INVESTOR PRESENTATION October 2015
Introduction to Acal Acal is an industrial electronics company Designing, manufacturing & distributing customised electronics to 25,000 industrial customers Products are generally used in customer’s end products Unique High margin, differentiated, technologically complex products c.50% of products are customised and c.20% are uniquely sourced International growth business Two thirds of revenue come from Germany, UK & Nordic 12% of revenue beyond Europe and growing Acquisitive Acquiring businesses that strengthen our capabilities and expand our geographic reach 9 acquisitions since December 2009 Generating significant shareholder returns Upper quartile TSR vs FTSE small cap index over each of the last 3 years TSR growth of 101% in the last 3 years, c.400% over last 6 years INVESTOR PRESENTATION October 2015 INVESTOR PRESENTATION│ October 2014 2
Examples of our customers We supply: Temperature sensor assemblies Providing: Consistent temperature coffee over long term repeated usage We supply: Custom transformers Providing: High quality, low noise power conversion for scanners We supply: Custom cable assemblies Providing: Connectivity in the stair lift between power and control signals We supply: Custom embedded computers Providing: Flight controller for Neuron Unmanned Aerial Vehicle INVESTOR PRESENTATION October 2015 INVESTOR PRESENTATION│ October 2014 3
Acal today Operating companies Custom distribution Market reach – 20,000 customers, 12 geographies Share customer opportunities Sales & engineering capability – 560 employees Achieve synergies Web platform – lead generation Retain an entrepreneurial culture EBIT Sales Power & Communications Magnetics 37% & Sensors 63% Electro- Design & Manufacturing mechanical Own products, highly differentiated, c.5000 customers c.75% customised Imaging & Higher margins Photonics 20,000 customers EBIT Sales Microsystems & Displays 37% 63% Key: Design & Manufacturing Custom Distribution Head Office INVESTOR PRESENTATION October 2015 INVESTOR PRESENTATION│ October 2014 4
Diversified Group Sales by industry sector Sales by customer Sales by country FY15 Automation Research 6% 4% Spain Italy 3% France 5% Transport 11% Other Top 10 Benelux 4% 8% Auto 11% 7% 8% 8% 14% International Renewable Oil & 8% 12% 6% Gas Comms Nordic 12% 2% FY11 Top 11-100 10% 19% 26% 23% Medical Consumer 9% All others 12% 4% UK 66% 23% 21% Distribution Industrial Germany 9% 20% 22% Defence 7% Largest individual customer – <2% Two thirds – Germany, UK, Nordic Industrial – 20% Top 100 individual customers – 34% Medical – 12% International - 12% and growing Communications – 10% Largest Group of customers- 3% Stable growing sectors INVESTOR PRESENTATION October 2015 INVESTOR PRESENTATION│ October 2014 5
The market opportunity Our future Attractive markets driven by technology adoption Customers need technology to create innovation in their products Focused customised electronics leader Estimated £12bn market globally (£4bn Eu, £6bn USA, £2bn Asia) • Design, manufacturing and custom distribution Markets likely to remain attractive long term • International footprint Growth well ahead of GDP • Industrial market Customer need for expert technical support will continue and grow • Driven by; Market will remain highly fragmented – acquisition opportunities Organic growth • Cross-selling Europe & USA will remain centres for high end industrial design • Acquisitions • * Management estimates INVESTOR PRESENTATION October 2015 INVESTOR PRESENTATION│ October 2014 6
Our Strategy Completing our transformation into a technology led provider of customised electronics for industrial applications with design, manufacturing and distribution capabilities Moving up the electronics value chain by focusing on higher-margin, differentiated products in design, manufacturing and custom distribution Growing sales organically well ahead of GDP by acquiring new customers via web marketing and realising operational efficiencies from cross-selling and synergies Acquiring businesses that broaden and strengthen Acal’s technology expertise with complementary products, customers, suppliers and geographies Developing sales internationally by following existing customers’ international needs and then by developing local market sales Well established strategy since 2009 – focused implementation which is delivering results INVESTOR PRESENTATION October 2015 INVESTOR PRESENTATION│ October 2014 7
