Perenti Limited · ASX:PRN
Perenti — Merger or Acquisition (July 2023)
38 slides from Perenti's merger presentation, Jul 17, 2023
Slide 1: Investor Roadshow July 2023
Investor Roadshow July 2023 1
Slide 2: Important notice and disclaimer
Important notice and disclaimer This presentation and these materials (together the “Presentation”) have been prepared by Perenti Limited ABN 95 009 211 474 No offer of securities (ASX:PRN) (“Perenti”) in relation to the proposed transaction between Perenti and DDH1 Limited ABN 48 636 677 088 (ASX:D
Slide 3: Important notice and disclaimer
Important notice and disclaimer Information about DDH1 Non-IFRS Financial Information Certain information in this Presentation has been sourced from DDH1. Perenti undertook a due diligence process in respect of This Presentation may use non-IFRS financial information including EBITDA, EBITDA margin,
Slide 4: DDH1 transaction overview
1 DDH1 transaction overview 4
Slide 5: Transaction overview
Transaction overview ▪ Transaction by way of a Scheme of Arrangement (the “Scheme”) pursuant to which Perenti will acquire 100% of the fully paid ordinary shares in Transaction structure DDH1 (the “Transaction”) ▪ DDH1 shareholders to receive $0.1238 of cash, plus 0.7111 Perenti shares for each DDH1
Slide 6: Compelling strategic rationale
Compelling strategic rationale Enhances Perenti’s position as the leading ASX-listed contract mining services company DDH1 is a leading global ▪ Complete range of underground and surface drilling services, including Tier 1 global drilling drilling provider with specialisation in deep and directional
Slide 7: We are strategically positioning our business for long-term trends
We are strategically positioning our business for long-term trends Decarbonisation, energy transition and autonomy Demand for critical 4x increase minerals by 20401 Global mining contractor Tier 1 global drilling with market leading provider known for its capabilities in specialisation in deep Decli
Slide 8: Comprehensive service offering across the mining value chain
Comprehensive service offering across the mining value chain Exploration Development Production Increased breadth of service offering 5% 95% Revenue by phase Capabilities across the mining cycle Potential to cross sell to existing clients and develop relationship earlier in lifecycle Production and
Slide 9: Compelling pro-forma financial profile
Compelling pro-forma financial profile FY23E FY23E FY23PF Perenti DDH1 Perenti + DDH1 3 Revenue1 $2.9b $0.55b $3.45b EBIT(A) margin1 ~9% ~13% ~10% Leverage ~1.0x ~0.2x ~0.9x Effective tax rate 36% 30% 31% Australian earnings2 47% 91% 54% ▪ Realisation of operational and listing cost synergies3 Other
Slide 10: Trading multiples do not reflect the underlying quality of the business
Trading multiples do not reflect the underlying quality of the business Perenti’s multiple is substantially below peers despite underlying improvement and enhanced quality of the pro -forma business EV / FY23e EBIT(A) 1,2 Mining services peers Drilling services peers 8.0x Includes offer premium; 7.0
Slide 11: Perenti business overview and strategy
2 Perenti business overview and strategy 11
Slide 12: Perenti Group | Leading global mining contractor
Perenti Group | Leading global mining contractor Only global mining contractor with large scale capability in ~9000 both surface and underground mining People One of the world’s largest and most successful hard-rock underground mining operating contractors across 25 6 ~10 Africa’s largest hard-rock
Slide 13: Specialist technical capability in underground mining
Specialist technical capability in underground mining Increasing level of underground Revenue Mine owners increasingly seeking lower capital costs, flexibility Barminco Revenue (A$b) 2.0 1.74 and rapid access to ore and cashflow – driving preference for 1.30 1.48 rapid decline versus shaft 0.75 FY19
Slide 14: Momentum in the business progressing towards our targets
Momentum in the business progressing towards our targets EBIT(A) margin expansion to FY25 – Perenti stand-alone 10.4% >10% 10.0% ~9.1% 8.4% ~8.7% 7.7% Iduapriem 8.0% 7.2% adjusted 6.8% 6.0% Indicative EBIT(A) margin expansion by category to FY25 (not to scale) 4.0% 2.0% 0.0% FY20 FY21 FY22 1H22 2H22
Slide 15: Significant work to date with further valuation upside
Significant work to date with further valuation upside Value creation to date Sustainability Improved business performance with EBIT(A) margin improvement value creation Upside from Divested non-core businesses idoba valuation Further growth Divested non-core assets Organic and inorganic (M&A) Enter
Slide 16: DDH1 business overview and strategy
3 DDH1 business overview and strategy 16
Slide 17: DDH1 is Australia's largest pure-play drilling services provider
DDH1 is Australia’s largest pure-play drilling services provider Fleet Four iconic brands with differentiated specialties One of the top five largest drill fleets globally, with a modern fleet of 193 rigs. 2 Overview Rigs % of revenue Mine life cycle Combination enhances our position as a tier 1 glo
Slide 18: DDH1's portfolio is positioned in highly attractive and strategic segments
DDH1’s portfolio is positioned in highly attractive and strategic segments 15% 33% Exploration Clients with est. Enterprise Value < A$1bn Predominantly Blue chip 1H23 1H23 production exposure 1 client base 1,2 67% 85% Clients with est. Production / Enterprise Value Resource Definition > A$1bn Europe
Slide 19: Positioned to tackle deeper deposits and more complex geology
Positioned to tackle deeper deposits and more complex geology The rapid deployment of clean energy technologies as part of the energy transition implies a significant increase in demand f or minerals. This trend is driving commodity supply deficits and the need for new & existing mine development Gr
Slide 20: DDH1 is known for its specialisation in deep and directional drilling
