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48 HOURS IN EDMONTON
October 2014
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.
2
INVESTMENT HIGHLIGHTS
Strong growth strategy
Well-positioned in diversified and growing markets
Major Capex, sales re-organization completed
Strong customer relationships
Demonstrated performance improvement and results
Globally recognized manufacturers
3
AN INDUSTRY LEADER
Major multiline mobile equipment dealer
Major brands: sales and product support
Diversified by industry, geography and product line
27 branches in Canada, 5 branches in U.S.
750 employees
TSX: SQP
4
BRAND RECOGNITION – MAJOR BRANDS
CONSTRUCTION
5
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
6
BRAND RECOGNITION – COMPLEMENTARY BRANDS
7
REVENUE CATEGORIES
SALES PRODUCT SUPPORT
RENTAL
8
EXTENSIVE BRANCH NETWORK
9
DIVERSE END-USE MARKETS
UtilitiesForestryQuarries and Aggregates
Mining
Non-Residential Construction
Industrial Material Handling
Oil & GasResidential Constructionand Landscaping
Waste ManagementInfrastructure
10
ROBUST ORDER BOOK $72M at December 31, 2012 $52M at December 31, 2013 $62M at September 30, 2014
VALUE AND GROWTH POTENTIAL
REVENUE GROWTH Total revenues up 5% in 2013 and 1% YTD (June 2014) Product support revenues increased 5% in 2013 and 6% YTD (June 2014)
1
2
3
4
ORGANIC GROWTH INVESTMENTS IN KEY MARKETS Increased operating capacity with new and upgraded facilities5
6
7
LOWER OUTSTANDING DEBT LEVELS Total outstanding debt decreased $18M since September 30, 2013 Net proceeds from sale and leaseback transactions contributed $42M in debt reduction Interest-bearing portion of equipment notes down $22M (year-over-year, September 2014)
IMPROVING ECONOMY Modest growth forecast for 2014 in Canada and United States
ACQUISITION OPPORTUNITIES Consolidation of equipment dealers Other related businesses
POSITIVE LONG-TERM OUTLOOK Infrastructure deficit across Canada Substantial development planned for northern Alberta, northern Ontario, northern Quebec and Labrador
11
ALBERTASTRATEGY
12
FINANCIAL TREND – ALBERTA
ALBERTA REVENUE 2009 - 2014($ millions)
2009 2010 2011 2012 2014
0
5
10
15
20
25
30
35
40
45
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3E
Equipment
Rentals
Product Support
2013
13
GROWTH STRATEGY – ORGANIC
NORTHERN ALBERTA STRATEGY
EDMONTON VOLVO (Acheson) EDMONTON CRANE FORT MCMURRAY
Volvo branch opened March 2012
Capital investment of $10.7M
Enabled significant growth in product support revenues
Improved customer service
Existing Edmonton branch upgraded in 2013 and now dedicated to crane
Capital investment of $1.2M
Enable significant growth in Crane product support revenues
Improved customer service
Regional management structure added
New branch opened in 2014
Capital investment of $18.7M
Directly service the oil patch
New branch will carry Volvo and crane products
Headcount currently in place: - branch manager - branch administrator - service manager - 7 field technicians- 4 parts/warehouse
14
DISTRIBUTION – WESTERN CANADA
SURREY
PENTICTON
GRAND PRAIRIE
FORT MCMURRAY
EDMONTONLLOYDMINSTER
SASKATOON
REGINA
WEYBURN WINNIPEG
LETHBRIDGE
MEDICINE HAT
BROOKS
RED DEER
CALGARY
Strongco Branches - 6
Sub dealer Locations - 17
15
Source: Statistics Canada / Haver Analytics
ECONOMIC OUTLOOK IN ALBERTA POSITIVE
ALBERTA ECONOMICS FORECASTAnnual average per cent change unless noted
2011 2012 2013E 2014F 2015F
Real GDP 5.2 3.8 3.8 3.5 3.2
Nominal GDP 10.3 4.6 6.3 6.9 4.8
Employment 3.8 2.7 2.9 2.9 1.9
Unemployment Rate % 5.5 4.6 4.6 4.4 4.2
Consumer Price Index 2.4 1.1 1.4 2.5 2.2
Retail Trade 6.8 7.0 6.9 8.5 5.0
Housing Starts -6.7 30.4 8.2 6.7 -14.5
Existing Home Sales 8.1 12.3 9.5 10.1 0.3
Avg. Existing Home Price 0.5 2.6 5.0 4.3 2.4
16
2010 2011 2012 2013 2014 2015
Atlantic 14,624 14,496 16,398 17,397 18,713 20,214
