Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013 Hellaby...

Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013

Hellaby capital raising Investor presentation27 March 2013

2Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013

Agenda

Page

Section 1 – Summary 3

Section 2 - Overview of Hellaby Holdings 5

Section 3 – Details of the equity capital raising 12

Section 4 – Our investments 16

Section 5 – Financial information 30

Section 6 – Appendices 35


Section 1: Summary


Capital raisingHellaby Holdings Limited (“Hellaby” or “the Company”) is undertaking the following measures to strengthen its balance sheet and increase financial flexibility:

raising $40 million of new equity through a targeted placement to investors

Share Purchase Plan to raise up to $10 million

UBS New Zealand Limited is acting as placement agent for the capital raising

RationaleEquity raising will broaden the shareholder register providing greater depth and liquidity to our investors

Hellaby continues to develop a pipeline of value accretive acquisitions. This capital raising will provide the Company with the financial resources to execute on its growth strategy

The equity raising is not to fund the Contract Resources acquisition

1.1. Summary


Section 2:Overview of Hellaby Holdings


• We are a NZX-listed holding company owning a diversified portfolio of New Zealand and Australian industrial, distribution and retail businesses

• We seek to generate attractive long-term shareholder value through a combination of performance improvement and organic growth in the businesses we own, and through smart acquisitions and divestments

• We actively manage our investments through a lean corporate office, and decentralise leadership and performance accountabilities to our companies

• We seek to generate total shareholder returns superior to the NZX50

• We structure our investment portfolio through four divisions

• We continue to develop a pipeline of accretive acquisitions to build out our portfolio of investments

2.1. Overview of Hellaby Holdings

‘buy, build, harvest’ investment philosophy


Situation in 2007

• No clear portfolio strategy or defined investment approach

• A mountain of debt which was strangling the business

• Commentators and market waiting for us to fail

• Low investor confidence, when dividends temporarily suspended

• appropriate dividend policy subsequently established

• A sub-optimal share register

• strong cornerstone shareholder, but limited institutional investors

• retail shareholders expecting a high dividend yield

• Weak governance

• low recognition of debt problem

• hands-off approach to subsidiary performance

2.2. Where we’ve come from


2.3. Where we are now• New corporate leadership team since mid 2007 has successfully turned around Hellaby

performance

– streamlined the investment portfolio

– reformed the balance sheet and gearing

– developed tight financial and operational disciplines across subsidiaries

– restored investor confidence

• A diversified range of NZ / Australian industrial, distribution, retail businesses

• Portfolio in four divisions - Automotive, Equipment, Packaging, Footwear

• Hands-on owner of assets – no longer a passive investor

• Long-term holder of assets, although portfolio change now likely

• Small, lean corporate office of 9 staff (2200 employees across group)1

• Strong balance sheet

– gearing reduced from 65% 31 December 2007 to 6% 30 June 2012

– $178 million free cash flow generated in five years1

We are now positioned for future growthNotes: 1 As at 30 June 2012


2.4. Hellaby is led by a very experienced management team

John WilliamsonChief Executive Officer & Managing Director BA, LLB, LLMJoined 2007

Neil MacCullochChief Operating Officer BSc, BCom, CAJoined 2008

Richard Jolly Chief Financial Officer & Company Secretary BCom, CAJoined 2006

Greg BatkinChief Investment OfficerBA (Econ), MBA Joined 2010

Hamish JohnstoneChief Human Resources OfficerBScJoined 2012


2.5. Where we are heading

• We will invest in one or two new sectors over time

• Completion of Contract Resources Limited (“Contract Resources”) acquisition – settlement 2 April 2013

• Pursue bolt-on acquisitions which enhance shareholder value

• Greater proportion of revenues and assets to be overseas-based by 2015

• Continued portfolio review

• A strong share register with broadened institutional support

• Improved liquidity


• We are actively working to reshape our investment portfolio

• With limited opportunity to achieve growth in the existing portfolio the focus is on growth via acquisition

• We are open to co-investment

• We are seeking to acquire businesses with the following criteria:• geographical and sector diversification• favourable industry dynamics• strong experienced management team• business of scale contributing to earnings and leader in its market niche• bolt-on acquisitions• profitable with clear growth prospects

