Interim Results. for the 6 months ended 31 December 2014.

Transcription

1 Interim Results for the 6 months ended 31 December 2014.

2 This presentation, which has been prepared by Regenersis PLC ( the Company ), includes statements that are, or may be deemed to be, forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms believes, estimates, plans, projects, anticipates, expects, foresees, intends, may, will or should or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not historical facts and include statements regarding the Company s intentions, beliefs or current expectations. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward looking statements. Any forward-looking statements in this presentation reflect the Company s view with respect to future events and other risks, uncertainties and assumptions relating to the Company s operations, results of operations, growth strategy and liquidity. The Company undertakes no obligation publicly to release the results of any revisions or up-dates to any forward-looking statements in this presentation that may occur due to change in its expectations or to reflect events or circumstances after the date of this presentation. This presentation comprises information which is already in the public domain. No reliance may be placed for any purposes whatsoever on the information contained in this document or on its completeness. None of the Company, its advisers, or any other party is under any duty to update or inform you of any changes to the information contained in this presentation. 2

3 Contents FINANCIAL HIGHLIGHTS EXECUTIVE SUMMARY SOFTWARE AND ADVANCED SOLUTIONS DEPOT SOLUTIONS FINANCIAL REVIEW STRATEGY PORTFOLIO CONCLUSIONS AND OUTLOOK 3

4 Financial highlights Revenue growth 2% revenue growth (12% in constant currency) Headline OCF** Cash conversion 70% (59% H1 FY14) 101.9m 99.7m 4.2m 2.7m H1 FY15 H1 FY14 H1 FY15 H1 FY14 Headline operating profit * 30% profit growth (46% in constant currency) Net cash Investment in R&D and new acquisitions 6.0m 4.6m 12.1m 20.6m H1 FY15 H1 FY14 H1 FY15 FY14 (financial year end) 4 * Headline Operating Profit is the key profit measure used by the Board to assess the underlying financial performance of the operating Divisions and the Group as a whole. Headline Operating Profit is stated before amortisation or impairment of acquired intangible assets, acquisition costs, exceptional restructuring costs, share based payments, share of results of associates and jointly controlled entities and profit/losses on disposal of jointly controlled entities. ** Headline operating cash flow is a key internal measure used by the Board to evaluate the cash flow of the Group. It is defined as operating cash flow excluding taxation, interest payments and receipts, exceptional acquisition and restructuring costs.

5 Executive summary (1) Key messages at interims Pleasing growth across the board Margin trending upwards Solid cash generation Positive outlook Results in context 2014 Launching new lines of business and restructuring the Group 2015 Consolidating this position and integrating Blancco 2016 Growing out the portfolio and rise of Software & Advanced Solutions 5

6 Margin progress % HOP from Software & Advanced Solutions H1 FY15 H1 FY14 58% 48% Group headline operating margin improving 8.4% 6.8% 5.9% 4.6% HOP margins by division 20.1% 16.5% S&AS Software & Advanced Solutions 5.2% 5.0% H1 15 H1 14 H1 15 H1 14 Depot Depot Solutions H1 15 H1 14 H1 15 H1 14 Divisions pre-hq Divisions pre-hq Total Total Group At year end 2014 our expectation was to see the rising divisional margins translate to group HOP margins 6

7 Executive summary (2) Software and Advanced Solutions Blancco: post-acquisition progress good growing sales at c. 20% per annum IFT: important contract signed with Liberty Global steady growth in USA and Europe Digital Care: good growth in H1 entering a key period of validation at scale Xcaliber/SmartChk: landmark first contract with major US telco good sales pipeline Break-even run rate passed, as expected, at the end of H1 Depot Solutions Organic top-line growth following exit from low margin UK mobile operations in FY14 good new business generation Strategy To deliver strong upward trend in profit margins and shareholder value Focus on growing these lines of business, including Depot as the key to client access Shift towards higher margin S&AS business means less emphasis on revenue 7

