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Interim Results for the 6 months ended 31 December 2014.

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Presentation on theme: "Interim Results for the 6 months ended 31 December 2014."— Presentation transcript:

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


4 Financial highlights 2% revenue growth (12% in constant currency) Revenue growth Headline operating profit * Headline OCF** Cash conversion 70% (59% H1 FY14) Net cash *‘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. 4 30% profit growth (46% in constant currency) Investment in R&D and new acquisitions (financial year end)

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

6 H1 FY14H1 FY15 Margin progress HOP margins by division Group headline operating margin improving 6 H1’15H1‘14H1‘15H1‘14 Depot Solutions Software & Advanced Solutions H1’15H1‘14H1‘15H1‘14 Divisions pre-HQ Total Group At year end 2014 our expectation was to see the rising divisional margins translate to group HOP margins % HOP from Software & Advanced Solutions

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 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 7 Break-even run rate passed, as expected, at the end of H1 Shift towards higher margin S&AS business means less emphasis on revenue

8 H1 FY15H2 FY14H1 FY14H2 FY13 Revenue £M22.430.515.814.0 Growth / Const.-27% / -18% currency +42% / +59% HOP £M4. Growth / Const.-8% / 0% currency +73% / +89% HOP margin20.1%16.1%16.5%15.7% 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 8 Acquisition of Blancco boosted margins Recommerce contributed £16M revenue at high single digit margins in FY14

9 Underlying Software & Advanced Solutions trend 9 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 £millionH1'13H2'13H1'14H2'14H1'15 Reported HOP1. Recommerce(0.4)(1.2) IFRS revenue recognition at Blancco 0.11.0 Underlying HOP 1.42.2 3.85.5 Underlying trend in Software & Advanced Solutions HOP, eliminating one-offs Reported Software and Advanced Solutions HOP margin % Doubling of S&AS margin 2 months Blancco consolidated

10  Strong growth in H1 2015, following contraction in H2 2014 on exit from low margin UK mobile operations  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 H1 2015 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  Target: deliver higher margins from  Improved position in terms of clients and geographies  Ongoing continuous improvement  Reduced level of change  Roll out of IT system Depot Solutions 10 H1 FY15H2 FY14H1 FY14H2 FY13 Revenue £M79.567.383.975.5 Growth / Const.+18% / +29% currency -5% / +3% HOP £M4. Growth / Const.+5% / +15% currency -2% / +7% HOP margin5.2%5.8%5.0%5.2% FY14 closure of low margin UK mobile business Ramp up of new business and depot sites

11 Underlying Depot Solutions trend 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 1.Note FY13 included 10 months of HDM acquisition leaving approx. £4 million annualisation benefit in FY14. £16 million of revenue acquired with Bitronic, Digicomp, Landela, Regenersis Russia. Total £20 million acquired Depot revenue between FY13-FY15. Depot UK Depot RoW: Nokia & RIM Depot RoW: Other clients Depot Revenue Split Depot HOP and HOP margin 100% 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 Excluding costs of start-up sites (£0.5m) 11

12 Financial review 12 Income Statement  2.2% 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 £’millionH1 FY15H1 FY14 Revenue101.999.7 Headline operating profit before corporate costs8.66.8 Corporate costs(2.6)(2.2) Headline operating profit after corporate costs6.04.6 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 profit2.32.9 Unwinding of deferred consideration(0.4)(0.9) Revaluation of deferred consideration2.2- Other finance charges(0.6)(0.4) Profit before tax3.51.6 Tax0.8(0.2) Profit after tax4.31.4

13 Balance sheet 13  Goodwill arising on SafeIT acquisition  ROCE remains strong  Continue to turn stock quickly £’million H1 FY15FY14 Non current assets Goodwill and investments 85.582.6 Acquired intangible assets 21.722.5 Internally generated intangible assets * 7.06.0 Tangible assets * 5.75.3 Deferred tax 2.21.2 122.1117.6 Current assets Stock * 10.010.1 Debtors * 38.737.7 Creditors * (42.8)(44.3) Provisions * (0.6)(0.8) Other net current liabilities (2.3)(1.4) 3.01.3 Net Cash 12.120.6 Non current liabilities Deferred consideration (5.9)(6.4) Other non current liabilities (2.3)(2.7) (8.2)(9.1) Net assets 129.0130.4 Capital Employed (*) 18.014.0 ROCE annualised (HOP / Capital employed) 66.6%78.3%

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

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

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

17 Conclusions and outlook 17 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

18 Appendix

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

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

21 Repair sector underlying drivers * STB forecast from HIS Inc, 2014 (covering 2012-2017) Smartphone ASP by OS 2012-18 Source: IDC 2014 Millions of units Device sales volumes 2013-2017 Source: IDC 2013 21

22 Foreign Exchange 22 EUR:GBP PLN:GBP Combined 50% of Group revenues and profit RON:GBP ZAR:GBP MXN:GBP  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 H1 2014.  Further weakening of currencies from 1 January 2015 to date Emerging markets currencies combined 40% of Group revenues and profit, including Romanian Leu, South African Rand and Mexican Peso H1 2014 H2 2014 H1 2015

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