Gresham Mining & Infrastructure Services Quarterly
We are pleased to present Edition 25 of the Gresham Mining and Infrastructure Services Quarterly (GMISQ), a snapshot of the performance, news and trends across the resources and infrastructure services sectors.
The Gresham Mining and Infrastructure Services Index (GMISI) rose 7% during the December 2019 quarter, while the broader equity market finished flat over the period. The index appreciation was driven by the GMISI’s larger constituents, with 18 of the top 25 companies by market capitalisation posting share price increases. In contrast, 18 of the lower 25 companies went backwards during the quarter. The index has softened in the opening weeks of 2020, following the announcement of operating issues at several companies and concerns around the potential impact of the coronavirus on resources activity.
At the end of the December quarter, the sector’s median FY20 EV/EBIT and EV/EBITDA multiples were 8.8x and 5.6x respectively, both above long term averages. While equity markets were generally strong over 2019, IPO activity remained subdued, as a number of potential new listings in the sector were withdrawn or deferred late in the quarter. However, it was a busy period for M&A, with major announced transactions including Ventia’s acquisition of Broadspectrum, the sale of Lendlease’s Engineering business to Acciona and NRW’s purchase of BGC Contracting.
In this edition we take a snapshot of some highlights from 2019, including corporate transactions and the biggest movers in the index. The data shows that the largest share price changes were primarily observed in small-caps that have reported material earnings changes. We also present the corporate outlook commentary from the 2019 AGM season, which generally saw companies anticipate the continuation of spending directed towards public infrastructure and a recovery in mining expenditure. While there may be heightened uncertainty in the short term, the positive theme is largely consistent what we are seeing in the midst of the 1H20 reporting season, with strong results being achieved across most constituents.
Editorial Team
Chris Branston Tom Waddell David Burton [email protected] [email protected] [email protected]
Edition 25 Gresham Advisory Partners Ltd is a leading Australian mergers and acquisitions/corporate advisory 1 February 2020 business and one of Australia’s largest and highest ranking independent corporate advisors. Share Price Movements
GMISI CONSTITUENTS1 LEADERS & LAGGARDS (SHARE PRICE)1
Ranks Market Cap (A$m) Share Leaders Laggards Company price Dec Sep 31 Dec 19 30 Sep 19 r % 39% 39% 39% 1 1 CIMIC Group Ltd. (ASX:CIM) 10,728 10,198 5% 28% 23% 2 2 Orica Ltd. (ASX:ORI) 8,373 8,578 -2%
3 3 Worley Ltd. (ASX:WOR) 7,967 6,752 18%
4 4 Seven Group Holdings Ltd. (ASX:SVW) 6,607 5,912 12%
5 5 Downer EDI Ltd. (ASX:DOW) 4,859 4,639 5%
6 6 ALS Ltd. (ASX:ALQ) 4,429 3,869 14% (20%) (23%) (24%) (27%) 7 7 Mineral Resources Ltd. (ASX:MIN) 3,108 2,517 23%
8 9 Monadelphous Group Ltd. (ASX:MND) 1,575 1,485 6% (44%)
9 11 NRW Holdings Ltd. (ASX:NWH) 1,367 874 39%
10 8 Perenti Global Ltd. (ASX:PRN) 1,112 1,530 -27%
NRW
Swick
Decmil Perenti
11 10 Service Stream Ltd. (ASX:SSM) 1,084 1,066 2% Lucas AJ
Saunders Macmahon
12 12 Emeco Holdings Ltd. (ASX:EHL) 701 619 13% Mastermyne
13 15 Macmahon Holdings Ltd. (ASX:MAH) 614 442 39% Construction MineralResources 14 13 Imdex Ltd. (ASX:IMD) 572 543 5% AcrowFormwork &
15 16 Alliance Aviation Services Ltd. (ASX:AQZ) 329 289 12% 1 16 17 MACA Ltd. (ASX:MLD) 281 257 9% PERFORMANCE RELATIVE TO S&P 200 INDICES
17 18 Lycopodium Ltd. (ASX:LYL) 222 216 3%
18 na Intega Group Ltd. (ASX:ITG) 212 na na 14%
19 na Mader Group Ltd. (ASX:MAD) 212 na na
7%
6% 6%
5% 5% 4%
20 14 Cardno Ltd. (ASX:CDD) 211 498 -16% 3%
3% 3%
2% 0% 21 22 Fleetwood Corp. Ltd. (ASX:FWD) 199 183 9% 0%
22 20 Civmec Ltd. (ASX:CVL) 196 207 -5% (0%)
23 25 Engenco Ltd. (ASX:EGN) 186 171 9% (0%)
(3%) (3%)
24 26 RPMGlobal Holdings Ltd. (ASX:RUL) 183 166 10% (8%)
25 23 SRG Global Ltd. (ASX:SRG) 178 181 -2%
26 21 BSA Ltd. (ASX:BSA) 171 189 -10%
27 27 MMA Offshore Ltd. (ASX:MRM) 162 163 -8% IT
28 28 Southern Cross Electrical Engineering Ltd. (ASX:SXE) 145 134 3%
GMISI
A-REIT
Energy Utilities
29 24 Boart Longyear Ltd. (ASX:BLY) 143 171 -16% Materials
Resources
Industrials
Cons.Disc.
