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Materials Technology and Productivity for Industry World-wide

Materials Technology and Productivity for Industry World-wide. Preliminary Results - 3 March 1999. Stephen Howard. Group Chief Executive. 1998 Preliminary Results*. Turnover (£bn) Operating profit (£m) Operating cash flow (£m) Total dividend per share (p). 1998. 1997. 1.6 163 221

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Materials Technology and Productivity for Industry World-wide

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  1. Materials Technology and Productivity for Industry World-wide Preliminary Results - 3 March 1999

  2. Stephen Howard Group Chief Executive

  3. 1998 Preliminary Results* Turnover (£bn) Operating profit (£m) Operating cash flow (£m) Total dividend per share (p) 1998 1997 1.6 163 221 9.4 1.6 167 204 9.2 *(Continuing businesses; constant exchange rates)

  4. Cookson’s Strengths • Clear strategic vision • Focus on materials technology and process solutions • Leadership positions in markets served • Emphasis on selling services and results • Global growth potential

  5. Strategy at work Fewer Stronger Leaner Providing materials technology and productivity improvements for industry

  6. Disposal programme successfully executed: Fewer CMC JV Cookson Fibers Zimco Total £65m £93m £4m £162m

  7. Disposal of Cookson Fibers • H2 RoI of 7%, well below acceptable levels • Exit multiple of >10, based on H2 EBIT

  8. Stronger Through acquisitions Electronics £41m AlliedSignal (Euro. laminates) Accel Corp SMTech Ceramics £74m Flogates / KSR Becker & Piscantor Engineering £39m Inverness Matrix Total £154m

  9. Stronger Impact of acquisitions versus disposals Return on Sales 7.2% 11.1% Return on Investment 7.7% 13.0% Disposals* Acquisitions** * (CMC,Fibers, Zimco) ** (in year 1)

  10. Stronger Capacity to invest and acquire • Fourth year of positive free cash flow • Strong balance sheet • Healthy interest cover

  11. Leaner Streamlined Group Structure Delayeredmanagement structure Greater focus,efficiency & productivity

  12. Leaner Major restructuring & rationalisation programme... • 20 sites closed; further 10 rationalised • 4.5% reduction in headcount • Permanent reduction in fixed cost base • £14m annual cash saving from 2000 • Strengthening Group’s competitive advantage ...ensuring that we stay ahead of the game

  13. Review of 1998 Trading

  14. Electronics Key financials No change -19% (1997: 9.7%) • Turnover • Operating Profit • Return on Sales £736m £58.2m 7.9%

  15. Electronics (excluding Equipment) Key financials No change -19% • Turnover • Operating Profit +2% +2%

  16. Action on Electronics Equipment • Consolidated 3 businesses into 1 • Important new product introduced (Matrixx; Xyflex) • Bolt-on acquisitions (ACCEL; SMTech) • Significant senior management changes

  17. Ceramics Key financials • Turnover • Operating Profit • Return on Sales £416m £54.2m 13% +16% +18% (1997: 12.8%)

  18. Engineering Key financials • Turnover • Operating Profit • Return on Sales £472m £50.3m 10.7% -1% +1% (1997: 10.4%)

  19. Engineering (excluding Telecomms) Key financials • Turnover -1% • Operating Profit +1% +4% +26%

  20. Platforms for Growth

  21. Electronics Platforms for Growth • Electronics Market expected to grow 7% - 10% • Benefits from BGA processes • 1998 - 2005 CAGR > 20% • Developing leadership in Flip Chip and lead free technologies • Embryonic at present, but the next big ‘wave’: will benefit all sectors

  22. Electronics Platforms for Growth • Successful cross-sector partnering • Materials & Equipment teaming with Siemens • Materials & Equipment joint approach to Mexican market • Materials & Equipment: complementary products and processes for BGA’s • Materials & PC Fab joint development of patented PCB surface coating • Outsourcing offering for value added services

  23. Ceramics Platforms for Growth • Steel sector • Continued geographic expansion • Product line expansion: KSR/Flogates • Trade dispute resolution for US steel makers • Glass & Foundry sector • Growth of market share • Globalisation through transactions and greenfield development • Outsourcing offerings

