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ALS LIMITED — Investor Presentation 2018
May 27, 2018
64365_rns_2018-05-27_055d5fbd-9434-44a8-9a6d-60ebdadd27ab.pdf
Investor Presentation
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Full Year Results FY2018
Raj Naran, Managing Director and CEO, ALS Limited
28 May 2018
Right Solutions • Right Partner www.alsglobal.com
Right Solutions • Right Partner
IMPORTANT NOTICE AND DISCLAIMER
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This presentation has been prepared by ALS Limited, (ALS or the Company). It contains general information about the Company’s activities as at the date of the presentation. It is information given in summary form and does not purport to be complete. The distribution of this presentation in jurisdictions outside Australia may be restricted by law, and you should observe any such restrictions.
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This presentation is not, and nothing in it should be construed as, an offer, invitation or recommendation in respect of securities, or an offer, invitation or recommendation to sell, or a solicitation of an offer to buy, securities in any jurisdiction. Neither this document nor anything in it shall form the basis of any contract or commitment. This presentation is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate.
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The Company has prepared this presentation based on information available to it, including information derived from public sources that have not been independently verified. No representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness or reliability of the information, opinions or conclusions expressed herein.
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This presentation includes forward-looking statements within the meaning of securities laws. Any forward-looking statements involve known and unknown risks and uncertainties, many of which are outside the control of the Company and its representatives. Forward-looking statements may also be based on estimates and assumptions with respect to future business decisions, which are subject to change. Any statements, assumptions, opinions or conclusions as to future matters may prove to be incorrect, and actual results, performance or achievement may vary materially from any projections and forward-looking statements.
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Due care and attention should be undertaken when considering and analysing the financial performance of the Company.
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All references to dollars are to Australian currency unless otherwise stated.
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2 Investor Presentation. Full Year Results FY2018
FY2018 Highlights
ALS FY2018 Final dividend Underlying EPS is Underlying NPAT 9.0 cents 28.4 cents within guidance at per share, per share, $142.2 million, up FY18 total dividend up 22% 21.1% on up 25.9% prior year On-market Business outlook Share Buyback continues to continue to remain stable
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Proposed Divestment of Oil & Gas laboratories
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Investor Presentation. Full Year Results FY2018
3
Global Operations Map
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50+ 300+ 40+ 13,000+ 20+ million $1.4+ billion Countries Locations Years of strong Staff worldwide Processed samples Global revenue business per year performance
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Investor Presentation. Full Year Results FY2018
4
Business streams
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Investor Presentation. Full Year Results FY2018
5
Sustainability Program. 2017-18 Achievements
People
Health & Safety Training & Safety as a Priority development investing in talent development
Diversity & equality Respecting differences
Human rights Worker’s rights upheld
Environment
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Operational Waste reduction Environmental Reduce, reuse, recycle
Performance
Water conservation Managing a scarce resource
Management of adverse environmental emissions
Climate Change
Energy management The pursuit of energy efficiency
Estimating CO2 emissions and its economic impact
Society
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Economic Employment Contributions creation Paying our fair share of tax Creating jobs in the local community
Local investment Investing in the local community
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53% female new hires
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Record Low Injury Rates
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Global employee survey completed
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44,000 training sessions completed >50%
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Hazard observations >50%
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Energy Intensity reduced by average of 7%
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No uncontrolled releases
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>2500 kg Extra glass diverted from landfill
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1300 new employees
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Support of science education programs
