INVESTOR PRESENTATION October 2015 Introduction to Acal Acal is an - - PowerPoint PPT Presentation

INVESTOR PRESENTATION

October 2015

2 INVESTOR PRESENTATION│ October 2014

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

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Examples of our customers

We supply: Custom cable assemblies Providing: Connectivity in the stair lift between power

and control signals

We supply: Temperature sensor assemblies Providing: Consistent temperature coffee over long

term repeated usage

We supply: Custom embedded computers Providing: Flight controller for Neuron Unmanned

Aerial Vehicle

We supply: Custom transformers Providing: High quality, low noise power conversion

for scanners

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37%

EBIT

Power & Magnetics Electro- mechanical Microsystems & Displays Communications & Sensors Imaging & Photonics

Head Office Custom Distribution Design & Manufacturing Key:

20,000 customers

Acal today

Design & Manufacturing



Own products, highly differentiated, c.5000 customers



c.75% customised



Higher margins

Custom distribution



Market reach – 20,000 customers, 12 geographies



Sales & engineering capability – 560 employees



Web platform – lead generation

37%

Sales

63%

EBIT

63%

Sales

 Operating companies

 Share customer opportunities  Achieve synergies  Retain an entrepreneurial culture

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Diversified Group

France 11% International 12% UK 21% Germany 22% Nordic 19% Benelux 7% Italy 5%

Spain 3%

FY15

14% 26% 23% 9% 12% 8% 8%

FY11

Sales by country Sales by industry sector Sales by customer

 Largest individual customer – <2%  Top 100 individual customers – 34%  Largest Group of customers- 3%

Automation 6% Auto 8% Comms 10% Consumer 4% Distribution 9% Defence 7% Industrial 20% Medical 12% Oil & Gas 2% Renewable 6% Transport 4% Research 4% Other 8%

 Two thirds – Germany, UK, Nordic  International - 12% and growing  Industrial – 20%  Medical – 12%  Communications – 10%  Stable growing sectors

Top 10 11%

Top 11-100 23%

All others 66% INVESTOR PRESENTATION October 2015

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The market opportunity

 Attractive markets driven by technology adoption

 Customers need technology to create innovation in their products  Estimated £12bn market globally (£4bn Eu, £6bn USA, £2bn Asia)

 Markets likely to remain attractive long term

 Growth well ahead of GDP  Customer need for expert technical support will continue and grow  Market will remain highly fragmented – acquisition opportunities  Europe & USA will remain centres for high end industrial design Focused customised electronics leader

• Design, manufacturing and custom

distribution

• International footprint
• Industrial market
• Driven by;
• Organic growth
• Cross-selling
• Acquisitions

Our future

* Management estimates

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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

• perational 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

Our Strategy

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(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

Strategic & performance targets

Key Strategic Indicators

Mid term 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 target

• 1. Organic sales growth
• 16%

2% 3%

• 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% 4 Generate strong free cash flow (FCF)(3)

• 86%

76% > 75% PBT 5 Generate long term value for shareholders (TSR)

• 42%

19% (percentile vs FTSE Small Cap Index)

27th percentile 21st percentile

FY 10 FY 10 Well ahead

• f GDP

GDP grew 1.1% in Europe (CY 14); UK and Norway behind GDP growth rates

Upper quartile

101% TSR in 3 yrs

FY 14 FY 15(2) FY 14 FY 15 Comments re FY15

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Growth expected to continue

155 164 170 16 36 42 59 FY 13 FY 14 FY 15

Revenue (£m CER)

2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 0.0 3.0 6.0 9.0 12.0 15.0

FY 13 FY 14 FY 15 Underlying operating profit (CER) % of revenue (CER) Operating Profit £m Operating Margin %

1.7p 1.7p 1.8p 1.8p 1.8p 2.2p 3.4p 3.7p 4.0p 4.4p 5.0p 5.4p 5.1p 5.4p 5.8p 6.2p 6.8p 7.6p FY10 FY11 FY12 FY13 FY14 FY15

Dividend per share(1)

9.8p 11.8p 15.4p

FY 13 FY 14 FY 15

Underlying EPS Profitability

*Consensus of analysts as of Oct 2015

Distribution Noratel/Foss Other D&M

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Analysis Reported CER Consensus Growth Growth FY 16* FY 15 % FY 15 % Sales 293 271 8% 252 17% Operating profit 16.4 13.4 22% 12.0 37% Operating margin 5.6% 4.9% 0.7ppts 4.8% 0.9ppts Profit before tax 14.1 11.8 19% 10.6 33% Fully diluted EPS 16.0p 15.4p 4% 13.8p 16% Fully diluted shares 67.2m 60.9m 10% Actual CER

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Shareholder value creation

Shareholder value creation 2009 - 2015 (£m) 6 180

• Effective acquisition and integration of good businesses

has been an important value driver for the business since 2009

20 40 60 80 100 120 140 160 180 200 EV at 31/3/09 Acquisitions Organic growth Value multiple Synergies Disposals Noratel, Foss EV at 31/5/15

3 drivers of value creation

1.

