2016 Interim Results For the 6 months ended 30 June 2016 Agenda - - PowerPoint PPT Presentation

2016 Interim Results For the 6 months ended 30 June 2016

• CEO appointment
• Overview
• Operational Priorities
• Financial Highlights
• Vending Update
• Outlook

Agenda

2

CEO appointment

• Meinie Oldersma appointed as CEO with effect from 1 August 2016
• Extensive experience of European and international markets

― 2008 to 2014 CEO of 20:20 Mobile Group – telecom distributor - £1bn revenue ― 1993 to 2008 various roles in $46bn revenue Ingram Micro, largest technology distributor in the world, including CEO of $1.8bn revenue China region

• Non-Executive director of Bunzl plc until 22 August 2016
• Business review initiated, with conclusions to be announced in Q4
• Actions to improve operational and financial performance
• Appropriate capital structure to support future development

3

Overview

• Group revenue up 1.8% at reported rates, down 1.3% at constant currency
• Gross margin down 1 percentage point to 29.5% due to impact of lower supplier rebates

arising from the stock reduction programme

• Adjusted profit before tax* of £5.0 million, reported loss before tax of £13.9 million after non

cash Nordic goodwill impairment of £16.9 million

• Turnaround plan now being implemented in the UK
• Adjusted operating cash generation of £24.7 million reflects approx. £14 million cash

generated from on-going stock reduction programme

• Net debt of £107.7 million reflecting £13.5 million adverse exchange movement offsetting

effect of stock reduction programme. Net debt to EBITDA ratio of 2.8x is within financial covenant of 3.0x

• No interim dividend declared

4

* before amortisation of acquired intangibles, goodwill impairment, acquisition related costs and exceptional items

2016 SPWD at CER YTD

5

• 9%
• 7%
• 7%
• 3%
• 6%
• 8%

0% 1,016 1,087 1,114 1,115 1,091 1,072 1,063 Jan Feb Mar Apr May Jun Jul UK

SPWD in £’000 at €1.286:£1. Growth rates represent year on year changes

8% 3% 0% 2%

• 4%
• 1%

4% 564 536 566 536 516 531 501 Jan Feb Mar Apr May Jun Jul Germany

1% 5%

• 1%

2%

• 4%

3% 0% 779 842 822 833 781 804 814 Jan Feb Mar Apr May Jun Jul Other Territories

2016 SPWD at CER YTD

6

5% 0% 4%

• 2%

6% 1%

• 7%

368 388 385 354 372 390 373 Jan Feb Mar Apr May Jun Jul France

SPWD in £’000 at €1.286:£1. Growth rates represent year on year changes

2016 SPWD at CER YTD

7

SPWD in £’000 at €1.286:£1. Growth rates represent year on year changes

• 3%
• 2%
• 4%
• 2%
• 3%
• 4%

0% 2,872 3,009 3,052 3,010 2,948 2,991 2,889 Jan Feb Mar Apr May Jun Jul Group

• 24%
• 24%
• 20%
• 23%

0%

• 14%

16% 145 156 165 172 188 194 142 Jan Feb Mar Apr May Jun Jul Nordics

2016 Operational Priorities

Reduction in net debt

• Net debt at £107.7m (December 2015: £104.3m) representing net debt/EBITDA of 2.8x

(December 2015: 2.4x) within 3.0x financial covenant limit

• Underlying net debt reduction of £10.1m offset by £13.5m adverse exchange impact

reflecting stock reduction plan and other actions

• Continued focus on cash generation, reducing debt and improving working capital efficiency

to reduce net debt during H2

• Business review will address capital structure

9

HY 2014 FY 2014 HY 2015 FY 2015 H1 2016 Net debt/EBITDA* 1.4x 1.8x 2.1x 2.4x 2.8x

* The ratio of Consolidated Total Net Borrowings to Consolidated EBITDA in relation to the trailing 12 month period, calculated using the average exchange rates for the trailing 12 month period

