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Cookson Group plc Preliminary Results 2004 15 March 2005

Cookson Group plc Preliminary Results 2004 15 March 2005. Highlights of 2004 Results. Operating profit up 60% at constant exchange rates All three divisions record strong increases Significant improvement in return on sales EPS before exceptionals increases three-fold

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Cookson Group plc Preliminary Results 2004 15 March 2005

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  1. Cookson Group plc Preliminary Results 2004 15 March 2005

  2. Highlights of 2004 Results • Operating profit up 60% at constant exchange rates • All three divisions record strong increases • Significant improvement in return on sales • EPS before exceptionals increases three-fold • Marked reduction in net debt • New £200m bank facility announced in March 2005 • Strategic review concluded

  3. Dennis Millard Group Finance Director

  4. vs GrowthReported 20032004 rates 2004 Actual Turnover £739m +5% +11% Ceramics – Turnover* % of Group Turnover 44% *Excludes JVs

  5. Growth vs 2003 at 2004 rates 2004 Actual Ceramics – Turnover by Sector* Iron & Steel £478m +13% Foundry & IP £172m +3% Glass £89m +18% Division £739m +11% *Excludes JVs

  6. Continental Europe: sound growth Ceramics – Turnover 2004* By location of operation Turnover 2004 - £739m Asia-Pacific: share of total double since 2002;strong growth in sales &profitability USA:strong growth; steel production increases 13% 30% RoW 16% 10% 31% UK *Excludes JVs

  7. GrowthReported 20032004 rates 2004 Actual Operating Profit* £56.8m +14% +23% Ceramics % of Group Turnover 44% vs Turnover £739m +5% +11% Return on Sales* 7.7% 2003 : 7.0% * Before amortisation of intangibles and exceptional items. All numbers exclude JVs

  8. £m % £m 2003 2004 2003 2004 2004 Ceramics – Half Year Trends (at 2004 exchange rates) Return on Sales* Turnover Operating Profit* 2003 * Before amortisation of intangibles and exceptional items. All numbers exclude JVs

  9. % of Group Turnover 39% Turnover £626m +10% +19% Electronics – Turnover* vs GrowthReported 20032004 rates 2004 Actual *Excludes JVs

  10. Growth vs 2003 at 2004 rates 2004 Actual Chemistry £214m +5% Laminates £132m +26% Division £626m +19% Electronics – Turnover by Sector* Assembly Materials £280m +28% *Excludes JVs

  11. UK Electronics – Turnover 2004 By location of operation Turnover 2004 - £626m* Asia-Pacific:increased share; strongest growth & most profitable USA: strong recovery in H1; rate of growth slowed in Q4 27% 40% 24% Continental Europe: electronics products flat, non-electronics growth 4% 5% RoW *Excludes JVs

  12. % of Group Turnover vs GrowthReported 20032004 rates 2004 Actual 39% Electronics Turnover £626m +10% +19% Operating Profit* £49.5m +138% +155% • Higher raw materials prices – tin, copper foil, resin • Lower manufacturing and SG&A costs • Healthy operational leverage (31%) • Turnover: +£99m • Profit: +£30m * Before amortisation of intangibles and exceptional items. All numbers exclude JVs

  13. % of Group Turnover vs GrowthReported 20032004 rates 2004 Actual 39% Electronics Turnover £626m +10% +19% Operating Profit* £49.5m +138% +155% Return on Sales* 7.9% 2003 : 3.7% * Before goodwill amortisation and exceptional items. All numbers exclude JVs

  14. Electronics – Operating Profit* By sector Growth vs 2003* £m 2004 Actual £22.2m +7.3 Assembly Materials Chemistry £27.2m +8.4 Laminates £0.1m +14.4 Division £49.5m +30.1 * 2003 at 2004 exchange rates; before amortisation of intangibles and exceptional items; excludes JVs

  15. 2003 2003 2003 2004 2004 2004 Electronics – Half Year Trends(at 2004 exchange rates) Turnover Return on Sales* Operating Profit* £m £m £m * Before amortisation of intangibles and exceptional items. All numbers exclude JVs

  16. % of Group Turnover vs GrowthReported 20032004 rates 2004 Actual 17% Turnover £288m Net Sales Value (NSV)* £116m -7% -7% -1% -1% Precious Metals * Excludes precious metal content

  17. % of Group Turnover 17% Division £288m -1% Precious Metals – Turnover Growth vs 2003 at 2004 rates 2004 Actual USA £151m +9% UK and Cont Europe £137m -10%

  18. % of Group Turnover vs GrowthReported 20032004 rates 2004 Actual 17% Turnover £288m -7% -1% 2003 : 6.9% Precious Metals Operating Profit* £9.3m +8% +22% Return on NSV* 8.0% * Before amortisation of intangibles and exceptional items

  19. £m £m £m 2004 2003 2004 2003 Precious Metals – Half Year Trends(at 2004 exch rates) Turnover & Net Sales Value Return on Net Sales Value* Operating Profit* 2004 2003 Net Sales Value * Before amortisation of intangibles and exceptional items