8 Software & Advanced Solutions Blancco is continuing to perform well under our ownership and is growing sales at around 20% p.a. Bolt-on acquisitions: SafeIT live-environment erasure business; buy-out of minorities in Blancco US and Sweden Clear market leadership position continues IFT: Set top box diagnostics showed steady growth Contract with Liberty Global extended from 2016 to 2018 Digital Care reached break-even run-rate in December Focus for H2 is successfully managing the ramp up in Poland Strong potential demand for accidental damage programs in other geographies Xcaliber won its first two significant SmartChk contracts (after period end) Strong endorsement / validation of the technology Good sales pipeline to build on Recommerce contributed 16M revenue at high single digit margins in FY14 H1 FY15 H2 FY14 H1 FY14 H2 FY13 Revenue M Growth / Const. -27% / -18% currency +42% / +59% HOP M Growth / Const. -8% / 0% currency +73% / +89% HOP margin 20.1% 16.1% 16.5% 15.7% Acquisition of Blancco boosted margins 8

9 Underlying Software & Advanced Solutions trend Reported Software and Advanced Solutions HOP margin % Doubling of S&AS margin Underlying trend in Software & Advanced Solutions HOP, eliminating one-offs 25% million H1'13 H2'13 H1'14 H2'14 H1'15 20% 15% Reported HOP Recommerce (0.4) (1.2) 10% 5% IFRS revenue recognition at Blancco % H1'13 H2'13 H1'14 H2'14 H1'15 Underlying HOP months Blancco consolidated Outlook Software & Advanced Solutions is the largest and fastest growing part of the Group in profit terms Enabling expected double digit operating profit growth, at steadily improving margins, at the Group level 9

10 Depot Solutions Strong growth in H1 2015, following contraction in H on exit from low margin UK mobile operations FY14 closure of low margin UK mobile business Ramp up phase of Memphis, Portugal and Czech sites (approximately ( 0.5 million) HOP impact in the half year, or 0.6% of revenue) 32 million of new business won in H including Sony mobile business in Mexico New HTC EMEA and USA volumes ASUS business in Germany Absorbed volume reductions at one large OEM client, and some operational issues in Spain and India H1 FY15 H2 FY14 H1 FY14 H2 FY13 Revenue M Growth / Const. +18% / +29% currency -5% / +3% HOP M Growth / Const. +5% / +15% currency -2% / +7% HOP margin 5.2% 5.8% 5.0% 5.2% Target: deliver higher margins from 10 Improved position in terms of clients and geographies Ongoing continuous improvement Reduced level of change Roll out of IT system Ramp up of new business and depot sites

11 Underlying Depot Solutions trend Depot Revenue Split 100% 100% 2% 14% 34% 26% 84% 40% Depot UK Depot RoW: Nokia & RIM Depot RoW: Other clients Major change in the Depot portfolio Exit from UK and shrinkage in Nokia & RIM Offset by growth in the rest of the business ( 55m to 120m run-rate) Approximately 2/3 organic 1 Underlying growth ex-uk has been good FY13 FY15 Depot HOP and HOP margin 6.0m 5.0m 4.0m 3.0m 2.0m 4.2m 3.9m 4.2m 3.9m 4.1m 1.0m Excluding costs of start-up sites ( 0.5m) 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% HOP and HOP margin have been stable, but: Suppressed in H2 FY14 ( 1.0m) and H1 FY15 ( 0.5m) by new site start-up site costs Suppressed throughout the last 2 years by costs of changing the revenue mix Reduced levels of change going forward should push margins upwards - H1'13 H2'13 H1'14 H2'14 H1'15 0.0% 1. Note FY13 included 10 months of HDM acquisition leaving approx. 4 million annualisation benefit in FY million of revenue acquired with Bitronic, Digicomp, Landela, Regenersis Russia. Total 20 million acquired Depot revenue between FY13-FY15. 11

12 Financial review Income Statement million H1 FY15 H1 FY14 Revenue Headline operating profit before corporate costs Corporate costs (2.6) (2.2) Headline operating profit after corporate costs Acquisition costs (1.3) (1.2) Exceptional Restructuring Costs (0.4) - Amort'n of acquired intangible assets (1.1) (0.1) Share-based payments (0.6) (0.2) Share of results of associates and jointly controlled entities (0.3) (0.2) Operating profit Unwinding of deferred consideration (0.4) (0.9) Revaluation of deferred consideration Other finance charges (0.6) (0.4) Profit before tax Tax 0.8 (0.2) Profit after tax % revenue growth 12.2% under constant currency 26.5% growth in headline operating profit before corporate costs 45.7% under constant currency Corporate costs increased to support growth Tax credit arising due to reassessment of brought forward tax losses 12