2.6. Investment strategyHellaby Holdings is an active, hands-on owner of assets, with a ‘buy, build and harvest’ investment strategy

We continue to develop a pipeline of accretive acquisitions to build out our portfolio of investments


Section 3:Details of equity capital raising


• $40 million targeted placement

• Placement price of $3.00 per share

• The new shares will rank equally with existing shares, and will be entitled to receive the interim dividend of 5cps (record date 12 April)

• Long-time supportive and major shareholder, Castle Investments is fully supportive of the capital raising and will be participating

3.1. Details of the offer: Placement


• Shareholders in New Zealand have the opportunity to subscribe for new Hellaby Holdings shares up to a maximum application size of NZ$15,000

• Maximum aggregate funds raised of $10 million

• Pricing for the SPP will be the lower of:

• $2.95, being the placement price less the 5c interim dividend; and

• the average end of day market price, calculated over the period of five business days immediately prior to the offer closing

• Offered to New Zealand shareholders on the register at 8 April 2013

• Shares issued in the SPP will not be entitled to the dividend payable on the 19 April 2013

3.2. Details of the offer: Share Purchase Plan


3.3. Key dates

Placement date 27 March 2013

Trading halt on the NZX 27 March 2013

Allocations finalised 27 March 2013

Trading resumes 28 March 2013

Placement settlement date 3 April 2013

Record date for SPP 8 April 2013

Record date for interim dividend 12 April 2013

Interim dividend payment date 19 April 2013

Note: Dates are indicative only and may be subject to change without notice


Section 4:Our investments


• We manage a portfolio of companies across the New Zealand economy, with a small Australian presence

• Our portfolio investment strategy diversifies risk and gives investors the opportunity to participate in any cyclical upswing in the economy

• We will continue to review our ownership of assets in the portfolio to ensure we allocate capital efficiently and maximise returns to shareholders

4.1. Summary overview

Group ($m) FY10 FY11 1H12 FY12 1H13

Sales 454.2 465.0 241.2 493.9 243.7

Trading EBITDA 27.7 34.0 15.8 37.4 13.7

Trading EBIT 20.3 26.8 12.2 30.1 10.6

Trading surplus 12.3 22.6 11.1 27.9 9.6

NPAT 10.3 15.3 7.8 19.3 6.2

ROFE 17.4% 25.3% 25.2% 29.6% 24.8%


• Hellaby has entered into a conditional agreement to acquire shares in Contract Resources from Rangatira Limited, existing management and founder shareholders for an EV $116 million1

• Contract Resources is an international specialised industrial services company

• Operations in Australia (largest market), New Zealand, USA, the Middle East and South America

• 90% of revenues are generated offshore (70% in Australia)

• Blue chip client base that includes a large number of multi-national oil and gas companies

• Contract Resources expected to generate EBITDA of greater than $20 million; EBIT of greater than $13.7 million in FY142

• Contract Resources expected to provide EPS accretion to Hellaby shareholders in FY142 of ~6.0 cps3 on a pro-forma basis

• Hellaby is targeting further growth and as such Contract Resources will have a requirement for further investment, including capex of ~$8.0 million in FY142

4.2. Contract Resources: overview

Notes: 1 Equates to EV/EBITDA FY14 (forecast) multiple of 5.82 FY14 relate to the financial year ended 30 June 20143 HBY shares on issue at 27 March 2013: 75.782 m


4.3. Contract Resources: services

• Catalyst handling – loading and unloading• Commissioning, maintenance and repair of catalytic reactors• On site vessel and column repair and welding• Cold cutting and bolt tensioning and torqueing• Plant shutdowns and demolition

Catalyst Handing and Mechanical Services

• Tank maintenance and cleaning• Water jetting and heat exchanger services• Pipeline services• Sludge removal• Mercury and asbestos decontamination• Industrial coatings• Currently EIS offered in Australia, NZ and the Middle East

Environmental and Industrial Services


• Sizeable business – projected FY14 revenues of around $150 million and FY14 EBITDA of greater than $20 million, Contract

