Slide 1: Simonds Group Equity Raising
Simonds Group Equity Raising 25 November 2022
Slide 2: Important Notice and Disclaimer
Important Notice and Disclaimer Important Notices and Disclaimer The following notice and disclaimer applies to this investor presentation (Presentation) and you are therefore advised to read this carefully before reading or making any other use of this Presentation or any information contained in t
Slide 3: Important Notice and Disclaimer
Important Notice and Disclaimer Not investment or financial product advice This Presentation is not financial product or investment advice or a recommendation to acquire Simonds shares or accounting, legal or tax advice. Each recipient of this Presentation should make its own enquiries and investiga
Slide 4: Important Notice and Disclaimer
Important Notice and Disclaimer Past performance Past performance and pro forma historical information given in this Presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of Simonds' views on its future performance or condition. Investors sh
Slide 5: Executive Summary
1 Executive Summary PAGE 4
Slide 6: Rationale and reasons to support the Offer
Rationale and reasons to support the Offer 1 Increases balance sheet strength and ▪ Strengthened balance sheet, with pro-forma liquidity after the Offer of $44.2 million (as at Sep-22) to support flexibility the Company’s working capital requirements 2 Allows Company to continue its focus ▪ Resets t
Slide 7: Executive Summary
Executive Summary ▪ A range of factors have adversely impacted Simonds Group Limited (Simonds or the Company) and the Australian residential building sector more generally, including the impact of prolonged wet weather and flooding, supply shortages and delivery delays for materials, reduced availab
Slide 8: Executive Summary (Cont’d)
Executive Summary (Cont’d) ▪ Simonds’ pro forma average daily net cash balance in Q1 FY23 was ~$7.9 million1 ▪ As at 30 September 2022, Simonds had pro forma available liquidity2 (before proceeds of the Offer, as defined below) of ~$19.7 million ▪ Simonds’ lender has provided a letter of support for
Slide 9: Investment Highlights
Investment Highlights 1 70+ years of history and originally listed on ASX in 2014 Leading position as one of the largest volume residential builders in Australia, with a leading presence in Victoria and 2 growing operations in Queensland 3 High quality and diverse product offering with four differen
Slide 10: Current Trading Conditions
2 Current Trading Conditions PAGE 9
Slide 11: Industry Backdrop
Industry Backdrop ▪ According to data released by National Housing Finance and Investment House construction input price growth Corporation (NHFIC) in October 2022, building material and labour cost inflation rose at its fastest pace in nearly 50 years on the back of supply constraints over the last
Slide 12: Weather Events and Labour Market
Weather Events and Labour Market Melbourne CBD – Rainfall (Millimetres) 180 160 In October 2022, Melbourne’s CBD recorded its highest rainfall 140 since 1992 and its third wettest month since 19731, with 120 prolonged wet weather and flooding being experienced across 100 Victoria and the Australian
Slide 13: Favourable Medium-term Tailwinds
Favourable Medium-term Tailwinds Although current market conditions are challenging, Simonds is positioning to benefit from the new National Housing Accord, which is expected to deliver one million new homes over 5 years from 2024 1 Federal: In its Oct-22 Budget, the Queensland: Federal Government C
Slide 14: Current Trading and Outlook
Current Trading and Outlook Simonds is operating in an extremely challenging environment ▪ A range of factors have adversely impacted Simonds and the Australian residential building sector more generally, including the impact of prolonged wet weather and flooding, supply shortages and delivery delay
Slide 15: Margins
Current Trading and Outlook (Cont’d) Simonds expects adverse market conditions to continue for longer than originally anticipated. It is uncertain how long these conditions will continue Simonds targets high margin work and high productivity ETS % expected to remain elevated near-term ▪ Management e
Slide 16: Contract Profile Summary
