Investor
Presentation
Half Year Results December 2019 HRL Holdings (ASX:HRL)
DISCLAIMER
This presentation is not a prospectus nor an offer for securities in any jurisdiction nor a securities recommendation. The information in this presentation is an overview and is based on publicly available information and internally developed data and does not contain all information necessary for investment decisions. In making investment decisions in connection with any acquisition of securities, investors should rely upon their own examination of the assets and consult their own legal, business and/or financial advisors and should not be relied on in connection with a decision to purchase or sell any securities.
The information contained in this presentation has been prepared in good faith by HRL Holdings Limited ("HRL") however, no representation nor warranty expressed or implied is made as to the accuracy, correctness, completeness or adequacy of any statements, estimates, opinions or other information contained in this presentation.
Investment in HRL is subject to investment risk, including possible loss of income and capital invested. The occurrence of events in the future are subject to risks, uncertainties and other factors that may impact HRL's actual results, performance or achievements to differ from those referred to in this presentation. Neither HRL, nor any other member company of the HRL Group, nor any officer or employee guarantees any particular rate of return or performance, nor do they guarantee the repayment of capital. Further, they do not give any assurance or guarantee that the occurrence of the events referred to in this presentation will actually occur as contemplated.
The presentation may contain forward-looking statements regarding the potential of the Company's revenues, projects, interests and the development potential of the Company's business. Any statement describing a goal, expectation, intention or belief of the Company is a forward-looking statement and should be considered an at-risk statement. Given these risks, readers are cautioned not to rely on forward-looking statements. Actual results could differ materially from those anticipated in these forward-looking statements due to many important factors, risks and uncertainties including, without limitation, risk associated with product sales, development and manufacture, risks inherent in the business, future capital needs, general economic uncertainty and other risks detailed from time to time in the Company's announcements to the ASX.
HRL • Investor Presentation | Half Year Results December 2019 | 2 |
HRL Overview
HRL • Investor Presentation | Half Year Results December 2019 | 3 |
WHO WE ARE
WHAT WE DO | BRANCH NETWORK |
Data | ||||
Sampling | Laboratory | Management | ||
LABORATORY SERVICES
Geotech and | Occupational | |||||
Construction | ||||||
Food | Materials | Environmental | Hygiene |
Laboratory locations:
Brisbane - Darra
Brisbane - Yatala
Sunshine Coast
Darwin
Auckland
Wellington
Christchurch
Dunedin
Hamilton
Consulting offices
Palmerston North
HRL • Investor Presentation | Half Year Results December 2019 | 4 |
OUR MAJOR SHAREHOLDERS
Shareholder composition: | Substantial holder notices >5% |
Board and management ~18%
Institutional~58%
Other | ~24% |
Viburnum Funds | 23% | |
Perennial Value | 15% | |
AustralianSuper | 6% | |
Entities associated | 7% | |
with Terry Cooney | ||
HRL • Investor Presentation | Half Year Results December 2019 | 5 |
FINANCIAL HIGHLIGHTS
H1 FY20 | H1 FY19 | INCREASE | |
$000's | $000's | ||
$000's | |||
(Pre AASB 16)2 | (Pre AASB 16)2 | ||
Revenues | 16,288 | 14,104 | 2,184 |
Underlying EBITDA | 2,600 | 711 | 1,889 |
Underlying NPAT | 1,056 | (139) | 1,195 |
Operating cash flows generated 3 | 3,528 | (58) | 3,586 |
Working capital 4 | 810 | 524 | 286 |
Statutory loss after tax 1 | (2,728) | (4,226) | 1,498 |
H1 FY20
$000's
(Post AASB 16)
16,288
3,080
1,056
3,940
810
(2,728)
- Underlying EBITDA, EBIT and NPAT reflects statutory profit as adjusted to reflect the Directors' assessment of the result for the ongoing business activities of the Group, in accordance with AICD/Finsia principles of recording underlying earnings. Underlying profit measures have not been audited. Refer to Appendix A for further details of non-underlying items. Statutory loss includes non-operating items as detailed in Appendix A, with the majority comprising the Analytica earnout ($2.2M) and amortization of acquisition intangibles ($1.6M).
- During the period HRL adopted the new leasing standard AASB 16. Comparative figures were not restated. For comparability, the above figures have been calculated before adjustments arising under AASB 16. Refer to Appendix B for further details.
- Excludes cash outflows associated with earn-out payments.
- Working capital is defined as net current assets, excluding an interest only loan drawn to $2.3M which has no expiry but is subject to annual review by Westpac.
HRL • Investor Presentation | Half Year Results December 2019 | 6 |
SOCIAL
RESPONSIBILITY
Continued focus on
safety with 28% reduction in total reportable injuries
No uncontrolled | Diverse workforce with | |||||
environmental releases | 46% female |
HRL • Investor Presentation | Half Year Results December 2019 | 7 |
H1FY2020 Highlights
HRL • Investor Presentation | Half Year Results December 2019 | 8 |
SEGMENT PERFORMANCE - H1FY20
TRADING DIVISIONS | CORPORATE | CONSOLIDATED | |||||||
HAZMAT | GEOTECH | FOOD/ENVIRO | SOFTWARE | TOTAL | |||||
LABORATORY | |||||||||
$000's | $000's | $000's | $000's | $000's | $000'S | $000's | |||
Revenues | 4,723 | 3,526 | 7,557 | 438 | 16,280 | - | 16,280 | ||
Underlying EBITDA before AASB 16 ($) | 1,272 | 90 | 1,865 | 240 | 3,467 | (867) | 2,600 | ||
Underlying EBITDA (%) | 27% | 3% | 25% | 55% | 21% | - | 16% | ||
Operating depreciation and amortisation | (219) | (113) | (701) | (37) | (1,070) | (5) | (1,075) | ||
Net interest expense | (31) | (7) | 7 | - | (31) | (101) | (132) | ||
Underlying profit before tax | 1,022 | (29) | 1,170 | 203 | 2,366 | (973) | 1,393 | ||
Operating income tax | (281) | 8 | (328) | (57) | (658) | 321 | (337) | ||
Underlying profit after tax | 741 | (21) | 843 | 146 | 1,709 | (652) | 1,056 | ||
Non-operating adjustments | |||||||||
Analytica earn-out expenses | - | - | (2,158) | - | (2,158) | - | (2,158) | ||
Amortisation of intangible assets arising from acquisitions | - | (295) | (912) | (281) | (1,488) | - | (1,488) | ||
Lapsed performance shares | - | - | - | - | - | (21) | (21) | ||
Share of loss - equity accounted investments | - | - | (268) | - | (268) | - | (268) | ||
Non-operating income tax | - | 258 | 254 | - | 335 | (185) | 150 | ||
Statutory profit after income tax | 741 | (235) | (2,242) | (135) | (1,870) | (858) | (2,728) | ||
HRL • Investor Presentation | Half Year Results December 2019 | 9 |
H1FY20: STRONG FINANCIAL PERFORMANCE
+265% $2.6M $3.5M
EBITDA recovery | Underlying EBITDA (pre | Cashflow from operations |
continues and up 265% on | AASB 16) upper range of | excluding vendor earnout |
PCP | guidance* | payments |
*AGM guidance range of $2.4M - $2.7M
HRL • Investor Presentation | Half Year Results December 2019 | 10 |
H1FY20: RESULTS ON TRACK
- Revenue and profitability continues to improve following on from H2FY19
- Strong revenue growth from both existing and new services lines across HAZMAT, laboratories and software divisions
Half Year Results - Revenue
$17,000,000 | ||||
$16,500,000 | ||||
$16,000,000 | ||||
$15,500,000 | ||||
$15,000,000 | ||||
$14,500,000 | ||||
$14,000,000 | ||||
$13,500,000 | ||||
$13,000,000 | ||||
$12,500,000 | ||||
1st half | 2nd half | 1st half | 2nd half | 1st half |
FY2018 | FY2018 | FY2019 | FY2019 | FY2020 |
- Performance still weak in Geotech division
- Well placed to continue momentum into the seasonally stronger 2nd half. Historically revenues have been split 35/65 1st half to 2nd half
- FY20 broker consensus* $6.975m EBITDA
$5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000
$500,000 $-
Half Year Results - EBITDA
1st half FY2018 | 2nd half | 1st half FY2019 | 2nd half | 1st half FY2020 |
FY2018 | FY2019 |
EBITDA | EBITDA (Adjusted for AASB 16) | ||
*Canaccord Genuity $6.9m 17/10/2019, Morgans $7.1m 17/10/2019, Bell Potter $7.1m 12/12/2019, Taylor Collison $6.8m 29/11/2019
* FY2018 figures are on a pro-forma basis including the full 12-month trading results for Analytica.
