Hydrodec Group plc Results Presentation. March Ian Smale, Chief Executive Chris Ellis, Chief Financial Officer

Transcription

1 Hydrodec Group plc 2012 Results Presentation March 2013 Ian Smale, Chief Executive Chris Ellis, Chief Financial Officer 1

2 PRECAUTIONARY STATEMENT This presentation has been issued by Hydrodec Group plc ( Hydrodec ) and is personal to the recipient. This presentation and these slides may not be reproduced or published in whole or in part for any purpose. This presentation and associated discussion includes forward-looking statements. Certain information contained in this presentation relating to Hydrodec has been compiled from public sources. All statements other than statements of historical fact included in this presentation, including without limitation those regarding the plans, objectives and expected performance of Hydrodec, are forward-looking statements. Hydrodec has based these forward-looking statements on its current expectations and projections about future events, including numerous assumptions regarding its present and future business strategies, operations, and the environment in which it will operate in the future. Forward-looking statements generally can be identified by the use of forward-looking terminology such as 'ambition', 'may', 'will', 'could', 'would', 'expect', 'intend', 'estimate', 'anticipate', 'believe', 'plan', 'seek' or 'continue', or negative forms or variations of similar terminology. Such forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors related to Hydrodec. By their nature, forward-looking statements involve risks, uncertainties and assumptions and many relate to factors which are beyond the control of Hydrodec, such as future market and economic conditions, external factors affecting operations and the behaviour of other market participants. Actual results may differ materially from those expressed in forward-looking statements. Given these risks, uncertainties, and assumptions, you are cautioned not to put undue reliance on any forward-looking statements. In addition, the inclusion of such forward-looking statements should under no circumstances be regarded as a representation by Hydrodec that Hydrodec will achieve any results set out in such statements or that the underlying assumptions used will in fact be the case. Other than as required by applicable law or the applicable rules of any exchange on which securities of Hydrodec may be listed, Hydrodec has no intention or obligation to update or revise any forward-looking statements included in this presentation. This presentation is for information only and does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase, any shares in Hydrodec or any other securities, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied upon in connection with, any contract or investment decision related thereto.

3 Hydrodec Group plc 2012 Results Presentation March

4 Who we are We produce new, high quality oil from globally distributed waste streams; Our unique clean-technology is proven, proprietary, sustainable and industry-leading; The core business is a virtual closed-loop re-useable transformer oil offer for the electrical utility industry; It is the most competitive, non-destructive technology to treat PCB (polychlorinated biphenyl) contamination in oil; We have achieved proof of concept to produce high quality Group II base oil from used industrial oil, with potential to extend to engine oils; New, re-usable oil will come with a carbon credit or offset as a source of value and a unique sales proposition. 4

5 Our strategy being delivered Focus on technology through two core revenue streams: process waste oil at company-owned operations and sell branded products into an attractive market; and generate royalty income through licencing our unique clean technology. Create value through sustainability and carbon-free oil: address feedstock supply in the US; leverage Australian technology & research to create new, differentiated product lines in industrial lubricants; deliver a participation and partnership model to unlock Japan, and thereafter new geographies. 5

6 2012 Results Highlights Revenues and plant utilisation levels hit a new record; Feedstock supply chain improved significantly and plants generated positive operating cashflow for the first time; A clear strategy that will deliver a profitable transformer oil business based on world class industrial oil re-refining technology; US joint venture will transform scale of the business and is part of a clear roadmap to positive cash flow; Positive operating cash flow (pre-interest) targeted from Q4 of current year; Piloting new technology has potential to be a material breakthrough in global re-refining of used oil; The second phase for growth. 6

7 2012 Results Highlights Revenue (US$m) CAGR:13.8% USA Australia Revenue up 17% to US$26.1 million Sales volumes up 11% to 22.5 million litres Higher utilisation of capacity at 70% (2011: 63%) Unit sales margin flat at US$0.24 per litre (2011: US$0.25) Sales volumes (litres m) Both plants delivered positive operating cash-flow for first time and contributed to central overheads USA Australia 7

