INTERIM RESULTS Half year ended 30 September 2016 29 th November - - PowerPoint PPT Presentation

INTERIM RESULTS

Half year ended 30 September 2016 29th November 2016

2 INTERIM RESULTS│29TH November 2016

Overview

 A good set of results in difficult conditions



Further EPS growth, up >70% last 3 years  Focused on:

 Building new project business to drive future organic growth  Managing costs and working capital  Acquisitions

 Upward revision to medium term strategic targets  Underlying operating profit up 14% (+1% CER)

 Underlying EPS up 10%

 Organic revenue down 7% CER

 Reported sales up 10% AER

 Cost reductions across both divisions (saving £4m pa)  Interim dividend up 5%

(1) Underlying measures exclude exceptional items, amortisation of acquired intangible assets and IAS19 legacy pension cost (see Appendices III and IV).

3 INTERIM RESULTS│29TH November 2016

A business transformed – with much more to go for

Design & Manufacturing <5%

Custom Distribution 95%

FY10

Design & Manufacturing 52%

Custom Distribution 48%

H1 17

86% of Group profit contribution is now generated by D&M division

(1) Ongoing Group revenue, excluding disposed businesses. (2) EBIT & EPS are underlying measures. (3) Analyst consensus - does not constitute a profit forecast. H1 H1 £30m £80m £130m £180m £230m £280m £330m FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Consensus

Revenue(1)

(3)

H1 H1 (5p) 0p 5p 10p 15p 20p 25p

• £5m

£0m £5m £10m £15m £20m £25m FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Consensus

EBIT & EPS(2)

Underlying EBIT EPS

(3)

4 INTERIM RESULTS│29TH November 2016

Financial review

5 INTERIM RESULTS│29TH November 2016

Revenue (£156.7m)

 Reported revenue up 10%

 +1% CER  -7% organic

Gross margin (33.0%) – highest yet

 Gross margin up 1.4ppts

 Up c.7ppts in last 6 yrs  Highlights continuing delivery of strategy

Gross profit (£51.7m)

 Gross profit up 15%

 +5% CER  -5% organic

Revenue (£m) and gross margin (%) Gross profit (£m)

Revenue, gross profit and gross margin

30.0 37.4 44.9 51.7 +25% +20% +15% H1 14 H1 15 H1 16 H1 17 100 121 142 157 +20% +18% +10% 29.9% 30.9% 31.6% 33.0% H1 14 H1 15 H1 16 H1 17

6 INTERIM RESULTS│29TH November 2016

Increased operating profit

 Underlying operating profit(1) of £8.8m

 Up £1.1m (+14%)  Up 1% CER

 Underlying operating margin(1) of 5.6%

 Up 0.2ppts

Underlying

• perating

profit £m Underlying

• perating

margin %

2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 0.0 3.0 6.0 9.0

H1 14 H1 15 H1 16 H1 17

Underlying

• perating profit

Underlying

• perating margin

(1) Underlying measures exclude exceptional items, amortisation of acquired intangible assets and IAS19 legacy pension cost (see Appendices III and IV).

7 INTERIM RESULTS│29TH November 2016 (1) Organic sales include pre-acquisition sales of Flux, Contour and Plitron (D&M).

Divisional performance driven by D&M

 Design & Manufacturing – profit up £1.5m

 Organic revenue 4% lower on softer Nordic

 Custom Distribution – profit down £1.2m

 Organic revenue 10% lower (strong comparatives, market slowdown)

 Customer demand influenced by economic uncertainty  Group efficiency programme underway

£m

Underlying Underlying Revenue Operating % Revenue Operating % CER Reported Organic(1) profit profit

Design & Manufacturing 81.8 10.0 12.2% 72.4 8.5 11.7% 13% 24% (4%) Custom Distribution 74.9 1.6 2.1% 83.5 2.8 3.4% (10%) (2%) (10%) Unallocated (2.8) (2.6) Total (CER) 156.7 8.8 5.6% 155.9 8.7 5.6% 1% 10% (7%) FX (13.7) (1.0) (0.2%) Total (reported) 156.7 8.8 5.6% 142.2 7.7 5.4% H1 17 Sales Growth H1 16 (CER)

