Sgh Limited · ASX:SGH
Sgh — Seven Group Holdings — H1 FY2015 Earnings Presentation
38 slides from Sgh's earnings presentation, Feb 25, 2015
Slide 1: Results for the Six Months Ended 31 December 2014
RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2014 Presentation on 25 February 2015
Slide 2: Disclaimer
Disclaimer Basis of preparation of slides Included in this presentation is data prepared by the management of Seven Group Holdings Limited (SGH) and other associated e ntities and investments. This data is included for information purposes only and has not been subject to the same level of review
Slide 3: Today's Agenda
Today’s Agenda Overview & Outlook Don Voelte Financials Richard Richards Industrial Services Ryan Stokes WesTrac Group Coates Hire Group AllightSykes Media Ryan Stokes Energy Don Voelte Property Ryan Stokes Investment Portfolio Ryan Stokes Share Buy-back Richard Richards Key
Slide 4: Group Structure
Group Structure Industrial Services Media Energy Investments 35% + $316m RCPS Property ~$63m 100% Portfolio Australia 100% Longtom ~$793m Listed Portfolio 100% 100% 15% Crux China Other Unlisted 100% Echuca Shoals Investments 100% 46% 11% Bivins Ranch 100% Other Exploration 100% 50% Notes: 1. Group
Slide 5: Group Highlights – Operational
Group Highlights – Operational 1H underlying EBIT result down by 8% on pcp and slightly ahead of AGM Result in line with guidance guidance provided in November 2014 Primarily due to timing differences Parts and service revenue up 16% on pcp in WesTrac Australia Product support revenue Growth
Slide 6: Group Highlights – Cash Flow and Balance Sheet
Group Highlights – Cash Flow and Balance Sheet Despite challenging business conditions, the Group generated underlying Cash flow strength operating cash flow of $271m during the half EBITDA cash conversion remains strong at 136% Balance sheet flexibility retained with minimal revolving net deb
Slide 7: Key Financial Numbers
Key Financial Numbers Statutory Results 1H FY15 1H FY14 % Change Trading revenue $ 1,397.8 m $ 1,577.1 m -11% Earnings before interest and tax $ (96.1) m $ 354.9 m - Reported net profit after tax for the period $ 69.2 m $ 264.7 m -74% Statutory earnings per share (ordinary shares) 1 18 cents 81 cent
Slide 8: Transformation Update
Transformation Update Commitment to further improving employee and customer safety across all businesses Cost structure being rationalised – FTE count reduced by 285 in WesTrac Australia, WesTrac China and AllightSykes and reduced by 195 in Coates Hire System enhancements to drive productivity
Slide 9: Outlook – refer disclaimer
Outlook – refer disclaimer We remain cautious about trading conditions in the mining, energy and industrial services sectors in Australia and China Our focus remains on effectively deploying our available capital to enhance shareholder return We will continue to assess further opportunities ba
Slide 10: Consolidated Profit and Loss
Consolidated Profit and Loss $m 1H FY15 1H FY14 Change % Revenue 1,397.8 1,577.1 -11% Significant Items Other income 59.5 61.6 -3% are further Share of results from equity accounted investees 53.0 67.4 -21% summarised on Total revenue and other income 1,510.3 1,706.1 -11% slide 11 Expenses (excl.