DDH1 is known for its specialisation in deep and directional drilling DDH1’s technical expertise enables it to capitalise on the long-term trend towards deeper and more complex drilling. This technical expertise provides significant differentiation to new entrants. Directional drilling Directional d
Slide 21: DDH1's attractive fleet delivers strong return on invested capital
DDH1’s attractive fleet delivers strong return on invested capital Specialist equipment Large modern fleet Continuous investment ▪ Full suite services across mining value ▪ Modern, well-maintained fleet with ▪ Ongoing investment in automation and chain economic life of 20+ years2 emission reduction
Slide 22: Consistent delivery of value growth
Consistent delivery of value growth Revenue (A$m)1 5502 518 Long term track record of growth 449 401 357 326 248 269 232 Higher exposure to production rather than exploration provides resilience to cyclicality experienced by drillers more focused on exploration FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY2
Slide 23: Combination overview and rationale
4 Combination overview and rationale 23
Slide 24: How Perenti is positioned to generate value through M&A
How Perenti is positioned to generate value through M&A What typically makes M&A successful 1 Positioned for success ▪ Clear strategic alignment ✓ Perenti has ~40yrs experience in drilling and understands risks and opportunities ▪ Disciplined and focused approach ▪ Value creation ✓ Acquisition has d
Slide 25: How we said we would evaluate acquisitions
How we said we would evaluate acquisitions Key Assessment Criteria Strategic Fit within Value creation attractiveness Perenti potential ✓ ✓ Commodity mix ✓ ✓ Complementary offering ✓ ✓ Earnings growth ✓ ✓ Market position ✓ ✓ Attractive geographies ✓ ✓ Strengthen balance sheet ✓ ESG future focused ✓
Slide 26: DDH1 is a highly attractive addition to Perenti's portfolio
DDH1 is a highly attractive addition to Perenti’s portfolio Perenti has a long history and understanding of the drilling market ▪ Ausdrill heritage and Barminco Diamond Drilling business Transaction enhances the scale and quality of Perenti’s offering ▪ Becomes a tier 1 global drilling provider with
Slide 27: Diversified and balanced portfolio by geography and commodity
Diversified and balanced portfolio by geography and commodity Reweights portfolio back to Australia Highly attractive commodity exposure Pro-forma Revenue by Geography 1,2 Pro-forma Revenue by Commodity 4% 4% 11% 6% 5% 11% 10% 9% 4% 3% 12% 13% 1H23 47% 1H23 54% 1H23 1H23 28% 11% 59% 33% 63% 13% Sout
Slide 28: Unlocks value for DDH1 shareholders
Unlocks value for DDH1 shareholders ▪ Combined group creates a leading global contract mining services player, Greater breadth and Strong strategic fit with deep capabilities across drilling services, contract mining and mining depth of capabilities services with a technology driven service offering
Slide 29: Aligned with Perenti's sustainability goals
Aligned with Perenti’s sustainability goals Perenti’s sustainability DDH1 fully aligned with Perenti’s imperatives sustainability imperatives Caring for our people & Strong safety culture communities Commitment to diversity and inclusion Valuing the environment & enabling the energy Mental hea
Slide 30: Confidence in earnings outlook for combined group
Confidence in earnings outlook for combined group Perenti DDH1 DDH1 Drill Rig Utilisation % FY23 Revenue guidance $2.9b $0.55b FY23 EBITDA guidance – $117m – $121m FY23 EBIT(A) guidance $260m – $265m – Expected to be at top end Perenti Drivers DDH1 Drivers Robust earnings and consistent margin impro
Slide 31: Combines talent from both organisations with operating model alignment
Combines talent from both organisations with operating model alignment DDH1 and Ausdrill to combine Drilling brands to remain independent providing consistent offering and customer continuity Utilise shared experiences across drilling division to enhance service and customer offering Contract Mining
Slide 32: Combined Board to deliver on 2025 Strategy
Combined Board to deliver on 2025 Strategy Industry leading experience Diverse range of backgrounds Robert Cole Mark Norwell Alex Atkins Tim Longstaff Highly complementary skill sets with ASX100 Non-Executive Chair Group MD and CEO Non-Executive Director Non-Executive Director exposure Inter
Slide 33: Synergies drive value accretion, with substantial additional cash tax benefits
Synergies drive value accretion, with substantial additional cash tax benefits Material run rate operational synergies – expected to be delivered within 2 years Tax synergies realised from transaction completion P&L synergies Cash Source Description (Post-tax basis, annual) Annual ▪ Savings asso
Slide 34: Potential additional synergy upside not included in baseline
Potential additional synergy upside not included in baseline Cross-selling of services to respective client bases Formation of relationships earlier in mine lifecycle to position for subsequent contract mining opportunities De-risked expansion of respective brands into new geographies Optimisation o
Slide 35: Compelling logic that is highly synergistic and value accretive
Compelling logic that is highly synergistic and value accretive High degree of strategic alignment that bolsters Scenario analysis supports valuation and value Perenti’s underground service offerings accretion under a wide range of outcomes ~150% uplift in free cash flow 1 ✓ Conducted deep due
Slide 36: Thank you
Thank you Thank You perentigroup.com perentigroup.com Perenti is a diversified mining services group with interests in contract mining, mining support services and future technology solutions. The Group was founded in Kalgoorlie in 1987 and is today one of the world’s largest mining services SUSTAIN
Slide 37: Appendix
A ppendix (—O Perenti
Slide 38: Indicative timetable
Indicative timetable Transaction expected to close during 2023 1 Milestone Indicative date Send Scheme Booklet to ASIC August 2023 First Court Date August 2023 Election Date September 2023 Scheme Meeting September 2023 Second Court Date September 2023 Effective Date October 2023 Record Date October