Half year ended 30 September 2018 December 2018 Specialist plastic - - PowerPoint PPT Presentation

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Half year ended 30 September 2018 December 2018 Specialist plastic - - PowerPoint PPT Presentation

Interim Results Presentation Half year ended 30 September 2018 December 2018 Specialist plastic products for global markets Innovative plastic products for global markets... Disclaimer THIS PRESENTATION IS CONFIDENTIAL AND IS BEING SUPPLIED


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Specialist plastic products for global markets

Interim Results Presentation Half year ended 30 September 2018 December 2018

Innovative plastic products for global markets...

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Plastics Capital plc

THIS PRESENTATION IS CONFIDENTIAL AND IS BEING SUPPLIED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED, FURTHER DISTRIBUTED TO ANY OTHER PERSON OR PUBLISHED, IN WHOLE OR IN PART, FOR ANY PURPOSE. Neither this presentation, nor the information contained in it constitutes or forms part of an admission document or a prospectus and does not form any part of (and should not be construed as constituting or forming any part of) an offer of, or invitation to apply for, securities nor shall this document or any part of it, or the fact of its distribution, form the basis of or be relied on in connection with any investment decision, contract or commitment whatsoever. This presentation should not be considered a recommendation by Plastics Capital plc (the “Company”) or any of its respective directors, members, officers, employees, agents or advisers in relation to any purchase of the Company’s securities, including any purchase of or subscription for any ordinary shares in the capital of the Company. Accordingly, information and opinions contained in this presentation are being supplied to you solely for your information only. Although reasonable care has been taken to ensure that the facts stated in this presentation are accurate and that the opinions expressed are fair and reasonable, the contents of this presentation have not been verified by the Company or any other person. Accordingly, no representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information and opinions contained in this presentation, and no reliance should be placed on such information or opinions. Further, the information in this presentation is not complete and may be changed. Neither the Company nor any of its respective members, directors, officers or employees nor any other person accepts any liability whatsoever for any loss howsoever arising from any use of such information or opinions or

  • therwise arising in connection with this presentation.

In the UK this presentation is being provided only to investment professional and high net worth companies, as described in articles 19 and 49(2), respectively, of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 and persons otherwise exempt under such Order. Securities in the Company have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “Securities Act”), or qualified for sale under the law of any state or

  • ther jurisdiction of the United States of America and may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not

subject to, the registration requirements of the Securities Act. The Company does not presently intend to register any securities under the Securities Act, and no public offering of securities in the United States will be made. If relevant, in the United States, this presentation is directed only at, and may be communicated only to, persons that are institutional “accredited investors” within the meaning of Rule 501(a) (1), (2), (2) or (7) under the Securities Act. Neither the United States Securities and Exchange Commission (“SEC”) nor any securities regulatory body of any state or other jurisdiction of the United States of America, nor any securities regulatory body of any other country or political subdivision thereof, has passed on the accuracy or adequacy of the contents of this presentation. Any representation to the contrary is unlawful. The distribution of this presentation in certain other jurisdictions may be restricted by law, and persons into whose possession this presentation comes should inform themselves about, and observe, any such restrictions. This presentation may contain forward-looking statements that reflect the Company's current expectations regarding future events, its liquidity and results of

  • perations and its future working capital requirements and capital raising activities. Forward-looking statements involve risks and uncertainties. Actual events could

differ materially from those projected herein and depend on a number of factors, including the success of the Company's development strategies, the successful and timely completion of clinical studies, the ability of the Company to obtain additional financing for its operations and the market conditions affecting the availability and terms of such financing. By participating in and/or accepting delivery of this presentation you agree to be bound by the foregoing restrictions and the other terms of this disclaimer.

