2015 Interim Results
For the six months ended 30 June 2015
Further market share gains in challenging
markets
Agenda
• Overview
• Financial highlights
• Market drivers
• Growth Strategy
– Key Accounts
– Insites
TM– Product range extension
– Market segmentation
– Vending
• Current trading and outlook
Overview
•
We assume no growth in market demand over next two years
•
Group revenue up 0.4% and up 7.5% at constant currency**
•
Gross margin decline 80 basis points to 30.5%
•
Underlying profit* down 19.4% to £14.1 million
•
Exchange headwinds reduced reported revenue and profit but organic growth strategy and
significant investment in growth drivers still delivering market share gains
•
Insite
TMsales** up 6.8% to £100.7 million
•
Key Account sales** up 7.9% , representing 53.6% of total revenues
•
Vending concept proven and will become strongest growth driver
•
Underlying base business decline reflects difficult market conditions
•
Half year dividend held at 3.6 pence
3
* Before amortisation of acquired intangibles, acquisition related costs and exceptional items ** Constant currency at €1.3:£1
Customer validated cost savings
0.4 2.6 8.8 15.1 15.0 25.8 30.0 34.9 51.5 60.0 66.2 24.3 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1 2015 4Over
3,400
separate cost savings provided to our customers in 2015
We saved £24m for our customers, similar to H1 2014*
£m
6 months to 30 June 2015 2014 Change Constant currency change** Organic change*** Underlying* Sales £365.6m £364.1m +0.4% +7.5% 1.8% Operating profit £17.2m £20.6m -16.5% -12.5% -21.3%
Profit before tax £14.1m £17.5m -19.4% -14.8% -25.4%
EPS 8.1p 10.8p -25.0%
Dividend per share 3.6p 3.6p -
Return on operating capital employed 21.5% 26.6%
Return on investment 11.7% 14.0%
Reported
Operating profit £12.2m £14.7m
Profit before tax £9.1m £11.6m
EPS 5.2p 7.1p
Profit & Loss
6 * pre amortisation of acquired intangibles, acquisition related costs and exceptional items ** at constant currency
H1 2015 H1 2014
Group Acquisitions Organic * 2014 FX H1 2014
Reported
Constant currency at €1.3:£1** at €1.22:£1
Turnover 375.5 19.9 355.6 349.2 (14.9) 364.1
Gross margin 114.2 5.7 108.5 109.3 (4.7) 114.0
Gross % 30.4% 28.5% 30.5% 31.3% 31.3%
Sales, Distribution &
Administrative Costs (96.7) (3.9) (92.8) (89.3) 4.1 (93.4)
Underlying operating
profit 17.5 1.8 15.7 20.0 (0.6) 20.6
% 4.7% 9.0% 4.4% 5.7% 5.7%
Interest (3.1) - (3.1) (3.1) - (3.1)
Underlying profit after
interest 14.4 1.8 12.6 16.9 (0.6) 17.5
H1 2015 H1 2014
H1 2015
Reported FX Group Acquisitions Organic * 2014 FX
H1 2014 Reported at €1.365:£1 Constant currency at €1.3:£1** at €1.22:£1 Turnover 365.6 (9.9) 375.5 19.9 355.6 349.2 (14.9) 364.1 Gross margin 111.5 (2.7) 114.2 5.7 108.5 109.3 (4.7) 114.0 Gross % 30.5% 30.4% 28.5% 30.5% 31.3% 31.3%
Sales, Distribution &
Administrative Costs (94.3) 2.4 (96.7) (3.9) (92.8) (89.3) 4.1 (93.4)
Underlying operating
profit 17.2 (0.3) 17.5 1.8 15.7 20.0 (0.6) 20.6
% 4.7% 4.7% 9.0% 4.4% 5.7% 5.7%
Interest (3.1) - (3.1) - (3.1) (3.1) - (3.1)
Underlying profit after
interest 14.1 (0.3) 14.4 1.8 12.6 16.9 (0.6) 17.5
H1 2015 H1 2014
Group Acquisitions Organic * 2014 Constant currency at €1.3:£1** 375.5 349.2 114.2 109.3 30.4% 31.3% (96.7) (89.3) 17.5 20.0 4.7% 5.7% (3.1) (3.1) 14.4 16.9 H1 2015 H1 2014
