Scales Corp. Ltd. · NZX:SCL
Scales — Investor Presentation (June 2015)
39 slides from Scales's investor presentation, Jun 23, 2015
Slide 1: Scales Corporation Limited – Your Diversified Agribusiness Portfolio
SCALES CORPORATION LIMITED YOUR DIVERSIFIED AGRIBUSINESS PORTFOLIO Craigs Investor Day 23 June 2015
Slide 2: Agenda
AGENDA • Introduction to Scales: “Who we are, what we do, and why we are different.” • A Closer Look at our Divisions • 2014 Financial Results • Growth Story • 2015 Outlook • Investor Returns Scales – Craigs Investor Day Presentation June 2015 2
Slide 3: Introduction to Scales
1 INTRODUCTION TO SCALES “WHO WE ARE, WHAT WE DO, AND WHY WE ARE DIFFERENT”
Slide 4: We Are a Diversified Agribusiness Portfolio
WE ARE A DIVERSIFIED AGRIBUSINESS PORTFOLIO Scales is a diversified agribusiness group with 117 years of trading experience. The Group comprises 8 operating companies organised into 3 trading divisions managed by a corporate office. Scales – Craigs Investor Day Presentation June 2015 4
Slide 5: Diversified by Sector and Region
DIVERSIFIED BY SECTOR AND REGION National coverage, critical scale. • Asset rich portfolio, scale efficiencies, very high entry barriers. Scales – Craigs Investor Day Presentation June 2015 5
Slide 6: What We Do
WHAT WE DO We have skills, experience, expertise, and capital to assist in delivering – and will greatly benefit from – improvements in NZ Agricultural production. • There’s 3 things that we absolutely believe. 1 New Zealand’s agribusiness sector can be the most 2 productive and the most competitive
Slide 7: Why We Are Different
WHY WE ARE DIFFERENT We have the expertise, experience and financial capability to help transform New Zealand into a global agribusiness super-power amongst the world’s temperate climates. Endowments: With these endowments, we: • Culture – the “Scales’ Way” • Add value to the portfolio • Great Asset
Slide 8: Divisional Detail
2 DIVISIONAL DETAIL
Slide 9: Horticulture at a Glance
HORTICULTURE AT A GLANCE New Zealand’s largest integrated apple grower, packer and marketer. 1,052 Ha. planted 420m+ apples 4m boxes packed orchard picked 130+ CUSTOMERS 40+ COUNTRIES Outside Growers During the height of the Apple Harvest, we will fill more than 5,500 bins a day Scales – 2015 Annual
Slide 10: Horticulture Division
HORTICULTURE DIVISION New Zealand’s largest integrated grower, packer, and marketer. • 1,052 Ha. Planted apple orchard. • 3 packhouses, 2 with high-speed apple sorting machines. • 5 coolstores. • Mr Apple’s share of the national apple crop is ~23%. If we add in volumes exported by our associate comp
Slide 11: Horticulture Division: Excellent yields
HORTICULTURE DIVISION Excellent yields through climatic, soil, and orchard management advantages. 1 2 … and our Yields are better than the rest of New NZ achieves better yields than any other country… Zealand (avg. 35% above for 2009-2014) Chart: Gross Yields / Ha. – Apple Producing Countries Chart:
Slide 12: Shift in Focus to Asian and Middle Eastern Markets
HORTICULTURE DIVISION Shift in Focus to Asian and Middle Eastern Markets. We are seeing a large shift in our customer mix from traditional • Increasing middle class, and diet westernisation driving markets… considerable demand from Asian markets. Chart: Exports by Market 2007 • $11.3m invested to re
Slide 13: Shift in Focus to Asian and Middle Eastern Markets (continued)
HORTICULTURE DIVISION Shift in Focus to Asian and Middle Eastern Markets (continued). • Premium varieties targeted to Asian and Middle Eastern markets achieving weighted average premiums of 30%+. Asia & Middle East want apples that are: Red Sweet • Additional $2.1m invested in 500kms of reflecti