Slide 11: Summary of Significant Items
Summary of Significant Items $m 1H FY15 1H FY14 Gain on sale of investments and mark-to-market on derivatives 8.5 32.2 (Impairment) / reversal - SWM equity (195.5) 127.9 (Impairment) - WesTrac China distribution network (71.4) - Restructuring, redundancy and other costs (1.4) (11.7) Share of equity
Slide 12: Earnings Summary
Earnings Summary Total WesTrac WesTrac Allight Coates Media Other $m Energy Other Group Aus China Sykes Hire Invest. Invest. Trading revenue 1,392.6 1,072.6 276.8 43.2 - - - - - Statutory EBIT (96.0) 86.2 (58.2) (3.2) 5.1 (150.9) (2.4) 28.0 (0.6) Add unfavourable Individually Significant Items Mark-
Slide 13: Consolidated Balance Sheet
Consolidated Balance Sheet As at As at Change $m 31 Dec 14 30 Jun 14 % Trade and other receivables 682.2 599.0 14% Inventories 885.9 856.6 3% Investments 2,127.6 2,533.6 -16% Property, plant and equipment 228.7 237.3 -4% Production and development assets 364.2 45.1 - Exploration and evaluation asset
Slide 14: Balance Sheet Metrics
Balance Sheet Metrics As at As at $m 31 Dec 14 30 Jun 14 Total assets 5,736.9 5,399.4 Net debt reduction of Total shareholder's equity 3,251.2 3,143.0 $110m achieved during the period, inclusive of Net debt 1 986.2 1,096.6 debt-related derivatives Debt ratios Gearing: net debt 1 to net debt plus e
Slide 15: Operating Cash Flow
Operating Cash Flow $m 1H FY15 1H FY14 Underlying EBIT 175.0 189.2 Add: depreciation and amortisation 23.7 24.5 Underlying EBITDA 198.7 213.7 Operating cash flow 238.4 225.3 Add: interest and other costs of finance paid 43.3 33.6 Income taxes (refunded) / paid (16.8) 137.5 Add back: restructuring co
Slide 16: Total Cash Flow
Total Cash Flow $m 1H FY15 1H FY14 Operating cash flow 238.4 225.3 Investing cash flow (26.9) (3.7) Financing cash flow (1.5) (240.7) Net increase in cash and cash equivalents 210.0 (19.1) Cash and cash equivalents at end of period 341.8 524.9 Opening net debt 1,069.3 713.4 Movement in net debt (14.
Slide 17: Consolidated Debt Maturity Profile
Consolidated Debt Maturity Profile At 31 December 2014, the Group had $975m of available undrawn borrowing facilities Current “<1 year” debt includes a number of offshore facilities that are regularly rolled over Syndicated for further terms and are categorised as current facility due to their s
Slide 18: WesTrac Australia
WesTrac Australia Market conditions continue to be challenging – Reduction in iron ore and coal prices has seen miners reduce capex programs and fleet expansion requirements – WesTrac is supporting miners on programs to drive efficiencies as part of their cost reduction initiatives Product suppo
Slide 19: WesTrac Australia
WesTrac Australia Product sales decline of 47% on pcp Trading Revenue $m EBIT $m 1,261 – Impact of falling commodity prices in the half 1,073 97 87 – Lack of new mining projects 649 Product – Miners continue to optimise fleet utilisation support 750 Product support sales up 16% on pcp Product 61
Slide 20: WesTrac China
WesTrac China Improved profitability and positive cash flow Trading Revenue EBIT US$m US$m – Delivered EBIT growth of 41% on pcp 247 243 Product 11.4 – Higher EBIT margin of 4.1% support 59 58 9.1 – Operating cash flow of US$38m Product 188 185 Growth in new markets and products sales – Sales of
Slide 21: Coates Hire Group
Coates Hire Group CEO Michael Byrne commenced in October Trading Revenue $m EBIT $m – New management team being installed 586 113 487 – Strategic review of operations completed 68 Revenue down 14% on pcp (adjusted for sale of Coates UK) – Lower commodity prices are impacting demand 1H 15 1H 14 1
Slide 22: Media Investments Profit and Loss
Media Investments Profit and Loss Excluding Significant Items $m 1H FY15 1H FY14 Change % - SWM share of associate NPAT 1 43.6 48.6 -10% SGH holds a 35.33% interest in the ordinary shares of SWM and - Other investment income 2 15.0 14.0 7% also holds RCPS with a carrying Segment EBIT Contribution
Slide 23: Seven West Media
Seven West Media Continued leadership in ratings and products SWM Revenue 1H FY15 1H FY14 Change % Television 677.2 683.7 -1.0% – 40.4% TV advertising market share for Jul-14 to Dec-14 Newspapers 125.0 139.4 -10.3% – Market share growth in Digital and Magazines Magazines 114.1 123.8 -7.9% Other 25
Slide 24: Energy – Overview
Energy Overview SGH’s energy strategy was initiated in 2013 Assets Initial Capex (AUD m) Investment CY 2015 – Search for “third pillar” as part of SGH’s operating businesses Longtom - 200.01 – Nexus Energy transaction commenced December 2013 Crux - 60.0 Echuca Shoals - 50.0 – Bivins Ranch transact