Group Acquisitions Organic * 2014 Constant currency at €1.3:£1** 375.5 19.9 355.6 349.2 114.2 5.7 108.5 109.3 30.4% 28.5% 30.5% 31.3% (96.7) (3.9) (92.8) (89.3) 17.5 1.8 15.7 20.0 4.7% 9.0% 4.4% 5.7% (3.1) - (3.1) (3.1) 14.4 1.8 12.6 16.9 H1 2015 Constant currency at €1.3:£1** 375.5 114.2 30.4% (96.7) 17.5 4.7% (3.1) 14.4
Profit & Loss
*Including incremental growth from 2014 acquisitions ** Management rates for 2015 at €1.3:£1
Note: Results are stated before amortisation of acquired intangibles, acquisition related costs and exceptional items Average number of working days for H1 2015 is 123 days (H1 2014:122.5 days)
£m 7 Turnover Gross margin Gross %
Sales, Distribution & Administrative Costs Underlying operating profit
% Interest
Underlying profit after interest H1 2014 349.2 109.3 31.3% (89.3) 20.0 5.7% (3.1) 16.9 H1 2015 Constant currency at €1.3:£1** 375.5 114.2 30.4% (96.7) 17.5 4.7% (3.1) 14.4 H1 2015 H1 2014 H1 2015
Reported FX Group Acquisitions Organic * 2014 FX
H1 2014 Reported at €1.365:£1 Constant currency at €1.3:£1** at €1.22:£1 Turnover 365.6 (9.9) 375.5 19.9 355.6 349.2 (14.9) 364.1 Gross margin 111.5 (2.7) 114.2 5.7 108.5 109.3 (4.7) 114.0 Gross % 30.5% 30.4% 28.5% 30.5% 31.3% 31.3%
Sales, Distribution &
Administrative Costs (94.3) 2.4 (96.7) (3.9) (92.8) (89.3) 4.1 (93.4)
Underlying operating
profit 17.2 (0.3) 17.5 1.8 15.7 20.0 (0.6) 20.6
% 4.7% 4.7% 9.0% 4.4% 5.7% 5.7%
Interest (3.1) - (3.1) - (3.1) (3.1) - (3.1)
Underlying profit after
Revenue by segment (£’m) First Half 2015 First Half 2014 Reported Constant currency* Reported Constant currency* UK 143.5 143.8 142.2 142.2 Germany 60.1 63.1 62.8 58.9 France 42.7 44.8 43.8 41.2 Spain 26.5 27.9 24.3 22.8 Benelux 26.1 27.4 27.3 25.6 Nordic 24.2 24.7 27.6 24.2
Eastern Europe & Other 42.5 43.8 36.1 34.3
Total Group 365.6 375.5 364.1 349.2
Profit & Loss
8
Segments
9
UK Germany France Spain Benelux
Eastern Europe &
Other
Continental
Europe Nordic Total
H1 2 0 1 5 Turnover 143.8 63.1 44.8 27.9 27.4 43.8 207.0 24.7 375.5 Underlying operating profit 6.1 3.5 1.4 2.5 1.7 2.3 11.4 - 17.5 H1 2 0 1 4 Turnover 142.2 58.9 41.2 22.8 25.6 34.3 182.8 24.2 349.2 Underlying operating profit 8.2 3.6 1.6 2.2 1.3 1.8 10.5 1.3 20.0 Change Turnover 1.6 4.2 3.6 5.1 1.8 9.5 24.2 0.5 26.3 Underlying operating profit (2.1) (0.1) (0.2) 0.3 0.4 0.5 0.9 (1.3) (2.5)
UK Germany France Spain Benelux
Eastern Europe &
Other
Continental
Europe Nordic Total
H1 2 0 1 5 Turnover 143.5 60.1 42.7 26.5 26.1 42.5 197.9 24.2 365.6 Underlying operating profit 6.1 3.4 1.4 2.4 1.6 2.3 11.1 - 17.2 H1 2 0 1 4 Turnover 142.2 62.8 43.8 24.3 27.3 36.1 194.3 27.6 364.1 Underlying operating profit 8.2 3.9 1.8 2.5 1.4 1.0 10.6 1.8 20.6 Change Turnover 1.3 (2.7) (1.1) 2.2 (1.2) 6.4 3.6 (3.4) 1.5 Underlying operating profit (2.1) (0.5) (0.4) (0.1) 0.2 1.3 0.5 (1.8) (3.4)
Segments
10Product Range Extension – by customer type
11
2015 2014 Change
Organic7 Acqns Total Total Total Organic7
Total Group 355.6 19.9 375.5 349.2 7.5% 1.8%
Base business
Bearings1 64.2 6.6 70.8 69.3 2.2% -7.4%
Power transmission2 34.5 1.8 36.3 38.3 -5.2% -9.9%
Fluid Power3 21.9 2.8 24.7 21.7 13.8% 0.9%
Tools & General Maintenance4 18.2 7.0 25.2 16.9 49.1% 7.7%
General Consumables5 15.7 1.7 17.4 16.7 4.2% -6.0%
Total Base Business 154.5 19.9 174.4 162.9 7.1% -5.2%
Key Accounts
Bearings1 44.7 - 44.7 41.9 6.7% 6.7%
Power transmission2 34.2 - 34.2 32.7 4.6% 4.6%
Fluid Power3 29.2 - 29.2 26.8 9.0% 9.0%
Tools & General Maintenance4 58.7 - 58.7 52.8 11.2% 11.2%
