Saint-Gobain has fundamentally undervalued...
Transcript of Saint-Gobain has fundamentally undervalued...
BPB plcResponse to Saint-Gobain’s offer
Saint-Gobain has fundamentally
undervalued BPB
5 years ago BPB was a good companyNow it is well on the way to becoming
a great company
BPB urges shareholders to reject the bid
720p substantially undervalues BPBand represents almost no premium
BPB is a scarce and valuable asset
Note (1): Implied premium of only 0.7%
(1)
1. BPB’s position today
2. Financial track record
3. Management strategy & future actions
4. Plasterboard market
5. Regional growth & drivers
6. 2005/06 profit forecast
7. Financial implications
8. Case for re-assessment
AgendaAgendaAgenda
The Directors of BPB accept responsibility for the information contained in these presentation materials, except that the only responsibility accepted by them in respect of the information contained in these presentation materials relating to Saint-Gobain, its subsidiary undertakings and the directors of Saint-Gobain and/or any such subsidiary undertakings, which has been compiled from published sources, is to ensure that such information has been correctly and fairly reproduced and presented. Subject as aforesaid, to the best of the knowledge and belief of the Directors of BPB (who have taken all reasonable care to ensure that such is the case), the information contained in these presentation materials for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of that information.
These presentation materials should be read in conjunction with, and subject to, the circular to BPB shareholders published on 14 September 2005 (the "Circular"). In particular, the information contained in these presentation materials is, unless otherwise stated, derived from the Circular and presented on the basis set out in Appendix 3 to thereto (Bases of calculation and sources of information).
These presentation materials contain statements that are or may be forward-looking with respect to the financial condition, results of operations and businesses of BPB. These forward-looking statements include risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors which could or may cause actual results or developments to differ materially from those expressed or implied by such forward-looking statements. The information contained in these presentation materials is provided as of the date of issue. All written and oral forward-looking statements attributable to the Directors of BPB or persons acting on their behalf are qualified in their entirety by these cautionary statements.
1. BPB’s position today
2. Financial track record
3. Management strategy & future actions
4. Plasterboard market
5. Regional growth & drivers
6. 2005/06 profit forecast
7. Financial implications
8. Case for re-assessment
AgendaAgendaAgenda
No.1 EuropeNo.1
Canada
No.1South Africa
No.1Egypt
No.2 Thailand
No.3USA
No.1 India
No.1Brazil
Global leadership in core products
No.1 UK & IrelandNo.1 FranceNo.2 GermanyNo.1 Benelux
No.1 IberiaNo.1 ItalyNo.2 Eastern EuropeNo.1 Nordic
No.6 China
Global No.1 in Plasterboard and Building Plasters
BPB’s position today
Over 80% of salesin plasterboard and
building plasters
Productsales
Geographicsales
A broadly based geographic presence
65%Plasterboard
Other 19%
16%Plasters
18% UK
10%Central Europe
5% Eastern Europe
23%N America
Emerging 5%Markets
8% Iberia
16%France
15%Rest of Europe
Plasterboardmarket sectors
New Residentialc.33%
RMIc.33%
Commercialc.33%
Exposure to 3 market sectors
Competitive global position
• Key markets have undergone considerable consolidation
• Most markets have 2-3 competitors
• National, Georgia Pacific (gypsum) & USG operate mainly in North America
• Yoshino operates mainly in Japan
Plasterboard
18%USG
19%Other
7%Yoshino
19%BPB
12%NGC6%
GP
7%Knauf
12%Lafarge
AgendaAgendaAgenda
1. BPB’s position today
2. Financial track record
3. Management strategy & future actions
4. Plasterboard market
5. Regional growth & drivers
6. 2005/06 profit forecast
7. Financial implications
8. Case for re-assessment
Strong sales growth
Sales + 53%
CAGR + 11%
Even greater operating profit growth
Underlying Op profit +105%
CAGR + 20%
1,6621,931
2,1712,317
2,535
2002 2003 2004 2005 2006(f)
180221
249304
369
2002 2003 2004 2005 2006(f)
£m
£m
Year end March
CAGR +11%
CAGR +20%
Group financial performanceDelivering record results
Group financial performanceDelivering record results
Impressive EPS performance
Underlying EPS +143%
CAGR + 25%
Strong EBITDA growth
