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Transcript of Presentation for Ocado · This presentation comprises information which is already in the public...
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.
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£2.9m £1.9m
FY12 FY13
£7.8m £9.5m
FY12 FY13
£5.9m
£11.0m
FY12 FY13
£139.9m £179.7m
FY12 FY13
Financial highlights. 28% revenue growth (13% FY12)
Revenue growth
Adjusted EPS
Headline operating profit*
Headline operating cash flow**
22% profit growth (24% FY12)
Profit conversion 116% (75% FY12)
Net debt
(*) Headline operating profit excludes exceptional restructuring costs, acquisition costs, amortisation or impairment of acquired intangible assets, share-based payments and share of results of jointly controlled entities. (**)Headline operating cash flow excludes tax and interest payments.
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13.85p 16.80p
FY12 FY13
20% growth (13% FY12)
Executive summary (1 of 3).
Financial performance well on track Accelerated our high level of growth With superior levels of cash generation, supporting
an increased dividend Profit driven by Emerging Markets and Advanced
Solutions (81% of HOP) Whilst we additionally absorbed pressures Funded investment in management strength and new lines of business Impact of stronger pound on our foreign earnings Volume reductions from certain large mobile OEM clients And stepped up the pace of corporate activity Landela – market leader in set-top box repair in South Africa Digicomp – market leader in repair in India Regenersis Refurbishment – partnership with EcoAsia Xcaliber – technical leader in mobile diagnostic applications
6
Entry to the Indian market, and launch of a mobile diagnostic business – like IFT for smartphones
Growth in our target areas
Executive summary (2 of 3).
We continued to develop and improve operationally Successful integration of HDM, Anovo Nordics and
Landela acquisitions Senior appointments: COO, MD Renew and Group Sales
& Marketing Director Many further new recruits throughout the team 3 separate sales regions created (APAC, EMEA, and
Americas) Creation of new Renew division
Focus on sales began to bear fruit in H2
Europe-wide mobile repair contract for major OEM Device refurbishment partner for several new insurance
clients, including Telefonica Insurance (Spain) Repair and reverse logistics supplier to a major Spanish
mobile operator Digital Care and Recommerce supplier to market-leading
Polish mobile operator New repair clients in South Africa, Mexico and Sweden
7
Winning new business synergistically
Reshaping the top management team
Investment in Global Sales Team and new capabilities starting to pay back
UK
Germ
any
Poland
Rom
ania
Russia
Nordics
USA
Turkey
South Africa
Spain
Mexico
Argentina
India
Mobile
Repair X X X X X X X X X X Vendor
Management Outsourcing/
BPO X X X X
Media & Entertainment
STB Repair X X X TVs, Sat Nav,
Laptops X X X X X
B2B niche products
Cash and payment X X X X
Medical and Industrial X X X
Advanced solutions
Recommerce X X X X X X X Digital Care X X
Remote Diagnostics X X
Refurbishment X X X X X
8
Executive summary (3 of 3).
Progress in the last 6 months
Financial review.
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Income Statement £million FY13 FY12 Revenue 179.7 139.9 Headline operating profit 9.5 7.8
Exceptional restructuring costs - (4.9) Acquisition costs (1.9) - Amort'n of acquired int assets (0.1) (0.2) Share based payments and JV (0.4) (0.5) Other income - (0.1)
Operating profit 7.1 2.1 Net finance charge (1.4) (0.4) Profit before tax 5.7 1.7
Tax (1.0) (0.3) Profit after tax 4.7 1.4
28% revenue growth 22% Headline operating
profit growth Finance charge
increased due to £0.7 million unwind of discount factor on deferred consideration
17% effective tax rate
falling to 15.5% in H2 2013
£million FY13 FY12 Non current assets
Goodwill and investments (legacy) 27.0 27.0 Goodwill and investments (new) 13.4 - Tangible assets * 4.4 3.4 Intangible assets 4.6 1.6 Deferred tax 3.5 1.6
52.9 33.6 Current assets
Stock * 7.9 6.6 Debtors * 26.1 18.4 Creditors * (32.7) (20.9) VAT* (0.7) 0.2 Other net current liabilities (0.9) (0.8)
(0.3) 3.5 Net Debt (1.9) (2.9) Non current liabilities (11.3) (3.3) Net assets 39.4 30.9
Capital Employed (*) 5.0 7.7
ROCE (HOP / Capital employed) 190% 101%
Balance sheet.
11
Improved working capital management
Improvement in ROCE
to 190%
Cash flow.
