Interim Results for Six Months to 30 June 2002

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(No Transcript)
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Interim Results for Six Months to 30 June 2002

• John Allan Chief Executive
• John Coghlan Deputy Chief Executive and Group
  Finance Director
• Monday 29 July 2002

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Agenda

• Highlights and operating review John Allan
• Financial review John Coghlan
• Strategic update and outlook John Allan

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Highlights
Highlights

• Good profit growth in mixed markets
• Profit Before Tax up 13
• Freight management outperformed underlying
  markets
• Turnaround of underperforming operations
• Turnover growth achieved despite weak technology
  and automotive markets
• Strong free cash flow of 60.9m
• Annualised new contract gains exceeded 350m in H1

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Financial Summary
Operating Review
Six months to 30 June
change
2001 m
2002 m
Turnover - continuing operations
2,234.9
2,175.1
2.7
Operating profit - continuing operations
107.5
102.9
4.5
Margins - continuing operations
4.8
4.7
PBT including discontinued
100.3
88.6
13.2
EPS
22.7p
19.6p
15.8
Dividend
7.5p
7.0p
7.1
Note Where relevant, all figures are pre
goodwill amortisation and exceptional items
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Contract Wins, Losses and Renewals
Operating Review

• Over 350m annualised turnover in new contract
  wins
• Gained over 220m net annualised turnover
• Renewed over 280m of contract logistics turnover
• expected increases in contract turnover and
  margins
• particularly strong performance in retail,
  consumer and healthcare contracts

Good performance in nearly all sectors
Enhanced value added services and contract scope
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Margin Causal
Operating Review
Six months to 30 June

2001
Price
Other
2002
Volume
Perf./
Cost Mgt
Freight
2.3
0.8
(0.6)
0.6
3.2
0.1
Management

2001
Insurance
US Tech
Other
2002
Spain
Contract
4.9
(0.3)
(0.2)
(0.1)
-
4.3
Logistics
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Freight Management Activities
Operating Review

• 48 of logistics turnover
• 25 global airfreight
• 6 global seafreight
• 17 US intermodal
• and other

Freight Management
Integrated Logistics
Contract Logistics
Leading global freight management business
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Key Factors in Freight Management Performance
Operating Review

• Strong recent business gains partially offset by
  underlying technology volume decreases
• Despite overall market weaknesses achieved strong
  growth in Asia Pacific and Europe - weak US
  export volumes
• Good seafreight growth
• Steady intermodal performance
• Expected customer pricing pressure seen in all
  regions

Turnover

• Purchasing and consolidation efficiencies offset
  pricing pressures
• Tighter capacity in Asia Pacific towards end of
  the period
• Good cost management maintained

Margins
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Outperformed Underlying Airfreight
MarketPerformance in H1 2002
Operating Review
Total International Market Volumes Change in
airweight Exel 10 Underlying market
(consolidated estimate) 1-2
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Outperformed Underlying Airfreight
MarketPerformance in H1 2002
Operating Review
European Export Volumes Change in airweight
Exel 11 Underlying market (consolidated
estimate) (4)
Market source Average of key airport gateways -
all figures in tonnes of airweight. June 0
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Outperformed Underlying Airfreight
MarketPerformance in H1 2002
Operating Review
Americas Export Volumes Change in airweight
Exel (15) Underlying market (consolidated
estimate) (17)
0
J
A
S
O
N
D
J
F
M
A
M
J
-5
-10
-15
-20
-25
Source IATA. Market figures for April and May
are estimates based on airport volumes. No
comparable analysis available for June
Market
Exel
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Outperformed Underlying Airfreight
MarketPerformance in H1 2002
Operating Review

• Exel has seen a significant shift in balance of
  trade flows across US import and export activity
• Total From Asia From Europe
• Imports Up 26 Up 40 Up 19
• Total To Asia To Europe
• Exports Down 15 Down 9 Down 16

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Outperformed Underlying Airfreight
MarketPerformance in H1 2002
Operating Review
Asia Pacific Export Volumes Change in airweight
Exel 22 Underlying market (consolidated
estimate) 11
Source Average of key airport gateways - all
figures in tonnes of airweight
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Freight Management PerformanceAnalysis of change
by Geography
Operating Review

• Share gains and improved market conditions
  supported good turnover growth
• Strong volumes offset tighter gross margins