HRL • Investor Presentation | Half Year Results December 2019 | 11 |
MARGIN PERFORMANCE RECOVERED
EBITDA Margins of HRL Peer Group (last 12 months)
25%
20%
15%
10%
5%
0%
HRL | ALS | Applus | Bureau Cardno Eurofins Intertek Mistras | SGS |
Veritas |
Source: Latest 12-month results from publicly released reports
HRL • Investor Presentation | Half Year Results December 2019 | 12 |
CASH FLOW
H1 FY20 | H1 FY19 | H1 FY20 | |||
$000's | $000's | $000's | |||
(Pre AASB 16)2 | (Pre AASB 16)2 | (Post AASB 16)2 | |||
EBITDA | 2,600 | 712 | 3,080 | ||
Working capital movements | 1,571 | 106 | 1,562 | ||
Income tax payments | (505) | (884) | (505) | ||
Net interest costs | (138) | (15) | (196) | ||
Operating cash flows generated | 3,528 | (81) | 3,941 | ||
CAPEX investments | (501) | (741) | (501) | ||
Investments in Food Lab joint venture | (135) | - | (135) | ||
Analytica earn out payments | (2,584) | - | (2,584) | ||
Bank debt/lease repayments | (88) | (495) | (501) | ||
Net increase/(decrease) in cash | 220 | (1,317) | 220 | ||
Opening cash | 1,031 | 5,393 | 1,031 | ||
FX movements | 5 | 135 | 5 | ||
Closing cash | 1,256 | 4,211 | 1,256 | ||
c
Operating cash flow up $3.6M
- 265% increase in EBITDA
- Strong debtor recovery
- Disciplined working capital management
- Lower tax payments due to weaker FY2019
Analytica earn out complete
- Final earn out payment made in Nov 2019
- Total of $11M NZD paid through CY2019
- Funded through bank facilities and internal cash flow
- 2nd half cash flows available for capital investment and debt reduction
HRL • Investor Presentation | Half Year Results December 2019 | 13 |
DEBT METRICS
December | |
2019 | |
Banking Covenants | |
Debt service cover (min >1.5 times) | 4.2 times |
Debt to EBITDA (max 200%) | 82% |
Debt/Equity Mix | |
Net Debt | $3.7M |
Total Equity | $26.3M |
Bank Facilities | |
Total available facilities | $8.4M |
Total undrawn facilities | $3.5M |
Bank Facilities Maturity Profile
(total facility amounts)
$9,000,000 | |||||
$8,000,000 | |||||
$7,000,000 | |||||
$6,000,000 | |||||
$5,000,000 | |||||
$4,000,000 | |||||
$3,000,000 | |||||
$2,000,000 | |||||
$1,000,000 | |||||
$0 | |||||
June 2020 | June 2021 | June 2022 | June 2023 | June 2024 | |
Bank overdrafts | Amortising bank loans | Equipment financing |
(no expiry, subject to annual review)
HRL • Investor Presentation | Half Year Results December 2019 | 14 |
CONTACTS AND MORE INFORMATION
Steven Dabelstein | CEO +61 405 770 166 steven.dabelstein@hrlholdings.com
Michael Harvey | CFO +61 409 334 366 michael.harvey@hrlholdings.com
www.hrlholdings.com
HRL • Investor Presentation | Half Year Results December 2019 | 15 |
APPENDIX A
DETAILS ON NON-OPERATING PROFIT
ADJUSTMENT | DESCRIPTION |
Analytica earn-out expense | The Analytica vendors achieved the full earn-out profit target resulting in the full earn-out payment of NZ$11,000,000. Payment of |
the earn-out consideration was contingent on ongoing service of certain key staff and was recognized progressively over the service | |
period. The expense recognized in HY2019 was $2,157,570 | |
Amortisation of intangible assets arising from | The excess purchase price over the value of both the tangible assets and goodwill acquired during the acquisitions of Analytica, |
acquisitions | Morrison Geotechnic and OCTFOLIO has been allocated against specific identifiable intangible assets. These intangible assets are |
being amortised over a 2 - 5 year period. | |
Equity accounted share of profits | Both Food Lab Pacific Limited and CAIQTest (Pacific) Limited remain at an early phase of development and accreditation. |
Lapsed performance shares | In July 2018 HRL introduced a long term incentive plan for management. The performance conditions of these instruments were |
not met and the performance shares have now lapsed in full. The value of these performance shares was recognized as an | |
expense in the income statement over the vesting period. | |
HRL • Investor Presentation | Half Year Results December 2019 | 16 |
APPENDIX B
AASB 16 "LEASES" IMPACTS
INCOME STATEMENT | H1 FY20 |
$000's | |
Revenues | 16,280 |
Other expenses (excluding building lease expenses, interest, deprecation and amortization) | (13,200) |
Underlying EBITDA (post AASB 16) | |
Right-of-use asset amortization expense | |
Interest on leased premises liabilities | |
Underlying EBITDA (pre AASB 16) | |
Operating depreciation and amortisation | (1,075) |
Net interest expense | (132) |
Underlying profit before tax | 1,393 |
Operating income tax | (337) |
Underlying profit after tax | 1,056 |
Non-operating adjustments | |
Analytica earn-out expenses | (2,158) |
Amortisation of intangible assets arising from acquisitions | (1,488) |
Lapsed performance shares | (21) |
Share of loss - equity accounted investments | (268) |
Non-operating income tax | 150 |
Statutory profit after income tax | (2,728) |
c
Income Statement Changes
- Lease costs associated with premises are now reclassified as amortization and interest expense
- Lease costs were previously shown as rent expenses
- EBITDA calculated under AASB 16 is $480k higher
- Underlying and statutory profit remain unchanged
HRL • Investor Presentation | Half Year Results December 2019 | 17 |
APPENDIX B
AASB 16 "LEASES" IMPACTS
Cash Flow Statement | H1 FY20 | H1 FY20 |
$000's | $000's | |
(Pre AASB 16) | (Post AASB 16) | |
Receipts from customers | 19,217 | 19,217 |
Payments to suppliers and employees | ||
Net interest costs | ||
Income tax payments | (505) | (505) |
Operating cash flows generated | 3,528 | 3,941 |
CAPEX investments | (501) | (501) |
Investments in Food Lab joint venture | (135) | (135) |
Analytica earn out payments | (2,584) | (2,584) |
Bank debt/lease repayments | ||
Net increase/(decrease) in cash | 220 | 220 |
Opening cash | 1,031 | 1,031 |
FX movements | 5 | 5 |
Closing cash | 1,256 | 1,256 |
c
Cash Flow Changes
- Lease payments associated with premises are now reclassified as principal and interest payments
- Lease payments were previously shown as payments to suppliers
- Operating cash flows under AASB 16 are $413k higher
- Financing cash flows under AASB 16 are $413k lower
HRL • Investor Presentation | Half Year Results December 2019 | 18 |
APPENDIX B
AASB 16 "LEASES" IMPACTS
Balance Sheet | H1 FY20 | H1 FY20 |
$000's | $000's | |
(Pre AASB 16) | (Post AASB 16) | |
Assets | ||
Plant and Equipment | ||
Right of use assets | ||
Other assets | 29,848 | 28,567 |
TOTAL ASSETS | 36,713 | 36,713 |
Borrowings | ||
Lease liabilities | - | 1,381 |
TOTAL LIABILITIES | 26,299 | 26,299 |
c
Balance Sheet Changes
- Bank financed equipment under finance lease/hire purchase style arrangements are now reclassified as a right-of-use asset.
- Lease arrangements for building premises are now recognized as a right- of-use asset and a corresponding amortizing lease liability
- Bank equipment financing is now reclassified as a lease liability
HRL • Investor Presentation | Half Year Results December 2019 | 19 |
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HRL Holdings Ltd. published this content on 07 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 February 2020 23:12:06 UTC