Stock reduction programme

Working Capital Days 2011 2012 2013 2014 2015 H1 2016 Receivables 52.8 52.9 50.4 51.4 46.3 44.4 Inventories 77.0 83.0 85.0 97.0 107.0 88.0 Payables (64.4) (60.6) (65.9) (66.0) (58.6) (57.5) Total 65.4 75.3 69.5 82.4 94.7 74.9 4.7x 4.4x 4.3x 3.8x 3.4x 4.2x

10

• Good progress with stock reduction

programme

• Stock down £14.1 million overall, and

£26.4 million reduction at constant currency

• On target to achieve £30m target by

September

• Targeting sustainable stock turns of at

least 4.5x

Inventory Dec 2015 FX Dec 2015* Change* June 2016 Total 142.2 12.3 154.5 26.4 128.1

* £m at constant currency €1.203:£1

UK H1 performance

11

• Buck & Hickman main contributor to
• verall decline, principally driven by

large drops in small number of customers

• Brammer UK* performance better,

however significant drop in May, and

• nly partially recovered in June

*Brammer UK includes Brammer UK, Ireland and Iceland

UK SPWD Jan Feb Mar Apr May Jun B&H 323 351 356 359 355 330 SPWD change (20)% (18)% (22)% (7)% (6)% (17)% Brammer UK* 693 736 758 756 736 742 SPWD change (2)% (1)% 4% (1)% (6)% (3)% Total UK 1,016 1,087 1,114 1,115 1,091 1,072 SPWD change (9)% (7)% (7)% (3)% (6)% (8)%

UK business turnaround

• UK performance continued to suffer from:

― Continued decline in T&GM spend in Aerospace, Steel and Government Sectors ― Recovering from historic operational issues

• Turnaround plan identified and actions are at an early stage

― Reinvigorate sales channels ― Focus on core bearings business ― Improve service levels and operational efficiency ― Employee engagement

• Improvements expected in H2 and thereafter

12

UK Performance 2013 2014 2015 H1 2015 H1 2016 Revenue 290.2 282.1 278.1 143.5 135.6 Adjusted Operating profit 21.3 15.8 12.6 6.1 2.0

Goodwill impairment in Nordic region

£m as reported

Nordic Performance 2014 2015 H1 2015 H1 2016 Revenue 54.4 45.4 24.2 21.0 Adjusted Operating profit 2.3 (1.3)

• (2.0)
• Conditions remain very challenging
• No significant benefit experienced in local

markets despite partial recovery in oil price

• Actions to refocus Nordic business away from Oil

and Gas sector continuing with:

• Large T&GM contract win in Norway
• Key Accounts growth continuing with SPWD

up 17%. KA now 17% of sales (2015: 12%)

• New Swedish MD appointed
• Medium term outlook updated resulting in Nordic

goodwill of £22.2 million written down to £5.3 million

• Resulting impairment charge £16.9 million

13

SPWD change by product and customer type Norway Sweden Finland Denmark Total Nordic Sales £m 10.2 8.1 1.2 1.5 21.0 Key Accounts 3% 70% (36)% 46% 17% Base business (22)% (9)% (54)% (21)% (21)% Bearings & Power Transmission (33)% T&GM 485% Other Products 71% Total (17)% (3)% (54)% (20)% (17)%

Gross profit

• Group margins declined by 1.0 ppt to 29.5% from

June 2015

• Underlying country margin improvement of

0.2ppt reflects better focus and commercial execution

• Margin erosion from stock reduction through

reduced supplier rebates from lower purchase volumes and increased stock turns

• Continued improvements will be partially offset

by effect of reduced supplier rebates in H2 2016

14

2015 HY Gross Margin % 30.5% Underlying country margin improvement 0.2% Supplier rebates (0.8)% Stock reduction effect: Release of overheads from stock (0.4)% 2016 HY Gross Margin % 29.5%

Financial highlights

H1 2016 H1 2015 Change CER** Sales £372.3m £365.6m +1.8%

• 1.3%

Adjusted* Operating profit* £8.4m £17.2m

• 51.2%
• 52.0%

Profit before tax* £5.0m £14.1m

• 64.5%
• 65.0%

EPS* 2.1p 8.1p

• 74.0%

Dividend per share

• 3.6p
• Return on operating capital employed*

5.4% 12.1% Reported Operating (loss)/profit £(10.5)m £12.2m (Loss)/profit before tax £(13.9)m £9.1m (LPS)/EPS (12.1)p 5.2p