8 INTERIM RESULTS│29TH November 2016

Operating profit analysis

 Organic revenue impact offset by organic improvements in gross margin, tight control of

• perating costs and last year’s acquisitions

7.7 (3.9) 1.2 1.2 1.6 1.0 8.8

H1 16 Revenue GM Opex Acqs FX H1 17

9 INTERIM RESULTS│29TH November 2016

Translation effects

 Sterling strengthened over the previous

2 yrs but weakened significantly in H1 17

 c80% of Group revenues are non-UK

(mainly € and Nordic)

 Sales benefit for H1 17 of £13.7m

(1) Nordic rate is a weighted average combination of £/NOK, £/SEK and £/DKK rates based on Group sales in each territory.

Foreign exchange impact on Acal

Operational effects

 Sterling weakened significantly against US$ in

H1 falling 12% (H1 17 ave v H1 16 ave)

 Approximately 90% of UK cost of goods are non-

Sterling, so impacts on purchase pricing

 UK companies largely sell to UK customers

rather than export

 The Group hedges material transactional

exposures from order through to payment

 Protects GM at FX rate at time of order  Post Referendum orders therefore hedged at higher

sterling equivalent pricing.

FY16 rate £ / € £ / Nordic(1) v FY14 rate

• 13%
• 20%

v FY15 rate

• 7%
• 9%

v H1 17 rate 11% 10%

10 INTERIM RESULTS│29TH November 2016

4.8p 6.5p 7.7p 8.5p H1 14 H1 15 H1 16 H1 17

Growth in profit and earnings

 Underlying PBT up 7%  Underlying EPS of 8.5p, up 10%

 Up 77% in 3 yrs

Underlying EPS

(1) Underlying measures exclude exceptional items, amortisation of acquired intangible assets and IAS19 legacy pension cost (see Appendices III and IV).

£m H1 17 H1 16 Underlying operating profit(1) 8.8 7.7 Finance costs (1.5) (0.9) Underlying PBT(1) 7.3 6.8 Effective tax rate 22% 24% Underlying PAT 5.7 5.2 Fully diluted shares (m) 67.3 67.1 Underlying EPS (p) 8.5p 7.7p

11 INTERIM RESULTS│29TH November 2016

Efficiency programme

 Efficiency programme in both D&M and CD

 D&M – production closures (and transfers to lower cost

facilities), Spanish closure

 CD – management headcount reduction, Spanish closure,

purchasing integration

 £4m ongoing savings  Total cash cost of project £8m

(1) Underlying PBT excludes exceptional items, amortisation of acquired intangible assets and IAS 19 legacy pension cost (see Appendices III and IV).

£m H1 17 H1 16 Underlying PBT(1) 7.3 6.8 Exceptional - restructuring (2.6)

• Exceptional - acquisition

Integration (0.5) (0.1) Earn-outs (0.3) (0.3) Amortisation (1.8) (1.3) IAS 19 charge (0.2) (0.3) Reported PBT 1.9 4.8 Reported diluted EPS 1.8p 5.4p

12 INTERIM RESULTS│29TH November 2016

Financing and cash flow

 Operating cash flow(1):

 H1: £8.6m, up 37%, 98% of operating profit  Last 12m: £18.6m, up 13%, 107% of operating profit

 Free cash flow:

 Last 12m: £13.5m, up 31%, 90% of PBT

 Net debt at 30 Sep 16 of £41.1m

 Net debt up £3.0m – earn-outs, restructuring  Gearing ratio(2) of 1.9x

 Revolving credit facility increased to £120m

 Plus £30m accordion  Term extended from July 2019 to July 2021

(1) Operating cash flow is defined as free cash flow before financing and tax – see Appendix VI. (2) Net debt at 30 September 2016 as a ratio of adjusted EBITDA (being Group underlying EBITDA annualised for acquisitions).