HealthCare
S&P/ASX200 Cons.Staples
30 31 Austin Engineering Ltd. (ASX:ANG) 127 110 16% AllOrdinaries TelcoServices
31 29 GR Engineering Services Ltd. (ASX:GNG) 123 134 -8% Financial-x-A-REIT
32 33 Mitchell Services Ltd. (ASX:MSV) 118 99 4% 33 19 Decmil Group Ltd. (ASX:DCG) 117 211 -44% PERFORMANCE OVER TIME 34 32 EnviroSuite Ltd. (ASX:EVS) 107 107 -15%
35 30 Mastermyne Group Ltd. (ASX:MYE) 97 121 -20% 90 Gresham Mining & Infrastructure Services Index (GMISI)
36 34 AJ Lucas Group Ltd. (ASX:AJL) 82 79 -24% S&P/ASX 200 37 41 Acrow Formwork & Construction Services Ltd. (ASX:ACF) 70 43 39% 80 S&P/ASX 200 Resources 38 35 Laserbond Ltd. (ASX:LBL) 67 72 -7% GMISI (less top 5) 39 37 Veem Ltd. (ASX:VEE) 64 72 -11%
40 36 Boom Logistics Ltd. (ASX:BOL) 60 72 -15% 70
41 39 Primero Group Ltd. (ASX:PGX) 59 55 -7%
42 38 Swick Mining Services Ltd. (ASX:SWK) 55 63 -23% 60 43 40 LogiCamms Ltd. (ASX:LCM) 37 46 -20%
44 43 Valmec Ltd. (ASX:VMX) 37 38 -3% 50 45 42 Matrix Composites & Engineering Ltd. (ASX:MCE) 36 42 -13%
46 45 Saunders International Ltd. (ASX:SND) 34 26 28%
47 44 XRF Scientific Ltd. (ASX:XRF) 31 33 -8% 40
48 47 Veris Ltd. (ASX:VRS) 22 21 5%
49 46 EVZ Ltd. (ASX:EVZ) 20 21 -5% 30 50 51 Tempo Australia Ltd. (ASX:TPP) 15 10 20% Dec16 Jun17 Dec17 Jun18 Dec18 Jun19 Dec19
Notes: (1) Performance measured over the period 30-Sep-19 to 31-Dec-19 (inclusive). Source: FactSet, IRESS. 2
2 Valuation Multiples
The median forward PE multiple fell during the start of the December Quarter before later recovering and finishing ~12% above the longer term median.
1 YEAR FORWARD PRICE EARNINGS RATIO OVER TIME
18x
16x
14x
12x GMISI Median: 10.4x 10x
8x
6x
GMISI 4x All Ordinaries 2x Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 Jun 19 Dec 19
PRICE EARNINGS RATIO (FY20F)
30x
25x
20x
15x Median: 13.0x
10x
5x
-
LYL
ITG
LBL
BLY
ORI
SXE
CVL
EHL
VRS ACF
RUL
BOL
SRG
CIM
PGX
ALQ
PRN
SND AQZ
IMD
MIN
CDD
SSM
DCG
ANG
SWK
MSV
MLD
GNG
SVW
VMX
FWD
MAH
WOR
MND
NWH DOW
DIVIDEND YIELD (FY20F)
8.0%
7.0%
6.0%
5.0% Median: 2.3%
4.0%
3.0%
2.0%
1.0%
-
LYL
ITG
LBL
ORI
SXE
EVS
CVL
EHL
VRS
ACF
RUL
BOL
SRG
CIM
PGX
ALQ
PRN
AQZ IMD SND
MIN
CDD
SSM
DCG
ANG
SWK
MCE
MSV
MLD
GNG
SVW
VMX
FWD
MAH
WOR
MND
NWH DOW
Large Cap (>$1bn) Mid Cap (between $200m and $1bn) Small Cap (<$200m)
Notes: (1) Only companies with consensus earnings forecasts are included in charts; (2) Share prices are as at 31-Dec-19; (3) Earnings multiples are not calendarised; (4) Companies exhibiting negative multiples have been excluded from the above analysis. Source: FactSet. 3