Slide 25: Energy – Strategy
Energy Strategy Focus on quality assets at appropriate prices Revenue Oil assets Gas assets – Leveraging experience of SGH’s management team Base and alignment with leading operators – Long term view with global demand for energy to Caelum Auriga continue to grow Bivins Bivins Diversification US
Slide 26: Energy – Nexus current status
Energy Nexus – current status December 2014 – Court Approval and Deed of Company Arrangement effectuated – Deed administrators terminated and Board changes implemented – Nexus Energy Limited shares transferred to SGH Energy (No 2) Pty Ltd, becoming a wholly owned subsidiary of SGH – Nexus Creditor
Slide 27: Energy – Longtom update
Energy Longtom update VIC/L29 (00% interest) – Producing from Longtom 4 well to meet Santos nominations per Longtom GSA (expires December 2018) – Longtom 3 well remains suspended since February 2014 Development options for 2015 – Longtom 3 rectification and/or Longtom 4 workover and/or drilling
Slide 28: Energy – Browse Basin update
Energy Browse Basin update Crux AC/RL9 – Joint venture with SGH 15% interest, Shell (operator 82%) and Osaka Gas (3%) – Retention lease work program being progressed – Detailed work program activities for years 2 to 5 consolidated with all activities required to be completed within the term of the
Slide 29: Energy – Bivins Ranch
Energy Bivins Ranch Original purchase 11.2% gross / 8.4% net interest – After review of 20+ US opportunities – US$63.7m purchase price – 26 existing vertical wells were in production within the Paint Ridge field with high liquids content – 27 further verticals were expected within 12-18 months – W
Slide 30: Energy – Bivins Ranch early horizontal results
Energy Bivins Ranch Early horizontal results – Two horizontal wells were in progress from outset of SGH interest in Bivins – Positive early signs from Bivins East 41 #1H and Bivins East 94 #1H – SGH has participated in a further 16 horizontal wells to date – 35 total wells planned in 2015 (per Nov
Slide 31: Energy – Bivins Ranch development potential
Energy Bivins Ranch Development potential – 800 horizontal well locations targeted by Apache across their area of interest in Bivins Ranch and adjoining properties – SGH area of interest implies 580 well locations across multiple development zones – SGH currently participating in 16 horizontal wel
Slide 32: Energy – Bivins Ranch well economics
Energy Bivins Ranch Well economics – Limited early stage results suggest an estimated ultimate recovery (EUR) of 377 Mboe per well (gross) – Type curve based on initial production rate of 1,021 boe/day over first 30 days – Drilling and completion costs of US$8.5m per horizontal well (gross) – SGH
Slide 33: Investments and Property Profit and Loss
Investments and Property Profit and Loss Excluding Significant Items $m 1H FY15 1H FY14 Change % Revenue - - - Other income 21.2 16.3 30% Share of results from equity accounted investees 0.3 3.4 - Total revenue and other income 21.5 19.7 9% Expenses (excluding interest and corporate) (1.2) (2.1) -43
Slide 34: SGH Property Holdings
SGH Property Holdings Our aim is to maximise the value and return from our existing property assets: – Perth Entertainment Centre / Kings Square – Seven’s Tuart Hill studio in Perth – Indirect property investments through the Flagship unlisted trust and other holdings Current initiatives include
Slide 35: SGH Investment Portfolio
SGH Investment Portfolio Our aim is to enhance shareholder return by selectively deploying available capital $86m total gain in the six months to 31 Dec 2014 10.0% total return for the half (annualised) versus 6.6% return on S&P / ASX 200 Dividend yield on portfolio of 7.1% (gross annualised
Slide 36: Share Buy-back
Share Buy-back Our aim is to – Ensure an efficient capital structure and maintain prudent levels of gearing – Retain sufficient balance sheet flexibility to fund the working capital needs of operating businesses and to pursue growth and investment opportunities Previous buy-back of 11.9m shares
Slide 37: Key Takeaways and Questions
Key Takeaways and Questions We continue to focus on safety improvement, productivity improvement and cost efficiency We are determined to maintain our market- leading positions with systems enhancement set to deliver superior customer service We are adding value by creating new businesses and
Slide 38: 1H FY15 Results Presentation – 25 February 2015 Slide 38
1H FY15 Results Presentation – 25 February 2015 Slide 38
Seven Group Holdings — H1 FY2015 Earnings Presentation on 6ix