Profit & Loss

16

* pre amortisation of acquired intangibles, goodwill impairment, acquisition related costs and exceptional items ** Constant currency rates of €1.286:£1

Profit & Loss

17

* Constant currency rates of €1.286:£1 Results are stated before amortisation of acquired intangibles, impairment of goodwill, acquisition related costs and exceptional items £m

H1 2016 H1 2015 FX* H1 2015 Reported Change Turnover 372.3 377.2 11.6 365.6 +1.8% Gross margin 109.8 115.0 3.5 111.5 Gross margin % 29.5% 30.5%

• 30.5%

Sales, Distribution and Administrative Costs (101.4) (97.5) (3.2) (94.3) Adjusted operating profit 8.4 17.5 0.3 17.2

• 51.2%

Return on sales % 2.3% 4.6%

• 4.7%

Interest (3.4) (3.2) (0.1) (3.1) Adjusted profit before tax 5.0 14.3 0.2 14.1

• 64.5%

H1 SPWD by segment

18

Constant currency rates of €1.286:£1 Average number of working days for H1 2016 is 125 days (2015:123 days)

SPWD growth at constant currency Q1 Growth Q2 Growth H1 Growth H1 £’000 By geography: UK (7)% (5)% (6)% 1,085 Germany 3% (1)% 1% 541 France 3% 1% 2% 377 Nordics (21)% (13)% (17)% 172 Other territories 2%

• %

1% 812 Total Group (3)% (3)% (3)% 2,987 By product: Bearings and Power Transmission (5)% (10)% (8)% 1,358 T&GM (3)% 1% (1)% 672 Other 1% 5% 3% 957 Total Group (3)% (3)% (3)% 2,987 By customer: Key Accounts

• %

(1)%

• %

1,633 Base Business (6)% (5)% (6)% 1,354 Total Group (3)% (3)% (3)% 2,987

H1 2016 Cash generation

8.4 4.6 0.5 25.8 (0.3) (14.3) (1.9) 22.8 Inventories Depreciation and amortisation Operating profit (before amortisation, impairment, acquisition costs and exceptionals) Operating Cash Flow Payables Receivables Share option charges

£m

Exceptional and acquisition related costs

19

22.8 (7.5) (3.9) (0.9) (0.4) 10.1

Movement in net debt

£m

Movement in net debt Opening 104.3 Exchange 13.5 Movement (10.1) Closing 107.7

Capital expenditure (net) Operating cash inflow Tax Interest, pension funding and other Purchase of

• wn shares

(net) Net cash inflow

20

Invend £3.4m

21

Capital expenditure

• Capital investment in vending of £3.4m
• Continued investment in group systems and UK ERP
• Branch investment includes French NDC and Poland branch refurbishment
• H2 guidance approx. £5m including reduced vending capex

£m As reported

Land & Buildings Equipment Intangible assets Total Vending

3.4 3.4

Information Technology

0.2 2.5 2.7

Branch investment, vehicles and other

0.4 1.0 1.4

Total

0.4 4.6 2.5 7.5

Vending update

Invend™

23

• InvendTM teams in 6 countries together with the Central Support team provide

services to 17 countries in total. 132 people support the InvendTM initiative

• Demand remains strong with 505 machines installed (net of removals) in H1
• H1 installation rates were below expectations as a result of slower conversion

rates; ongoing SDA of c. £5.3m

• More selective approach going forward to ensure effective sales pricing
• Reduced number of installations expected in H2 compared to H1 in line with

Group priorities

• Capital expenditure expected to be lower in H2 (H1: £3.4m)

