growth and strategic acquisitions Agenda Overview Financial - - PowerPoint PPT Presentation

2014 Interim Results For the six months ended 30 June 2014 Continued market share gains through organic growth and strategic acquisitions

• Overview
• Financial highlights
• Market drivers
• Growth Strategy

– Key Accounts – InsitesTM – Product range extension – Market segmentation

• Current trading and outlook

Agenda

2

Overview

• Group revenue up 10.9% to £364.1 million with an improving trend
• Gross margin up 60 basis points on H1 2013 to 31.3%
• Operating profit* up 19.8% to £20.6 million
• Organic growth strategy delivering market share gains
• Seven acquisitions completed to June with pipeline remaining strong
• Successful share placing raising net £52.4 million to support acquisition strategy
• Strong presence established in Scandinavian markets
• Interim dividend up 5.9%

3 *Before amortisation of acquired intangibles, acquisition related costs and exceptional items

Growth continues

• Organic group SPWD growth

rate now improving for six consecutive quarters

• Bearing sales growth of 0.7%

in H1

• Non-bearing sales showing

significant growth

• Continental T&GM growth at

50.9%

• Continuing market uncertainty

Business area at constant currency rates (€1.25:£1) Q1 2014 Q2 2014 HY 2014 Revenue H1 2014 Growth rates (%) £m SPWD Total group

13.1 15.4

14.1 360.6 Organic+

5.0 6.7

5.4 335.4 Revenue Bearings

2.9

• 1.5

0.7 74.3

Non-bearings

15.9 17.9 16.9 286.3

T&GM – Total

8.1 1.5 4.7 86.9

– Continental

47.0 54.4 50.9 17.4

Key Accounts

10.7 8.6 9.6 190.7

Base business - Total

15.4 19.5 17.4 169.9

Base business - excl. Lönne

• 3.7

2.5

• 0.7

143.7

4

+Including incremental growth of Lönne

Financial highlights

9.8 12.3 10.8 H1 2013 H2 2013 H1 2014 328 324 364 H1 2013 H2 2013 H1 2014

Highlights

Total sales

Statutory 10.9% Constant currency 13.1% FX

• 2.2%

Organic+ 5.4% Statutory 19.8% Constant currency 21.6% FX

• 1.8%

Operating profit

5.2% 7.0% 5.7% H1 2013 H2 2013 H1 2014

Operating margin

DPS +5.9% 3.4 6.8 3.6 H1 2013 H2 2013 H1 2014

Earnings Dividend

67.0 69.5 80.9 H1 2013 H2 2013 H1 2014

H1 2013 H1 2014 Receivables 51.7 55.3 Inventories 70.0 84.0 Payables (54.7) (58.4) Total 67.0 80.9

Working capital days

Note: Results are stated before amortisation of acquired intangibles, acquisition related costs and exceptional items.

+Including incremental growth of Lönne

17.2 22.6 20.6 H1 2013 H2 2013 H1 2014 EPS +10.2%

H1 2013 Reported Change 328.4 10.9% 100.8

• 30.7%
• (83.6)
• 17.2

19.8% 5.2%

• (2.0)
• 15.2

15.1%

Profit & Loss

H1 2014 Turnover 364.1 Gross margin 114.0 Gross % 31.3% Sales, Distribution and Administrative Costs (93.4) Underlying operating profit 20.6 % 5.7% Interest (3.1) Underlying profit after interest 17.5

£m Note: Results are stated before amortisation of acquired intangibles, acquisition related costs and exceptional items.