Slide 14: We Have Evolved Apple Growing from an Art into a Science
HORTICULTURE DIVISION We Have Evolved Apple Growing from an Art into a Science. Growing: Grading: • 53 Global Gap accredited orchards. • Automated defect grading, • 100 wind machines providing frost complemented by inhouse software protection. with commercial opportunities • 90% of our orchards are
Slide 15: Apple Growing from an Art into a Science (continued)
HORTICULTURE DIVISION We Have Evolved Apple Growing from an Art into a Science (continued). Cool Chain: • Mr Apple has invested more than Globally Leading Brands: $10.6m in state of the art forced air • Our commitment to product cooling. excellence, supplemented by our • Ability to SmartFresh, pre-c
Slide 16: Storage & Logistics at a Glance
STORAGE & LOGISTICS DIVISION Storage & Logistics at a Glance 702,300 m3 Over 2,000,000 m3 of product loaded in Refrigerated and out every year Warehouse Space Sea and Air freight logistics arranged for more than 17,300 TEUs 57 Bulk Liquid Storage tanks 22,200 MT capacity Scales – 2015 Annual Shareho
Slide 17: Essential Services to Some of the Largest Exporters
STORAGE & LOGISTICS DIVISION Essential Services to some of the Largest Exporters. • Very strict rules govern the storage of foods and other products: Temperature (storage temperatures vary significantly between food groups) Time to bring down product to temperature (e.g. Most customers require t
Slide 18: Storage & Logistics: Strong Drivers of Demand
STORAGE & LOGISTICS Strong Drivers of Demand. • Linked to New Zealand’s agricultural output, which has, and is expected to continue to increase: Improvements in technology and agronomy practices. Large scale irrigation projects (e.g. Central Plains). New Zealand – Total Exports of Perishable Foo
Slide 19: Food Ingredients Division
FOOD INGREDIENTS DIVISION Petfood and Apple Juice Concentrate. 16.4m kg Petfood Ingredients sold 4.6m Litres Juice Concentrate • Apple • Organic • Kiwfruit Scales – 2015 Annual Shareholders’ Meeting June 2015 19
Slide 20: 2014 Highlights
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Slide 21: Trading Ahead of IPO Forecasts
TRADING AHEAD OF IPO FORECASTS Financial performance targets exceeded. • We are committed to delivering on our IPO forecasts and so far have met those targets. $’000 2014 Actual 2014 IPO Variance Forecast Revenue 263,262 253,927 +3.7% Gross Margin 81,273 77,256 +5.2% Underlying EBITDA 39,849 38,811
Slide 22: EBITDA Composition
EBITDA COMPOSITION FY2014A EBITDA by Division and Business (NZ$) FOOD Share of Profruit INGREDIENTS $1.0m HORTICULTURE Meateor Scales Logistics $4.6m $0.8m $5.7m Liqueo 14% $1.3m $23.9m 57% $12.3m Mr Apple Coldstores 29% $23.5m $10.3m STORAGE & LOGISTICS Share of Fern Ridge $0.5m Group EBITDA $39.8m
Slide 23: Strength Through Diversity
STRENGTH THROUGH DIVERSITY Consistent, and predictable, financial performance through diversification. • Since listing, some of the challenges identified in our Prospectus have arisen. With our diversified economic strength, and through careful management of those risks, Group performance exceeded t
Slide 24: Meeting or Exceeding KPIs
MEETING OR EXCEEDING KPIs $’000 2014 Actual 2014 IPO Variance Forecast Horticulture: Total Volume Sold (Mr Apple + External Growers) 3,970 3,887 +2.1% Total Mr Apple Volume Sold 2,752 2,569 +7.1% Comprising: Premium Apples - Mr Apple total own volumes sold (TCE 000s) 1,036 984 +5.3% - Weighted avera
Slide 25: Strong Balance Sheet