EBITDA + 81%
CAGR + 16%
21.025.8
30.5
38.5
51*
2002 2003 2004 2005 2006(f)
CAGR +25%
268328 350
402
485
2002 2003 2004 2005 2006(f)
*2006 EPS is stated on a proforma (undiluted) basis to reflect the full year impact of the capital return
£m
pence
CAGR +16%
Year end March
Group financial performanceDelivering record results
Almost doubled ROIC
ROIC + 87%
CAGR + 17%
Significant dividend growth
Dividends per share + 76%
CAGR + 15%
14.212.5
9.98.8
7.6
2002 2003 2004 2005 2006(f)
13.10 13.55 14.2516.00
23.00
2002 2003 2004 2005 2006(f)
pence
%
CAGR +17%
CAGR +15%
Year end March
Europe: Core region continues to perform strongly
• Around 70% of2004/05 group profits
• Real progress over last 2 years in sales and margins
• 2005/06(f) profits up over 13%
• Restructuring helped margins
• Market expected to grow strongly
184.3 182.0193.9
213.8
242
0
100
200
300
2002 2003 2004 2005 2006(f)0
500
1,000
1,500
2,000
Underlying operating profit Sales
Sales (£m)
Underlying operating profit (£m)
29.4
40.1
71.1
104
(11.8)
-30
0
30
60
90
120
2002 2003 2004 2005 2006(f)-200
0
200
400
600
800
North America: Excellent profit growth
• Improved performance driven by cost savings and price increases
• Operating at high utilisation levels
• Targeting lower operating costs
• Good margins despite cost inflation
Sales (£m)
Underlying operating profit (£m)
Underlying operating profit Sales
7.59.1
15.2
23
19.0
0
10
20
30
2002 2003 2004 2005 2006(f)0
50
100
150
200
Emerging Markets:Exceptional growth potential
• Profit growth in excess of 20% pa
• Some start-up costs at new plants
• Achieving margins of 14-15%
• Region exhibiting very high growth rates
Sales (£m)
Underlying operating profit (£m)
Underlying operating profit Sales
1. BPB’s position today
2. Financial track record
3. Management strategy & future actions
4. Plasterboard market
5. Regional growth & drivers
6. 2005/06 profit forecast
7. Financial implications
8. Case for re-assessment
AgendaAgendaAgenda
A straightforward model
• Focus on plasterboard systems and building plasters
• Exploiting growth in our core products
• Investing in Europe, North America and the Emerging Markets
• A strong management team
• Spreading best practice to improve performance
Implying …
• Driving development of the global market
• Investing in excess of twice depreciation
• Spreading best practice through our “7i’’ change programme launched in 2002
1. Safety 2. Marketing3. Product management4. World class manufacturing5. Purchasing & supply chain6. People development7. Information systems & technology
Safety
• Moral responsibility and good management
• BPB’s performance was disappointing
• First “7i’’ initiative to be launched
• Excellent improvement
17.015.5
9.5
5.74.9
02 03 04 05 ytd 06
No. of 1 day lost time accidentsper 1,000 employees
Improving Safety Performance
(year to March)
World Class Manufacturing
• WCM is an excellent Japanese methodology
• 4 pilot plants in 2002/03
• Global roll out from 2004/05
• Initial results outstanding
• As an example, Chambery net efficiency up from 87% to 96% over 3 years
• Tremendous potential over next 3-4 years
Efficiency improvements
Factory & general overheads(% turnover)
135
151
168183
2002 2003 2004 2005
18.4%
19.7%20.1%
21.4%
2002 2003 2004 2005
Sales per employee(£000s)
14% reduction 35% increase
AgendaAgendaAgenda
1. BPB’s position today
2. Financial track record
3. Management strategy & future actions
4. Plasterboard market
5. Regional growth & drivers
6. 2005/06 profit forecast
7. Financial implications
8. Case for re-assessment
560 550
2,371
3,500
803
1,600
387
1,050
1995 2005
Plasterboard is a growth product
• Strong growth across all stages of market development
• Since 1995 global market has grown over 60% (CAGR over 5%)
• BPB’s organic growth 6.5% pa since 1995
High growth rates and attractive market dynamics
4.1bnsq m
Emerging & other markets
Europe
6.7bnsq m
+171%
+99%
+48%
Japan(2)%
North America
Plasterboard growth drivers
• Economic growthUSA
Plasterboardvolume + 46%
GDP + 34%
UK
Plasterboard volume + 71%
GDP + 29%
EU
Plasterboardvolume + 47%
GDP + 21%
• Population growth and demographics
• Product substitution
• More stringent building regulations
1995 2000 2004 1995 2000 2004 1995 2000 2004100
125
150
100
125
150
175
100
125
150
Slide 24
s7 MASTERS OF THESE SLIDES AT END OF THE PRESENTATIONshowcase, 13/09/2005
0.3 0.6 1.0 1.11.6 1.9 2.0 2.2 2.3 2.7
3.3 3.6 3.94.6 4.7 4.8
9.5
10.8
<0.1
Indi
a
Chin
a
Sout
h Af
rica
Thai
land
Ital
y
Chile
Pola
nd
Spai
n & P
ort.
