Ipd Group Ltd · ASX:IPG
Ipd — Investor Presentation (November 2023)
55 slides from Ipd's investor presentation, Nov 28, 2023
Slide 1: Acquisition of CMI Operations and Equity Raising
Acquisition of CMI Operations and Equity Raising INVESTOR PRESENTATION | 28 November 2023 IPD GROUP FY23 RESULTS PRESENTATION 0
Slide 2: Important notice & disclaimer (1 of 5)
Important notice & disclaimer (1 of 5) The following notice and disclaimer applies to this presentation dated 28 November 2023 (Presentation) and you should read this carefully before reading or making any other use of this Presentation or any information contained in this Presentation. By accepting
Slide 3: Important notice & disclaimer (2 of 5)
Important notice & disclaimer (2 of 5) Summary Information: This Presentation contains summary information about the current activities of the Company as at the date of this Presentation. The information in this Presentation is of a general nature and does not purport to be complete. This Presentati
Slide 4: Important notice & disclaimer (3 of 5)
Important notice & disclaimer (3 of 5) Forward looking statements: This Presentation may include forward-looking statements or opinions including statements regarding the Company’s intent, belief or current expectations with respect to the Company and its subsidiaries’ (the Group) business operation
Slide 5: Important notice & disclaimer (4 of 5)
Important notice & disclaimer (4 of 5) Information and liability: None of the underwriter, nor any of their Relevant Parties, nor the advisers to the Company, have authorised, permitted or caused the issue, submission, dispatch or provision of this Presentation and none of them makes or purports to
Slide 6: Important notice & disclaimer (5 of 5)
Important notice & disclaimer (5 of 5) Jurisdictions: The distribution of this Presentation in jurisdictions outside of Australia may be restricted by law and you should observe any such restrictions. Any failure to comply with those restrictions may constitute a violation of applicable securities l
Slide 7: Contents
Contents Transaction Overview & Trading Update 7 CMI Overview 12 Pro forma Financials 21 Transaction Funding & Outlook 26 Appendices 32 6 IPD GROUP – – INVESTOR INVESTORPRESENTATION PRESENTATION 6
Slide 8: Transaction Overview & Trading Update
Transaction Overview & Trading Update IPD GROUP – – INVESTOR INVESTORPRESENTATION PRESENTATION 7
Slide 9: Transaction Highlights
Transaction Highlights IPD is undertaking the acquisition of CMI Operations • IPD Group Limited (“IPD”) to acquire CMI Operations Pty Ltd (“CMI”), a leading distributor of electrical cables and manufacturer and distributor of plug brands in Australia, from ASX listed Excelsior Capital Limited (“Exce
Slide 10: Transaction Overview
Transaction Overview • IPD has entered into a conditional agreement to acquire 100% of CMI from Excelsior (“Acquisition”) • Consideration comprises: Transaction ‒ an upfront payment of $92.1 million (equivalent to 6x CMI’s FY23A EBIT of ~$15.5 million); and summary ‒ a contingent payment of $6 for e
Slide 11: Transaction Overview (continued)
Transaction Overview (continued) • The Acquisition is subject to several customary conditions including approval by shareholders of Excelsior at a shareholder meeting (expected to be conducted in Timing mid-January 2024) • Completion is anticipated to occur by February 2024 • Cable division ‒ suppli
Slide 12: Trading Update
Trading Update • Positive momentum has continued into FY24 and the outlook for IPD’s markets remain buoyant • Tailwinds from the electrification of the economy have had a positive impact Trading • IPD is expecting a number of significant projects to commence in the second half of the year update • U
Slide 13: CMI Overview
CMI Overview IPD GROUP – INVESTOR PRESENTATION 12
Slide 14: CMI Overview
CMI Overview CMI sells a portfolio of electrical cables and Australia’s leading plug brand for hazardous environments Key facts • Established in Sydney in 1991, CMI is a leading distributor of electrical $104.3m 18% cables and manufacturer and distributor of the “Minto” plug brand FY23A net sales FY
