BY WORKING TOGETHER WE CAN MAKE A DIFFERENCE August 2013 The - - PowerPoint PPT Presentation

BY WORKING TOGETHER WE CAN MAKE A DIFFERENCE

August 2013

E&A Limited

The Journey To Date

“Our Core Values”

E&A Limited is a high yield publicly listed investment company focused on identifying opportunities and investing funds in order to create wealth by delivering outstanding value to all its stakeholders. E&A Limited’s core values are :

• We care about our people, customers, contractors, suppliers and our

shareholders;

• We value stakeholder relationships and aim for fairness in all our

dealings; and

• We partner seeking to build long-term commercial relationships where all

stakeholders benefit. “The Journey To Date”

E&A Limited

“Background”

• E&A Limited operates 8 wholly owned subsidiaries providing specialist engineering

services across the mining, oil and gas, defence, water and energy sectors.

• In 1997, we established Equity & Advisory to invest “EQUITY” in businesses with

development potential and to provide merger, acquisition and strategic advisory services “ADVISORY” to Government, public and large private enterprises.

• By 2007 when the parent company of Equity & Advisory, E&A Limited was listed
• ur firm had invested in six operating businesses. These included two Iron Triangle

businesses Louminco an outsourced procurement provider of rotable spares to OneSteel and BHP Billiton and Whyalla Fabrication.

• When we floated E&A Limited on the ASX the group turnover was $85m and nearly

half of this turnover was generated in the Iron Triangle by Louminco and Whyalla

• Fabrication. At that time E&A Limited’s subsidiaries were focused on the pending

expansion of Olympic Dam.

E&A Limited

“The Journey To Date”

“Today”

E&A Limited

• 50

100 150 200 250 FY08 FY09 FY10 FY11 FY12 FY13

Revenue by Financial Year ($ m)

• Next week we will report a turnover in the order of $200m a compound 18%

growth year on year. Below is a snapshot of our current performance.

• FY13 2nd Half Forecast Revenue

“The Journey To Date”

Key EAL Statistics Ticker Code EAL Market Capitalisation ($m) 70 Shares on issue (m) 109.6 Share price (12 mnth range) (c) 16.0-78.5 TSR (rolling 12 mnths to 31 Dec 12) (%) 182 Net tangible assets per share (c) 6.5 Interim dividend (cents fully franked), payable 14 June 2013 2.5 Full year FY12 dividend (cents fully franked) 4.0 Revenue (circa $m) 200 Interest cover (times) 6.1

“Current Businesses”

E&A Limited

Ottoway Engineering

• Ottoway Engineering is a supplier and installer of

pipes for the petro-chemical, oil and gas, mining, water and defence industries.

• Involved in all aspects of turn key project management

including engineering, procurement, manufacture, fabrication, machining, installation and maintenance.

• Extensive manufacturing and fabrication capabilities

within modern 5000m2 production facility in Adelaide and a 3000m2 facility in Dalby.

• Ottoway has experienced substantial growth and the
• utlook for pipe spooling work from South Australia,

Queensland and Western Australia is strong.

• Current annual turnover:  $70m

“The Journey To Date”

“Current Businesses”

E&A Limited

ICE Engineering & Construction

• ICE Engineering supplies electrical services and contract labour to

the electrical and instrumentation sector of the water, mining, oil and gas sectors.

• Electrical engineering consultancy and project management
• Design of electrical control systems for heavy industry,

manufacturing and commercial installations

• Industrial and Commercial electrical instrumentation

installation

• Communication and data systems installation
• High Voltage transformer , switchgear and cable installation
• High Voltage switchyard maintenance and repairs
• Hazardous area design, installation and inspection
• Preventative maintenance programs and breakdown repair
• Commissioning
• SAMFS approved fire system installer
• ICE operates offices in Adelaide, Whyalla, Roxby Downs and

Perth and continues to win project work nationally.

• Current annual turnover:  $40m

“The Journey To Date”

“Current Businesses”

E&A Limited

E&A Contractors

• E&A Contractors provides a range of steel fabrication and

structural engineering services in Whyalla and Mt Isa.

• E&A Contractors operates from a 10,000 m2 facility with overhead

lifting capacity up to 100 tonnes.

• Capabilities include:
• Project Management;
• Heavy Engineering Design, Fabrication and erection
• Wind tower Fabrication;
• On-site construction;
• Shutdown maintenance and repair; and
• Sheet metal and light machining.
• Current annual turnover:  $40m

“The Journey To Date”

“Current Businesses”

E&A Limited

Blucher Australia

• Blucher supplies high quality stainless steel products

for both drainage and supply systems in industrial, commercial and residential applications

• Supplying Blucher stainless steel drainage and Blucher

pressure systems to the Australian, New Zealand and South East Asian markets for ten years.

• Based in Adelaide, South Australia, our products are

distributed throughout the Oceanic Region by sales representatives, retail chains promoting a high quality product for use and excelling in demanding situations.

• Blucher is positioned for growth as a consequence of

the expanded geographic representation, product range and industry wide investment in water infrastructure.

• Current annual turnover: $10m

“The Journey To Date”

“Current Businesses”

E&A Limited

Fabtech

• An Australian owned company, Fabtech is a

national leader in geomembrane applications for liquid containment.

• Established in 1986 Fabtech is a national

leader in the provision of flexible geomembrane liners and floating covers for dams, reservoirs & tunnels to the mining,

• il and gas, potable and waste water

containment and agricultural industries.

• Fabtech has established operations in South

East Queensland and has developed and patented large geomembrane storage tanks which are utilised to store water at a number of South East Queensland coal seam gas facilities.

• Current annual turnover:  $40m.

“The Journey To Date”

“Current Businesses”

E&A Limited

Quarry & Mining Manufacture

• QMM offers a comprehensive range of design,

manufacture, fabrication and machining services to the quarry, recycling, asphalt, concrete and mining sectors, including:

• Plant design and upgrade;
• Repairs and maintenance (on-site & in

workshop);

• Buying & Selling of crushing and screening

equipment;

• On-site breakdown and shutdown labour –

particularly mine maintenance by highly skilled on-site “flying squad” servicing aboveground and underground shutdown labour requirements for the mining industry; and

• Spare parts manufacture and supply.
• Current annual turnover:  $15m.

“The Journey To Date”

“Current Businesses”

E&A Limited

Heavymech

• Heavymech is a general engineering

company which began in 1968 and has a broad capability for all types of work pieces, namely, casting, fabrication, forging, plate and bar stock.

• The main machine tools include

horizontal and vertical boring, radial drilling, milling, slotting, cylindrical and slideway grinding and honing – these service medium to large size work pieces plus general purpose machine tools.

• Current annual turnover:  $7m

“The Journey To Date”

“Current Businesses”

E&A Limited

Human Resources :

• More than 800 employees

Skills Quantity Skills Quantity Management/Supervision 45 Boilermakers 100 Safety 7 Machinists 50 Quality 10 Fitters 85 Engineers 30 Electricians 90 Draftsmen 18 Trade Assistants 50 Technical Officers 14 Apprentices 21 Welders 200 Finance /Admin 30 Geomembrane welders 80

“The Journey To Date”

“Major Clients”

E&A Limited ICE ENGINEERING & CONSTRUCTION OTTOWAY ENGINEERING E & A CONTRACTORS QMM Guidera O’Connor Santos Arrium (OneSteel) Fulton Hogan BHP Billiton Beach Siemens Holcim Arrium (OneSteel) Monadelphous Theiss Astec Kerman Contracting Citic Pacific Mining – Sino Iron BHP Billiton Metso Minerals Fluor BHP Billiton Caterpillar – Cavpower BHP Billiton McConnell Dowell Boral Transfield Services Theiss Built Environs Jeffries HEAVYMECH FABTECH BLUCHER AUSTRALIA EQUITY & ADVISORY Penrice Ostwald Bros Football Park, Adelaide Western Desert Rescources Ensign Melbourne Water Sydney Opera House Elders Limited SA Water SA Water 60% of Abattoirs across Australia Australian Railway Corporation Hunt Energy GELOR Dairy Farmers Karidis Corporation Leightons BHP Billiton Carlton Brewery Metrocorp NRG Flinders Origin Energy Cadbury Schweppes Best Doors Australia McKechnie Arrow Energy Victorian Desalination State Government Agencies Santos GELOR Woods Bagot

“The Journey To Date”

“Speed Humps”

• E&A Limited’s growth over the last six years has been challenging. When we

floated in 2007 our businesses expected that BHP Billiton would commit to the expansion of Olympic Dam in 2009. At that time, as is still the case, all of EAL’s engineering businesses had an exposure to Olympic Dam and were well poised to benefit from the expected expansion.