InvendTM - Update

24

Machines Live

Q1 Q2 Q3 Q4

2016

1,554 1,810

2015

658 845 1,062 1,305

2014

178 278 371 501

2013

1 14 44 115

Installations by Geography UK

727

Germany

260

France

302

Other

521

Group

1,810 Machines Signed* Q1 Q2 Q3 Q4 Total

2016

310 280

2015

235 299 249 261 1,044

2014

134 91 106 183 514

2013

11 34 28 86

159

Machines Installed** Q1 Q2 Q3 Q4

Total 2016

249 256

2015

157 187 217 243 804

2014

63 100 93 130 386

2013

1 13 30 71 115

*Net of cancellations **Net of machines removed from customers

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16

Net Cumulative Machines in Agreements

Net Cumulative Machines in Agreements

InvendTM - Update

25

Total Account sales* (for accounts with vending machines) Q1 Q2 Q3 Q4 2016 16,413 18,218 2015 8,026 9,654 10,735 14,015 2014 2,311 3,719 5,223 6,352 2013 7 105 477 803 InvendTM Customer growth rates** Q1 Q2 Q3 Q4 2016 17.8% 15.3% 2015 37.2% 24.7% 20.5% 26.5% 2014 74.0% 47.5% 62.1% 48.4% 2013

• 243.2%

35.9% 106.5%

*£’000 at constant currency €1.286:£1 measuring revenue of customer sites with live installed InvendTM machines at the end of the quarter. **InvendTM customer growth rates reflect the percentage increase in sales for customer sites with machines installed at the end of the quarter for both direct and indirect sales compared with total sales (both direct and indirect) for the same quarter a year ago for those same customer locations

Direct sales* (through vending machines) Q1 Q2 Q3 Q4 2016 2,003 2,577 2015 765 1,108 1,337 1,706 2014 102 241 385 537 2013

• 6

13 65 Indirect sales* (for accounts with vending machines) Q1 Q2 Q3 Q4 2016 14,410 15,641 2015 7,261 8,546 9,398 12,309 2014 2,209 3,478 4,838 5,815 2013 7 99 464 738 *£’000 at constant currency €1.286:£1 measuring revenue of customer sites with live installed InvendTM machines at the end of the quarter.

OUTLOOK

Outlook

• Macro-economic outlook remains uncertain
• No improvements in markets beyond levels seen in the first four months of the year
• Continued focus on operational priorities from which the Group should see increasing benefits

in H2: – UK business turnaround – Improve gross margins – Increase cash generation through stock reduction and reduce net debt

• Detailed business review initiated, to be taken forward by Meinie Oldersma, to identify actions

required to improve operational and financial performance of the business as well as its capital requirements

• Conclusions of the business review to be announced in the fourth quarter

27

Appendices

Key Performance Indicators and other measures

29

Key Performance Indicators and other measures H1 2016 £m H1 2015 £m Group sales growth1

• 1.3%

7.5% Organic SPWD growth1,2 1.8% 1.6% Key Account SPWD growth1

• %

7.9% Return on Capital employed3 5.4% 12.1% Net debt to EBITDA4 2.8 2.1 Interest Cover5 6.4 9.2 Stock turn 4.2 3.8

1at constant currency 2 the 2015 comparator reflects incremental growth from acquisitions in 2014 3Represents adjusted operating profit expressed as a percentage of the period end capital employed. Capital

employed represents total equity adjusted for net debt, pension liability, goodwill and intangibles previously written off and deferred and contingent consideration

4The ratio of Consolidated Total Net Borrowings to Consolidated adjusted EBITDA in relation to the trailing 12

month period, calculated using the average exchange rates for the trailing 12 month period

5The ratio of adjusted EBITDA to interest. Interest represents total interest excluding discount unwind on

deferred consideration and notional interest on pension scheme liabilities

30

Revenue by product and customer type

Table product by KA/non KA

£m Constant currency exchange rates at €1.286:£1

SPWD growth at constant currency H1 2016 H1 2015 Change % Total Bearings and Power Transmission 1,358 1,469 (8)% T&GM 672 676 (1)% Other products 957 927 3% Group 2,987 3,072 (3)% Key Accounts Bearings and Power Transmission 588 607 (3)% T&GM 453 462 (2)% Other products 593 568 4% Group 1,634 1,637

