Q4/YE 2013 INVESTOR PRESENTATION. April 8, 2014

Transcription

1 Q4/YE 2013 INVESTOR PRESENTATION April 8, 2014

2 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 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. 1

3 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 2

4 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,

5 BRAND RECOGNITION MAJOR BRANDS CONSTRUCTION 4

6 5 BRAND RECOGNITION COMPLEMENTARY BRANDS

7 DIVERSE END-USE MARKETS Non-Residential Construction Residential Construction and Landscaping Oil & Gas Mining Quarries and Aggregates Forestry Utilities Infrastructure Industrial Material Handling Waste Management 6

8 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 7

9 ECONOMIC OUTLOOK IN ALBERTA POSITIVE CONTINUED GROWTH IN OIL SANDS Oil Sands Mining Oil Sand in Situ Forecasted Bitumen Volumes 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

10 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 overshadowed by an oversupply of equipment 9

11 BENEFITS OF SCALE 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 UNIQUELY POSITIONED TO BENEFIT FROM INDUSTRY CONSOLIDATION 10

12 GROWTH STRATEGY

13 GROWTH STRATEGY ORGANIC Increase market penetration of brands represented Add key brands to service customers and increase throughput Enhance market presence ACQUISITION Acquire dealerships Focus on brands already represented Target regions close to existing markets Improve operations 12

14 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: Q Further builds on growing presence in the province, provides higher visibility in key market 13

15 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: Q Betters position as a performance leader in the Quebec region Photos: Johany Jutras 14

16 15 EXPANSION OF COMPLEMENTARY BRANDS

17 16 EXTENSIVE BRANCH NETWORK

18 STRONG OEM RELATIONSHIPS VOLVO S LARGEST NORTH AMERICAN DEALER in 2013 FOR 5 YEARS RUNNING RECOGNIZED AS LARGEST PRODUCER OF RETAIL FINANCING FOR VOLVO FINANCE MANITOWOC CRANE ELITE DEALER 17

19 REVENUE CATEGORIES SALES RENTAL PRODUCT SUPPORT 18

20 2013 REVENUE BREAKDOWN REVENUE BY CATEGORY ($ MILLIONS) $321.2 Equipment Sales 66% EQUIPMENT SALES BY BRAND $133.2 Product Support 27% $31.3 Equipment Rental 7% REVENUE BY BUSINESS UNIT Multiline 55% PARTS REVENUE BY BRAND Case 7% Crane 26% Chadwick-BaRoss 12% Case 7% Case 6% Volvo 49% Manitowoc 26% Volvo 58% Manitowoc 9% Used 1% Other 26% Used 7% Other 11% 19

21 20 FINANCIAL RESULTS

22 FINANCIALS REVENUE ($ millions) EARNINGS BEFORE TAXES ($ millions) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

23 FINANCIALS EBITDA ($ 000s) EBITDA MARGIN (%) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, % 12% 10% 8% 6% 4% 2% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

24 FINANCIAL TREND TOTAL STRONGCO EQUIPMENT INVENTORY ($ millions) EQUIPMENT NOTES PAYABLE (%) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Interest Free Interest Bearing 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

25 FINANCIAL TREND TOTAL STRONGCO CAPEX ($ millions) $33.6 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 $9.0 $5.9 $9.0 No major capital expenditures planned for 2014 beyond completion of SAP implementation $0.7 $ E 24

26 FINANCIAL RESOURCES Canadian Bank Credit Facilities 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 U.S. Bank Credit Facilities 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 Equipment Finance Lines Total lines of $300M with captive finance affiliate of OEMs and other non-bank lenders Renewable annually Availability of $91M at December 31,

27 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 26

28 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 $72M at December 31, 2012 $52M at December 31, 2013 $61M at March 31, 2014 LOWER INVENTORY LEVELS Levels decreased by $32 million in 2013 and sales climbed 5% over Management continues to explore greater efficiencies with new branches and organizational structure in place IMPROVING ECONOMY Modest growth forecast for 2014 in Canada & United States 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 27

29 SHARE OWNERSHIP LISTED ON TSX (SQP) 13.2 Million Shares Outstanding Others 56.2% Oakwest Corporation (Robert Beutel - Chairman) 22.4% Boeckh Investments 10.9% Strongco Insiders 2.8% Fidelity Management 7.7% 28

30 SHARE PRICE SHARE PRICE 2009 to March 31,

31 COMPARABLE VALUATION ANALYSIS EV / CCY 2013E EBITDA Avg. 9.5x WesternOne Inc. Finning International Inc Strongco Corporation Wajax Corp Toromont Industries Ltd Cervus Equipment Corp 6.9x 7.7x 7.8x 8.6x 8.7x 9.0x Ritchie Bros. Auctioneers Inc Rocky Mountain Dealerships Inc Source: Canaccord Genuity, Thomson One Priced as of September 23, x 13.8x 0x 5x 10x 15x EV/EBITDA (2013E) 30

32 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 31

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