q4/ye 2013 investor presentation - strongco · manitowoc 26% equipment sales by brand volvo 49%...

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Q4/YE 2013 INVESTOR PRESENTATION April 8, 2014

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Page 1: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

Q4/YE 2013 INVESTOR

PRESENTATION

April 8, 2014

Page 2: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

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.

Page 3: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

2

INVESTMENT HIGHLIGHTS

Strong growth strategy

Well-positioned in diversified and growing markets

Major Capex, sales re-organization completed

Globally recognized manufacturers

Strong customer relationships

Demonstrated performance improvement and results

Page 4: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

3

AN INDUSTRY LEADER

Major multiline mobile equipment dealer

Represent major brands: Volvo, Case Construction, The Manitowoc Company, National and Grove

750 employees

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

Market Cap $46.3 million*

TSX: SQP

*As at March 31, 2014.

Page 5: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

4

BRAND RECOGNITION – MAJOR BRANDS

CONSTRUCTION

Page 6: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

5

BRAND RECOGNITION – COMPLEMENTARY BRANDS

Page 7: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

6

DIVERSE END-USE MARKETS

UtilitiesForestryQuarries and Aggregates

Mining

Non-Residential Construction

Industrial Material Handling

Oil & GasResidential Constructionand Landscaping

Waste ManagementInfrastructure

Page 8: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

7

KEY REGIONS

Alberta

Resumed momentum since flooding in spring 2013

Oil Sands activity growing at more controlled pace

Long-term outlook for Alberta is positive

Page 9: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

8

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 a day by 2030 ̶ a 210% increase over 2011 production levels

According to the Canadian Association of Petroleum Producers , the total mined bitumen volumes are expected to double by 2027

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

Page 10: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

9

KEY REGIONS

Ontario Quebec New England

Slow, uncertain recovery

Strong pockets around large projects (e.g., mining and forestry in northern Ontario and the Pan-Am games)

Customers continue to curtail equipment purchases unless absolutely necessary

Market for heavy equipment down close to 20% in 2013

Strongco’s unit sales down only 5% as we improved market share

Infrastructure deficit continues to grow

Near-term softness will continue due to Charbonneau Commission investigation, suspension of infrastructure spending and increased mining royalties

Acquired Chadwick-BaRoss for US$11.5M in February 2011

Small up-tick in U.S. residential housing and job creation were less noticeable in New England

Modest increase in demand for equipment overshadowedby an oversupply of equipment

Page 11: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

10

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

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3

4

5

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Page 12: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

GROWTH STRATEGY

Page 13: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

12

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

Page 14: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

13

GROWTH STRATEGY: ORGANIC

FORT MCMURRAY, ALBERTA

Direct service to the oil patch

New branch will carry Volvo and complementary brands (Manitowoc, National and Grove Crane products)

23,000-square-foot facility on 6 acres of land

Total capital cost: $18.7 million

Opened: Q1 2014

Further builds on growing presence in the province, provides higher visibility in key market

Page 15: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

14

GROWTH STRATEGY: ORGANIC

SAINT-AUGUSTIN-DE-DESMAURES, QUEBEC

New, larger facility replaces existing Ste-Foy branch

New branch to carry Volvo equipment

40,500-square-foot facility on 8 acres of land

Approximately 40 employees, including 15 expert technicians

Total capital cost: $8.9 million

Opened: Q4 2013

Betters position as a performance leader in the Quebec region

Photos: Johany Jutras

Page 16: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

15

EXPANSION OF COMPLEMENTARY BRANDS

Page 17: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

16

EXTENSIVE BRANCH NETWORK

Page 18: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

17

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

Page 19: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

18

REVENUE CATEGORIES

SALES PRODUCT SUPPORT

RENTAL

Page 20: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

19

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%

Page 21: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

20

FINANCIAL RESULTS

Page 22: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

21

FINANCIALS

($ millions)

REVENUE 2009 ̶̶ 2013

EARNINGS BEFORE TAXES 2009 ̶̶ 2013($ millions)

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40

60

80

100

120

140

160

2009 2010 2011 2012 2013

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

-4

-3

-2

-1

0

1

2

3

4

5

2009 2010 2011 2012 2013

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

Page 23: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

22

FINANCIALS

($ 000s)

EBITDA 2009-2013

EBITDA MARGIN 2009-2013(%)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2009 2010 2011 2012 2013

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

0%

2%

4%

6%

8%

10%

12%

14%

2009 2010 2011 2012 2013

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

Page 24: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

23

FINANCIAL TREND – TOTAL STRONGCO

($ millions)

