Brammer PLC Interim Results -4-

  sales -%                            56.7   57.3   62.5    67.7    71.6     74.5 
 Non Key Accounts proportion 
  of total sales -%                   43.3   42.7   37.5    32.3    28.4     25.5 
 Insites proportion of total 
  sales -%                            33.2   34.4   40.0    38.3    43.7     42.6 
 
 Bearings proportion of total 
  sales -%                            22.3   22.1   20.6    12.4    11.9     10.3 
 T&GM as a proportion of total 
  sales -%                            10.1   10.7   13.0    47.5    47.7     47.9 
 Fluid Power as a proportion 
  of total sales -%                   20.0   20.4   19.9    12.0    12.3     12.8 
 

* Includes Buck & Hickman

Revenues in SPWD for the UK decreased by 1.4%, with operating profit down 3.5% to GBP8.2 million.

Key Account sales increased by 1.4%, a lower growth rate than historically experienced in the UK, where the Brammer strategy is most advanced. The moderation in growth rate is largely due to several specific national Key Account contracts who have delayed maintenance programmes during the first half. Therefore, whilst the National Contract tier of Key Accounts declined 4.6% in the period, the main tier of pan-European Key Accounts reflected more typical growth rates of 10.9% in the period. Insite(TM) sales and Tools and General Maintenance sales have therefore also declined although we anticipate growth will recover somewhat in the second half.

The proportion of turnover which is Key Accounts has increased by 2.9 percentage points and now represents 74.5% of turnover. Our value proposition continues to be attractive to new customers and we continued to win new Key Accounts including Honeywell Technologies, Smurfit Kappa and Tarmac.

The number of full time and part time Insites(TM) now totals 195, four more than last year. Twelve new Insites(TM) opened in the period, including ten relating to Tools and General Maintenance customers.

Bearing sales declined 4.3% reflecting a challenging market, as some customers restrict discretionary spend, but our ongoing cross-selling initiatives delivered improvements in Tools and General Maintenance and Fluid Power sales as a proportion of total sales.

The integration of the Buck & Hickman business has been extremely successful and ongoing synergy benefits continue to be ahead of our original expectations. The proposal to merge the logistics and administrative functions of Buck & Hickman and Brammer UK during the second half of the year represents a further opportunity to drive efficiency and would provide a large step towards the full integration of the businesses.

Germany

 
                                                                              H1 
                                      2009   2010   2011    2012    2013    2014 
 SPWD growth -%                      -30.8   13.4   19.2     0.0    -2.4     7.7 
 
 Key Account sales growth -%         -22.4   20.9   24.1     7.2    11.5    10.6 
 Insite sales growth -%               -6.7   36.8   37.2    16.4    12.1    18.4 
 Insite numbers                         12     20     37      47      54      55 
 Customer signed off cost savings 
  -GBP'm                               0.5    5.4    9.4     7.9    12.7     3.2 
 
 Bearings Growth -%                  -38.1    9.7   14.7   -10.6   -10.6    -2.6 
 Non bearings 
 Mechanical Power Transmission 
  sales growth -%                    -30.0   27.0   11.0     1.4     7.3     0.3 
 Fluid Power sales growth -%         -50.5    2.3   28.1    13.0     1.3     7.4 
 Tools and General Maintenance 
  (T&GM) sales growth -%             -25.6   24.4   58.6    13.9    45.9    62.4 
 
 Key Accounts proportion of total 
  sales -%                            22.8   24.1   26.8    30.5    35.3    36.4 
 Non Key Accounts proportion 
  of total sales -%                   77.2   75.9   73.2    69.5    64.7    63.6 
 Insites proportion of total 
  sales -%                             3.8    4.5    7.9     9.4    11.6    13.9 
 
 Bearings proportion of total 
  sales -%                            33.3   32.0   31.6    28.5    26.0    24.4 
 T&GM as a proportion of total 
  sales -%                             2.1    2.3    3.4     3.9     4.3     5.4 
 Fluid Power as a proportion 
  of total sales -%                   18.1   16.2   17.9    20.5    22.2    22.2 
 

SPWD returned to growth in 2014, increasing by 7.7% in the period and trading profit increased by 27.6% to GBP3.7 million.

Bearings sales declined 2.6% in the year reflecting a challenging market, but the rate of decline significantly reduced compared to the 10.6% decline experienced in the full year 2013. Our focus on product range extension saw a 9.9% growth in non-bearings products, including the bolt-on acquisition of a small tools and general maintenance specialist during the period. This has helped growth in Tools and General Maintenance accelerate to 62.4% compared to the 2013 full year reflecting an important step change in this key product range.

