MDM Engineering Group Limited Merger with Sedgman and HY Financial Results Listen Design Deliver Deliver Listen Design Listen Del Listen Design Deliver Deliver Listen Design Deliver Design Deliver Listen Strictly Private and Confidential Listen Design Deliver Listen Tharisa, South Africa, August 2012 For personal use only
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MDM Engineering Group Limited
Merger with Sedgman and HY Financial Results
Listen Design Deliver
Deliver Listen Design Listen Del
Listen Design Deliver
Deliver Listen Design Deliver
Design Deliver Listen
Strictly Private and Confidential
Listen Design Deliver Listen Tharisa, South Africa, August 2012
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Disclaimer
The content of this promotion has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000. Reliance on this promotion for the purpose of engaging in any investment activity may expose an individual to a significant risk of losing all of the property or other assets invested.
These presentation slides (the “Slides”) do not comprise an admission document, listing particulars or a prospectus relating to MDM Engineering Group Limited (“the Company”) or any subsidiary of the Company, do not constitute an offer or invitation to purchase or subscribe for any securities of the Company and should not be relied on in connection with a decision to purchase or subscribe for any such securities. The Slides and the accompanying verbal presentation do not constitute a recommendation regarding any decision to sell or purchase securities in the Company.
The Slides and the accompanying verbal presentation are confidential and the Slides are being supplied to you solely for your information and may not be reproduced or distributed to any other person or published, in whole or in part, for any purpose. No reliance may be placed for any purpose whatsoever on the information contained in the Slides and the accompanying verbal presentation or the completeness or accuracy of such information. No representation or warranty, express or implied, is given by or on behalf of the Company, Canaccord Genuity Limited or their respective shareholders, directors, officers or employees or any other person as to the accuracy or completeness of the information or opinions contained in the Slides and the accompanying verbal presentation, and no liability is accepted for any such information or opinions (including in the case of negligence, but excluding any liability for fraud).
The Slides contain forward-looking statements, which relate, inter alia, to the Company’s proposed strategy, plans and objectives. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the control of the Company that could cause the actual performance or achievements of the Company to be materially different from such forward-looking statements. Accordingly, you should not rely on any forward-looking statements and the Company accepts no obligation to disseminate any updates or revisions to such forward-looking statements.
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The Slides and their contents are directed only at persons who fall within the exemptions contained in Articles 19 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (such as persons who are authorised or exempt persons within the meaning of the Financial Services and Markets Act 2000 and certain other persons having professional experience relating to investments, [certified high net worth individuals,] high net worth companies, unincorporated associations or partnerships, and the trustees of high value trusts [and self-certified sophisticated investors]) and persons to whom distribution may otherwise lawfully be made. Any investment, investment activity or controlled activity to which the Slides relates is available only to such persons and will be engaged in only with such persons.
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Persons of any other description, including those that do not have professional experience in matters relating to investments, should not rely or act upon the Slides.
The Slides should not be distributed, published, reproduced or otherwise made available in whole or in part by recipients to any other person and, in particular, should not be distributed to persons with an address in the United States of America, Australia, the Republic of South Africa, the Republic of Ireland, Japan or Canada or in any other country outside the United Kingdom where such distribution may lead to a breach of any legal or regulatory requirement. No securities commission or similar authority in Canada has in any way passed on the merits of the securities offered hereunder and any representation to the contrary is an offence. No document in relation to the Placing has been, or will be, lodged with, or registered by, The Australian Securities and Investments Commission, and no registration statement has been, or will be, filed with the Japanese Ministry of Finance in relation to the Placing or the Shares. Accordingly, subject to certain exceptions, the Shares may not, directly or indirectly, be offered or sold within Canada, Australia, Japan, South Africa or the Republic of Ireland or offered or sold to a resident of Canada, Australia, Japan, South Africa or the Republic of Ireland.
The Securities have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “US Securities Act”) or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered or sold within the United States or to, or for the account or benefit of, any US Person as that term is defined in Regulation S under the US Securities Act. The Company has not been registered and will not register under the United States Investment Company Act of 1940, as amended. The Slides and their contents are confidential and should not unless otherwise agreed in writing by Canaccord Genuity Limited be copied, distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person. Canaccord Genuity Limited, which is authorised and regulated by the Financial Services Authority, is advising the Company and no one else in relation to the proposed Placing and Admission and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Canaccord Genuity Limited. Any other person should seek their own independent legal, investment and tax advice as they see fit. Canaccord Genuity Limited’s responsibilities as the Company’s Nominated Adviser under the AIM Rules will be owed solely to the London Stock Exchange plc and not to the Company, to any of its directors or any other person in respect of a decision to subscribe for or acquire shares or other securities in the Company. Canaccord Genuity Limited has not authorised the contents of, or any part of, the Slides and no representation or warranty, express or implied, is made by as to any of its contents.
