Metro Performance Glass Ltd · NZX:MPG
Metro Performance Glass — Investor Day (July 2017)
83 slides from Metro Performance Glass's investor day presentation, Jul 6, 2017
Slide 1: Metro Performance Glass
Metro Performance Glass Investor Update 6 July 2017 Strictly confidential and not for public release
Slide 2: Disclaimer
Disclaimer This presentation (“Presentation”) has been prepared by Metro Performance Glass Limited (Company Number 5267882) (“Metro Performance Glass”). Please do not read this Presentation in isolation This presentation contains some forward looking statements about Metro Performance Glass and the
Slide 3: Agenda
Agenda 9:00am Welcome and overview of the day Andrew Paterson 9:05am 1. Metro Glass strategy – a longer term view Nigel Rigby 9:30am 2. Residential and distribution – strengthening our core Robyn Gibbard 10:00am 3. Commercial – building an internationally competitive capability Barry Paterson 10:20a
Slide 4: Metro Glass strategy – a longer term view
Metro Glass strategy – a longer term view Nigel Rigby, CEO Strictly confidential and not for public release 3
Slide 5: Key messages
Key messages Metro Glass is well‐positioned with seven distinct businesses that each have articulated opportunities, strategies, and execution plans Investments in this first double glazing growth cycle and expanded presence in commercial and retrofit markets are setting Metro Glass up for the l
Slide 6: Metro Glass is more than half way through its journey towards sustainable market leadership
Metro Glass is more than half way through its journey towards sustainable market leadership in New Zealand Current position Step out growth Deliver sustainable Create and execute Australia Market Opportunity with AGG market leadership Develop Metro leadership to Prepared for the Deliver market
Slide 7: A longer-term view: transformation of Metro Glass' production
A longer‐term view: transformation of Metro Glass’ production New Zealand's first ever Before the Building Code up‐cycle for double glazing changes in 2007, circa. 90%+ of 35,000 90% NZ Dwelling Consents (Last 12 Months) Metro Glass’ window 80% manufacturing were single 30,000 panes of glass, with d
Slide 8: Three pillar strategy supports market position
Metro Glass’ three pillar strategy supports its market position, with customer intimacy providing strong protection against import‐based competition Strictly confidential and not for public release 7
Slide 9: Metro Performance Glass business strategy
Metro Performance Glass business strategy Strictly confidential and not for public release 8
Slide 10: Key drivers of growth in New Zealand
Key drivers of growth In New Zealand Metro Glass is strongly positioned for growth through sustained underlying construction activity, structural market changes, and a range of Metro‐led initiatives A. Favourable Historical Net migration Construction economic Cyclical underbuild trends market growth
Slide 11: Our core activities
Our core activities Metro Glass has a fully integrated value chain position to the builder and consumer in New Zealand. Australian Glass Group is focused on glass processing involving residential windows DGU in South East Australia New Zealand construction market generally expects a high level of cu
Slide 12: Macro conditions in New Zealand
Macro conditions in New Zealand Low interest rates, strong net migration, a robust economy and the persistent housing shortage in the upper North Island are continuing to fuel a supportive market backdrop. Activity in Canterbury is expected to continue its decline Total New Zealand revenue remains a
Slide 13: Australian entry - strategic step out growth for Metro Glass
Australian entry ‐ strategic step out growth for Metro Glass Strictly confidential and not for public release 12
Slide 14: Organisation advantage
Organisation advantage To enable Metro revenue doubling over the last 5 years we need a robust organisational game plan • Building the Senior Leadership internally and externally - Robyn Gibbard, Alex McDonald and Gareth Hamill joined NZ Senior Leadership Team in 2017 - Linking individual objectives
Slide 15: Metro Glass' growth strategy is attractive in a sustained strong market
Metro Glass’ growth strategy is attractive in a sustained strong market Strictly confidential and not for public release 14