8 2012 Results Highlights % 80% 60% 40% 20% 0% Feedstock volumes (litres m) USA Australia Feedstock sources (US) FY 11 FY 12 Utility Consolidator Asset Recovery Feedstock volumes up 18% year-on-year and increased proportion direct from utilities Awarded US EPA permit to treat PCB contaminated oil Signed heads of terms for new strategic alliance in US to underpin major capacity expansion Achieved proof of concept in applying technology to used industrial and motor oils 2 million debt redeemed and 5 million debt secured on improved terms 8

9 Transformer oil market dynamics $1.20 Benchmarks and margin Narrowing the discount to ICIS (US sales price) $ % $0.80 $0.60 $ % 90% 85% 80% $ % $0.00 J-12 F-12 M-12 A-12 M-12 J-12 J-12 A-12 S-12 O-12 N-12 D-12 70% Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 ICIS (Avg $/Lit) NYH Ultra Low Sulfur No. 2 Diesel ($/Lit) Hydrodec margin (sales price less feedstock price - US) Margin broadly unchanged despite US$0.10 per litre compression in pricing indices Discount to sales index narrowed consistently over two years 9

10 2012 summary of results USD' Revenue 26,112 22,414 Gross profit 5,367 4,981 Gross profit margin % 21% 22% Underlying operating loss 1 (4,510) (3,567) Underlying operating EBITDA 1 (3,034) (2,203) Operating cashflow pre growth costs 2 (2,549) (2,633) Net cash 3 1,093 6,755 Loss after tax (14,196) (11,479) Loss per share (cents) (3.48) (3.20) Revenue growth 17% year on year Margins flat despite index compression Reflects increased investment in capability Both plants delivered positive operating cashflow for the first time 1 Before growth costs 2, intangible asset amortisation and share based payment costs 2 "Growth costs" includes expenditure on market expansion and new product development of US $2.2m (2011: US$0.8m) 3 Additional 2.5m received in debt funding post year-end 10

11 Income statement 12 Months 12 Months Dec-12 Dec-11 USD$m USD$m Staff costs USD'000 USD'000 Revenue Gross profit Operating costs Employee benefit expense Other administrative expense Foreign exchange(loss)/gain Depreciation Total operating costs Operating Loss Analysed as: Underlying operating loss Growth costs Amortisation of intangible assets Share based payment costs Treatment of Young contaminated material Operating loss for the period Loss after interest and tax Underlying operating EBITDA* *Before growth costs, share based payment costs and treatment of Young contaminated material Wages and salaries 7,524 5,781 Average number of employees Number Number Operations Corporate office 11 9 Growth costs USD 000 USD 000 Market expansion development costs 1, New product development 456-2, Employee benefit expense 1, Other costs 1, ,

12 Balance sheet Dec-12 USD$m Dec-11 USD$m Fixed assets Intangibles * Non-current assets Cash Other current assets Current liabilities Net current assets Provisons Long term borrowings Deferred tax Net assets * Prepaid royalty, goodwill and Hydrodec technology Redeemed 2m debt financing 5m new debt financing announced on 19th December 2012 ( 2m received as at 31 December further 2.5m in 2013) On 1st November 2012, 12,790,000 of convertible unsecured loan stock reverted to to an unsecured debt obligation with an 8% pa coupon. The Company has the right to repay the outstanding amount in full at par at any time prior to or on 31 st October

13 Cashflow 12 Months 12 Months 31 Dec Dec 2011 USD$m USD$m Cash outflow generated from operations Underlying cash outflow from operations Growth cost Capital expenditure US$2.5m positive cash contribution at plant level Significant investment in growth initiatives Improving operational integrity Net cash inflow from financing Decrease/Increase in cash Movement in net cash Cash Bank overdraft Opening cash & equivalents Decrease/Increase in cash Closing cash & equivalents Additional 2.5m from Dec-12 debt financing received in

