Pro-pac Packaging Ltd · ASX:PPG
Pro-pac Packaging — Investor Presentation (September 2022)
48 slides from Pro-pac Packaging's investor presentation, Sep 5, 2022
Slide 1: $30 million pro rata Accelerated Renounceable Entitlement Offer
$30 million pro rata Accelerated Renounceable Entitlement Offer 5 September 2022
Slide 2: Important notice & disclaimer
Important notice & disclaimer This investor presentation (Presentation) is dated 5 September 2022 and has been prepared by Pro-Pac Packaging Limited (ABN 36 112 971 874) (Pro-Pac or the Company). By attending an investor presentation or briefing, or accepting, accessing or reviewing this Presentatio
Slide 3: Important notice & disclaimer (cont’d)
Important notice & disclaimer (cont’d) Investment risk An investment in Pro-Pac shares is subject to known and unknown risks, some of which are beyond the control of Pro-Pac and its directors and officers. Pro-Pac does not guarantee any particular rate of return or the performance of Pro-Pac nor doe
Slide 4: Important notice & disclaimer (cont’d)
Important notice & disclaimer (cont’d) You are strongly cautioned not to place undue reliance on forward-looking statements, particularly in light of the current economic climate and the significant volatility, uncertainty and disruption caused by factors including the COVID-19 pandemic. Forward- lo
Slide 5: Today’s presenters
Today’s presenters Jonathan Ling Darren Brown Executive Chairman Director, Interim CFO • Joined Pro-Pac as Non-Executive Chairman in April 2019 • Joined Pro-Pac as Non-Executive Director in July 2018 • Appointed Executive Chairman in July 2022 • Appointed Interim CFO in May 2022 • Experienced manufa
Slide 6: Business update
Business update • Group revenue1 of $467.0m (FY21 $440.1m), EBITDA1 of $10.6m (FY21 $33.2m) and PBT2 of $(2.9)m (FY21 $18.8m) • Continuing operations revenue1 of $403.9m (FY21 $372.2m), EBITDA1 of $5.5m (FY21 $26.4m) and PBT2 of $(6.8)m (FY21 $14.4m) FY22 full year • Net debt at 30 June 2022 of $23.
Slide 7: Business update (cont’d)
Business update (cont’d) • Implementing operating initiatives and cost reduction including identified operational expenditure savings of $6.4m per annum, with ~$4.6m to be realised in FY23 (of which $0.2m has already been achieved in July and August 2022)1 • Further, resin lag sell price recovery in
Slide 8: Business update (cont’d)
Business update (cont’d) • Pro-Pac’s net bank debt increased to $29.4m at 31 August 2022 • Negotiations with Pro-Pac’s existing banking group have resulted in covenant waivers for the remainder of FY23, on the basis that $5.0m will be repaid on its syndicated debt facility from proceeds of the Offer
Slide 9: EBITDA bridge: continuing operations
EBITDA bridge: continuing operations Pre AASB-16 EBITDA pre-significant items (A$m)2 1H FY22 2H FY22 Commentary EBITDA1 from continuing operations 2.5 • Excluding the 1H contribution from the Rigid Packaging segment, Pro-Pac achieved $8.3m of EBITDA from continuing operations 1H FY22 • 2H FY22 EBITD
Slide 10: Net debt bridge
Net debt bridge Net debt (A$m) 31 December 2021 to 31 August 2022 (unaudited)3 2H FY22 YTD FY23 (unaudited) Commentary 2H FY22 • Net debt reduced significantly from 1H 16.6 FY22 ($82.1m) to 30 June 2022 ($23.6m) 7.7 • Strong cash from operations ($16.6m) and proceeds from the sale of Pro-Pac’s Rigid
Slide 11: Operational initiatives | Operating expenditure savings
Operational initiatives | Operating expenditure savings Overview Annualised FY23 Cost to Commentary Impact1 Impact1 Achieve • In line with PPG’s commitment to right size Head Office the business, a number of operational • Reduction in Head Office headcount activities to be completed by October 2022
Slide 12: Operational initiatives | Capital efficiencies
