Market Segmentation Strategy

Transcription

1 2015 Interim Results For the six months ended 30 June 2015 Further market share gains in challenging markets

2 Agenda Overview Financial highlights Market drivers Growth Strategy Key Accounts Insites TM Product range extension Market segmentation Vending Current trading and outlook 2

3 Overview We assume no growth in market demand over next two years Group revenue up 0.4% and up 7.5% at constant currency** Gross margin decline 80 basis points to 30.5% Underlying profit* down 19.4% to 14.1 million Exchange headwinds reduced reported revenue and profit but organic growth strategy and significant investment in growth drivers still delivering market share gains Insite TM sales** up 6.8% to million Key Account sales** up 7.9%, representing 53.6% of total revenues Vending concept proven and will become strongest growth driver Underlying base business decline reflects difficult market conditions Half year dividend held at 3.6 pence * Before amortisation of acquired intangibles, acquisition related costs and exceptional items ** Constant currency at 1.3: 1 3

4 Customer validated cost savings Over 3,400 separate cost savings provided to our customers in 2015 We saved 24m for our customers, similar to H1 2014* H *on a constant currency basis m 4

5 Financial highlights

6 Profit & Loss 6 months to 30 June Change Underlying* Constant currency change** Organic change*** Sales 365.6m 364.1m +0.4% +7.5% 1.8% Operating profit 17.2m 20.6m -16.5% -12.5% -21.3% Profit before tax 14.1m 17.5m -19.4% -14.8% -25.4% EPS 8.1p 10.8p -25.0% Dividend per share 3.6p 3.6p - Return on operating capital employed 21.5% 26.6% Return on investment 11.7% 14.0% Reported Operating profit 12.2m 14.7m Profit before tax 9.1m 11.6m EPS 5.2p 7.1p * pre amortisation of acquired intangibles, acquisition related costs and exceptional items ** at constant currency *** at constant currency including incremental growth of acquisitions 6

7 Profit & Loss H H1 H H H H H H Constant Group currency Acquisitions FX at Group Organic Acquisitions * 2014 Organic * 2014 FX Reported Reported 1.3: 1** at 1.365: 1 Constant currency at 1.3: 1** Constant currency at 1.3: 1** at 1.22: 1 Turnover (9.9) (14.9) Gross margin (2.7) (4.7) Gross % 30.5% 30.4% 31.3% 28.5% 30.4% 30.5% 28.5% 31.3% 30.5% 31.3% 31.3% Sales, Distribution & Administrative Costs (94.3) (96.7) 2.4 (89.3) (3.9) (96.7) (92.8) (3.9) (89.3) (92.8) (89.3) 4.1 (93.4) Underlying operating profit (0.3) (0.6) 20.6 % 4.7% 5.7% 9.0% 4.7% 4.4% 9.0% 5.7% 4.4% 5.7% 5.7% Interest (3.1) - (3.1) - (3.1) (3.1) - (3.1) (3.1) (3.1) - (3.1) Underlying profit after interest (0.3) (0.6) 17.5 *Including incremental growth from 2014 acquisitions ** Management rates for 2015 at 1.3: 1 Note: Results are stated before amortisation of acquired intangibles, acquisition related costs and exceptional items Average number of working days for H is 123 days (H1 2014:122.5 days) m 7

8 Profit & Loss Revenue by segment ( m) First Half 2015 Constant Reported currency* First Half 2014 Constant Reported currency* UK Germany France Spain Benelux Nordic Eastern Europe & Other Total Group * Constant currency management exchange rates for 2015 at 1.3: 1 8

9 Change H H Segments UK Germany France Spain Benelux Eastern Europe & Other Continental Europe Nordic Total Turnover Underlying operating profit Turnover Underlying operating profit Turnover Underlying operating profit (2.1) (0.1) (0.2) (1.3) (2.5) As reported at constant exchange rates 1.3: 1 9

10 Change H H Segments UK Germany France Spain Benelux Eastern Europe & Other Continental Europe Nordic Total Turnover Underlying operating profit Turnover Underlying operating profit Turnover 1.3 (2.7) (1.1) 2.2 (1.2) (3.4) 1.5 Underlying operating profit (2.1) (0.5) (0.4) (0.1) (1.8) (3.4) As reported at statutory exchange rates of 1.365: 1 (2014: 1.22: 1) 10

