Acquisition of US Maintenance

Transcription

1 Transfield Services Limited Acquisition of US Maintenance Investor Presentation 8 June 2006

2 Transaction Overview Transfield Services has an ongoing focus on acquiring businesses that provide a growth path through geographic, industry and skills base expansion Consistent with this vision, Transfield Services has agreed to acquire leading services management company, US Maintenance, for A$372 million (US$276 million) US Maintenance is a leading provider of outsourced contractor management services in the USA Highly attractive services management business model provides a sustainable competitive advantage and delivers strong profitability The acquisition provides a strong platform for earnings growth in the world s largest outsourced services market 2

3 Strategic Rationale Best of breed services management business model Significant competitive advantages over alternative business models Substantial market position and scale End services provided by proprietary network of over 9,000 subcontractors - provides genuine national coverage and a variable cost structure with minimal capex and working capital requirements Entrenched, long-standing relationships with blue-chip customers 8 of the top 10 customers have been with the business for over 5 years Compelling customer value proposition Industry-leading compliance program focussing on client brand protection Sophisticated business systems deliver tailored solutions to customers 3

4 Strategic Rationale Diverse, blue-chip customer base Strong track record of organic growth Compound annual revenue and EBITDA growth of 24% and 35% respectively for the last 3 years Strong and sustainable EBITDA margins (double-digit) 90% of revenue from scheduled, recurring services 95% of 2005 revenue originated from longstanding clients 4

5 Strategic Rationale Provides Transfield Services with a strong growth platform in North America Transfield Services has a market leading position in Australia and New Zealand The acquisition will provide Transfield Services with a new growth path in the world s largest outsourced services market Extensive geographic footprint across USA and Canada Opportunity to leverage Transfield Services expertise by: providing additional services to the US Maintenance customer base (including asset management, project management and capital works management) expanding into sectors not currently pursued by US Maintenance but core to the Transfield Services offering 5

6 Acquisition Snapshot Purchase price of A$372 million (US$276 million) Represents an FY2007 EBITA multiple of 9.7 times, based on the company s forecast earnings EPS accretive from the first year of ownership (FY2007), becoming more accretive in FY2008 The transaction also includes an earn-out structure with US Maintenance senior management providing for a base payment of A$10 million in FY2010, adjusted depending on the company s earnings growth rate between 2006 and 2009 The acquisition is subject to regulatory approvals and customary conditions precedent Completion expected to occur in mid-july

7 Profile of US Maintenance Business Overview US Maintenance is a leading provider of outsourced contractor management services in the USA US Maintenance is a services management company end services are provided by a proprietary network of over 9,000 subcontractors Provides a broad range of essential, specialised facilities management solutions Blue-chip customer base of over 250 national clients, servicing 45,000 sites Extensive geographic footprint extends across 50 US states, Canada and Puerto Rico Stable and recurring revenue stream with 90% of revenues from scheduled and recurring services Industry-leading compliance and risk management program Scaleable business model, utilising centralised systems and customer account management 7

8 Profile of US Maintenance Industry Overview The US commercial facilities services industry consumes approximately US$50bn p.a. in outsourced services Increasing trend towards national / multi-regional customers outsourcing facilities management services Increasing trend for facilities management services to be outsourced to a national, single-source provider US Maintenance is the leading single-source provider of outsourced contractor management services in the USA Highly fragmented market, with a lack of national, single-source providers 8

9 Profile of US Maintenance Best of Breed Services Management Model US Maintenance is a services management company US Maintenance services its customer base through the management of an extensive network of over 9,000 subcontractors Proprietary subcontractor network developed over the past 18 years Distinguishes US Maintenance from competitors using self-perform and franchise models The subcontractor management model provides several important benefits: Scalable and seamless national coverage (even in remote locations) Creates a single source of contact for customers Cost effective solutions for customers Sophisticated business systems enable delivery of tailored solutions to customers Competitive rates on subcontractor services due to volume of deal flow, supply discounts and timely payments Strong free cash flow due to minimal capex and working capital requirements Variable cost structure 9

10 Profile of US Maintenance Best of Breed Services Management Model Extensive proprietary network of over 9,000 subcontractors provides a wide geographic footprint 10

