Emeco Holdings Limited · ASX:EHL
Emeco — Investor Presentation (July 2010)
26 slides from Emeco's investor presentation, Jul 13, 2010
Slide 1: Emeco Group Strategy Briefing
For personal use only Emeco Group Strategy Briefing Keith Gordon, Managing Director & CEO July 2010
Slide 2: Presentation Outline
For personal use only Presentation Outline 1. The Challenge 2. The Strategy 3. Executing the Strategy 4. Operating Update 2
Slide 3: Highlights
For personal use only Highlights Strategic review confirms focus back on core mining markets US & Europe closure complete Exit Victoria Rental & restructure Australian Sales & Parts to align with core customer base Capital release and FY11 cash flow to provide balance sheet flexibility Dis
Slide 4: The Challenge: Earnings growth has not translated into acceptable returns
1. The Challenge Earnings growth has not translated into acceptable returns For personal use only Earnings Returns +12.2% CAGR (5 yrs) -2.9% CAGR (5 yrs) A$M % A$M 140 1,400 18.0% Invested Capital ROC % ROFE % EBIT 120 1,200 16.0% 100 1,000 14.0% 80 800 12.0% 60 600 10.0% 40 400 20 200 8.0% – – 6.0%
Slide 5: The Strategy
For personal use only 2. The Emeco Strategy Ongoing optimisation of Grow without sacrificing invested capital and quality of earnings earnings Leverage capabilities for Continue to evolve the growth business model Consistent Value Creation for Shareholders Disciplined investment above WACC
Slide 6: Creating Shareholder Value
2. The Emeco Strategy Creating Shareholder Value All strategies and objectives focused on creating value for shareholders For personal use only Disciplined investment of capital to achieve returns greater than WACC Building capability to deliver consistent returns Optimise capital structure Co
Slide 7: Optimise the Core
2. The Emeco Strategy Optimise the Core Focus on markets where value can be created For personal use only Embed “Customer Centric” model Focus on customers in growing mining markets Exit civil infrastructure sector, maintaining support to mine infrastructure Align Australian Sales and Parts
Slide 8: Sustainable Growth
2. The Emeco Strategy Sustainable Growth Long term earnings growth to be sustainable and capital efficient For personal use only Invest incremental capital in core markets which have historically delivered above WACC returns Expand maintenance services offering Pursue project based opportuniti
Slide 9: Meeting Customers Needs
2. The Emeco Strategy Meeting Customers Needs Customer requirements vary but Emeco’s solution is used at all stages of mine life For personal use only Emeco’s Mine Mine Core Overburden Mining cycle Construction Development Production (Production) leverage: 6% 19% 42% 33% Customers Flexibility Equipm
Slide 10: Case Studies
2. The Emeco Strategy Case Studies High propensity for initial contract tenure to extend For personal use only Need Customer Fleet Services Site usage Time on Site Flexibility Blue-chip 37x items of plant, based on Full maintenance Primary 3 years miner 2 production fleets of 150tn services & labour
Slide 11: Evolving the Model - Today
2. The Emeco Strategy Evolving the Model - Today Harness core competencies to deliver quality rental offering to core mining customers For personal use only Core Mining Customer Customer Safety & understanding Quality & relationships standards Asset Mngt & Sales Quality Rental Maintenance Offering P
Slide 12: Evolving the Model – Short Term
2. The Emeco Strategy Evolving the Model – Short Term Leveraging relationships with core mining customers For personal use only Core Mining Customer Customer Safety & understanding Quality & relationships standards Asset Mngt & Sales Quality Rental Maintenance Offering Procurement Parts Capabilities
Slide 13: Evolving the Model – Medium Term
2. The Emeco Strategy Evolving the Model – Medium Term Building and leveraging capabilities to expand products and services to core customers For personal use only Core Mining Customer Customer Safety & understanding Quality & relationships standards Other Products, Services & Asset Mngt & Sales Geo
Slide 14: Executing the Strategy: Management team
3. Executing the Strategy Fresh management team committed to delivering Consistent value creation for shareholders strategy and improving shareholder returns For personal use only Keith Gordon, Managing Director & CEO Ian Testrow Tony Halls David Tilbrook Hamish Christie- Johnston Procurement, North
Slide 15: Executing the Strategy: Portfolio review
3. Executing the Strategy Consistent value creation Portfolio review complete with focus back on the core for shareholders mining markets For personal use only Portfolio review thresholds: Blue-chip miners Mid-Small miners Contractors Above WACC returns are achievable Coal Gold Iron Ore Oil Sands
Slide 16: Successfully completed USA & European restructure
3. Executing the Strategy Successfully completed USA & European restructure For personal use only Business Rationale for Exit / Restructure P&L Charges Asset Disposals Internal Cash.. Cash Non-cash Transfers Realised USA Mature USA coal market with high cost $(10)m $(13)m $26m $16m producers & dec
Slide 17: Portfolio review complete
3. Executing the Strategy Portfolio review complete For personal use only Business Rationale & strategies for Exit / Restructure Victoria Rental Inherent volatility in end market activity Numerous suppliers Sales process commenced FY10 Operating EBIT of $3.2m1 Australian Sales Reduce inves
Slide 18: Fleet configuration strategy well progressed
3. Executing the Strategy Fleet configuration strategy well progressed For personal use only June-09 June-10 Civil Civil Fleet Successfully disposed of Fleet 16.3% Large Mining 9.5% ~200 pieces of non-core Large WDV: 23.6% Mining equipment 35.8% Jun-09 $623M Jun-10 $548M Small Targeting 5% civil
Slide 19: Investment of incremental capital in core businesses
3. Executing the Strategy Investment of incremental capital in core businesses to deliver returns above the cost of capital For personal use only Returns from Core Businesses over 4 years Australia will remain around 75% of 21.5% 25.0% earnings in short to medium term FY07 Customer diversificati
Slide 20: A sound balance sheet and strong cashflows in FY11 provides flexibility
3. Executing the Strategy A sound balance sheet and strong cashflows in FY11 provides flexibility For personal use only Strong operating cashflow and working capital release in FY09 & FY10 Healthy balance sheet position coming out of GFC Comfortable debt levels with gearing returned to target
Slide 21: Operating Update: Utilisation underpinning improving performance
4. Operating Update Utilisation underpinning improving performance For personal use only Rental Utilisation Continued improvement in utilisation 100.0% Utilisation % (WDV) through 2H10 90.0% Large truck capex program successfully 80.0% bedded down 70.0% Weather in Eastern Australia and 60.0% C
Slide 22: Performance in line with guidance across a range of metrics
4. Operating Update Performance in line with guidance across a range of metrics For personal use only Objective Committed (at Feb-10) Delivered Operating NPAT $40m - $44m $40m - $41m Complete by June 10 Completed on time Exit USA & Europe 2H10 EBIT charge of $29.5m Total 2H10 charge of $
Slide 23: Consistent Value Creation for Shareholders
For personal use only The Emeco Strategy Strategic review complete confirming focus on customers in key resource markets Action taken on underperforming businesses Market fundamentals and historical returns in core markets supports further investment Consistent Value Creation Disciplined app
Slide 24: Questions
For personal use only Questions
Slide 25: Company Contact Details
For personal use only Company Contact Details Thank you for your interest in Emeco Further investor enquiries should be directed to: Keith Gordon CEO Stephen Gobby CFO Graham Borgerson Investor Relations emecogroup.com
Slide 26: Disclaimer
For personal use only Disclaimer Reliance on third party information The information and views expressed in this Presentation were prepared by Emeco Holdings Ltd (the Company) and may contain information that has been derived from publicly available sources that have not been independently verified.