Emeco Holdings Limited · ASX:EHL
Emeco — Merger or Acquisition (October 2017)
53 slides from Emeco's merger presentation, Oct 31, 2017
Slide 1: Acquisition of Force Equipment and Equity Raising
For personal use only Emeco Holdings Limited Acquisition of Force Equipment and Equity Raising 31 October 2017
Slide 2: Important Notices and Disclaimer
IMPORTANT NOTICES AND DISCLAIMER This investor presentation (“Presentation”) has been prepared by Emeco Holdings Limited (ACN 112 188 815) (“Emeco” or “Company”). This Presentation has been prepared in connection with the fully underwritten accelerated non-renounceable pro-rata entitlement offer (“O
Slide 3: Important Notices and Disclaimer (Continued)
IMPORTANT NOTICES AND DISCLAIMER (CONTINUED) Future performance This Presentation contains certain “forward looking statements”. Forward looking statements can generally be identified by the use of forward looking words such as, “expect”, “anticipate”, “likely”, “intend”, “should”, “could”, “may”, “
Slide 4: 1. Transaction Summary
For personal use only 1. Transaction Summary
Slide 5: Transaction Summary
TRANSACTION SUMMARY Emeco’s acquisition of Force Equipment increases earnings, grows the rental fleet and enhances maintenance capabilities, whilst strengthening the balance sheet For personal use only Transaction Compelling strategic Fully underwritten Strengthened Positive outlook and overview rat
Slide 6: 2. Acquisition Rationale
For personal use only 2. Acquisition Rationale
Slide 7: Acquisition Summary
ACQUISITION SUMMARY Strategic acquisition within Emeco’s core capability of equipment rental For personal use only — Emeco to acquire Force, national equipment rental and maintenance business — Force has a high quality fleet with significant projects and long-term customer relationships, particularl
Slide 8: Compelling Acquisition Rationale
COMPELLING ACQUISITION RATIONALE Emeco’s acquisition of Force Equipment increases earnings, grows the rental fleet and enhances maintenance capabilities, whilst strengthening the balance sheet For personal use only Quality rental Quality rental fleet with strong utilisation and earnings, particula
Slide 9: Ensuring Security of Supply in a Tightening Market
ENSURING SECURITY OF SUPPLY IN A TIGHTENING MARKET Acquisition provides significant and highly complementary fleet For personal use only — Estimate of ready to work equipment available for sale in Australia is less than 100 units Significant acquisition — Decline of available inventory due to overse
Slide 10: 3. Overview of Force Equipment
For personal use only 3. Overview of Force Equipment
Slide 11: Force Equipment – Company Overview
FORCE EQUIPMENT – COMPANY OVERVIEW Force is a high quality national equipment rental and maintenance business For personal use only RENTAL WORKSHOPS REVENUE Workshops FY17 Revenue1: 42% FY17 Revenue1: A$58.0m Rental A$41.8m 58% • Mid to large scale, long-term dry hire and • Four high quality and str
Slide 12: Force Equipment – Fleet Overview
FORCE EQUIPMENT – FLEET OVERVIEW Force’s fleet includes 179 pieces of equipment with an average age of ~22,600 SMU hours Force Equipment Fleet composition2 For personal use only Emeco 34 other machines • High quality fleet with a strong position in highly sought models 45 machines • Provides signifi
Slide 13: Force Equipment – Presence in Key Mining Areas
FORCE EQUIPMENT – PRESENCE IN KEY MINING AREAS Force has a significant presence across Australia’s key mining regions, particularly Western Australia and Queensland, with strong relationships with key customers For personal use only Darwin Mackay workshop Port Hedland workshop Broome Pilbara Bowen P
Slide 14: Force Equipment – Workshops Overview
FORCE EQUIPMENT – WORKSHOPS OVERVIEW Force has four state-of-the-art workshops located close to customer sites in key mining regions For personal use only Workshop Perth Kalgoorlie Port Hedland Mackay Approximate size 16,000m2 15,000m2 10,000m2 10,200m2 Key commodity Iron ore, nickel and gold Nickel
Slide 15: Force Equipment – Management Team
FORCE EQUIPMENT – MANAGEMENT TEAM Force has a skilled workforce, led by an experienced management team, joining Emeco to contribute to future success For personal use only Management Experience — Jason has over 38 years’ experience in the mining and earthmoving equipment industries — Jason joined Fo
Slide 16: 4. Combined Group Profile
For personal use only 4. Combined Group Profile
Slide 17: Pro Forma Transaction Impact
PRO FORMA TRANSACTION IMPACT Emeco will have a strengthened financial profile and significantly improved leverage metrics following the transaction For personal use only Financial impact Pro-forma leverage • FY17 pro forma run rate operating EBITDA of $139.8 million, based 10.0x 9.5x on Emeco’s 4Q17
Slide 18: Improved Operational Diversification
IMPROVED OPERATIONAL DIVERSIFICATION Pre-acquisition Australian revenue by region1 Pro forma post-acquisition estimated Australian revenue VIC by region1,2 VIC For personal use only 7% 6% WA & SA QLD NSW 24% WA & SA 25% 38% 39% NSW QLD 30% 31% Pre-acquisition estimated revenue by commodity exposure3
