INVESTOR PRESENTATION - Finning · 2020-05-06 · INVESTOR PRESENTATION Toronto, Montreal March...

INVESTOR PRESENTATION

Toronto, Montreal

March 27-28, 2018

Scott Thomson, President and CEO

Mauk Breukels, VP Investor Relations

Forward Looking Information

This report contains statements about the Company’s business outlook, objectives, plans, strategic priorities and other statements that are not historical facts. A statement

Finning makes is forward-looking when it uses what the Company knows and expects today to make a statement about the future. Forward-looking statements may include

words such as aim, anticipate, assumption, believe, could, expect, goal, guidance, intend, may, objective, outlook, plan, project, seek, should, strategy, strive, target, and will.

Forward-looking statements in this report include, but are not limited to, the timeline for equipment forecast to cash program; capital allocation priorities; expectations for

2018 capital expenditures, net rental additions, and free cash flow; online parts revenue projections; and connected asset projections. All such forward-looking statements are

made pursuant to the ‘safe harbour’ provisions of applicable Canadian securities laws.

Unless otherwise indicated by us, forward-looking statements in this report reflect Finning’s expectations as at the date of this report. Except as may be required by Canadian

securities laws, Finning does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or

otherwise.

Forward-looking statements, by their very nature, are subject to numerous risks and uncertainties and are based on several assumptions which give rise to the possibility that

actual results could differ materially from the expectations expressed in or implied by such forward-looking statements and that Finning’s business outlook, objectives, plans,

strategic priorities and other statements that are not historical facts may not be achieved. As a result, Finning cannot guarantee that any forward-looking statement will

materialize. Factors that could cause actual results or events to differ materially from those expressed in or implied by these forward-looking statements include: general

economic and market conditions; foreign exchange rates; commodity prices; the level of customer confidence and spending, and the demand for, and prices of, Finning’s

products and services; Finning’s ability to maintain its relationship with Caterpillar Inc.; Finning’s dependence on the cont inued market acceptance of its products, including

Caterpillar products, and the timely supply of parts and equipment; Finning’s ability to continue to improve productivity and operational efficiencies while continuing to

maintain customer service; Finning’s ability to manage cost pressures as growth in revenue occurs; Finning’s ability to reduce costs in response to slowing activity levels;

Finning’s ability to attract sufficient skilled labour resources as market conditions, business strategy or technologies change; Finning’s ability to negotiate and renew collective

bargaining agreements with satisfactory terms for Finning’s employees and the Company; the intensity of competitive activity; Finning’s ability to raise the capital needed to

implement its business plan; regulatory initiatives or proceedings, litigation and changes in laws or regulations; stock market volatility; changes in political and economic

environments for operations; the integrity, reliability and availability of, and benefits from information technology and the data processed by that technology; and Finning’s

ability to protect itself from cybersecurity threats or incidents. Forward-looking statements are provided in this report for the purpose of giving information about

management’s current expectations and plans and allowing investors and others to get a better understanding of Finning’s operating environment. However, readers are

cautioned that it may not be appropriate to use such forward-looking statements for any other purpose.

Forward-looking statements made in this report are based on a number of assumptions that Finning believed were reasonable on the day the Company made the forward-

looking statements. Some of the assumptions, risks, and other factors which could cause results to differ materially from those expressed in the forward-looking statements

contained in this report are discussed in Section 4 of the Company’s current AIF and in the annual MD&A for the financial risks.

Finning cautions readers that the risks described in the MD&A and the AIF are not the only ones that could impact the Company. Additional risks and uncertainties not

currently known to the Company or that are currently deemed to be immaterial may also have a material adverse effect on Finning’s business, financial condition, or results of

operations.

Except as otherwise indicated, forward-looking statements do not reflect the potential impact of any non-recurring or other unusual items or of any dispositions, mergers,

acquisitions, other business combinations or other transactions that may be announced or that may occur after the date of this report. The financial impact of these

transactions and non-recurring and other unusual items can be complex and depends on the facts particular to each of them. Finning therefore cannot describe the expected

impact in a meaningful way or in the same way Finning presents known risks affecting its business.

