48 hours in edmonton october 2014 - strongco · 16 2010 2011 2012 2013 2014 2015 atlantic 14,624...

48 HOURS IN EDMONTON

October 2014

1

FORWARD-LOOKING STATEMENTS

Today’s discussion may contain forward-looking statements that involve assumptions and

estimates that may not be realized and other risks and uncertainties. These statements relate to

future events or future performance and reflect management’s current expectations and

assumptions which are based on information currently available to the Company’s management.

The forward-looking statements include but are not limited to: (i) the ability of the Company to

meet contractual obligations through cash flow generated from operations, (ii) the expectation

that customer support revenues will grow following the warranty period on new machine sales

and (iii) the outlook for 2014. There is significant risk that forward-looking statements will not

prove to be accurate. These statements are based on a number of assumptions, including, but

not limited to, continued demand for Strongco’s products and services. A number of factors

could cause actual events, performance or results to differ materially from the events,

performance and results discussed in the forward looking statements. The inclusion of this

information should not be regarded as a representation of the Company or any other person that

the anticipated results will be achieved and investors are cautioned not to place undue reliance

on such information. These forward-looking statements are made as of the date of this

presentation, or as otherwise stated and the Company does not assume any obligation to

update or revise them to reflect new events or circumstances.

Additional information, including the Company’s financial statements, Management Discussion

and Analysis, and Annual Information Form, may be found on SEDAR at sedar.com.

2

INVESTMENT HIGHLIGHTS

Strong growth strategy

Well-positioned in diversified and growing markets

Major Capex, sales re-organization completed

Strong customer relationships

Demonstrated performance improvement and results

Globally recognized manufacturers

3

AN INDUSTRY LEADER

Major multiline mobile equipment dealer

Major brands: sales and product support

Diversified by industry, geography and product line

27 branches in Canada, 5 branches in U.S.

750 employees

TSX: SQP

4

BRAND RECOGNITION – MAJOR BRANDS

CONSTRUCTION

5

VOLVO’S LARGEST NORTH AMERICAN DEALER in 2013 FOR 5 YEARS RUNNING

LARGEST PRODUCER OF RETAIL FINANCING FOR VOLVO FINANCE

MANITOWOC CRANE “ELITE” DEALER

RECOGNIZED AS

STRONG OEM RELATIONSHIPS

6

BRAND RECOGNITION – COMPLEMENTARY BRANDS

7

REVENUE CATEGORIES

SALES PRODUCT SUPPORT

RENTAL

8

EXTENSIVE BRANCH NETWORK

9

DIVERSE END-USE MARKETS

UtilitiesForestryQuarries and Aggregates

Mining

Non-Residential Construction

Industrial Material Handling

Oil & GasResidential Constructionand Landscaping

Waste ManagementInfrastructure

10

ROBUST ORDER BOOK $72M at December 31, 2012 $52M at December 31, 2013 $62M at September 30, 2014

VALUE AND GROWTH POTENTIAL

REVENUE GROWTH Total revenues up 5% in 2013 and 1% YTD (June 2014) Product support revenues increased 5% in 2013 and 6% YTD (June 2014)

1

2

3

4

ORGANIC GROWTH INVESTMENTS IN KEY MARKETS Increased operating capacity with new and upgraded facilities5

6

7

LOWER OUTSTANDING DEBT LEVELS Total outstanding debt decreased $18M since September 30, 2013 Net proceeds from sale and leaseback transactions contributed $42M in debt reduction Interest-bearing portion of equipment notes down $22M (year-over-year, September 2014)

IMPROVING ECONOMY Modest growth forecast for 2014 in Canada and United States

ACQUISITION OPPORTUNITIES Consolidation of equipment dealers Other related businesses

POSITIVE LONG-TERM OUTLOOK Infrastructure deficit across Canada Substantial development planned for northern Alberta, northern Ontario, northern Quebec and Labrador

11

ALBERTASTRATEGY

12

FINANCIAL TREND – ALBERTA

ALBERTA REVENUE 2009 - 2014($ millions)

