Hydrodec Group plc 2014 Results Presentation Re-emerging Stronger - - PowerPoint PPT Presentation

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Hydrodec Group plc

2014 Results Presentation

Re-emerging Stronger

Ian Smale, Chief Executive Chris Ellis, Chief Financial Officer 24 March 2015

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2014 performance highlights

Re-emerging stronger with a sound base platform for growth Final and comprehensive insurance settlement for Canton; impacts results but still positive with improvement in key measures Full year trading with OSS, plus oil trading in US, delivers sales up 31%; income up 36% Despite challenging market conditions, gross margin and Operating EBITDA both increased after accounting for business interruption income Real strategic progress in technology – CEP UK license and collaboration; two new provisional patent applications Successful refinancing of US business to create an appropriate funding structure capable of supporting the development of the business, and a positive statement of intent

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Positive platform for growth

Canton: 6 ‘trains’ in 3 modules on site in situ; commissioning during April, with production building through May Feedstock in hand alongside an expect minimum 10% improvement in effective operating capacity. On track for 2015 at ca. 19m litres Young relocation to Southern Oil’s Re-refinery, Bomen – on track, on time Feedstock in hand and outsource schedule starts tolling with Southern Oil

• n 1 April

OSS – reacting to challenging environment Rationalised operations and cost; restructured business will focus on the customer and delivering a compliant, competitive, convenient offer UK re-refining – de-risked technical development; FEED in progress Classification as a Nationally Significant Infrastructure Project extends planning but provides more certainty on process and timing

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Business model – growth through two business streams

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2015 – strategic priorities

To deliver the rebuild and expansion of our transformer oil re-refinery at Canton, Ohio. To deliver the relocation of our Australian operations to the Southern Oil Re- Refinery, Bomen, New South Wales. Leverage and consolidate UK feedstock collection; drive OSS performance through re-structuring. Translate exclusive CEP technology licence into UK base oil re-refining plant through NSIP planning process. Relocate and reinforce technology programme to the UK; focus on distinctive yield and product quality in re-refining lubricant base oil. Work to ensure an appropriate UK regulatory framework to support investment. Identify and deliver value-chain consolidation opportunities in the UK; other

• ptions to deploy the business model.

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Financial Highlights

Impacted by full year OSS and insurance settlement

10 20 30 40 50 60 2011 2012 2013 2014 USD Millions Year Recycling Re-refining

Total Revenue

Target - to grow revenue year-on-year Performance: Total revenue up 36% to US$54.7m (2013: US$40.1m) despite margin based insurance income in US and pricing pressure in the UK with lower oil prices. Supplementary oil trading in US added 7.8m litres generating US$4.5m revenue Total oil sales grew 31% to 48.6m litres (2013: 37.0m litres) despite closure of Canton, driven by full year trading at OSS

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Insurance Settlement

2014 USD'000 Proceeds recognised in 2013 7,596 Proceeds recognised in 2014 9,658 Proceeds to be recognised in 2015 1,496 18,750 Recognised in 2014 9,658 Less asset disposal costs (409) Less insurance claim related costs (697) Net Income recognised in 2014 8,552

. Insurance proceeds

On 11 November 2014, Hydrodec and its insurers settled its insurance claim arising from the incident at Canton in December 2013. The total gross value of the claim was agreed at US$20m, which after deduction of property damage and business interruption insurance excesses

• f US$1.25m in aggregate,

resulted in cash payments of US$18.75m to the Group.

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Total volumes and gross margin

Total volumes

Total oil sales grew to 48.6 million in 2014, up 31% on 2013. Lost volume in Canton supplemented by traded oil of 7.8 million litres. Full year of OSS at 36.2 million litres.

10 20 30 40 50 60 2011 2012 2013 2014 Million Litres Year Recycling Re-refining 5 10 15 20 25 30 35 2011 2012 2013 2014 Margin % Year Re-refining Recycling

Gross margin

Comparison difficult due to business interruption income settlement. On a pro forma basis re- refining margin would have increased to 30% (2013: 23%) OSS contributed US$4.9 million gross margin at 14.4%, down from 16% in 2013.

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2014 Operating EBITDA

.

Key performance measure, non-statutory, reconciled to operating loss

Operating EBITDA

• 3.5
• 3
• 2.5
• 2
• 1.5
• 1
• 0.5

0.5 1 1.5 2 2011 2012 2013 2014 USD Million Year

USD’000 Operating EBITDA* 1,610 Growth costs (2,278) Depreciation (3,123) Amortisation (3,513) Share based payment costs (324) Foreign Exchange Loss (227) Statutory operating loss (7,855)

*Includes US$1.5 million (less associated lease rentals) from the gain on disposal of assets in Hydrodec (UK) Limited

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Canton – operational update

All three modules installed and being connected/wired All equipment and materials required for start up substantially onsite or available Expansion “trains” 1&2 (Module 1):

• Mechanically complete/partially powered; accessible for training
• Pre-commissioning from 5 April
• “oil in plant” from 4 May
• Production from 10 May

Replacement “trains” 3-6 (Modules 2&3):

• Pre-commissioning from 20 April
• “oil in plant” from 18 May
• Production from 20 May

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Canton – two trains, one module: old vs. new building and footprint

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Bomen – operational update

All plant successfully decommissioned at Young and transported to Southern Oil’s Re-refinery at Bomen, NSW. Plant re-configuration to fit Southern Oil site, re-connections, tank farm, piping, electrical and instrumentation is on track for end March re- commissioning and start up beginning of April. QA Laboratory transfer to Southern Oil completed. Operational staff transfer to Southern Oil underway and due to complete in first week of April. First Oil sales, after QA certification of initial oil production on schedule for April.

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In-situ, Bomen site, Southern Oil

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Bomen – view to relocated plant through new tank farm

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Delivering a strategy to grow the business

Targeting outstanding growth and profitability To drive returns and organic growth through profitable US and Australian transformer oil businesses To develop a general lubricant oil re-refining opportunity in the UK, including through supporting an appropriate UK regulatory framework for that investment To focus on reducing business, technology and financial risk through new and successful partnership models To secure our intellectual property, including through patent protection To drive business growth through identifying and delivering value-chain consolidation across the business models Drive performance, efficiency and growth with responsible balance sheet management and a relentless focus on EBITDA

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Contact

Hydrodec Group plc 6 Hay’s Lane London SE1 2HB United Kingdom +44 (0)20 3300 1643 www.hydrodec.com