13 Balance sheet million H1 FY15 FY14 Non current assets Current assets Goodwill and investments Acquired intangible assets Internally generated intangible assets * Tangible assets * Deferred tax Stock * Debtors * Creditors * (42.8) (44.3) Provisions * (0.6) (0.8) Other net current liabilities (2.3) (1.4) Net Cash Non current liabilities Deferred consideration (5.9) (6.4) Other non current liabilities (2.3) (2.7) (8.2) (9.1) Net assets Goodwill arising on SafeIT acquisition ROCE remains strong Continue to turn stock quickly Capital Employed (*) ROCE annualised (HOP / Capital employed) 66.6% 78.3% 13

14 Cash flow Cash conversion of 70% (H1 FY14: 59%) Capex and R&D spend of 4.0m up 82%. Development expenditure and intangibles comprising 59% of spend 25.1m Xcaliber SafeIT Blancco Other Total 2.0M 1.6M 1.1M 0.2M 4.9M Repayment of borrowings and foreign exchange movements millions m 12.1m

15 Strategy portfolio Group portfolio today Future vision Operating margin 100% 10% Depot Blancco IFT Xcaliber Digital Care Operating margin 100% 10% IFT Depot Software Digital Care 1% 1% 10% 100% 1000% Revenue growth outlook 1% 1% 10% 100% 1000% Revenue growth outlook (Illustrative scaling by HOP) 15

16 Software and Advanced Solutions intent Blancco Top-line growth from 20% p.a. up to 30%+ by improving sales operations B New products like Live Environment Erasure and Data Erasure Management boost growth to 50%+ S Blancco finds a product/market/channel fit that drives strong growth G What might bronze, silver and gold look like? Digital Care B Contracts in Poland scale up to deliver several million live policies S We win contracts in other geographies over the next 12 months G We convert an early lead into sustained market leadership in this new mobile insurance category Set top box diagnostics Roll out successfully into the European estate of Liberty Global B Also roll out into the full estate of the current main US client S We win new clients in the US G Xcaliber too early to predict but early signs encouraging 16

17 Conclusions and outlook Outlook The Board expects that full year results will be in line with market expectations Remains confident that the Group s portfolio of businesses will generate further growth in Group profit margins and substantial value for shareholders Strategy being followed presents the opportunity for continued double digit growth in Headline Operating Profit. The Group made good progress in the first half of the year. Depot Solutions has delivered organic growth following our decision to exit our lower margin mobile operations in the UK, and it is a significant milestone that Software and Advanced Solutions is now the largest, as well as the fastest-growing part of the Group in profit terms, with very exciting market opportunities in prospect. As a result the Group profit margin is tracking upwards, and we expect to be able to deliver steadily improving operating margins over the medium term. Matthew Peacock, Executive Chairman 17

18 Appendix

19 Our key asset = relationships Leading international clients Large geographical footprint Complementary services 19

20 Operating matrix Malaysia Czech Republic Australia Japan Canada Italy France Belgium Portugal India Argentina Mexico Spain South Africa USA Nordics Russia Romania Poland Germany UK Depot Software and Advanced solutions Repair & Refurbishment X X X X X X X X X X X X X Service Position start 2011 Network X X X B2B niche products X X X X X X X X IFT Diagnostics X X X Digital Care Insurance X X Mobile diagnostics X X Data Erasure X X X X X X X X X X X X X X X X = Progress in the last 6 months 20

21 Repair sector underlying drivers Device sales volumes Source: IDC 2013 Smartphone ASP by OS Source: IDC 2014 Smartphone Tablet Portable PC Dektop PC STB* Millions of units * STB forecast from HIS Inc, 2014 (covering ) 21

22 Foreign Exchange Combined 50% of Group revenues and profit EUR:GBP H PLN:GBP H H Foreign currencies in which the Group transacts are weakening compared to Sterling The Euro and the Polish Zloty have weakened 10.4% and 12.2% since H Further weakening of currencies from 1 January 2015 to date RON:GBP ZAR:GBP MXN:GBP Emerging markets currencies combined 40% of Group revenues and profit, including Romanian Leu, South African Rand and Mexican Peso 22