3 Valuation Multiples (cont.)
The sector’s median FY20 EV/EBIT and EV/EBITDA multiples are 8.8x and 5.6x respectively. Whilst the historical large- cap premium continued, several of the asset-light consultancies and technology companies are also trading well.
EV/EBIT (FY20F)
20.0x 18.0x 16.0x 14.0x 12.0x Median: 8.8x 10.0x 8.0x 6.0x 4.0x 2.0x
-
LYL
ITG
LBL
BLY
ORI
SXE
CVL
EHL
VRS
ACF
RUL
BOL
SRG
CIM
PGX
ALQ
PRN
IMD SND AQZ
MIN
CDD
SSM
DCG
ANG
SWK
MSV
MLD
GNG
SVW
VMX
FWD
MAH
WOR
MND
NWH DOW
EV/EBITDA (FY20F)
16.0x
14.0x
12.0x
10.0x Median: 5.6x 8.0x
6.0x
4.0x
2.0x
-
LYL
ITG
LBL
BLY
ORI
SXE
CVL
EHL
ACF VRS
RUL
BOL
SRG
CIM
PGX
ALQ
PRN
SND AQZ
IMD
MIN
CDD
SSM
DCG
ANG
SWK
MSV
MLD
GNG
SVW
VMX
FWD
MAH
WOR
MND
NWH DOW
PRICE/NTA
600.0%
500.0%
400.0%
300.0% Median: 198%
200.0% Companies trading at a discount to NTA 100.0%
-
AJL
LYL
LBL
ORI
SXE
EVS
TPP XRF CVL
EVZ
EHL
VEE
ACF VRS
BSA
RUL
BOL
SRG
CIM
PGX
ALQ
PRN
AQZ SND
IMD
MIN
CDD
EGN
DCG
LCM
MYE
ANG
SWK
MCE
MSV
MLD
GNG
SVW
VMX
FWD
MAH
MND
NWH MRM
Large Cap (>$1bn) Mid Cap (between $200m and $1bn) Small Cap (<$200m)
Notes: (1) Only companies with consensus earnings forecasts are included in charts; (2) Share prices are as at 31-Dec-19 (3) Earnings multiples are not calendarised; (4) Enterprise Value is based on market capitalisation plus minority interests and last reported net debt adjusted for capital raisings and acquisitions. (5) Companies exhibiting negative multiples have been excluded from the above analysis. Source: FactSet. 4
4 Forecast Profitability & Gearing
Strong revenue and earnings growth is forecast over the next 2 years. While many companies note that the market remains highly competitive, analysts are also forecasting some margin expansion.