12
£4.3m capital expenditure and R&D investment
Reduction in working capital whilst growing revenue by 28%
(£2.9m)
£9.5m
£2.4m
£6.5m £1.4m (£0.8m) (£0.4m) (£0.8m)
(£0.6m) (£4.3m)
(£2.6m)
(£2.4m)
(£5.2m)
(£1.5m)
(£1.9m) (5.0)
0.0
5.0
10.0
15.0
20.0
Net
deb
t at 1
Jul
y 20
12
Ope
ratin
g pr
ofit
Dep
reci
atio
n
Sha
re Is
sue
Pro
ceed
s
Wor
king
cap
ital
Taxa
tion
Inte
rest
Div
iden
d
FX a
nd o
ther
Cap
ex a
nd R
&D
Exc
eptio
nal C
ash
Pay
men
ts
Sha
re V
estin
g
Acq
uisi
tion
HD
M
Acq
uisi
tion
Land
ela
Net
deb
t at 3
0 Ju
ne 2
013
£ m
illio
ns
116% profit to cash conversion
Divisional performance.
13
£m Revenue OP OM % FY13 FY12 FY13 FY12 FY13 FY12 Emerging Markets 55.4 41.3 5.9 4.6 10.6% 11.1% Western Europe 96.1 79.7 2.2 2.1 2.3% 2.6% Depot Solutions 151.5 121.1 8.1 6.7 5.3% 5.5% Advanced Solutions 28.2 18.8 3.6 2.9 12.8% 15.4% Total 179.7 139.9 11.7 9.6 6.5% 6.9%
Corporate costs - - (2.2) (1.8) - - Group 179.7 139.9 9.5 7.8 5.3% 5.6%
Emerging markets – double digit growth on improving margins – in spite of volume pressures at large clients
Western Europe – revenue growth but margin pressure in a consolidating market
Advanced solutions - 50% growth in revenue. Digital Care start up costs of £0.6 million suppressed operating margin from 14.9% to 12.8%
81% of HOP in Advanced Solutions and Emerging Markets
Underlying operating margin of 5.6% after add back of Digital Care start up costs
M&A matrix progress
X = acquired X = synergy
Nordics
Spain
Mexico
Argentina
India
Repair X X X X
VMO/ BPO X
CE Repair X X
Recommerce X X X
Digital Care X
Refurbishment X X X
Corporate Actions.
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Platforms for growth acquired at lower multiples HDM Anovo Nordic Proving the
synergies
Increasing share price and rating
M&A team and pipeline bulked up
Partnerships and Venture Investing
Growing pipeline of earnings-accretive acquisitions
How to deal with early-stage technology acquisitions?
EcoAsia Xcaliber
Landela Digicomp
Example synergy contracts:
• HTC - Spain • Telefonica Insurance • Spain mobile operator
– repair and logistics • Global OEM – parts
refurbishment • Sweden -
refurbishment clients
• Partners want access to our global distribution
• Large economic share without large cheque & risk
• Strengthen our core (win more repair contracts)
M&A team put in place
2011
2012
2013
Digicomp. Digicomp Complete Solutions Limited India market leader in laptop repair One main depot in Bangalore and 92 owned and
franchised stores in major Indian cities. Customers include including Dell, HP, Lenovo and Acer Laptop recovery offering, similar to Recommerce
business. Completed 10 September 2013 INR 451m (£4.5m) consideration with earn-out in March
2015 and September 2016 £7 million revenue (FY 31March 2013) Growing at 25%-40% per annum over the last three
years
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“It is not always easy to find genuinely high-quality businesses in Emerging Markets. India is a hugely exciting market for us and Digicomp ticks all of our boxes in terms of management, client relationships and quality of operations.”
Xcaliber. Xcaliber Technologies LLC Mobile diagnostics software developer 60 employees Smartcheck product
Android, iOS and Window Mobile Deployable in all service channels (online, retail
and telephone) 70 diagnostic tests
Investment of USD 1.2m (£0.75m) for 15% stake (plus the option to acquire a further 10%)
Sales commission agreement (share of value significantly in excess of our equity stake)
Exchanged on 17 September 2013 Regenersis will become Xcaliber’s route to markets
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“Repair Avoidance is the trending topic in our sector. Xcaliber is the technology leader in on-device diagnostic applications for improving customer service and reducing reverse supply chain costs.”
Equivalent of Infield Tester for smartphones
Strategy update.
