Steel & Tube Holdings Limited · NZX:STU
Steel & Tube — Investor Presentation (August 2018)
32 slides from Steel & Tube's investor presentation, Aug 7, 2018
Slide 1: Steel & Tube Equity Raise Investor Presentation
Steel & Tube Equity Raise Investor Presentation 7 August 2018
Slide 2: Important Information
Important Information Information of a general nature The information in this document and any information provided during any presentation of this document (collectively, Information) has been compiled by Steel & Tube Holdings Limited (Steel & Tube) solely to provide interested parties with further
Slide 3: Overview of Steel & Tube
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Slide 4: Presenting today...
Presenting today... Mark Malpass Greg Smith CEO CFO AND COMPANY SECRETARY Previous experience: Previous experience: - Chief Executive of Fletcher Building’s largest division, - Financial and senior level leadership experience across Infrastructure Products, which included transforming the telco,
Slide 5: Processing and distributing New Zealand's most comprehensive range of processed steel
Processing and distributing New Zealand’s most comprehensive range of processed steel Value chain position Steel & Tube locations Mining Imports from small number of pre-qualified Asian suppliers Primary processing Nationwide footprint with 40 - Primary processing of steel in New Zealand is by
Slide 6: Strong industry fundamentals
Strong industry fundamentals Steel & Tube’s exposure is well balanced across construction, manufacturing and rural sectors Construction Steel & Tube Group Sector Exposure 2018 Steel & Tube is exposed to Infrastructure, Infrastructure Food 11% Commercial (non-residential) and Residential manufactur
Slide 7: Construction fundamentals remain supportive
Construction fundamentals remain supportive The 2018 National Construction Pipeline report forecast indicates a smoothing of the boom bust cycle(1) Forecast is for strong long-term growth: All construction nationally (by activity type)(2) For the first time in the history of the National Construct
Slide 8: Well invested footprint, leading supplier in all segments
Estimated market share by volume(1) Well invested footprint, leading supplier in all segments, acquisitions have provided access to higher value segments Long Products Flat Products Specials Steel Structures Others Others Others Others Others Others Others Others Others Others Others Steel & Tube ST
Slide 9: Overview of key business units
Overview of key business units Distribution Infrastructure(1) Products are sourced from preferred steel mills and distributed Products are processed before sale and typically on a contract or through Steel & Tube’s national network of branches project basis, including onsite installation service
Slide 10: Strong board with extensive, relevant experience
Strong board with extensive, relevant experience Subset of skills matrix Industry and Governance Experience Executive in Audit / IT Prior listed sector Risk company experience experience Susan Paterson Professional director since 1996 Chair and Worked in Steel Sector at Fletcher Challenge, as Ge
Slide 11: Operational review and refresh
OPERATIONAL REVIEW AND REFRESH
Slide 12: Operational review and refresh
Operational review and refresh In late calendar 2017 Steel & Tube embarked on an extensive company wide reset to drive long-term sustainable earnings improvement Detailed Organisational Refreshed Leadership Change Programme Initiated Review Susan Paterson and Mark Late calendar 2017 Right sizi
Slide 13: Legacy issues identified and resolved
Legacy issues identified and resolved The detailed organisational review uncovered a number of legacy issues, materially impacting FY18 earnings FY18P EBIT Impact(1) Description Inventory write-downs $(24.0)m New ERP increased visibility of inventory management Extensive stock takes confirmed ex
Slide 14: Steel & Tube's strategy for profitable growth
Steel & Tube’s strategy for profitable growth Strategic Goal: To be the leader in buying, selling, processing and placing steel products in New Zealand 1 Commitment to safety and Put the Customer at the heart of 2 quality our business Focus on ensuring a safe and healthy work Organise the busine
Slide 15: Project Strive
Project Strive Steel & Tube is progressing its Project Strive business transformation initiatives. Improvements will benefit FY19 performance FY18 FY19 FY20 FY21 Key Value Drivers Commitment to Group-wide update to ISO 9001:2015 Disciplined company-wide safety and practices quality Third party aud
Slide 16: Strong management team focussed on execution
Strong management team focussed on execution Role Industry and Governance Experience Role Industry and Governance Experience Mark Malpass Greg Smith Marc Hainen Joined Steel & Tube in November 2017 CEO CFO and Company Secretary General Manager Previous experience: Distribution - Background in sa