Slide 16: Financial performance – a good track record
Financial performance – a good track record • Metro revenue has increased 1.9 times and EBITDA has increased by 3 times over the five year period • Majority of growth is organic including investments in developing segments and businesses • Targeted revenue growth over the next 3 years based on our t
Slide 17: NZ residential and distribution businesses
NZ residential and distribution businesses Robyn Gibbard, UNI Sales Manager Strictly confidential and not for public release 16
Slide 18: Glass for living
Glass for living Kitchens Bathrooms Splashbacks, benchtops, kitchen Splashbacks, mirrors, mirrors, table tops, cabinet and oven showers, room dividers doors (via Merchants) Residential Windows Living Spaces Low E Double Glazing, Site Glazing Stairs & balustrades, room dividers doors, mirrors, furnit
Slide 19: Residential windows – market structure
Residential windows – market structure 4 Prime Die Holders Relationship Group Home Builders (work across all PDH brands) 11 Marketed Brands / Individually Owned Individually Owned +/‐ 300 Individually Window Window Owned and Operated Manufacturer Manufacturer Franchises Franchises Window Operating u
Slide 20: Window manufacturing - residential supply process
Window manufacturing ‐ residential supply process Prime Die Holder Window Metro Performance Manufacturer Glass Completed Dwelling Supplies aluminium to Window Manufacturer Manufactures aluminium Manufactures glass Window window frames Manufacturer Orders Supply‐only Double Glazed Units from MPG Manu
Slide 21: Our value proposition – residential windows
Our value proposition – residential windows Service Delivery Service Delivery Custom Product – Short lead‐time – Glass on time – Quality < 2% Reject rate Product Advantage Manufacturing Capabilities • Market leading Low E range • Large Panel Size IGU capability • Digital Print & Decorative IGU • Sof
Slide 22: Residential window requirements are becoming more complex
Residential window requirements are becoming more complex FY15 v FY17 Growth Low E % 25% 22% 20% 20% 15% 15% 17% 15% $ 8% 10% 11% m² 5% 6% Average Unit Size: 0% 2015 2016 2017 2018 YTD Increased 8% FY15 to FY17 New Legislation expected to increase T/T DGU volume On Site Glazing On Site Glazing (base
Slide 23: Windows are all about the glass
Windows are all about the glass • The advent of Low E double glazing has allowed New Zealanders to increase the size of there windows without the previous heat loss. • In some areas window size has doubled in the last few years. With this increase in window size, the glass is becoming the key focus
Slide 24: Residential fit out
Residential fit out To create a Residential Internal Fit Out range that: Mirrors Creates product differentiation Kitchens Shows what ‘best’ is Frameless Showers Enables MPG to compete at top and bottom of the market & Pool Fences Balustrades Simplifies glass selection Furniture Creates demand for MP
Slide 25: Communication & Influence + Merchant businesses
Merchant market – main centres Communication & Influence 750+ Merchant businesses Nationwide Builders Homeowner Strictly confidential and not for public release 24
Slide 26: Non-window opportunities
Non‐window opportunities Residential Fit Out & Merchant Market has some challenges given the structure of the local market, presenting many opportunities for MPG Market characteristics NZ toughened glass imports (SQM) ‐ Last 12 Months 600,000 • Highly fragmented: few scale players 500,000 • Lack of
Slide 27: Metro Glass custom shower offer
Metro Glass custom shower offer Strictly confidential and not for public release 26
Slide 28: Metro Glass Maui shower offer
Metro Glass Maui shower offer Strictly confidential and not for public release 27
Slide 29: Residential fitout & merchant market value proposition
Residential fitout & merchant market value proposition Residential Fitout Offer Create Primary Demand • Shower, Mirror, Splashback, Balustrade • TVC’s on Residential Fitout Offer • Good, Better, Best Product Offer • Run good Builder Programme • Create demand for MPG solutions • Innovation Showrooms/
Slide 30: Metro Glass' distribution network