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$47M taxes
Governance
Financial performance Maximise return for shareholders
Anti-bribery & corruption
Zero tolerance for bribery and corruption
Honesty & integrity An ALS core value
Regulatory compliance
Systems to maintain legal compliance
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Modern slavery statement published
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9500 Code of Conduct training sessions completed
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Re- invigorated whistle-blower program & hotline
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Investor Presentation. Full Year Results FY2018
6
ALS Segments and Business Streams Revenue split
LIFE SCIENCES Environmental Food Pharmaceutical Consumer Products
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COMMODITIES & INDUSTRIAL Geochemistry Metallurgy Trade Inspection Coal Asset Care Tribology
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Investor Presentation. Full Year Results FY2018
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Full Year FY18 Financial Summary Underlying performance from continuing operations
NPAT Guidance met
$142.2m
NPAT growth
21.1%
Share buyback progress
EBITDA growth Revenue growth EPS growth
21.9% $106.8m
12.3% 14.7%
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Investor Presentation. Full Year Results FY2018
8
Revenue waterfall FY17 vs FY18 – all operations
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+80 +1 +2 -56
Strong +4
Life Sciences
growth
+54 -1 -3 +5 +5 Oil & Gas
discontinued
operation
Strong
Flat
Commodities
Industrial
performance
performance
+39
$1,365.6 million $1,495.1 million
FY17 Environmental Food Pharma Consumer Products Asset Care Tribology Mineral Inspection Geochemistry Metallurgy Coal Oil & Gas Other FY18
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Investor Presentation. Full Year Results FY2018
9
Cash Flow
| Cash Flow | ||||
|---|---|---|---|---|
| Full year | FY17 AUD mn |
FY18 AUD mn |
||
| Analysis includes both continuing and discontinued operations ^ Based on statutory EBITDA |
Underlying operating profit (EBIT) | 171.6 | 216.7 | |
| Depreciation & Amortisation | 78.8 | 72.9 | ||
| EBITDA | 250.4 | 289.6 | ||
| Working capital | 12.3 | (16.1) | ||
| CAPEX | (58.7) | (73.4) | ||
| Other | 5.0 | 7.6 | ||
| Free cash flow | 209.0 | 207.7 | ||
| Acquisitions | (106.4) | (31.8) | ||
| Divestments | - | 79.5 | ||
| Dividends paid | (58.0) | (80.8) | ||
| Issued capital bought back | - | (106.8) | ||
| Borrowings - movement | - | (38.4) | ||
| Interest and Tax | (68.3) | (73.5) | ||
| Restructuring costs | (19.1) | (14.2) | ||
| Net increase/(decrease) in cash | (42.8) | (58.3) | ||
| Opening net cash | 297.9 | 248.9 | ||
| Effect of FX on cash held | (6.2) | (3.4) | ||
| Closing net cash | 248.9 | 187.2 |
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Investor Presentation. Full Year Results FY2018
10
Capital management
Share Buyback Program
Up to $175million, commenced mid-December 2017 for up to 12 months
Buyback Progress
15.5 million shares (representing 3.1% of the original base) have been bought back on-market for an overall consideration of $106.8 million
The Company will continue to use its existing cash balances and free cash flow to fund the buy-back program
Company retains strong balance sheet and flexibility to pursue opportunities (leverage 1.7 times at 31 March 2018)
Balance Sheet
Positive market environment will support generation of additional free cash flow to fund the buy-back
Company will also pursue its growth agenda through bolt-on targeted acquisitions
Refinancing work underway for July 2019 debt maturity
Dividend
Full Year underlying payout ratio 59% (final dividend 9.0c per share) Existing dividend policy to remain unchanged
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Investor Presentation. Full Year Results FY2018
11
Margin strong post bottom of the cycle
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ALS Revenue
AUD$ million ALS EBITDA Margin EBITDA
ALS Revenue Margin Intertek
1,500 30% SGS
Eurofins
Bureau Veritas
1,200 24% Applus
Mistras
900 18%
Bottom of
the cycle
Eurofins, Applus
600 12%
300 6%
0 0%
'12 '13 '14 '15 '16 '17 '18
ALS Financial Year Ending March
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EBITDA Margin for SGS, Intertek, Bureau Veritas, Eurofins, Applus & Mistras is for Calendar Year 2017. EBITDA Margin & Revenue for ALS includes all corporate expenses. EBITDA is underlying EBITDA for all companies
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12 Investor Presentation. Full Year Results FY2018
Commodities. Overview
| Geochemistry Sample volumes up 26% pcp Revenue up 27% pcp Contribution margin 27% versus 24% pcp |
Metallurgy Revenue up 2.5% pcp Contribution margin records improved performance due to cost base reductions Pricing and volume outlook improving |
Inspection Revenue up 16.7% pcp Contribution margin up 0.8% pcp UK hub laboratory processing increasing sample volumes benefiting from recent capacity upgrades |
Coal |
|---|---|---|---|
| Revenue up 3.6% pcp Contribution margin 14.5% versus 13.3% pcp New mine site operations providing increased revenues |
| Underlying results (AUD) | FY18 | FY17 | Change |
|---|---|---|---|
| Revenue | $518.9 mn | $427.2 mn | +21.5 % |