Asia PacificTurnover 259m 13 Profit
17.4m 66

• Lower international airfreight volumes offset
  domestic strengths
• Improvements at Transportation Services and other
  performance initiatives offset volume reduction
  impact

UK IrelandTurnover 121m - 7 Profit
2.9m 38
AmericasTurnover 439m - 5 Profit 7.1m
1

• Improved profit performance despite lower
  technology volumes

Continental Europe Turnover 236m
11 Profit 6.0m 28

• Improved volumes new business and market share
  gains with technology customers
• Cost management and purchasing efficiencies more
  than offset price pressure

includes Africa Middle East
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Key Factors in Contract Logistics Performance
Operating Review

• Benefits of recent net contract gains more than
  offset customer volume reductions
• Retail, Consumer and Healthcare sectors
  particularly robust
• Underlying technology volumes weak, partially
  offset by new wins

Turnover

• Non-recoverable insurance costs of nearly 4m
• Specific operational issues in Spain impacted
  margins
• US technology hit by weaker volumes

Margins
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Contract Logistics PerformanceAnalysis of change
by Geography
Operating Review

• New business in China, Hong Kong, Malaysia and
  Singapore
• Management team strengthened to maintain growth
  in region

Asia PacificTurnover 41m 48 Profit
1.7m 143
AmericasTurnover 341m 6 Profit 17.3m
-1
UK IrelandTurnover 584m 2 Profit
28.9m - 8

• Solid performance in consumer, retail and
  healthcare
• Automotive steady despite weak markets
• Performance at many technology operations hit by
  reduced volumes

• Solid underlying performance in retail, consumer
  and healthcare
• Technology volumes very weak
• Performance improvement at AMS
• Increased insurance costs

Continental Europe Turnover 163m -
1 Profit 0.1m -98

• Disappointing performance in Spain led by weaker
  volumes and several operating issues
• Strong performance in The Netherlands
• Higher insurance costs across the region

includes Africa Middle East
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Progress with UnderperformersAs at end July 2002
Operating Review
AMS

• Operational efficiencies starting to impact the
  business
• Improved underlying margins seen in H1
• Business outlook remains positive

• Management made good progress in stabilising the
  business
• Met internal forecasts for H1 2002
• New opportunities being developed to broaden the
  customer base
• Ford remains a significant influence on prospects
  for balance of 2002

FX Coughlin
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Environmental Highlights
Operating Review
Turnover 50.5m -1
Operating Profit 8.0m 1

• Steady trading performance
• landfill activities performed well
• municipal services contracts slightly down
• Concluded Western Riverside Waste Authority
  contract
• 700m over 30 years
• over 1bn including related operations
• significant recycling component
• Contract renewal with Gloucester County Council
• incremental revenues from recycling and other
  services

Strategically Positioned to Maximise Potential
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John CoghlanDeputy Chief Executive and Group
Finance Director
Financial Review
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Profit and LossBefore goodwill and exceptional
items
Profit and Loss
Six months to 30 June
2001 m
2002 m
Change
Operating profit
- Continuing
107.5
102.9
4.5
- Discontinued
-
(1.3)
107.5
101.6
(7.2)
(13.0)
Net interest
Profit before tax
100.3
88.6
13.2
Earnings per share
22.7p
19.6p
15.8
Interest cover
15x
8x
Interim dividend per share
7.5p
7.0p
7.1
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Profit and Loss
Profit and Loss
Six months to 30 June
2001 m
2002 m
Profit before tax, goodwill and exceptional items
100.3
88.6
Goodwill
(11.8)
(9.2)
Exceptional items
0.8
(1.6)
Profit before tax
89.3
77.8
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Exceptional Items
Profit and Loss
Six months to 30 June
2001 m
2002 m
0.8 -
Profit on disposal of properties Cost of
reorganisation following merger
8.0 (9.6)
Total
0.8
(1.6)
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Cash Flow AnalysisSix months to 30 June 2002
Cash Flow Analysis
EBITDA
m
160
140
120
100
154.5m
80
60
40
20
0
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Capital Expenditure
Capital Expenditure
2001 m
2002 m
Six months to 30 June
60.3
54.1
Gross capital expenditure
(33.6)
(9.7)
Disposal proceeds
26.7
44.4
Net capital expenditure
129
114
Gross capital expenditure as a percentage of
depreciation
57
94
Net capital expenditure as a percentage of
depreciation
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Balance Sheet
Balance Sheet
30 June 2001 m
30 June 2002 m
31 Dec 2001 m
402.2
378.7
Goodwill
389.8
648.3
617.8
Fixed assets
621.3
133.1
102.4
Working capital
110.9
306.9
342.5
Pensions prepayment
324.4
(198.0)
(215.7)
Provisions (inc. deferred tax)
(211.6)
(111.3)
(107.4)
Other net liabilities
(137.8)
1,181.2
1,118.3
1,097.0
864.4
889.8
Shareholders funds
860.3
20.4
20.2
Minority interests
16.9
296.4
208.3
Net debt
219.8
1,181.2
1,118.3
1,097.0
34.3
23.4
25.5
Balance sheet gearing
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Foreign Exchange
Foreign Exchange