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“Year 3”: focus on Emerging Markets and Advanced Solutions (and populating the resulting services/territory matrix) is working well
Accelerated by M&A
Helping the traditional repair business with attractive multi-service/multi-geography offering
Three new ‘Game Changers’ now in focus Quality of our people One Regenersis – globalisation and integration M&A – methodically consolidating “Value” by acquisition, while
partnering with “Ingenuity”
Our Game Changers both reflect and enable success and momentum – it is a virtuous circle
• Mobile diagnostics alongside IFT
• Parts refurbishment alongside Recommerce
• Entering Mexico, Argentina and India
The stand-out team in the sector, working together in a consistent way across the world
Contracts such as with a major OEM and Telefonica Insurance
Sustainable competitive advantage
Redoubling efforts in a risk-balanced way
Conclusions and outlook. Current trading is in line with market expectations New business wins have progressed very well and are significantly ahead of the run rate at this
stage for last year Opportunities for global growth, both organically and by acquisition, remain strong Continued strong growth is expected from Emerging Markets and Advanced Solutions Investment in capital expenditure and head office cost growth to further strengthen the
management team will continue throughout the business, in order to deliver efficiencies and further growth in 2015 and beyond
Proposed final dividend of 1.83 pence per share (total dividend of 2.50 pence per share) reflects the board’s confidence
Our performance over the last 2-3 years shows that the aftermarket services sector offers outstanding opportunities to innovative businesses
We are demonstrably on track (financially, operationally, strategically and in M&A) to continue to target double-digit growth in revenue and profitability for the foreseeable future.
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Regenersis overview.
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Products Customers
21 depot sites 105 owned or franchised “retail units” 13 countries 3,751 full time equivalent employees £120m market capitalisation
Facts
Mobile 50% M&E 25% B2B 25% Mobile M&E B2B
40 50 60 70 80 90
100 110 120 130 140 150 160 170 180 190 200 210 220 230 240
2012 Nov. 2010 - 2011
Timeline.
Regenersis plc:
an underperforming
but well-positioned
business (~ 45
pence per share).
Hanover announces
14% stake
New board appointed.
Introduction of new
strategy and geographic
P&L reporting, showing
>50% of profits from
Emerging Markets.
Full year results showing
first operating
improvements.
Acquisition of HDM,
bringing Spain / Mexico /
Argentina.
Hanover
announces stake
increased to 23%.
Release of
2012 final
results
2013 Share price graph.
Trading
update H1
FY 2013
24
Trading
update H2
FY 2013 Acquisition
of Digicomp
Hanover Investors.
Founded 2002
Public market turnaround specialist
Selected public transactions shown opposite
25
Selected Public Transactions
Company Year Return
4Imprint Plc 2003 2.8x Elementis Plc 2005 2.5x Spirent Plc 2006 2.1x Fairpoint Plc 2009 2.0x Regenersis Plc 2011 4.0x
Turnaround Milestones.
2012 2013 2011
South Africa New Site Turkey New
Site
New CFO appointed
Digital Care rollout
commenced
Close down of Glasgow commenced
Global rollout of
B2B commenced
Acquisition of Spain &
LATAM
Recommerce rollout
commenced
Virgin Media
IFT rollout commences
First Global Mobile
Customer Secured
Group Sales & Marketing
Director Appointed
USA New Site
26
Acquisition of Landela
Remote Diagnostics
division created
Renew division
created & formation of partnership
with EcoAsia
Acquisition of Digicomp
Renew MD Appointed
Investment in Xcaliber
C.O.O. Appointed
Operational development.
Executive Chairman
COO Depot
Solutions
CFO
Global Sales
Renew Division
Strategy M&A
Refurbish-ment
Re-commerce
Digital Care
Emerging Markets
W. Europe & Americas
Integration and Cont.
Impr.
IT
IT
3. New senior management • Bryce Boothby • Pritpal
Matharu • Simon Harper
M&E and B2B
6. Separate IT approach to Renew
5. Scale up of new divisions and several new contracts
4. Integration of HDM, Anovo Nordics and Landela
2. Scale up of M&A team
1. Scale up of sales team
7. EcoAsia partnership
8. Renew division
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Competitive landscape.
Competitive Building Blocks
Category Examples Financial strength and performance
Repair and reverse capability
Focus on Emerging Markets
Focus on Beyond Repair
Regenersis
Pureplays SBE, Anovo Local specialists
Cordon, Bitronic
EMS repair operations
Jabil, Flextronic () ()
Large logistics and distribution
DHL, Arvato, Brightpoint, ()
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Investment proposition. Proposition Highlights
Play on emerging middle classes in emerging markets
Good organic growth & continuing M&A opportunities
Growing markets with resilience in down turn
5th consecutive year of revenue and profit growth 2009-2013 and on track to deliver consensus for 2014.
Exposure to strategic shake out Continuing M&A activity in the
sector - and for Regenersis
New high growth business ‘Beyond Repair’ in the Advanced Solutions area
IFT UK: completed and other countries being pursued
New Services: Renew (Digital Care, ReCommerce & Refurbishment) and Remote Mobile Diagnostics
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