| EBITDA | $146.3 mn | $109.8 mn | +33.2 % |
| EBITDA Margin | 28.2 % | 25.7 % | +250 bps |
| EBIT | $123.5 mn | $86.1 mn | +43.5 % |
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Investor Presentation. Full Year Results FY2018
13
Global Mineral Exploration Market
Market Trends
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400 20
350
300 15
250
18%
200 10
150
100 5
50
0 0
$ Grassroots $ Late stage $ Minesite
Grassroots Late stage Minesite
Index
USD$ billion
Global Exploration Spend
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Analytical Spend Drivers
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generic innovative
SERVICE
value
DOLLARS
price
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ALS continued investment to maintain technical capabilities and feed innovation to high end value added services
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ALS focus on systems, productivity and cost base to maintain volume in generic services market sector
Source: SNL Data
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Investor Presentation. Full Year Results FY2018
14
Geochemistry – The Recovery looks real
ALS Global Mineral Sample Flow (trailing 52 week running average) and Global Exploration Spend
Average Weekly Sample Flow
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Global Exploration Spend US$bn
Relative Gold Price in USD
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
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Week
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100%
90% ALS Global Mineral Sample Flow
80% (two week growth trend)
70%
60%
50%
40% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18
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DELTA (last 2 weeks sample flow Versus same 2 weeks last year)
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Week
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Investor Presentation. Full Year Results FY2018
15
Commodities. Outlook
Continuation of positive market sentiment and improved market conditions for geochemistry
Geochemistry market share gains globally to translate into improved FY19 performance
Gradual but sustained improvement in Metallurgy expected to carry on throughout FY19
Demand for coal services remains and will be underpinned by recent new contract wins
Inspection business benefiting from capacity upgrade and is focused on cost-based management
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Investor Presentation. Full Year Results FY2018
16
Life Sciences. Overview
Environmental
Food & Pharma
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Revenue growth (in AUD) Focus on developing new greenfield Revenue growth (in AUD) Asia (+16.7%) opportunities within selected Asian and Europe (+33.1%) Australia (+5.2%) European markets to deliver new growth Australia (+7.3%) – all organic Europe & Middle East (+20.1%) prospects New Marshfield (US)
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Ongoing cost reduction Organic growth remains strong acquisition creates the initiatives introduced in the throughout the Australian and Asian beachhead for further North Americas and UK markets to markets and new contract wins in South American food expansion improve FY19 ROS America reinforce optimistic outlook
| Underlying results (AUD) |
FY18 | FY17 | Change | H2FY18 | H2FY17 | Change |
|---|---|---|---|---|---|---|
| Revenue | $734.1 mn | $641.6 mn | +14.4 % | $368.4 mn | $320.6 mn | +14.9 % |
| EBITDA | $140.7 mn | $134.3 mn | +4.8 % | $65.8 mn | $61.7 mn | +6.6 % |
| EBITDA Margin | 19.2 % | 20.9 % | -169 bps | 17.9 % | 19.2 % | -130 bps |
| EBIT | $102.1 mn | $99.8 mn | +2.3 % | $46.2 mn | $44.2 mn | +4.5 % |
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Investor Presentation. Full Year Results FY2018
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Financial update: Longer term trends, Life Sciences
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EBITDA Life Sciences Underlying Food & Pharmaceutical, UK
mn EBITDA by half FY17 vs FY18 Monthly development, underlying EBITDA
80
800
12 per. Mov. Avg.
(EBITDA Underlying)
60
600
40
400
20
200
0
H1FY17 H2FY17 H1FY18 H2FY18 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
GBP ‘000’S
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Investor Presentation. Full Year Results FY2018
18
Life Sciences. Outlook
Focus on automation and workflow centralisation to improve future operating margins
Food safety and pharmaceutical strategy will continue expansion via targeted acquisitions
The environmental businesses in the Americas and Europe continue to demonstrate improved revenue performance
EMENA revenue growth driven by UK improvement following integration restructure and recent acquisition in Sweden
[New greenfield life science business in India to be operational in H2FY19]
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Investor Presentation. Full Year Results FY2018
19
Industrial. Overview
Asset Care
Tribology
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In Australia, growth in Mining maintenance services offset smaller FY18 power generation outage program and O&G maintenance services
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Revenue growth and margin improvement delivered in all regions – Australasia, North America and South America