H1 2014 Lönne Organic H1 2013 2013FX H1 2013 Reported Change Turnover 364.1 25.8 338.3 322.2 (6.2) 328.4 10.9% Gross margin 114.0 8.7 105.3 99.1 (1.7) 100.8

• Gross %

31.3% 33.7% 31.1% 30.7%

• 30.7%
• Sales, Distribution and

Administrative Costs (93.4) (7.1) (86.3) (82.1) 1.5 (83.6)

• Underlying operating

profit 20.6 1.6 19.0 17.0 (0.2) 17.2 19.8% % 5.7% 6.2% 5.6% 5.3%

• 5.2%
• Interest

(3.1) (0.6) (2.5) (2.0)

• (2.0)
• Underlying profit after

interest 17.5 1.0 16.5 15.0 (0.2) 15.2 15.1%

H1 2013 Reported Change 328.4 10.9% 17.2 20.0% 5.2%

• 222.0
• 28.9%
• 15.5%
• Ratios

^Segmental assets including goodwill less liabilities, before current and deferred tax, dividends, cash, loans, deferred consideration & pension liability at constant currency **Underlying operating profit as a percentage of operating capital as defined in ^ but excluding goodwill and acquired intangibles ***Underlying operating profit as a percentage of operating capital as defined in ^

H1 2014 Turnover 364.1 Underlying operating profit 20.6 Return on Sales 5.7% Closing operating capital^ 294.9 Return on operating capital employed** 26.6% Return on investment*** 14.0% H1 2014 Lönne Organic H1 2013 2013FX H1 2013 Reported Change Turnover 364.1 25.8 338.3 322.2 (6.2) 328.4 10.9% Underlying operating profit 20.6 1.6 19.0 17.0 (0.2) 17.2 19.8% Return on Sales 5.7% 6.2% 5.6% 5.3%

• 5.2%
• Closing operating

capital^ 294.9

• 243.9

217.8 (4.2) 222.0

• Return on operating

capital employed** 26.6%

• 26.0%

26.6%

• 28.9%
• Return on investment***

14.0%

• 15.6%

15.6%

• 15.5%

Sales* contribution by growth driver

318.7 26.3 16.7 10.4 31.2 (42.7) 360.6 250.0 300.0 350.0 400.0 450.0 500.0 Key Accounts InsitesTM Lönne Market segmentation & Product extension Eliminations+ & Base business H1 2013 H1 2014

*At constant currency – management rates €1.25: £1

+Eliminating sales included in more than one category

Base business (1.0) Eliminations (41.7)

9

Cash generation

20.6 4.4 1.2 7.5 (20.8) (16.5) (3.4) (7.0) 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 Inventories Depreciation and amortisation Operating profit (before amortisation, acquisition costs and exceptionals) Operating Cash Outflow Payables Receivables Share option charges

£m

Exceptional and acquisition costs

10 Days H1 2013 H1 2014 Receivables 51.7 55.3 Inventories 70.0 84.0 Payables (54.7) (58.4) Total 67.0 80.9

• 8.0

7.8

• 29.8

Working Capital Cash flow

H1 2013 H2 2013 H1 2014

(7.0) (8.1) (3.6) (4.5) (0.7) (46.8) 52.4 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

Acquisitions Proceeds from share placing

(18.3)

Movement in net debt

£m

Movement in net debt Opening (52.9) Exchange 2.0 Movement (18.3) Closing (69.2)

Capital expenditure (net) Operating Cash Outflow Tax Interest and pension funding Purchase of

• wn shares

(net) Net cash

• utflow

11

Capital expenditure

• Continued IT investment
• Continued investment in growth drivers, notably Tools & General Maintenance

£m

Land & Buildings Equipment Intangible assets Total Tools & General Maintenance Division

2.7 0.9 3.6

Information Technology

0.3 1.5 1.8

Vehicles

0.1 0.1

Branch investment and other

0.1 2.8 2.9

Capital expenditure

0.1 5.9 2.4 8.4

12

Growth strategy

Growth Strategy

Growth Capability Costs Synergies Geographical development Key Accounts development Business Skills Development European Buying Systems Integration InsitesTM 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 €50 bn market