Operating cash flow in last 12 months(1) (£m)

6.1 9.9 16.5 18.6 100% 104% 106% 107% H1 14 H1 15 H1 16 H1 17 Operating cash flow % underlying operating profit

13 INTERIM RESULTS│29TH November 2016

Dividend

 Interim dividend up 5%  Delivered 58% growth in 6yrs  Maintaining progressive policy

 2-3x cover (underlying basis) 1.69p 1.69p 1.82p 1.82p 1.82p 2.20p 2.33p 2.45p 3.40p 3.74p 3.99p 4.36p 4.98p 5.40p 5.72p 5.09p 5.43p 5.81p 6.18p 6.80p 7.60p 8.05p FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

14 INTERIM RESULTS│29TH November 2016

Operating review

15 INTERIM RESULTS│29TH November 2016

Design & Manufacturing division

 Revenue up 24% AER, 13% CER  Operating profit up 18% CER



Acquisitions of Flux, Plitron, Contour  Organic revenue down 4% CER  Operating margin 12.2% (up 0.5 ppts)  Efficiencies



Consolidation of smaller European factories

Revenue(1) Operating Profit(1)

(1) At constant exchange rates (CER).

Revenue by destination

Nordic 35% Germany 11% Asia 13% UK 15% Other Europe 10% USA 9% Southern Europe 7%

£0.7m

£2.0m £4.5m £8.5m £10.0m 17% 44% 59% 75% 86%

H1 13 H1 14 H1 15 H1 16 H1 17

Operating profit % Group profit contribution

£8m £17m £39m £73m £82m 10% 20% 34% 46% 52%

H1 13 H1 14 H1 15 H1 16 H1 17

Sales % group total

16 INTERIM RESULTS│29TH November 2016

£3.6m £2.6m £3.1m £2.8m £1.6m

H1 13 H1 14 H1 15 H1 16 H1 17

Custom Distribution division

 Revenue -10% CER



Broad based slowdown  Orders flat excluding Spain (to be closed in H2)  Operating profit down £1.2m CER  Cost reductions



Spain closure



Management ‘de-layering’



SG&A costs

(1) At constant exchange rates (CER). (2) Ongoing sales exclude large non-repeating sales and sales of the final major non-specialist, low margin supplier, which was discontinued last year.

Revenue(1) Operating Profit(1) Revenue by destination

Central Europe 37% Southern Europe 28% UK 24% Nordic 8% Asia & Africa 3%

£73m £72m £74m £83m £75m

£4m £6m £8m £0.6m

H1 13 H1 14 H1 15 H1 16 H1 17

Ongoing Discontinued

(2)

17 INTERIM RESULTS│29TH November 2016 30 40 50 60 70 80 90 100 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 £m

Order book

 £94m order book – record high at period end  Order book drivers

 Demand levels of current projects  New project starts  New opportunities

 High level of project wins and new

• pportunities continues

At constant exchange rates (CER).

18 INTERIM RESULTS│29TH November 2016

Efficiency programme

 Sustainable cost savings and efficiency improvements of £4m per annum  Operational efficiencies

 Closure of 3 production units in Nordic region (Noratel)

• £1m pa saving

 Closure of Spain operations (ABFi & Noratel)

• £1.5m pa saving

 Distribution restructuring

• £1.5m pa saving

 Headcount reduction

 Custom Distribution – Management delayering  Design & Manufacturing – Production streamlining

 One-off implementation cost - £8m

19 INTERIM RESULTS│29TH November 2016 

Industrial connectivity



Smart metering, communication, industrial control, ‘Internet of Things’



Industrial semiconductors forecast to grow 10% CAGR 2014-19(4)

Our target markets



Medical



Control, monitoring & diagnostic



Medical semiconductors forecast to grow 12% CAGR 2012-18(2)



Renewable energy



Wind, solar, tidal



Wind turbine power expected to account for 50% of incremental power generated 2014-30(3)



Transportation



Road, rail, air



Automotive electronics forecast to grow 8% CAGR 2014-19(1)

1. Source: Gartner, PWC, Eden McCallum 2. Source: IC insights 3. Source: International Energy Outlook 2015 4. Source; Gartner, PWC, Eden McCallum

 Markets with short & long term growth (10+ yrs)  Driven by technology  Need for specialist products

20 INTERIM RESULTS│29TH November 2016

Strategy update

Accelerate implementation of the established strategy:

 Building the Design & Manufacturing division

 Operating margin >10%

 Optimising Custom Distribution performance

 Deliver operating profit in 3~5% range over the cycle  Cross selling D&M products

 Further acquisitions  Internationalise

Building a leader in specialist electronics

21 INTERIM RESULTS│29TH November 2016

(1) As a proportion of group revenue. (2) Return on trading capital employed excludes goodwill. (3) Free cash is the net cash flow before payment of exceptional items, payment to the legacy defined benefit pension scheme, dividends, net proceeds from equity fund raising and costs of acquisitions. (4) Growth in TSR over the previous 3 years; 2½ year TSR for H1 16 and H1 17.