Metro Glass’ distribution network Metro Brands Regional Brands Metro Glass Manufacturing Sites Frameless Glass Installer Auckland, Tauranga Wellington, Christchurch Auckland Metro Glass Hub – One Stop Shop for Merchant Customers Glass Merchant/Installer Wellington Glass Merchant/Installers Whangarei
Slide 31: "We do anything glass"
“We do anything glass” Locations support our market position • Windows Residential Residential • RFO market Supply • Retrofit Windows • Commercial Supply + Glaze • Merchant Internal Fit Out Design, Supply & Install Window Manufacturer Local relationship and market knowledge • Logistical support and
Slide 32: Targeted revenue mix & local capabilities
Targeted revenue mix & local capabilities Targeted Metro Direct revenue model Commercial Retrofit 6% 13% Manufacturers Retail 27% 37% Metro Direct = Local Expertise • Sales • Health & Safety • Project Management • Site Measuring and Specialist Installation • Retrofit Sales & Installation • Site Glaz
Slide 33: "We do anything glass"
“We do anything glass” In addition to supporting our approach to market in the main Provincial areas Metro Direct will play in other niche parts of the market • Smash Repair • Insurance work • Automotive • Walk in Retail • Marine Industry • Logging Industry • Dairy Industry • Table Top • Fish tank •
Slide 34: NZ commercial
NZ commercial Barry Paterson, National Commercial Manager Strictly confidential and not for public release 33
Slide 35: New Zealand market backdrop - macro trends
New Zealand market backdrop ‐ macro trends Non‐residential consent value Non‐residential work put in place forecasts (LTM $m; non s.a.) (2009/10 prices; $m) 3,000 7,000 7,000 2,500 6,000 6,000 5,000 2,000 5,000 NZ (RHS) Regions 4,000 1,500 4,000 3,000 1,000 3,000 2,000 500 1,000 2,000 ‐ ‐ 1,000 Jun‐
Slide 36: Commercial glazing business
Commercial glazing business Metro Glass commercial glazing revenue (NZ; $m) Commercial Forward Book (NZ; $m) 29.7 28.8 51.0 27.0 41.6 18.6 15.8 13.8 Metro Group Sep‐14 Mar‐15 Sep‐15 Mar‐16 Sep‐16 Mar‐17 FY16 FY17 Metro Glass participates in a wide variety of commercial glazing projects from internal
Slide 37: Why is commercial an attractive sector for Metro?
Why is commercial an attractive sector for Metro? Significant growth opportunity‐ robust market for next five years Opportunity for higher returns through complexity and scale‐ but with higher risk High barriers to entry Challenges business to continually improve Competitive advantage – Local proces
Slide 38: Commercial process/offering
Commercial process/offering ‐Technical ‐ Quantity ‐ Account ‐ Quantity ‐ Quantity ‐ Glass ‐ Glaziers ‐ Commercial Engineers Surveyors Managers Surveyors Surveyors Operators ‐ Project Manager ‐ Architectural ‐ Commercial ‐ Commercial ‐ Project Managers Account Manager Manager Managers Managers ‐ Tech
Slide 39: Focus areas for commercial glazing in FY18
Focus areas for commercial glazing in FY18 Execute current forward work Compliance – Health and safety – Technical and contractual requirements Commercial pricing/profitability – National pricing strategy – Project profitability Improve capability and processes across business Hutt City Council Admi
Slide 40: NZ Retrofit
NZ Retrofit Craig Chetty, National Retrofit Manager Strictly confidential and not for public release 39
Slide 41: The market and our capability
The market and our capability The Market Retrofit Capability 17 Retrofit outlets • More than 1.4 million • Vertically integrated nationally owned homes single with Metro Glass – glazed pre 2007 in NZ broad product range and quick turnaround • A house has an avg. of on glass supply 40 sq. meters of s
Slide 42: Retrofit's competitive advantage
Retrofit’s competitive advantage • Currently the only truly national player in the NZ market • Own manufacture – 3 day lead for double glazed units • Most comprehensive library of aluminium and timber components to suit most joinery in the market • Supply superior soft coat LowE technology in our do
Slide 43: Key objectives for Retrofit
Key objectives for Retrofit •1 Targeting annual compound revenue growth of 30% pa •2 Continue to focus our resources on developing Auckland and the upper North Island which constitutes close to half of all existing NZ homes •3 Improve sales conversion and the average value of the sale •4 Improve our
Slide 44: Overview of the Retrofit process