11 Product Range Extension by customer type Change Organic 7 Acqns Total Total Total Organic 7 Total Group % 1.8% Base business Bearings % -7.4% Power transmission % -9.9% Fluid Power % 0.9% Tools & General Maintenance % 7.7% General Consumables % -6.0% Total Base Business % -5.2% Key Accounts Bearings % 6.7% Power transmission % 4.6% Fluid Power % 9.0% Tools & General Maintenance % 11.2% General Consumables % 6.9% Total Key Accounts % 7.9% 1 Includes Linear Motion & Seals 2 Includes Gearboxes, Motors & Industrial Automation 3 Includes Process 4 Includes Personal Protective Equipment 5 Includes Fasteners, Chemicals, Services and other products 6 Constant currency at 2015 management rates of 1.3: 7 Includes incremental sales growth from 2014 acquisitions 11

12 Revenue by product area T&GM 14.2 General Consumables Power Bearings Transmission 4.3 (0.5) Fluid Power H H Constant currency management exchange rates for 2015 at 1.3: 1 m 12

13 Gross profit Gross profit margin declined 80 basis points Mix effect from Key Account and T&GM sales growth Half of margin erosion in base business results from reduction in organic bearings sales Margin decline showing an improving trend 2014 Gross Margin % 31.3% Mix effect - Key Account sales (0.1)% Mix effect - T&GM sales (0.1)% Base business (0.6)% 2015 Gross Margin % 30.5% 13

14 Cash generation 30.0 Working capital Days H FY 2014 H Operating profit (before amortisation, acquisition related costs and exceptionals) 4.2 Depreciation and amortisation Share option Inventories charges (16.8) Receivables (4.0) Payables Receivables Inventories Payables (58.4) (66.0) (64.1) Total (4.7) Exceptional and acquisition related costs (0.5) Operating Cash Flow m As reported 14

15 Movement in net debt Movement in net debt Opening (85.3) Exchange 6.4 Movement (11.9) Closing (90.8) (0.5) Operating cash outflow (4.7) Capital expenditure (net) (3.4) Interest, pension funding and other (1.6) Tax (1.7) (11.9) Purchase of own shares Net cash outflow m As reported 15

16 Capital expenditure New Regional Distribution Centre for Nordic region Continued investment in Vending & Tools & General Maintenance Land & Buildings Equipment Intangible assets Total Regional Distribution centre - Sweden Tools & General Maintenance, including Vending Information Technology Vehicles Branch investment and other Total m As reported 16

17 Growth strategy

18 Growth Strategy Growth Capability Costs Synergies Geographical development Key Accounts development Business Skills Development European Buying Systems Integration Insites TM expansion Distributed Learning Programme Development IT and Other Cost Reductions Brand Development Product range extension Internal Communications and Involvement Capital Employed Management Supplier Relationship Management Country organic growth People Development Supplier Rationalisation Business Best Practice Bearings c.10% share of 2bn market MPT 3% share of 5 bn market Fluid Power 1% share of 10 bn market Tools & General Maintenance 1% share of 55 bn market 18

19 Sales per working day - Europe Since Jan 2012: - European Production Index is up 1.06% - Brammer is up 10.8% 19

20 Segments SPWD/ Sales At constant currency ( 1.3: 1) Quarter One 2015 Quarter Two 2015 Half Year 2015 Revenue 2015 Growth rates (%) m Key Accounts 8.6% 7.4% 8.0% Base business (organic)* - excluding Nordic (3.3)% (2.4)% (2.8)% Base business (organic) *- Nordic (1.6)% (38.6)% (21.9)% 18.8 Acquisitions 19.9 Base business 11.8% 2.0% 6.3% * Including incremental growth from 2014 acquisitions 20

21 Key Accounts Key Accounts grew by 7.9% Now represents 53.6% of group sales Significant growth continues in pan- European accounts, up 18.6% 6 new pan-european contracts won Down-trading by significant UK customer reduced Key Accounts growth by 1.9% Strong pipeline Brammer, P&G incumbent MRO supplier, has a proven record of helping P&G reduce working capital, improve production efficiency and reduce total-cost of ownership. With the new contract, both P&G and Brammer will continuously work side by side to keep the momentum and bring both business and relationship to the next level. Yehong Zhu Senior Purchasing Manager, P&G 21