Monetary amounts are in Canadian dollars and from continuing operations unless noted otherwise

Largest Caterpillar dealer

Unrivalled service for 85 years

Diversified customer base

~12,500 employees

Finning Overview

Santiago

Bolivia

Argentina

Chile

Cannock

United Kingdom

IrelandBC AB

YT

Edmonton

Vancouver

head office

NWT

SK

NU

Product

support

56%New

equipment

34%

Used

equipment

6%

Rental

4%

2017 Revenue by

line of business

Construction

44%

Power

Systems

25%

Mining

19%

Forestry

4%

Government

3%

Other

5%

2017 New

equipment sales by

industry

Canada

49%

South

America

34%

UK & Ireland

17%

2017 Revenue

by region

(1) At March 16, 2018

(2) See description of non-GAAP financial measures in 2017 MD&A

(3) See description of significant items in 2017 MD&A

Financial Statistics - 2017

Revenue 6.3B

EBITDA(2) 583M

EBIT 399M

EPS 1.31

Adjusted EPS(2)(3) 1.36

Free cash flow(2) 165M

Invested capital(2) 2.8B

Market Statistics(1) - FTT (TSX)

Share price 32.60

Market Cap 5.5B

S&P/DBRS rating BBB(+/high)

Annual dividend / share 0.76

Dividend yield 2.3%

Strategic Direction

PURPOSE

We believe in partnering and

innovating to build and power

a better world

VISION

Leveraging our global

expertise and insight, we are a

trusted partner in

transforming our customers’

performance

Value Proposition

Significant operating leverage on increased revenue

Working capital efficiency improvements

Innovative customer solutions

Higher return on invested capital

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Canada South America UK & Ireland

Revenue (C$ millions)

2016 2017

(1) See description of significant items in 2017 MD&A

5.5%

8.4%

1.8%

7.4%

8.6%

4.0%

0%

2%

4%

6%

8%

10%


Adjusted EBIT Margin(1)

2016 2017

32.2%

30.4%

27.1%

2.38

2.49

2.83

2.00

2.20

2.40

2.60

2.80

3.00

24%

26%

28%

30%

32%

34%

2015 2016 2017

Working Capital Efficiency

Working Capital to Sales Ratio (%)

Inventory Turns (times)

9%

16%

10%

9.3%

15.0%

5.9%

13.5%

18.0%

14.7%

0%

3%

6%

9%

12%

15%

18%

21%


Adjusted ROIC(1)

2016 2017

Equipment Supply Chain Transformation

Forecast Sales NEP(1) Invoice

500

550

600

650

700

750

800

2013 2014 2015 2016 2017

New Equipment Inventory ($m)

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2013 2014 2015 2016 2017

New Equipment Turns (times)

(1) New equipment preparation

Reduce invoice to cash cycle

Improve execution

Simplify quoting, sales, and attachment processes

Improve accuracy and planning

Days of Inventory

Equipment Forecast to Cash Program Timeline

Canada Q2 2016 – Q4 2017

UK & Ireland Q2 2017 – Q4 2018

South America 2018 +

Capital Allocation Priorities

Investments in growth opportunities and long-term strategic initiatives

New ERP system in South America

Digital and e-commerce capabilities

Electric drive mining vehicles

Rental and used equipment integrated go-to-market strategy

Dividends

Disciplined complementary acquisitions

Opportunistic share repurchases

441

483

325

370

165

100

150

200

250

300

350

400

450

500

550

2013 2014 2015 2016 2017

Free Cash Flow ($ millions)

1.82

1.78

1.85

1.90 1.90

1.98

2.02

2.10

1.70

1.75

1.80

1.85

1.90

1.95

2.00

2.05

2.10

2.15

Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17

Invested Capital Turnover (times)

