Transcript Investor Presentation

Hellaby capital raising
Investor presentation
27 March 2013
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
Agenda
Page
Section 1 – Summary
3
Section 2 - Overview of Hellaby Holdings
5
Section 3 – Details of the equity capital raising
12
Section 4 – Our investments
16
Section 5 – Financial information
30
Section 6 – Appendices
35
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
2
Section 1:
Summary
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
3
1.1. Summary
Capital raising
•
Hellaby Holdings Limited (“Hellaby” or “the Company”) is undertaking the following
measures to strengthen its balance sheet and increase financial flexibility:
– raising $40 million of new equity through a targeted placement to investors
– Share Purchase Plan to raise up to $10 million
•
UBS New Zealand Limited is acting as placement agent for the capital raising
Rationale
•
Equity raising will broaden the shareholder register providing greater depth and liquidity to
our investors
•
Hellaby continues to develop a pipeline of value accretive acquisitions. This capital raising
will provide the Company with the financial resources to execute on its growth strategy
•
The equity raising is not to fund the Contract Resources acquisition
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
4
Section 2:
Overview of Hellaby Holdings
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
5
2.1. Overview of Hellaby Holdings
•
We are a NZX-listed holding company owning a
diversified portfolio of New Zealand and Australian
industrial, distribution and retail businesses
•
We seek to generate attractive long-term shareholder
value through a combination of performance
improvement and organic growth in the businesses we
own, and through smart acquisitions and divestments
•
We actively manage our investments through a lean
corporate office, and decentralise leadership and
performance accountabilities to our companies
•
We seek to generate total shareholder returns
superior to the NZX50
•
We structure our investment portfolio through four
divisions
•
We continue to develop a pipeline of accretive
acquisitions to build out our portfolio of investments
‘buy, build, harvest’ investment philosophy
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
6
2.2. Where we’ve come from
Situation in 2007
•
No clear portfolio strategy or defined investment approach
•
A mountain of debt which was strangling the business
•
Commentators and market waiting for us to fail
•
Low investor confidence, when dividends temporarily suspended
– appropriate dividend policy subsequently established
•
A sub-optimal share register
– strong cornerstone shareholder, but limited institutional investors
– retail shareholders expecting a high dividend yield
•
Weak governance
– low recognition of debt problem
– hands-off approach to subsidiary performance
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
7
2.3. Where we are now
• New corporate leadership team since mid 2007 has successfully turned around Hellaby
performance
– streamlined the investment portfolio
– reformed the balance sheet and gearing
– developed tight financial and operational disciplines across subsidiaries
– restored investor confidence
• A diversified range of NZ / Australian industrial, distribution, retail businesses
• Portfolio in four divisions - Automotive, Equipment, Packaging, Footwear
• Hands-on owner of assets – no longer a passive investor
• Long-term holder of assets, although portfolio change now likely
• Small, lean corporate office of 9 staff (2200 employees across group)1
• Strong balance sheet
– gearing reduced from 65% 31 December 2007 to 6% 30 June 2012
– $178 million free cash flow generated in five years1
Notes: 1 As at 30 June 2012
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
We are now positioned for future growth
8
2.4. Hellaby is led by a very experienced management team
Greg Batkin
Hamish Johnstone
John Williamson
Richard Jolly
Neil MacCulloch
Chief Investment
Officer
BA (Econ), MBA
Joined 2010
Chief Human Resources
Officer
BSc
Joined 2012
Chief Executive Officer
& Managing Director
BA, LLB, LLM
Joined 2007
Chief Financial Officer
& Company Secretary
BCom, CA
Joined 2006
Chief Operating Officer
BSc, BCom, CA
Joined 2008
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
9
2.5. Where we are heading
• We will invest in one or two new sectors over time
• Completion of Contract Resources Limited (“Contract Resources”) acquisition – settlement
2 April 2013
• Pursue bolt-on acquisitions which enhance shareholder value
• Greater proportion of revenues and assets to be overseas-based by 2015
• Continued portfolio review
• A strong share register with broadened institutional support
• Improved liquidity
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
10
2.6. Investment strategy