14 Outlook Completion of US deal mid-april Technology roadmap Pilot plant in Australia Grant funding application for A$3.5m (50% HYR) Deliver a solution for scale in Australia Repatriate technology and restructure Japanese business opportunity with bias for licensing Target major European market entry through participation or licensing Target positive operating cash flow from Q4 onwards (pre-interest) 14

15 Q&A Ian Smale, Chief Executive Chris Ellis, Chief Financial Officer Appendices 15

16 The team Ian Smale, Chief Executive 30 year career with BP plc. Leadership positions including Group Head of Strategy & Policy, Global Head of Mergers and Acquisitions, and as President and Chief Executive of BP Exploration North Africa Joined Hydrodec as CEO in January 2012 Mark McNamara, Head of Technology and International Projects 10 years with Clough Engineering responsible for the environmental technology and engineering division Joined Hydrodec in 2004 originally as Chief Operating Officer, assumed the role of CEO in 2005 Became Head of Technology and International Projects in January 2012 [Insert photo] Chris Ellis, Chief Financial Officer 20 years board level finance and management experience running large, complex international businesses as well as small and medium sized ventures, including significant period with GE Capital Qualified chartered accountant Joined Hydrodec as CFO in July 2012 Lee Taylor, Head of Corporate Development Corporate partner at Linklaters for 15 years including as Global Head of the Energy and Utilities sector Structured several ground-breaking BP transactions, including the Amoco merger, the Burmah Castrol takeover and the BP / TNK joint venture Joined Hydrodec as Head of Corporate Development in January 2012 David Robertson, Chief Operating Officer 30 years at BP plc., with executive level roles in BP Chemicals and Technology Recently COO at a US based technology startup business in the energy / waste sectors. Has worked in the US for the past 13 years Joined Hydrodec as Chief Operating Officer in January 2012 More than 125 years of oil, technology and business-based experience 16

17 Our technology simple chemistry and smart process engineering Developed in Australia to treat PCB (polychlorinated biphenyl) contamination the technology is simple chemistry and smart process engineering; IP protected; operational know-how increasingly important; Hydrogenation cleans and restores the hydrocarbon molecule, creating new reusable oil less susceptible to future oxidation with semi-synthetic properties as good if not better than new mineral oil ; A sustainable methodology has been submitted for UNFCCC approval to qualify as carbon neutral oil ; The process is extremely efficient, rendering PCB contamination into an inert residue and recovering more than 99% of the original oil with negligible emissions; Extension into industrial oils has achieved proof of concept. 17

18 Our core transformer oil business model Transformer oil Core Offer CUSTOMER Business Model Safe alternative to incineration Owner operator (potential JV) PCB elimination Equity/debt funded Re-usable oil Sustainable carbon neutral Oil service offer Full-cycle margin (including royalty) Cost effective - not reliant on subsidy Variable logistic and market channels First commercial plant and R&D facility in Young, Australia (2006), 6.5m litre p.a. capacity 27m litre p.a. capacity plant in Canton, Ohio (2008) 18

19 Expanding through Strategic Relationships in North America A non-binding heads of terms announced on 30 th November 2012 to establish a joint venture with an industry participant in North America: Participant to contribute feedstock sufficient to expand production capacity by six processing trains at more than one location; capacity will increase from 27 million litres to c. 65 million litres; Hydrodec will licence proven technology to joint venture to manufacture new oil in North America in return for 5 per cent royalty on revenues; Participant will initially acquire 25 per cent interest in Hydrodec North America and, subject to build-out, up to 49.9 per cent of the joint venture; Initial value set at 5 times 2012 EBITDA, subject to earn-out at 6.5 times by which 2013 EBITDA exceeds Completion likely in early

20 Hydrodec Group plc Ian Smale Chief Executive Chris Ellis Chief Financial Officer London Office 50 Curzon Street London W1J 7UW Main: +44 (0)