FORECAST REVENUE GROWTH (FY19-21F CAGR)
30.0% 25.0%
20.0% Median: 11% 15.0% 10.0% 5.0% -
(5.0%)
LYL
ITG
LBL
BLY
ORI
SXE
EVS
CVL
EHL
ACF
RUL
SRG
CIM
PGX
ALQ
PRN
AQZ
IMD
MIN
CDD
SSM
DCG
SWK
MCE
MSV
MLD
GNG
SVW
VMX
FWD
MAH
WOR
MND
NWH DOW
FORECAST EBITDA GROWTH (FY19-21F CAGR)
50.0%
40.0%
30.0% Median: 13% 20.0%
10.0%
-
LYL
ITG
LBL
BLY
ORI
SXE
CVL
EHL
VRS
ACF
RUL
BOL
SRG
CIM
PGX
ALQ
PRN
IMD AQZ
MIN
CDD
SSM
DCG
ANG
SWK
MSV
MLD
GNG
SVW
VMX
FWD
MAH
WOR
MND
NWH DOW
EBITDA MARGINS (FY20F)
30.0%
25.0%
20.0% Median: 11% 15.0%
10.0%
5.0%
-
LYL
ITG
LBL
BLY
ORI
SXE
CVL
EHL
ACF
RUL
SRG
CIM
PGX
ALQ
PRN
AQZ SND
IMD
MIN
SSM
DCG
SWK
MSV
MLD
GNG
SVW
VMX
FWD
MAH
WOR
MND
NWH DOW
NET DEBT / ENTERPRISE VALUE
90.0%
60.0%
30.0% Median: 8%
-
(30.0%)
(60.0%)
(90.0%)
AJL
LYL
ITG
LBL
BLY
ORI
SXE
EVS
TPP CVL XRF
EVZ
EHL
VEE
VRS ACF
BSA
RUL
BOL
SRG
CIM
PGX
ALQ
PRN
AQZ SND
IMD
MIN
CDD
EGN
SSM
DCG
LCM
MYE
ANG
SWK
MCE
MSV
MLD
GNG
SVW
VMX
FWD
MAD
MAH
WOR
MND
NWH
DOW MRM
Large Cap (>$1bn) Mid Cap (between $200m and $1bn) Small Cap (<$200m)
Source: FactSet; Company filings. Note: for companies reporting part year results during the quarter, the prior corresponding period reflects the prior year’s part year results. 5
5 Contract Awards
There was a reasonable amount of contracting activity in the final quarter of 2019, with several iron ore related contracts awarded.
MAJOR CONTRACT AWARDS
Date Commodity/ Company Client Project/Facility Location Services Value (A$m) Announced Sector Nuclear Power Plants 30-Dec-19 Worley Nuclear Power Plant Egypt Consulting N/A Energy Authority NRW Holding Eliwana Mine and Rail 23-Dec-19 Fortescue Metals Group WA Construction 138 Iron Ore Limited project Confluence Water Design, construction, JV (Downer, Partnering for Success maintenance and 20-Dec-19 Sydney Water NSW 2,000 Infra. Broadspectrum and (north) facilities management Jacobs) services Brownfield and greenfield 20-Dec-19 Worley Imperial Oil and Syncrude Canada EPC N/A Oil & Gas projects Engineering & 20-Dec-19 Worley Marathon Petroleum Renewable diesel refinery North Dakota N/A Energy procurement services Earthworks and civil 20-Dec-19 CIMIC Rio Tinto Robe Valley WA 150 Iron Ore works MARBL Lithium Kemerton lithium Electrical & 20-Dec-19 SCEE WA 65 Lithium (Albemarle) hydroxide processing plant implementation
Talison Lithium Australia Greenbush lithium mine WA Electrical load increase Lithium
Energy Resources of Electrical & Ranger Mine NT Uranium Australia implementation
Shape Australia 231 Elizabeth Street NSW Electrical fitout Commercial 19-Dec-19 SCEE 35 City - 7 Development Geocon Constructors ACT Design & construct. Commercial Project Lighting, communication Icon for Work Parade Project ACT services, security and Commercial access control systems Telco. & data J. Hutchinson RUData SYD53 data centre NSW Electrical centres Construction & Construction / 19-Dec-19 John Holland NSW Government Waterloo metro station NSW 299 integrated development Development D4C consortium Design, construction, (Comdain Partnering for Success maintenance and 19-Dec-19 Infrastructure, John Sydney Water NSW 200 p.a. Infra. (regional) facilities management Holland, Lend Lease services Services, WSP) Construction / 18-Dec-19 John Holland NSW Government Sydney Football Stadium NSW Construction N/A Development
17-Dec-19 CIMIC WA Government METRONET WA Rail 423 Infra.
Refurbishment & 17-Dec-19 Lendlease Queensland Gov't Cairns Convention Centre QLD 176 Construction expansion Logan Water Infrastructure 12-Dec-19 Downer EDI Limited Logan City Council QLD Design & construct 520 Infra. Program Australian Rail Track North East Rail Line 9-Dec-19 John Holland VIC Various upgrades N/A Infra. Corporation Upgrade
Source: Company announcements. 6
6 Contract Awards (cont.)
Contracting activity during the quarter continued to be concentrated in the east coast infrastructure market.