General Consumables5 34.3 - 34.3 32.1 6.9% 6.9%
Total Key Accounts 201.1 - 201.1 186.3 7.9% 7.9%
1 Includes Linear Motion & Seals 2 Includes Gearboxes, Motors & Industrial Automation
3 Includes Process 4 Includes Personal Protective Equipment
5 Includes Fasteners, Chemicals, Services and other products 6 Constant currency at 2015 management rates of €1.3:£ 7 Includes incremental sales growth from 2014 acquisitions
Revenue by product area
349.2 4.3 (0.5) 5.4 14.2 2.9 375.5 330.0 335.0 340.0 345.0 350.0 355.0 360.0 365.0 370.0 375.0 380.0 12 Bearings H1 2014 H1 2015 Power Transmission £m General Consumables Fluid Power T&GMGross profit
•
Gross profit margin declined
80 basis points
•
Mix effect from Key Account
and T&GM sales growth
•
Half of margin erosion in
base business results from
reduction in organic bearings
sales
•
Margin decline showing an
improving trend
13
2014 Gross Margin % 31.3%
Mix effect - Key Account sales (0.1)%
Mix effect - T&GM sales (0.1)%
Base business (0.6)%
Cash generation
17.2 4.2 0.6 3.0 (16.8) (4.0) (4.7) (0.5) -5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 Inventories 14 Depreciation and amortisation Operating profit (before amortisation, acquisition related costsand exceptionals)
Operating Cash Flow Payables Receivables Share option charges £m As reported Exceptional and acquisition related costs Working capital Days H1 2014 FY 2014 H1 2015 Receivables 55.3 51.4 51.3 Inventories 84.0 97.0 97.0 Payables (58.4) (66.0) (64.1) Total 80.9 82.4 84.2
Movement in net debt
(1.6) (0.5) (4.7) (3.4) (1.7) (11.9) 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 15Movement in net debt
Opening (85.3) Exchange 6.4 Movement (11.9) Closing (90.8) Capital expenditure (net) Operating cash outflow Tax Interest, pension funding and other Purchase of own shares Net cash outflow £m As reported
Capital expenditure
•
New Regional Distribution Centre for Nordic region
•
Continued investment in Vending & Tools & General Maintenance
16
Land &
Buildings Equipment
Intangible
assets Total
Regional Distribution centre - Sweden 0.6 0.6
Tools & General Maintenance, including Vending 1.6 1.6
Information Technology 0.4 2.0 2.4
Vehicles 0.2 0.2
Branch investment and other 0.5 0.6 1.1
Total 0.5 3.4 2.0 5.9
Growth Strategy
18
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 €55 bn market
Since Jan 2012:
-
European Production Index is up 1.06%
-
Brammer is up 10.8%
Sales per working day - Europe
Segments
20 SPWD/ Sales At constant currency (€1.3:£1) Quarter One 2015 Quarter Two 2015 Half Year 2015 Revenue 2015 Growth rates (%) £m Key Accounts 8.6% 7.4% 8.0% 201.1Base business (organic)* - excluding Nordic (3.3)% (2.4)% (2.8)% 135.7
Base business (organic) *- Nordic (1.6)% (38.6)% (21.9)% 18.8
Acquisitions 19.9
Base business 11.8% 2.0% 6.3%
Key Accounts
•
Key Accounts grew by 7.9%
•
Now represents 53.6% of group sales
•
Significant growth continues in
pan-European accounts, up 18.6%
•
6 new pan-European contracts won
•
Down-trading by significant UK
customer reduced Key Accounts
growth by 1.9%
•
Strong pipeline
21
“
Brammer, P&G incumbent MRO supplier,
has a proven record of helping P&G reduce
working capital, improve production
efficiency and reduce total-cost of
ownership. With the new contract, both
P&G and Brammer will continuously work
side by side to keep the momentum and
bring both business and relationship to the
next level.”