Slide 15: Business Structure
Business Structure CMI operates through two divisions Cables Minto Plugs FY23A revenue split A leading portfolio of Highly engineered, class- cable brands dedicated leading products for use in to requirements of the 80% highly regulated hazardous and 20% entire electrical industry safety-focused env
Slide 16: CMI Overview - Cables
CMI Overview - Cables CMI supplies electrical cables to major construction, infrastructure and renewables projects Products Applications 81% • Power supply in low and medium voltage applications • Used in commercial and industrial sub-mains, factories, Industrial, infrastructure, Utility infrastruct
Slide 17: CMI Overview – Minto Plugs
CMI Overview – Minto Plugs Minto plugs are highly engineered products for hazardous and safety-focused environments Products Applications • Market leader when power and safety are required in a complex and extremely hazardous To power on-site equipment To extend existing cabling 84% environment • Mi
Slide 18: Minto Plugs
Minto Plugs Minto is underpinned by strict compliance requirements and a strong R&D and engineering capability Minto 1 product lifecycle R&D / engineering capabilities Minto 1 products are used in highly regulated hazardous environments requiring strict Minto has a strong R&D / engineering capabilit
Slide 19: CMI Overview - Financials
CMI Overview - Financials CMI has an attractive financial profile that can self-fund future growth NET SALES ($M) GROSS PROFIT ($M) AND GROSS PROFIT MARGIN (%) 104.3 93.8 35 28.6 30.0% 24.7 75.2 30 19.3 29.0% 25 27.4% 28.0% 20 15 26.3% 27.0% 10 25.7% 26.0% 5 0 25.0% FY21A FY22A FY23A FY21A FY22A FY2
Slide 20: CMI Growth Opportunities
CMI Growth Opportunities CMI is well positioned to benefit from favourable industry tailwinds, as well as continue to leverage its capabilities to tap into new geographies and industry sectors Cables Minto Plugs Further penetration in existing and 1 Build share in existing markets 1 new markets Cont
Slide 21: Strategic Rationale
Strategic Rationale The Acquisition is consistent with IPD’s strategic priorities and provides significant benefits across its core divisions Strengthening customer Adds engineering and R&D 1 Complementary product portfolio 2 relationships 3 capabilities Cables are an adjacent offering to IPD’s
Slide 22: Pro forma Financials
Pro forma Financials IPD GROUP – INVESTOR PRESENTATION 21
Slide 23: Pro forma FY23A Revenue & EBIT
Pro forma FY23A Revenue & EBIT PRO FORMA FY23A REVENUE ($M)1 PRO FORMA FY23A EBIT ($M)1 40% 31% ~$331m ~$39m 69% 60% IPD CMI IPD CMI 1. Pro forma FY23A metrics excludes any synergies, incremental costs, or one-off transaction or integration costs IPD GROUP – INVESTOR PRESENTATION 22
Slide 24: Pro forma FY23A Financial Metrics
Pro forma FY23A Financial Metrics EPS (CENTS)1,2 EBIT ($M)1 24.3 ~66% increase in earnings 38.9 >30% accretion 18.6 23.4 IPD Pro forma IPD Pro forma EBIT MARGIN (%)1 GROSS DEBT / EBITDA (X)1,3 ~1.4% margin expansion 11.7% 10.3% 0.9x Nil debt IPD Pro forma IPD Pro forma 1. Pro forma FY23A metrics exc
Slide 25: Expected Financial Impact
Expected Financial Impact Description • The Acquisition delivers pro forma FY23A EPS accretion of over 30%1 Accretion ‒ while synergies are expected, they have not been included in EPS accretion calculation • An increase in gross debt of $40 million (assuming the maximum contingent payment of $8.9 m
Slide 26: Revenue Diversity
Revenue Diversity PRO FORMA FY23A PRODUCT BY REVENUE PRO FORMA FY23A END CUSTOMER MARKETS PRO FORMA FY23A SUPPLIER BY REVENUE 2% 1% 7% 6% 6% 4% 32% 5% 29% 30% 9% 5% 44% 5% 19% 9% 14% 25% 9% 23% 14% Power distribution Commerical construction Largest supplier Suppliers 2 - 5 Infrastructure/Industrial
Slide 27: Transaction Funding & Outlook
Transaction Funding & Outlook IPD GROUP – INVESTOR PRESENTATION 26
Slide 28: Funding Summary
Funding Summary Acquisition to be funded with a combination of debt and equity Acquisition Funding Sources & Uses Sources $m • Acquisition to be fully funded, including full coverage of the contingent payment and transaction costs Equity Raising $65.0m • Fully underwritten Equity Raising of $65 mill