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Recommended Merger with Sedgman
HY Results
Appendix: Overview of MDM
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Transaction Overview
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• MDM and Sedgman Limited (Sedgman) have agreed to merge via a recommended takeover offer under which
Sedgman will acquire all of the shares in MDM (the Offer, or the Transaction)
• Established in 1979 and listed on the ASX in 2006, Sedgman is a leading provider of mineral processing and
associated infrastructure solutions to the global resources industry
• Offer Price of £1.81 cash per MDM share1,2 represents
− MDM equity value (undiluted) consideration of £67.9 million (US$109 million)
− 23% premium to one-month VWAP
− cash consideration provides immediate liquidity for MDM Shareholders
− certainty of value for MDM Shareholders
• In addition, MDM shareholders will receive an interim dividend of US 8.0 cents per share payable in January 2013
• The Offer Price may be adjusted subject to an agreed level of cash and working capital at completion. Details of
the adjustment will be disclosed in the Notice of Meeting to be despatched to MDM Shareholders
Note 1: certain Key Shareholders of MDM will be offered a combination of cash (70%) and shares in Sedgman (30%) equivalent to the Offer Price
Note 2: Sedgman will make a separate offer for MDM’s employee options
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Transaction Process
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• MDM and Sedgman have entered into a Merger Implementation Agreement (MIA) to progress the Offer
• The Board of MDM unanimously recommends that MDM shareholders vote in favour of the Offer
• Shareholders representing approximately 25% of the issued ordinary shares of MDM have executed voting and
escrow deeds, and a further 40% of MDM shareholders intend to enter into such agreements, pursuant to which
these shareholders undertake vote in favour of the Offer
• The Offer is conditional upon:
− MDM shareholder approval – 75% of votes cast (Meeting of Shareholders to be held on or around 18
December 2012);
− satisfaction of certain Conditions Precedent contained in the MIA; and
− South African regulatory approvals, including approval by the relevant competition authorities
• Transaction expected to close in March 2013
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Transaction Rationale
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• The Offer Price represents an attractive premium to recent trading prices of MDM:
– 8.7% premium to MDM’s closing price on 27 November 2012
– 23.0% premium to the one-month VWAP
– 21.6% premium to the three-month VWAP
• 100% cash consideration provides immediate liquidity and certainty of value
• Crystallises positive near term outlook for MDM
• Risk mitigation: the merged Sedgman-MDM business will have an enhanced balance sheet with improved
access to funding facilities, thereby providing the capacity required to execute larger and increasingly
complex EPC execution projects
• The Board of MDM unanimously recommends that MDM shareholders vote in favour of the Offer
• Shareholders representing approximately 25% of the issued ordinary shares of MDM have executed
voting and escrow deeds, and a further 40% of MDM shareholders intend to enter into such agreements,
pursuant to which these shareholders undertake vote in favour of the Offer
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Timetable
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MDM announcement of the Offer on AIM Wednesday, 28 November 2012
Sedgman announcement of the Offer on ASX Wednesday, 28 November 2012
MDM Meeting of Shareholders to approve the Offer On or around, Tuesday, 18 December 2012
Expected receipt of South African regulatory approvals February 2013
Expected Transaction close March 2013
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Overview of Sedgman
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• Established in 1979, Sedgman is a leading provider of mineral processing and associated infrastructure solutions to
the global resources industry
• Listed on the ASX with ticker “SDM”; market capitalisation ~A$190m1
• Sedgman business units:
– Projects: engineering design, EPC, EPCM in the global coal and metalliferous markets
– Operations: operation of coal handling and processing plants (CHPP)
– 50/50 JV with Thiess (subsidiary of Leighton Holdings, a 33% shareholder in Sedgman) for design and construction
of CHPP projects in excess of $40m in value
• In FY2012, Sedgman recorded revenue of A$650.8m, EBITA (underlying) of A$64.0m, NPAT (underlying) of A$43.7m
• Sedgman has a strong balance sheet with net cash of A$65 million and unused debt facilities of approximately $148m2
• Merger with MDM is consistent with Sedgman’s strategy to increase its presence in Africa and exposure to precious
and base metals projects
Note 1: 217.6m ordinary shares on issue, last close of A$0.88 per share
Note 2: at 30 June 2012
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Recommended Merger with Sedgman
HY Results
Appendix: Overview of MDM
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HY Results Summary
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HY13 HY12 Change
Revenue US$m 78.9 19.8 298%
Gross Profit US$m 13.2 7.5 76%
EBITDA US$m 8.0 3.2 150%
Profit Before Tax US$m 8.1 3.3 145%
Earnings Per Share cps 15.94 6.51 145%
Interim Dividend cps 8.0 2.5 220%
Cash and equivalents US$m 20.1 11.9 69%
Note 1: For the 6 months ending 30 September respectively
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Historic Financial Data
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HY Results Commentary
• Record HY revenue of US$78.9 million