Strategic & performance targets Key Strategic Indicators Mid term FY 15 (2) FY 10 FY 14 target 1. Increase Design & Manufacturing revenue (1) c.5% 18% 37% 65% 2. Increase cross-selling & web generated sales (1) 0% 2.7% 4% 4~5% 3. Build sales beyond Europe (1) 0% 5% 12% 20% Key Performance Indicators 3 yr FY 10 FY 14 FY 15 Comments re FY15 target GDP grew 1.1% in Europe (CY 14); Well ahead 1. Organic sales growth -16% 2% 3% UK and Norway behind GDP growth of GDP rates 2. Increase underlying operating margin -0.3% 3.3% 4.9% 6-7% H2 FY15 at 5.3% 3. Attractive ROTCE (2) - 24% 24% >25% Generate strong free cash flow (FCF) (3) 4 - 86% 76% > 75% PBT 5 Generate long term value for shareholders (TSR) - 42% 19% Upper 101% TSR in 3 yrs (percentile vs FTSE Small Cap Index) 27th percentile 21st percentile quartile (1) As a proportion of group revenue (2) Return on trading capital employed excludes goodwill using annualised result for Foss and Noratel acquisitions in the year (3) Free cash flow defined as 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 / proceeds from acquisitions and disposals INVESTOR PRESENTATION October 2015 INVESTOR PRESENTATION│ October 2014 8
Growth expected to continue Analysis Reported CER Actual CER Consensus Growth Growth Dividend per share (1) 7.6p FY 16* FY 15 % FY 15 % 6.8p 6.2p Sales 293 271 8% 252 17% 5.8p 5.4p 5.1p Operating profit 16.4 13.4 22% 12.0 37% 5.4p 5.0p Operating margin 5.6% 4.9% 0.7ppts 4.8% 0.9ppts 4.4p 4.0p 3.7p 3.4p Profit before tax 14.1 11.8 19% 10.6 33% Fully diluted EPS 16.0p 15.4p 4% 13.8p 16% 2.2p 1.8p 1.8p 1.8p 1.7p 1.7p Fully diluted shares 67.2m 60.9m 10% FY10 FY11 FY12 FY13 FY14 FY15 *Consensus of analysts as of Oct 2015 Operating Margin % Operating Profit Underlying EPS Profitability £m Revenue (£m CER) 15.0 5.5% 59 5.0% 12.0 4.5% 9.0 42 36 4.0% 16 15.4p 6.0 3.5% 170 164 3.0 11.8p 155 3.0% 9.8p 0.0 2.5% FY 13 FY 14 FY 15 FY 13 FY 14 FY 15 FY 13 FY 14 FY 15 Underlying operating profit (CER) % of revenue (CER) Distribution Noratel/Foss Other D&M INVESTOR PRESENTATION October 2015 INVESTOR PRESENTATION│ October 2014 9
Shareholder value creation Shareholder value creation 2009 - 2015 3 drivers of value creation (£m) Organic growth 1. 180 200 £200m Differentiated value proposition 180 160 140 120 100 Acquisitions 2. 80 60 Good fit 40 6 20 £6m Priced right 0 EV at Acquisitions Organic Value Synergies Disposals Noratel, EV at 31/3/09 growth multiple 31/5/15 Foss Synergies 3. Operational cost efficiencies • Effective acquisition and integration of good businesses Production efficiencies has been an important value driver for the business Cross Selling since 2009 EV – Enterprise Value = Market Cap + Debt - Cash INVESTOR PRESENTATION October 2015 INVESTOR PRESENTATION│ October 2014 10
The acquisition of Noratel is delivering results Designer & manufacturer of customised transformers & inductors Acquired in July 2014 for £71m, plus 3 year earn out subject to performance Higher operating margins c.70% customised products Selling in Europe, Asia and USA Progress Trading well as expected 7% organic sales growth in H2 North America returned to profitability and sales growth Cross-selling underway First orders received in cross-sell activities Further opportunities identified Purchasing synergies of £0.2m achieved in Poland & China In line with expectations INVESTOR PRESENTATION October 2015 INVESTOR PRESENTATION│ October 2014 11
Foss recently acquired Designer, manufacturer and distributor of customised fibre optic cables and support products Acquired in January 2015 for £10m 3 year earn out of up to £2m subject to performance targets Based in Norway and Slovakia Sales, production and value add capabilities Established 1984 in Norway and acquired Slovakian facility in 2013 Proven management remaining with the business Broadly doubles Acal’s fibre optic business Cross-selling activities underway Creates further bolt-on acquisition opportunities Immediately earnings enhancing INVESTOR PRESENTATION October 2015 INVESTOR PRESENTATION│ October 2014 12
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