11 Profile of US Maintenance Broad Portfolio of Managed Services US Maintenance manages the following services for its customer base via its proprietary network of over 9,000 subcontractors USM service offering Contractor management Project management Compliance program Risk management program Quality assurance Customised reporting and invoicing Maintenance management Key activities performed by subcontractors Electrical, lighting & sign services Repair & disaster restoration Scheduled maintenance of facilities (interior & exterior) Parking lot maintenance, repair and rehabilitation 11

12 Profile of US Maintenance Broad Portfolio of Managed Services US Maintenance Revenue by Service Type (2005) (A$230m) Electrical, Lighting & Sign 8% Repair 3% Scheduled Maintenance -Interior 50% Scheduled Maintenance -Exterior 39% 12

13 Profile of US Maintenance Blue Chip Customer Base Large customer base of national and multi-regional blue chip companies >250 customers across 26 industry sub-sectors US Maintenance has relationships with 39% of large retail chains (i.e. >100 stores) Sticky customer relationships 95% of 2005 revenue originating from longstanding customers 8 of the top 10 accounts have been clients for 5 or more years Top 15 Customers = 62% of revenue Other 38% Top 15 Customers 62% 13

14 Profile of US Maintenance Financial Highlights 3 year compound annual revenue growth of 24% 3 year compound annual EBITDA growth of 35% Strong, sustainable EBITDA margins (double-digit) Minimal capex and working capital requirements strong free cash flow 42% 34% 25% 17% 8% -% Strong Organic Growth 1 35% 24% Revenue CAGR (CY02-CY05) EBITDA CAGR (CY02-CY05) 1. Pro-forma for the US Maintenance group 14

15 Profile of US Maintenance Growth Strategy Strong double-digit revenue and EBITDA growth is expected to continue Leverage Transfield Services Expertise Acquisitions New Customers Cross-Sell New Services Expand with Existing Customers Contract Retention 15

16 Profile of US Maintenance Management The US Maintenance senior management team has over 140 years aggregate industry experience longstanding relationships with customers and sub-contractor entities David Gansky (co-founder and CEO) and Ivan Dubow (COO) have led the company for 16 years Senior management team to continue with the business under 3 year employment contracts Earn-out structure will ensure US Maintenance senior management team is strongly incentivised to deliver forecast earnings growth 16

17 Transfield Services After the Acquisition FY06 Forecast Revenue (Services Only) (pre-acquisition of US Maintenance) FY06 Pro-Forma Revenue (Services Only) (adjusted for acquisition of US Maintenance) Infrastructure Services 35% Facilities Management 31% Infrastructure Services 30% Facilities Management 40% Mining, Process and Hydrocarbons 34% Mining, Process and Hydrocarbons 30% 17

18 Transfield Services After the Acquisition FY06 Forecast Revenue by Geography (pre-acquisition of US Maintenance) FY06 Pro-Forma Revenue by Geography (adjusted for acquisition of US Maintenance) International 19% International 28% Australia 81% Australia 72% 18

19 Integration and Management Strategy Transfield Services has developed a successful track record of integrating acquisitions Serco Group NZ (2004) Areva (2005) Existing US Maintenance senior management team to be retained 3 year employment contracts and earn-out structure US Maintenance branding to be maintained Broadspectrum (2005) APP (2006) David Gansky (existing US Maintenance CEO) will report directly to Joseph Sadatmehr (CEO International - Transfield Services) A governing board will be established to oversee the strategic direction and activities of US Maintenance (comprising TSE senior management and selected US Maintenance executive management) Transfield Services senior management presence in North America to be strengthened Over time, staff will be cross-pollinated between the Australian and US businesses to share best practice and IP across the broader business 19

20 Funding Acquisition to be initially funded by an underwritten US$ acquisition debt facility Transfield Services intends to undertake funding through various options which will include a pro-rata renounceable equity issue to be launched in conjunction with the release of its FY2006 results in late August 2006 All shareholders will have an opportunity to participate in the equity issue Size of equity issue will take into account balance sheet strength and future funding headroom 20

21 Building Blocks for Growth The acquisition of US Maintenance continues Transfield Services strategy of acquiring businesses which provide geographic and industry expansion Value International Investments and Aquisitions Joint Ventures and Alliances Organic Growth Value Add to Existing Clients Contract Retention 21

22 Summary Best of breed services management business model Diverse, blue-chip customer base Strong track record of organic growth Provides Transfield Services with a strong growth platform in North America EPS accretive 22