2009 2010 2011 2012 2014

0

5

10

15

20

25

30

35

40

45

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3E

Equipment

Rentals

Product Support

2013

13

GROWTH STRATEGY – ORGANIC

NORTHERN ALBERTA STRATEGY

EDMONTON VOLVO (Acheson) EDMONTON CRANE FORT MCMURRAY

Volvo branch opened March 2012

Capital investment of $10.7M

Enabled significant growth in product support revenues

Improved customer service

Existing Edmonton branch upgraded in 2013 and now dedicated to crane


Enable significant growth in Crane product support revenues

Improved customer service

Regional management structure added

New branch opened in 2014


Directly service the oil patch

New branch will carry Volvo and crane products

Headcount currently in place: - branch manager - branch administrator - service manager - 7 field technicians- 4 parts/warehouse

14

DISTRIBUTION – WESTERN CANADA

SURREY

PENTICTON

GRAND PRAIRIE

FORT MCMURRAY

EDMONTONLLOYDMINSTER

SASKATOON

REGINA

WEYBURN WINNIPEG

LETHBRIDGE

MEDICINE HAT

BROOKS

RED DEER

CALGARY

Strongco Branches - 6

Sub dealer Locations - 17

15

Source: Statistics Canada / Haver Analytics

ECONOMIC OUTLOOK IN ALBERTA POSITIVE

ALBERTA ECONOMICS FORECASTAnnual average per cent change unless noted

2011 2012 2013E 2014F 2015F

Real GDP 5.2 3.8 3.8 3.5 3.2

Nominal GDP 10.3 4.6 6.3 6.9 4.8

Employment 3.8 2.7 2.9 2.9 1.9

Unemployment Rate % 5.5 4.6 4.6 4.4 4.2

Consumer Price Index 2.4 1.1 1.4 2.5 2.2

Retail Trade 6.8 7.0 6.9 8.5 5.0

Housing Starts -6.7 30.4 8.2 6.7 -14.5

Existing Home Sales 8.1 12.3 9.5 10.1 0.3

Avg. Existing Home Price 0.5 2.6 5.0 4.3 2.4

16

2010 2011 2012 2013 2014 2015

Atlantic 14,624 14,496 16,398 17,397 18,713 20,214

Quebec 44,212 46,923 49,833 51,685 54,985 58,720

Ontario 69,301 71,391 75,764 77,699 82,868 89,132

Alberta 61,026 69,737 78,572 84,593 92,221 100,882

SQP Total 189,163 202,547 220,567 231,374 248,787 268,948

Total 243,869 260,919 284,194 298,597 321,257 347,802

SQP as % of Canada 78% 78% 78% 77% 77% 77%

Y O Year Real Growth SQP 3.9% 5.5% 1.5% 3.7% 4.1%

Canada GDP Real Growth 2.5% 1.9% 1.5% 2.0% 2.9%

ECONOMIC OUTLOOK IN ALBERTA POSITIVEPopulation Forecast

(in MM of Inhabitants)

Value of Total Construction (Current MM of Can$)

Source: Statistics Canada

Source: Reed Construction Data

2013 2014 2015 2016 2021

AB 4,003 4,083 4,162 4,242 4,629

QC 8,103 8,169 8,235 8,299 8,607

ON 13,737 13,904 14,069 14,234 15,050

ALT 2,349 2,352 2,355 2,358 2,373

SQP Regions 28,191 28,507 28,821 29,133 30,659

% Growth 1.1% 1.1% 1.1% 2.2%

17

ECONOMIC OUTLOOK IN ALBERTA POSITIVE

CONTINUED GROWTH IN OIL SANDS

Recent forecasts project an increase in production of oil sands operations to 5 million barrels/day by 2030 ̶ a 210% increase over 2011 levels

Total mined bitumen volumes expected to double by 2027Source: Canadian Association of Petroleum Producers