Organic growth

 Differentiated value proposition

2.

Acquisitions

 Good fit  Priced right

3.

Synergies

 Operational cost efficiencies  Production efficiencies  Cross Selling

£6m £200m

EV – Enterprise Value = Market Cap + Debt - Cash INVESTOR PRESENTATION October 2015

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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

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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

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Acal - A leader in customised electronics with excellent prospects

 Compelling market opportunity

 Helping industrial design companies innovate and solve technological challenges  Structural trends in target markets are driving underlying growth well ahead of GDP

 Attractive business model, unique market position

 High quality, recurring revenues with rising operating margins  Low risk with no customer / supplier >3% of revenue

 Strong platform for growth

 Organic growth and additional cross selling opportunities  Operational leverage and synergies  Fragmented market ideal for acquisitions

 Good track record of delivery

 Successful turnaround story since 2009

– Profit growth and margin improvement

 Nine successful acquisitions and integrations

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Thank you – any questions?

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APPENDIX

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Technology capabilities

Medical

Power & Magnetics Communications & Sensors Imaging & Photonics Electromechanical

Shielding

Microsystems & Displays

Keyboards

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Non-Executive Directors

R J Moon - Non-Executive Chairman* Richard joined the Board in September 2004 and became Chairman in April 2005. Formerly a Director of Racal Electronics plc and Chief Executive of Thales plc, he is Non-Executive Chairman of Seven Technologies Holdings Limited and is Chairman of Synergie Business

• Limited. Richard will step down from the board in July 2015.

R J Brooman MA FCA FCMI - Senior Non-Executive Director* Richard, a Chartered Accountant, became a Non-Executive Director in January 2013. He is a Non-Executive Director, and Chairman of the Audit Committees, at Hg Capital Trust plc and Invesco Perpetual UK Smaller Companies Investment Trust plc. A Director or Trustee of several businesses and charities in the third sector, during his executive career he was Group Finance Director of Sherwood International Plc and VCI Plc. H E Marsh MBA MA - Non-Executive Director* Henrietta (Het) was appointed a Non-Executive Director in May 2013. She is also a Non-Executive Director of Dods (Group) PLC, where she chairs the Remuneration Committee; a Non-Executive Director of Electric Word plc; an Operating Partner of ISIS Equity Partners ("ISIS"); and a member of the London Stock Exchange's AIM Advisory Group. Previously, she was a Fund Manager at ISIS and a Director of 3i plc.

* Denotes membership of the Board

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Acal – Senior Management

N J Jefferies – Group Chief Executive* Nick joined Acal as Group Chief Executive in January 2009. His experience of electronics and the components industry comes from holding senior positions for over 15 years with leading international distributors of electronic components and computer products, such as Electrocomponents plc and Arrow Electronics. Nick originally trained as an Electronics Design Engineer with Racal Defence (now part of Thales plc) S M Gibbins – Group Finance Director* Simon was appointed as Group Finance Director in July 2010. A Chartered Accountant, he was previously Global Head of Finance and Deputy CFO at Shire plc. Prior to joining Shire in 2000, he spent 6 years with ICI plc in various senior finance roles, both in the UK and overseas. His earlier career was spent with Coopers & Lybrand in London P H Neville ACA - Group Commercial Director Paul was appointed Group Commercial Director in March 2009. A Chartered Accountant, he has over 15 years experience of working in senior management positions for listed public companies, including Wincanton plc and Uniq plc. Prior to joining Acal, he was Group Chief Executive of an AIM listed software development company. M F Pangels - Group Strategy and Development Director Martin is Group Strategy and Development Director. He joined Acal in July 2010 after working as an advisor to the business. Prior to joining Acal, Martin spent 9 years at Electrocomponents plc, where he was Regional General Manager for Europe, and 6 years with Bain & Company as a strategy consultant. G P Shillinglaw FCIS - Group Company Secretary Gary joined Acal as Group Company Secretary in August 2008. A qualified Chartered Secretary, he has previously held that position in a number of listed and non-listed public companies, including Countryside Properties plc, B&Q plc and First Leisure Corporation plc. P G Webster - Group Product Management and Operations Director Paul joined Acal in June 2010 as Managing Director, Acal BFi

• UK. He has many years experience in senior management roles,

including Head of Product Management for Electronics globally at Electrocomponents plc. He began his career as a design engineer for Plessey Avionics (now part of BAE Systems).

* Denotes membership of the Board

INVESTOR PRESENTATION October 2015