• Maintained healthy GP Margin of 16.8%
• EBITDA of US$8.0 million, up 150%
• Second half FY13 will see improved conversion to cash
– Project completion bonuses earned in 1H FY13 will be received early in the second half
• Efficient delivery of execution projects – on time, within budget
– Tharisa 3.6 mtpa chrome and PGM concentrator plant commissioned in Sep 2012; EPC fixed price contract valued in
excess of US$130 million
• Continue to see strong demand for gold and base metals projects
– Continuous demand for project tenders and feasibility studies
– MDM’s exposure to gold projects backed by high quality mining companies has insulated MDM from the downturn
experienced by some competitors
• Multiple execution projects in progress, with a number of Pre-Feasibility and Bankable Feasibility Studies currently being
undertaken creating the next execution project pipeline
• Current and future order book circa US$800-900 million
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Project Visual Update
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Tarkwa, Ghana, commissioning, January 2012 Tarkwa, Ghana, commissioning, January 2012
Camrose, DRC, DMS 1 plant, March 2012 Camrose, DRC, DMS 1 plant , May 2012
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Project Visual Update
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Kalagadi, South Africa, August 2012 Kalagadi, South Africa, August 2012
Tharisa, South Africa, August 2012 Tharisa, South Africa, August 2012
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Recommended Merger with Sedgman
HY Results
Appendix: Overview of MDM
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About MDM Engineering
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o Mineral Process Engineering & Project Management company
o Providing engineering & project services to the mining and resources industry
o Market leader in EPCM & EPC contracting
o Significant project record in Africa completed by core team – over 55 projects
o Strong track record of converting feasibility studies to execution contracts
o Strong and committed management team with a high level of ownership
o Experienced and high quality team with a long standing track record
o Growth forecasts supported by contracted and committed projects
o Geared for organic and strategic growth (projects & regions)
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History of MDM
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o MDM has a long standing reputation for excellence in
process, design, project management, construction
and commissioning of minerals projects in Africa
– Recognised leader in the delivery of fit for purpose
metallurgical plants, particularly in the precious
metals sector
– Completed 66 bankable feasibility studies and
constructed over 55 metallurgical plants
o MDM was formed when the assets of its predecessor
MDM (Pty) Ltd. which was founded in 1989, were
acquired out of liquidation in February 2006
o New management team led by George Bennett and
Martin Smith has provided the commercial acumen
and client relationships to deliver sustained profitability
o On May 12, 2008 MDM was listed on the London
Stock Exchange AIM Market
o Post-listing, MDM’s execution capabilities have
continued to grow. MDM is now delivering multiple
execution projects in excess of $150m for Tier 1 clients
2011 2010 2009 2008 2007 2006 2012
MDM is established by George Bennett
IPO on the AIM market of the
London Stock Exchange
Martin Smith appointed CEO
MDM reaches $36 million in revenue
and $11 million in EBITDA
Awarded $150 million Tharisa Project
Awarded Ezulwini Gold and Uranium Projects
($87 and $59 million)
FY12 revenue $89m with EBITDA $7m
Awarded $60 million Banro Project
HY 13 revenue $79m with EBITDA $8m, Merger with Sedgman
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Corporate Structure
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Top Shareholders Ownership
9-0 Trust 23.79%
Pipestone Capital 18.75%
Emirate Investments Limited 16.78%
Henderson Global Investors Ltd 9.33%
Alpine Nominees Limited 7.56%
Alchemy Holdings 5.90%
Board Position
Bill Nairn Non-Executive Chairman
Martin Smith CEO
George Bennett Executive Director
Dominique De La Roche Financial Director
Mark Summers Non-Executive Director
Capital Structure
Share price: £1.67 / US$2.91
Ordinary shares (m) 37.5
Market Cap (undiluted) £62.4m / US$100.3
Cash (30 Sep 12) £12.5m / US$20.1
Enterprise value £49.9m / US$80.2
Options (m) 3.8
Share Price Chart
Note 1: USDGBP exchange rate of 0.622
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Culture and Strategy
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o Culture built on rich history of executing projects in Africa
o Proud of our technical expertise in design and process engineering
– Every plant designed and built by MDM has achieved or exceeded nameplate
throughput
o Appreciation of African construction risk and country specific risk
o Target studies from scoping all the way through to BFS/DFS
o Strong focus on studies achieving project financing (c. 95% historic financing rate)
o Targeted strategy of converting studies into execution projects
– Strong source of execution work
– Detailed project knowledge ensures execution risk is mitigated
– Repeat work
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Client Profile
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o MDM’s traditional client base has consisted primarily of mid-cap miners with African projects which typically do not have
the in-house capabilities to develop these projects alone
o MDM has recently increased its exposure to large international players such as African Barrick Gold, Gold Fields Limited
and ENRC
o The following provides an overview of MDM’s largest customers: