GR ENGINEERING SERVICES LIMITED — Investor Presentation 2020

Aug 30, 2020

Investor Presentation FY20

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Corporate Profile

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Share Price Performance – FY20
Capital Structure
$1.20 3.5
Shares on issue m 153.65 $1.00 3.0
Share price (GNG.ASX) (Aug 2020) $ 0.96 $0.80 2.5
2.0
Market Capitalisation $m 147.5 $0.60
1.5
$0.40
Cash (30 June 2020) $m 37.5 1.0
Debt (30 June 2020) $m 4.0 $0.20 0.5
$- 0.0
Enterprise Value $m 114.0
Volume (millions) GNG.ASX
Directors & Management Register Analysis
Phillip Lockyer Non-Executive Chairman 15.0%
Geoff Jones Managing Director
Tony Patrizi Executive Director
Barry Patterson Non-Executive Director
23.0%
Peter Hood Non-Executive Director
62.0%
Joe Totaro Non-Executive Director
Omesh Motiwalla Chief Financial Officer
Directors, Founders & Senior Management Institutions Other
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Our Strategy

Growing to increase the Company’s diversity and strength

Facilitate larger projects and minimise vulnerability to changing market conditions

Extend Geographical Presence		Strategic Alliances and Investments		Larger Projects
Strong Client Relationships		Extend and Diversify Experience		Acquisition

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Capabilities

• GR Engineering  Process engineering design and construction contractor servicing the mining and minerals processing industry

• Specialising in EPC / EPCM project delivery to provide project outcomes with secure cost, time, plant performance and contract completion warranties and guarantees

• Expertise in gold, base metals and industrial mineral commodities

Upstream Production Solutions

• Oil and gas services business providing operations, maintenance, project advisory and engineering services to Australian oil and gas industry

• Strong presence on and offshore Perth Basin, Timor Sea, Queensland and Victoria

Selected Clients

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Selected Clients

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FY20 Results Summary

Earnings

Balance Sheet & Cash Flow

Revenue

Cash

Revenue			Cash
$250m			$40m
$200m			$30m
$0m $50m $100m $150m	FY20 222.4	FY19 182.3	$0m $10m $20m	FY20 37.5	FY19 31.4
EBITDA			Net Operating Cash Flow
$15m Underlying EBITDA*			$25m $30m
$10m			$20m
$5m	FY20 11.3	FY19 9.9	$10m $15m	FY20	FY19 24.7
$0m			$5m	11.2
			$0m
$15m PBT			Total 8cps	Dividend
		FY19	6cps
-$5m $5m	FY20 -9.7	8.8	2cps 4cps	FY20 6.0	FY19 6.0
-$15m			0cps

*Underlying EBITDA excludes one-off bad debt expenses of $17.6m primarily associated with the TOGA debtor write-off, $0.3m relating to miscellaneous inventory and debtor write-offs and $0.1m relating to Hanlon acquisition costs

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FY20 Results

• During FY20, GR Engineering increased revenue by 22.0% to $222.4 million.

• The solid underlying EBITDA contribution of $11.3 million was the result of a strong second half performance. GR Engineering recorded an underlying EBITDA contribution of $9.3 million in the second half of FY20.

• As reported at 31 December 2019, the FY20 financial results were negatively impacted by the impairment of a $17.6 million receivable owed by Timor Sea Oil & Gas Pty Ltd (liquidators appointed) to the Company’s wholly owned subsidiary, Upstream Production Solutions Pty Ltd.

• Cash at bank increased significantly to $37.5 million at 30 June 2020 (31 December 2019: $20.7 million).

• The Total Reportable Injury Frequency Rate for FY20 was 3.77 comparing favourably to the FY19 result of 4.99.

• A final dividend of 4 cps (unfranked) has been declared, resulting in FY20 dividends of 6 cps (unfranked).

• In February 2020, GR Engineering completed the acquisition of Hanlon Engineering & Associates Inc., a multi-disciplinary engineering services firm based in Tucson, Arizona. The acquisition increases GR Engineering’s footprint in the Americas.

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FY20 Summary – Mineral Processing

 Practical completion achieved:

• OZ Minerals Limited’s Carapateena Northern Wellfield Water Supply Project in South Australia

• Kirkland Lake Gold Limited’s Fosterville Paste Plant Project in Victoria

 New and ongoing projects include:

Salt Lake Potash Ltd	Lake Way Project	EPCM/EPC	$107.0m	Australia
Silver Lake Resources Ltd	Deflector Flotation Tails Leach Project	EPC	$23.0m	Australia
Saracen Minerals Holdings Ltd	Thunderbox Paste Plant Project	EPC	$22.0m	Australia
Saracen Minerals Holdings Ltd	Carosue Dam Operations Plant Expansion Project	EPC	$32.6m	Australia
Ora Banda Mining Ltd	Davyhurst Restart Project	EPC	$10.8m	Australia
Tellus Holdings Ltd	Sandy Ridge Waste Storage Project	EPC	$46.0m	Australia
First Majestic Corp.	San Dimas Silver Mine Project	EPCM	US$4.5m	Mexico
Bluestone Mines Tasmania JV	Renison Tin Upgrade Projects	EPC	$8.7m	Australia