Key Accounts growth continued into the fifth consecutive year, at 10.6% and we continued to win new Key Accounts including St Gobain and Daimler. The number of Insite(TM) locations continues to increase and now totals 55 with seven Insites(TM) opening during the period and six others closing. Despite a similar number of Insites(TM) to 2013, Insite(TM) sales growth accelerated by 6.3 percentage points to 18.4%.

France

 
                                                                            H1 
                                      2009   2010   2011   2012   2013    2014 
 SPWD growth -%                      -14.6   11.1   14.2    3.5   -4.7     3.9 
 
 Key Account sales growth -%          -4.1   18.8   19.1   12.3    3.1     5.7 
 Insite sales growth -%              -14.0   38.7   16.0   27.3   30.9     6.7 
 Insite numbers                         20     22     31     39     45      50 
 Customer signed off cost savings 
  -GBP'm                               2.0    2.6    3.8    2.6    4.5    10.4 
 
 Bearings Growth -%                  -18.5    6.1    9.2   -5.0   -8.4    -5.5 
 Non bearings 
 Mechanical Power Transmission 
  sales growth -%                    -10.1    9.8   10.6    3.5   -9.4    -5.9 
 Fluid Power sales growth -%          -7.2   28.0   25.6   14.6    1.5     6.7 
 Tools and General Maintenance 
  (T&GM) sales growth -%              21.8   84.4   32.7   16.5   39.8    39.2 
 
 Key Accounts proportion of total 
  sales -%                            31.0   33.3   35.8   40.0   44.1    44.2 
 Non Key Accounts proportion 
  of total sales -%                   69.0   66.7   64.2   60.0   55.9    55.8 
 Insites proportion of total 
  sales -%                             5.0    6.2    6.6    9.6   13.7    13.8 
 
 Bearings proportion of total 
  sales -%                            38.6   36.5   35.0   32.1   30.6    28.0 
 T&GM as a proportion of total 
  sales -%                             2.4    4.0    4.6    5.2    7.6     8.9 
 Fluid Power as a proportion 
  of total sales -%                   12.2   13.9   15.4   17.0   18.0    17.9 
 

SPWD grew by 3.9% with a growth of 21.4% in operating profit to GBP1.7million. In the face of continuing difficult conditions in the market, bearings sales declined by 5.5%, but Key Account growth accelerated to 5.7%. We won new contracts including Rio Tinto, Massily, Polyrey, Safran and Fleury Michon, and Key Accounts now represent 44.2% of sales.

A small bolt-on acquisition made in the second quarter will contribute to future Fluid Power growth. Sales of Tools and General Maintenance product grew at 39.2%. Although this is a similar growth rate to the full year 2013, quarter on quarter growth rates are accelerating this year.

We opened five Insites(TM) in the first half, only one fewer than the six in the full year of 2013 and there is a healthy pipeline of future contracted Insite(TM) agreements.

Spain

 
                                                                             H1 
                                      2009   2010   2011    2012   2013    2014 
 SPWD growth -%                      -22.3    9.5   12.3    -0.3    3.8    14.0 
 
 Key Account sales growth -%          -4.2   19.5   28.5    15.3   19.5    32.9 
 Insite sales growth -%               27.6   22.0   46.3    31.8   56.0    64.9 
 Insite numbers                         13     15     22      30     38      39 
 Customer signed off cost savings 
  -GBP'm                               1.7    1.3    2.3     2.1    1.2     0.5 
 
 Bearings Growth -%                  -28.4    4.4    3.3   -10.1    3.3     0.3 
 Non bearings 
 Mechanical Power Transmission 
  sales growth -%                    -21.9    7.0   14.9    -4.9   -0.9    10.4 
 Fluid Power sales growth -%          -0.1   34.2   46.1    23.9   23.4    30.6 
 Tools and General Maintenance 
  (T&GM) sales growth -%               4.3   48.0   33.2    89.0   71.5    78.8 
 
 Key Accounts proportion of total 
  sales -%                            25.0   26.8   31.2    36.4   40.6    47.0 
 Non Key Accounts proportion 
  of total sales -%                   75.0   73.2   68.8    63.6   59.4    53.0 
 Insites proportion of total 
  sales -%                             5.6    6.3   10.5    13.7   21.2    27.3 
 
 Bearings proportion of total 
  sales -%                            43.4   41.2   37.9    34.1   32.6    28.2 
 T&GM as a proportion of total 
  sales -%                             1.7    2.3    2.7     5.1    8.0    11.3 
 Fluid Power as a proportion 
  of total sales -%                    7.3    8.9   11.6    14.3   16.4    18.3