Quebec 44,212 46,923 49,833 51,685 54,985 58,720
Ontario 69,301 71,391 75,764 77,699 82,868 89,132
Alberta 61,026 69,737 78,572 84,593 92,221 100,882
SQP Total 189,163 202,547 220,567 231,374 248,787 268,948
Total 243,869 260,919 284,194 298,597 321,257 347,802
SQP as % of Canada 78% 78% 78% 77% 77% 77%
Y O Year Real Growth SQP 3.9% 5.5% 1.5% 3.7% 4.1%
Canada GDP Real Growth 2.5% 1.9% 1.5% 2.0% 2.9%
ECONOMIC OUTLOOK IN ALBERTA POSITIVEPopulation Forecast
(in MM of Inhabitants)
Value of Total Construction (Current MM of Can$)
Source: Statistics Canada
Source: Reed Construction Data
2013 2014 2015 2016 2021
AB 4,003 4,083 4,162 4,242 4,629
QC 8,103 8,169 8,235 8,299 8,607
ON 13,737 13,904 14,069 14,234 15,050
ALT 2,349 2,352 2,355 2,358 2,373
SQP Regions 28,191 28,507 28,821 29,133 30,659
% Growth 1.1% 1.1% 1.1% 2.2%
17
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/day by 2030 ̶ a 210% increase over 2011 levels
Total mined bitumen volumes expected to double by 2027Source: Canadian Association of Petroleum Producers
Forecasted Bitumen Volumes
0
500
1000
1500
2000
2500
3000
3500
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
GROWTHSTRATEGY
19
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
1
2
3
4
5
6
7
8
20
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
21
CAPEX LARGELY COMPLETE
Major Capital Expenditures – 2011 to 2014:
– New Acheson Branch$10.7 million
– New Fort McMurray Branch$18.7 million
– New Saint-Augustin Branch$8.9 million
– Upgrade Edmonton Crane Branch$1.2 million
– Renovations Mississauga Branch$1.4 million
– New Dealer Management System (SAP)$5.7 million
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)
2009-2014
22
FINANCIAL RESULTS
23
FINANCIALS
($ millions)
REVENUE 2009-2014
EARNINGS BEFORE TAXES 2009-2014($ millions)
0
20
40
60
80
100
120
140
160
2009 2010 2011 2012 2013 2014
Q1 Q2 Q3 Q4
-5
-4
-3
-2
-1
0
1
2
3
4
5
2009 2010 2011 2012 2013 2014
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
24
FINANCIALS
($ 000s)
EBITDA 2009-2014
EBITDA MARGIN 2009-2014(%)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2009 2010 2011 2012 2013 2014
0%
2%
4%
6%
8%
10%
12%
14%
2009 2010 2011 2012 2013 2014
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
25
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%
26
FOCUS ON INVENTORY MANAGEMENT
($ millions)
EQUIPMENT INVENTORY 2010-2014
EQUIPMENT NOTES PAYABLE 2010-2014(%)
0
50
100
150
200
250
300
2010 2011 2012 2013 2014
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3E Q4E
0
50
100
150
200
250
Q1 Q2 Q3 Q4
2010 2011 2012 2013 2014
Interest Free Interest Bearing
Q1 Q2 Q3 Q4 Q1 Q2 Q3E Q4EQ1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Estimate
Estimate
27
$272.2
$287.5 $285.5
$259.5
$287.3 $288.3
$267.9
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014E
FOCUS ON DEBT REDUCTION
Net proceeds from sale and leaseback transactions contributed $42M in debt reduction Interest-bearing portion of equipment notes down $22M (year-over-year, September 2014)
$18M Reduction
($ millions)
Q1 2013–Q3 2014E
28
SHARE OWNERSHIP
Oakwest Corporation(Robert Beutel - Chairman)22.4%
Boeckh Investments 12.8%
Strongco Insiders 2.8%
Others54.3%
LISTED ON TSX (SQP)13.2 Million Shares Outstanding
Fidelity Management 7.7%
29
STRATEGIC FOCUS
Continue revenue and market share growth through enhanced presence and improved customer experience in key markets
Move beyond the “launch phase” of our new facilities and sales organization to reach the bottom line, and realize ROI
Focus on inventory management to reduce ongoing debt levels and costs
1
2
3
Improve operating efficiencies4
Continue to identify opportunities to accelerate growth (organic and external), to leverage Strongco’s scale and strong reputation in the marketplace5