Shaft Sinkers Investor Presentation - 19th July 2012 - Proactive ...

Presentation 19 July 2012
Alon Davidov
CEO
Chris Hall
CFO
Louis Germishuys
COO

Disclaimer
IMPORTANT INFORMATION
For the purposes of the following disclaimers, references to this “document” shall be deemed to include references to
the presenters’ speeches, the question and answer session and any other related verbal or written communications.
This document contains certain “forward-looking statements” with respect to the financial condition, results of
operations and businesses of Shaft Sinkers Holdings plc and certain of the plans and objectives of Shaft Sinkers
Holdings plc with respect to these items. Forward-looking statements are sometimes, but not always, identified by their
use of a date in the future or such words as
“anticipates”, “aims”, “due”, “could”, “may”, “should”, “expects”, “believes”, “intends”, “plans”, “targets”, “goal” or
“estimates”. By their very nature forward-looking statements are inherently unpredictable, speculative and involve risk
and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a
number of factors that could cause actual results and developments to differ materially from those expressed or implied
by these forward-looking statements. These factors include, but are not limited to, changes in the economies and
markets in which the Shaft Sinkers Group operates; changes in the regulatory and competition frameworks in which the
Shaft Sinkers group operates; changes in the markets from which the Shaft Sinkers group raises finance; the impact of
legal or other proceedings against or which affect the Shaft Sinkers group; technological developments; and changes in
interest and exchange rates. All written or verbal forward-looking statements,made in this document or made
subsequently, which are attributable to Shaft Sinkers Holdings plc or any member of its group or persons acting on their
behalf are expressly qualified in their entirety by the factors referred to above. Shaft Sinkers Holdings plc does not
intend to update these forward-looking statements.
This document is not an offer to sell, exchange or transfer any securities of Shaft Sinkers Holdings plc and is not
soliciting an offer to purchase, exchange or transfer such securities in any jurisdiction.
Neither Shaft Sinkers Holdings plc nor any member of its group or persons acting on their behalf shall have any liability
whatsoever for loss howsoever arising, directly or indirectly, from use of the information contained within this document
and neither Shaft Sinkers Holdings plc nor any member of its group or persons acting on their behalf makes any
representation or warranty, express or implied, as to the accuracy or completeness of the information contained within
this document.
Past performance of securities of Shaft Sinkers Holdings plc cannot be relied upon as a guide to the future performance
of securities of Shaft Sinkers Holdings plc.
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Presenters
Alon Davidov, CEO
– Business development for IMR since 2003 and non-executive
director of Samancor Chrome since 2005
– Previously FD of Bateman Litwin Kazakhstan
– Responsible for IMR’s investment in the Group in 2007 and
subsequent strategic oversight / development, has been a
director of Shaft Sinkers (Pty) since 2007
– Fluent Russian speaker
Chris Hall, CFO
– Joined Group in 2007 as CFO following 3 years as CEO of JSElisted
Excellerate Holdings
– Over 13 years' experience in the oil industry, FD of Total (SA)
with 7 years spent in France
– Qualified as a Chartered Accountant and spent 4 years postqualification
with PricewaterhouseCoopers and Ernst & Young
Louis Germishuys, COO
– over 24 years of international mining, sinking and contracting
experience
– Former head of operations at Shaft Sinkers in 2008, re-joined the
Group in May 2012 after heading up Aveng Grinaker-LTA Africa
International
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Agenda
• Summary financial highlights
• Summary operational highlights
• Financials
• Operational update
• Strategy
• Outlook
• Summary
4

Summary financial highlights
• 2011 Revenue up 24% to £226.5 million (2010: £183.1 million)
• 2011 Gross profit up 31% to £38.3 million (2010: £29.2 million)
– Gross profit margin 15.9% - 16.9%
• 2011 PBT before exceptional items up 29% to £18.5 million (2010: £14.2
million)
FY 2011 Highlights
£250,000
£200,000
£150,000
£100,000
£50,000
£0
2007 2008 2009 2010 2011
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Margin
Revenue
Profit before tax before exceptional items
1. 2011 IPO bonus 2010 contract provision and settlement
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Summary financial highlights cont’d
• 2011 Earnings per share before exceptional items 23.4p (2010: 18.3p)
• 2011 Final dividend paid 4.8p, making 7.2p for the year
• 31 December 2011 Net cash and cash equivalents of £6.1 million (2010:
£11.1 million)
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• Eurochem suspension of operations
• Year end order book £301 million
• Safety statistics improved
• Strong pipeline of tenders
Summary operational highlights
7