”
Yehong Zhu
Senior Purchasing Manager, P&G
Key Accounts
22
Key Account Sales Performance
Multi-site Status Scope Sales Growth
Tier 1 EU contract Part EU Group 89.7 18.6%
106.4
Tier 2 National contract Part EU Group 80.4 7.3%
86.3
Tier 3 No contract Part EU Group 23.8 -13.9%
20.5
Tier 4 National contract National Group 48.3 -
48.3
242.2
7.9%
261.5
In Euro at constant currency at €1.3:£1 2015 figures in bold
Key Accounts – excluding specific UK customer
23
Key Account Sales Performance
Multi-site Status Scope Growth - %
Tier 1 EU contract Part EU Group 18.6%
Tier 2 National contract Part EU Group 13.6%
Tier 3 No contract Part EU Group -13.9%
Tier 4 National contract National Group -
9.8%
2006 2007 2003 2004 2005 2008 2009 2010 2011 2012 No. o f k ey A c c ou nts 60 40 30 20 10 0 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
Pan-European Supply Agreements
24 100 80 60 40 20 0 E U K A Rev en ue s ( M €)
Experience at scale
• More than
500
people serving 70+ Pan-EU Key Accounts
• Key Account support provided in 17 countries
Insites
TM
Update
•
Total 458 Insites
TM•
Net increase of 31 in the period
Insite
TMsales grew by 6.8%
•
Insite
TMsales 50.1% of Key Accounts
business
•
EU Insite
TMpipeline remains strong
25
“
In close cooperation with our internal
customers and Brammer’s technical team,
we have implemented the concept of
Vendor Management Inventory. This has
brought us a clearer picture of the level of
inventory we really need in order to meet
internal customer needs. As a result, we
have significantly reduced our overall
inventory and our related working capital
costs.
”
Bart Philipsen and Thierry Lacourt,
Purchasing Department, AGC Glass Europe
Product Range Extension
Update
•
Bearings sales up 3.9% but decline of
2.1% organically
•
Non bearing sales up 9.2% and growth
of 3.6% organically
•
45 people dedicated for T&GM
development in the continent
•
Growth of over 30% in catalogue sales
following launch of enhanced T&GM
catalogue last year
26
“
Brammer receives a prestigious award for
Safety Excellence from (BSIF) - the UK’s
leading trade body within the safety industry.
The award recognises commitment to
excellence in terms of delivering first class
health and safety products and services.
Brammer won the Safety Excellence award –
which commends major improvements in
occupational safety – in recognition of a two
year collaborative project with The Royal Mint,
which reduced their number of hand and
finger related injuries from double figures per
year to zero.
”
British Safety Industry Federation (BSIF)
Product Range Extension
27
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 at constant currency €1.3:£1
69.7 78.2 83.9
H1 2014 H2 2014 H1 2015
Tools & General Maintenance +20.4% 71.0 67.3 70.5 H1 2014 H2 2014 H1 2015 Power Transmission -0.7% 238.0 242.8 260.0 H1 2014 H2 2014 H1 2015 Non-Bearings +9.2% 111.2 110.4 115.5 H1 2014 H2 2014 H1 2015 Bearings +3.9% 48.5 47.1 53.9 H1 2014 H2 2014 H1 2015 Fluid Power +11.1% 48.8 50.2 51.7 H1 2014 H2 2014 H1 2015 General Consumables +5.9%
Vending
Update
•
Invend
TMprogramme gains momentum
•
117 employees now supporting Invend
TM•
845 machines installed in 13 countries
•
Increasing confidence in scalability of our
processes
•
Vending customers are 5.4% of total revenue
and growing 29.9%
• Vending Investor Event on 28 July
28
“
Invend™ has simplified the job
for our plant managers: from the
daily management of how an
employee can access a PPE
product, to documenting and
keeping track of our PPE stock
and the associated costs. It has
had a really positive impact.
.
”
Axier Bengoetxea Diez,
Health & Safety Manager, Grupo Leche Pascual
The Industrial Supplies Partner of choice...