Upward revision to strategic targets

• Mid term defined as 3~5 years
• Targets first set in November 2014, upwardly revised November 2016

Key Strategic Indicators

Prior New mid target term target

• 1. Increase revenue from D&M(1)
• c. 5%

18% 37% 46% 52% 65% 75%

• 2. Increase underlying operating margin
• 0.3%

3.4% 4.9% 5.4% 5.6% 7.0% 8.5%

• 3. Build sales beyond Europe(1)

0% 5% 12% 16% 18% 20% 30%

Key Performance Indicators

3 yr target (FY 20)

• 1. Organic sales growth
• 16%

2% 3% 2%

• 7%
• 2. Increase cross-selling
• £0.3m

£0.9m £1.5m £1.9m £10m p.a.

• 3. Attractive ROTCE(2)
• 24%

24% 23% 22% >25% 4 Generate strong free cash flow (FCF)(3)

• 86%

76% 74% 88% >75% PBT 5 Generate long term value for shareholders

• 3 year TSR(4)
• +5%

+101% +78% +23%

• percentile v FTSE small cap index
• 71st percentile

20th percentile 18th percentile 39th percentile

FY15 FY15 FY10 FY10 Well ahead

• f GDP

Upper quartile H1 16 FY14 FY14 H1 16 H1 17 H1 17

22 INTERIM RESULTS│29TH November 2016

Outlook

As we said – a softer H1 leading to a stronger H2. We remain on track for the full year.

 Strong order book, trading picking up as expected  Macro indicators show rising industrial output, but macro uncertainty continues  Promising acquisition pipeline  Strong order book, robust margins, efficiencies and a pipeline of new opportunities underpin our

confidence in the second half and beyond

Building a leader in specialist electronics

APPENDICES

24 INTERIM RESULTS│29TH November 2016

Acal Group

 Design & Manufacturing

 Individual business units  Integrated back office functions (eg treasury)  Retains entrepreneurial culture

 Custom Distribution

 Multi country sales & engineering  Cross-selling

Appendix I

Head Office Custom Distribution Design & Manufacturing

Key:

Design & Manufacturing 52% Custom Distribution 48%

Revenue

Design & Manufacturing 86% Custom Distribution 14%

Profit

Power & Magnetics Electro- mech & Cabling Microsystems Comms & Sensors Imaging & Photonics

Noratel Myrra Plitron Flux RSG Hectronic Contour Stortech MTC Foss Compotron

France 9% International 18% UK 19% Germany 18% Nordic 22% Benelux 6% Italy 5% Spain 2%

H1 FY17

Revenue by country

25 INTERIM RESULTS│29TH November 2016

 Gross margin up 1.4ppts to 33.0%  Operating cash flow of £8.6m, up 37%  Working capital at 17% of sales(2) - in line with FY16

Summary H1 performance

Appendix II

(1) Underlying profits exclude exceptional items, amortisation of acquired intangible assets and IAS 19 legacy pension charge (see Appendices III & IV). (2) Annualised Q2 sales at CER.

H1 17 H1 16 Growth Revenue £156.7m £142.2m +10% Underlying operating profit(1) £8.8m £7.7m +14% Underlying operating margin(1) 5.6% 5.4% +0.2ppts Underlying profit before tax(1) £7.3m £6.8m +7% Reported profit before tax £1.9m £4.8m n/a Underlying EPS(1) 8.5p 7.7p +10% Reported diluted EPS 1.8p 5.4p n/a Interim dividend per share 2.45p 2.33p +5%

26 INTERIM RESULTS│29TH November 2016

Underlying to IFRS reconciliation

 Management believe the adjustments

enable a better understanding of the performance of the business.