Segmental analysis
Revenue / PBT – by geography (1)
% 2010 2011
Revenue
South Africa 81% 81%
Rest of the World 19% 19%
100% 100%
£'000
2010 2011
Profit before tax - South Africa 11,877 11,800
Profit before tax – RoW 13,722 13,048
Profit before tax – Centralised overheads (8,890) (11,342)
Profit before income tax 16,709 13,506
Note:
(1) Results for Capstone, the former holding company of the Group.
Figures converted at average exchange rates. Results for underlying
Shaft Sinkers business consolidated from 1 April 2007
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KPIs
Gross margin %
16.9%
15.9%
2010
2011
Pre exceptional items
EBITDA/revenue
11.7%
12.4%
Pre exceptional items
EPS (pence)
20.81
23.43
2010
2011
2010
2011
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South African heritage expanding internationally
BLUE-CHIP CLIENT BASE
Current clients / projects
South Africa:
Impala
Lonmin
AngloGold
Historical clients / projects
Rio Tinto
Anglo American
Randgold
De Beers
Offices
Mauritius
The Netherlands
Kazakhstan
Cyprus
Dubai
Moscow
Johannesburg
Holding Company
Current projects
Historical projects
Offices
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Safety
• Awarded “Best in Safety Class” 2011 (SAIMM and AMMSA)
• Improved LTIFR 1.58 below benchmark of 3.88
• Snakes for Safety and Unplugged initiatives
• 1 fatality in 2011 – Lonmin Karee 3
• 1 fatality to date in 2012 – Impala 17
Lost time injury frequency rate
4.88
1.58
2010
2011
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Current projects South Africa
Styldrift
Moab
Hernic
Saffy Karee 3
Hossy
Impala 16 Impala 17
Leeuwkop
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BEE shareholder structure
• BEE shareholding Structure implemented in South Africa
• Beneficial for securing new contracts in South Africa
• Will assist the Group in meeting the requirements of some of its clients
under the South African Mining Charter
• Enhances the long-term sustainability of the business in South Africa
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International activities
• Russia – EuroChem
– Operations suspended December 2011
– Is being terminated with effect 21 April 2012
• India - Teesta II hydroelectric project
– Operations suspended October 2011
– Project virtually complete
• India – Hindustan Zinc Limited
– Contract awarded May 2012
– Mobilisation commenced – in process of site establishment
• METs projects underway in
– Peru
– Israel
– India
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Geographic diversification
• Established CIS team
• Gearing up Indian team
• Improved business development team
• Established role for international operations
• Risk Reward Matrix
• Efficient international structure to benefit group
• Key senior management hires
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Maintaining competitive advantage
• Sourcing and refurbishing winders
– Invested £2 million in winders in 2011
• Focus on expanding service offerings to clients
– Civils
– Raisebore/ Mechanised sinking
• Technological innovations for safer operations
– Automated kibble tipping
– Computerised signalling
• Exploring investment in laser shaft scanning system
– Opportunity to enhance client product and service offering
• Improved IT systems across the company
• Measures will improve profitability and safety
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Strategic direction
• Increase presence outside of SA by pursuing geographical expansion
• Enhance our competitive position by increasing our operating efficiencies
• Grow organically through existing client base
• Focus on winning value-enhancing tenders
• Leverage and expand our integrated service offering
• Continue to emphasise safety
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Order book /outlook
• Order book 31 Dec 2011 £301 million
• Tenders > £1 billion
• Target is 8-10 new contracts over five years
• 2 major new contracts this year
• Record level of enquiries
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Summary
• Strong financial performance
• International development continues despite Eurochem
• Tender pipeline strong and beginning conversion to contracts
• Business development process and team sharpened
• Business poised to deliver with no capacity constraints
• Committed to a progressive dividend policy
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QUESTIONS?