Hellaby Holdings is an
active, hands-on owner
of assets, with a ‘buy,
build and harvest’
investment strategy
We continue to develop
a pipeline of accretive
acquisitions to build out
our portfolio of
investments
•
We are actively working to reshape our investment portfolio
•
With limited opportunity to achieve growth in the existing portfolio
the focus is on growth via acquisition
•
We are open to co-investment
•
We are seeking to acquire businesses with the following criteria:
–
–
–
–
–
–
geographical and sector diversification
favourable industry dynamics
strong experienced management team
business of scale contributing to earnings and leader in its market niche
bolt-on acquisitions
profitable with clear growth prospects
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
11
Section 3:
Details of equity capital raising
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
12
3.1. Details of the offer: Placement
•
$40 million targeted placement
•
Placement price of $3.00 per share
•
The new shares will rank equally with existing shares, and will be entitled to receive the
interim dividend of 5cps (record date 12 April)
•
Long-time supportive and major shareholder, Castle Investments is fully supportive of the
capital raising and will be participating
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
13
3.2. Details of the offer: Share Purchase Plan
•
Shareholders in New Zealand have the opportunity to subscribe for new Hellaby Holdings
shares up to a maximum application size of NZ$15,000
•
Maximum aggregate funds raised of $10 million
•
Pricing for the SPP will be the lower of:
– $2.95, being the placement price less the 5c interim dividend; and
– the average end of day market price, calculated over the period of five business days
immediately prior to the offer closing
•
Offered to New Zealand shareholders on the register at 8 April 2013
•
Shares issued in the SPP will not be entitled to the dividend payable on the 19 April 2013
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
14
3.3. Key dates
Placement date
27 March 2013
Trading halt on the NZX
27 March 2013
Allocations finalised
27 March 2013
Trading resumes
28 March 2013
Placement settlement date
3 April 2013
Record date for SPP
8 April 2013
Record date for interim dividend
12 April 2013
Interim dividend payment date
19 April 2013
Note: Dates are indicative only and may be subject to change without notice
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
15
Section 4:
Our investments
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
16
4.1. Summary overview
•
•
•
We manage a portfolio of companies across the
New Zealand economy, with a small Australian
presence
Our portfolio investment strategy diversifies risk
and gives investors the opportunity to participate
in any cyclical upswing in the economy
Group ($m)
FY10
FY11
1H12
FY12
1H13
Sales
454.2
465.0
241.2
493.9
243.7
Trading EBITDA
27.7
34.0
15.8
37.4
13.7
Trading EBIT
20.3
26.8
12.2
30.1
10.6
Trading surplus
12.3
22.6
11.1
27.9
9.6
NPAT
10.3
15.3
7.8
19.3
6.2
ROFE
17.4%
25.3%
25.2%
29.6%
24.8%
We will continue to review our ownership of assets
in the portfolio to ensure we allocate capital
efficiently and maximise returns to shareholders
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
17
4.2. Contract Resources: overview
•
Hellaby has entered into a conditional agreement to acquire shares in Contract Resources
from Rangatira Limited, existing management and founder shareholders for an EV $116
million1
•
Contract Resources is an international specialised industrial services company
•
Operations in Australia (largest market), New Zealand, USA, the Middle East and South
America
•
90% of revenues are generated offshore (70% in Australia)
•
Blue chip client base that includes a large number of multi-national oil and gas companies
•
Contract Resources expected to generate EBITDA of greater than $20 million; EBIT of
greater than $13.7 million in FY142
•
Contract Resources expected to provide EPS accretion to Hellaby shareholders in FY142 of
~6.0 cps3 on a pro-forma basis
•
Hellaby is targeting further growth and as such Contract Resources will have a
requirement for further investment, including capex of ~$8.0 million in FY142
Notes:
1 Equates to EV/EBITDA FY14 (forecast) multiple of 5.8
2 FY14 relate to the financial year ended 30 June 2014
3 HBY shares on issue at 27 March 2013: 75.782 m
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
18
4.3. Contract Resources: services
Catalyst Handing and Mechanical Services
•
•
•
•
•
Catalyst handling – loading and unloading
Commissioning, maintenance and repair of catalytic reactors
On site vessel and column repair and welding
Cold cutting and bolt tensioning and torqueing
Plant shutdowns and demolition
Environmental and Industrial Services
•
•
•
•
•
•
•
Tank maintenance and cleaning