Interim results presentation

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Disclaimer

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Plastics Capital plc Interim results presentation

Highlights Financial Review Strategy Outlook

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Plastics Capital plc

Operational highlights

  • 12.1% organic revenue growth at constant currency

– Films Division revenue up 12.0% organically, 11.1% in volume terms – Industrial Division revenue up 12.2% organically at constant currency

  • EBITDA up 29.0% at constant currency driven mainly by the Industrial Division

– Bearings projects flowing through to product sales as anticipated – Prior year matrix business acquisitions progressing well

  • Integration of Films Division progressing as planned; full benefits still to be felt
  • Further £2.1 million invested in capability and capacity expansion projects for future growth
  • Project wins in bearings business continue to build

– £5.8 million of annual sales from won projects still to enter production

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HY 18-19 Highlights

Underlying Results

  • Excluding amortisation, exceptionals and unrealised fx gains/losses and share-based incentive scheme charges

^ Also excludes non-controlling interests + Applying an underlying tax charge of 13% (17-18 – 10%) and based on the weighted average number of shares in issue in the year

£m HY 18-19 HY 17-18 % Sales 40.6 36.5 11% EBITDA* 3.7 2.6 43% PBT*^ 2.1 1.2 75% eps*^+ (p) 4.7 2.8 68% dps (p) nil nil na Net Debt 15.7 15.0 5%

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Plastics Capital plc

  • 53.4% of total sales

– 93% UK, 7% export

  • Sales value up 12%, sales volume up 11%

– Superior/innovative products and service; weaker competitors – Blue chip growing key accounts – we grow with our customers

  • Stable raw material prices in HY18-19 – no impact on margins in this period
  • Management of growth a key challenge; people/overhead costs up 17.9%

– Recruitment and training of new staff – Upgrade and maintenance of production machinery – Expansion of logistics infrastructure – Project engineering for the substantial capacity expansion

  • Management integration of three businesses proceeding satisfactorily

– One sales team, three specialized factories, centralised administration – 6-18 months work to conclude this stage

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HY 18-19

Films Division

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Plastics Capital plc

  • 46.6% of total sales

– 5% UK; 95% ROW

  • Bearings sales up 18%, 19.7% at constant fx

– Slow project start-ups from prior year have progressed satisfactorily – Additional projects have moved into production as expected – Pipeline of converted projects to enter production has strengthened

  • Creasing matrix and consumables sales up 10.8%, 12.1% at constant fx

– Consumables sales progressing very well – Matrix production rationalization programme completed – Focus on sales and margin bringing good results – Further opportunity for improvement in USA and China

  • Mandrels sales down 5% at constant fx

– Prior year growth (c40%) unsustainable – Lead times now 4 weeks as customers have destocked – Good potential for further growth in Asia and USA

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HY 18-19

Industrial Division

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Plastics Capital plc

  • Pipeline of won business not yet in production has increased over the year

– Mainly reflects bearings projects

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New Business Pipeline

£’k

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Plastics Capital plc Interim results presentation

Highlights Financial Review Strategy Outlook

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Plastics Capital plc Interim results presentation

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HY 18-19

Sales Bridge

£m Comments Sales HY 17-18 36.5 Actual FX impact

  • 0.2

Sales HY 17-18 36.3 Constant FX Films Division 2.2 Industrial Division 2.1 Sales HY 18-19 40.6 Actual

  • Sales growth of 11.4% top line overall; of which:

– 12.1% due to organic growth – (0.7)% due to currency

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Plastics Capital plc

  • Commodity plastics have been relatively stable over HY18-19

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Raw Materials

Raw material prices FY10 – HY19

Index (Apr’10=100)

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Plastics Capital plc Interim results presentation

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HY 18-19

EBITDA Bridge

£m Comments EBITDA HY 17-18 2.6 Actual FX impact 0.1 EBITDA HY 17-18 2.7 Constant FX Films Division 0.2 Industrial Division 0.8 EBITDA HY 18-19 3.7 Actual

  • EBITDA up 42.8%

– 29.0% due to organic growth – 13.8% due to currency

  • Driven mainly by Industrial Division

– Bearings projects flowing through to product sales as anticipated – Prior year matrix business acquisitions progressing well