Slide 19: Pro Forma Statement of Financial Position
PRO FORMA STATEMENT OF FINANCIAL POSITION For personal use only Pro Forma Combined Emeco as at 30 June Force Group as at 30 June $m 2017 Entitlement Offer1 Acquisition2,3,4,5,6 2017 Cash & cash equivalents 17.0 77.6 (71.8) 22.8 Plant & Equipment 349.7 - 59.4 409.1 Other assets 154.0 - 23.8 177.8 Tot
Slide 20: Pro Forma Earnings and Leverage
PRO FORMA EARNINGS AND LEVERAGE Net debt / FY17 run rate operating EBITDA reduced to 3.2x post Acquisition For personal use only Pro Forma Combined Emeco year ended Group year ended 30 $m 30 June 2017 Entitlement Offer Force acquisition June 20172 Net debt 457.1 (77.6) 71.8 451.3 FY17 Operating EBIT
Slide 21: 5. Equity Raising Overview
For personal use only 5. Equity raising overview
Slide 22: Equity Raising Overview
EQUITY RAISING OVERVIEW Transaction conservatively financed by equity raising, reducing leverage and ensuring Emeco’s balance sheet remains strong For personal use only — Fully underwritten pro-rata accelerated non-renounceable entitlement offer to existing shareholders to raise up to approximately
Slide 23: Sources and Uses of Funds
SOURCES AND USES OF FUNDS For personal use only Sources A$m Uses A$m Gross proceeds from Entitlement Offer 80.0 Acquisition of Force Equipment 69.8 Transaction costs and general working capital 10.2 Total sources of funds 80.0 Total uses of funds 80.0 23
Slide 24: Equity Raising Timetable
EQUITY RAISING TIMETABLE For personal use only Event Date (Sydney time) Trading halt and announcement of Acquisition and Entitlement Offer Tuesday 31 October 17 Institutional Entitlement Offer opens Institutional Entitlement Offer closes Wednesday 1 November 17 Trading halt lifted and trading resume
Slide 25: 6. Summary
For personal use only 6. Summary
Slide 26: Company Highlights
COMPANY HIGHLIGHTS With a strengthened balance sheet and stronger fleet, together with Emeco’s ongoing focus on business improvement and For personal use only operational excellence, Emeco has a platform for long-term sustainable growth Significant national presence following acquisitions of Andy’s
Slide 27: Strategy & Outlook
STRATEGY & OUTLOOK Emeco continues to pursue its Australia-focused strategy to drive investor returns • The acquisition of Force represents a continuation of Emeco’s strategy to grow the Australian rental business, which previously generated pre-corporate For personal use only cost margins in excess
Slide 28: FY18 Outlook and Beyond
FY18 OUTLOOK AND BEYOND For personal use only Emeco is strategically well positioned in the Australian market, offering significant opportunity for future earnings growth — Increased activity and a strong pipeline of projects coming to market, particularly in thermal/coking coal, base metals (includ
Slide 29: A. Risk Factors
For personal use only A. Risk factors
Slide 30: Risk Factors
RISK FACTORS Introduction For personal use only Investors should be aware that there are risks associated with an investment in Emeco. Some of the principal factors which may, either individually or in combination, affect the future operating performance of Emeco are set out below. Some are specific
Slide 31: Risk Factors – Business Risks
RISK FACTORS Business risks For personal use only In order to generate revenue and earnings, the Company requires access to new and used earthmoving equipment and parts. If the Company is unable in the future to secure adequate supplies of the required number of machines at appropriate prices or if
Slide 32: Risk Factors – Business Risks (continued)
RISK FACTORS For personal use only Business risks (continued) Earthmoving equipment age is determined by the hours it has been utilised as opposed to the period of time since manufactured. In periods of high utilisation, equipment ages at a faster rate bringing forward any major components and repla
Slide 33: Risk Factors – Residual Value Risk
RISK FACTORS Business risks (continued) For personal use only The market value of any given piece of rental equipment could be less than its depreciated value at the time it is sold. The market value of used rental equipment depends on several factors, including: i. the market price and availability
Slide 34: Risk Factors – Business Risks (continued)
RISK FACTORS Business risks (continued) For personal use only The Company relies on computer, information, and communications technology and related systems in order to properly operate the administrative and compliance aspects of its business. From time to time, the Company experiences occasional s
Slide 35: Risk Factors – Mine Site Interruptions
RISK FACTORS Business risks (continued) For personal use only Mining operations are vulnerable to the risk of interruption as a result of a variety of factors, which may be beyond the control of the Company, including the following: i. prolonged heavy rainfall or cyclone; ii. geological instability,
Slide 36: Risk Factors – Environmental Risks