MAJOR CONTRACT AWARDS (CONT.)
Date Commodity/ Company Client Project/Facility Location Services Value (A$m) Announced Sector
Rio Tinto Iron Ore Kookaideri mine WA Design & construct 115 Iron Ore
Primero Group 6-Dec-19 Northern Star Pogo gold mine USA Construction n/a Gold Limited Neometals Battery WA & Assessment and process Battery Neometals n/a Recycling Project Canada development recycling Monadelphous Pilbara maintenance Plant maintenance & 20-Nov-19 Rio Tinto WA 100 Iron Ore Limited services contract shutdown Drilling, blasting, loading 20-Nov-19 MACA Limited FQM Australia Nickel Ravensthorpe WA 480 Nickel & hauling
AGR Australia Noble Tom Prosser Rig VIC Support vessels n/a Oil & Gas MMA Offshore 15-Nov-19 Limited Esso Australia Noble Tom Prosser Rig VIC Support vessels n/a Oil & Gas
WestConnex M4-M5 Link 12-Nov-19 BSA Limited NSW Government Tunnels Fire Suppression NSW Project management 30 Infra. Systems Adani-Carmichael Coal 8-Nov-19 Decmil Carmichael Rail Network QLD Design & construct 41.4 Thermal Coal Project Carosue Dam Operations 5-Nov-19 GR Engineering Saracen Gold Mines WA Design & construct 24.5 Gold Plant Extension Brunswick crossing 1-Nov-19 John Holland VIC Government VIC Construction N/A Infra. removals Melbourne M80 Ring Road 30-Oct-19 CIMIC VIC Government VIC Design & construct 331 Infra. Upgrade Queensland Transport & 29-Oct-19 John Holland Bruce Highway Upgrade QLD Design & construct 481 Infra. Main Roads NRW Holding 24-Oct-19 Fortescue Metals Cloudbreak mine WA Design & construct n/a Iron Ore Limited Chrishold Road Prison 22-Oct-19 John Holland VIC Government VIC Design & construct N/A Construction project Inner City South State 17-Oct-19 CIMIC Queensland Government QLD Construction 110 Infra. Secondary College St George Community 13-Oct-19 Lendlease 11 Gibbons Street NSW Development 170 Construction Housing Decmil Group Major Road Projects 2-Oct-19 Mordialloc Freeway Project VIC Construction 417 Infra. Limited Victoria
2-Oct-19 CIMIC VIC Government Sunbury Line Upgrade VIC Power system upgrade 158 Infra.
Major Roads Project 2-Oct-19 Decmil Modialloc Freeway VIC Construction 417 Infra. Victoria
2-Oct-19 John Holland VIC Government Sunbury Line Upgrade VIC Upgrade N/A Infra.
BHP Billiton Mitsubishi Goonyella Riverside coal 1-Oct-19 Downer EDI Limited QLD Mining 200 Met Coal Alliance mine
Source: Company announcements. 7
7 Corporate Activity
It was an active quarter for M&A, with the largest being Ventia’s announced agreement with Ferrovial S.A. to purchase Broadspecturm for an EV of A$525 million.
MERGERS & ACQUISITIONS
Date Target Value Interest Status Target Business Seller Acquirer Forum Cons. Announced HQ (A$m) (%)
Broadspectrum Infrastructure 23-Dec-19 Pending NSW Ferrovial Ventia 525 Private 100% Cash Limited services
SAExploration Exploration & drilling SAExploration 29-Nov-19 Complete QLD Terrex Pty Ltd 8 Private 100% Cash Australia Pty Ltd services Holdings
Lendlease Infrastructure LendLease Acciona Australia Pty 19-Dec-19 Pending NSW 180 Private 100% Cash (engineering business) services Group Ltd
Remote power / 9-Dec-19 Pending UON Pty Ltd WA na Macquarie Bank Ltd na Private 50% na mine water services
Mining, energy & BGC Contracting Pty 28-Nov-19 Complete infrastructure WA BGC NRW Holdings Ltd 285 Private 100% Cash Ltd services
Deepcore Drilling Pty Scott Mitchell Services 14-Nov-19 Pending Drilling services VIC 32 Private 100% Mixed Ltd Tumbridge Limited
Construction & Colin Heitman Alltype Engineering WestStar Industrial 12-Nov-19 Pending maintenance WA & Kelvin 10 Private 100% Scrip Pty Ltd Limited services Andrijich
Construction / Waterway Keller Group 31-Oct-19 Complete maintenance of NSW Polaris Marine Pty Ltd na Private 100% na Constructions Pty Ltd Plc marine structures
Transportation maintenance Sasser Family Anchorage Capital 24-Oct-19 Complete CF Asia Pacific Group NSW 250 Private 100% Cash services & stock Holdings Inc Partners Pty Ltd. leasing
Acrow Formwork and Uni-span Australia Pty Scaffolding hiring 17-Oct-19 Pending QLD na Construction Services 26 Private 100% Mixed Limited services Limited
Martinus Rail Railway construction 2-Oct-19 Pending Infrastructure Pty NSW na Gamuda Berhad na Private 50% Cash & maintenance Limited
Source: Company announcements. 8
8 Corporate Activity
There was also a handful of equity raisings, related to both acquisition funding and balance sheet strengthening.