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Plastics Capital plc Interim results presentation

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HY 18-19

EBITDA to PATAEFX

  • Depreciation has grown due to increased capex during current and prior year
  • Non controlling interest refers to that part of matrix businesses still not fully owned

– Performance improving following manufacturing rationalisation

  • Effective tax rate is estimated at 13% - same as FY17-18

HY 18-19 £'000 HY 17-18 £'000 % EBITDA 3,673 2,572 42.8 Depreciation

  • 1,177
  • 1,030

14.3 Interest

  • 398
  • 395

0.7 Non-controlling interest gain / (loss)*

  • 2

48 104.2 PBTAEFX 2,096 1,195 75.4 Tax

  • 272
  • 101

169.3 PATAEFX 1,824 1,094 66.7 EPS (p) 4.7p 2.8p 67.9

* Non controlling interest refers to that part of CCM and Mito we don’t own

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Plastics Capital plc

  • Working capital is tightly managed and benefitting from “faster cycle” business mix

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Working Capital

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Plastics Capital plc

  • Leverage has decreased and interest cover has increased over the half year

– Both are within acceptable ranges

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Leverage and Interest Cover

x

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Plastics Capital plc

  • Continued investment to enable future growth

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HY 18-19

Cash Flow - Capital Allocation

£’000 Comments EBITDA 3,673 Development Expenditure

  • 125

Capitalised R&D. Total annual R&D spend is c£1m

Change in Working Capital

  • 1,103

Capital Expenditure

  • 420

Maintenance and replacement capex

Taxes

  • 144

Corporation tax

Net Interest Paid

  • 398

Other

  • 97

Free Cash Flow 1,386 Capital Available 1,386 Acquisition / Minority Interest Capex

  • 2,145

Growth capex

Fees & Restructuring Capital Used 2,145 (Increase) in Net Debt

  • 759
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Plastics Capital plc Interim results presentation

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HY 18-19

Capital Expenditure

  • £2.5 million invested in new machinery and facilities in HY18-19

– All as planned

  • Films Division has required £1.9 million in H1

– Substantial 8 colour printing press – 2,800 tonne multi-layer extrusion line (c30% capacity increase) – New in-line conversion machine – Recycling unit relocated from Haslingden to Dunstable – 1,000 tonne extruder relocated from Haslingen to Dunstable

  • Industrial Division has required £0.6 million in H1

– One new injection moulding line for specific project – Remainder is maintenance and replacement capex

  • Further capital expenditure expected in H2

– Three additional conversion lines being installed – New logistics and office complex in Haslingden – Similar expenditure required in Industrial Division in H2

  • £4 million set aside for FY18-19 remains a prudent expectation
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Plastics Capital plc Interim results presentation

Highlights Financial Review Strategy Outlook

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Plastics Capital plc Interim results presentation

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HY 18-19

Plastic Waste

  • Most plastic products are superior and more sustainable than the alternatives

– E.g. Global warming impact of paper is significantly greater

  • However, plastic waste not being handled properly is a big problem

– But it is also a great opportunity for improvement

  • Our products are industrial products sold to industrial businesses and not used by consumers

– No single use consumer plastics – We are not “in the eye of the storm”

  • Budget 2018 announced a new tax from 2022 to apply to plastic packaging not containing

30% recycled content – Subject to a consultation process in the meantime – Announcement begs a lot of questions – Too early to say how this could affect the markets that we compete in

  • We are doing everything we can to address plastic waste - in four main ways:

1. Increasing our own internal recycling – “waste not want not” 2. Enabling our customers to use less plastic - introduction of thinner / stronger films 3. Assisting our customers to recycle more of the products that they buy from us 4. in the longer run, finding materials that will recycle more easily or degrade safely

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Plastics Capital plc Interim results presentation