Operational initiatives | Capital efficiencies ~$39m of capital has been invested into the underlying business over the past 3 financial years1 Investment in Flexibles segment ERP system • Growth investment strategy working well with extrusion, • ~$11.2 million spent on the implementation costs on t
Slide 13: FY23 outlook
FY23 outlook • Our key priority is to return the Flexibles business back to the profitability it achieved in FY21 and to reduce our corporate overheads. • We expect that resin costs will continue to stabilise albeit at record high levels. We also expect that cost increases across most spend categori
Slide 14: Overview of the Offer
Overview of the Offer Offer size and • Fully underwritten 1.24 for 1 pro rata accelerated renounceable entitlement offer to raise approximately $30.2 million (“Entitlement Offer”) structure • The Entitlement Offer price of A$0.30 per new PPG share (“Offer Price”) represents: Offer price — 33.3% disc
Slide 15: Rationale and reasons to support the Offer
Rationale and reasons to support the Offer • Strengthened balance sheet with reduced syndicated debt Increases balance sheet • Pro-forma net debt of $16.6m after applying $5.0m proceeds to partially repay the syndicated debt facility and retaining $5.0m cash for ongoing general strength and flexibil
Slide 16: Risks associated with investing in Pro-Pac
Risks associated with investing in Pro-Pac • There are risks associated with an investment in Pro-Pac, including an inability to obtain debt funding or refinancing, failure to manage business strategy effectively, inability to retain key customers or secure new customers and inability to attract and
Slide 17: Sources and uses of funds
Sources and uses of funds Proceeds raised (net of offer costs) will be used to partially repay syndicated debt facilities with remaining cash to be applied to provide additional financial flexibility and support the working capital requirements of the business Sources A$m Commentary Equity raising 3
Slide 18: Pro-forma funding position
Pro-forma funding position A$m 30 June 2022 31 August 2022 Impact of the Equity Raising (net of Pro Forma post Equity Raising Commentary (Actual) (Unaudited) Transaction Costs) (Unaudited) • $30.2m in proceeds from the Offer will reduce drawn debt by $9.3m, pay Offer costs of $1.4m and remaining Ava
Slide 19: Indicative timetable
Indicative timetable Event Indicative date1 Announce Entitlement Offer and conduct Institutional bookbuild 5 September 2022 Institutional Entitlement Offer shortfall bookbuild 6 September 2022 Announce results of Institutional Entitlement Offer 7 September 2022 Suspension lifted and PPG shares recom
Slide 20: Bespoke flexible packaging solutions
• Bespoke flexible packaging solutions specifically tailored for the industrial, food and beverage, health and agriculture sectors • Stretch & shrink wrap, agriculture silage packaging, fresh produce bags, barrier and lidding films, industrial protective films • High value added laminated and printe
Slide 21: Investment highlights
Investment highlights 1 Market leading packaging manufacturer with established presence across flexible and industrial packaging solutions 2 High quality and diverse distribution and manufacturing footprint across Australia and New Zealand 3 Culture of innovation and proven ability to develop and ex
Slide 22: Appendix 1 | Key risks
Appendix 1 | Key risks 21
Slide 23: Risks relating to Pro-Pac and its business
Risks relating to Pro-Pac and its business Risk Description Inability to obtain debt funding or Pro-Pac utilises debt funding to partially fund its business and may need to access additional debt finance or capital to fund its operations. If Pro-Pac is unable to access capital, or refinance, repay o