Resources is a significant business• Platform for growth

– Contract Resources has grown its revenue from $88 million in FY09 to $140 million in FY12, a CAGR of 17%• Expanding sectors

– Hellaby had long identified the oil and gas services sector as one of potential interest– Contract Resources’ growth opportunities are underpinned by favourable sector trends– The oil, gas, mining and petrochemical sectors are projected to achieve significant growth over the next 10

years, supported by new technologies and sources of energy (shale/oil and gas, liquefied natural gas “LNG”) coming on stream

• Significant player– Contract Resources estimates it has in excess of 75% share of the catalyst handling and associated

mechanical services (“CHMS”) market in New Zealand and Australia and significant shares of the environmental and industrial services (“EIS”) market in the same regions

• Barriers to entry– A combination of best practice technology, significant health, safety and environmental requirements and

longstanding blue chip clients with stringent provider pre-selection processes underpins Contract Resources’ strong market position

4.4. Contract Resources: business attributes

Note: All references to financial years for Contract Resources other than FY14 unless otherwise specified refer to financial years ended 31 March. All references to FY14 relate to the financial year ended 30 June 2014


Inert entry technicians during catalyst project

Mechanical technicians reinstalling pipework in high hazard facility Semi automated heat exchanger cleaning during plant turnaround

Sludge removal equipment on offshore platform -Timor Sea


• Six wholesale distribution businesses supply automotive and truck replacement parts, batteries, tyres and wheels to trade repairers and resellers

• Distributes tyres and wheel componentry to the agricultural and materials handling equipment and truck sectors

• National network– Over 80 branches across Australasia

4.5. Automotive: overviewFY10

Sales 157.0 161.7 83.7 167.9 85.6

Trading EBITDA 19.4 20.8 10.5 21.6 10.4

Trading EBIT 18.2 19.6 9.8 20.3 9.8

ROFE 36.8 43.8% 44.8%

Free cash flow 24.9 22.7 16.2

Staff numbers 553 541 566

FY11 1H12 FY12 1H13$m


4.6. Automotive: market dynamics

Market dynamics Strategy

• Repco and BNT group are NZ’s two largest wholesale distributors

• Relatively stable industry structure

• Fragmented autoparts customer base, without dependency on larger customers

• Average age of NZ vehicle fleet is 13 years, hence steady aftermarket demand

• Consolidate NZ wholesale autoparts position with specialist bolt-on acquisitions

• Expand wholesale tyre segmentation (eg truck tyre expansion)

• Evaluate NZ retail autoparts opportunities

• Develop wholesale autoparts position in Australia through acquisition


• One of NZ's leading suppliers of materials handling and construction equipment

• Provides equipment servicing and rentals though a network of 18 technical service centres across NZ

• Distributor of leading global brands incl Toyota, Sumitomo, Tigercat, Linde, Vermeer, Manitou

• Blue chip fleet customers for Toyota and Linde forklifts

• Amalgamation late 2012 of AB Equipment and Eurolift into single entity will improve service offering and efficiencies

• AB Equipment secured Doosan and Bobcat distributorships in February 2013

4.7. Equipment: overviewFY10

Sales 82.5 89.8 55.4 116.5 61.5

Trading EBITDA (0.3) 2.6 2.5 6.4 2.7

Trading EBIT (1.9) 1.0 1.5 4.5 2.0

ROFE (10.8)% 7.1% 33.0%



FY11 1H12 FY12 1H13$m


4.8. Equipment: market dynamics


• Multiple global equipment brands represented in NZ

• Heavy equipment sector recovering from severe market downturn in 2008-11

• AB Equipment’s differentiation is – its breadth and quality of

equipment brands– strength in key specialist

segments (directional drilling, forestry)

– scale of service workshop operation (one of NZ’s largest aftermarket operations)

• Achieve efficiency and service improvements in FY14 from amalgamation of AB Equipment and Eurolift

• Grow the aftermarket service workshop footprint, incl though small regional acquisitions