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HY 18-19

Targets

  • 2019-20 target – EBITDA £10.5 million

– A stretch but achievable – But becoming a short term target as we approach last 15 months – Needs to be superseded by new long-term target to guide strategy – 2023-24 target – EBITDA £15 million

  • Potential for further strong growth is good

– We have superior products and technical expertise – Many key accounts available to be converted and served – Many only buy a subset of their product needs from us – This requires ongoing investment – Committed and talented teams – New facilities, machinery and equipment – Development and introduction of new products – A virtuous circle then ensues

  • Our working assumptions are for

– Slow economic growth over the long term – Current exchange rates remaining broadly unchanged

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Plastics Capital plc Interim results presentation

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HY 18-19

Key Initiatives

Films Division

  • The introduction of new multi-layer films into a range of sacks and

pouches with extended life properties to be produced in-house

  • The introduction of a new range of very high strength films,

enabled by recently installed conversion machinery

  • The development of a patented sack that provides a superior

solution replacing two layer paper / plastic sacks currently used for packing powders

  • An increased focus on export markets, with particular emphasis
  • n Northern Europe and Australia
  • An increase in internal recycling of plastic scrap and waste

material with an objective of recycling and reusing internally 75%

  • f the scrap we produce
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Plastics Capital plc Interim results presentation

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HY 18-19

Key Initiatives

Industrial Division

  • Roll-out of our innovative plastic bearing solutions for key accounts in
  • ur core applications

– steering columns, instrument controls, domestic appliances, video conferencing cameras, conveyors and shower enclosures

  • Introduction of a range of plastic bearings to operate at higher loads,

temperatures and speeds – Widens the range of applications and available market that can be served

  • Forward integration in the matrix business; increasing the

– Range of customers we serve directly – Range of products we can offer

  • Improvement in the security and speed of supply of bespoke mandrels

to key accounts, particularly those based in the USA and Asia.

  • The introduction of new abrasion resistant films suitable for hose

coverings and possibly transmission belts and conveyor belts

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Plastics Capital plc Interim results presentation

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HY 18-19

Other Matters

Capital Allocation

  • Cash generated is all being reinvested in growth

– Capital allocated for growth (for incremental growth capex and working capital) is £4m annually – Additional annual run-rate sales being achieved is £8 - £10 million – Annual EBITDA / Sales percentage = ~10% – Run-rate incremental EBITDA is therefore £0.8–1.0 million – Equivalent to a ~20% rate of return on capital

  • Whilst this rate of growth and incremental return is being achieved, we believe that capital should be

allocated to continued reinvestment

Company Name Change

  • To signify and symbolize

– The priority we will be applying to the issue of sustainability and plastic waste a name change is proposed – The core competence of the business being the “synthesis of innovative solutions”

  • Synnovia PLC – ticker SYN
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Plastics Capital plc Interim results presentation

Highlights Financial Review Strategy Outlook

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Plastics Capital plc

  • Revenue growth has been strong and likely to remain so for foreseeable

future – Balanced across the two divisions – Order book is good – Pipeline of won projects has strengthened

  • Profitability has improved and is likely to continue to do so in H2

– Currency - weak sterling is now contributing – Business mix more favourable - towards Industrial Division – Provided there are no disruptions - Brexit is the main concern near term

  • We are benefitting from investments in capabilities and capacity made
  • ver recent years

– We continue to invest to take advantage of the momentum now built – Surplus cash flow will be used to pay down debt

  • Minimising our own and our customers’ plastic waste is a priority

– To signify this we intend to change our name to Synnovia plc

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Summary & Outlook

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Plastics Capital plc

Appendix

Interim results presentation

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Plastics Capital plc

  • Sales growth driven substantially by acquisitions
  • Organic growth target is 5-10%; achieved 13% in FY17-18 and 12.1% in HY18-19
  • Margins have reduced but sales growth has increased
  • Good return on capital employed
  • Gearing levels at the top end of our range