Slide 24: Risks relating to Pro-Pac and its business (cont’d)
Risks relating to Pro-Pac and its business (cont’d) Risk Description Disruption to business continuity Pro-Pac is exposed to a range of operational risks relating to both current and future operations. These include equipment failures, unplanned shutdown of, or operating disruption to, any one of it
Slide 25: Risks relating to Pro-Pac and its business (cont’d)
Risks relating to Pro-Pac and its business (cont’d) Risk Description Increased competition Pro-Pac’s financial performance or operating margins could be adversely affected if the actions of competitors or potential competitors become more effective, or if new competitors (including offshore competit
Slide 26: Risks relating to Pro-Pac and its business (cont’d)
Risks relating to Pro-Pac and its business (cont’d) Risk Description Risks associated with research and The financial performance of Pro-Pac may be adversely affected if it fails to identify qualifying expenditure, which may lead to the under-recovery of tax concessions and unrealised financial gain
Slide 27: General risks
General risks Risk Description Risks associated with an investment in shares There are general risks associated with investments in equity capital such as Pro-Pac shares. The price at which Pro-Pac shares trade on ASX may be affected by a number of factors, including the financial and operating perf
Slide 28: General risks (cont’d)
General risks (cont’d) Risk Description Renouncement risk If a shareholder does not take up their entitlement under the Entitlement Offer, then their entitlements will be treated as renounced and there is no guarantee that any value will be received for their renounced entitlement through the releva
Slide 29: Appendix 2 | International offer restrictions
Appendix 2 | International offer restrictions 28
Slide 30: International offer restrictions
International offer restrictions This document does not constitute an offer of new ordinary shares ("New Shares") of the Company in any jurisdiction in which it Other than in the entitlement offer, the New Shares may only be offered or sold in New Zealand (or allotted with a view to being would be u
Slide 31: Appendix 3 | Underwriting Agreement Summary
Appendix 3 | Underwriting Agreement Summary 30
Slide 32: Underwriting Agreement Summary
Underwriting Agreement Summary Pro-Pac entered into an underwriting agreement with MA Moelis Australia Advisory Pty Limited (the Lead Manager) (Underwriting Agreement), pursuant to which the Lead Manager is acting as lead manager, underwriter and bookrunner of the Entitlement Offer. The Underwriting
Slide 33: Underwriting Agreement Summary
Underwriting Agreement Summary • Pro-Pac withdraws the Entitlement Offer; • any government agency: — holds, or gives notice of intention to hold, a hearing or investigation in relation to the Entitlement Offer or Pro-Pac; or — prosecutes or gives notice of an intention to prosecute, or commences pro
Slide 34: Underwriting Agreement Summary
Underwriting Agreement Summary In addition, if, in the reasonable opinion of the Lead Manager, any of the following events has had, or could reasonably be expected to have, a material adverse effect on the success, outcome, marketing or settlement of the Entitlement Offer or on the ability of the Le
Slide 35: Appendix 4 | Potential control implications
Appendix 4 | Potential control implications 34
Slide 36: Arrangements with major shareholder
Arrangements with major shareholder Party Arrangements Kin Group Kin Group Pty Ltd (Kin Group) currently holds 57.6% of the shares in Pro-Pac through its subsidiary Bennamon Pty Ltd (Bennamon). Bennamon has committed to take up its entitlement in full under the Entitlement Offer. Bennamon has also a
