Austin Engineering Limited · ASX:ANG
Austin Engineering — H1 2016 Earnings Presentation
35 slides from Austin Engineering's earnings presentation, February 2016
Slide 1: Austin Engineering Ltd 1H16 Results Presentation
Austin Engineering Ltd 1H16 Results Presentation
Slide 2: Summary – Highlights
Summary – Highlights • Austin generated Sales Revenue of $108.0m, up 7.8%, and Normalised EBITDA of $3.8m in 1H16. Although earnings were down on the prior corresponding period, Austin expects a stronger 2H16 than was delivered in 1H16 • Raised $51.6m in new capital, comprising $31.6m in equity and
Slide 3: Summary – Highlights
Summary – Highlights • Implemented changes in senior executive leadership which will facilitate this strategic refocus. Experienced General Managers at operational levels ensure “business as usual” throughout the period of the strategic refocus • Continued with initiatives to reduce costs (e.g. Bris
Slide 4: Summary – Results
Summary – Results Austin has been able to win new business and grow its revenue in 1H16, with sales growth of 7.8%, however mix has changed to include more lower margin work and this has impacted short term profitability ahead of a recovery in orders in the workshops 1H15 1H16 Half on Half $m $m % C
Slide 5: Summary – Normalisations
Summary – Normalisations Reported results lower than normalised results due to non-recurring unusual items and impairments of intangibles taken in the period EBITDA NPAT $m $m Reported Results (17.9) (22.0) Restructuring Costs(1) 10.6 7.4 Impairment Charges(2) 9.1 9.1 Legal costs(3) 2.0 1.3 Underlyi
Slide 6: Contents
Contents 1. Summary pg 2 2. 1H16 Results pg 7 3. Strategic Refocus pg 13 4. Capital Management pg 20 5. Outlook pg 28 6
Slide 7: 1H16 Results - Group
1H16 Results - Group 1H15 1H16 Half on Half $m $m % Change Sales Revenue* 100.2 108.0 7.8% EBITDA** 5.6 (8.8) nmf Normalised EBITDA 9.0 3.8 (58.0%) Depreciation (5.2) (5.5) 7.2% Amortisation / Impairment (41.4) (9.5) (77.0%) EBIT (41.0) (23.9) (41.8%) Net interest expense (1.6) (2.7) 64.2% PBT (42.6
Slide 8: 1H16 Results – Segments
1H16 Results – Segments 1H15 1H16 Half on Half $m $m % Change Revenue: Australia 58.8 63.0 7% Americas 37.5 44.1 18% Asia (Indonesia) 5.8 1.7 (71%) Normalised EBITDA*: Australia 3.4 2.2 (35%) Americas 3.8 1.6 (57%) Asia (Indonesia) 1.8 (0.0) nmf EBITDA % Margin: Australia 5.8% 3.5% (39%) Americas 10
Slide 9: 1H16 Results – Operational Review
1H16 Results – Operational Review Australia: • Overall mine production levels continued to be maintained or increased but clients continued to defer major capital replacement programs • East Coast operations results reflect continuing difficult market conditions in the coal industry • Closure of the
Slide 10: 1H16 Results – Operational Review
1H16 Results – Operational Review Americas: • Overall numbers in the Americas were down on the prior period due to low commodity prices resulting in deferral of capex • The La Negra operation has a base loading with the long-term Collahausi contract but other manufacturing remains subdued due to the
Slide 11: 1H16 Results – Operational Review
1H16 Results – Operational Review Americas (con’t): • The Colombian operation reported a positive result based on an onsite/offsite maintenance/repair contract and a small number of manufacturing orders • The Company’s first tray order from Cerrejon is now on trial at the mine and following the tria
Slide 12: 1H16 Results – Safety
1H16 Results – Safety • LTIFR reduced from 3.5 to 1.5 on the PCP 12
Slide 13: Strategic Refocus – Mining Industry Conditions
Strategic Refocus – Mining Industry Conditions • Most of Austin’s current products and services are directly linked to the mining industry • Austin’s key products are consumables necessary for production – which inevitably wear out • Importantly, major miners – that represent the focus of Austin’s w
Slide 14: Strategic Refocus – Findings
Strategic Refocus – Findings • In light of challenging industry conditions and Austin’s recent financial performance, Austin has undertaken a strategic review of its business with a view to identifying ways to make operations more effective, to enhance revenues, reduce costs and improve earnings • T
Slide 15: Strategic Refocus – Findings
Strategic Refocus – Findings • Strategic refocus Customer centric: The industry now demands a much stronger, customer centric strategic marketing and service function and Austin will move its approach to better match this need Leverage global engineering expertise: Austin can better leverage its
Slide 16: Strategic Refocus – Action Items
Strategic Refocus – Action Items Organisational Leverage Whole of Life Production Redesign Fabrication Services Efficiencies What is the Central coordinated Develop new End to end from Better utilise certain scope? functions products design, delivery, facilities ‒ Marketing Increase throug
Slide 17: Strategic Refocus – Cost Savings
Strategic Refocus – Cost Savings • Austin continues to actively seek opportunities to reduce costs in order to align with current market activity levels and to be better positioned for the upturn • Cost cutting measures being implemented: The Brisbane operation is in the process of being closed, w
Slide 18: Strategic Refocus – Management Changes
Strategic Refocus – Management Changes • Austin announced changes to its executive leadership on 17 February 2016 • Specific changes in senior positions comprise: ‒ Executive Chairman: Mr Peter Pursey AM has been made permanent Chairman and, on an interim basis, will assume executive responsibilitie
