H1 17 Results Presentation. Alan Stubbs, Chief Executive Officer Mike Cane, Chief Financial Officer September 2017

Transcription

1 H1 17 Results Presentation Alan Stubbs, Chief Executive Officer Mike Cane, Chief Financial Officer September 2017

2 1 Servelec Group Overview Servelec Automation Servelec is a UK-headquartered technology Group, with significant intellectual property, providing software, hardware and services to the healthcare, social care and education, oil and gas, energy and utilities sectors. Servelec HSC Comprising: Healthcare, Synergy, Corelogic, Abacus Software Systems, Support & Hosting Mental, Community & Child Health Acute Healthcare Social Care Children s Services Servelec Group 56 employees 619 total employees at H1 17 Hardware, Software & Control Systems Servelec Controls: Oil & Gas Power & Infrastructure Servelec Technologies: Utilities Broadcast Rail 257 employees Finance 306 employees % of Group Revenue % of Group Profit Servelec HSC 56% 59% Servelec Controls 18% 11% Servelec Technologies 26% 30%

3 2 Servelec Group at H1 17 Return to growth - Underlying operating profit up 44% Cash conversion returns to normal levels Servelec HSC main driver for return to growth due to strong performance in Healthcare and Children s Services Servelec Automation delivering strong result in Servelec Controls Oil & Gas but market challenges persist for Servelec Technologies Reduction in anticipated growth for the full year

4 3 Results Summary Revenue ( '000) H H H Underlying Operating Profit* ** ( '000) H H ,506 H Order Entry ( '000) H ,746 H ,437 31,513 28,377 30,006 6,504 6, m 6.5m 34.7m Return to growth Group revenue up 11% Organic revenue up 2% Organic operating profit growth of 20% Adjusted EPS up 45% Cash conversion at 96% Order bank increased 4.2m Increased interim dividend 2.00p (H1 2016: 1.65p) H Order Bank ( '000) H H ,404 73,184 44, m H Cash Conversion H H % H % 76, % 96% *Underlying operating profit excludes share based payments, non-recurring items and amortisation from acquired intangibles

5 Servelec HSC Performance and Market Opportunities

6 4 Servelec HSC '000s H H % Change Segment Revenue 17,503 14,951 17% Cost of Sales (8,999) (8,490) 6% Adjusted Gross Profit 8,504 6,461 32% Gross Margin % 49% 43% Overheads (2,496) (2,290) 9% Underlying Operating Profit 6,008 4,171 43% Net margin % 34% 29% Healthcare and Synergy performing well but Corelogic flat Profit growth a combination of acquisitions and the business improvements made in 2016 Slight increase in recurring revenue at 66% compared to 64% in FY16 Invested in sales team and account management Closed our Indian development centre in Q3 Positive on converting opportunities particularly mobile apps and portals 14%

7 5 Servelec HSC: H1 17 Update Across our Markets NHS Local Government Cumulative value of potential new contracts coming to market in next five years: 50m Oceano: 500m Flow: 70m PICS 50m 100m 50m Non-Acute Acute Social Care Education Delivering steady performance Market opportunities growing Focusing on account management of installed base Investing in portal and mobile product extensions University Hospitals Birmingham live with Oceano Reference site Royal Cornwall Hospitals in delivery phase to go live in early 2018 Encouraging bidding activity Active market Sales behind expectations Revitalising go-tomarket strategy Action taken to strengthen team Account management of installed base Portal product extensions Increasing links between our products as markets converge Synergy continues to perform well Contributor to growth Continues to outperform competitors (CACI & Capita) Market testing every five years High win rate