Overview of the Retrofit process LEAD QUOTE FINAL MEASURE Targeting 4 to 5 weeks from lead to install ORDER PROCESS INSTALLATION PROCESS FINAL INVOICE Strictly confidential and not for public release 43
Slide 45: Lead generation
Lead generation Strictly confidential and not for public release 44
Slide 46: The Retrofit sales & marketing programme
The Retrofit sales & marketing programme • Television commercials is currently the main lever used to generate leads • Run both winter and summer campaigns – and these will get more sophisticated over time • Retrofit participates in a number of trade, home and DIY shows and events to increase awaren
Slide 47: Retrofit faces the challenges of an early stage growth business
Retrofit faces the challenges of a early stage growth business • Balancing of sales resources to cater for the peaks and troughs in servicing of leads through the year (peaking in winter) • Vetting of leads to separate the tyre kickers from true demand • Improving our internal systems to reduce the
Slide 48: Developing innovative technology
Developing innovative technology Lead Management Quoting Installation • Effective software for lead • Software and measuring • Specifically developed for management tools that increase efficiency Metroglass software – of sales calls provides real time • Full spectrum CRM to help information on the i
Slide 49: Operations and manufacturing
Operations and manufacturing Geoff Rasmussen, General Manager Operations Strictly confidential and not for public release 48
Slide 50: Our manufacturing operations are evolving with advances in glass processing technology
Our manufacturing operations are evolving in line with rapid advances in glass and glass processing technology Building standards Construction Our customers are are being Metro Glass has activity levels are demanding larger, strengthened with evolved – and in the midst of a more advanced the consume
Slide 51: We have learnt a lot since the scoping of the Highbrook plant in 2012
We have learnt a lot since the scoping of the Highbrook plant in 2012? (completed in 2015) • Why was the Highbrook plant built? • The Highbrook facility was intended to increase DGU manufacturing capacity, deliver operational savings including an reduction in FTE, reduced raw materials, wastage and
Slide 52: Update on NZ processing plants
Update on NZ processing plants Metro Glass has delivering record levels of production and product complexity in FY17. That said, we see continue to see considerable improvement opportunities in Auckland and Christchurch Automated plants labour efficiency above our manual plants, with all Highbrook p
Slide 53: FY18 capital will add capacity, simplify processes and enhance technology
FY18 capital will add capacity, simplify processes and enhance technology Total capital expenditure across Metro Glass and AGG in FY18 is expected to be in the range of $22m ‐ $25m including ~$15m on processing equipment enhancements across the group’s six plants, Auckland will account for approxima
Slide 54: Double glazing technology upgrade: Swiss Spacer processing machine
Double glazing technology upgrade: Swiss Spacer processing machine and spacer bar magazine Metro Glass exclusive technology (NZ/AU) New spacer bar provides improved thermal performance across all DGUs Simplifies processing approach by rationalising three spacer bar materials into one Step changes qu
Slide 55: Increasing maximum processing dimensions: Jumbo DGU line
Increasing maximum processing dimensions: Jumbo DGU line Significant boost to commercial capabilities, size, speed and quality. Specifically developed to handle 6.0m x 3.3m high performance glass Reduces average cycle time per unit by up to 30% Able to fill units efficiently with multiple gases for
Slide 56: Plant simplification: combined vertical edge polishing, drill/mill & washing
Plant simplification: combined vertical edge polishing, drill/mill & washing Simplifies the production process by providing a one stop shop for polishing, holes, milling. Removes three existing standalone machines Increases capacity with approximately half the cycle time of the existing machinery (s
Slide 57: Revenue generation: increasing glass lamination capacity
