INVESTOR PRESENTATION
October 2015 Introduction to Acal
Acal is an industrial electronics company Designing, manufacturing & distributing customised electronics to 25,000 industrial customers Products are generally used in customer’s end products
Unique High margin, differentiated, technologically complex products c.50% of products are customised and c.20% are uniquely sourced
International growth business Two thirds of revenue come from Germany, UK & Nordic 12% of revenue beyond Europe and growing
Acquisitive Acquiring businesses that strengthen our capabilities and expand our geographic reach 9 acquisitions since December 2009
Generating significant shareholder returns Upper quartile TSR vs FTSE small cap index over each of the last 3 years TSR growth of 101% in the last 3 years, c.400% over last 6 years
INVESTORINVESTOR PRESENTATION PRESENTATION│ October October 2015 2014 2 Examples of our customers
We supply: Temperature sensor assemblies
Providing: Consistent temperature coffee over long term repeated usage
We supply: Custom transformers
Providing: High quality, low noise power conversion for scanners
We supply: Custom cable assemblies
Providing: Connectivity in the stair lift between power and control signals
We supply: Custom embedded computers
Providing: Flight controller for Neuron Unmanned Aerial Vehicle
INVESTORINVESTOR PRESENTATION PRESENTATION│ October October 2015 2014 3
Acal today
Custom distribution Operating companies Market reach – 20,000 customers, 12 geographies Share customer opportunities Sales & engineering capability – 560 employees Achieve synergies Web platform – lead generation Retain an entrepreneurial culture
Sales EBIT
Power & Magnetics Communications 37% & Sensors 63%
Design & Manufacturing Electro- mechanical Own products, highly differentiated, c.5000 customers c.75% customised Imaging & Higher margins Photonics 20,000 customers EBIT Sales Microsystems & Displays 37% 63% Key:
Design & Manufacturing
Custom Distribution
Head Office
INVESTORINVESTOR PRESENTATION PRESENTATION│ October October 2015 2014 4 Diversified Group
Sales by country Sales by customer Sales by industry sector
FY15 Research Automation 6% Spain 4% Italy 3% France 5% 11% Transport Top 10 Other Benelux 4% 8% Auto 7% 11% 8% 14% International Renewable 8% 8% Oil & 12% 6% Gas Comms Nordic 12% 2% 19% Top 11-100 10% FY11 26% 23% 9% Medical Consumer All others 12% 4% UK 66% 23% 21% Distribution Germany Industrial 9% 22% 20% Defence 7%
Two thirds – Germany, UK, Nordic Largest individual customer – <2% Industrial – 20%
International - 12% and growing Top 100 individual customers – 34% Medical – 12%
Largest Group of customers- 3% Communications – 10%
Stable growing sectors
INVESTORINVESTOR PRESENTATION PRESENTATION│ October October 2015 2014 5 The market opportunity
Attractive markets driven by technology adoption Our future Customers need technology to create innovation in their products Focused customised electronics leader
Estimated £12bn market globally (£4bn Eu, £6bn USA, £2bn Asia) • Design, manufacturing and custom distribution
Markets likely to remain attractive long term • International footprint Growth well ahead of GDP • Industrial market Customer need for expert technical support will continue and grow • Driven by;
Market will remain highly fragmented – acquisition opportunities • Organic growth Europe & USA will remain centres for high end industrial design • Cross-selling • Acquisitions
* Management estimates
INVESTORINVESTOR PRESENTATION PRESENTATION│ October October 2015 2014 6 Our Strategy
Completing our transformation into a technology led provider of customised electronics for industrial applications with design, manufacturing and distribution capabilities
Moving up the electronics value chain by focusing on higher-margin, differentiated products in design, manufacturing and custom distribution
Growing sales organically well ahead of GDP by acquiring new customers via web marketing and realising operational efficiencies from cross-selling and synergies
Acquiring businesses that broaden and strengthen Acal’s technology expertise with complementary products, customers, suppliers and geographies
Developing sales internationally by following existing customers’ international needs and then by developing local market sales
Well established strategy since 2009 – focused implementation which is delivering results
INVESTORINVESTOR PRESENTATION PRESENTATION│ October October 2015 2014 7 Strategic & performance targets
Key Strategic Indicators Mid term FY 10 FY 14 FY 15(2) target 1. Increase Design & Manufacturing revenue(1) c.5% 18% 37% 65%
2. Increase cross-selling & web generated sales(1) 0% 2.7% 4% 4~5%
3. Build sales beyond Europe(1) 0% 5% 12% 20%