Market Segmentation
Update
•
Market segmentation approach continues
•
Demonstrates understanding of specific
industry requirements
•
Allows focus on resilient segments in
challenging markets
•
Food & Drink growth of 10.0%
•
Metals growth of 17.6%
•
Automotive sales growth of 15.4%
30
“
Brammer have been working in
partnership with us since 2009. Since
then, they’ve helped us drive
operational excellence at our plants
through increased spend visibility and
control. The partnership with Brammer
has been invaluable to our long term
MRO strategy.
.
”
REXAM
Market Segmentation
31 13.3
15.8
H1 2014 H1 2015
Pulp, Paper & Packaging +18.8%
40.8
44.9
H1 2014 H1 2015
Food and Drink +10.0%
17.2
19.9
H1 2014 H1 2015
Construction & Aggregates +15.7% 46.5 54.7 H1 2014 H1 2015 Metals +17.6% 95.9 97.9 H1 2014 H1 2015 Other segments +2.1% 53.7 52.1 H1 2014 H1 2015 Industrial Machinery -3.0% 36.4 42.0 H1 2014 H1 2015 Automotive +15.4% 22.4 26.5 H1 2014 H1 2015 Wholesale +18.3% 23.0 21.7 H1 2014 H1 2015 Aerospace -5.7% £m at constant currency €1.3:£1
Growth Track Record
33 £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 HY 2015 Total Revenue 270.8 287.4 314.3 379.6 478.4 426.1 468.4 571.5 639.6 651.9 723.6 365.6 GP % 30.1% 30.9% 30.5% 30.4% 30.0% 30.1% 30.1% 30.3% 30.5% 31.5% 31.7% 30.5% Operating profit 9.8 12.5 15.1 19.9 26.2 18.4 23.0 31.8 37.2 39.8 41.2 17.2 292.1 TP % 3.6% 4.4% 4.8% 5.2% 5.5% 4.3% 4.9% 5.6% 5.8% 6.1% 5.7% 4.7% Operating cash flow 18.7 15.7 11.9 16.7 29.2 33.3 27.5 28.9 28.6 48.4 20.6 4.2 283.7 Net Debt (€ equiv) 80.7 73.7 80.4 80.9 86.8 44.9 42.8 42.1 66.3 63.6 110.0 128.2 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 66.2 24.3Outlook
•
Currency headwinds continue to adversely impact our results
•
No expectation of industrial output growth in Europe over next two years
•
Adverse conditions in Nordic region expected to continue
•
Self help growth drivers will continue to significantly benefit results
•
Improvement in the UK continues
•
Continued overall growth and market share gains in continental Europe, especially T&GM
•
Key Accounts growth remains strong
•
Vending programme gaining traction, beginning to deliver attractive returns
•
Gross margin on an improving trend
•
3 additional working days in second half (equivalent to £1 million of gross profit per day)
•
Swift action on costs at the start of the second quarter will benefit the second half
Vending Investor Event
‘Machine behind the machine’
3.00pm – 4.30pm
The Honourable Artillery Company,
Armoury House, City Road, London EC1Y 2BQ
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 430 locations across 23 countries
• 4.8 million product lines
• More than 100,000 customers
• Robust fundamental growth drivers
Segments
£m
At constant currency £1:€1.3
* Segmental assets excluding goodwill and acquired intangibles less liabilities, before current & deferred tax, dividends, cash, loans, deferred consideration & pension liability
38
UK Germany France Spain Benelux Nordic
Eastern Europe &
Other
Total
Turnover 143.8 63.1 44.8 27.9 27.4 24.7 43.8 375.5
Sales per working day growth
(Like for like) 0.9% 7.0% 9.0% 22.6% 9.3% (3.7)% 28.5% 7.2%
Underlying operating profit 6.1 3.5 1.4 2.5 1.7 - 2.3 17.5
Return on sales 4.2% 5.5% 3.1% 9.0% 6.2% - 5.3% 4.7%
Return on sales 2014 5.8% 6.1% 3.9% 9.6% 5.1% 5.4% 5.2% 5.7%
Operating capital employed* 57.7 19.8 15.5 4.1 9.6 8.1 3.1 157.8
Return on operating capital
employed 21.1% 35.4% 18.1% 122.0% 35.4% - 10.7% 21.5%
Return on operating capital
Exchange rates
H1 2014 H1 2015
Average 1.22 1.365
Closing 1.249 1.412
Disclaimer
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.