Water jetting and heat exchanger services
Pipeline services
Sludge removal
Mercury and asbestos decontamination
Industrial coatings
Currently EIS offered in Australia, NZ and the Middle East
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
19
4.4. Contract Resources: business attributes
•
Sizeable business
– projected FY14 revenues of around $150 million and FY14 EBITDA of greater than $20 million, Contract
Resources is a significant business
•
Platform for growth
– Contract Resources has grown its revenue from $88 million in FY09 to $140 million in FY12, a CAGR of 17%
•
Expanding sectors
– Hellaby had long identified the oil and gas services sector as one of potential interest
– Contract Resources’ growth opportunities are underpinned by favourable sector trends
– The oil, gas, mining and petrochemical sectors are projected to achieve significant growth over the next 10
years, supported by new technologies and sources of energy (shale/oil and gas, liquefied natural gas
“LNG”) coming on stream
•
Significant player
– Contract Resources estimates it has in excess of 75% share of the catalyst handling and associated
mechanical services (“CHMS”) market in New Zealand and Australia and significant shares of the
environmental and industrial services (“EIS”) market in the same regions
•
Barriers to entry
– A combination of best practice technology, significant health, safety and environmental requirements and
longstanding blue chip clients with stringent provider pre-selection processes underpins Contract
Resources’ strong market position
Note: All references to financial years for Contract Resources other than FY14 unless otherwise specified refer to financial years ended 31 March. All references to FY14
relate to the financial year ended 30 June 2014
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
20
Sludge removal equipment on offshore platform -Timor Sea
Mechanical technicians reinstalling pipework in high hazard facility
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
Inert entry technicians during catalyst project
Semi automated heat exchanger cleaning during plant turnaround
21
4.5. Automotive: overview
•
•
•
$m
Six wholesale distribution businesses supply
automotive and truck replacement parts,
batteries, tyres and wheels to trade repairers
and resellers
Distributes tyres and wheel componentry to
the agricultural and materials handling
equipment and truck sectors
National network
FY10 FY11 1H12
FY12 1H13
Sales
157.0
161.7
83.7
167.9
85.6
Trading EBITDA
19.4
20.8
10.5
21.6
10.4
Trading EBIT
18.2
19.6
9.8
20.3
9.8
ROFE
36.8
43.8%
44.8%
Free cash flow
24.9
22.7
16.2
Staff numbers
553
541
566
– Over 80 branches across Australasia
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
22
4.6. Automotive: market dynamics
Market dynamics
Strategy
•
Repco and BNT group are NZ’s two
largest wholesale distributors
•
•
Relatively stable industry structure
Consolidate NZ wholesale
autoparts position with specialist
bolt-on acquisitions
•
Fragmented autoparts customer
base, without dependency on
larger customers
•
Expand wholesale tyre
segmentation (eg truck tyre
expansion)
•
Average age of NZ vehicle fleet is
13 years, hence steady aftermarket
demand
•
Evaluate NZ retail autoparts
opportunities
•
Develop wholesale autoparts
position in Australia through
acquisition
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
23
4.7. Equipment: overview
•
•
•
•
•
•
One of NZ's leading suppliers of materials
handling and construction equipment
Provides equipment servicing and rentals
though a network of 18 technical service
centres across NZ
Distributor of leading global brands incl Toyota,
Sumitomo, Tigercat, Linde, Vermeer, Manitou
Blue chip fleet customers for Toyota and Linde
forklifts
Amalgamation late 2012 of AB Equipment and
Eurolift into single entity will improve service
offering and efficiencies
AB Equipment secured Doosan and Bobcat
distributorships in February 2013
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
$m
FY10 FY11 1H12
FY12 1H13
Sales
82.5
89.8
55.4
116.5
61.5
Trading EBITDA
(0.3)
2.6
2.5
6.4
2.7
Trading EBIT
(1.9)
1.0
1.5
4.5
2.0
ROFE
(10.8)%
7.1%
33.0%
Free cash flow
6.2
0.4
7.2
Staff numbers
267
277
309
24
4.8. Equipment: market dynamics
Market dynamics
Strategy
•
•
Achieve efficiency and service
improvements in FY14 from
amalgamation of AB Equipment
and Eurolift
•
Grow the aftermarket service
workshop footprint, incl though
small regional acquisitions
•
Integrate and grow Doosan and
Bobcat brands
•
Broaden the equipment portfolio
with specialist equipment brands
•
Evaluate opportunities in NZ
agricultural equipment and truck
sectors
•
•
Multiple global equipment brands
represented in NZ
Heavy equipment sector
recovering from severe market
downturn in 2008-11
AB Equipment’s differentiation is
– its breadth and quality of
equipment brands