2018 Projections

Capital Expenditures $150-200 million

Net Rental Additions $125-175 million

Free Cash Flow Positive

Innovate – Digital Strategy

Customer Benefits

Valuable insights and visibility

Increased fleet uptime

Lower owning and operating costs

Improved equipment performance

Omni-channel choice

Finning Opportunities

Deeper customer and market insights

Additional revenue growth opportunities

Lower cost to serve

Deeper customer relationship and loyalty

Competitive advantage

E-Commerce: Omni-Channel Choice

(2) Parts purchases from Finning as a percentage of total parts opportunity

(1) Caterpillar study covering 11,700 e-commerce and integrated

procurement customers between 2010-2014

Customer Parts Share(2)

Transaction Cost

11 points

E-COMMERCE - Parts(1)

Benefits

Cost savings - customer and Finning

Analytics - improved visibility into customer needs

Ease of doing business with Finning

Customer loyalty

Online Parts Revenue

% of total(3)

0%

5%

10%

15%

20%

25%

30%

35%

2016 Q1

2017

Q2

2017

Q3

2017

Q4

2017

2018E 2019E

up 8

points

(3) Excludes parts in service jobs

Connected Assets

(1) Parts purchases from Finning as a percentage of total parts opportunity

(2) Caterpillar study covering >37,000 connected customers vs 174,000

non-connected between 2010 and 2013

Drive

Parts Share(1)

~10 points(2)

Enable

Performance

Solutions

14%

40%

0%

10%

20%

30%

40%

50%

2013 2016

Connected Machines (%)

0%

10%

20%

30%

40%

50%

2013 2016

Parts Market Share

Connected

Customer Parts Share(1)

CAT machines (2013 vs 2016)

Connected +

service contract

17 points

24 points

CASE STUDYBolivia - Connected Assets

Insights drive improved equipment performance, market visibility, and lower costs

Connected Assets Projections

Estimated % of addressable population(3)

0%

20%

40%

60%

80%

100%

2015 2016 2017 2018E 2019E

(3) Assumes constant addressable population

APPENDIX

Talent – Strengthened Leadership Team

Number of Recruited Executives

Employees in Green 9-Box (%)

48%51%

66%

56%

79%

70%77% 77%

0%

20%

40%

60%

80%

100%

Canada UK & Ireland South America Consolidated

2014 2017

(1) The 9-box grid is a matrix tool used to evaluate and plot a company’s talent pool based on performance and potential of individual employees

(1)

7

6

3

1

2014 2015 2016 2017

Dealer Principal Candidates

2014

zero

2017

three

Women in Leadership Roles (%)

20%19%

7%

26%

22%

12%

0%

5%

10%

15%

20%

25%

30%

Canada UK & Ireland South America

2014 2017

(2) Canadian data excludes corporate head office, OEM Remanufacturing, and The Cat Rental Store

(2)

Women on Board of Directors

2014

one

2017

four

500

550

600

650

700

750

2013 2014 2015 2016 2017

Parts Supply Chain Improvement

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

3.6

3.8

2013 2014 2015 2016 2017

Parts Turns (times)Parts Inventory ($ millions)

Key Improvement Drivers

Centralized inventory management

Simplified and optimized network

Reduced network routes and touches

Increased direct shipments to customers

Customer Loyalty

From 2013 to 2017

Parts Turns

14 points

0.8 times

Performance Solutions

Performance Metrics Customer Benefits

Operator events ↓ 23%

Fuel burn ↓ 13%

Carbon impact ↓ 575,000 CO2

Saleable product output ↑ 9.5%

Tonnes per hour ↑ 22%

Cost per tonne ↓ 31%

Mixed Fleet 100% Caterpillar

CASE STUDYUK - Large Quarrying Customer

Technology to maximize

machine productivity on

job sites

~25 %

Revenue Growth

CAGR (2012 – 2017)Predictive analytics drive improved

maintenance and increased productivity

Key Data & Services Customer Benefits

Hours and location Tracking by job site and fleet; security

Invoice automation

Utilization, fuel and

production

Idle time and fuel consumption

Asset optimization and fleet production

Machine health Preventative maintenance

Lower operating costs

Training and site

development

Operator training

Haul road analysis

Data analytics Optimization recommendations

Site & management performance reporting

Fatigue management Improved safety performance

INVESTOR PRESENTATION - Finning · 2020-05-06 · INVESTOR PRESENTATION Toronto, Montreal March...

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