Slide 1: Waterco Limited Investor Presentation: Full Year Results to 30 June 2006
Waterco Limited Investor Presentation Full Year Results to 30 June 2006
Slide 2: A leading manufacturer and distributor of water pumps and filters
A leading manufacturer and distributor of water pumps and filters, accessories, and heating systems for the residential swimming pool and spa markets and the commercial water filtration and recycling markets globally.
Slide 3: Background
Background Founded in 1981 by current CEO — Mr Soon Sinn Goh Listed on ASX in 1989 Exports to over 40 countries Offices in Australia, Malaysia, NZ, USA,UK, Canada and China employing over 590 people Dominant market share in Australia & NZ via ownership of ‘Swimart franchise retail chain with 56 stor
Slide 4: FY06 Revenue and EBIT
FYO6 Revenue and EBIT Headline - Reported Results + Sales Revenue of $88 million up 9.0% + EBITDA of $9.05 million up 3.9% « EBIT of $7.31 million down 1.8% «* NPAT- Members of $4.19 million up 0.43% « EPS of 18.6 cents down 2.6% + Final Dividend declared of 9 cents bringing total for the FY06 perio
Slide 5: Revenue Growth
Revenue Growth + Over the last 5 years Waterco has grown its total revenues at a compound average growth rate (CAGR) of 9.75% of which the O Unallocated Revenue mAust Revenue CAGR of its offshore revenues 7 has been 28.25% p.a. Millions « Revenue generated outside Australia now represent approx. MOS
Slide 6: Normalised FY06 Profit
Normalised FY06 Profit Result FX gains were non cash in nature and reflect Canadian Dollars denominated loans owing from Canadian subsidiary; UK divisional losses reported in FY05 have been reversed in FY06; $2.8m after tax losses from Canadian operations which are considered non recurring; $0.25 mi
Slide 7: Divisional Performance
Divisional Performance Divisional Contribution Pre Tax ($m) Australia SE Asia New Zealand USA / Canada Total Eliminations FY06 7.38 0.98 (0.10) (3.19) 0.60 5.64 (0.14) FY0S 5.18 0.78 0.07 1.19 (0.93) {6.3) (0.1) $ $ $ $ Other (inc. UK) $ $ $ $ Reported Pre Tax Profit 5.50 nla HAA AA A 6.20 FYO6 resu
Slide 8: Global Operations
Global Operations WAT business activities are summarised below: Australia — Represents 62% of Revenue; dominant market share in pool & spa market; franchisor of 56 ‘Swimart’ retail outlets; national distribution network; head office and R&D facilities; Malaysia — major manufacturing and export hub;
Slide 9: Australia
Australia Australia represents approx. 62% of total group revenue underpinned by swimart franchise which accounts for directly for 25% of revenue; Revenue generated from independent stores, trade and Swimart outlets accounts for 43% of revenues highlighting lack of dependence on majors; Pre Tax resu
Slide 10: Australia — Product / Customer Mix
Australia — Product / Customer Mix The key strength in WAT customer mix is: « the ability to satisfy the domestic retail market with a complete range of products for the pool / spa market + The organic growth in the revenue of the Swimart franchise outlets; * The lack of reliance on the major depart
Slide 11: Australia — Swimart Outlets
Australia — ‘Swimart Outlets’ Swimart stores account for 25% of total Australian revenues. Sales growth of 14% in the Swimart Franchise business in the last year which is above the CAGR of 12% over the last 10 years. Over the past 10 years Waterco has gradually expanded its franchise retail outlets
Slide 12: Asia / China / NZ
Asia / China / NZ The expectation for growth is highest in the emerging markets in Asia for water filtration and recycling products; Waterco has a dominant position( estimated 50 percent share), in the “whole of house” water filtration market in Malaysia; Revenue in SE Asia still represents only 4%
Slide 13: Canadian Operations