Key Performance Indicators 3 yr FY 10 FY 14 FY 15 Comments re FY15 target Well ahead GDP grew 1.1% in Europe (CY 14); 1. Organic sales growth -16% 2% 3% of GDP UK and Norway behind GDP growth rates 2. Increase underlying operating margin -0.3% 3.3% 4.9% 6-7% H2 FY15 at 5.3%
3. Attractive ROTCE (2) - 24% 24% >25%
4 Generate strong free cash flow (FCF)(3) - 86% 76% > 75% PBT 5 Generate long term value for shareholders (TSR) - 42% 19% Upper 101% TSR in 3 yrs (percentile vs FTSE Small Cap Index) 27th percentile 21st percentile quartile
(1) As a proportion of group revenue (2) Return on trading capital employed excludes goodwill using annualised result for Foss and Noratel acquisitions in the year (3) Free cash flow defined as net cash flow before payment of exceptional items, payment to the legacy defined benefit pension scheme, dividends, net proceeds from equity fund raising and costs of / proceeds from acquisitions and disposals
INVESTORINVESTOR PRESENTATION PRESENTATION│ October October 2015 2014 8 Growth expected to continue
Analysis Reported CER Actual CER Consensus Growth Growth Dividend per share(1) 7.6p FY 16* FY 15 % FY 15 % 6.8p 6.2p Sales 293 271 8% 252 17% 5.8p 5.4p Operating profit 16.4 13.4 22% 12.0 37% 5.1p 5.4p Operating margin 5.6% 4.9% 0.7ppts 4.8% 0.9ppts 5.0p 4.0p 4.4p 3.7p Profit before tax 14.1 11.8 19% 10.6 33% 3.4p
Fully diluted EPS 16.0p 15.4p 4% 13.8p 16% 2.2p Fully diluted shares 67.2m 60.9m 10% 1.7p 1.7p 1.8p 1.8p 1.8p
FY10 FY11 FY12 FY13 FY14 FY15 *Consensus of analysts as of Oct 2015
Operating Operating Profit Margin % £m Revenue (£m CER) 15.0 Profitability 5.5% Underlying EPS
59 5.0% 12.0
4.5% 170 9.0 42 36 4.0% 16 6.0 15.4p 164 3.5% 155 170 3.0 11.8p 155 164 3.0% 9.8p
59 0.0 2.5% FY 13 FY 14 FY 15 FYFY 13 13 FY 14 FYFY 15 15 FY 13 FY 14 FY 15 Underlying operating profit (CER) % of revenue (CER) DistributionNoratel/Foss Noratel/FossOther D&M DistributionOther D&M
INVESTORINVESTOR PRESENTATION PRESENTATION│ October October 2015 2014 9 Shareholder value creation
Shareholder value creation 2009 - 2015 3 drivers of value creation (£m) 1. Organic growth 200 £200m180 180 Differentiated value proposition 160 140 120 100 80 2. Acquisitions 60 40 Good fit 20 £6m6 0 Priced right EV at Acquisitions Organic Value Synergies Disposals Noratel, EV at 31/3/09 growth multiple Foss 31/5/15
3. Synergies Operational cost efficiencies • Effective acquisition and integration of good businesses has been an important value driver for the business Production efficiencies since 2009 Cross Selling
EV – Enterprise Value = Market Cap + Debt - Cash
INVESTORINVESTOR PRESENTATION PRESENTATION│ October October 2015 2014 10 The acquisition of Noratel is delivering results
Designer & manufacturer of customised transformers & inductors Acquired in July 2014 for £71m, plus 3 year earn out subject to performance Higher operating margins c.70% customised products Selling in Europe, Asia and USA
Progress
Trading well as expected 7% organic sales growth in H2 North America returned to profitability and sales growth
Cross-selling underway First orders received in cross-sell activities Further opportunities identified
Purchasing synergies of £0.2m achieved in Poland & China In line with expectations
INVESTORINVESTOR PRESENTATION PRESENTATION│ October October 2015 2014 11 Foss recently acquired
Designer, manufacturer and distributor of customised fibre optic cables and support products Acquired in January 2015 for £10m 3 year earn out of up to £2m subject to performance targets
Based in Norway and Slovakia Sales, production and value add capabilities Established 1984 in Norway and acquired Slovakian facility in 2013
Proven management remaining with the business
Broadly doubles Acal’s fibre optic business Cross-selling activities underway
Creates further bolt-on acquisition opportunities
Immediately earnings enhancing
INVESTORINVESTOR PRESENTATION PRESENTATION│ October October 2015 2014 12 Acal - A leader in customised electronics with excellent prospects
Compelling market opportunity Helping industrial design companies innovate and solve technological challenges Structural trends in target markets are driving underlying growth well ahead of GDP
Attractive business model, unique market position High quality, recurring revenues with rising operating margins Low risk with no customer / supplier >3% of revenue
Strong platform for growth Organic growth and additional cross selling opportunities Operational leverage and synergies Fragmented market ideal for acquisitions
Good track record of delivery Successful turnaround story since 2009 – Profit growth and margin improvement Nine successful acquisitions and integrations
INVESTORINVESTOR PRESENTATION PRESENTATION│ October October 2015 2014 13 Thank you – any questions?