CAPITAL RAISINGS
(Discount) / Date Amount Raised Status Company Type Premium to Last Purpose Announced (A$m) Price (%)
Balance sheet strength / fund 6-Dec-19 Completed Primero Placement 7.6 (8.1%) newly awarded contracts
Acrow Formwork & Fund Sun Metals Zinc Refinery 4-Dec-19 Completed Placement 5.2 (13.0%) Construction Services contract & acquisition of Uni-span
3-Dec-19 Completed Tempo Australia Ltd Rights issue 2.3 (20.0%) General working capital
29-Nov-19 Completed NRW Holdings Placement 120 1.4% Acquisition of BGC Contracting
Entitlement Reduce debt burden and fund 7-Nov-19 Completed AJ Lucas Group 46 (27.8%) offer future investment Strengthen balance sheet and Share 23-Oct-19 Completed Swick Mining Services 2 (8.0%) providing liquidity to support purchase plan growth Accelerate growth and extending 14-Oct-19 Completed Envirosuite Placement 10 (28.0%) product suite
ACTIVE SHARE BUYBACKS
Date Announced Company Type Size Purpose
13-Dec-19 CIMIC On-market 10% Ongoing capital management
Acquire shares where the Board deems the 21-Feb-19 Cardno On-market 10% share price to be below intrinsic value
22-Nov-19 Boom Logistics On-market Up to 88 million shares Ongoing capital management
Source: Company announcements. 9
9 Executive Movements
EXECUTIVE & DIRECTOR APPOINTMENTS
Date Announced Company Name Role Date Effective
19-Dec-19 AJ Lucas Group Limited Austen Perrin Non-executive Director 1-Jan-20
17-Dec-19 Orica Limited John Beevers Non-executive Director 1-Feb-20
6-Dec-19 Envirosuite Limited Zhigang Zhang Non-executive Director 6-Dec-19
25-Nov-19 Imdex Limited Paul House CEO 1-Jul-20
Independent Non- 21-Nov-19 ALS Limited Leslie Desjardins 21-Nov-19 executive Director CEO and Managing 4-Nov-19 Cardno Susan Reisbord 4-Nov-19 Director
22-Oct-19 Valmec Peter McMurrow Non-executive Director 1-Nov-19
22-Oct-19 LogiCamms Limited Phillip Campbell Non-executive Director 22-Oct-19
22-Oct-19 LogiCamms Limited Matthew Morgan Non-executive Director 22-Oct-19
17-Oct-19 Primero Limited Cliff Lawrenson Non-executive Director 17-Oct-19
4-Oct-19 Swick Alan Bye Non-executive Director 8-Nov-19
EXECUTIVE & DIRECTOR RESIGNATIONS / RETIREMENTS
Date Announced Company Name Role Date Effective
19-Dec-19 AJ Lucas Group Limited Ian Meares Non-executive Director 1-Jan-20
26-Nov-19 Valmec Vincent Goss Non-executive Director 31-Dec-19
25-Nov-19 Veris Derek La Ferla Non-executive Chairman 25-Nov-19
4-Nov-19 Cardno Ian Ball CEO 4-Nov-19
31-Oct-19 Orica Lim Chee Onn Non-executive Chairman 31-Oct-19
Independent Non- 23-Oct-19 Cimic Trevor Gerber 31-Dec-19 executive Director
2-Oct-19 SRG Global Limited Enzo Gulloti Executive Director 2-Oct-19
Source: Company announcements. 10
10 Quarterly Focus: Calendar Year 2019 Overview
While not without some challenges, 2019 saw the GMISI increase in value to $57.5b, driven by solid results and general asset price appreciation. It was also a busy year for corporate activity in the sector with a range of mid-sized public and private deals. The major movers in the index were generally small-caps, other than NRW which continued its track record of successful acquisitions.