RISK FACTORS Business risks (continued) For personal use only Environmental management and compliance is an important part of the business of the Company’s customers. The Company works with its customers to ensure that its equipment and maintenance services operate in alignment with their onsite pol
Slide 37: Risk Factors – Competition
RISK FACTORS Business risks (continued) For personal use only There are two levels of competition that the Company experiences in the industry. The first is for the supply of equipment and if a customer would prefer to purchase equipment as opposed to rent equipment from a provider. The second level
Slide 38: Risk Factors – Indebtedness
RISK FACTORS Business risks (continued) For personal use only The Company's gross debt position is approximately $463 million of senior secured notes (“Notes”) and approximately A$9.8 million of finance leases. The Company also has up to A$35 million in additional debt and A$30 million in bank guara
Slide 39: Risk Factors – Insurance Risks
RISK FACTORS Business risks (continued) For personal use only Although insurance is maintained for ownership and rental of equipment within ranges of coverage consistent with industry practice, no assurance can be given that such insurance will be available in the future on commercially reasonable t
Slide 40: Risk Factors – Risks Related to the Acquisition
RISK FACTORS Risks related to the Acquisition of Force Equipment For personal use only Emeco may terminate the Acquisition agreement in certain circumstances including where there is a material adverse change in Force Equipment or where Emeco receives notice in writing from the ACCC stating that the
Slide 41: Risk Factors – Acquisition Risks (continued)
RISK FACTORS Risks related to the Acquisition of Force Equipment (continued) For personal use only The Acquisition involves the integration of Force Equipment which has previously operated independently to Emeco. As a result, there is a risk that the integration of Force Equipment may be more comple
Slide 42: Risk Factors – Acquisition Risks (continued)
RISK FACTORS Risks related to the Acquisition of Force Equipment (continued) In accordance with AASB 3, Force Equipment’s identifiable assets, liabilities and contingent liabilities, including intangible assets, must be identified and valued For personal use only as at the Acquisition date. The purc
Slide 43: Risk Factors – Entitlement Offer and Share Ownership
RISK FACTORS Risks associated with the Entitlement Offer and Share ownership For personal use only There are general risks associated with investments in equity capital such as Emeco shares. The trading price of Emeco shares may fluctuate with movements in equity capital markets in Australia and int
Slide 44: Risk Factors – Entitlement Offer and Share Ownership (continued)
RISK FACTORS Risks associated with the Entitlement Offer and Share ownership (continued) For personal use only Change in accounting or Changes in accounting or financial reporting standards may adversely impact the reported financial performance of the Emeco Group. financial reporting standards War
Slide 45: Risk Factors – Underwriting Agreement
RISK FACTORS For personal use only Risks associated with the Entitlement Offer and Share ownership (continued) The Underwriting Agreement relating to the Entitlement Offer sets out various events, the occurrence of which will entitle the Underwriters to terminate the Underwriting Agreement. Accordin
Slide 46: B. International Offer Restrictions
For personal use only B. International Offer Restrictions
Slide 47: 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 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
Slide 48: International Offer Restrictions – Hong Kong
INTERNATIONAL OFFER RESTRICTIONS Hong Kong WARNING: This document has not been, and will not be, registered as a prospectus under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong, nor has it been authorised by the Securities and Futures Commission in Hong Kong
Slide 49: International Offer Restrictions – Switzerland
INTERNATIONAL OFFER RESTRICTIONS For personal use only Switzerland The New Shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to
Slide 50: C. Basis of Preparation and Operating to Statutory Financials Reconciliation
For personal use only C. Basis of preparation and operating to statutory financials reconciliation
Slide 51: Pro Forma Financials – Basis of Preparation
PRO FORMA FINANCIALS – BASIS OF PREPARATION For personal use only Basis of Preparation The basis of preparation in compiling the combined group’s pro forma statement of financial position and pro forma earnings and leverage information post Entitlement Offer and Acquisition and the combined group’s
Slide 52: Operating to Statutory Financials Reconciliation
OPERATING TO STATUTORY FINANCIALS RECONCILIATION For personal use only FY17 4Q17 4Q17 run rate Statutory NPAT from continuing operations ($156.1m) ($130.3m) Adjusted for: Business acquisition and restructuring costs $88.0m $88.0m Impairment expense $10.2m $9.3m Depreciation and Amortisation $61.5m $
Slide 53: Thank you
For personal use only Thank you emecogroup.com
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