• Minimal impact on first half results
• Interim statement on prospects reflects the
  movements in exchange rates to US1.56 and 1.58
• Further movements of one cent from those rates
  would have the following impact on PBT

H2 2002 and related 0.35m 0.10m
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John AllanChief Executive
Strategic Progress
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Strategic FocusExels Approach
Strategic Progress
Mission Exel will be the preferred, global supply
chain partner to its customers. Exels skilled
and motivated people will create value for
customers and shareholders through consistently
superior delivery of innovative business
solutions.
Customer Focus

• Focus on key customers and sectors
• Expand geographical and service penetration
• Innovate and customise solutions
• Strengthen positions in key market sectors
• Provide consistent global capabilities and
  management

Global Coverage

• Achieve global coverage and strong market
  positions in key service offerings
• In airfreight, be a top 5 player in the worlds
  top 20 markets
• In seafreight, develop a strong market position
  on all major lanes
• In 3PL, build on existing coverage to develop
  positions in all key economies

Integrated Capability

• Enhance IT capability to support integrated
  supply chain management
• Invest in resources to design and implement
  proven integrated supply chain solutions
• Identify and secure major outsourcing projects

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Understanding of Exel is Growing
Strategic Progress
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Overall Exels Level of Service has Improved
Strategic Progress
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Exels People Differentiate the Business
Strategic Progress
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Reputation and Quality of Staff Continues to
Strengthen
Strategic Progress
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2002 Customer Survey DemonstratesGrowing Demand
for Integrated Solutions
Strategic Progress
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Americas Contract GainsSelected wins during H1
2002
Strategic Progress

• 50 contract logistics wins in Brazil, Canada,
  Mexico and the US
• Over 140 freight management gains spanning
  intermodal, road and airfreight

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Goodyear names Exel as its Lead Logistics Provider
Recent News

• Exel and Goodyear
• The success has been evident in significant
  positive results in inventories, that have
  improved our cash flow, and fill-rates, that have
  improved our customer service.
• With Exel we will be working with.the best
  equipped to service our supply chain needs
• Going forward
• This move will expand Exels reach into our
  supply chain network beyond its current effective
  management of our distribution centers.
• John Loulan
• Goodyears VP of Operations NA

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Asia Pacific Contract GainsSelected wins during
H1 2002
Strategic Progress

• Over 25 contract logistics wins in Australia,
  China, India, Malaysia, Philippines, Singapore
  and Thailand
• Over 30 significant freight management wins
  across Asia Pacific

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XingWang - Beijing, ChinaFebruary 2002
Investing in Developing Markets
Picture not available
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XingWang - Beijing, ChinaMarch 2002
Investing in Developing Markets
Picture not available
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XingWang - Beijing, ChinaJuly 2002
Investing in Developing Markets
Picture not available
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Arndell Park - Sydney, Australia
Strategic Progress
Picture not available
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European Contract GainsSelected wins during H1
2002
Strategic Progress

• 80 contract logistics wins across Europe
• Around 50 freight management wins in France,
  Germany, Italy, Portugal, Spain, Turkey and the UK

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Seafreight USCL Acquisition
Strategic Progress

• US and China based consolidation services
  business
• Strategically positioned in high growth South
  East China
• Strong presence in retail and consumer