Slide 17: Impact of initiatives
Impact of initiatives Steel & Tube has begun to see positive results from the implementation of its change program – specifically increasing both volumes and sales Distribution Infrastructure Distribution (combined Heritage Distribution, Stainless and Roll-forming (Roofing, Coil Processing, Purlins,
Slide 18: Noticeable improvement in customer satisfaction
Noticeable improvement in customer satisfaction “We have been a customer of Steel & Tube for over 46 years. It’s a two way, win-win relationship. They have always been supportive and fair with our business, through the good times and the tough times… They’ve had their ups and downs recently, but the
Slide 19: Specific risk factors and key mitigants
Specific risk factors and key mitigants In addition to general operational risks, Steel & Tube has identified and looked to mitigate key specific business risks Description Mitigants Key outcomes ERP Implementation issues negatively impacted sales volumes Significant improvements made to ERP sys
Slide 20: Trading update and guidance
TRADING UPDATE AND GUIDANCE
Slide 21: Trading update – FY18P
Trading update – FY18P(1) Unaudited Management Accounts Revenues impacted in FY18(1) by issues with ERP system implementation affecting FY18P Revenue $495.8m customer service FY18P EBIT $(36.2)m Management are now addressing to improve customer service and stock availability FY18P Normalised EBI
Slide 22: Recent acquisitions continue to perform favourably
Recent acquisitions (excluding S&T Plastics) continue to perform favourably Acquisition Date Price Description / Rationale Performance As distributor and installer of ComFlor, the acquisition Continues to be a leader in composite floor decking $13.25m enhanced Steel & Tube’s supply of steel floo
Slide 23: FY19 guidance
FY19 guidance Legacy issues behind us and major financial restructuring completed FY19F EBIT guidance $25m+ Beginning journey to significantly improved operating and financial performance Recent increases in volumes are encouraging as ERP stabilised and focus has shifted to servicing customers
Slide 24: Medium term objectives
Medium term objectives Steel & Tube expects to achieve normalised EBIT of $35-40m in the next 3 years EBIT bridge from FY19F to FY21F 60.0 +$6m 50.0 +$15m EBIT (NZ$m) -$4m 40.0 -$4-5m $35-40m -$4-7m +$5m 30.0 $25m 20.0 10.0 - FY19F EBIT Market activity Strive ERP recovery Expense Other change Headwi
Slide 25: Recapitalisation
RECAPITALISATION
Slide 26: Overview of the Capital Raising
Overview of the Capital Raising Purpose of the Capital Raising Steel & Tube intends to raise approximately NZ$80.9 million to recapitalise its balance sheet to allow it to execute its business transformation initiatives and longer term strategic objectives The Capital Raising to be undertaken by
Slide 27: Key terms of the Capital Raising
Key terms of the Capital Raising Placement Offer Price NZ$1.15 per new share, representing a 21.2% discount to last close price on the NZX of NZ$1.46 per share on 6 August 2018 Offer Size Approximately NZ$20.8 million Approximately 18.1 million shares Ranking New Shares issued under the Offe
Slide 28: Capital Raising timetable
Capital Raising timetable Important dates Announcement of the Offer Tuesday 7 August 2018 Steel & Tube announce FY18 audited results Friday 31 August 2018 Placement Placement conducted under trading halt Tuesday 7 August 2018 Trading expected to resume Wednesday 8 August 2018 Settlement and allotmen
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Slide 30: FY18P Profit & Loss – Unaudited Management Accounts
FY18P(1) Profit & Loss – Unaudited Management Accounts $M FY17 FY18P(1) Sales revenue 511.4 495.8 Other operating income 1.7 1.0 Cost of sales (384.9) (398.4) Operating expenses (96.5) (115.9) Operating earnings before other gains and financing costs 31.6 (17.5) Impairment of fixed assets and goodwi
Slide 31: FY18P Balance Sheet – Unaudited Management Accounts
FY18P(1) Balance Sheet – Unaudited Management Accounts $M FY17 FY18P(1) Cash and cash equivalents 6.5 5.6 Trade and other receivables 93.5 99.2 Inventories 143.1 116.0 Income tax refund 0.2 5.2 Derivative financial instruments 0.0 1.3 Assets held for sale - 1.6 Current assets 243.3 228.9 - - Propert
Slide 32: FY18P Cash Flow Statement – Unaudited Management Accounts
FY18P(1) Cash Flow Statement – Unaudited Management Accounts $M FY17 FY18P(1) Cash flows from operating activities Customer receipts 513.0 489.7 Interest receipts 0.1 0.1 Payments to suppliers and employees (480.3) (478.6) Income tax payments (8.2) (5.6) Interest payments (3.6) (4.2) Net cash inflow
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