  24. Engineering Platforms for Growth • Precious Metals • Successful expansion into Findings • Cross selling in international markets • Continued progress of electronic and electrical stampings and contacts • Plastic Moldings • Significant new contract wins and opportunities • US production for CHEP ramped up & relationship extended to Europe;

  25. Engineering - Telecomms 20 year gross revenue sharing arrangement • Right-of-Way • Network Electronics/Operations • Fiber maintenance • Marketing & sales • Customer care • Carrier status FOCAS ELI • 935 route miles of fiber backbone • 72 fiber OPGW • Cable system design & engineering • Construction management • Turnkey project

  26. Dennis Millard Group Finance Director

  27. Outline • Group Trading Results: Continuing Activities • Group pre- and post-tax profits • Shareholder returns • Exceptional items • Cash flow • Financial condition

  28. Group Trading Results - Continuing Operations

  29. Turnover 1998 £m 1997 £m GROUP at reported exchange rates less: Exchange rate effect GROUP at 1998 exchange rates less: Discontinued - Anzon, Plantpak, CMC - Fibers - Zimco CONTINUING OPERATIONS - at 1998 exchange rates 1,760 - 1,760 136 - 96 40 1,624 1,984 32 1,952 379 241 95 43 1,573 -11% -10% +3%

  30. Divisional Turnover at1998 exchange rates Electronics Ceramics Engineering - Precious Metals - Other CONTINUING OPERATIONS 1998 £m 1997 £m 736 416 472 274 198 1,624 736 358 479 267 212 1,573 0% +16% -1% +3% -7% +3%

  31. Operating Profit* 1998 £m 1997 £m GROUP at reported exchange rates less: Exchange rate effect GROUP at 1998 exchange rates less: Discontinued - Anzon, Plantpak, CMC - Fibers - Zimco CONTINUING OPERATIONS - at 1998 exchange rates 175.2 - 175.2 12.5 - 10.3 2.2 162.7 203.8 4.0 199.8 32.6 15.3 14.8 2.5 167.2 -14% -12% -3% *(before Goodwill Amortisation and Exceptional Items)

  32. Divisional Operating Profit* at 1998 exchange rates Electronics Ceramics Engineering - Precious Metals - Other CONTINUING OPERATIONS Inc/Dec vs.1997 1998 £m £m % 58.2 54.2 50.3 33.1 17.2 162.7 -13.4 +8.4 +0.5 +5.5 -5.0 -4.5 -19 +18 +1 +20 -23 -3 *(before Goodwill Amortisation and Exceptional Items)

  33. Summary of Trading Results1st & 2nd Half Continuing Operations - at 1998 exchange rates 1st Half 2nd Half Year Turnover 1998 £m % 807 817 1,624 +7 +0 +3

  34. Summary of Trading Results1st & 2nd Half Continuing Operations - at 1998 exchange rates 1st Half 2nd Half Year Turnover Operating Profit* % 1998 £m % 1998 £m 807 817 1,624 +7 +0 +3 84.1 78.6 162.7 +12 -15 -3 *(before Goodwill Amortisation and Exceptional Items)

  35. Profitability Return on Sales at 1998 exchange rates Electronics Ceramics Engineering - Precious Metals - Other CONTINUING OPERATIONS 1998 % 1997 % 7.9 13.0 10.7 12.1 8.7 10.0 9.7 12.8 10.4 10.3 10.5 10.6

  36. ProfitabilityReturn on Investment* Electronics Ceramics Engineering - Precious Metals - Other CONTINUING OPERATIONS 1998 % 1997 % 10.0 16.2 15.2 22.5 9.3 13.0 13.2 17.4 16.1 22.6 11.8 15.0 *Operating profit as % of (net assets + goodwill + borrowings)

  37. ProfitabilityReturn on Investment 1997 1998 25 20 14% 15 % 10 5 0 Cost of Capital (10% After tax) Electronics Ceramics Precious Metals Engineering: Other

  38. Contribution from Acquisitions 1998 Continuing Operations 1998 Sales (£m) Operating Profit (£m) Return on Sales (%) Investment : total (£m) : wt. ave. (£m) Return on Investment (%) 106 12 11.1 154 91 13.0