Slide 37: Potential control implications
Potential control implications The potential effect or consequence that the Entitlement Offer will have on the control of Pro-Pac will depend on a number of factors, including the extent to which eligible shareholders take up their entitlements, the extent to which eligible retail shareholders parti
Slide 38: Appendix 5 | Reconciliations
Appendix 5 | Reconciliations 37
Slide 39: Adopting AASB 16 Leases
Adopting AASB 16 Leases AASB 16 Leases became effective for Pro-Pac Packaging on 1 July 2019, requiring operating lease arrangements to be recognised on balance sheet The impact on the profit or loss for the Group for FY22 is shown in the table below: FY22 FY21 Pre- Adopt Post- Pre- Adopt Post- A$ m
Slide 40: Adopting AASB 16 Leases
Adopting AASB 16 Leases AASB 16 Leases became effective for Pro-Pac Packaging on 1 July 2019, requiring operating lease arrangements to be recognised on balance sheet The impact on the profit or loss for Continuing Operations for FY22 is shown in the table below: FY22 FY21 Pre- Adopt Post- Pre- Adop
Slide 41: Reconciliations
Reconciliations Reconciliation to EBIT* & EBITDA* for the Group FY22 FY21 Pre- Adopt Post- Pre- Adopt Post- A$ millions AASB 16 AASB 16 AASB 16 AASB 16 AASB 16 AASB 16 Profit/(loss) before tax (17.6) (1.0) (18.6) 14.2 (3.0) 11.2 Add: significant items 15.6 - 15.6 7.6 - 7.6 Add: finance costs 4.0 3.3
Slide 42: Reconciliations
Reconciliations Reconciliation to EBIT* & EBITDA* for Continuing Operations FY22 FY21 Pre- Adopt Post- Pre- Adopt Post- A$ millions AASB 16 AASB 16 AASB 16 AASB 16 AASB 16 AASB 16 Profit/(loss) before tax (40.8) (0.9) (41.8) 9.2 (2.1) 7.0 Add: significant items 34.9 - 34.9 7.3 - 7.3 Add: finance cos
Slide 43: Reconciliations
Reconciliations Reconciliation to Operating Cash Flow* for the Group FY22 FY21 Pre- Adopt Post- Pre- Adopt Post- A$ millions AASB 16 AASB 16 AASB 16 AASB 16 AASB 16 AASB 16 Net cash flows from operating activities (3.1) 9.7 6.5 18.9 8.5 27.4 Add: income tax paid 0.9 - 0.9 1.8 - 1.8 Add: significant
Slide 44: Reconciliations
Reconciliations Reconciliation to Operating Cash Flow* for Continuing Operations FY22 FY21 Pre- Adopt Post- Pre- Adopt Post- A$ millions AASB 16 AASB 16 AASB 16 AASB 16 AASB 16 AASB 16 Net cash flows from operating activities 0.1 7.7 7.8 11.9 7.4 19.2 Add: income tax paid 0.9 - 0.9 1.8 - 1.8 Add: si
Slide 45: Reconciliations
Reconciliations Reconciliation to Gearing* for the Group JUN-22 JUN-21 A$ millions LTM EBITDA* (Post AASB 16) 23.6 45.5 Less: Adjustment for AASB 16 Leases (13.0) (12.3) LTM Adjusted EBITDA* (pre-AASB 16) 10.6 33.2 Borrowings 25.0 58.9 Less: cash and cash equivalents (1.3) (7.9) Net debt* 23.6 51.0
Slide 46: Reconciliations
Reconciliations Reconciliation of Significant Items* for the Group FY22 FY21 Pre- Adopt Post- Pre- Adopt Post- A$ millions AASB 16 AASB 16 AASB 16 AASB 16 AASB 16 AASB 16 Rigid divestment gain, less associated costs (19.3) - (19.3) - - - Goodwill impairment 25.0 - 25.0 - - - Integration and restruct
Slide 47: Reconciliations
Reconciliations Reconciliation of Significant Items* for Continuing Operations FY22 FY21 Pre- Adopt Post- Pre- Adopt Post- A$ millions AASB 16 AASB 16 AASB 16 AASB 16 AASB 16 AASB 16 Goodwill impairment 25.0 - 25.0 - - - Integration and restructuring costs 7.3 - 7.3 3.8 - 3.8 Chester Hill closure pr
Slide 48: For further information please contact
For further information please contact: Investors: Jonathan Ling Executive Chairman Email: investors@ppgaust.com.au Tel: +61 3 9474 4222 Darren Brown Director & Interim Chief Financial Officer Email: investors@ppgaust.com.au Tel: +61 3 9474 4222
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