8 6 Servelec HSC: Mobile Apps Product Enhancements through Mobile Apps Signed two deals to secure best of breed mobile product extensions Role-based apps to deliver product enhancements in line with customer demand and market trends towards staff mobilisation First app = RiO District Nursing app Clinical testing complete to ensure robust product Competitive landscape Total Mobile, EMIS, ACS Currently in Healthcare, moving into Social Care & Technologies Market Opportunity Every nurse an e-nurse endorsement of apps from NHS Digital Anticipated market share increase YoY over next three years Swift rate of adoption anticipated Business Model Minimal cost of development Pay per User per Month recurring revenue model Revenue share with third party developers High margins Outlook / Next Steps Launch date available now

9 7 Servelec HSC: Portals for channel shift in Social Care Care Saving customers money, improving their efficiencies, empowering end users Citizens & Professionals Portal Market place Reverse auction Extranet Empowering the customer s clients Citizens purchase care services online Providers bid for services required Providers manage invoicing online End to end solution of portal technology Market Opportunity Finestra already in Social Care market place Upgrading existing customers and account management sell to Mosaic installed base Business Model Nil cost uplift for new product development Finestra development by third party, CHIPS & Extranet in-house IP Recurring licence revenue model Outlook / Next Steps Launch date available now

10 Servelec Automation Performance and Market Opportunities

11 8 Servelec Controls Many points now covered on next slide so need to refine '000s H H % Change Segment Revenue 5,721 5,397 6% Cost of Sales (4,081) (3,988) 2% Adjusted Gross Profit 1,640 1,409 16% Gross Margin % 29% 26% Overheads (1,095) (1,002) 9% Underlying Operating Profit % Oil & Gas segment delivering stronger than anticipated performance Power & Infrastructure under pressure due to hiatus in nuclear market Consolidated business under one Managing Director Common engineering team across specialist routes to market Turkey CHP Plant decision to be taken at year-end Net margin % 10% 8%

12 9 Servelec Controls: H1 17 Performance & Market Drivers H1 17 Performance Market Drivers Oil & Gas Power & Infrastructure Oil & Gas Power & Infrastructure Third Remote Operations contract received from Centrica High win rate of lower value but faster turnaround jobs as predicted Current hiatus in nuclear market and proposed termination of coal-fired power production by 2025 impacting pipeline Action taken to consolidate our offices and engineering team Market Drivers: Remote Operations Opex reduction Brownfield refurbishment Market Drivers: Complementary verticals of Defence and Infrastructure Brownfield refurbishment Mature market Competitive landscape: Delayed market Cumulative value of potential new contracts coming to market in next five years: 500m 1bn Key differentiators: Boulting Cetix DAI Inspec Solutions OEMs & customers (internal teams) Capula Bilfinger Ematics Reputation for delivery High customer retention Value / benefit proposition Customer service

13 10 Servelec Technologies '000s H H % Change Segment Revenue 8,289 8,029 3% Cost of Sales (3,914) (4,172) (6)% Adjusted Gross Profit 4,375 3,857 13% Gross Margin % 53% 48% Revenue broadly flat with small increase in profit Strong margins maintained Reduced order entry due to deferment of AMP6 orders for SCADA / Telemetry projects and RTUs Overhead increase predominantly due to currency changes post EU Referendum result Overheads (3,023) (2,586) 17% Underlying Operating Profit 1,352 1,271 6% Net margin % 16% 16% 10.9m

14 11 Servelec Technologies: H1 17 Performance & Market Opportunities H1 17 Performance Market Opportunity RTUs Software RTUs Software UK RTU sales in AMP6 are still behind expectations Awarded Severn Trent Water Framework Global RTU sales steady Changing underperforming partners, improving our approach. Sales gaining traction in focus regions Uptick in growth UK water companies are investing in opex reduction and control and monitoring Expanding customer base Entry into new markets (UK & Global) UK: Disruption from Open Water continuing for longer than anticipated Weak Sterling affecting water company budgets due to rising water treatment costs Orders expected to start to build 5bn* from 2018 Global: Focusing on optimising channel partner network in China, Middle East and USA. SCADA / Telemetry: Reduction in large projects in remainder of 2017 Focusing on account management Business Optimisation: Expanding customer base UK water companies investing and continued success through global supply chain Key differentiator: The only UK-based end-to-end data acquisition, control and optimisation product suite Cumulative value of potential new contracts coming to market in next five years*: Global: SCOPE: 5bn 80m (UK) 1bn (Global) UK: 34m (RTUs) 30m (loggers) Optimisation 70m (UK) Creating the market globally * Based on Management review of available market