INVESTORINVESTOR PRESENTATION PRESENTATION│ October October 2015 2014 14 APPENDIX
Technology capabilities
Power & Magnetics Electromechanical
Communications & Sensors
Shielding
Imaging & Photonics
Microsystems & Displays
Keyboards Medical
INVESTORINVESTOR PRESENTATION PRESENTATION│ October October 2015 2014 16 Non-Executive Directors
R J Moon - Non-Executive Chairman* R J Brooman MA FCA FCMI - Senior Non-Executive Director* Richard joined the Board in September 2004 and became Richard, a Chartered Accountant, became a Non-Executive Chairman in April 2005. Formerly a Director of Racal Director in January 2013. He is a Non-Executive Director, and Electronics plc and Chief Executive of Thales plc, he Chairman of the Audit Committees, at Hg Capital Trust plc and is Non-Executive Chairman of Seven Technologies Invesco Perpetual UK Smaller Companies Investment Trust plc. Holdings Limited and is Chairman of Synergie Business A Director or Trustee of several businesses and charities in the Limited. Richard will step down from the board in July 2015. third sector, during his executive career he was Group Finance Director of Sherwood International Plc and VCI Plc.
H E Marsh MBA MA - Non-Executive Director*
Henrietta (Het) was appointed a Non-Executive Director in May 2013. She is also a Non-Executive Director of Dods (Group) PLC, where she chairs the Remuneration Committee; a Non-Executive Director of Electric Word plc; an Operating Partner of ISIS Equity Partners ("ISIS"); and a member of the London Stock Exchange's AIM Advisory Group. Previously, she was a Fund Manager at ISIS and a Director of 3i plc.
* Denotes membership of the Board
INVESTORINVESTOR PRESENTATION PRESENTATION│ October October 2015 2014 17 Acal – Senior Management
N J Jefferies – Group Chief Executive* S M Gibbins – Group Finance Director* Nick joined Acal as Group Chief Executive in January 2009. His Simon was appointed as Group Finance Director in July 2010. A experience of electronics and the components industry comes Chartered Accountant, he was previously Global Head of from holding senior positions for over 15 years with leading Finance and Deputy CFO at Shire plc. Prior to joining Shire in international distributors of electronic components and computer 2000, he spent 6 years with ICI plc in various senior finance products, such as Electrocomponents plc and Arrow Electronics. roles, both in the UK and overseas. His earlier career was spent Nick originally trained as an Electronics Design Engineer with with Coopers & Lybrand in London Racal Defence (now part of Thales plc)
P H Neville ACA - Group Commercial Director M F Pangels - Group Strategy and Development Director
Paul was appointed Group Commercial Director in March 2009. A Martin is Group Strategy and Development Director. He joined Acal Chartered Accountant, he has over 15 years experience of in July 2010 after working as an advisor to the business. Prior to working in senior management positions for listed public joining Acal, Martin spent 9 years at Electrocomponents plc, where companies, including Wincanton plc and Uniq plc. Prior to joining he was Regional General Manager for Europe, and 6 years with Acal, he was Group Chief Executive of an AIM listed software Bain & Company as a strategy consultant. development company.
G P Shillinglaw FCIS - Group Company Secretary P G Webster - Group Product Management and Operations Director Gary joined Acal as Group Company Secretary in August 2008. A qualified Chartered Secretary, he has previously held that Paul joined Acal in June 2010 as Managing Director, Acal BFi position in a number of listed and non-listed public companies, UK. He has many years experience in senior management roles, including Countryside Properties plc, B&Q plc and First Leisure including Head of Product Management for Electronics globally Corporation plc. at Electrocomponents plc. He began his career as a design engineer for Plessey Avionics (now part of BAE Systems).
* Denotes membership of the Board
INVESTORINVESTOR PRESENTATION PRESENTATION│ October October 2015 2014 18