GMISI CONSTITUENT MARKET CAPITALISATION MAJOR TRANSACTIONS
Date Transaction Value (A$m) 57,505 Announced Ventia’s acquisition of Broadspectrum Dec-19 525 from Ferrovial S.A.
Acciona Australia’s acquisition of Dec-19 181 Lendlease’s Engineering business
Nov-19 NRW’s acquisition of BGC Contracting 285
Anchorage Capital’s acquisition of CF Oct-19 250 Asia Pacfic Group 49,784
Oct-19 Cardno’s demerger of Intega 213
Oct-19 The IPO of Mader 228
Jul-19 QIC’s acquisition of Pacific Energy 538
Qube’s acquisition of LCR Group from May-19 135 31 Dec 18 31 Dec 19 Archer Capital
MAJOR POSITIVE SHARE PRICE MOVEMENTS MAJOR NEGATIVE SHARE PRICE MOVEMENTS
Market Share Market Share Company Cap Price Commentary Company Cap Price Commentary (A$m) Reaction (A$m) Reaction
Signed an agreement to One-off project execution secure a strategically EnviroSuite 107 +238% challenges and the funded entry into the EVZ 20 -30% Malaysian construction China market cycle slowdown.
Outperformed guidance Acrow Ongoing timing issues and achieved 45% revenue Formwork & across the civil Laserbond 67 +122% growth. LBL continues to 70 -33% Construction infrastructure pipeline target double digit growth. Services
The Australia surveying Reported strong operating business underperformed results and made two well NRW 1,367 +100% Veris 22 -39% margin expectations received acquisitions resulting in an impairment
Strong earnings growth Impacted by UK XRF Scientific 31 +64% across each of its divisions AJ Lucas 82 -62% Government moratorium in FY19 on hydraulic fracturing
Record underlying EBITDA Reported NPAT losses, an driven by growth across all impairment, and was in BSA 171 +52% operating divisions and the Tempo 15 -65% suspension relating to the successful divestment of review of a problematic HVAC Build contract.
Source: Company announcements, FactSet. 11
11 Quarterly Focus: 2019 AGM Market Commentary
Market commentary throughout the 2019 AGM season showed companies anticipate the continuation of spend directed towards public infrastructure and a recovery in mining expenditure.
SELECTED AGM MARKET COMMENTARY
Company Business Guidance Statement The energy, chemicals and resources market indicators and growth in backlog provide Energy services and Worley evidence of continued improvement in market conditions. However, our markets are being consulting tempered by macroeconomic global uncertainty.
Strong medium to long term outlook for mining production and infrastructure investment; Opportunities being created through new mining projects planned by major miners and Industrial services, oil Seven Group growing pipeline of government infrastructure projects; FY20 EBIT growth expected in the and gas, and media mid-teens through continued mining parts demand, growing new equipment orders, continued level of infrastructure activity in NSW / VIC and growth in WA equipment hire.
We have increased our focus on Urban Services in recent times as governments in both Australia and New Zealand are continuing to invest in economic and social infrastructure as Downer Diversified services they respond to the ongoing demands of population growth and increasing urbanisation … the 7% profit growth we have forecast for the year ahead is a good outcome in the current environment.
Just as we secured significant new work last year, we also have a strong pipeline for the next 24 months. This includes $8.5b of potential work across more than 40 surface and underground projects covering multiple geographies and commodities for new and existing Perenti Global Mining services clients. We believe there is significant scope for continued growth in our underground mining operations given the opportunities available while the focus for our surface mining business will be on enhancing earnings from existing projects.
