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1HFY14 Results
Presentation
February 2014
Stephen Bizzaca, Managing Director & CEOTony McFadden, CFO & Company SecretaryF
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1. Highlights
2. Financial Review
3. Operational Review
4. Strategy
5. Outlook
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Agenda
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1. Highlights
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Highlights
Maintained top quartile
safety performance
Total recordable injury frequency rate 12.9 (29% improvement)
Sector downturn
impacting financials
Revenue $35.4m (-52%)Unaudited underlying NPAT -$1.0m (-119%) Non cash goodwill impairment charge $29.2m
Debt reduction
continues
Debt $15.3m (-49%)Net Debt $14.4m (-41%)
Stringent cost reduction
program
Organisation costs reduced by $2.2m (29%)Labour costs for new work reduced by 15%
CompetitivenessImproved
Contract extensions achievedIncreased level of tender awardsNew mines/clients obtainedNew type of work obtained
Operations Impacted by sector downturn and timing of longwall projectsHours worked decreased by 43%Equipment utilisation significantly decreased
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2. Financial Review
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Financial Review - Summary
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Change 1HFY2014 1HFY2013
NPAT -686% -$30.7m $5.2m
Underlying NPAT -119% -$1.0m $5.2m
Revenue -52% $35.4m $73.8m
EBITDA -95% $0.5m $10.8m
Underlying EBITDA -90% $1.0m $10.8m
Underlying EPS -119% -2.2c 11.7c
Cash on hand -75% $0.9m $3.6m
Net Debt -41% $14.4m $24.5m
Debt -49% $15.3m $30.2m
Assets - PPE $37.6m $44.9m
Net Tangible Assets per security -5% 62c 65c
Cash position was impacted by restructuring costs/numerous redundancies, which are non-recurring, with the value of employee benefits in the six months, reducing by $2.8m ($6.7m to $3.9m)
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Financial Review
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Balance Sheet & Cashflow
Balance Sheet Dec13 Dec12
Cash ($m) 0.91 3.60
Total Assets ($m) 55.67 112.41
Total Shareholder funds ($m) 28.39 57.28
Net Debt ($m) 14.37 24.52
Net Debt to Equity 49% 43%
Cashflow Dec13 Dec12
Operating activities ($m) (1.93) 2.93
Investing activities ($m) 4.75 (7.91)
Financing activities ($m) (7.85) 3.49
Net (decrease) increase in cash ($m) (5.03) (1.49)
Cash at beginning of period ($m) 5.93 5.10
Closing cash ($m) 0.91 3.61
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Debt reduction
Material reduction achieved in 1HFY
Reduction will continue in CY14
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Investment Phase
Target Reduction
$0.0m
$5.0m
$10.0m
$15.0m
$20.0m
$25.0m
$30.0m
$35.0m
Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15
Debt Reduction
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3. Operational Review
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The Coal Sector
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Trading
Conditions
Coal sector continues to experience challenging conditionsMining companies remain focused on cost reduction causingcancellation and/or deferral of a considerable amount of workDownward pricing pressure on existing contracts and a highly competitive environment for new workDeferral of new mine developments
DSBImpacts
Current and new work secured by improved competitive pricingBerrima transitions to “Care & Maintenance”Workbook and pipeline reductionF
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Management Actions
DSB
Response
Focused on improving competitiveness & providing value add solutions to our clients
15% labour cost reduction programMaintained existing contracts and extend duration
Reducing organisation costsReduced by $2.2m in 1HFY14 to 1HFY13Full year and sustainable reduction target $5.5m
Debt managementDebt reduced by $10m in 1HFY14 ($25m @ 30 Jun 13)
Cashflow managementNew enhanced invoice facility being finalised
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Sustainability via diversification
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TO BE UPDATED
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Relationships
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Safety
Overall safety performance remains in the top quartile
Leading zero harm initiatives remain on target
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TRIFR FY13Qld Industry Ave 24.4 NSW Industry Ave 27.3
Frequency rates based on 1,000,000 hours
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People
Coal sector downturn impacting hours worked
Personnel numbers in the 1QCY14, will increase in excess of 65 (+20%) due to new contracts
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-
5,000
10,000
15,000
20,000
25,000
FY10 FY11 FY12 1HFY13 2HFY13 1HFY14
Average HoursWorked per Week
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Equipment
Utilisation impacted by sector downturn and timing of longwall projects
Mobile equipment utilisationexpected to double in 2HFY14
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Growth opportunities availableComplete set of roadway development equipment
(continuous miner, feeder breaker, shuttle car, ramcars,
substations/distribution units, & ventilation fans)
Utilisation revenue weighted and 52 week period. Pro-rata for actual acquisition date
0
10
20
30
40
50
60
0%
10%
20%
30%
40%
50%
60%
70%
FY11 FY12 FY13 1st H FY14
# U
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Mobile Equipment
Utilisation # Units
0