Slide 29: Offer Summary
Offer Summary The Equity Raising is a fully underwritten institutional placement (“Institutional Placement”) and 1 for 13.65 accelerated non- Offer structure and size renounceable entitlement offer (“Entitlement Offer”) to raise gross proceeds of $65 million Approximately 16.5 million new shares
Slide 30: Timetable
Timetable Date1 Equity Raising announced and investor presentation lodged on the ASX Tuesday, 28 November 2023 Institutional Entitlement Offer and Placement opens Tuesday, 28 November 2023 Placement and Institutional Entitlement Offer bookbuild closes Wednesday, 29 November 2023 Results of Instituti
Slide 31: Pro forma Balance Sheet - June 2023
Pro forma Balance Sheet - 30 June 2023 IPD CMI Pro forma Adjustments Merged Pro forma $’m1 Jun-23 Jun-23 Acq. Funding2 Purchase of CMI Jun-23 Cash 20.8 -- 101.0 (101.0) 20.8 Inventory 42.3 23.3 -- -- 65.6 Trade Receivables 46.0 23.5 -- -- 69.5 Goodwill & Intangible Assets 10.5 8.7 -- 58.6 77.8 Right
Slide 32: Trading Update and Outlook
Trading Update and Outlook Earnings guidance Guidance is based on unaudited management H1 FY23 H2 FY23 Underlying H1 H1 FY23 vs H1 FY24 accounts for the first four months of FY24 and $m statutory statutory FY24 guidance 1 change (%)2 management budget for November and December EBITDA 13.4 14.3 16.0
Slide 33: Appendices
Appendices
Slide 34: Appendix 1: Other additional information
Appendix 1: Other additional information IPD GROUP – – INVESTOR INVESTORPRESENTATION PRESENTATION 33
Slide 35: CMI Management Team
CMI Management Team Led by a highly experienced and dedicated management team Jim Johnson Zac Zaharia Chairman Chief Operating Officer Jim joined CMI as General Manager in 2017. He has Zac joined CMI as Chief Operating Officer of the over 20 years of experience in the electrical Electrical Division
Slide 36: CMI Customers
CMI Customers CMI has a diverse customer base across cables and plugs, with more than 500 unique customers CABLES PLUGS Top 10 customer sales mix (FY23A) Top 5 customer sales mix (FY23A) Customer 1 Customer 1 Customer 2 9% Customer 2 Customer 3 22% 8% Customer 4 33% Customer 3 7% Customer 5 Customer
Slide 37: Case Study: Cables
Case Study: Cables CMI’s cable business represents a significant cross-selling opportunity Data centre (Southern Highlands, NSW) $5 $0.6 • IPD’s Addelec division was engaged to provide a ‘turn-key’ package of works for the electrical system of a data centre million million • The project involved pro
Slide 38: Case Study: Plugs
Case Study: Plugs Certain IPD customers require plugs on projects where IPD products are already supplied • Industrial couplings & connectors are Substation Pump starter regularly used on substations and fan/pump starters Customer cross ‒ customers of IPD including OEMs over and panel builders are
Slide 39: Appendix 2: Key Risks
Appendix 2: Key Risks IPD GROUP – – INVESTOR INVESTORPRESENTATION PRESENTATION 38
Slide 40: Key Acquisition Risks
Key Acquisition Risks The Company undertook a due diligence process in respect of the Acquisition, which relied in part on a review of financial, operational, legal and other information provided in respect of CMI. Despite making reasonable efforts as part of its due diligence investigations, the Co
Slide 41: Key Acquisition Risks (continued)
Key Acquisition Risks (continued) If the conditions precedent to the Sale Agreement are not satisfied by their due date for satisfaction, completion of the Acquisition may be deferred or may not occur on the current terms or at all. Similarly, if any of the completion deliverables under the Sale Agr
Slide 42: Key Acquisition Risks (continued)
Key Acquisition Risks (continued) There is a risk that the success and profitability of the Company following completion of the Acquisition could be adversely affected if CMI is not integrated effectively. The process of integrating operations could, among other things, divert management's attention
