2008 annual general meeting 28 november 2008 melbourne · record results, with ebit up 133% to...

2008 annual general meeting 28 November 2008 Melbourne

2008 annual general meeting

agenda

Chairman’s address

Managing Director’s address

AGM formalities

Close and opportunity to meet over refreshments


snapshot

Current share trading data

Share price $1.20

Shares on issue 47.1m

Market capitalisation $57m

Key 2008 financial data

EBIT $17.05m

Net profit $11.54m

EPS 24.73c

Annual dividend per share 7.5c

Dividend payout ratio range 25-40%

Board and executive team

Peter Fitch Chairman

Michael Buckland Managing Director

Peter Pursey Non-Exec Director

Eugene Fung Non-Exec Director

Colin Anderson CFO/Company Secretary

Top 5 shareholders

Merrill Lynch (Australia) Nominees Pty Ltd 13.2%

ANZ Nominees Ltd 8.2%

Michael Buckland 5.2%

S J Quinlivan Pty Ltd 4.8%

National Nominees Ltd 4.7%


key achievements in FY 2007/08

Record results, with EBIT up 133% to $17.05m and NPAT up 132% to $11.54m from previous year

Total annual dividend per share increased to 7.5c, up 88% from previous year

Improved operational performance across the existing Australian business units, with revenue up 30% from previous year

Productive capacity increased by 65% in Perth and Mackay to meet demand


key achievements in FY 2007/08

Further positioning and consolidation within the Australian market as a leading national provider of mining products and services

Global market footprint, engineering capabilities and product range significantly strengthened through the acquisition of USA-based Western Technology Services Inc. (“Westech”)

Successful roll-out and customer acceptance of the Westech product range in the Australian market

Continued and growing demand for the group’s products and services with a record order intake of $50m over the last three months of the financial year


financial results overview FY 2007/08

FY2007/08$m

FY2006/07$m

Increase%

Revenue 106.34 57.50 85%

EBITDA 18.86 8.46 123%

EBIT 17.05 7.31 133%

PBT 16.40 7.10 131%

NPAT 11.54 4.98 132%

Basic earnings per share (cents) 24.73 12.45 99%

Final dividend per share (cents) 6.5 3.5 86%

Total annual dividend per share (cents) 7.5 4.0 88%

Net assets 31.62 18.61 70%

EBITDA/Revenue 17.7% 14.7%

EBIT/Revenue 16.0% 12.7%

NPAT/Revenue 10.8% 8.7%

Significant increases in volumes and performance:

Significant EBIT and NPAT volume increases flowing from higher revenue base, which includes a full year of Austbore and seven months of Westech

30% organic revenue growth across existing Queensland and WA operations

Improved operating margins from higher capacity utilisation and efficiencies, increased automation, consolidation into product lines and growth into repair and maintenance activities

Result includes three months of lost contribution from Kaldura operations in Mackay due to flooding events in Central Queensland

Improved NPAT result also reflects low cost (<4%) of US$19m of debt funding for Westech acquisition



Tangible asset growth flowing from quality business acquisitions and growth in operations

Continued strong, positive cash balances

Increased property asset base following acquisition of Westech and completion of new, modern workshop facilities in Mackay

Debt mostly comprised of US$19m bank loan to fund Westech acquisition, with a 3.80% interest rate at June 2008

US$19m Westech acquisition backed by US$14m of hard net assets and only US$5m of goodwill

Relatively low gearing, capacity to secure further debt to accommodate further growth and acquisitions

EBIT/Interest cover of over 20 times for the year

30 June 2008$m

30 June 2007$m

Increase %

Working capital 12.14 7.88 54%

Property, plant and equipment 21.85 9.99 119%

Intangible assets 16.75 9.60 75%

Total assets 82.82 41.15 101%

Total liabilities 51.20 22.54 127%

Net assets 31.62 18.61 70%

Debt 21.84 8.85 147%

Net debt (debt less free cash resources) 16.03 2.54 531%

Gearing % (net debt/net debt plus equity) 33.6% 12.0%

Gearing (net debt/EBITDA) 0.85 0.30

Interest cover (EBIT/interest cost) 20.45 18.00

NTA per share ($) 0.32 0.23

Significant balance sheet growth and strengthening:



