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Borgestad ASA Investor presentation Q3 2019
Table of contents
2
Introduction to Borgestad
Financials
Borgestad Properties
Borgestad Industries
Borgestad at a glance
Background and description
• Founded in 1904 by Norwegian PM Gunnar Knudsen
- The company was a result of the merger of three
limited partnerships owning steamships
• Listed on the Oslo Stock Exchange in 1917 under its
former name Aktieselskapet Borgestad
• In 2013, Borgestad acquired the remaining 50% shares in
Agora Bytom and merged the industry segment into
Borgestad as a wholly owned subsidiary
- The two transactions were important elements in a
strategy for the company to control its biggest
investments
• In 2018, a major restructuring and simplification of the
ownership structure was carried out
- Strengthened the ability to effectively manage costs,
profitability, liquidity and growth
• The group's main business areas are now in property
investments and in the refractory industry
Simplified company structure
3Source: Company
61.8%
Shopping center opened in 2010 with a gross area of
52,000 sq.m. and a rental area of over 30,000 sq.m.
Located centrally in the city of Bytom in the south of Poland
Also comprising Borgestad Næringspark
Develops, manufactures, and delivers refractory products,
installations and turnkey solutions that enhance the
productivity and competitiveness of industrial customers
+ 6 other
subsidiaries
100%
100% 100%
• The oldest company on Oslo Børs; founded in 1904 and listed in 1917
• Diversification through investments in real estate and refractory industry
• Growth in revenues and profitability
• Increase in t/o in Agora Bytom YTD and Q3YOY
• Cinema City has prolonged for five new years, largest tenant in terms of
sq.m.
• Increased revenues and profitability
• The strategic ownership and brand change to Höganäs Borgestad in 2019
have already contributed to improved profitability, and customer knowledge
• Increasing revenue and profitability Q319 and YTD19
• Signed new contract in South East Asia worth of 100 NOKm in revenue
Borgestad highlights
4
Diversified and
sustainable
conglomerate
with >100 years’
history
Properties
provide
significant asset
backing
Industrial
operations with
solid operational
performance
1
2
3
Since 1917
Table of contents
5
Introduction to Borgestad
Financials
Borgestad Properties
Borgestad Industries
Solid and steady EBITDA contribution
Revenue (NOKm) EBITDA (NOKm)
6
10
20
0
80
70
40
30
50
60
68
2016
65
Q3 2019 LTM
79
2018
69
2017
NOKm
6 % 1 % 15 %Growth:
40
30
60
70
20
80
50
0
10
2018
30
NOKm
2017
40
Q3 2019 LTM
31
2016
34
50 % 43 % 50 %Margin: 48 %
Positive trend expected to continue in 2020
Latest trends and development
• Agora Bytom has a strong position in its local market
• Expecting a continued increase in revenues and EBITDA
- Driven by the unique location of Agora Bytom and
increased purchasing power in Poland
• Seeing increased rent per tenant and increased occupancy
• Forecasted growth in turnover for the centre and stabilised
footfall going forward
• Some changes in tenants and tenant mix, but not material
changes
• Dedicated focus on entertainment and experiences has
proven successful
- The largest tenant is Cinema City, which recently
signed up for 5 new years on current conditions
Revenue development (NOKm)
7
EBITDA development (NOKm)
Q3’18Q3 2019 LTM
69.079.1
Q3’19
16.1 20.2
2018
11.1
39.6
2018 Q3’18
8.9
Q3 2019 LTM
29.6
Q3’19
26 %Growth: 15 %
Margin: 55 %50 % 55 %43 %
Agora Bytom – key facts and location
Key information about the property Prime location in Bytom
8
Location Bytom, Poland
Primary market 320 000 inhabitants
Visitors 6,100,000 (2018)
Completion 2010
Total GLA (sq.m)30,658 sq.m (52,000 sq.mgross)
Floors4 floors above ground and 1 floor below ground.