– strength in key specialist
segments (directional drilling,
forestry)
– scale of service workshop
operation (one of NZ’s largest
aftermarket operations)
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
25
4.9. Packaging: overview
•
•
•
•
•
•
•
Acquired Elldex Packaging in 2005
Supplier of flexible plastic packaging
Elldex’s point of difference in NZ is
combination of local manufacturing with
strong competency in Asian sourcing
Christchurch extrusion, printing and
conversion manufacturing plant
Performance improvement initiatives under
new leadership; overheads being reduced
NZ sales performance relatively steady, with
blue chip customers in dairy, meat,
supermarket and retail sectors
Struggled to grow Australian sales on
sustainable basis (now being addressed)
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
$m
FY10 FY11 1H12
FY12 1H13
Sales
53.2
50.8
24.5
48.6
23.1
Trading EBITDA
5.6
5.7
1.8
3.6
1.7
Trading EBIT
5.1
5.1
1.4
3.0
1.5
ROFE
39.4%
43.9%
24.3%
Free cash flow
7.4
5.3
1.2
Staff numbers
160
155
117
26
4.10. Packaging: market dynamics
Market dynamics
Strategy
•
•
Streamline Australian sales
operation to improve performance
•
Improve NZ business development
capability
•
Consolidate overhead savings
initiatives
•
Capitalise on client nervousness
about Amcor / Aperio dominance
(‘the credible alternative’)
•
Capitalise on Elldex’s combined
Asian sourcing and local
manufacturing capability
•
Modernise manufacturing footprint
for planned sales growth in food
sector
•
•
Merger of Amcor / Aperio has
created dominant Australasian
position in flexible packaging
Elldex is a market leader in the
next tier of flexible packaging
suppliers
Primary sector food processors
prefer supply from local flexible
packaging manufacturers (rather
than import)
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
27
4.11. Footwear: overview
•
$m
Acquired 80% of No1 Shoe Warehouse in
July 2005, balance in 2007
FY10 FY11 1H12
FY12 1H13
Sales
163.8
165.0
78.7
163.4
74.7
Trading EBITDA
7.0
9.7
3.3
11.8
2.5
Largest footwear retail presence in New
Zealand with 40-50% market share
Trading EBIT
3.3
6.4
1.7
8.4
0.9
ROFE
8.3%
16.9%
24.8%
•
Well known brands; Hannahs, Number One
Shoes and Hush Puppies chains that cover
most market segments
Free cash flow
1.6
11.6
11.1
Staff numbers
1,296
1,175
1,191
•
Successful, major repositioning of Number
One Shoes under new leadership since 2009
•
History of strong financial performance in
tough trading environment
•
National network
•
– 115 stores across NZ
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
28
4.12. Footwear: market dynamics
Market dynamics
Strategy
•
Consumer spending trend for
footwear relatively flat; and
depressed demand in FY13
•
Enhance performance through
improved inventory and product
management
•
Emerging online competition for
the footwear dollar
•
•
Growth through new stores and
improved retail footprint
Strong NZ dollar has enhanced
margins over recent years
•
•
Number One Shoes the only
dedicated ‘category killer’ in
footwear
Expanded online offering at
Hannahs and Number One Shoes
•
Review long-term portfolio fit
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
29
Section 5:
Financial information
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
30
5.1. Historical performance FY12
•
Trading EBITDA up 10% to $37.4 million, outpacing 6%
revenue growth
•
Trading EBIT up 13% to $30.1 million
•
NPAT up 26% to $19.3 million
•
$28.9 million free cash flow generated
•
30% return on funds employed
•
29% total shareholder return
•
All four divisions exceeded Hellaby’s 20% ROFE target
37.4
EBITDA
34.0
27.7
26.5
$m
2009
2010
Return on funds
employed (ROFE)
2011
2012
29.6%
25.3%
17.4%
•
Hellaby has its most conservative capital structure in a
decade
12.8%
2009
2010
2011
2012
Target < 20%
60% increase in operating profit over the last 3 years
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
31
5.2. Review of interim result 1H13
Trading EBITDA
15.8
14.6
•
Despite soft market conditions, Hellaby’s combined divisional
performance at a level largely consistent with pcp
9.7
•
Three of four divisions achieved operating profits equal to or
better than pcp, with Footwear performance below pcp
•
Sales growth up 1.0% to $243.7m in challenging trading period
$m Dec-09
•
Trading EBITDA down 13.3% to $13.7 million
NPAT
•
$6.2 million NPAT is below pcp due to flat market conditions
and higher corporate costs
•
Higher corporate costs related to acquisition due diligence
costs, investment in HR initiatives and long-term executive
incentive scheme expense
•
Total net debt reduced 19.2% to $23.8 million
•
13.5% gearing is well within target of <45%
•
ROFE of 24.8% (rolling 12 months), exceeds 20% target
•
Net asset backing $2.02 per share, compared to $1.92 per
share pcp
13.7
Dec-10
Dec-11
7.8
6.2
5.5
2.3
$m Dec-09
