Q4/YE 2013 INVESTOR PRESENTATION - Strongco · Manitowoc 26% EQUIPMENT SALES BY BRAND Volvo 49%...
Transcript of 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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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.
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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
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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.
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BRAND RECOGNITION – MAJOR BRANDS
CONSTRUCTION
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BRAND RECOGNITION – COMPLEMENTARY BRANDS
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DIVERSE END-USE MARKETS
UtilitiesForestryQuarries and Aggregates
Mining
Non-Residential Construction
Industrial Material Handling
Oil & GasResidential Constructionand Landscaping
Waste ManagementInfrastructure
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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
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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
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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
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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
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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
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GROWTH STRATEGY
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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
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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
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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
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EXPANSION OF COMPLEMENTARY BRANDS
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EXTENSIVE BRANCH NETWORK
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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
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REVENUE CATEGORIES
SALES PRODUCT SUPPORT
RENTAL
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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%
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FINANCIAL RESULTS
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FINANCIALS
($ millions)
REVENUE 2009 ̶̶ 2013
EARNINGS BEFORE TAXES 2009 ̶̶ 2013($ millions)
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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
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FINANCIALS
($ 000s)
EBITDA 2009-2013
EBITDA MARGIN 2009-2013(%)
0
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4,000
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6%
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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
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FINANCIAL TREND – TOTAL STRONGCO
($ millions)
EQUIPMENT INVENTORY 2011-2013
EQUIPMENT NOTES PAYABLE 2011-2013(%)
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Interest Free Interest Bearing
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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
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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
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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
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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
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$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
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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%
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SHARE PRICE
SHARE PRICE 2009 to March 31, 2013
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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
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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
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