Units 130
Parking 820 spots
WAULT (byincome)
3.13 years
WAULT (by area) 3.55 years
12 month rolling increase in t/o
6.5 %
Average rent 16.99 € per mth
Diversified tenant base and decreased risk
related to renewals
Decreased renewal risk Highly diversified tenant base
9
Key tenants Contract duration (sq.m)
• Several renewals to kick in November
2020
• Borgestad is well prepared and has a
clear strategy for all leases expiring in
November 2020
• The largest tenant, Cinema City, has
prolonged for 5 new years on current
conditions
• Constructive dialogue with several
tenants regarding these renweals
2024
31.4%
2023
20.2%
2022
2.7%
2021
11.2%
2020
31.7%
2019
2.9%
4.6%
Tenant 3
4.7% 4.5%
Tenant 5Tenant 4
100.0%
TotalTenant 8
2.5%
Tenant 7
3.0%
Tenant 6
4.3%
Tenant 2
5.7%
Tenant 1
7.7%
Other
58.9%
Tenant 10
2.0%
Tenant 9
2.1%
Lettable area per tenant
Solid underlying fundamentals for Agora
Bytom
Strong underlying trend in Poland
• Positive development in retail sales (6.5% YTD, 4.9% YoY)
• Basket growing rapidly, 7.7 % YTD, and 10.2 % YoY in Q3
• Footfall has stabilised last months after a period of decrease
caused by “Sunday legislation”
• Populistic government vs. increased purchase power
- Higher minimum wages
- New child benefits introduced in 2019, with effect from
October 2019
• Polish economy among the most sustainable in the EU
- Poland’s economy grew by 5.1% in 2018, and has
positive mid-term outlook
- The unemployment rate is below 4%, and other key
indicators of the economic outlook are looking strong
• The low unemployment rate, favourable labour market trends,
and strong wage growth are driving private consumption, and
thereby supporting consumer confidence
Consistently improving retail sales (turnover ‘11-’19)
10
Strong footfall (Agora monthly footfall ‘11-’19)
20,000,000
25,000,000
0
10,000,000
15,000,000
5,000,000
SepMarFeb AugApr Oct NovJan Jul DecMay Jun
2019201820162015 20172012 2013 20142011
200,000
0
800,000
600,000
400,000
FebJan Mar DecNovOctSepApr Jun JulMay Aug
201920172012 20182015201420132011 2016
Table of contents
11
Introduction to Borgestad
Financials
Borgestad Properties
Borgestad Industries
Introduction to Borgestad Industries
Key facts
• Supplier of heat-resistant products and services
- Key input in all industries working with temperatures
above 200 °C
- Refractory products: Manufactures bricks, clay, concrete
prefabricated products and accessories
- Refractory services: Installation, supervision, solutions,
engineering and design
• Leading market position in the Nordics and customers in more
than 70 countries
- Strong customer base in traditional industries, and
growth within energy & waste
• High focus on R&D to develop new products
- 200 years of track record developing new refractory
materials
Customer segments
12
Increasing revenue and EBITDA
Revenue (NOKm) EBITDA (NOKm)
13
0
300
700
900
600
500
200
800
100
400
2018
NOKm
Q3 2019 LTM
823
761
2016
717
2017
727
5 % 8 %1 %Growth:
35
55
30
25
5
20
50
45
40
0
60
10
15
2016
37
20
41
NOKm
Q3 2019 LTM2018
30
2017
3.9 % 5.0 %5.1 %2.8 %Margin:
Positive development in the industry
segment - expected to continue in 2020
Recent trends and development
• Market strategy and organisational changes materialising
- Turnover from installation is the main driver
- Strong development in 12 month rolling EBITDA
• Installation still in high season and increased production
volumes result
- Expecting increased revenues and EBITDA in Q4’19
• Positive development in order backlog, high probability of
increased orders in installation for Q1’20
- Expecting increase of ~40% for bricks and ~11% for
Monolithic in 2020
• Market visibility has improved significantly with the
reorganisation to Höganäs Borgestad
• Recently developed brick for aluminium and cement
industry with a green carbon footprint
- Positive feedback and first order received
Revenue development (NOKm)
14
EBITDA development (NOKm)
241.4237.0
823.0761.0
Q3’19Q3’182018 Q3 2019 LTM
25.3
13.5
41.2
29.9
Q3’19Q3 2019 LTM Q3’182018
2 %Growth: 8 %
Margin: 10 %5 % 6 %4 %
Höganäs Borgestad has identified and
initiated several improvement programs
15
• Increased focus on productivity: New key employees within production for 2019
- New production manager with experience from production management and turnaround cases
