Steel & Tube Holdings Limited · NZX:STU
Steel & Tube — FY2019 Earnings Presentation
34 slides from Steel & Tube's earnings presentation, 2019
Slide 1: FY19 Results Presentation
FY19 Results Presentation For the 12 months ended 30 June 2019
Slide 2: FY19 Challenging Market, However Good Progress on Business Turnaround
FY19 CHALLENGING MARKET, HOWEVER GOOD PROGRESS ON BUSINESS TURNAROUND 1H19 trading in line with expectations CHALLENGING TRADING ENVIRONMENT χ Market contraction in some sectors and price pressures in 2H19 Responded to unsolicited non-binding indicative offer in September 2018 $10m in benefit
Slide 3: Challenging Trading Conditions in 2H19
CHALLENGING TRADING CONDITIONS IN 2H19 1H19 trading in line with expectations; VOLUME FY18:FY19 2H19 margin performance lower than expected and impacted on result Easter/ANZAC Second half trading FY19 (2H19) Tonnes • Growing market share and volumes were more than FY18 FY19 offset by market contract
Slide 4: Continuing Commitment to Quality & Safety
CONTINUING COMMITMENT TO QUALITY & SAFETY Quality: Safety, Health, Environment: • Telarc ISO 9001:2015 quality certification • Focus on management of critical risks • Continued implementation of Lloyd’s Register • Continuing improvement in health and safety independent steel mill audits with Employe
Slide 5: FY19 Group Financial Summary
FY19 GROUP FINANCIAL SUMMARY RESULTS IMPACTED BY STRONG CASHFLOW % $m FY19 FY18 2H19 GROSS MARGIN GENERATION change PERFORMANCE $21.3M Revenue 498.1 495.8 0.5% Normalised Revenue1 497.1 473.5 5% NORMALISED REVENUE1 REDUCTION IN NET EBIT 16.8 (36.2) $497.1M +5% DEBT TO $15M Normalised EBIT1 16.0 13.1
Slide 6: Increased Revenue Driven by New and Existing Customers
INCREASED REVENUE DRIVEN BY NEW AND EXISTING CUSTOMERS 5% increase in Group normalised revenue1 NORMALISED REVENUE1 • Gains in market share and volumes 550 • New business growth due to a combination of 500 473.5 497.1 delivery performance and better customer offer 450 • Distribution: Particularly im
Slide 7: Reduction in Normalised Operating Expenses
REDUCTION IN NORMALISED OPERATING EXPENSES 4% reduction in operating expenses on a normalised basis1 $m FY19N1 FY18N1 % Change FY18 Opex 95.9 99.4 (4)% 115.9 Underlying structural reduction of ~$5m achieved partially offset by increased lease costs from sale and lease backs in FY18 and Strive execut
Slide 8: EBIT Bridge: FY18N to FY19
EBIT BRIDGE: FY18N1 TO FY19 25.0 2.2 7.8 20.0 0.8 16.8 2.1 16.0 15.0 (9.2) 13.1 10.0 5.0 - FY 19 EBIT Sales & Margin Sales & Margin S&T Plastics Opex and Other income FY 18 EBIT Normalised FY19 EBIT Normalised Opex EBIT ($M) Base 1) See Slide 32 and 33 for definitions of financial terms and reconcil
Slide 9: Strengthened Balance Sheet
STRENGTHENED BALANCE SHEET Tight capital management and reduction in debt $m FY19 FY18 creating a strong balance sheet – critical for Trade and other receivables 90.7 99.2 companies in softening economic environment Inventories 114.0 116.0 Trade and other payables (41.1) (49.9) Working Capital 163.6
Slide 10: Disciplined Working Capital Management
DISCIPLINED WORKING CAPITAL MANAGEMENT • Disciplined management and improved collections FY18 Excl leading to reduction in accounts receivable, Days FY19 FY18 Plastics particularly in the second half 48 65 55 Trade Receivables (DSO) • Collections improvement with debtors days Inventories (DIO) 107 1
Slide 11: Significant Reduction in Net Debt
SIGNIFICANT REDUCTION IN NET DEBT FY18:FY19 NET DEBT BRIDGE Strong balance sheet provides the financial strength to execute strategies and manage 120 5.6 109.9 (78.8) business trading cycles 104.3 105 • Significant reduction in debt following capital 90 raise concluded in September 2018 • Further re
Slide 12: Prudent Capital Expenditure Focused on Productivity Improvements
PRUDENT CAPITAL EXPENDITURE FOCUSED ON PRODUCTIVITY IMPROVEMENTS CAPITAL INVESTMENT Capex back to ‘business as usual’ levels after significant investments in previous years 50 40 • Slightly below depreciation and amortisation • Funded through operating cash flow 30 Major projects in FY19: 20 • Repla
Slide 13: NZ IFRS 16 Effective 1 July 2019
NZ IFRS 16 EFFECTIVE 1 JULY 2019 BALANCE SHEET ASSETS LIABILITIES • Removes the distinction between operating 500 and finance leases, with all leases now on 400 balance sheet 300 • Results in a shift of operating lease costs, 200 currently reported within other operating expenses, to interest and de
Slide 14: Divisional Review
DIVISIONAL REVIEW Distribution Infrastructure
Slide 15: Our Business: Divisions
OUR BUSINESS: DIVISIONS DISTRIBUTION INFRASTRUCTURE Products are sourced from preferred steel mills and distributed through Products are processed before sale and typically on a contract or project Steel & Tube’s national network of branches basis, including onsite installation services FY19: ~58% o
Slide 16: FY19 Divisional Performance
FY19 DIVISIONAL PERFORMANCE Distribution FY19 REVENUE FY19 FY18N 1 % Change FY18 Distribution $m • Hardest hit by market Revenue 287.7 288.3 (0)% 288.3 segment contraction in some EBIT 2.9 2.62 9% (12.8) 42% segments and pricing pressure 58% • Cost management and efficiencies focus delivering benefi