The resources and energy sector in Australia is expected to provide a solid pipeline of opportunities over coming years as more favourable market conditions return. Project development activity has increased with a number of resources construction opportunities coming to market, particularly in the iron ore sector. Prospects arising from further Engineering & development in LNG production are also expected to be positive in the years to come. Monadelphous maintenance Maintenance activity in the resources market is expected to be strong as production levels in Australia continue at record levels. Customer focus on optimising production will drive demand for solid levels of maintenance support and sustaining capital work. Investment in infrastructure remains healthy, and prospects in both the water and renewables sector will continue to provide opportunities.
We remain confident of strong activity levels across our key sectors over the years ahead NRW Mining services & civil and we maintain our guidance of circa $1.5 billion in revenue for FY20 with covered revenue as at 30 October 2019, at $1.46 billion.
Recovery and growth of the Western Region is gaining momentum and aligns with our strategy of diversifying our commodity exposure. Demand in the Eastern Region continues to be robust, particularly as we see customers remaining disciplined with capital Emeco Equipment hire expenditure allocation. As a result, utilisation in the Eastern Region remains high, particularly in metallurgical coal. Our projects in thermal coal continue to provide us with stable earnings.
Our order book remains strong, with current work in hand of approximately $2 billion. We are experiencing increased demand for our services and are pursuing many opportunities Maca Ltd Mining services with both existing and new clients. We believe that the sector outlook is positive and that MACA is well positioned to take advantage of this and achieve its growth objectives.
At a macro level, the fundamentals for a continued recovery remain positive. We are seeing a significant number of oil and gas projects being sanctioned globally, with this MMA Offshore Marine services trend expected to continue. Importantly, a large number of projects are scheduled for development in our key regions of operation, which will translate into increased demand for offshore services and vessels in our markets.
Source: Company reports and presentations. 12
12 Gresham’s Credentials
LANDMARK MERGERS & ACQUISITIONS
2018 2016 2015 2014 2014 2013
Advised Advised First Lead Advised the Wesfarmers on State Super on Independent Advised Bank of Advised Boral on Lonsdale the sale of its its acquisition of financial adviser Queensland on the formation of Consortium on underwriting and the land titles to the Board of the acquisition of a US$1.6bn joint the acquisition of insurance and registry BHP Billiton on $2.5bn loan venture with a 50-year lease broking functions of Land the demerger of portfolio from USG Corporation of Port of businesses Use Victoria South32 Investec Melbourne
MINING AND INFRASTRUCTURE SERVICES
2019 2018 2017 2017 2016 2015
Advised CHAMP Advisor to Coffey Adviser to Adviser to Advisor to SCEE Adviser to QIC on and Frontenac International in Barminco on its Quadrant on the in relation to the the acquisition of on the sale of relation to acquisition by sale of CQMS acquisition of Pacific Energy H-E Parts acquisition by Ausdrill Razor Heyday5 International Tetra Tech
TAKEOVER RESPONSE
2017 2017 2016 2014 2013 2011
Advised DUET Advised Asciano on Group in relation Advised Little Advisor to UGL in its takeover by a Advised David Advised Fosters to its $13bn World relation to its consortium led by Jones in relation on its $12.3bn takeover by a Beverages on takeover by Canada Pension to acquisition by takeover by consortium its acquisition CIMIC Plan Investment Woolworths SABMiller comprising CKP, by Lion Board CKI and PAH
AWARDS & ACCOLADES
Excellence in 2011 M&A Deal 2009 Most Secondary Market Equity Raising of 2007 Best M&A Best M&A Deal Corporate of the Year Innovative Deal the Year Deal in Australia Advisory - 2012 SABMiller’s Babcock & Wesfarmers’ Wesfarmers’ Wesfarmers’ Boutique / acquisition of Brown $2.6bn equity acquisition of acquisition of Independent Foster’s Group Infrastructure’s raising Coles Coles recapitalisation
13 Contact Details
Chris Branston Charlie Graham Matt Keenan Executive Director, Perth Managing Director, Sydney Managing Director, Melbourne E: [email protected] E: [email protected] E: [email protected] T: +61 8 9213 0290 T: +61 2 9224 0247 T: +61 3 9664 0353
Michael Smith Neville Spry Mark Stevens Executive Director, Perth Managing Director, Sydney Managing Director, Melbourne E: [email protected] E: [email protected] E: [email protected] T: +61 8 9213 0286 T: +61 2 9224 0237 T: +61 3 9664 0381
Gresham Advisory Partners Limited ABN 88 093 611 413
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