- New head of research and development with several years of experience from the refractory business
• Standardisation of products: Will result in improved planning and production efficiency
• Centralised stock handling: Decreasing local stock and focusing on «need to have» products
• Crushing of raw material: Reviewing the possibility to crush raw material locally in Bjuv
- Potential cost savings of NOK 5 -10m for raw material tonnage used in production today
• Organising manpower on group level rather than on a company level
- Centralised agreements and orders of manpower
Completed
Started and ongoing
• Cost saving program
• Restructuring - simplification of ownership structure
• Sourcing of manpower for projects
Under planning
Increased production will improve results
Comments
• Volume-based production related
to bricks
• Stable production cost with
variation of +/- 2,500 ton
• Increased production gives lower
factory cost per ton vs. higher
margin
16
Tonnage effect on real margin of bricks
15,00012,500 17,500 22,50020,000
Facto
ry c
ost per
ton Standard cost per tonFactory cost per ton
12,500 15,000 17,500 20,000 22,500
Marg
in in %
Real margin in %Standard margin in %
Production sensitivity per ton of bricks
Table of contents
17
Introduction to Borgestad
Financials
Borgestad Properties
Borgestad Industries
Financials
Revenue (NOKm) EBITDA (NOKm)
18
400
800
900
600
0
300
200
700
500
1,000
100
2018
793
NOKm
2017
910
827
2016
781
Q3 2019 LTM
4 % 10 %2 %5 %Growth:
80
20
70
0
100
10
40
60
30
50
90
50
2017
62
Q3 2019 LTM
70
2016 2018
NOKm
43
6 % 8 %8 %6 %Margin:
Key financials
P&L
19
2019 2018 2019 2018
(NOK 1 000) 01.07 - 30.09 01.07 - 30.09 01.01 - 30.09 01.01 - 30.09
Revenues 261 047 252 312 682 427 599 716
COGS (60 435) (84 549) (212 153) (216 135)
Personnel (84 980) (78 142) (223 924) (197 052)
Other OPEX (81 580) (70 429) (191 031) (151 283)
EBITDA 34 052 19 191 55 319 35 245
D&A (8 448) (6 322) (26 736) (20 068)
EBIT 25 604 12 869 28 583 15 176
Net finance (10 772) (10 884) (45 696) (38 159)
Pre Tax Income 14 832 1985 (17 114) (22 983)
Tax 4 249 10 510 5 158 12 933
Net Income 19 081 12 495 (11 956) (10 050)
Other comprehensive income 5 205 (5 838) (7 437) (24 376)
Comprehensive net income 24 286 6 657 (19 393) (34 426)
Quarterly sales and EBITDA development
Financials
20
40%
10%
30%
20%
0%
-5%
35%
15%
25%
5%
200
-40
40
120
0
280
80
240
320
160
-10%
9% 8%6%
-1%
8%
203
Q2
185172
Q3
178
210
7%
171
Q2 Q4 Q1
167
%
13%
Q1
8%
2% 2%
11%
7%
(NOKm)
9%
-1%
Q4
8%
Q1
261
Q2Q1Q3
190
212
155
Q2 Q4
233
142
267
Q3
171
Q3
2016 2017 2018 2019
Sales EBITDA EBITDA%
Balance sheet
Financials
21
2019 2018 2019 2018
(NOK 1 000) 30.09 31.12 (NOK 1 000) 30.09 31.12
Equity 450 064 439 303
Intangible Assets 120 293 116 535
PP&E 120 787 134 342 Secured Debt 544 422 530 261
Investment Properties 925 392 941 136 Bond 298 555 293 791
Other Financial assets 55 406 57 246 Other Long-Term Debt 30 722 37 445
Non-Current Assets 1 221 877 1 249 259 Non-Current Debt 873 699 861 498
Revolving Credit Facilities 121 195 127 556
Inventory 146 331 151 432 Other Secured Debt 26 354 30 633
Receivables 184 971 139 703 Payables 75 625 74 260
Other Short Term Receivables 46 138 36 058 Public Duties Payable 41 790 30 509
Cash & Cash Equivalents 46 982 57 056 Other Short Term Debt 57 573 69 748
Current Assets 424 422 384 248 Current Debt 322 537 332 706
Total Assets 1 646 300 1 633 507 Total Equity and Liabilities 1 646 300 1 633 507
Positive trend expected to continue in 2020
• Borgestad expects a stronger Q4 in 2019 compared to last year
- The operations of the Borgestad Group are developing positively
- Underlying trends are moving in a positive direction
• Continued growth expected in Borgestad Properties in 2020
- Growth in revenues and EBITDA driven by purchasing power in Poland and an attractive tenant mix
• Expecting revenues in Borgestad Industries of NOK 850-900m and
improved margins in 2020, normalised medium-term EBITDA margin
between 8 and 10%
- Increasing order book for both installation and in-house products
- A result of increased production and sales of own products, as well as overall improved operations
• Positive revenue and EBITDA development expected for the group in 2020
22