Net
herla
nds
Ger
man
y
Belg
ium
Aust
ria
Den
mar
k
Swed
en UK
Fran
ce
Finl
and
Cana
da
USA
Future market potential
Plasterboard consumptionm2 per capita in 2005
Demographic trends, economic growth & product penetrationexpected to underpin an acceleration of historic global market growth rate
Future market growth
• Global plasterboard market expected to increase by c.33% to almost 9bn sq metres by 2010
• Implied growth rate up from 5% to 6% pa
• Increasing product penetration
• BPB to increase capacity by c.45% by 2010 - emerging market capacity to treble
Exciting growth prospects
AgendaAgendaAgenda
1. BPB’s position today
2. Financial track record
3. Management strategy & future actions
4. Plasterboard market
5. Regional growth & drivers
6. 2005/06 profit forecast
7. Financial implications
8. Case for re-assessment
• Excellent housing prospects
• More stringent building regulations
• New board plant at Sherburn
• New plaster plant at East Leake
• Strong position in Ireland
Population: 64mPopulation growth: 0.4% paPenetration per capita: 4-5 sq m Market growth: 5%-6% pa Market position: No.1
UK and Ireland
Plasterboard plantPlaster plantFuture plasterboard plant
Key:
Future plaster plant
• Attractive demographics
• Growth driven by new housing and RMI
• Excellent gypsum deposit near Paris
• Plaster plant upgraded at Vaujours
• Vaujours rebuild will increase plasterboard capacity by 25% in 2008
Population: 60mPopulation growth: 0.5% paPenetration per capita: 4-5 sq mMarket growth: 5%-6% paMarket position: No.1
France
Plasterboard plantPlaster plantFuture plasterboard plant
Key:
Future plaster plant
• Plasterboard markets still under-developed, so growing faster
• Plasterboard capacity in Spain almost doubling
• Moving to higher value plasters in Spain
• Significant opportunity in east of region
The Mediterranean
Population: 215mPopulation growth: 0.5% paPenetration per capita: 1-2 sq m Market growth: c.10%-12% paMarket position: No.1
Plasterboard plantPlaster plantFuture plasterboard plant
Key:
Future plaster plant
• Growth driven by economic modernisation and penetration
• Current plants sold out
• Romanian board plant on stream later this year
• 3 further plants planned for the region by 2010
Population: 300mPopulation growth: - 0.5% paPenetration per capita: <1 sq mMarket growth: c.10% paMarket position: No.2
Eastern Europe
Plasterboard plantPlaster plantFuture plasterboard plant
Key:
Future plaster plant
• Demographics and economic background mixed
• Restructured German business
• Upside potential when German economy improves
• No major growth investment planned
Population: 147mPopulation growth: 0.1% paPenetration per capita: 2-3 sq mMarket growth: Modest
(exc. Germany)
Market position: No.1-2
Central Europe, Benelux & Nordic
Plasterboard plantPlaster plantFuture plasterboard plant
Key:
Future plaster plant
• Strong demographic factors support continued growth
• Industry capacity utilisation above 95%
• BPB beginning to broaden product mix
• Building two new plants in Eastern USA
Population: 320mPopulation growth: 1.0% paPenetration per capita: 10+ sq mMarket growth: 3%-4% paMarket position: No.3
North America
Plasterboard plantPlaster plantFuture plasterboard plant
Key:
Future plaster plant
• Exceptionally strong demographics
• Rapidly improving economy
• BPB investing ahead of growth
• 7 board plants by 2010
• Exciting plaster opportunity
Population: 1,000mPopulation growth: 1.5% paPenetration per capita: <0.1 sq m Market growth: c.30% pa Market position: No.1
India
Plasterboard plantPlaster plantFuture plasterboard plant
Key:
Future plaster plant
• Strong demographics and economic prospects
• Malaysian plant on-stream early 2006
• Second Thai plasterboard line near completion
• Opportunities elsewhere in the region