14

Update

• Key Accounts grew by 9.6%
• Now represents 53% of group sales,

57% excluding Lönne

• Pan-European Key Accounts growth

accelerated, up 28.2%

• Some national Key Accounts have

delayed maintenance programmes in H1

• 4 new pan-European contracts won
• Pipeline remains strong

Case study

• Global leader in Food and Ingredients,

with > 24,000 people worldwide

• Successful implementation and roll out in

Ireland and UK in 2013

• Pan-European rollout in June 2014 with

expectations of revenue > £5m in Year 1

• 30 locations across 9 Brammer

geographies

• Senior sponsorship to deliver full range
• f Brammer products and services
• Opportunity to deliver stores

management solutions

Key Accounts

15

Key Accounts

Key Account Sales Performance Multi-site Status Scope Sales Growth Tier 1 EU contract Part EU Group €67.0m 28.2% €85.9m Tier 2 National contract Part EU Group €81.5m

• 0.6%

€81.0m Tier 3 No contract Part EU Group €23.5m 4.8% €24.6m Tier 4 National contract National Group €45.4m 3.1% €46.8m €217.4m 9.6% €238.3m

16

2006 2007 2003 2008 2009 2010 2004 2005 2011 2012

• No. of key Accounts

60 40 30 20 10

2013 First ever EKAM Employed

Key Milestones & Investments

Investment in European KA Team Central support team established Account Development Managers Major Investments in KA infrastructure Focus on resilient sectors Sector Management established KA Tools established

Experience at scale

• More than 500 people serving 60 Pan-EU Key Accounts
• Key Account support provided in 16 countries
• 14 Key Accounts are in the Global Fortune 500 list

Pan-European Supply Agreements

17

100 80 60 40 20 EU KA Revenues (M€)

Update

• Total 396 InsitesTM

– 165 full time; 231 part time

• Increased by 13 overall
• Continued strong sales growth of

12.3%

• InsiteTM sales 48.7% of total Key

Accounts business

• EU InsiteTM pipeline strong with 366
• pportunities
• Currently in direct negotiation with 94

customer locations Case study

• Global tobacco manufacturer adopts

pan-European InsiteTM programme

• Turnover growth of 105% in the period
• 7 Insites™ in 5 countries
• Insite™ sales of £0.6m account for 96%
• f total sales
• Growth potential approaching £4.5m

supporting future InsiteTM growth

InsitesTM

18

Update

• Bearing sales grew 0.7% reflecting

market conditions

• Key bearing suppliers report

bottoming out of market

• Non-bearing sales up 16.9% driven

by product range extension through Europe

• Further market share gains secured
• Growth rates improving

Case study

• Roebuck tools brand introduced in 2013
• Successful launch with encouraging

sales to c.2,600 customers

• Roebuck products are now available

across Europe

• Significant product range expansion in

development for 2014 following initial success

• Roebuck catalogue will support further

sales growth from H2

Product Range Extension

19

20

Mechanical Power Transmission –

Chains & Sprockets

Seals Tools & Maintenance Health and Safety Gearboxes Linear Motion -

Industrial Automation

Motors Bearings Fluid Power Mechanical Power Transmission -

Belts & Pulleys

Fluid Power

£m like for like at constant currency

Product Range Extension

82.9 84.6 86.9 H1 2013 H2 2013 H1 2014 Tools & Maintenance +4.7% 36.0 34.8 38.5 H1 2013 H2 2013 H1 2014 Mechanical Power Transmission 6.9% 244.9 239.9 286.3 H1 2013 H2 2013 H1 2014 Non-Bearings +16.9% (SPWD +18.1%) 73.8 74.7 74.3 H1 2013 H2 2013 H1 2014 Bearings 0.7% (SPWD 1.0%) 49.5 49.6 54.5 H1 2013 H2 2013 H1 2014 Fluid Power +10.1%