Revenue generation: increasing glass lamination capacity Laminated glass is required in balustrades and large façade windows, and provides noise reduction benefits Required to meet the significant market demands following the change in building standards Increases NZ lamination capacity by up to 60%
Slide 58: Australian operations
Australian operations Capital expenditure of c. $9m in FY18 to drive increased throughput, and open a basic processing facility in Tasmania Early progress AGG adapting well to a Metro Glass manufacturing methodology that facilitates increased throughput, enabling double digit volume growth Focus on
Slide 59: Product and Technical
Product and Technical Dr. Andrew Piraccini, Senior Structural Engineer Strictly confidential and not for public release 58
Slide 60: Organisation
Organisation Increasing scale and sophistication drives need for additional capability • Glass and window facades technical knowledge ENGINEERING BUILDS CHANGES IN GLASS QUALITY TECHNOLOGY • Resistance in Quality • Competitive Structure with Glass • Market Leader in Standards • Glass and Photovolt
Slide 61: Three pillar strategy supports market position
Metro Glass’ three pillar strategy supports its market position, with customer intimacy providing strong protection against import‐based competition ENGINEERING BUILDS QUALITY CHANGES IN GLASS TECHNOLOGY RESISTANCE IN MARKET ‐ LEADER RISK STRUCTURE GLASS AND INTERACTIVE QUALITY IN STANDARDS MINIMIZA
Slide 62: Product leadership is a critical part of Metro Glass' strategy
Product leadership is a critical part of Metro Glass’ strategy Innovations in double glazing • “Extreme” LowE • Swiss Spacer Laminate / LSG development • Supports changes in balustrade systems Metro Glass’ “Ezy Clean” • Hydrophobic surface Strictly confidential and not for public release 61
Slide 63: Technical capabilities - tools for internal and customers
Technical capabilities ‐ tools for internal and customers Metro PS App • Clear documentation of issued Producer Statements • Customer oriented access to standard PS • Cost and time efficiency for Metro • Service provided, revenue stream Metro Caluwin App • UW Calculator for all Metro products • Ener
Slide 64: A longer-term view – the future is clear
A longer‐term view – the future is clear Glass will be increasingly used as a structural base in the future • Buildings will be structured from glass, not just the facades Strictly confidential and not for public release 63
Slide 65: A longer-term view – strength to strength
A longer‐term view – strength to strength Glass is transformed and used as a mechanical structure • Glass will no longer be seen simply as Digital glass will have multiple applications windows and fancy façades • Glass will make information visible as a data transfer system • This will have commerci
Slide 66: A longer-term view – interactive glass façade technology
A longer‐term view – interactive glass façade technology • Glass Façade Technology with digital print which combines the external and internal skin into one, not requiring any aluminum systems • The glass is the dominant structural component. Strictly confidential and not for public release 65
Slide 67: A longer-term view – glass and carbon fibre
A longer‐term view – glass and carbon fibre • Glass and architectural design in combination with light construction and components • Carbon fibre and glass architecture Strictly confidential and not for public release 66
Slide 68: A longer-term view – the power of glass
A longer‐term view – the power of glass • The future of energy will be solar; renewable energy. • Photovoltaic systems will be in high demand • The future for photovoltaic is transparency in glass, that’s clear Strictly confidential and not for public release 67
Slide 69: Australian Glass Group
Australian Glass Group John Fraser‐Mackenzie, CFO Strictly confidential and not for public release 68
Slide 70: Strategic rationale for our entry into Australia
Strategic rationale for our entry into Australia Why Australia? Metro Glass has a greater than 50% share of the glass processing market in New Zealand and over the medium to long term there may be a ceiling to its growth potential The Australian glass processing market offers significant opportuniti
Slide 71: Increasing adoption of double glazing presents a significant opportunity