Slide 43: Key Acquisition Risks (continued)
Key Acquisition Risks (continued) CMI, if acquired by the Company, will be a significant part of the IPD Group's overall business. The increased relative exposure to the IPD Group's businesses Size of the Acquisition could adversely impact the IPD Group's financial position and performance if CMI do
Slide 44: Key Acquisition Risks (continued)
Key Acquisition Risks (continued) k) the Company is unable to proceed with the Offer or withdraws all or any part of the Offer or no longer intends to pursue all or any part of the Offer; l) the Company becomes required to give or gives a correcting notice under section 708A(9)(c) or 708AA(10) of th
Slide 45: Key Acquisition Risks (continued)
Key Acquisition Risks (continued) y) *a default by the Company in the performance of any of its obligations under the underwriting agreement occurs or a representation or warranty given by the Company under the underwriting agreement is breached or is, or becomes, untrue or incorrect or misleading o
Slide 46: Business Risks
Business Risks ABB Aus, Elsteel Private and Emerson AP are IPD’s three largest suppliers, with the sale of their products representing approximately 44%, 8% and 4%, respectively, of FY23 statutory gross revenue. As such, the Company’s relationship with each of ABB Aus, Elsteel Private and Emerson AP
Slide 47: Business Risks (continued)
Business Risks (continued) Any defects in the products that the Company distributes may harm its workforce, reputation and business. The Company may also be subject to warranty and liability claims for damages related to defects in products it distributes and may not be able to recover these costs f
Slide 48: Business Risks (continued)
Business Risks (continued) Maintenance of The reputation and brand of the Company and the products it distributes are important in attracting customers to use these products. Any reputation reputation damage or negative publicity around IPD or its products could adversely impact on the Company’s bus
Slide 49: Business Risks (continued)
Business Risks (continued) IPD is subject to, and must comply with, a variety of laws and regulations in the ordinary course of its business. These laws and regulations include those that relate to fair trading and consumer protection, product safety, employment, property, taxation (including goods
Slide 50: Business Risks (continued)
Business Risks (continued) The Company may, as part of its business strategy, acquire or make significant investments in companies of a similar nature, although no such acquisitions or investments are currently committed. The Board may also decide to establish new business ventures which may prove t
Slide 51: General Risks
General Risks Economic and financial The Company is subject to general market conditions and risks inherent to all entities whose securities are publicly listed on a securities exchange. General economic conditions (both domestically and internationally), long-term inflation rates, exchange rate mov
Slide 52: General Risks
General Risks Future issues of debt or An investment in the Company’s shares carries no right to participate in any future issue of securities by the Company, other than future pro rata issues if the shareholder is eligible to participate in the pro rata issue under relevant laws. other securities b
Slide 53: Appendix 3: International Offer Restrictions
Appendix 3: International Offer Restrictions IPD GROUP – INVESTOR PRESENTATION 52
Slide 54: International Offer Restrictions
International Offer Restrictions This document does not constitute an offer of New Shares of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may not be offered or sold, in any country outside Austral
Slide 55: International Offer Restrictions (continued)
International Offer Restrictions (continued) Singapore (continued) Any offer is not made to you with a view to the New Shares being subsequently offered for sale to any other party in Singapore. On-sale restrictions in Singapore may be applicable to investors who acquire New Shares. As such, investo