Forecasted Bitumen Volumes

0

500

1000

1500

2000

2500

3000

3500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Oil Sands Mining

Oil Sand in Situ

GROWTHSTRATEGY

19

BENEFITS OF SCALE

UNIQUELY POSITIONED TO BENEFITFROM INDUSTRY CONSOLIDATION

OEM preference for larger, financially strong, professionally managed dealers

Ability to attract complementary brands

More efficient use of capital; more effective use of overhead

Improved inventory management ̶ equipment sharing, parts rationalization

Sharing of best practices

Optimum use of the most advanced computer management systems

More sophisticated sales and marketing organization

Brand recognition of Strongco

1

2

3

4

5

6

7

8

20

GROWTH STRATEGY

ORGANIC

Increase market penetration of brands represented

Add key brands to service customers and increase throughput

Enhance market presence

Improve operations

ACQUISITION

Acquire dealerships

Focus on brands already represented

Target regions close to existing markets

21

CAPEX LARGELY COMPLETE

Major Capital Expenditures – 2011 to 2014:

– New Acheson Branch$10.7 million

– New Fort McMurray Branch$18.7 million

– New Saint-Augustin Branch$8.9 million

– Upgrade Edmonton Crane Branch$1.2 million

– Renovations Mississauga Branch$1.4 million

– New Dealer Management System (SAP)$5.7 million

No major capital expenditures planned for 2014 beyond completion of SAP implementation

$0.7 $0.3

$9.0

$5.9

$33.6

$9.0

2009 2010 2011 2012 2013 2014E

($ millions)

2009-2014

22

FINANCIAL RESULTS

23

FINANCIALS

($ millions)

REVENUE 2009-2014

EARNINGS BEFORE TAXES 2009-2014($ millions)

0

20

40

60

80

100

120

140

160

2009 2010 2011 2012 2013 2014

Q1 Q2 Q3 Q4

-5

-4

-3

-2

-1

0

1

2

3

4

5

2009 2010 2011 2012 2013 2014

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

24

FINANCIALS

($ 000s)

EBITDA 2009-2014

EBITDA MARGIN 2009-2014(%)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2009 2010 2011 2012 2013 2014

0%

2%

4%

6%

8%

10%

12%

14%

2009 2010 2011 2012 2013 2014



25

2013 REVENUE BREAKDOWN

Other 11%

Case 7%

Manitowoc26%

EQUIPMENT SALES BY BRAND

Volvo49%

Used 7%

$133.2Product Support 27%

$31.3Equipment Rental7%

REVENUE BY CATEGORY

$321.2Equipment

Sales66%

Case 7%

Crane 26%

REVENUE BY BUSINESS UNIT

Multiline 55%

Other 26%

Case 6%

Manitowoc 9%

PARTS REVENUE BY BRAND

Volvo58%

Used 1%

($ MILLIONS)

Chadwick-BaRoss12%

26

FOCUS ON INVENTORY MANAGEMENT

($ millions)

EQUIPMENT INVENTORY 2010-2014

EQUIPMENT NOTES PAYABLE 2010-2014(%)

0

50

100

150

200

250

300

2010 2011 2012 2013 2014

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3E Q4E

0

50

100

150

200

250

Q1 Q2 Q3 Q4

2010 2011 2012 2013 2014

Interest Free Interest Bearing

Q1 Q2 Q3 Q4 Q1 Q2 Q3E Q4EQ1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Estimate

Estimate

27

$272.2

$287.5 $285.5

$259.5

$287.3 $288.3

$267.9

Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014E

FOCUS ON DEBT REDUCTION

Net proceeds from sale and leaseback transactions contributed $42M in debt reduction Interest-bearing portion of equipment notes down $22M (year-over-year, September 2014)

$18M Reduction

($ millions)

Q1 2013–Q3 2014E

28

SHARE OWNERSHIP

Oakwest Corporation(Robert Beutel - Chairman)22.4%

Boeckh Investments 12.8%

Strongco Insiders 2.8%

Others54.3%

LISTED ON TSX (SQP)13.2 Million Shares Outstanding

Fidelity Management 7.7%

29

STRATEGIC FOCUS

Continue revenue and market share growth through enhanced presence and improved customer experience in key markets

Move beyond the “launch phase” of our new facilities and sales organization to reach the bottom line, and realize ROI

Focus on inventory management to reduce ongoing debt levels and costs

1

2

3

Improve operating efficiencies4

Continue to identify opportunities to accelerate growth (organic and external), to leverage Strongco’s scale and strong reputation in the marketplace5

48 hours in edmonton october 2014 - strongco · 16 2010 2011 2012 2013 2014 2015 atlantic 14,624...

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