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Continued investment in technologies to support maintenance contracts
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OILCHECK acquisition in Brazil delivering in line with expectations (completed May 2017)
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Market remains highly price sensitive
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Continued investment in laboratory automation and data management
| Underlying results (AUD) | FY18 | FY17 | Change |
|---|---|---|---|
| Revenue | $193.9 mn | $192.7 mn | 0.6 % |
| EBITDA | $32.1 mn | $32.7 mn | (1.8) % |
| EBITDA Margin | 16.6 % | 17.0 % | -40 bps |
| EBIT | $26.2 mn | $26.5 mn | (1.2) % |
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Investor Presentation. Full Year Results FY2018
20
Industrial. Outlook
Despite headwinds, well positioned to support mining, O&G, and power generation maintenance programs in Australia. Market to remain highly price sensitive Mobilisation of US construction projects in FY19 H1 to underpin FY19 regional growth
Lab automation, online monitoring and data management solutions driving increased efficiency and improved quality
Tribology expansion of Prague operations in FY19 H1, creating a footprint in Europe
Asset Care greenfield start-up established in Thailand in FY19 Q1
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21 Investor Presentation. Full Year Results FY2018
Strategic Priorities Unchanged
Strategic priorities Focus (Testing as our Core) Brand recognition Operational excellence One ALS Client focused Leverage services across business streams Existing market share growth Target: non-resource Balanced business to be > 50% New business streams of the company EBIT at portfolio the top of the mineral Geographic expansion cycle through: Bolt-on acquisitions Cost base management and automation Technology and LIMS Strategic Achieving FY2022 focus financial targets Talent and staff development Integrated business services across all business streams
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Investor Presentation. Full Year Results FY2018
22
Strategic Roadmap
| ▪ Integrated to cost based operational model ▪ Procurement leverage ▪ Strong cash conversion ▪ Improve earnings per share ▪ Analytics for operations ▪ Standardized systems and processes Finance |
▪Organic growth projects… +5% of revenues ▪Technology and efficiency projects ▪Focus on ROCE ▪Capital management strategy Capital Allocation |
|---|---|
| ▪ Internal talent development to support the growth of the business ▪ Executive Development Program ▪ Transparency and talent exchange across business streams Talent and Leadership Development |
▪Expansion into new geographies (Asia, Americas, Europe) ▪New business streams with testing at their core ▪Scale and leverage for existing businesses ▪Focus on bolt-on and strategic acquisitions with ROCE minimum 15% ▪New technology Acquisition Criteria ▪New capabilities within business streams |
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23 Investor Presentation. Full Year Results FY2018
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Financial appendix
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Full Year FY18 Financial Summary
| Full Year | FY17 ($mn)** |
Full Year FY18 ($mn) | Full Year FY18 ($mn) | Full Year FY18 ($mn) | Full Year FY18 ($mn) | Full Year FY18 ($mn) | Full Year FY18 ($mn) |
|---|---|---|---|---|---|---|---|
| Underlying* | Underlying* | Discontinued Operations |
Divestment & Impairment Charges |
Restructuring & other one off items |
Amortisation of Intangibles |
Statutory Results |
|
| Revenue | 1,261.5 | 1,446.9 | 48.2 | - | - | - | 1,495.1 |
| EBITDA | 257.6 | 289.3 | 0.3 | 0.9 | (15.1) | - | 275.4 |
| Impairment charges & FX losses transferred from FCTR |
- | - | - | (74.1) | - | - | (74.1) |
| Depreciation & amortisation | (65.2) | (68.0) | (4.9) | - | - | (2.6) | (75.5) |
| EBIT | 192.4 | 221.3 | (4.6) | (73.2) | (15.1) | (2.6) | 125.8 |
| Interest expense | (27.3) | (25.8) | - | - | - | - | (25.8) |
| Tax expense | (46.5) | (51.7) | 1.2 | - | 3.9 | - | (46.6) |
| Non-controlling interests | (1.2) | (1.6) | - | - | - | - | (1.6) |
| NPAT | 117.4 | 142.2 | (3.4) | (73.2) | (11.2) | (2.6) | 51.8 |
| EPS (basic – cents per share) | 23.3 | 28.4 | 10.3 | ||||
| Dividend (cents per share) | 13.5 | 17.0 |
* continuing operations ** restated
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Investor Presentation. Full Year Results FY2018
25
Debt Metrics
| Mar-14 | Mar-15 | Mar-16 | Mar-17 | Mar-18 | |
|---|---|---|---|---|---|
| STATISTICS | |||||
| Gearing Ratio(comfort 45%) | 34% | 38% | 27% | 29% | 31% |
| Leverage (net debt/ EBITDA; max 3.00) | 2.2 | 2.5 | 1.7 | 1.9 | 1.7 |
| EBITDA interest cover(min 3.75) | 12.2 | 9.1 | 7.7 | 9.2 | 11.3 |
| BALANCE SHEET MEASURES | |||||
| Total Equity(AUD mn) | 1419 | 1228 | 1186 | 1185 | 1122 |
| Net Debt (AUD mn) | 722 | 762 | 438 | 485 | 506 |
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AUD$ DEBT MATURITY &
Debt Denomination Cash Holdings AUD$m million
CAPACITY PROFILE
350 Long Term Debt - USPP Notes
as at 31 March 2018
Bank Debt - Undrawn Capacity
CAD 33.0% 33.2%
250
15%
Other, 67 26.8%
USD, 73
150
USD 7.0%
GBP, 10 50
85% AUD, 29 52.1
EUR, 8 2018 2019 2020 2021 2022
-50
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26 Investor Presentation. Full Year Results FY2018