– Ideally should be between 1.5x – 2x

  • Interest cover comfortable

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Long Term Financial KPIs

KPI FY09-15 FY15-18 Annual Sales Growth 5.8% 24.7% Organic Sales Growth 1.8% 9.1% EBITDA Margin * 16% 11% Cash Conversion 71% 48% Annual eps Growth * 9.7%

  • 4.5%

ROCE * 36.5% 22.4% Dividend Yield 1.2% 2.2% Net Debt Leverage 2.4x 2.0x Interest Cover 8.2x 11.8x

* Excluding amortisation, exceptionals and unrealised fx gains/losses and share-based incentive scheme charges

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Plastics Capital plc Interim results presentation

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HY 18-19

Statutory vs Underlying

£’000 Statutory HY 18-19 Underlying HY 18-19 Notes EBITDA 3,673 3,673 Exceptionals

LTIP charge

  • 28

– Depreciation

  • 1,177
  • 1,177

Amortisation

  • 401

– EBIT 2,067 2,496 Interest

  • 450
  • 398

Difference = Amortisation

  • f deal fees

FX Translation loss (unrealised)

  • 712

Unrealised derivative gain

Non-controlling interest

  • 2

NCI relating to CCM and Mito

PBT 905 2,096 Tax charge

  • 272
  • 272

PAT 633 1,824

EPS (p) 1.6p 4.7p

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Plastics Capital plc

  • Capital expenditure – additional capacity being added for growth in key business areas

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Total Capex HY 18-19 £'000 HY 17-18 £'000 Maintenance 153 159 Replacement 267 325 New Capacity – existing products 434 225 New Capacity – new products /projects 1,361 746 Infrastructure / facilities improvement 350 195 Total 2,565 1,650

  • Employees – increase in staff due to due to the Films Division

Total Full Time Employees at Year End 31-Mar-17 31-Mar-18 30-Sept-18 Senior Management 27 27 25 Administration 52 50 51 Business Development 83 82 84 Production & Distribution 406 436 475 Total 568 595 635

HY 18-19

Capex and Headcount

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Plastics Capital plc

  • Continued investment to enable us to grow – focused on growth capex in H1.

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HY 18-19

Cash Flow

£’000 Comments EBITDA 3,673 Exceptional Costs Development Expenditure

  • 125

Capitalised R&D. Total annual R&D spend is c£1m

Change in Working Capital

  • 1,103

Capital Expenditure

  • 2,565

New capacity in films, bearings and mandrels

Taxes

  • 144

Corporation tax

Operating Cash Flow

  • 264

Net Interest Paid

  • 398

Acquisition and Minority Interests Other

  • 97

(Increase) in Net Debt

  • 759
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Plastics Capital plc

  • Annual organic sales growth rate (%)

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Supporting Data

Capital Allocation Analysis

£m Comments

Sales FY15-16 50.8

Actual

Synpac 4.0

Acquired July’16

CCM 6.0

Acquired May’16

Mito 1.0

Acquired Dec’16

Sales FY15-16 61.8

Proforma

Organic sales increase 22.1 Sales CAGR = 11% Sales FY18-19 83.9

Brokers’ consensus Proforma FY16-17 £m Actual FY17-18 £m Actual HY18-19 £m

Sales 68.0 76.7 40.3

  • Incl. proforma sales from Synpac, CCM & Mito: £2.3m in FY16-17

EBITDA 7.2 7.0 3.7

  • Incl. proforma ebitda from Synpac, CCM & Mito: £0.3m in FY16-77

EBITDA margin 10.6% 9.1% 9.2% Average = 9.6%

  • EBITDA margin (%)

Actual FY16-17 £m Actual FY17-18 £m Consensus FY18-19 £m

Growth capex 3.0 2.8 3.6 Working capital 0.2 1.6 0.9 Increase in invested capital 3.2 4.4 4.5 Average = £4.0m

  • Invested Capital (£m)