161201 final investor update
TRANSCRIPT
Investor UpdateDecember 2016
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Disclaimer
2
A lot has happened in the last year:
– Acquisition of Bachmann Plant Hire
– Acquisition of SubZero (now MRS Services Group)
– Consulting business closed
– Loss making contracts terminated
– Former CEO and head office staff removed from the group
– New board members
– New equity and debt finance secured
Introduction
3
Consulting Division closed down during November 2016
Cost reduction $1.5m p.a.
PEAL contract (Papua New Guinea)
– Fuel farm facility for airstrip
– Net outstanding to MRS approximately $2.5m
Aiotec (New South Wales)
– Polypropylene Plant decommissioning
– Net outstanding to MRS approximately $3.8m
Both contracts terminated and in dispute
Low likelihood of recovery but no further cost being incurred
Former Consulting Division
4
MRS Today
– Bachmann Plant Hire
• Bulk earthworks provider
• Greater Brisbane Area growth corridor
• Clients include BMD Group, Pensar Civil, Katala Constructions, GW Civil Contracting, Mcllwain Civil
– MRS Services Group
• Mining Services
• Hunter Valley mining cluster
• Clients include Rio Tinto, BHP Billiton and Glencore
MRS Going Forward
5
Joe Clayton – Chief Executive Officer
40 years experience in mining and 22 years leading mining operations
Qualified Mining Engineer, Graduate Australian Institute of Company Directors, Fellow ofAustralian Institute of Mining and Metallurgy and Chartered Professional in Management
Mining career:
– 1976 to 1993 Coal Mining Operations
– 1993 to 2004 GM and Project Director of Contract Mining Operations
– 2004 to 2012 GM, Project Director, Country Manager of Mines and Developments
– 2012 to present Mining Services CEO and Executive Directorships
Successfully implemented major change management programs at some of the mostchallenging mining operations in South East Asia.
CEO of SubZero Group through a restructure of the business with continuous positive trading inReceivership to a successful sale to MRS.
Murray d’Almeida – Chairman
Over 35 years national and international business experience
Qualified Accountant and Fellow of Australian Institute of Company Directors
Founded ASX listed RFG in Australia and grew it to over 300 branches across seven countries
Significant ASX and AIM experience on 13 Boards
Extensive Government and NFP experience
Board of Directors
6
Timothy Jones – Finance Director
Almost 40 years experience in the oil and gas industry
Qualified Chartered Accountant
Extensive Public Company experience.
Chris Berkefeld
40 years experience in civil, mining and industrial services
Currently on the boards of Wagner Group, Hiway Group, Tellus Holdings Ltd and HSE Mining,all companies associated with mining and civil operations.
Formerly 25 years with Brambles Industries Ltd in logistics, industrial services and wastemanagement including 5 years as Executive Director Brambles Europe and 6 years ManagingDirector and CEO of BISCleanaway.
Former Deputy Executive General Manager of Leighton Mining
Board of Directors
7
Acquired February 2016
Located in Ipswich, near Brisbane, QLD.
The highest population growth area in Australia through the “Economic Development Plan for Ipswich”, a government led drive to attract 235,000 new residents by 2031
Bulk earthworks provider to residential subdivision developers and public authorities
Current construction estimated at 500 new homes per month, with supporting retail, industrial, education and medical construction following suit.
Bachmann Plant Hire
8
Bachmann: Operations Area
9
Bachmann: Revenue split by client
10
Founded in 1999, acquired October 2016
Provides a range of mining and resources services, primarily to the largest mining companies, including:
– Maintenance support: heavy engineering, fabrication, machining and maintenance/repair servicing
– Mining support: mine rehabilitation, water reticulation, bulk earthworks, equipment hire, on site civil works
– Labour support: operators, tradesmen, white collar
Based in Muswellbrook, the heart of the Hunter Valley mining area, with:
– Broadest service offering
– Largest services group
– Largest off-site workshop in NSW
– Cranage support providing a unique competitive advantage.
The Hunter Valley exports 150Mt of coal pa through Port of Newcastle
Upturn in business as a result of the significant upturn in the price of thermal coal over the last six months
Recently moved premises achieving significant reduction in rental cost
MRS Services Group
11
12
MRS SG: Operations Area
13
Fabrication Mechanical Mining Labour
MRS SG: Revenue split by client and service
14
RIO Tinto44%
Glencore28%
BHP Billiton21%
BengallaMining
3%
Other4%
Mining32%
Fabrication31%
Mechanical25%
Automotive6%
Industrial Services
3%
Lineboring 3%
Coal Price Thematic
15Source: Index Mundi November 2016
Newcastle thermal coal
FOB total cash costs 2015
16Source: Wood Mackenzie – Coal costs benchmarking tool – January 2015
Clients highlighted
20% increase in contract labour since Jan 2015
Glencore / JPU contract USD$94.75/t
Bachmann
– Turnover approximately $26.33m
– EBITDA approximately $2.17m
SubZero (normalised)
– Turnover approximately $63.71m, businesses purchased $43.71
– Operating EBITDA approximately $3.08
Audit work still being finalised, target publication early January 2017.
Note: the figures above are unaudited and extracted from the management accounts of the two businesses. The audited accounts to 30 June 2016 will include losses and provisions for the former consulting business plus head office and non-recurring exceptional costs and will not show a contribution from MRS Services Group which was acquired after the year end.
Financial Expectations for FY16
17
4. Recommendations
18
Majority of forecast revenue for FY17 and FY18 subject to a contract or closed book/panel of suppliers. Where no contracts are in place, the revenue forecast is generally PO based.
Bachmann plant hire sales are subject to purchase orders, whilst there are contracts in place for Contract Jobs. As the typical contract job is a 3 month term, 30% of forecast FY17 Contract Jobs are secured. Due to the short term nature of Contract Jobs, FY18 contracts will be up for tender late FY17, therefore all of FY18 Contract Jobs are currently unsecured.
76%
20%
64%
24%
80%
36%
100%
–
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
FY17 (MRSSG) FY17 (BPH) FY18 (MRSSG) FY18 (BPH)
Secured Unsecured
Contracted Revenue
Shareholders on resumption of trading:
– Paul Morffew (former CEO) entities 19.8%
– Macquarie Bank 8.8%
– Bachmann Vendors 7.5%
– August 2016 placees (aggregate) 34.8%
– Daniella Athan 5.5%
Major Creditors
– Westpac - $15.8m
– Hermes Capital - $6m
Stakeholders
19
To be the provider of choice for
mining and civil services solutions.
Implementation:
Accretive growth through current opportunities
Cross sell solutions across the current geographic coverage with existing and new clients
JV and strategic alliance opportunities
Compatible acquisitions
Vision
20
Regular charitable donations
Apprenticeship Training
JV with Indigenous business
Assisting with local council graffiti clean up
Workforce support of fundraisers for Breast Cancer and Prostate Cancer
Social License
21
For further information contact:
Joe Clayton
Chief Executive Officer
+61 437 763 477