• Integrate and grow Doosan and Bobcat brands

• Broaden the equipment portfolio with specialist equipment brands

• Evaluate opportunities in NZ agricultural equipment and truck sectors


• Acquired Elldex Packaging in 2005• Supplier of flexible plastic packaging• Elldex’s point of difference in NZ is

combination of local manufacturing with strong competency in Asian sourcing

• Christchurch extrusion, printing and conversion manufacturing plant

• Performance improvement initiatives under new leadership; overheads being reduced

• NZ sales performance relatively steady, with blue chip customers in dairy, meat, supermarket and retail sectors

• Struggled to grow Australian sales on sustainable basis (now being addressed)

4.9. Packaging: overviewFY10

Sales 53.2 50.8 24.5 48.6 23.1

Trading EBITDA 5.6 5.7 1.8 3.6 1.7

Trading EBIT 5.1 5.1 1.4 3.0 1.5

ROFE 39.4% 43.9% 24.3%



FY11 1H12 FY12 1H13$m


4.10. Packaging: market dynamics


• Merger of Amcor / Aperio has created dominant Australasian position in flexible packaging

• Elldex is a market leader in the next tier of flexible packaging suppliers

• Primary sector food processors prefer supply from local flexible packaging manufacturers (rather than import)

• Streamline Australian sales operation to improve performance

• Improve NZ business development capability

• Consolidate overhead savings initiatives

• Capitalise on client nervousness about Amcor / Aperio dominance (‘the credible alternative’)

• Capitalise on Elldex’s combined Asian sourcing and local manufacturing capability

• Modernise manufacturing footprint for planned sales growth in food sector


• Acquired 80% of No1 Shoe Warehouse in July 2005, balance in 2007

• Largest footwear retail presence in New Zealand with 40-50% market share

• Well known brands; Hannahs, Number One Shoes and Hush Puppies chains that cover most market segments

• Successful, major repositioning of Number One Shoes under new leadership since 2009

• History of strong financial performance in tough trading environment

• National network• 115 stores across NZ

4.11. Footwear: overviewFY10

Sales 163.8 165.0 78.7 163.4 74.7

Trading EBITDA 7.0 9.7 3.3 11.8 2.5

Trading EBIT 3.3 6.4 1.7 8.4 0.9

ROFE 8.3% 16.9% 24.8%


Staff numbers 1,296 1,175 1,191

FY11 1H12 FY12 1H13$m


4.12. Footwear: market dynamics


• Consumer spending trend for footwear relatively flat; and depressed demand in FY13

• Emerging online competition for the footwear dollar

• Strong NZ dollar has enhanced margins over recent years

• Number One Shoes the only dedicated ‘category killer’ in footwear

• Enhance performance through improved inventory and product management

• Growth through new stores and improved retail footprint

• Expanded online offering at Hannahs and Number One Shoes

• Review long-term portfolio fit


Section 5:Financial information


• Trading EBITDA up 10% to $37.4 million, outpacing 6% revenue growth

• Trading EBIT up 13% to $30.1 million

• NPAT up 26% to $19.3 million

• $28.9 million free cash flow generated

• 30% return on funds employed

• 29% total shareholder return

• All four divisions exceeded Hellaby’s 20% ROFE target

• Hellaby has its most conservative capital structure in a decade

5.1. Historical performance FY12

60% increase in operating profit over the last 3 years

26.5 27.7

34.0 37.4

2009 2010 2011 2012

EBITDA

$m

12.8%

17.4%

25.3%

29.6%

2009 2010 2011 2012

Return on funds employed (ROFE)

Target < 20%


96.9

73.3

45.2

24.5 29.5

10.1 23.8

0%

10%

20%

30%

40%

50%

60%

0

50

100

Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12

Total Net Debt and Gearing

Gearing

$m

Target< 45%

• Despite soft market conditions, Hellaby’s combined divisional performance at a level largely consistent with pcp

• Three of four divisions achieved operating profits equal to or better than pcp, with Footwear performance below pcp

• Sales growth up 1.0% to $243.7m in challenging trading period • Trading EBITDA down 13.3% to $13.7 million• $6.2 million NPAT is below pcp due to flat market conditions

and higher corporate costs • Higher corporate costs related to acquisition due diligence

costs, investment in HR initiatives and long-term executive incentive scheme expense