Canadian Operations WAT Canada (Focus Temp) acquired for $6.7m in March05; WAT Canada reported A$2.8million after tax loss (A$3.3m pre tax) for FY06 on revenues of $10.2m; Poor performance caused by previous management (vendors) inflating inventory; inaccurate costing of products and low debtor coll
Slide 14: European Operations
European Operations Revenue from Europe up 62% on the previous year European market is estimated at approx E1.2 billion of which 30% is controlled by Astral (Spain) and the balance is spread among 20 smaller distributors; Operational base established in UK via Lacron acquisition; Turnaround in profi
Slide 15: US Operations
US Operations USA / Canada, there are approximately five (5) million swimming pools, with about 200,000 new pools being built each year (i.e., 4% growth). The US residential swimming pool aftermarket is worth US$3.9 billion per annum in revenue terms, while the aftermarket dollar amount of the U com
Slide 16: Cash Flow and Working Capital
Cash Flow and Working Capital Cash Flow / Working Capital * Operating cash flow was positive $1.7 million for FYO6 (FY05 $3.6m) due to the impact of the Canadian operations and working capital increases in Baker Hydro; * Working capital was $34.4m at June06 (JuneO05 $30.5m) reflecting build up of in
Slide 17: Balance Sheet and Gearing
Balance Sheet and Gearing Balance Sheet / Gearing Net debt at year end approx. $29 million (FYO5 $17.4m). Increase in debt reflects expenditure on new Mfg facilities and plant & equip; Gearing at year end 73%; Interest cover for FY06 remains at 4.03x. NTA of $36.4m ($1.61 per share). Year End June 3
Slide 18: Return on Capital
Return on Capital Return on Capital Employed (ROCE) FY05 FY06 Capital Empl. EBIT ROCE (%) Capital Empl. EBIT ROCE (%) Waterco - Canada & USA $ 10.7 $ 4.2 11.2% § 14.3 $ (3.2) (24.1%) Malaysia $ 14.4 $ 0.8 58% § 19.8 $ 4.4 5.4% China $ 1.9 $ 0.4 202% § 4.8 $ 0.3 6.2% Total $ 267 $ 24 9.0% $ 38.9 $ G8
Slide 19: Key Strategic Initiatives
Key Strategic Initiatives Increase ROIC from US/Canada by turnaround of profitability in Canada and expanding product distribution in US; Achieve strategic distribution alliances in the US; Reduce working capital by $3m-$4m in 2007; Expand production throughput in Malaysian and China factories and o
Slide 20: Commercial Water Treatment & Recycling
Commercial Water Treatment & Recycling Waterco revenue in Australia from commercial & household water filtration and recycling products represents only 4% of total revenue. Based on new products that have recently been developed, sales growth in the commercial sector continues to be a significant gr
Slide 21: Global Market Opportunity
Global Market Opportunity Goldman Sachs estimate the Global Water Market is worth US$365 billion annually across the municipal, industrial, residential and commercial sectors and dealing in product categories ranging from equipment through to systems, service and operations. WAT operates in an indus
Slide 22: Waterco Issued Capital
Waterco ~ Issued Capital Current Share Price ($) No shares (m) Market Cap ($m) $ 245 22.60 $ 48.59 nhac Total Revenue 68.7 EBITDA VT Depreciation (1.4) EBITA 6.6 Goodwill Impairment/Amortisation (0.4) Total EBIT 6.5 Net Interest Expense (1.2) Pre-Tax Profit 5.3 Tax and Minorities (1.4) Reported NPAT
Slide 23: EPS (c) - Pre Impairm/Amort (total)
EPS (c) -Pre Impairm/Amort (total) 215 26.9 19.5 19.4 EPS Growth (%) Nia 25.1 278) (0.8) CFPS (c) 51.0 175 16.3 11.9 PIE Ratio (x) 14.9 116 16.4 21.4 DPS (c) 13.0 15.0 16.0 17.0 Franking (%) 100.0 100.0 100.0 100.0 Note: Reported profit figures impacted by $2.8m after tax loss from Canadian operatio
Slide 24: Top Shareholders - September 2006
Top 20 Shareholders - 1 September 2006 Holder GSS Holdings Pty Ltd * Invia Custodians - Loftus A/C Mr Soon Sinn Goh* ANZ Nominees Limited Mister Rain Pty Ltd Citicorp Nominees Pty Ltd Goh Lai Huat & Sons Sdn Bhd* Mr Loke Weng Foo Brazil Farming Pty Ltd BJ Services GWK Corporation Pty Ltd SG Corporat