STRONG BALANCE SHEET Assets by Category • We have a large asset base centred 250.0 Working Capital and Other Other PP&E Biological Assets Land & Buildings around our material investment in Net Assets 200.0 land and buildings. 25.6 27.3 31.4 • We currently have considerable 150.0 26.9 44.3 headroom i
Slide 26: Our Strategy for Creating Growth
4 OUR STRATEGY FOR CREATING GROWTH
Slide 27: Scales' Vision
Scales’ Vision: To be the foremost investor in, and grower of, New Zealand agribusinesses by leveraging our unique insights, experience, and access to collaborative synergies. Our long-term goal: To generate a long-run average 15% Return on Capital employed across our portfolio.* *Calculated as Unde
Slide 28: Organic Growth Strategy
ORGANIC GROWTH STRATEGY Progressing the next phase of our growth strategy. • Our pre-IPO growth strategy was focused around an intensive 3-5 year investment in our Horticultural division. With that investment largely completed and paying dividends, our attention is now fully on our Storage & Logisti
Slide 29: Focusing on Storage & Logistics
FOCUSING ON STORAGE & LOGISTICS Our current investment cycle is focused on achieving even better returns from our Storage & Logistics division. • Established perishable airfreight specialist division Balance Cargo – growing strongly. • Auckland Coldstore – construction progressing well. Opening for
Slide 30: Expanding Our Reach
EXPANDING OUR REACH • We have the skills, networks and experience to add value to the New Zealand agricultural sector. • We continue to actively investigate ways we can develop our existing divisions or extend our agribusiness reach either by: Acquiring appropriate ‘bolt-on’ businesses to support
Slide 31: Clearly Defined Objectives
CLEARLY DEFINED OBJECTIVES • Our Annual Report clearly outlines our Near and Medium Term Objectives, both for the Group and for each of our operating divisions. • Our Group objectives are repeated below: OUR OBJECTIVES NEAR TERM OBJECTIVES (<2 YEARS) MEDIUM TERM OBJECTIVES (2-5 YEARS) Align Health &
Slide 32: The Year Ahead
5 THE YEAR AHEAD
Slide 33: Trading Update Q1
TRADING UPDATE Q1 We remain confident of meeting our 2015 IPO forecast. Horticulture Storage & Logistics Food Ingredients Apple harvest completed. Coldstore utilisation has started Petfood trading to April 2015 in Gross production volumes above well (as predicted – product line with the same period
Slide 34: Group Financial Performance
GROUP FINANCIAL PERFORMANCE FY2013 and FY2014 Actual vs FY2015 IPO Forecast Performance. Scales - Group Financial Performance FY2013 FY2014 FY2015 NZ$000s Actual Actual IPO Fcst Horticulture Revenue 174,171 158,808 158,881 Storage & Logistics Revenue 91,662 90,609 93,374 Food Ingredients Revenue 33,
Slide 35: Investor Returns
6 INVESTOR RETURNS
Slide 36: Share Price and Volume
SHARE PRICE AND VOLUME • Solid share price appreciation since mid-October 2014. • 8% return on issue price to date (being $0.03 cash dividend + current* share price of $1.70 on $1.60 issue price). • Average of ~200,000 shares traded every day (last two months). $1.70 $0.07 Current* $1.80 Share Price
Slide 37: Dividend Yield
DIVIDEND YIELD • At current pricing, Scales offers a leading dividend yield. The chart below compares the dividend yield of all companies in the NZX50 and how Scales compares to those companies (NB. For clarification, Scales is not currently included in the NZX50). Gross Dividend Yield*, Based on
Slide 38: Questions
QUESTIONS
Slide 39: Disclaimer
DISCLAIMER Please do not read this presentation in isolation This presentation supplements our full year results announcement dated 26 February 2015 and Annual Report dated 27 March 2015. It should be read subject to and in conjunction with the additional information in that release, other material