Strong operational cash flow in the year reflects improved underlying operational performance

Ongoing benefit of advance progress payments from customers, which reduces underlying investment in net working capital

$5.7m of capex on programs to increase capacity, efficiencies, productivity and profitability all funded from cash flow

$6.8m of Austbore acquisition bank debt repaid during the year

Successful completion of $2.2m capital raising at the beginning of the financial year

Westech acquisition bank loan funding package secured on an US dollar denominated basis, with <4% interest rate at June 2008 and interest-only basis for first two years of its term

Strong operational cash flows and free cash resources:

FY2007/08$m

FY2006/07$m

Operating cashflow 13.48 3.67

Capex cashflow (5.67) (1.44)

Investing cashflow (23.45) (17.04)

Financing cashflow 15.14 9.25

Net cash flow (0.50) (5.56)

Free cash resources 5.81 6.31


FY 2008/09 business update – australian operations

Continuing high levels of activity and capacity utilisation to date across all operations

Financial performance to date tracking as planned with strong operational cashflow

High level of enquiries and tendering activity for the company’s products and services

Strong possibility of three orders worth a total of $57m expected before half year-end for 113 dump truck bodies with deliveries scheduled from Q4 in current financial year to Q2 in FY 2010/11

Acceptance and acknowledgement of the operational and productivity advantages of Westech bodies across a wider and growing customer base

JEC product range continues to grow and develop with orders for 30 buckets received since June 2008, for delivery in current financial year

High levels of activity expected for East and West coast operations throughout current financial year


Demands on capacity - particularly tightening steel supplies and labour availability -successfully managed in order to meet customer delivery requirements

Early signs of reductions in steel supply costs and increased labour availability in capital cities

New expanded workshop in Mackay has strengthened capabilities and enabled increased demand for new product manufacture in the Bowen Basin to be satisfied

Mackay facilities now operating at full capacity with available labour

Further productivity-enhancing capital expenditure programs undertaken, with $0.7m being invested on a new plasma cutting system in Perth - estimated payback of only 1.25 years

FY 2008/09 business update - australian operations


FY 2008/09 business update - international operations

Continuing high level of activity at Westech operations in Casper, Wyoming, over the first four months of current financial year

Mining and resources business sector - and demand for Westech’s mining products and services -showing resilience and strength despite disturbances in the wider North American economy

No obvious signs of slow down within Westech’s markets and customer base to date

Significant marketing initiatives well-advanced to increase market penetration of Westech products into North America and Canadian markets, particularly for dump truck body fleet replacement programs for new major customers

Further international business opportunities introduced to Westech and wider Austin business following attendance and product display at ‘MINEXPO’ mining equipment exhibition in Las Vegas in September - significant potential international orders being very actively pursued

Increased market presence and market share in South America actively being considered following assessment of the capabilities of existing industry players

Follow-on projects worth US$9m secured for Middle East operations including a four-year contract for the repair of anode stems at the Sohar aluminium smelter in Oman

Larger Middle-East projects being targeted, including a busbar installation project in Abu Dhabi


Australian mining sector has experienced an unprecedented level of activity in recent years

This has presented significant operational challenges to all participants in the mining services sector and led to an intensively competitive supply market for labour and materials against a background of very demanding customer delivery schedules

Early indication of ~10% production cutbacks by major miners but this is off an extraordinarily high level of activity - this level of re-alignment will still keep the industry well-occupied

Miners have invested heavily on new equipment over the past 3 years which needs to be replaced from 2009 and onwards

Major miners have placed orders with OEMs for the supply of equipment extending out until 2011

The manufacture of products for new developments and expansions will still be an important part of Austin’s activity but revenue from equipment replacement programs is expected to rise significantly

Austin expects, based on customer feedback, that the level of activity and demand for the company’s products and services is going to remain high for the foreseeable future

Current market conditions provide opportunities for business growth and consolidation within the mining services sector

FY 2008/09 business update - market analysis


Niche market:Austin operates in a market with limited competition on a worldwide basis

Industry players are fragmented and regional, with limited or no national/international presence

Product and service capability:

