Sgh Limited · ASX:SGH
Sgh — Seven Group Holdings — Merger or Acquisition (September 2017)
28 slides from Sgh's merger presentation, Sep 20, 2017
Slide 1: Acquisition of Coates Hire
For personal use only Acquisition of Coates Hire 20 September 2017 SGH Presentation | 20 September 2017
Slide 2: Important notice & disclaimers
Important notice & disclaimers For personal use only Basis of preparation of slides Included in this presentation is data prepared by the management of Seven Group Holdings Limited (“SGH”) and other associated entities and investments. This data is included for information purposes only and has no
Slide 3: Transaction overview
Transaction overview Coates Hire is a market leader in equipment solutions with strong growth prospects For personal use only Acquisition of remaining Seven Group Holdings (“SGH”) has entered into binding agreements with an affiliate of Carlyle Asia Partners II, stake in Coates Hire a fund managed
Slide 4: Transaction overview (cont'd)
Transaction overview (cont’d) Coates Hire is a market leader in equipment solutions with strong growth prospects For personal use only Funding and expected Purchase consideration to be funded by existing cash reserves and undrawn bank facilities financial impact − SGH has significant liquidity thr
Slide 5: Strategic rationale
Strategic rationale Strengthens SGH’s position as a leading industrial services operator For personal use only #1 hire equipment Coates Hire is the leading equipment hire company in Australia, across a range of end markets company in Australia Strengthens SGH’s position as a leading provider of
Slide 6: Strategic rationale (cont'd)
Strategic rationale (cont’d) Strengthens SGH’s position as a leading industrial services operator For personal use only FY17 EBIT (1,2) FY17 pro-forma EBIT (1,3) Other Energy 3% Other 6% Energy 4% 9% Media 17% WesTrac 40% Media 24% $297m WesTrac 55% $415m Coates Hire 8% Coates Hire 34% Industrial se
Slide 7: Overview of Coates Hire
Overview of Coates Hire #1 equipment hire company in Australia Australia’s largest equipment hire and solutions provider For personal use only − Approximately 4x larger than the nearest competitor − Strong market brand awareness and preference − Highly diversified end market exposure and customer
Slide 8: Coates Hire key highlights FY17
Coates Hire key highlights FY17 Achievements and changes For personal use only Achievements in FY17 Changes in FY17 Improved safety with a reduction in LTIFR of 48% over FY16 Resized the business: Assets on hire continue to reach new highs with Jun 17 at 55.7%, – Completed fleet size reduction
Slide 9: Safety first
Safety first Zero harm For personal use only Annual Lost Time Frequency Rate (Rolling 12m) Annual Total Recordable Injury Frequency Rate (Rolling 12m) as at 30 June 2017 as at 30 June 2017 Safety measures are moving in the right direction But still work to do with further reductions targeted in
Slide 10: Coates Hire's strategic pillars driving long-term success
Coates Hire’s strategic pillars driving long-term success For personal use only Sustainable profit delivered safety Financial Targets Non-Financial Targets Geographic Footprint Profitable Markets and Products Prioritise Profitable Customers PEOPLE CUSTOMER PRODUCTS & REVENUE BRAND OPERATIONAL SERVIC
Slide 11: Major initiatives in FY18 and beyond
Major initiatives in FY18 and beyond For personal use only Reinvestment in the $143m in net capital expenditure budgeted in FY18 up from $64m in FY17 business Long-term purchasing arrangements with OEMs to improve “whole of life” ownership costs Additional operational spend of $10m in FY18 for
Slide 12: Supportive market outlook
Supportive market outlook Positive outlook for infrastructure projects For personal use only Coates Hire set to capture further upside Strong growth in infrastructure activity on the Australian East Coast has improved demand for construction equipment and heavy machinery Further upside to be cap
Slide 13: Coates Hire outlook underpinned by major long-term projects
Coates Hire outlook underpinned by major long-term projects For personal use only Melbourne Arrium Bauxite 1 Barangaroo 2 WestConnex 3 Pacific Highway 4 Metro Rail 5 Weipa Type Construction Road Infrastructure Road Rail Mining Commence Jan-12 Mar-16 Jul-16 Jan-18 Mar-16 Finish Jan-20 Jun-20 Dec-21 D
Slide 14: Diversified business model
Diversified business model For personal use only Diversified end markets with strong leverage to Diversified blue chip customer base 1 infrastructure market 2 More than 17,000 customers FY17 sector revenue split No single customer represents more than 3% of revenues, with the Government Oil & ga
Slide 15: Strong fleet metrics and utilisation rates, enhancing return on invested capital
Strong fleet metrics and utilisation rates, enhancing return on invested capital For personal use only Fleet on hire experiencing positive trends Efficient return on invested capital via reduction in 1 2 redline equipment and improved turnaround time 58% 30% 55.7% 56% 53.5% 27.6% 54% 28% 52% 50% 26%
Slide 16: Coates Hire benefiting from positive market trend
Coates Hire benefiting from positive market trend For personal use only Trading revenue ($m) Underlying EBIT ($m) 279 1,241 +5% 1,095 188 +46% 919 873 918 142 104 97 FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 Underlying EBIT margin Underlying EBITDA & net capex ($m) 22.5% +4ppts 534 17.2% 15.