APPENDICES

The Business – Vertical shaft sectional layout
• Shafts typically either vertical
or declined dependent on
depth and cost
• Vertical shafts more economic
than decline shafts as depth
increases
• Additional associated shafts
for waste, ore and ventilation
• Very large scale – typically
16km of development
– Vertical – 5km
– Horizontal – 9km
– Associated – 2km
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The business – activities
Shaft sinking
Large underground
excavation
Shaft infrastructure /
maintenance
METS*
Impala 17, main shaft IPS station
Palabora, storage hall
(16x60x20m), Drakensberg
(16x200x45m)
Black Mountain, equipping of shaft
* Mining and Engineering Technical
Services – full EPCM solutions
Underground construction
Civil and mining tunnelling
Contract mining
Completed Project
Hossy, construction
Impala 16 shaft, development level
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Saffy, stoping
Palabora copper mine
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Work Profile
Cashflow Profile
Margin Profile
Typical shaft sinking project – recently awarded project
Tendering process
Work on site
Pre-qualification
(1 month)
Tender process
(5 months)
Contract
negotiation
(3 months)
1 Mobilisation and site 2 3 4 5
establishment
Pre-sink Main sink Equipping Mine and infrastructure
Cash received in advance for
(4-6 months) (12-36 months) (6-12 months) development
capex
(3-12 months)
METS
TYPICAL PROJECT
4-9 months 3-12 months (1) 22-54 months Up to 12 years
RECENT AWARD (2)
1 month 5 months 3 months 4 months 6 months 28 months 6 months
8 months
1 2 3 4 5
Sub-Contractors
Materials & Consumables
Equipment
Plant
Labour
Preliminaries & General
Note:
(1) Significantly shorter time-frame if winders are in stock
(2) Recent award took 18 months of discussions before tendering commenced
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Contracting model
Alternative contract types:
• Cost Plus
– Open book, agreed margin
– Represents c.35% of order book
• Agreed Target Cost
– Share gain and pain up to agreed level
– Represents c.20% of order book
• Agreed Rates
– Based on bill of quantities
– Represents c.45% of order book
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Committed order book
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Business drivers
Geographic diversification
Deeper ore bodies
Expand service offering
Client-funded capital model
Operational leverage
Increasing tender pipeline
Revenue growth
Margin improvement
Reinvest in strategic equipment
Infill acquisitions
Improve
ROCE vs WACC
CASH AND RETURNS
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Capital structure
Listed on the LSE – December 2010
Capital Structure
Tickers
SHFT
Share price (December 23, 2010) 143.5p
Share price (April 17, 2012)
83p
Shares in issue 47.50m
Market Capitalization (April 17, 2012) £39.6
Cash £16.1
Debt £22.3
Major Shareholders
International Mineral Resources BV 48.04%
JP Morgan Asset Management (UK) 8.82%
Artemis Investment Management 4.84%
Aviva PLC 3.33%
Ignis Asset Management 3.33%
1 Year Share Performance
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Directors and senior management
Directors
Senior management
AMRE YOUNESS
Non-executive Chairman
– Chief Executive Officer of IMR Management Services Limited
ALON DAVIDOV
Chief Executive Officer
CHRIS HALL
Chief Financial Officer
STEPHEN OKE
Independent Non-executive Director
IAN WATSON
Independent Non-executive Director
ROGER WILLIAMS
Independent Non-executive Director
LOUIS GERMISHUYS
Group Chief Operations Officer
TOM PIETRZAK
Chief Operations Officer - SA
DR HEIN JANSEN
Chief Operations Officer - International
SOLLY VAN DER WATH
Chief Technical Officer
JJ DURAND
Group Business Development Manager
PIOTR KISZKURNO
Chief Financial Officer – South Africa
ARNO OOSTHUIZEN
Chief Commercial Officer – South Africa
LEONID VUL
CIS Country Manager
SEAN HIRSCHOWITZ
Chief Information Officer
New
New
Promoted
Promoted
New
Promoted
Promoted
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