22 Key Accounts Key Account Sales Performance Multi-site Status Scope Sales Growth Tier 1 EU contract Part EU Group % Tier 2 National contract Part EU Group % Tier 3 No contract Part EU Group % Tier 4 National contract National Group % 2015 figures in bold In Euro at constant currency at 1.3: 1 22

23 Key Accounts excluding specific UK customer Key Account Sales Performance Multi-site Status Scope Growth - % Tier 1 EU contract Part EU Group 18.6% Tier 2 National contract Part EU Group 13.6% Tier 3 No contract Part EU Group -13.9% Tier 4 National contract National Group - 9.8% In Euro at constant currency at 1.3: 1 23

24 No. of key Accounts EU KA Revenues (M ) Pan-European Supply Agreements Experience at scale More than 500 people serving 70+ Pan-EU Key Accounts Key Account support provided in 17 countries 14 Key Accounts are in the Global Fortune 500 list Key Milestones & Investments First ever EKAM Employed Investment in European KA Team Central support team established KA Tools established Sector Management established Focus on resilient sectors Account Development Managers Major Investments in KA infrastructure

25 Insites TM Update Total 458 Insites TM Net increase of 31 in the period Insite TM sales grew by 6.8% Insite TM sales 50.1% of Key Accounts business EU Insite TM pipeline remains strong In close cooperation with our internal customers and Brammer s technical team, we have implemented the concept of Vendor Management Inventory. This has brought us a clearer picture of the level of inventory we really need in order to meet internal customer needs. As a result, we have significantly reduced our overall inventory and our related working capital costs. Bart Philipsen and Thierry Lacourt, Purchasing Department, AGC Glass Europe At constant currency 25

26 Product Range Extension Update Bearings sales up 3.9% but decline of 2.1% organically Non bearing sales up 9.2% and growth of 3.6% organically 45 people dedicated for T&GM development in the continent Growth of over 30% in catalogue sales following launch of enhanced T&GM catalogue last year Brammer receives a prestigious award for Safety Excellence from (BSIF) - the UK s leading trade body within the safety industry. The award recognises commitment to excellence in terms of delivering first class health and safety products and services. Brammer won the Safety Excellence award which commends major improvements in occupational safety in recognition of a two year collaborative project with The Royal Mint, which reduced their number of hand and finger related injuries from double figures per year to zero. British Safety Industry Federation (BSIF) At constant currency 26

27 Product Range Extension Bearings +3.9% Non-Bearings +9.2% Tools & General Maintenance +20.4% H H H Power Transmission -0.7% H H H General Consumables +5.9% Tools & Maintenance Seals H H H Health and Safety Fluid Power H H H H H H Fluid Power +11.1% H H H Mechanical Power Transmission Chains & Sprockets Fluid Power Bearings Motors Gearboxes Mechanical Power Transmission - Belts & Pulleys Linear Motion - Industrial Automation m at constant currency 1.3: 1 27

28 Vending Update Invend TM programme gains momentum 117 employees now supporting Invend TM 845 machines installed in 13 countries Increasing confidence in scalability of our processes Vending customers are 5.4% of total revenue and growing 29.9% Vending Investor Event on 28 July Invend has simplified the job for our plant managers: from the daily management of how an employee can access a PPE product, to documenting and keeping track of our PPE stock and the associated costs. It has had a really positive impact.. Axier Bengoetxea Diez, Health & Safety Manager, Grupo Leche Pascual 28

29 The Industrial Supplies Partner of choice......for the World s leading brands

30 Market Segmentation Update Market segmentation approach continues Demonstrates understanding of specific industry requirements Allows focus on resilient segments in challenging markets Food & Drink growth of 10.0% Metals growth of 17.6% Brammer have been working in partnership with us since Since then, they ve helped us drive operational excellence at our plants through increased spend visibility and control. The partnership with Brammer has been invaluable to our long term MRO strategy.. REXAM Automotive sales growth of 15.4% At constant currency 30