Slide 17: Pro-forma financial impact
Pro-forma financial impact SGH financial profile – pro-forma impact(1) For personal use only Pro-forma financial impact (FY17) Reported Pro-forma FY16 FY17 FY16PF FY17PF 15% underlying EPS accretive on FY17 continuing Revenue 2,237 2,282 3,110 3,193 pro-forma basis(2) Growth (%) (pcp) 2.0% 2.7%
Slide 18: Acquisition funding
Acquisition funding For personal use only Purchase Price Purchase consideration of $517m for 53.3% economic stake not owned by SGH Purchase consideration to be funded via: Funding ─ Existing cash / undrawn debt facilities ─ Expected proceeds of approximately $516m after tax from the sale of WesT
Slide 19: Trading update and outlook
Trading update and outlook For personal use only Coates Hire Poised to benefit from Coates Hire is expected to continue to benefit from branch rationalisation and fleet redeployment undertaken in the prior year, together with infrastructure activity price realisation strategies as the New South Wa
Slide 20: Appendix
For personal use only Appendix SGH Presentation | 20 September 2017 20
Slide 21: SGH pro-forma balance sheet
SGH pro-forma balance sheet For personal use only Basis of preparation: - Acquisition calculated as a step acquisition with an assumed 30% control premium in accordance with AASB 3 Business Combinations - Goodwill on acquisition subject to change within 12 months of transaction close pending finalis
Slide 22: SGH pro-forma free cash flow
SGH pro-forma free cash flow For personal use only SGH Presentation | 20 September 2017 22
Slide 23: Branch network overview
Branch network overview Coates Hire tailors its branch model based on location and customer needs For personal use only #1 Generalist branch structure #2 Hub and spoke structure #3 Project site facilities Typically used in regional areas that do not Typically adopted in metro regions to For ce
Slide 24: Overview of product offering
Overview of product offering Coates Hire has the broadest range and largest fleet in Australia For personal use only Broad range of product, largest fleet and wide end market exposure Continuous investment in new equipment means Coates Hire has broadest range and largest fleet in Australia, includ
Slide 25: Fleet management cycle
Fleet management cycle Comprehensive strategy across the full equipment life cycle For personal use only #5 #1 Disposal Hire fleet investment Equipment which is uneconomic to #5 Formalised hire fleet investment process maintain is disposed of through a Hire fleet which provides an approval frame
Slide 26: Customer value proposition
Customer value proposition Unmatched brand, product and service offering For personal use only Our vision: right equipment, right place, right time Unmatched branch network of >200 branches Formal national account management teams Branch network Enables Coates Hire to service the entire Nation
Slide 27: Equipment rental industry structure and trends
Equipment rental industry structure and trends Coates Hire well positioned as a national industry player For personal use only Industry structure: highly fragmented with national scale Fragmented market Fragmented with a limited number of players of scale Coates Hire footprint: – Extensive branc
Slide 28: Overview of SGH structure
Overview of SGH structure Diversified industrial services and investment group For personal use only Industrial services(1) Media investments Energy Other investments Listed Investments Business Australia Property Investments Business Diversified Media Caterpillar dealer in Industrial and general In
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