  20. Group – Joint Ventures* Turnover 45.2 39.1 +16% Operating Profit 4.0 1.7 +135% Return on Sales 8.8 4.3 £ million % Increase/ (decrease) 2004 2003 *At constant exchange rates

  21. vs GrowthReported 20032004 rates 2004 Actual Turnover £1,698m +5% +11% Return on Sales* 7.0% 2003 : 5.0% Group – Continuing Operations (including JVs) Operating Profit* £119.6m +47% +60% * Before amortisation of intangibles and exceptional items

  22. £m £m % 2003 2003 2003 2004 2004 2004 Group – Continuing Operations At reported exchange rates Operating Profit* Turnover Return on Sales * Before amortisation of intangibles and exceptional items

  23. Group Operating Profit* £ million 2004 Variance vs 2003 2003 CONTINUING OPERATIONS120 75 45 - at 2004 exchange rates Ceramics 57 46 11Electronics 50 19 31 Precious Metals 9 8 1 Joint Ventures 4 2 2 EXCHANGE RATE IMPACT - 6 (6) DISCONTINUED OPERATIONS - (17)17 Speedline - (16) 16 Precision Products, Others-(1)1GROUP - at reported exchange rates 120 64 56 * Before amortisation of intangibles and exceptional items

  24. Includes £5m deferred income from close-out of swaps in both 2003 & 2004 Group Profit Before and After Tax* £ million Variance vs 2003 2004 2003 OPERATING PROFIT120 64 56 Interest (27) (32) 5 • Positive exchange rate effect £3m • Lower amortisation of fees * Before amortisation of intangibles and exceptional items; at reported exchange rates

  25. Group Profit Before and After Tax* £ million 2004 2003 Variance vs 2003 OPERATING PROFIT120 64 56 Interest (27) (32) 5 PROFIT BEFORE TAX 93 32 61 * Before amortisation of intangibles and exceptional items; at reported rates

  26. 2003 2004 Group Profit Before Tax* Half year trends £m * Before amortisation of intangibles and exceptional items; at reported exchange rates

  27. Group Profit Before and After Tax* £ million 2004 2003 Variance vs 2003 OPERATING PROFIT120 64 56 Interest (27) (32) 5 PROFIT BEFORE TAX 93 32 61 Taxation (26) (10) (16) Minorities (4) (2) (2) PROFIT FOR YEAR 63 2043 Effective rate: 28% (2003: 30%) * Before amortisation of intangibles and exceptional items; at reported exchange rates

  28. Earnings and Dividend per Share 2004 2003 EARNINGS PER SHARE Headline* No. of shares (ave.) DIVIDEND PER SHARE 3.3p 1,883m nil 1.1p 1,880m nil *Before amortisation of intangibles and exceptional items

  29. Operating Exceptionals £ million 2004 P&L 2004 Cash Flow ELECTRONICS102 - Laminates 91 - Other11 CERAMICS – USA31 PRECIOUS METALS – Europe106 2003 INITIATIVES- 5 23 14 CASH RELATED 15 NON-CASH/ASSET WRITE-DOWNS8 23

  30. Non-Operating Exceptionals & Amortisation – 2004 £ million • Business Disposals* 40 • European brick businesses 33 • Other; mainly Fukuda JV dissolution 7 • Net Loss on Disposal of Fixed Assets 17 • Impairment of ELI investment 18 • Other; net surplus on sale of property (1) • TOTAL NON-OPERATING EXCEPTIONALS 57 • AMORTISATION OF INTANGIBLES 33 * Includes goodwill written-back/off

  31. Profit/EPS – Headline and Basic • Before amortisation of intangibles and exceptional items • After amortisation of intangibles and exceptional items

  32. Net Cash Flow from Operating Activities £ million Variancevs 2003 Inflows/(Outflows) 2004 2003 • EBITDA* 162 115 47 • Continuing operations 162 130 32 • - Discontinued operations - (15) 15 • Rationalisation (14) (14) - 20042005/6 £m£m Ceramics 1 2 Electronics 78 Precious Metals 64 1414 * Operating profit before amortisation of intangibles and depreciation; excl JVs

  33. Net Cash Flow from Operating Activities £ million Variancevs 2003 Inflows/(Outflows) 2004 2003 • EBITDA* 162 115 47 • Rationalisation (14) (14) - • Working Capital (3) 6 (9) • Trade (17) 10 (27) • Other 14 (4) 18 • Net Cash Flow fromOperating Activities145 107 +38 * Operating profit before amortisation of intangibles and depreciation; excl JVs

  34. £m % Cash flow – Working Capital : 2002-2004 Period end Trade Working Capital* & Average as % of Sales 25.2% 23.1% 22.8% 21.3% *Trade working capital = trade debtors + stock – trade creditors at period end; average is monthly average for period

  35. Operating Cash Flow £ million Variancevs 2003 Inflows/(Outflows) 2004 2003 NET CASH FLOW FROMOPERATING ACTIVITIES145 107 38 Capital Expenditure (40) (42) 2 - Capital Expenditure (gross) (42) (48) 6 - Asset Disposals 2 6 (4) Dividends from Joint Ventures 2 2 - OPERATING CASH FLOW107 67 40 * Before amortisation of intangibles and exceptional items; continuing operations