Contract Profile Summary ▪ The high inflation environment coupled with fixed price contracts has resulted in many residential builders having a substantial pipeline of low margin contracts that needs to be delivered ▪ Simonds contracts signed prior to Jan-22 are considered low margin as the pricing
Slide 17: Q1 FY23 Results Snapshot (unaudited)
Q1 FY23 Results Snapshot (unaudited) Unaudited Q1 FY23 Results Variance Variance $m Q1FY22 Q4FY22 Q1FY23 (Q4FY22 to (Q1FY22 to Revenue has continued to grow, primarily as a Q1FY23) Q1FY23) result of increased Site Start Values flowing Actuals Actuals Actuals (%) (%) from repricing strategies that ha
Slide 18: Right-sizing Initiatives Update
Right-sizing Initiatives Update Simonds continues to make good progress on the right-sizing initiatives communicated in August Key Initiative Communication in August November Update Reduce head count (~9%) through a targeted $12 million of annualised savings identified with Redundancy Program redund
Slide 19: Balance Sheet and Funding Position
3 Balance Sheet and Funding Position PAGE 18
Slide 20: Sep-22 Balance Sheet Snapshot (unaudited)
Sep-22 Balance Sheet Snapshot (unaudited) Unaudited Sep-22 Balance Sheet $m Jun-22 Sep-22 Bank overdraft and borrowings were $11.7 million as at Assets Sep-22. Further details of the Company’s borrowing Cash / Equivalents 11.1 - arrangements are provided on the following page Receivables1 38.2 34.1
Slide 21: Borrowing Arrangements
Borrowing Arrangements ▪ Simonds’ lender has provided a letter of support for updated borrowing facility terms, subject to completion of the proposed equity raising (including raising at least $25.0 million) and certain other conditions, including finalisation of an amended facility agreement ▪ Unde
Slide 22: Capital Raising to Provide Additional Liquidity
Capital Raising to Provide Additional Liquidity Liquidity position1 ($m) As at Sep-22 Key Liquidity Assumptions Utilised overdraft and loans (11.7) ▪ Simonds’ pro forma average daily net cash balance in Q1 FY23 was ~$7.9 million2 Plus: overdraft and loan facilities 21.5 ▪ As at Sep-22, Simonds had p
Slide 23: Equity Raising
5 Equity Raising PAGE 22
Slide 24: Overview of the Offer
Overview of the Offer ▪ 13 for 9 traditional pro-rata renounceable entitlement offer to raise approximately $25.5 million (Entitlement Offer) Offer size and structure ▪ Approximately 212.7 million new fully paid ordinary shares in the Company (New Shares) to be issued under the Entitlement Offer (re
Slide 25: Overview of the Offer (Cont’d)
Overview of the Offer (Cont’d) ▪ Eligible Shareholders who exercise their full Entitlement will be able to apply for additional Shares under the Oversubscription Facility at the Offer Price to the extent permitted by law Oversubscription ▪ To the extent there is greater demand than there is a shortf
Slide 26: Source and Use of Funds
Source and Use of Funds Net proceeds of the Offer will be used to support the Company’s working capital requirements and reset its capital structure in light of difficult trading and macroeconomic conditions Commentary $ million Sources ▪ Proceeds of the Offer are required to support the Company’s w
Slide 27: Equity Raising Timetable
Equity Raising Timetable Key Event Indicative Date1 Announcement of Entitlement Offer Friday, 25 November 2022 Ex Date for Entitlement Offer Tuesday, 29 November 2022 Entitlement trading commences on a deferred settlement basis Tuesday, 29 November 2022 Record Date of Entitlements Wednesday, 30 Nove
Slide 28: Appendix 1: Company Overview
Appendix 1 Company Overview PAGE 27
Slide 29: About Simonds
About Simonds Simonds is a proudly Australian residential home builder with over 70 years of experience building Australian homes Simonds Range ▪ Founded in 1949 by Gary Simonds, Simonds Homes is one of the largest detached homebuilders in Victoria, and while Victoria remains Simonds heartland, oper
Slide 30: Corporate Overview
Corporate Overview Key Statistics Top Shareholders ASX code SIO Shareholder % Shareholding Ordinary Shares 147,234,268 Vallence Gary Simonds 45.7% 52-week Low-High ($ per share) $0.125 – $0.445 McDonald Jones Homes Investments Pty Ltd 26.5% Market Capitalisation as at $18.4 million F.J.P. Pty Ltd 13
Slide 31: Appendix 2: Key Risks
Appendix 2 Key Risks PAGE 30
Slide 32: Key Risks
Key Risks Key Risk Description Specific risks relating to an investment in Simonds Failure in strategic Failure to deploy new brand and product ranges in a timely fashion to meet consumer expectations may lead consumers to choose products from other builders. A failure to product development effecti