EQUIPMENT INVENTORY 2011-2013

EQUIPMENT NOTES PAYABLE 2011-2013(%)

0

50

100

150

200

250

300

2009 2010 2011 2012 2013

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

0

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100

150

200

250

Q1 Q2 Q3 Q4

2009 2010 2011 2012 2013

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

Interest Free Interest Bearing

Page 25: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

24

FINANCIAL TREND – TOTAL STRONGCO

Major Capital Expenditures – 2011 to 2014:

– New Acheson Branch ̶ $10.7M

– New Fort McMurray Branch ̶ $18.7M

– New Saint-Augustin Branch ̶ $8.9M

– Upgrade Edmonton Crane Branch ̶ $1.2M

– Renovations Mississauga Branch ̶ $1.4M

– New Dealer Management System (SAP) ̶ $5.7M

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)

CAPEX 2009-2013

Page 26: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

25

Three-year committed facility

Operating line of $30M

Availability on operating line of $6M at December 31, 2013

Term loan of $5M outstanding at December 31, 2013 related to acquisition of Chadwick-BaRoss and construction of Acheson branch

Construction loan available of up to $14M to finance construction of new Fort McMurray branch – $11.5M drawn at December 31, 2013

Construction loan available of up to $8M to finance construction of new Saint-Augustin-de-Desmaures branch ̶ $5.3M drawn at December 31, 2013

Operating line of US$3M renewable annually

Availability on operating line of US$1.7M at December 31, 2013

Mortgage loans of US$3.5M for five branches in New England

Total lines of $300M with captive finance affiliate of OEMs and other non-bank lenders

Renewable annually

Availability of $91M at December 31, 2013

U.S. Bank Credit

Facilities

Equipment Finance Lines

Canadian Bank Credit

Facilities

FINANCIAL RESOURCES

Page 27: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

26

MANAGEMENT REPORT CARD: PROMISES MADE AND KEPT

TURNAROUND AND CONVERSION TO GROWTH AND VALUE STRATEGY

Clear achievable strategy with proven results

Tripled shareholder value

ORGANIC VALUE CREATION

Major Capex near completion

Improved sales organization

Superior customer experience

INVENTORY MANAGEMENT

Improved, but not where we need to be

ACQUISITIONS

Chadwick-BaRoss provides platform for U.S. growth

EARNINGS GROWTH

2013: Decline due to inventory challenges, together with the costs to build for the future

Page 28: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

27

OUTLOOK: CONTINUED PROFITABLE GROWTH

EQUIPMENT SALES PERFORMANCE Equipment sales up 5% in 2013 Market share gains in all regions except Eastern Canada

ROBUST ORDER BOOK

LOWER INVENTORY LEVELS Levels decreased by $32 million in 2013 and sales climbed 5% over 2012. Management continues to

explore greater efficiencies with new branches and organizational structure in place

1

2

3

$72M at December 31, 2012 $52M at December 31, 2013 $61M at March 31, 2014

IMPROVING ECONOMY Modest growth forecast for 2014 in Canada & United States4

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

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

5

6

7

Page 29: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

28

SHARE OWNERSHIP

Oakwest Corporation(Robert Beutel - Chairman)22.4%

Boeckh Investments 10.9%

Strongco Insiders 2.8%

Others56.2%

LISTED ON TSX (SQP)13.2 Million Shares Outstanding

Fidelity Management 7.7%

Page 30: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

29

SHARE PRICE

SHARE PRICE 2009 to March 31, 2013

Page 31: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

30

EV / CCY 2013E EBITDA

13.8x

13.7x

9.0x

8.7x

8.6x

7.8x

7.7x

6.9x

0x 5x 10x 15x

Rocky Mountain Dealerships Inc

Ritchie Bros. Auctioneers Inc

Cervus Equipment Corp

Toromont Industries Ltd

Wajax Corp

Strongco Corporation

Finning International Inc

WesternOne Inc.

EV/EBITDA (2013E)Source: Canaccord Genuity, Thomson One

Priced as of September 23, 2013

Avg. 9.5x

COMPARABLE VALUATION ANALYSIS

Page 32: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2

31

INVESTMENT HIGHLIGHTS

Strong growth strategy

Well-positioned in diversified and growing markets

Major Capex, sales re-organization completed

Globally recognized manufacturers

Strong customer relationships

Demonstrated performance improvement and results

Page 33: Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49% Used 7% $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY CATEGORY $321.2