2
4
6
8
10
0%
20%
40%
60%
80%
100%
FY11 FY12 FY13 1st H FY14
# U
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Mining Equipment
Utilisation # Units
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Major new services undertaken / completed
BMA’s Broadmeadow mine (Qld)
Completed longwall salvage
Mining equipment hire
Rio Tinto’s Kestrel Mine Expansion (Qld)
Completed longwall installation (commenced in FY13)
Whitehaven’s Narrabri mine (NSW)
Completed longwall relocation (commenced in FY13)
Commenced mobilisation for longwall relocation (including equipment)
Peabody’s Wambo mine (NSW)
Completed conveyor installation & gate conveyor salvage
Commenced mobilisation for longwall relocation
BHP Billiton’s Dendrobium and Westcliff mines (NSW)
Longwall relocation equipment hire
BHP Billiton’s Appin mine (NSW)
Completed conveyor civil work (commenced in FY13)
Completed various drill & blast excavations
Commenced conveyor installation
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Ongoing works
Boral’s Berrima mine (NSW) - Whole mine operations transition to care and maintenance
BHP Billiton’s Appin mine (NSW) - Roadwork development (two units), secondary support, dyke drill and blast excavation and other mine services activities
Peabody’s Metropolitan mine (NSW) - Secondary support and other mine services activities continued
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Products
DeltaGRID (Longwall Recovery Mesh System to enable longwalls to be recovered in an safe and efficient manner)
Now certified for use in Australian underground coal mines
Marketing and tendering has recently commenced
This grid mesh is extensively used in America (60% market share)
Company is pursuing, with expectation in the 1HCY14 to become a distributor and licensed applicator for injection resins associated with strata consolidation, cavity fill and strata control support.
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4. Strategy
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Business Strategy
Proactive Safety Management
Providing value add competitive services to clients and forging profitable long term partnerships
Providing services and products which have a competitive advantage & uniqueness
Diversity
Capability for growth
High focus on Asset Management
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Industry Downturn Strategy
Higher focus on sustainability of work
Improve value adding to our clients
Reduce cost base & improve competitiveness
Restructure organisation to reduce costs
Continue debt reduction program
Increase pipeline options, target all areas as no labour skills shortage
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Industry Downturn Strategy
Higher focus on cash flow
Replacement of current $2.5m invoice facility, by either
Group’s major shareholders commitment of a $3.5m invoice finance facility, or
External financier $4.65m invoice finance facility. Term sheet agreed, due diligence underway
Reduce cost base & improve competitiveness
Restructure existing equipment finance arrangements being investigated
Raise additional capital via new equity
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Utilise Our Competitive Advantage &
Uniqueness
Whole of mine operations capability
Short term projects represent >20% of work
Longwall install/relocation projects – largest provider
Full in house turn key longwall projects
Fit for purpose equipment – safer, reliable and productive
Pillar extraction capability
Diversity
Innovated mining solutions (Berrima)25
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5. Outlook
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FY14 Outlook
Market conditions will remain challenging
Continued pressure to reduce prices to client’s
Extremely competitive state
Market conditions have created a positive environment for:
Client's to expand outsourcing
Introduction of new Products
Mining innovation
Widening tender activities
No skills shortage
Ability and capacity to pursue appropriate growth opportunities
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Workbook and Pipeline
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Workbook impacted by sector downtown, but remains positive
Workbook excludes uncommitted “Recurring Work” which also continues to be positive
Targeted pipeline also impacted by sector downturn
Potential still positive
Activity
Enquiries,
$213m
Expected
Enquiries
FY14,
$41m
Future
Enquiries,
$70m
Target Pipeline ($323m)FY14,
$20m
FY15,
$102m
FY16,
$146m
Target Pipeline ($323m)
2HFY14,
$37mFY15,
$34m
FY16,
$5m
Workbook - $76m
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Summary
Safety Maintain safety performance, target Zero Harm
Sector Ensure outsourcing competitivenessMaintain diversity
Sustainability Maintain our excellent client relationshipsFocus on adding valuing
Opportunities Targeted all areas of pipeline Been ready for upturn
OrganisationCosts
Continue reduction program
Shareholders Focus on improving returns
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Contact Details
Gabe Meena
Chief Operating Officer
02 4629 0300
Stephen Bizzaca
Managing Director & Chief Executive
Officer
02 4629 0300
Tony McFadden
Chief Financial Officer &
Company Secretary
02 4629 0300
Address: Suite 220, 4 Hyde Parade Centric Park, Campbelltown NSW 2560
Appendices
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Company
Delta SBD is a leading Australian mining services company
Servicing the underground coal mine contracting sector for more than 17 years
Delivering growth
Expanding range of “fit for purpose” equipment