Population: 460mPopulation growth: 1.2% paPenetration per capita: 0.3-0.4 sq mMarket growth: over 15% paMarket position No.2
South-East Asia
Plasterboard plantPlaster plantFuture plasterboard plant
Key:
Future plaster plant
• Strong demographics and exceptional economics
• Industry structure changing
• BPB investing in very low cost plant network
Population: 1,300mPopulation growth: 0.7% paPenetration per capita: 0.3 sq m Market growth: c.20% paMarket position: No.6
China
Plasterboard plantPlaster plantFuture plasterboard plant
Key:
Future plaster plant
Current & planned BPB capacity(million square metres)
550
690
2005 2010 (f)
120
360
2005 2010 (f)
NorthAmerica
EmergingMarkets
700
940
2005 2010 (f)
Europe
+200% +25%+34%
c.45% increase in capacity by 2010
1. BPB’s position today
2. Financial track record
3. Management strategy & future actions
4. Plasterboard market
5. Regional growth & drivers
6. 2005/06 profit forecast
7. Financial implications
8. Case for re-assessment
AgendaAgendaAgenda
2005/06 Profit Forecast Year to 31 March
+23.8%282.6350Underlying PBT £m (2)
(before impact of capital return)
+9.4%2,316.82,535Turnover £m (1)
Change2005 (A)2006 (F)
Another record resultwith underlying proforma EPS of 51p
up almost a third
Notes(1) 2006 turnover around £2,535m(2) 2006 underlying PBT not less than £350m(3) Assuming a full year impact of the capital return
(3)
Regional Results Forecast Year to 31 March 2006
+21.4%+9.4%
13.114.6653692182,535Group
-
23
104
242
£m
Underlyingoperating profit
6
38
78
96
Change £m
(2)
164
610
1,763
£m
Turnover Return on sales
---Less inter-area
15.014.04Emerging Markets
13.417.033North America
12.813.728Europe
2005 (A) %
2006 (F) %
Change £m
Note(1) 2006 turnover around £2,535m
(1)
AgendaAgendaAgenda
1. BPB’s position today
2. Financial track record
3. Management strategy & future actions
4. Plasterboard market
5. Regional growth & drivers
6. 2005/06 profit forecast
7. Financial implications
8. Case for re-assessment
Capital return and dividend
Capital return
• c. £350 million (70p per share)
• Proforma 2005/06 interest cover 9.1x
• Earnings enhancing
More efficient balance sheet and re-based dividendreflecting confidence in the future
Dividend
• 2005/06 23p per share (+44%)
• Base for future dividends
Implied trading value
Applying only the average peer group PE multiple:
Saint-Gobain has fundamentally undervalued BPB
51p2005/06 underlying proforma EPS (undiluted)
3.2%Implied dividend yield (based on 23p per share)
715pImplied trading value per BPB share(1)
14.3xAverage peer group PE multiple
50p2005/06 underlying proforma EPS (diluted)
(1) Implied trading value per BPB share is calculated on the basis of the assumed issued share capital of BPBfollowing the capital return
AgendaAgendaAgenda
1. BPB’s position today
2. Financial track record
3. Management strategy & future actions
4. Plasterboard market
5. Regional growth & drivers
6. 2005/06 profit forecast
7. Financial implications
8. Case for re-assessment
BPB – Case for re-assessment
• Lots of positive new information
• Superior financial performance
• Diversified risk (geographic spread)
• Impact of industry consolidation
Earnings ratios failed to properly reflect long-term potential
BPB – A unique investment
• Clear strategy
• Exceptional growth prospects
• World leader
• Highly profitable
• Very cash generative
• The right team
Stay with BPB
Conclusions
5 years ago BPB was a good companyNow it is well on the way to becoming a great company
BPB urges shareholders to reject the bid
720p substantially undervalues BPBand represents almost no premium
BPB is a scarce and valuable asset
Note (1): Implied premium of only 0.7%
(1)
BPB plcResponse to Saint-Gobain’s offer
Saint-Gobain has fundamentally
undervalued BPB