Slide 19: Strategic Refocus – Timeline
Strategic Refocus – Timeline Calendar 2016 Calendar 2017 Mid / Long Term Mining Market Mining production levels Expect production levels to Ultimately sector returns to Conditions maintained be maintained improve and drive new Limited new projects Expect some miners to capital investment –
Slide 20: Capital Management – Net Debt
Capital Management – Net Debt Debt was significantly reduced during the period following on from the capital raising in July 2015 • Net Debt excluding FX translation reduced to $66.0m over the last 6 months. Currency movements affected this positively by $0.6m to arrive at a final value of $65.4m •
Slide 21: Capital Management – Material Reduction in Working Capital
Capital Management – Material Reduction in Working Capital $m Working Capital at 30 June 2015 22.1 Receivables (4.8) Payables (3.2) Inventories (2.7) Working Capital at 31 December 2015 11.4 • $11m (48%) reduction in working capital since June 2015 21
Slide 22: Capital Management – Continued Focus on Debt Reduction
Capital Management – Continued Focus on Debt Reduction • Austin had a sustained focus on debt reduction through 1H16, which continues. Current initiatives are focused on further reducing debt As at 30-Jun-15 Jul-15 capital raising 1H16 movements As at 31-Dec-15 Bond and land sales Proforma current(1
Slide 23: Capital Management – Bank Borrowings and Capital Structure
Capital Management – Bank Borrowings and Capital Structure • Austin, in conjunction with external advisers, has been evaluating options to extend the tenor of its syndicated bank debt, to improve the terms of that debt, and to access new and additional sources of capital to strengthen its balance sh
Slide 24: Capital Management – Status of Existing Syndicated Debt
Capital Management – Status of Existing Syndicated Debt • Prior to the end of December 2015, Austin negotiated terms of an extension in the due date for its existing syndicated senior debt facilities until 20 March 2017 • Austin is undertaking initiatives to retire and refinance the existing senior
Slide 25: Capital Management – New Sources of Debt
Capital Management – New Sources of Debt • Austin has had discussions with a number of new potential providers of debt • Conditional term sheets were obtained in late 2015 and early 2016 in respect of potential corporate bond investors and in respect of asset backed financiers • Austin does not pres
Slide 26: Capital Management – Debt Reduction Strategies
Capital Management – Debt Reduction Strategies • Austin has been exploring and capitalising on ways of strengthening its balance sheet • Operating cash flow ‒ Austin has used its operating cash flow to reduce debt by $3m, through principal repayments due under its South American loan facilities sinc
Slide 27: Capital Management – Sale of Land Assets
Capital Management – Sale of Land Assets • Austin has a substantial portfolio of property assets, leasehold improvements and equipment ‒ Carrying value of $113.2m • Austin has been progressing the sale of certain of these assets • Austin has reached agreement in respect of the following sales: Gross
Slide 28: Outlook – Summary
Outlook – Summary • Austin enters the second half of the year with a much higher base load than the first half • Several sites have encouraging order and tender book profiles, which are expected to result in solid revenues and earnings in 2H16 (discussed on the following pages) • As a finding of the
Slide 29: Outlook – Encouraging Recent Contract Wins
Outlook – Encouraging Recent Contract Wins Austin has recently secured a number of new contract wins and orders. These are encouraging signs for 2H16 profitability and beyond Americas: • 3 year contract, with a 3 year extension option, with Chilean state copper producer Codelco at its Chuquicamata m
Slide 30: Outlook – Encouraging Recent Contract Wins
Outlook – Encouraging Recent Contract Wins Australia: • West Coast operations have received 22 tray body orders from major miners in the Pilbara. It has also secured inaugural orders for a new product line with an order for a bucket for a 6060 Hydraulic Face Shovel for a WA gold miner • COR Cooling
Slide 31: Outlook – Update to Full Year FY16 Guidance
Outlook – Update to Full Year FY16 Guidance • In light of current and expected trading conditions and first half performance, Austin has revised its expectations of Normalised EBITDA for the full year to 30 June 2016 • Austin advises that it now expects to deliver an Normalised EBITDA of between $8m
Slide 32: APPENDIX
APPENDIX austinengineering..
Slide 33: Austin’s Principal Products
Austin’s Principal Products Off-highway Buckets Water tanks Service modules dump truck bodies Tyre handlers Ancillary Industrial cooling and heat attachments transfer systems (COR Cooling)
Slide 34: Austin Principal Services
Austin Principal Services Equipment Specialised Painting and repair and fabrication blasting maintenance Specialised On-site maintenance and shutdown machining and services (Austin Engineering Site Services) line boring
Slide 35: Austin Brands
Austin Brands The Austin Engineering brand encompasses design and manufacture of mining and earthmoving equipment, along with the provision of support services, from four Australian operations (Brisbane, Hunter Valley, Mackay, Perth), an Indonesian operation and Peruvian operation. The Austin Ingeni