Update

• Turnover grew 4.7% overall and

50.9% on the continent

• Growth in continental T&GM

accelerating to 54.4% in Q2

• Successful recent launch of MRO

catalogue Europe-wide

• Continued investment in European

Product Division, now comprising 30 professionals European MRO catalogue

• Single MRO publication across

continental Europe

• First Europe-wide publication
• 50,000 copies distributed in 19 countries
• Features >800 pages of Fluid Power

products

• Driving product range extension in all our

regions

European Product Division – Tools & General Maintenance

21

Update

• Focus on defensive segments

continues

• Utilities up 9.3% and Food & Drink up

12.1%

• Growth in other sectors, with

Consumer Goods up 19.1% and Metals up 28.1%

• Market focus is increasing resilience

and market share Case study

• Successful Europe-wide contract with

Alcoa, a global aluminium processor

• Relationship developed to supply one of

the worlds largest vertically integrated aluminium complexes, Alcoa Ma’aden

• Delivering significant cost savings and

service delivery to support future growth

• Strong sales growth

Market Segmentation

22

Market Segmentation

13.2 13.1 13.7

H1 2013 H2 2013 H1 2014 Pulp, Paper & Packaging +3.8%

34.0 34.6 37.6

H1 2013 H2 2013 H1 2014 Automotive +10.6%

37.3 38.7 41.8

H1 2013 H2 2013 H1 2014 Food and Drink +12.1%

15.7 15.8 17.8

H1 2013 H2 2013 H1 2014 Construction & Aggregates +13.4%

1.3 1.3 2.5

H1 2013 H2 2013 H1 2014 Recycling +92.3%

37.0 40.0 47.4

H1 2013 H2 2013 H1 2014 Metals +28.1%

15.0 12.4 16.4

H1 2013 H2 2013 H2 2014 Utilities +9.3%

23 £m

CURRENT TRADING & OUTLOOK

Sales per working day - Europe

Since 2007:

• European Production Index is down x%
• Brammer is up x% (x% excluding Buck & Hickman)

25 *Graph excludes Lönne group

0% 20% 40% 60% 80% 100% 120% 140% 160% 180% Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14

Deseasonalized Brammer SPWD Index vs Seasonally Adjusted European Production Index (EU28 - 3 month moving average)

Brammer EPI

Since 2007:

• European Production Index is down 8%
• Brammer is up 57% (31% excluding Buck & Hickman)

Sales per working day - Growth

2009 2010 2011 2012 Q1-13 Q2-13 Q3-13 Q4-13 2013 Q1-14 Q2-14 UK (0.4)% 8.0% 16.8% 7.6% (0.1)% 3.3% 0.4% 5.0% 2.2% 0.1% (3.0)% Germany (30.8)% 13.6% 16.1% 0.6% (7.5)% (1.7)% (0.8)% 1.8% (2.4)% 6.9% 8.7% France (14.6)% 11.1% 14.2% 3.5% (1.9)% (2.7)% (7.0)% (6.3)% (4.7)% (0.7)% 8.4% Spain (22.3)% 9.5% 12.3% (0.3)% (3.3)% (3.8)% 8.5% 15.8% 3.8% 12.4% 15.7% Netherlands (16.6)% 10.3% 17.2% 8.5% 4.6% (4.9)% 2.2% 9.0% 2.8% 7.1% 8.4% Poland

• 18.6%

24.1% 3.0% (1.5)% 3.1% 0.7% 6.1% 1.9% 13.7% 9.6% Total (16.1)% 11.6% 21.8% 17.1% (2.9)% (0.3)% (0.6)% 3.4% (0.2)%

13.1%

15.4% Organic (16.1)% 11.6% 15.9% 2.9% (2.9)% (0.3)% (0.6)% 3.4% (0.2)%

5.0%

6.7%

26

Growth Track Record

£m

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 H1 2014 Total Revenue 270.8 287.4 314.3 379.6 478.4 426.1 468.4 571.5 639.6 651.9 364.1 GP % 30.1% 30.9% 30.5% 30.4% 30.0% 30.1% 30.1% 30.3% 30.5% 31.5% 31.3% Operating profit 9.8 12.5 15.1 19.9 26.2 18.4 23.0 31.8 37.2 39.8 20.6 254.3 TP % 3.6% 4.4% 4.8% 5.2% 5.5% 4.3% 4.9% 5.6% 5.8% 6.1% 5.7% Operating cash flow 18.7 15.7 11.9 16.7 29.2 33.3 27.5 28.9 28.6 48.4 (3.6) 255.3 Net Debt (€ equiv) 80.7 73.7 80.4 80.9 86.8 44.9 42.8 42.1 66.3 63.6 86.4 Total Customer Signed off Cost Savings 0.4 2.6 8.8 15.1 15.0 25.8 30.0 34.9 51.5 60.0 25.9