• %

Base Business Bearings and Power Transmission 770 862 (11)% T&GM 219 214 2% Other products 364 359 1% Group 1,353 1,435 (6)%

• Total 485 InsitesTM, a net decrease of 8
• InsiteTM sales decreased by 0.3%, reflecting continuing declines in UK T&GM

InsitesTM

• Revenue from InsitesTM are 51% of Key Accounts business
• Focus on InsiteTM profitability during H2

InsitesTM - update

31

• Market segmentation approach enables specific industry requirements to be part of our

service offering

• Suite of industry specific brochures assists approach
• Challenging trading in Metals segment, down 15% driven by declines in the UK and

change in contractual services in our Saudi InsiteTM

• Continued growth of 5% in Food and Drink sales
• Automotive sales growth of 7%

Market Segmentation - update

32

Market Segmentation - update

33 17.8 20.0

2015 2016 Pulp, Paper & Packaging +12%

45.0 47.2

2015 2016 Food and Drink +5%

20.3 19.8

2015 2016 Construction & Aggregates

• 2%

54.4 46.3

2015 2016 Metals

• 15%

100.1 97.7

2015 2016 Other segments

• 1%

52.0 52.2

2015 2016 Industrial Machinery +0%

41.6 44.4

2015 2016 Automotive +7%

24.5 23.6

2015 2016 Wholesale

• 4%

21.5 21.1

2015 2016 Aerospace

• 2%

£m at constant currency €1.286:£1

34

Segment Goodwill - update

£m At closing exchange rates £1:€1.203

UK Germany France Nordic Other Total Goodwill at 31 December 2015 19.5 32.3 5.9 19.1 30.5 107.3 Exchange

• 4.1

0.7 3.1 3.5 11.4 Impairment charge

• (16.9)
• (16.9)

Goodwill at 30 June 2016 19.5 36.4 6.6 5.3 34.0 101.8

• Impairment charge identified on Lönne goodwill in Nordic region totals £16.9 million

Sales per working day - Growth

35

* Organic – including incremental growth from acquisitions

2009 2010 2011 2012 2013 2014

2015

Q1 Q2

H1 2016

UK

• %

8% 17% 8% 2% (3)%

(1)% (7)% (5)% (6)%

Germany (31)% 14% 16% 1% (2)% 8%

6% 3% (1)% 1%

France (15)% 11% 14% 4% (5)% 9%

8% 3% 1% 2%

Nordics

• (7)%

(21)% (13)% (17)%

Spain (22)% 10% 12%

• %

4% 15%

20% 9% 1% 5%

Netherlands (17)% 10% 17% 9% 3% 6%

11% 1% 1% 1%

Poland

• 19%

24% 3% 2% 15% 9%

14% 10% 12%

Total (16)% 12% 22% 17%

• %

15%

5% (3)% (3)% (3)%

Organic* (16)% 12% 16% 3%

• %

7%

1% (3)% (3)% (3)%

Segments

£m

36

4230 UK Germany France Nordic Other Territories Total Turnover 135.6 66.6 47.5 21.0 101.6 372.3 Sales per working day growth (6)% 1% 2% (17)% 1% (3)% Adjusted operating profit 2.0 1.2 1.3 (2.0) 5.9 8.4 Return on sales 1.5% 1.8% 2.7% (9.7)% 5.8% 2.3% Return on sales 2015 4.3% 5.6% 3.3%

• 6.7%

4.7% Operating assets 59.7 29.0 14.2 12.7 46.4 162.0 Goodwill 19.5 36.4 6.6 5.3 34.0 101.8 Acquired Intangible assets 26.5 Net debt (107.7) Current and deferred tax (8.1) Retirement benefits obligations, dividend creditor and other (54.0) Net assets 120.5

Exchange rates

H1 2015 H1 2016 € Average 1.365 1.286 Closing 1.412 1.203 NOK Average 11.85 12.09 Closing 12.37 11.19 SEK Average 12.75 11.92 Closing 13.05 11.33

As at June close

37

Disclaimer

38

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.