Picture not available

• Los Angeles
• 190,000 sq. ft. transit facility

• China
• 250,000 sq. ft. facility based in Yantian Free
  Trade Zone
• Cross-dock facility with capabilities for Import,
  Export and value-added services inc. sub-assembly
  work

Picture not available
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Seafreight Creating a Differentiated Value
Proposition with Consolidation Services
Strategic Progress
Work with manufacturers to expedite orders and
manage local logistics needs
De-consolidation, clearance and onward shipment
services

• Headquartered in Hong Kong
• Owned facilities in HK, China and USA
• Replicated capabilities in India, Indonesia,
  Korea, Malaysia, Singapore and Vietnam
• Volumes 160,000 TEU
• Carrier neutral solution

Consolidate shipments and provide delivery
services to Americas, Europe and elsewhere in
Asia Pacific
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Seafreight Commoditised ServicesConventional
Shipping Line Proposition
Strategic Progress
Port to Port Transit
Larger customers use buying power to purchase
lowest freight rates direct from the shipping
lines
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Seafreight Commoditised ServicesConventional
Freight Broking
Strategic Progress
Port to Port Transit
Freight Brokering
Deconsolidation
Customs Clearance
Customs Clearance
Seafreight brokers can consolidate smaller
companies freight needs and purchase capacity
more effectively direct from the shipping lines.
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Seafreight Exel Solutions Create Value Along the
Entire Supply Chain
Strategic Progress
Final product customisation or sub-assembly work
can be completed prior to shipment, in the free
zone if optimal
Integration with intermodal solutions in the US
provides end-to-end capability with no hand off
of responsibility
Final Product Customisation
Freight Brokering
Port to Port Transit
Deconsolidation
Final Onward Delivery
Supplier Management
Customs Clearance
Consolidation Optimisation
Customs Clearance
Optimisation of packaging and consolidation can
lead to 25 fewer shipments - significant
seafreight savings for the customer
Exel can provide supplier management to expedite
shipments, manage orders and optimise packaging
at the factory
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Seafreight Next Steps
Strategic Progress

• Complete integration of USCL with existing Exel
  operations
• Develop global capabilities -
• leveraging existing relationships
• US retail
• US consumer goods
• UK retail
• Continue to develop suitable acquisition
  opportunities that deepen Exels capabilities

Trans-Pacific Asia to Americas
Asia to Europe
Objective Strong organic growth supplemented by
selected strategic acquisitions
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Short Term Priorities
Summary

• Maintain momentum on new business development
• continued emphasis on cross-selling and
  integrated solutions
• Continued focus on cost and cash management
• Profitable development of Continental European
  contract logistics operations
• operational performance initiatives
• strengthen management teams
• elimination of under-performing assets

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Outlook
Summary

• No clear signs of recovery in underlying markets
• Trading conditions remain challenging
• airfreight pricing competitive
• technology volumes remain subdued
• Customer focus on low risk value for money
• a challenge and an opportunity
• Exel maintaining competitive advantage
• forward pipeline remains strong

Notwithstanding the current financial impact of
the weaker dollar, the Group remains confident
that, barring any deterioration in global trading
conditions, Exel should achieve market
expectations for 2002
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Spread and Balance of Activities
Total Logistics
Geographic Balance
Sector Focus
Asia Pacific 14
Other 7
Industrial 7
United Kingdom Ireland 32
Consumer 22
Chemical 7
Automotive 11
Retail 16
Americas 36
Technology 25
Healthcare 5
Continental Europe 18
H1 2002 Turnover 2,184m, up 3
includes Africa Middle East
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Spread and Balance of Activities
Freight Management
Geographic Balance
Sector Focus
Other 9
United Kingdom Ireland 11
Asia Pacific 25
Consumer 16
Industrial 14
Chemical 5
Retail 7
Continental Europe 22
Automotive 5
Healthcare 5
Technology 39
Americas 42
H1 2002 Turnover 1,056m, up 2
includes Africa Middle East
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Spread and Balance of Activities
Contract Logistics
Geographic Balance
Sector Focus
Other 5
Industrial 3
Asia Pacific 4
Chemical 7
Americas 30
Consumer 28
Automotive 15
Technology 12
United Kingdom Ireland 52
Continental Europe 14
Healthcare 5
Retail 25
includes Africa Middle East
H1 2002 Turnover 1,129m, up 4