• Total net debt reduced 19.2% to $23.8 million • 13.5% gearing is well within target of <45% • ROFE of 24.8% (rolling 12 months), exceeds 20% target • Net asset backing $2.02 per share, compared to $1.92 per

share pcp

5.2. Review of interim result 1H13

9.7

14.6 15.8

13.7

Dec-09 Dec-10 Dec-11 Dec-12

Trading EBITDA

$m

2.3

5.5

7.8

6.2

Dec-09 Dec-10 Dec-11 Dec-12

NPAT

$m


• Signalled that earnings will likely be flat pending acquisitions

• 30 June 2013 full-year NPAT forecast to be ~$18.5 million1

• Q4 negative impact of $0.8 million from combination of 85% share of Contract Resources profits, less one-off transaction and funding costs

• Contract Resources forecast to achieve >$20 million EBITDA in FY14

• Hellaby is in good shape, with strong ROFE, balance sheet and improved net asset backing

• Will continue to invest in people projects and M&A due diligence• Market conditions remain soft in 2H13• Impending acquisition of Contract Resources marks the

commencement of Hellaby’s growth phase through acquisition

5.4. Outlook

Hellaby is commencing a growth phase through acquisitionNote: 1 As announced to the NZX on 19 February 2013

0.7

10.3

15.3

19.3 18.5

2009 2010 2011 2012 2013F¹

NPAT

$m


• Dividend policy of distributing around 50% of NPAT

• Interim dividend of 5 cps, fully imputed (5 cps for pcp)

• Reflects Directors’ confidence that Hellaby’s underlying divisional performance is largely consistent with pcp

• Dividend to be paid on 19 April 2013

• Directors continue to recommend Dividend Reinvestment Plan

5.1. Dividend

0.0

8.0

10.0

13.0

2009 2010 2011 2012

Dividends per share

cps


Section 6:Appendices


6.1. 5 year summary

Earnings ($000)

Shareholder returns


6.2. 5 year summary

Asset backing ($000)

Other measures

Hellaby capital raising - Investor presentation| Hellaby Holdings Limited | March 2013

• This presentation provides information in summary form and is not intended to be complete. No attempt has been made to independently verify the information.

• Some statements in this presentation are forward looking statements regarding future events and/or the future financial performance of Hellaby Holdings Limited, its subsidiaries and investments (together, “HBY”) and the environment in which they operate. Because these statements are forward looking, Hellaby Holdings Limited's actual results could differ materially.

• Although management and directors may indicate and believe that the assumptions underlying the forward looking statements are reasonable:

– any of the assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the forward looking statements will be realised (and actual results or events may differ materially);

– no representation, warranty or assurance (express or implied) is given or made in relation to any forward-looking statement by any person (including HBY and HBY’s respective directors, officers and employees);

– the forward-looking statements in this document speak only as of the date of this presentation.

• Media releases, management commentary and investor presentations are all available on the company's website and contain additional information about matters which could cause HBY’s performance to differ from any forward looking statements in this presentation. Please read this presentation in the wider context of material previously published by Hellaby Holdings Limited.

• Nothing in this presentation constitutes legal, tax or other advice. This presentation does not constitute an invitation or offer to apply for shares. Neither this presentation nor anything contained in it shall form the basis of any contract or commitment and it is not intended to induce any person to engage in, or refrain from engaging in, any transaction. The information in this presentation does not take into account any person’s investment objectives, financial situation or particular needs.

• To the maximum extent permitted by law, HBY and HBY’s respective directors, officers, employees or advisors do no accept any liability for any errors, omissions or loss (including because of negligence) arising, directly or indirectly, from any use of this presentation or information contained in this presentation.

• This presentation has been prepared for publication in New Zealand and may not be released or distributed in the United States. This presentation does not constitute an offer of securities for sale in the United States or any other jurisdiction. Any securities described in this presentation may not be offered or sold in the United States absent registration under the US Securities Act of 1933 or an exemption from registration.

Disclaimer


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