  39. Summary of Group Trading Results Continuing Operations - at 1998 exchange rates TURNOVER (£m) OPERATING PROFIT* (£m) RETURN ON SALES* (£m) RETURN ON INVESTMENT* (%) 1998 1997 1,624 162.7 10.0 13.0 1,573 167.2 10.6 15.0 +3% -3% *(before Goodwill Amortisation and Exceptional Items)

  40. Group Pre- andPost-Tax Profits

  41. Profit Before Tax* 1998 £m 1997 £m OPERATING PROFIT: as reported INTEREST (net) - Interest : Group : Associates - Precious Metal Cons. Fees PROFIT BEFORE TAX - at 1998 exchange rates 175.2 (23.9) (18.5) (0.2) (5.2) 151.3 151.3 203.8 (24.8) (16.5) (3.6) (4.7) 179.0 174.9 -15% -13% *(before Goodwill Amortisation and Exceptional Items)

  42. Profit After Tax PROFIT BEFORE TAX* Taxation Minority interest PROFIT AFTER TAX* 1998 £m 1997 £m 151.3 (39.3) (2.1) 109.9 179.0 (46.9) (3.6) 128.5 Tax Rate 26.0% (1997: 26.2%) £m 98 97 Fibers 0.2 1.9 Other 1.9 1.7 *(before Goodwill Amortisation and Exceptional Items)

  43. Shareholder Returns 1998 1997 EARNINGS PER SHARE* - Reported rates - At 1998 exchange rates DIVIDENDS PER SHARE - Final - Interim DIVIDEND COVER 16.0p 16.0p 9.4p 5.1p 4.3p 1.7x 18.7p 18.2p 9.2p 5.1p 4.1p 2.0x -14% -12% +2% 0% +5% *(before Goodwill Amortisation and Exceptional Items)

  44. Goodwill Amortisation & Exceptional Items* 1998 £m 1997 £m • Within Operating Profit RESTRUCTURING INITIATIVES • “Below the line” DISPOSALS - goodwill - shortfall vs. book value - other, prior year closures LOSS ON SALE OF FIXED ASSETS GOODWILL AMORTISATION 2.8 49.5 80.6 60.4 9.9 10.3 9.0 141.9 - 15.5 85.4 85.3 0.1 - 2.2 103.1 Fibers £58.3m Zimco £2.1m Fibers £3.0m Zimco £6.9m *(before tax)

  45. Restructuring Initiative COSTS Cash related Asset write-offs CASH BENEFITS 1998 £m 1999 £m 2000 £m 8.6 40.9 49.5 nil 21.0 - 21.0 8.5 - - - 14.5 pa * *(£ 1.5m outlaid)

  46. Restructuring Initiative (cont.) COSTS Cash related Asset write-offs CASH BENEFITS 1999 2000 per annum CASH PAYBACK No. of years @ 2000 benefit Electronics £m Ceramics £m Engineering £m 11.2 5.8 17.0 2.6 5.5 2.0 16.0 27.6 43.6 4.8 8.0 2.0 2.4 7.5 9.9 1.1 1.0 2.4

  47. Group Cash Flow

  48. Cash Flow fromOperating Activities 1998£m 1997 £m Inc/(Dec) £m Operating Profit of Subsidiaries Depreciation & Amortisation EBITDA Working Capital Provisions/Other CASH FLOW : GROUP OPERATIONS : CONTINUING OPERATIONS 167 58 225 4 (7) 222 221 188 50 238 (11) (11) 216 204 (21) 8 (13) 15 4 6 17 +3% +8%

  49. Average WorkingCapital as % of Sales Continuing Operations 22.0 21.0 % 20.0 20.4 20.2 19.8 19.6 19.0 18.0 Jun 97 Dec 97 Jun 98 Dec 98

  50. Free Cash Flow 1998 £m 1997 £m Inc/(Dec) £m CASH FLOW FROM OPERATING ACTIVITIES Divs. from Associates Capital Expenditure Asset Disposals, other Interest, Tax and Dividends FREE CASH FLOW 222 3 (85) 14 (134) 20 216 4 (91) 6 (110) 25 6 (1) 6 8 (24) (5) YR: 1.5 x depr (‘97 - 1.8 x) H2: 1.3 x depr (‘97 - 2.1 x) £m Interest (13) Dividends (6) Tax (5)

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