Dec-10
Dec-11
Dec-12
Total Net Debt and Gearing
96.9
100
60%
73.3
50
50%
40%
45.2
30%
24.5
29.5
10.1
23.8
0
20%
10%
0%
$m Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12
Target < 45%
Gearing
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
Dec-12
32
5.4. Outlook
•
•
Signalled that earnings will likely be flat pending acquisitions
30 June 2013 full-year NPAT forecast to be ~$18.5
NPAT
million1
– Q4 negative impact of $0.8 million from combination of 85%
share of Contract Resources profits, less one-off transaction
and funding costs
•
•
•
•
18.5
2012
2013F¹
15.3
10.3
0.7
$m
2009
•
19.3
2010
2011
Contract Resources forecast to achieve >$20 million EBITDA in
FY14
Hellaby is in good shape, with strong ROFE, balance sheet and
improved net asset backing
Will continue to invest in people projects and M&A due diligence
Market conditions remain soft in 2H13
Impending acquisition of Contract Resources marks the
commencement of Hellaby’s growth phase through acquisition
Note: 1 As announced to the NZX on 19 February 2013
Hellaby is commencing a growth phase through acquisition
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
33
5.1. Dividend
•
Dividend policy of distributing around 50% of NPAT
•
Interim dividend of 5 cps, fully imputed (5 cps for pcp)
•
Reflects Directors’ confidence that Hellaby’s underlying divisional performance is largely
consistent with pcp
•
Dividend to be paid on 19 April 2013
•
Directors continue to recommend Dividend Reinvestment Plan
Dividends per share
13.0
10.0
8.0
0.0
cps
2009
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
2010
2011
2012
34
Section 6:
Appendices
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
35
6.1. 5 year summary
Earnings ($000)
Shareholder returns
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
36
6.2. 5 year summary
Asset backing ($000)
Other measures
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
37
Disclaimer
•
This presentation provides information in summary form and is not intended to be complete. No attempt has been made to independently verify the
information.
•
Some statements in this presentation are forward looking statements regarding future events and/or the future financial performance of Hellaby
Holdings Limited, its subsidiaries and investments (together, “HBY”) and the environment in which they operate. Because these statements are
forward looking, Hellaby Holdings Limited's actual results could differ materially.
•
Although management and directors may indicate and believe that the assumptions underlying the forward looking statements are reasonable:
–
any of the assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the
forward looking statements will be realised (and actual results or events may differ materially);
–
no representation, warranty or assurance (express or implied) is given or made in relation to any forward-looking statement by any person
(including HBY and HBY’s respective directors, officers and employees);
–
the forward-looking statements in this document speak only as of the date of this presentation.
•
Media releases, management commentary and investor presentations are all available on the company's website and contain additional information
about matters which could cause HBY’s performance to differ from any forward looking statements in this presentation. Please read this
presentation in the wider context of material previously published by Hellaby Holdings Limited.
•
Nothing in this presentation constitutes legal, tax or other advice. This presentation does not constitute an invitation or offer to apply for shares.
Neither this presentation nor anything contained in it shall form the basis of any contract or commitment and it is not intended to induce any person
to engage in, or refrain from engaging in, any transaction. The information in this presentation does not take into account any person’s investment
objectives, financial situation or particular needs.
•
To the maximum extent permitted by law, HBY and HBY’s respective directors, officers, employees or advisors do no accept any liability for any
errors, omissions or loss (including because of negligence) arising, directly or indirectly, from any use of this presentation or information contained in
this presentation.
•
This presentation has been prepared for publication in New Zealand and may not be released or distributed in the United States. This presentation
does not constitute an offer of securities for sale in the United States or any other jurisdiction. Any securities described in this presentation may not
be offered or sold in the United States absent registration under the US Securities Act of 1933 or an exemption from registration.
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
www.hellabyholdings.co.nz
Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013
39