA) Return on capital employed (%) Group NSV increased 5% - outperforming principal end-markets Market share capture through outperformance of key end-markets Pricing remained solid with gross margin increasing to 61% 34 34

35 Segmental analysis Reported Change % Reported Constant NSV ( m) Assembly Materials (2.2) 4.4 Surface Chemistries (1.2) 4.7 Alent Group ( m) (1.7) 4.6 Adjusted operating profit ( m) Assembly Materials (1.0) 5.3 Surface Chemistries Corporate (7.1) (6.8) (4.4) (6.0) Alent Group ( m) NSV Margin (%) Assembly Materials pts 0.2 pts Surface Chemistries pts 1.1 pts Alent Group (%) pts 0.6 pts 35 35

36 Assembly Materials NSV Reported m Change % Reported Constant Wave Solder Assembly (10.1) (1.0) Surface Mount Assembly Microelectronics Products (0.1) 4.6 Other (9.1) (6.0) Total NSV (2.2) 4.4 Adjusted operating profit (1.0) 5.3 NSV Margin 28.1% 27.8% 0.3 pts 0.2 pts Improving trends in electronics market Wave Solder Assembly Continued shift from Wave Solder Assembly to higher margin Surface Mount Assembly Double digit growth in Surface Mount Assembly Paste volume up 10% with further progress in margins as we leverage our OEM marketing and selling strategy Packaged preforms delivered strong growth in both volume and margin on the back of design wins in European automotive space Wire volume up 7% driven by increased demand in Asia Microelectronics NSV up 5% Promising prospects in die-attach technology Other NSV progression in water treatment business, offset by performance of reclaim business 36 36

37 Surface Chemistries NSV Reported m Change % Reported Constant Performance Coatings (2.8) 3.3 Electronics Chemistries Other (11.9) (6.3) Total NSV (1.2) 4.7 Adjusted operating profit NSV Margin 21.4% 20.3% 1.1 pts 1.1 pts Modest growth in automotive and industrial markets Performance Coatings and Electronics Chemistries segments outperformed underlying markets Continued progress in Performance Coatings segment PCB Chemistry volume up 6% through market share gain Performance Coatings NSV up 3% due to stronger demand in automotive markets and market share capture Electronics Chemistries Copper damascene NSV increased 7.8%, driven by ramp up of 28/20nm advanced nodes Continued progress at 14/10nm nodes with product evaluations at a number of key customers Settlement of litigation NSV margin increased 1.1pts to 21.4% 37 37

38 Net debt m Adjusted free cash flow Demerger costs Pension top-ups (0.2) (4.8) (2.4) (1.9) Dividends paid to shareholders (66.3) (23.3) Other, including foreign exchange & deferred consideration (7.2) 4.7 Movement on net debt in the year (11.8) 47.9 Net debt at start of year (96.5) (144.4) Net debt at end of year (108.3) (96.5) Financial covenants: Net debt to EBITDA (last 12 months) 3.0x EBITDA to net interest 4.0x Facility: 300m syndicated bank facility Debt maturity extended 2 years to x x 22.0x 38 38

39 Dividends Change Interim (pence) Final (pence) Full year (pence) Dividend cover 2.8x 2.8x - Special dividend 15.0 pence per share, representing a total payment of 42m Paid to shareholders on 17 October 2014 The Board has recommended a final dividend of 6.0 pence per share 2014 full year dividend of 9.0 pence per share 4.7% growth over the 2013 full year dividend Progressive dividend policy maintained Dividend at least in line with earnings growth Dividend cover within a range of 3.0 to 2.8 times 39 39

40 Definitions The following are referred to throughout this presentation:- NSV is revenue less commodity metals (tin, silver, gold). Adjusted operating profit, adjusted profit before tax, adjusted profit for the year and adjusted earnings per share are, where appropriate, each stated before: exceptional items; amortisation of acquired intangible assets; deferred tax on acquired intangible assets and goodwill; utilisation of deferred tax assets (where initial recognition was as an exceptional item); acquisition costs; the impact arising from the fair valuing of financial instruments; and profits or losses arising on business disposals. Adjusted cash generated from operations is cash generated from operations after adding back 0.2m (2013: 4.8m) for demerger cash costs. Free cash flow is defined as net cash from operating activities after net outlays for the purchase and sale of property, plant and equipment and dividends from joint ventures but before additional funding contributions to Group pension plans