  36. Free Cash Flow £ million Inflows/(Outflows) Variancevs 2003 2004 2003 • OPERATING CASH FLOW 107 67 40 • INTEREST & SERVICING OF FINANCE(34) (30) (4)- paid (net) (31) (34) 3- swap proceeds - 5 (5) • dividends to minorities (3) (1) (2) • TAXATION(21) (21) - • FREE CASH FLOW 52 16 36

  37. Net Cash Flow and Decrease in Net Debt £ million2004 FREE CASH FLOW 52 INVESTING ACTIVITIES (21) Acquisitions - 2004(2) - Deferred consideration (10) Disposals - 2004 1 - Prior period trailing costs (10) NET CASH FLOW BEFORE FINANCING 31 Refinancing costs – 2003 facility (1) Exchange rate translation adjustments 22 DECREASE IN NET DEBT52 At 31/12/04 £m 2005 (8) Thereafter (5) Total (13)

  38. Borrowings and Ratios 31/12/04 31/12/03 NET DEBT£307m £358m Grossborrowings 354 415 Cash(47) (57) RATIOS EBITDA : Interest 6.7 times4.3 times Net Borrowings : EBITDA 1.8 times 2.7 times Leverage (US GAAP) 32%36%

  39. New Bank Facility • Announcement: 1 March 2005 • Replaces £148m facility due to mature March 2006 • New facility: £200 million • 9 core banks • Until March 2008 plus 2 x 1 year options • Unsecured (security from previous facilities fully released) • Improved terms and lower margins

  40. Committed Facilities and Drawings FACILITIES - current DRAWINGS @ 31/12/04 FACILITES @ 31/12/04 £497m Headroom £445m £148m Bank facility £200m £108m £40m USPP notes* £297m £297m £297m * $570 million

  41. Facilities – Current Maturity Profile Maturity Profile £ million Maturities USPP LOAN NOTES 297 13 2005 - 2006 94 2007 - 2008 190 2009-2012 NEW BANK FACILITY 200 March 2008* 497 Ave. 4.3yrs * Options to extend 1yr x 2

  42. Summary • Strong improvement in operating profit and return on sales • up 60% at constant exchange rate • all divisions register strong increases • Profit before tax*: £93m significantly higher than 2003 • EPS* trebles to 3.3p • Strong positive free cash flow in H2 • Borrowings decrease by £51m to £307m • New £200m bank facility * Before goodwill and amortisation and exceptional items

  43. Re-cap on 18 January 2005Strategy PresentationNick SalmonChief Executive

  44. Cookson Today We are: • Not a pure-play electronics company • Less than 30% Group sales and profits from electronics • Laminates is only sector operating solely in electronics • Most cyclical business (Speedline) sold in 2003 • Not a “one stop shop” for the electronics industry • Market has evolved; customers are more diverse • Customer buying is focused on specific needs • Reorganising and restructuring our 3 “Electronics” sectors • Leverage our strong brands in their separate sectors • Maximise internal synergies • Eliminate central costs • Share market intelligence

  45. Cookson Today/continued We are: • A leading global supplier of speciality materials: • Strong market share in all our sectors • Competitive products – leader in technology • Balanced and competitive geographic footprint • Above GDP growth prospects • Reduced cyclicality • Benefiting from some synergies across Group: • Funding • HS&E • Precious Metals consignment lines A Materials Science Company

  46. Strategy • Programme to enhance operational and financial performance of core businesses • Improved profitability and cash flow • Disposals of some non-core activities across all three divisions • Expecting proceeds of £100m over next 2 years • Resume sustainable dividend payment as soon as possible • Funded out of free cash flow

  47. Objectives • Sales growth • > GDP • Reduced cyclical • Profitability improvement : by 2007 • Electronics: ROS* > 10% • Ceramics: ROS* > 10% • Precious Metals: RONSV* > 15% • Investment return criteria • Capex/acquisitions: > WACC • Restructuring: <2 years cash payback *Before exceptional items and amortisation of intangibles

  48. Objectives/continued • Progressive debt reduction • Enhanced profitability • Tight working capital management • Non-core business disposals • Disposal proceeds > £100m over 2 years • Renegotiation of banking facilities in 2005 • Return to sustained dividend payment • Out of free cash flow • Linked to underlying earnings • As soon as possible

  49. Achievements since 18 January 2005 • Refinancing • £200m, 3 year (extendable) facility dated 1 March with significantly improved terms and lower costs • Ceramics • NAFTA programme to shift production from USA to Mexico completed • Laminates • German social plan signed end of February; implementation in March for cost savings from Q2 onwards • China: third line now in full production • Chemistry • Labs in Shenzhen and Shanghai

  50. Current Trading and Outlook for 2005 • Ceramics • Robust market conditions continuing • Electronics • Evidence of customer destocking of some high margin products in late January/February, momentum now returning • Precious Metals • Weak environment remains but industry observers optimistic of recovery • Confident of delivering further improvements in 2005 • Q1 Trading Update – 5 May 2005

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