15 Group Financial Slides, Strategy & Outlook

16 12 Income Statement H H H Adjusted* '000 ' Group Revenue 31,513 28,377 Gross Profit 14,519 11,727 46% 41% Underlying Operating Profit 6,504 4,505 4,755 21% 16% 17% Non-recurring items - (943) Share based payments (285) (346) EBITA 6,219 3,216 Amortisation (1,778) (1,388) Operating Profit from Continuing Operations 4,441 1,828 Net Finance (Expense)/Income (158) (97) Profit Before Tax 4,284 1,731 Tax (825) (346) 19% 20% Profit After Tax from continuing operations 3,459 1,385 Return to growth in revenue, profit and gross margins in H1 Underlying operating profit growth is 37% (organic: 12%) compared to adjusted 2016* Amortisation has increased following acquisitions in 2016 Net finance expense includes debt used to fund the acquisition of Synergy in April 2016 * Includes an allocation of the full year Research and Development Credit (RDEC) which related to the full year but was booked in H Diluted EPS 4.8p 1.9p Adjusted EPS 7.1p 4.9p

17 13 Group Cash Flow Group Balance Sheet H H '000 '000 EBITDA (inc. non recurring items) 7,159 4,140 Working Capital Movements (297) (2,562) Movement in provisions 7 6 Operating Cash Flow 6,869 1,584 Cash conversion 96% 38% Net Interest paid (93) (79) Tax Paid (919) (752) Net Operating Cash Flow 5, Capex (inc Intangibles) (355) (873) Acquisition of Subsidiaries - (20,879) 5,502 (21,000) Movement in Loans - 15,113 Dividends Paid (2,790) (2,429) Other Net Cash Movement (3,560) (7,742) Opening Cash 5,555 9,896 Closing Cash 9,115 2,154 H H '000 '000 Fixed Assets & Intangibles 70,955 74,678 Inventories 1,743 1,682 Receivables 31,528 27,247 Cash 9,115 2,154 42,386 31,083 Payables (23,061) (22,385) Short term loans (15,113) (15,113) Corporation Tax (443) - Provisions (208) (195) Deferred Tax (2,963) (3,831) (41,788) (41,524) Net Assets 71,553 64,237 Cash conversion back to expected levels at 96% Synergy cash collections are H1 weighted so still targeting 80% cash conversion for the full year Loan relates to acquisition of Synergy in H Strong balance sheet No R&D capitalised YTD Reduction in net debt to 6.0m from 9.6m at FY 2016

18 14 Group Strategy and Performance in 2017 Drive organic growth Continued focus on customer satisfaction Improving sales and broadening customer base and markets Streamlining operations and reallocating resources Continue to enhance our product capability Developing a truly mobile offering Enhancement of portal technology to capitalise on channel shift Continued enhancement of business optimisation products Develop our distribution channels to market Broaden the product set being actively sold through distribution channels Build new relationships with proactive channel partners Acquire where beneficial to the business Continue to pursue bolt-on acquisitions that enhance solutions capability to focus on businesses with strong intellectual property and recurring revenues

19 15 Outlook Servelec Group is in a robust financial position with a strong balance sheet. Cash generation on track to return to normalised level with net debt balance expected to reduce further by the year-end. Servelec HSC is underpinned by steady revenue streams from Healthcare and Education. Improving pipeline in Corelogic but remains Q4 weighted due to timing of licenses. Within Servelec Automation, we see a building pipeline of opportunities for Controls, particularly within Oil & Gas, but customer deferments in other areas will temporarily slow growth prospects. The Board remains positive about the longer term prospects for the Group.

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