Slide 17: Distribution
DISTRIBUTION Revenue $287.7m EBIT $2.9m Lower margin, higher volume business - being impacted by market and pricing pressures Progress Warehousing of stock brought back in-house from November 2018 ($2.2m savings) Consolidation of 10 sites across the network, reducing costs and enhancing collabor
Slide 18: Infrastructure
INFRASTRUCTURE Revenue $209.4m EBIT $11.9m Higher margin business, with sales tailored to customers’ requirements Progress Margin improvements due to manufacturing efficiencies ($0.3m in Rollforming) Freight savings and efficiencies in Rollforming ($0.7m) Strong focus on Health & Safety with e
Slide 19: Strive in Action
STRIVE IN ACTION
Slide 20: Integration of Sites and Acquisitions
INTEGRATION OF SITES AND ACQUISITIONS Sites reduced from 48 to 35, optimising product range and resources with further network optimisation planned, whilst maintaining regional presence and services 20
Slide 21: Operational & Supply Chain Excellence: Distribution
OPERATIONAL & SUPPLY CHAIN EXCELLENCE: DISTRIBUTION Warehousing brought in-house from November 2018 Labour cost efficiencies and integration of acquisitions • Over 12,000 product lines transferred to ‘mother • Integration of acquisitions to core business, centres’ from external warehouses reducing d
Slide 22: Operational & Supply Chain Excellence: Infrastructure
OPERATIONAL & SUPPLY CHAIN EXCELLENCE: INFRASTRUCTURE Manufacturing efficiencies in reinforcing Freight efficiencies • Introduction of management processes to drive • Management & business process changes machine efficiencies introduced to improve freight recoveries in the Rollforming business • FY1
Slide 23: Strategy and Outlook
STRATEGY AND OUTLOOK
Slide 24: Strategic Pillars and Goals
STRATEGIC PILLARS AND GOALS OUR GOAL IS TO BE THE LEADER IN BUYING, SELLING, PROCESSING AND PLACING STEEL PRODUCTS IN NZ BUSINESS GOALS FURTHER RESTRUCTURE OUR DELIVER ON OUR CUSTOMER BUSINESS MODEL TO REDUCE IMPROVE BUSINESS PROCESS & SERVICE PROMISE – ON TIME, SUPPLY CHAIN & BUSINESS CONTROLS EVER
Slide 25: Achieving Our Goals
ACHIEVING OUR GOALS • Refine customer segmentation to better support our customers needs DELIVER ON OUR CUSTOMER • Improve sales effectiveness through solution bundling and identification of cross SERVICE PROMISE – ON TIME, EVERY TIME category opportunities • Continue business-wide focus on deliveri
Slide 26: Sector Dynamics
SECTOR DYNAMICS Steel & Tube Market Segments Construction Based on sales data for FY19 • Highly competitive market experiencing high demand, but risk sharing and profitability an issue • Residential consents remain healthy • Weakening construction sentiment and ongoing price pressures, key headwinds
Slide 27: Opportunities and Challenges
OPPORTUNITIES AND CHALLENGES Focus On Maximising Opportunities And Mitigating Challenges Opportunities • Steel remains a preferred building material • Multi-unit dwellings are an increasing share in the residential sector • Increased central and local government funded infrastructure, housing and de
Slide 28: FY20 Outlook
FY20 OUTLOOK Priority is margin improvement leading to profitable growth • FY20 results will reflect market trends and competitive intensity across majority of sectors in which S&T operates • Focus on further cost efficiencies, reducing business complexity and streamlining the supply chain • Competi
Slide 29: Questions
QUESTIONS d
Slide 30: Capital Management
CAPITAL MANAGEMENT Annual Capital Structure Targets Dividend Policy • Gearing Ratio (Net debt to net debt + equity) Dividend payout ratio target of between 60% and 80% within target range of < 30% - 35% of ‘normalised’ net earnings adjusted for any material non-trading items and subject to relevant
Slide 31: FY19 Half Year Performance
FY19 HALF YEAR PERFORMANCE • 2H19 Normalised1 revenue was $17.3m lower NORMALISED1 REVENUE 1H:2H than 1H19 Normalised1 revenue of $257.2m 260 257.2 • 2H19 Normalised1 EBIT of $6.3m was $3.4m 240 249.3 239.9 lower than 1H19 Normalised EBIT of $9.7m 220 • Margin shortfall due to significant industry 2
Slide 32: Non-GAAP Financial Information
NON-GAAP FINANCIAL INFORMATION Non-GAAP financial information: Steel & Tube uses several non-GAAP RECONCILIATION OF GAAP TO NON GAAP MEASURES June June measures when discussing financial performance. These include Year ended 30 June 2019 2019 2018 $000 $000 Normalised EBIT and Working Capital. Manag
Slide 33: Glossary of Terms
GLOSSARY OF TERMS EBIT: This means Earnings/ (Loss) before the deduction of interest and tax and is calculated as profit for the year before net interest costs and tax. FY18 EBIT was impacted by a number of non-trading adjustments totalling $(49.3) million, details of which are included in S&T’s Ann
Slide 34: Disclaimer
DISCLAIMER This presentation has been prepared by Steel & Tube Limited (“STU”). The information in this presentation is of a general nature only. It is not a complete description of STU. This presentation is not a recommendation or offer of financial products for subscription, purchase or sale, or a