Slide 33: Key Risks (Cont’d)
Key Risks (Cont’d) Key Risk Description Specific risks relating to an investment in Simonds Financing and Although Simonds monitors cashflow management and cashflow forecasts, in the event that Simonds does not maintain sufficient cash reserves to meet the requirements of liquidity risk and its busi
Slide 34: Key Risks (Cont’d)
Key Risks (Cont’d) Key Risk Description Specific risks relating to an investment in Simonds Labour shortages There are severe trade labour shortages in the construction industry, resulting from the impact of reduced migration levels during COVID-19 and the infrastructure and mining boom, which has a
Slide 35: Key Risks (Cont’d)
Key Risks (Cont’d) Key Risk Description Specific risks relating to an investment in Simonds Loss or theft of data There is a risk of security breaches of data (whether that of Simonds or that of its clients) by unauthorised access, theft, destruction, loss of information or misappropriation or relea
Slide 36: Key Risks (Cont’d)
Key Risks (Cont’d) Key Risk Description General investment risks Underwriting risk The Entitlement Offer is fully underwritten by the Company's largest shareholder, Vallence Gary Simonds (excluding his own entitlements, which he has committed to exercise in full), pursuant to the terms of the underw
Slide 37: Key Risks (Cont’d)
Key Risks (Cont’d) Key Risk Description General investment risks Effect of the Offer on Vallence Gary Simonds has committed to exercise all of his Entitlements under the Offer and to fully underwrite the remainder of Offer. 1 Following the Offer, Vallence Gary control Simonds’ respective shareholdin
Slide 38: Key Risks (Cont’d)
Key Risks (Cont’d) Key Risk Description General investment risks Force majeure events Events beyond the control of Simonds may impact the operations of the company and its future profitability. These events include (but are not limited to) fire, flood, earthquake, other natural disaster, pandemics,
Slide 39: Appendix 3: Potential Control Implications
Appendix 3 Potential Control Implications PAGE 38
Slide 40: Implications of the Entitlement Offer on control
Implications of the Entitlement Offer on control Background information relevant to assessing the potential impact of the Entitlement Offer on control Based on publicly available information as at the date of this presentation, the Company’s largest shareholder as at the Record Date is set out in th
Slide 41: Implications of the Entitlement Offer on control (cont’d)
Implications of the Entitlement Offer on control (cont’d) Ownership of the Company following completion of the Entitlement Offer The potential effect that the issue of the New Shares will have on the control of the Company, and the consequences of that effect, will depend on a number of factors, inc
Slide 42: Appendix 4: Underwriting Agreement Summary
Appendix 4 Underwriting Agreement Summary PAGE 41
Slide 43: Underwriting Agreement Summary
Underwriting Agreement Summary SFO Administration Pty Ltd (ACN 602 614 871) (Underwriter), acting as agent and trustee on behalf of and for the benefit of entities controlled by Simonds' largest shareholder, Vallence Gary Simonds, has agreed to fully underwrite the Offer (other than the entitlements
Slide 44: Underwriting Agreement Summary (cont’d)
Underwriting Agreement Summary (cont’d) h) (Application) There is an application to a governmental agency (including the Takeovers Panel) which in the Underwriter’s bona fide and reasonable opinion has reasonable prospects of success for an order, declaration (including of unacceptable circumstances
Slide 45: Underwriting Agreement Summary (cont’d)
Underwriting Agreement Summary (cont’d) i) (Prescribed Occurrence) certain events set out in section 652C(1) of the Corporations Act in respect of Simonds occurs during the Offer period, other than: i. as contemplated by the Underwriting Agreement; ii. in a manner described in the Offer materials or
Slide 46: Thank you
For more information contact us at: Telephone: +61 3 9682 0700 Mailing address: Locked Bag 4002 South Melbourne VIC 3205 Physical address: Level 1, 570 St Kilda Road Melbourne VIC 3004 www.simondsgroup.com.au Authorised for lodgement by Simonds Group Limited Board of Directors. Thank you