Excellent management team & proven Board of Directors
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About Delta SBD Limited
Delta SBD is one of the largest contracting companies servicing Australia’s underground coal mining industry. The Group is geographically diverse, with operations across NSW at the Southern, Western, Hunter Valley and Narrabri coalfields and across the Bowen Basin in Queensland
The Group’s objective is to provide value-add services to clients by forging profitable long term partnerships. Delta SBD provides each project/mine with competent work teams, fit for purpose equipment and excellent site management backed by a supportive corporate management. The Group uses safe and efficient work methods enabling on-time completion of all works and services to client requirements
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Corporate Overview
Capital structure
Shares on issues 47,628,648
Options 3,437,500
Shareholders – Top five
Stephen Bizzaca entities 36.0%
Glyn Dawkins entities 27.1%
Delta SBD Employee Trust 7.4%
Gardner entities 2.3%
Nehemine Pty Ltd 2.0%
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Strong Board
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Contact us
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Steve BizzacaChief Executive Officer & Managing Director02 4629 [email protected]
Tony McFadden
Chief Financial Officer & Company Secretary02 4629 [email protected]
Address: Suite 220, 4 Hyde Parade - Centric Park, Campbelltown NSW 2560 www.deltasbd.com.au
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Important Notice and Disclaimer
The following disclaimer applies to this presentation and any information provided regarding the information contained in this presentation (the Information). You are advised to read this disclaimer carefully before reading or making any other use of this presentation or any information contained in this presentation.
Except as required by law, no representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, reliability or correctness of the Information, opinions and conclusions, or as to the reasonableness of any assumption contained in this document. By receiving this document and to the extent permitted by law, you release Delta SBD Limited (“Delta SBD”), and its officers, employees, agents and associates from any liability (including in respect of direct, indirect or consequential loss or damage or loss or damage arising by negligence) arising as a result of the reliance by you or any other person on anything contained in or omitted from this document.
Statements contained in this material, particularly those regarding the possible or assumed future performance, costs, dividends, returns, production levels or rates, prices, reserves, potential growth of Delta SBD, industry growth or other trend projections and any estimated company earnings are or may be forward looking statements. Such statements relate to future events and expectations and as such involve known and unknown risks and uncertainties, many of which are outside the control of, and are unknown to, Delta SBD and its officers, employees, agents or associates. In particular, factors such as variable climatic conditions and regulatory decisions and processes may cause or may affect the future operating and financial performance of Delta SBD. Actual results, performance or achievement may vary materially from any forward looking statements and the assumptions on which those statements are based. The Information also assumes the success of Delta SBD’s business strategies. The success of the strategies is subject to uncertainties and contingencies beyond Delta SBD’s control, and no assurance can be given that the anticipated benefits from the strategies will be realised in the periods for which forecasts have been prepared or otherwise. Given these uncertainties, you are cautioned to not place undue reliance on any such forward looking statements. Delta SBD undertakes no obligation to revise the forward looking statements included in this presentation to reflect any future events or circumstances.
In addition, Delta SBD’s results are reported under Australian International Financial Reporting Standards, or AIFRS. This presentation includes
references to EBITDA and NPAT. These references to EBITDA and NPAT should not be viewed in isolation or considered as an indication of, or as an
alternative to, measures AIFRS or as an indicator of operating performance or as an alternative to cash flow as a measure of liquidity.
The distribution of this Information in jurisdictions outside Australia may be restricted by law and you should observe any such restrictions. This Information does not constitute investment, legal, accounting, regulatory, taxation or other advice and the Information does not take into account any investment objectives or legal, accounting, regulatory, taxation or financial situation or particular needs. You are solely responsible for forming your own opinions and conclusions on such matters and the market and for making your own independent assessment of the Information.
You are solely responsible for seeking independent professional advice in relation to the Information and any action taken on the basis of the Information. No
responsibility or liability is accepted by Delta SBD or any of its officers, employees, agents or associates, nor any other person, for any of the
Information or for any action taken by you or any of your officers, employees, agents or associates on the basis of the Information.
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