 The adjustments made to IFRS results

are:

 Acquisition/disposal related costs

(transaction costs, earn-outs, integration, amortisation of acquired intangibles, gain or loss on acquisition or disposal)

 Other exceptionals (restructuring,

IAS 19 pension charge related to legacy scheme)

Appendix III

H1 17 (£m)

Underlying

Excep. Amort IAS19 IFRS Gross profit 51.7 51.7 S&D costs (23.2) (23.2) Admin expenses (19.7) (3.4) (1.8) (0.2) (25.1) Operating Profit 8.8 (3.4) (1.8) (0.2) 3.4 Net finance costs (1.5) (1.5) Profit before tax 7.3 (3.4) (1.8) (0.2) 1.9 Taxation (1.6) 0.5 0.4 (0.7) Profit after tax 5.7 (2.9) (1.4) (0.2) 1.2 Effective tax rate 22% 37% EPS 8.5p 1.8p H1 16 (£m)

Underlying

Excep. Amort IAS19 IFRS Gross profit 44.9 44.9 S&D costs (21.0) (21.0) Admin expenses (16.2) (0.4) (1.3) (0.2) (18.1) Operating Profit 7.7 (0.4) (1.3) (0.2) 5.8 Net finance costs (0.9) (0.1) (1.0) Profit before tax 6.8 (0.4) (1.3) (0.3) 4.8 Taxation (1.6) 0.3 0.1 (1.2) Profit after tax 5.2 (0.4) (1.0) (0.2) 3.6 Effective tax rate 24% 25% EPS 7.7p 5.4p

27 INTERIM RESULTS│29TH November 2016

Appendix IV

Underlying adjustments and net assets

Underlying adjustments (£m) Net assets (£m)

H1 17 H1 16 Earn outs (0.3) (0.3) Integration costs (0.5) (0.1) Restructuring (2.6)

• Total Exceptionals

(3.4) (0.4) Amortisation of acquired intangibles (1.8) (1.3) Legacy pension - IAS19 (0.2) (0.3) Underlying Adjustments (5.4) (2.0) Tax impact of adjustments 0.9 0.4 After tax adjustments (4.5) (1.6) Net Assets

At 31 March 2016 101.9 Net profit after tax 1.2 Dividend paid (3.7) Currency net assets - translation impact 11.7 Loss on defined benefit scheme (2.5) Share-based payments (incl tax) 0.3 At 30 September 2016 108.9

28 INTERIM RESULTS│29TH November 2016

 Organic costs reduced by 3%  Underlying adjustments  Group efficiency programme  Acquisition related:

– Earn-out, integration, amortisation

Appendix V

Operating costs

(1) Organic costs include pre-acquisition costs of Flux, Contour and Plitron (D&M).

H1 17 H1 16 % Organic costs(1) 42.9 44.1

• 3%

Acquisitions/disposals

• (3.6)

Underlying (CER) 42.9 40.5 6% FX (translation)

• (3.3)

Acquisition/integration 0.8 0.4 Restructuring 2.6

• Amortisation

1.8 1.3 IAS 19 Pension 0.2 0.2 Reported (IFRS) 48.3 39.1 24%

29 INTERIM RESULTS│29TH November 2016

Cash flow and net debt

(1) Non-cash items are depreciation, amortisation and share based payments. (2) Operating cash flow as a percentage of underlying operating profit. (3) Free cash as a percentage of underlying profit before tax.

Appendix VI Net debt (£m) Cash flow (£m)

H1 17 H1 16 Underlying profit before tax 7.3 6.8 15.0 Finance costs 1.5 0.9 2.4 Non cash items(1) 2.1 1.9 3.7 Underlying EBITDA 10.9 9.6 21.1 Working capital (1.0) (2.2) 0.0 Capital expenditure (1.3) (1.1) (2.5) Operating cash flow 8.6 6.3 18.6 Finance costs (1.5) (0.9) (2.4) Tax (0.7) (2.3) (2.7) Free cash 6.4 3.1 13.5 Operating cash flow %(2) 98% 82% 107% Free cash flow %(3) 88% 46% 90% Last 12 mths

H1 17 Net debt at 31 March 2016 (38.1) Free cash flow 6.4 Acquisition related cash flow (1.8) Exceptional payments (3.0) Legacy pension (0.8) Dividends (3.7) Foreign exchange impact (0.1) Net debt at 30 Sept 2016 (41.1)