31 Market Segmentation 46.5 Metals +17.6% 54.7 Industrial Machinery -3.0% Food and Drink +10.0% 44.9 H H H H H H Automotive +15.4% Wholesale +18.3% Aerospace -5.7% 21.7 H H Construction & Aggregates +15.7% H H H H Pulp, Paper & Packaging +18.8% H H H H Other segments +2.1% 97.9 H H m at constant currency 1.3: 1 31

32 CURRENT TRADING & OUTLOOK

33 Growth Track Record Revenue HY 2015 Total GP % 30.1% 30.9% 30.5% 30.4% 30.0% 30.1% 30.1% 30.3% 30.5% 31.5% 31.7% 30.5% Operating profit TP % 3.6% 4.4% 4.8% 5.2% 5.5% 4.3% 4.9% 5.6% 5.8% 6.1% 5.7% 4.7% Operating cash flow Net Debt ( equiv) Customer Signed off Cost Savings m 33

34 Outlook Currency headwinds continue to adversely impact our results No expectation of industrial output growth in Europe over next two years Adverse conditions in Nordic region expected to continue Self help growth drivers will continue to significantly benefit results Improvement in the UK continues Continued overall growth and market share gains in continental Europe, especially T&GM Key Accounts growth remains strong Vending programme gaining traction, beginning to deliver attractive returns Gross margin on an improving trend 3 additional working days in second half (equivalent to 1 million of gross profit per day) Swift action on costs at the start of the second quarter will benefit the second half 34

35 Vending Investor Event Machine behind the machine 3.00pm 4.30pm The Honourable Artillery Company, Armoury House, City Road, London EC1Y 2BQ 35

36 Appendices

37 Brammer Europe s leading distributor of industrial maintenance, repair and overhaul products ( MRO ) Bearings Mechanical Power Transmission Fluid Power Tools & General Maintenance Added value service A fragmented 65 billion + market Over 430 locations across 23 countries 4.8 million product lines More than 100,000 customers Robust fundamental growth drivers 37

38 Segments UK Germany France Spain Benelux Nordic m At constant currency 1: 1.3 * Segmental assets excluding goodwill and acquired intangibles less liabilities, before current & deferred tax, dividends, cash, loans, deferred consideration & pension liability 38 Eastern Europe & Other Turnover Sales per working day growth (Like for like) Total 0.9% 7.0% 9.0% 22.6% 9.3% (3.7)% 28.5% 7.2% Underlying operating profit Return on sales 4.2% 5.5% 3.1% 9.0% 6.2% - 5.3% 4.7% Return on sales % 6.1% 3.9% 9.6% 5.1% 5.4% 5.2% 5.7% Operating capital employed* Return on operating capital employed Return on operating capital employed % 35.4% 18.1% 122.0% 35.4% % 21.5% 38.5% 32.0% 24.1% 44.7% 24.1% 28.6% 7.7% 26.6%

39 Exchange rates H H Average Closing

40 Disclaimer This document contains statements about Brammer plc that are or may be forward-looking statements. These forward-looking statements are not guarantees of future performance. They have not been reviewed by the auditors of Brammer plc. They involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of any such person to be materially different from any results, performance or achievements expressed or implied by such statements. They are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future. All subsequent oral or written forward-looking statements attributable to Brammer plc or any of its shareholders or any persons acting on its behalf are expressly qualified in their entirety by the cautionary statement above. All forward-looking statements included in this document speak only as of the date they were made and are based on information then available to Brammer plc. Investors should not place undue reliance on such forward-looking statements, and Brammer plc does not undertake any obligation to update publicly or revise any forward-looking statements. No representation or warranty, express or implied, is given regarding the accuracy of the information or opinions contained in this document and no liability is accepted by Brammer plc or any of its directors, members, officers, employees, agents or advisers for any such information or opinions. This information is being supplied to you for information purposes only and not for any other purpose. This document and the information contained in it does not constitute or form any part of an offer of, or invitation or inducement to apply for, securities. The distribution of this document in jurisdictions other than the United Kingdom may be restricted by law and persons into whose possession this document comes should inform themselves about, and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of laws of any such other jurisdiction. 40