Proven JEC and Westech product ranges are recognised and accepted by major miners and OEMs as market leaders on an international basis

Extensive in-house design capability which can respond to customer requirements with fast turnaround times and innovative solutions - a key and major attraction to customers

Quality and stable customers:

Our customers have robust order books with strong underlying commercial operations and financial stability

Customers are encouraging Austin’s business development and are keen to pursue strengthened, expanded and longer-term business relationships

austinengineering - market position and points of differentiation


Sustainable business model:Proven productivity and profitability improvements from superior product designs

Significant international market opportunities utilising the existing business strategy and model

Financial strength through solid operating margins and bottom-line profitability, strong operational cash flows, balance sheet capacity to accommodate growth, high EBIT interest cover and access to US dollar-denominated finance with low interest rates

Dedicated and motivated management team:Demonstrated capability to grow the business and to adapt to tough and evolving business conditions on an international basis

Commitment to pursue further business, product and performance improvements, working very closely with supportive customers and suppliers

Focus on developing the business further, using existing resources and expertise, to build the Austin Engineering brand and reputation and ultimately maximise value and shareholder wealth and returns

austinengineering - market position and points of differentiation


Continued expansion of the Westech product range domestically and internationally

Target further productivity, efficiency and margin improvements through coordinated procurement of key supplies on an international basis, investment in further automation and margin-enhancing capex programs

Concentrate on what we know best - manufacture of our products, supplemented by specialised repair and maintenance services all underpinned by quality engineering and design support

Business positioning to take advantage of revenue streams from the replacement of heavy mining equipment in 2009 onwards

Development of long-term relationships with key end-customers and OEMs on a worldwide basis to become the preferred supplier of quality mining products through long-term commercial arrangements, thereby securing recurring revenue streams

Take advantage of the fall in the AUD to aggressively develop and expand export markets including Indonesia, Asia and Africa

Particular focus on increased market share in the South American mining market, developing business relationships and demonstrating product capabilities to major mining houses

business strategy


Following recent meetings with the major mining companies the presence of Austin’s product range would be extremely well received and accepted in South America

Discussions have commenced with an established and recognised South American manufacturing company with a view to a potential acquisition of the company

Manufacture of Westech and JEC products directly in South America (existing licence arrangement in the process of being terminated)

Existing competition across South America lacks strategy, geographical presence and product range - a market growth opportunity exists for Austin

Austin business model would be easy to replicate in South America and would be successful

Potential for South American revenue streams to be greater that Australian revenue streams within two years

south america - an area of immediate and particular focus


High level of productive activity for current financial year FY 2008/09 with no signs of it abating

Workload base for FY 2009/10 beginning to fill up

Continuing high level of tendering and enquiry activity

A number of large and significant projects actively being pursued which, if successful in securing, would result in solid base workload levels for FY 2009/10 to FY 2010/11

Forecast underlying operational EBIT of $11.5m to $12.5m for the first half of FY 2008/09 (six months to December 2008), representing an increase of 64% to 79% over the corresponding period to December 2007

Forecasting continued strong level of activity in the second half of current financial year FY 2008/09 with further increases in all key financial measures

outlook

World’s largest non-OEM designer and manufacturer of mining dump truck bodies

For more information please visit www.austineng.com.au

Disclaimer: Austin Engineering Limited has made every effort to ensure the accuracy of information contained in this presentation. This presentation has been prepared by Austin Engineering based on information available to it at the date of this presentation. No responsibility or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, none of the Austin Engineering, its related bodies corporate or any of its directors, employees, agents or advisers accept any liability for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it, including, without limitation, any liability arising from fault or negligence on the part of Austin Engineering, its related bodies corporate or any of its directors, employees, agents or advisers. Any views expressed in this presentation are those of the individual presenter, except where specifically stated to be endorsed as the views of Austin Engineering. Nothing in this presentation is a promise or representation as to the future. Statements or assumptions in this presentation as to future matters may prove to be incorrect and the differences may be material. Austin Engineering, its related bodies corporate or any of its directors, employees, agents or advisers do not give any representation or warranty as to the accuracy of such statements or assumptions.

2008 annual general meeting 28 november 2008 melbourne · record results, with ebit up 133% to...

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