Wajax Strategic Update March 2018
\\ Cautionary Statement Regarding Forward-Looking Information This presentation contains certain forward-looking statements and forward-looking information, as defined in applicable securities laws (collectively, “ forward-looking statements ”) . These forward-looking statements relate to future events or the Corporation’s future performance. All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward looking statements can be identified by the use of words such as “plans”, “anticipates”, “intends”, “predicts”, “expects”, “is expected”, “scheduled”, “believes”, “estimates”, “projects” or “forecasts”, or variations of, or the negatives of, such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved. Forward looking statements involve known and unknown risks, uncertainties and other factors beyond the Corporation’s ability to predict or control which may cause actual results, performance and achievements to differ materially from those anticipated or implied in such forward looking statements. There can be no assurance that any forward looking statement will materialize. Accordingly, readers should not place undue reliance on forward looking statements. The forward looking statements in this presentation are made as of the date of this presentation, reflect management’s current beliefs and are based on information currently available to management. Although management believes that the expectations represented in such forward-looking statements are reasonable, there is no assurance that such expectations will prove to be correct. Specifically, this presentation includes forward looking statements regarding, among other things, our updated Strategic Plan, including organic growth plans, goals and performance expectations for our ten major product and service categories, as well as our planned investments in staffing, inventory and infrastructure to support such growth; our acquisition strategy and criteria for evaluating potential acquisition targets in Canada and the U.S.; our plans to achieve further cost savings and efficiencies through the continued consolidation/optimization of “back office” functions; our plans to increase hiring and grow our sales and service teams; our expectation that, as we execute our updated growth strategy our operating leverage should improve; our goal of managing costs to deliver a target annual sales, general and administrative expense to revenue ratio of between 14.5% to 15.5%, regardless of future revenue levels; our plans to further reduce and consolidate/optimize our branch network, emphasize multi-purpose branch locations and to achieve a target annual facility cost to revenue ratio of between 2% to 2.5%; our planned implementation of a new enterprise resource planning solution, as well as the anticipated timing for completion of, and expected benefits of, such solution; our planned investment in customer support centers, the benefits of such centers and the expected operational date of our first major center; the guiding financial principles we intend to adhere to in executing our updated strategy; our target leverage ratio range of 1.5 – 2.0 times; our expectation that execution of our updated Strategic Plan will lead to higher per share cash flow generation and structurally higher EBITDA margins; and our expectation that improvement in our EBITDA margins will create meaningful shareholder value. These statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions regarding general business and economic conditions; the supply and demand for, and the level and volatility of prices for, oil, natural gas and other commodities; financial market conditions, including interest rates; assumptions regarding product or service market size and strength, and the adoption of certain emissions standards; our ability to execute our updated corporate strategy, including our ability to execute on our organic growth priorities, manage costs, complete and effectively integrate acquisitions and to successfully implement new information technology platforms, systems and software; our ability to realize the full benefits from our 2016 strategic reorganization, including cost savings and productivity gains; the future financial performance of the Corporation; our costs; market competition; our ability to attract and retain skilled staff; our ability to procure quality products and inventory; and our ongoing relations with suppliers, employees and customers. The foregoing list of assumptions is not exhaustive. Factors that may cause actual results to vary materially include, but are not limited to, a deterioration in general business and economic conditions; volatility in the supply and demand for, and the level of prices for, oil, natural gas and other commodities; a continued or prolonged decrease in the price of oil or natural gas; fluctuations in financial market conditions, including interest rates; the level of demand for, and prices of, the products and services we offer; levels of customer confidence and spending; market acceptance of the products we offer; termination of distribution or original equipment manufacturer agreements; unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications or expectations, cost escalation, our inability to reduce costs in response to slow-downs in market activity, unavailability of quality products or inventory, supply disruptions, job action and unanticipated events related to health, safety and environmental matters); our ability to attract and retain skilled staff and our ability to maintain our relationships with suppliers, employees and customers. The foregoing list of factors is not exhaustive. Further information concerning the risks and uncertainties associated with these forward looking statements and the Corporation’s business may be found in our Annual Information Form for the year ended December 31, 2017, filed on SEDAR. The forward-looking statements contained in this presentation are expressly qualified in their entirety by this cautionary statement. The Corporation does not undertake any obligation to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise unless so required by applicable securities laws. 2 Wajax Strategic Update (March 2018)
\\ Contents Page Wajax Overview 4 Sustainable Revenue Growth 9 Operating Leverage 18 Investing in Key Infrastructure 21 Optimized Capital Structure 25 Creating Shareholder Value 28 3 Wajax Strategic Update (March 2018)
Wajax Overview
Who We Are \\ Founded in 1858, Wajax is one of Canada’s longest -standing and most diversified industrial products and services providers offering: National Footprint – 104 Branches • Broad range of products and services • Best-in-class manufacturing partners (OEM’s) • Diverse market experience across many industries • ~2,400 total employees ~ 750 Wajax operates an integrated distribution system providing sales, parts and services to a broad range of customers in diverse SKILLED TECHNICIANS sectors of the Canadian economy including construction, forestry, mining, industrial/commercial, oil sands, transportation, metal ~ 650 processing, government/utilities and conventional oil/gas. SALES & SUPPORT PROFESSIONALS ~ 300 PARTS & SERVICE SUPPORT 5 Wajax Strategic Update (March 2018)
\\ Diverse Revenue Base $1.32 billion 2017 revenue $1.22 billion 2016 revenue 8.0% YoY increase 6 Wajax Strategic Update (March 2018)
Wajax Transformation \\ LEGACY WAJAX “ONE WAJAX” • • Transitioned to “One Wajax” starting in 2016, Prior to the 2016 reorganization, Wajax operated three business segments that served common increasing operating leverage and asset end markets utilization, streamlining the customer and manufacturer relationship while improving our • Each legacy business operated its own “back - ability to drive change office”, sales, branch and support infrastructure, • Successfully reduced our annual administration managed its own OEM relationships and costs by ~$20 million product/service portfolios • • Legacy structure did not provide a competitive Positioned to execute our new strategy to further advantage. Change was required to lower costs, enhance growth, customer service, operational improve consistency of customer experience, efficiency and leverage technology investments drive higher growth and improve asset utilization. to improve national sales and service capabilities 7 Wajax Strategic Update (March 2018)
Why Invest Today? \\ SUSTAINABLE - Primary focus on organic growth REVENUE - Category specific investment thesis GROWTH - Secondary focus on acquisitions 1 MAXIMIZE - Disciplined capital deployment • - Leverage restructuring efficiencies OPERATING SHAREHOLDER - Improved earnings durability 5 2 • - Tight management of costs LEVERAGE VALUE - Shareholder/Management alignment • - Higher asset utilization 4 3 • OPTIMIZED INVESTING - Drive working capital efficiency - Implement new technology • CAPITAL IN KEY - Maintain maximum liquidity - Branch network optimization • - Manage leverage targets STRUCTURE INFRASTRUCURE - New Customer Support Centers 8 Wajax Strategic Update (March 2018)
1. Sustainable Revenue Growth
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