27

Customer validated cost savings

0.4 2.6 8.8 15.1 15.0 25.8 30.0 34.9 51.5 60.0 25.9 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 H1 2014

Over 3,300 separate cost savings provided to our customers so far in 2014

£m

28

Acquisitions

• Lönne group acquisition gives a major presence in Scandinavia
• Key account opportunities already identified and several InsitesTM opened
• Seven acquisitions completed to June, including six bolt on acquisitions with

total annualised revenues of €31m for a total consideration of €9.5m

• Pipeline remains strong as competitors find market conditions challenging with

two further bolt on acquisitions made in the second half so far

• Share placing, raising a net £52.4 million supports ongoing acquisition strategy

29

Outlook

30

• Continued successful execution of organic growth strategy in challenging markets
• Organic growth rates improving for six consecutive quarters
• Acquisitions strategy expands our European footprint, gains market share and

provides profit enhancing synergy opportunities

• Continued investment in growth projects including vending drives market share

gains

• Additional 107 FTEs solely dedicated to vending
• Self-help becoming ever more important in difficult market conditions

Appendices

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 350 locations across 19 countries
• 4.8 million product lines
• More than 100,000 customers
• Robust fundamental growth drivers

32

Segments - HY

UK Germany France Spain Benelux Scandinavia Eastern Europe & Other Total Turnover 143.8 61.3 42.8 23.7 26.6 26.3 36.1 360.6 Sales per working day growth (Like for like)

• 1.4%

7.7% 3.9% 14.0% 7.7% n/a 27.7% 14.1% Underlying operating profit 8.2 3.7 1.7 2.3 1.3 1.5 1.6 20.3 Return on sales 5.7% 6.0% 4.0% 9.7% 4.9% 5.7% 4.4% 5.6% Return on sales 2013 5.8% 5.1% 3.4% 8.6% 4.5% n/a 3.4% 5.2% Operating capital employed* 42.6 23.1 14.1 10.3 10.8 10.5 41.5 152.9 Return on operating capital employed 38.5% 32.0% 24.1% 44.7% 24.1% 28.6% 7.7% 26.6% Return on operating capital employed 2013 48.5% 28.3% 25.8% 60.8% 20.0% n/a 6.6% 28.9%

£m At constant currency £1:€1.25 * Segmental assets excluding goodwill and acquired intangibles less liabilities, before current & deferred tax, dividends, cash, loans, deferred consideration & pension liability 33

2014 Sales, Distribution and Administrative Costs (93.4) Intangible amortisation (0.6) Acquisition related (1.6) Exceptional item (3.7) Total Costs (99.3)

Costs

£m

2013 Reported (83.6) (0.6)

• (84.2)

34

Total reported costs increased by £15.1m

2014 Lönne Organic 2013 2013FX 2013 Reported Sales, Distribution and Administrative Costs (93.4) (7.1) (86.3) (82.1) 1.5 (83.6) Intangible amortisation (0.6)

• (0.6)

(0.6)

• (0.6)

Acquisition related (1.6) (0.4) (1.2)

• Exceptional item

(3.7)

• (3.7)
• Total Costs

(99.3) (7.5) (91.8) (82.7) 1.5 (84.2)

Underlying costs up 5.1% at constant currency Acquisition related costs and exceptional restructuring costs in 2014

Exchange rates - HY

June 2014 December 2013 June 2013 Average €1.22 €1.182 €1.181 Closing €1.249 €1.202 €1.167

35

Disclaimer

36

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.