• In late 2007 I travelled with BHP Billiton and the Government to Chile and

inspected the Escondida and Spence Mines. That visit left me with the impression that our businesses needed to grow significantly in terms of safety, quality and absolute scale.

• In late 2008 we were all hit by the Global Financial Crisis and we were pushed

through most of 2009 and 2010 by our major clients “to do more for less”. At EAL we decided to drop our gross margins by 5% and as a consequence we compromised our profitability but maintained the cash flow to keep all of our people and the client relationships that are fundamental to our business.

E&A Limited

“The Journey To Date”

“More Speed Humps”

• During 2009 when the Olympic Dam expansion was first deferred we decided to go

West to pursue the growth opportunities in Western Australia . For EAL the greatest burden from the GFC was the failure of our largest client AE&E for whom we were doing power station construction work in the West. At the time they failed they

• wed us nearly $6m.
• By early 2010 we had ventured both West and East and had established fabrication
• perations in Dalby in SE Queensland to take advantage of the pending coal seam

gas boom. Our subsidiaries who were operating in the Darling Downs, Broken Hill and Wentworth were all adversely impacted by the wettest year on record. We still have an outstanding contract dispute arising in part from the unseasonal weather conditions incurred that year.

• From those speed humps we have learned a number of valuable lessons :-

 The critical importance of skilled leadership with commercial acumen  The value of diversity both in respect of services, geography and industry  The importance of sound banking relationships

• In adversity we have learned to think strategically and act decisively.

E&A Limited

“The Journey To Date”

“Criteria for Future Success”

• All of our clients require us to demonstrate the capacity to deliver work safely.
• Since our visit to Escondida the EAL subsidiaries have invested significantly in safe work
• practices. As a matter of principle each of my Managing Directors has an individual safety

contract with each of our employees. That safety contract directs and empowers with my specific authority the employee not to undertake any work that he has not been trained to

• do. It also directs the employee only to undertake work that he has been trained to do in

accordance with his training.

• This simple frame work, the associated training together with my requirement that either

the Managing Director or the most senior person on site travel with any injured individual to the doctor has dramatically improved our safety performance.

• The manager travelling with the injured person is also required to contact me on my

mobile directly. These initiatives have enabled the following extraordinary results :-  ICE 2200 days and a million hours without an LTI  Fabtech 1400 days and 800,000 hours without an LTI  Ottoway 2223 days and 1.4 million hours without an LTI  E&A Contractors more than 1100 days and 600,00 hours without an LTI

E&A Limited

“The Journey To Date”

“Invest Your Effort Where There is Opportunity”

• In order to achieve our growth objective of 20% per annum, E&A has invested in 5 industry

segments Mining, oil and gas, defence, water and energy, where it is confident of growth as a consequence of national and international demand.

• The best recent example of that strategy has been our decision to acquire the management

team and wind tower fabrication assets of RPG who went into administration late last year. This business has been established in our Whyalla premises at a capital cost of $8m. It is our view that the local demand for wind towers will exceed 100 towers per annum for the next seven years

• Our investment decisions have been influenced by local and national data on major projects.
• Over the last three years we have followed work opportunities into both Western Australia,

South East Queensland and more recently the Northern Territory.

E&A Limited

“The Journey To Date”

“Diversification”

E&A Limited WA $135.48B 52% NT $34.74B 13% QLD $75.26B 29% NSW $9.05B 3% SA $1.36B 1% VIC $4.4B 2%

Source: BREE April 2013 Mining Industry Major Projects

By State By Sector

“The Journey To Date”

“E&A Diversification”

E&A Limited

“The Journey To Date”

By Sector By State

“Ingredients for Long Term Growth”

E&A Limited

“The Journey To Date”

Organic growth

• Existing

businesses continue to develop

Acquisition

• Disciplined

and risk- averse acquisition and funding model

• Targeted

growth sectors

Partnering

• Company

culture of partnering to add value

E & A Way

• Governance
• Systems
• Reporting
• Financial

management

• Safety
• Engaged

Management Style

Alignment of Interests

Targeted 5 year earnings growth rate to 2018

• Shareholders
• Directors
• Management

“Continuous Improvement”

E&A Limited

• South Australian businesses need to pursue and deliver excellence in an

increasingly competitive market.

• Our clients demand safe work compliant with their quality standards

delivered on time and within budget. What we’re expected to deliver continues to change and each year we end up doing “more for less”

• Continuous improvement is critical to success.

“The Journey To Date”

“ Good better best,

Never let it rest, Till your good is better And your better is best” Furphy