Increasing adoption of double glazing presents a significant opportunity Double glazing penetration is gathering significant momentum in cooler climates like Victoria and Tasmania, which we currently estimate to account for c. 30‐50% of windows in new construction Industry is fragmented, with market
Slide 72: AGG is a good fit with Metro Glass
AGG is a good fit with Metro Glass as it is focused on the best markets, performs well and Metro can add lots of value AGG provides direct entry into the most attractive AGG Customer Ratings on Criteria Ranked parts of the Australian market: by Importance * Industry benchmark ratings - Victoria & NS
Slide 73: Victoria has adopted the Building Code of Australia to regulate energy efficiency
Victoria has adopted the Building Code of Australia to regulate energy efficiency measures in residential homes Current Star Ratings for Annual Energy Usage (Example) Building Code of Australia Details Units: MJ/m2 • Index of building’s thermal performance for residential homes in Australia • BCA ma
Slide 74: NSW are increasing requirements for energy efficiency in homes
NSW are increasing requirements for energy efficiency in homes Changes to BASIX Why? • Existing homes in NSW use @17% of state energy, anticipate 1.8m new homes over 40 years What has changed? • BASIX energy targets will increase July 2017 • Typically efficiency targets increase +10% for houses and
Slide 75: AGG investment program
AGG investment program AGG due diligence and acquisition model anticipated initial investment requirements between $3m and $6m within first 18 to 36 months Existing business AGG FY14‐FY17 capex as a % of revenue • Current operational capability similar to Metro Glass in 2012 5.8% 4.4% • Focus on imp
Slide 76: Objectives for AGG
Objectives for AGG 1. Increased share of a growth market as DGU penetration increases 2. Leverage established Metro glass procurement and technology advantage 3. Reconfigure manufacturing assets, with investment to increase capacity and capability 4. Implement operating process methodology that driv
Slide 77: Financials and wrap up
Financials and wrap up John Fraser‐Mackenzie, CFO Strictly confidential and not for public release 76
Slide 78: Metro has grown revenue and EBITDA strongly
Metro has grown revenue and EBITDA strongly $ '000 Pro‐forma 244,318 30,488 188,037 213,830 170,948 155,374 126,865 135,612 Pro‐forma 44,897 31,531 34,234 37,449 4,766 14,952 22,335 40,131 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 Total Revenue EBITDA FY17 Metro Glass revenue FY17
Slide 79: Cashflow and balance sheet management
Cashflow and balance sheet management Cashflow history since the IPO Leverage profile: Net debt/EBITDA 120 100 30.7 38.3 80 1.93 15.4 60 3.7 27.4 40 1.38 68.2 20 45.4 1.16 0 borrowing Cashflow from Net IPO & equity Payments for PP&E Purchase of AGG Change in cash Dividends paid NZ businesses Additio
Slide 80: Metro long run capex profile is in line with industry peer group
Metro long run capex profile is in line with industry peer group 35% Capex profile F12‐F17 • Historically Metro has spent an average 30% of 30% EBITDA on capex, this is in line with peer group 25% 20% • Over this period Metro revenue has grown 1.7* 15% and EBITDA 2.7* 10% 5% • Includes upgrade of Me
Slide 81: Metro Glass' 3 year financial aspirations
Metro Glass’ 3 year financial aspirations • Continued link to 9 month lagged residential consents • Increased commercial and retrofit presence supporting Group revenue +5‐12% increased total glass market share • Anticipate Australian growth rate above NZ • Optimize profitability across all businesse
Slide 82: Key messages
Key messages Metro Glass is well‐positioned with seven distinct businesses that each have articulated opportunities, strategies, and execution plans Investments in this first double glazing growth cycle and expanded presence in commercial and retrofit markets are setting Metro Glass up for the l
Slide 83: Contact information
Contact information Metro Performance Glass Limited Nigel Rigby – Chief Executive Officer nigel.rigby@metroglass.co.nz 5 Lady Fisher Place, East Tamaki (+64) 027 703 4184 Auckland 2013 New Zealand John Fraser‐Mackenzie – Chief Financial Officer Ph: + 64 9 927 3000 john.fraser‐mackenzie@metroglass.co