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FY20 Summary – Mineral Processing

 GR Engineering’s pipeline of work opportunities includes:

Galena Mining Ltd	Abra Base Metals Project	$74.0m	Australia
Geopacific Resources Ltd	Woodlark Gold Project	$92.4m	PNG
EcoGraf (Australia) Ltd	WA Battery Graphite Manufacturing Facility	$25.0m	Australia
Sheffield Resources Ltd	Thunderbird Minerals Sands Project	-	Australia
Strandline Resources Ltd	Fungoni Mineral Sands Project	US$17.9m	Tanzania
Bacanora Lithium Plc	Sonora Lithium Project	-	Mexico

• At 30 June 2020, GR Engineering was engaged on 26 studies across a broad range of commodities for projects both in Australia and abroad. Eleven of these studies related to prospective gold projects.

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FY20 Summary – Oil & Gas

• GR Engineering’s wholly owned subsidiary, Upstream Production Solutions Pty Ltd (Upstream), generates longer term operations and maintenance services revenue which results in baseline revenue alongside project based design and construction work.

• During FY20, revenue contributions were primarily from:

• Wellsite and plant maintenance work in the Bowen and Surat Basins (Origin Energy Ltd and Santos Ltd)

• Timor Sea operations and maintenance services (Australian Government and Eni Australia Ltd)

• Maintenance work on assets in the Perth Basin including Mitsui Co. (Australia) Pty Limited

• Commissioning, operations and maintenance support services and surface facility construction in Victoria to clients including APA Group.

• As reported at 31 December 2019, Upstream PS’ FY20 results were negatively impacted by the impairment of $17.6 million relating to an outstanding receivable owned by Timor Sea Oil & Gas Pty Ltd (liquidators appointed) (TOGA).

• Following TOGA being placed into liquidation, the Australian Government engaged Upstream PS to provide operations and maintenance services to the Northern Endeavour FPSO, in a non-production environment.

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Balance Sheet

• Strong balance sheet maintained at 30 June 2020

• Cash: $37.5 million (30 June 2019: $31.4 million)

• Listed investments: $5.3 million

• Significant headroom on project facilities: • Bank guarantee facility: $70 million

• Insurance bond facility: $60 million

• Net operating cashflows: $11.2 million (FY19: $24.7 million)

• Full year dividends paid: 6 cents (unfranked)

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FY21 Outlook

• Since 1 June 2020, GR Engineering has increased its order book by $170 million. As the consolidated entity moves into FY21, GR Engineering has a strong order book dominated by Australian projects.

• The consolidated entity expects revenue for FY21 to be in the range of $280 million to $300 million, with improved EBITDA margins.

• GR Engineering’s strong cash position means that it is well capitalised to deliver its FY21 pipeline of work.

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Contact Details

Geoff Jones

Managing Director

• +61 8 6272 6000

Australian Office Details

GR Engineering Services Ltd

71 Daly Street Ascot WA 6104

 PO Box 258 Belmont WA 6984

Building 3, Level 3, Kings Row Office Park 42 McDougall Street Milton QLD 4064

 +61 7 3838 8000

• +61 8 6272 6000

• geoff.jones@gres.com.au

Omesh Motiwalla

CFO & Company Secretary

• +61 8 6272 6000

• omesh.motiwalla@gres.com.au

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Upstream Production Solutions

Level 16, 350 Queen Street Melbourne VIC 3000

Level 10, 345 Queen Street Brisbane QLD 4000

• +61 3 8623 9800

• +61 7 3239 5800

Level 11, 99 St Georges Terrace Perth WA 6000

29 Dawson Street East Arm NT 0822

• +61 8 6109 4000

• +61 8 7979 2340

Hanlon Engineering & Associates

2502 N Huachuca Dr, Tucson, AZ 85745, United States

• +1 520 326 0062

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Disclaimer

RELIANCE ON THIRD PARTY INFORMATION

This presentation may contain Information that has been derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. No responsibility, warranty or liability is accepted by GR Engineering Services Limited ( Company ), its officers, employees, agents or contractors for any errors, misstatements in or omissions from this presentation.

PRESENTATION IS A SUMMARY ONLY

This presentation is information in a summary form only and does not purport to be complete. It should be read in conjunction with the audited financial report for the year ended 30 June 2020. Any information or opinions expressed in this presentation are subject to change without notice and the Company is not under any obligation to update or keep current the information contained within this presentation.

NO OFFER OF SECURITIES

Nothing in this presentation should be construed as either an offer to sell or a solicitation of an offer to buy or sell Company securities in any jurisdiction.

FORWARD LOOKING STATEMENTS

This presentation may include forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, these statements are not guarantees or predictions of future performance, and involve both known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s control. As a result, actual results or developments may differ materially from those expressed in the statements contained in this presentation. Investors are cautioned that statements contained in this presentation are not guarantees or projections of future performance and actual results or developments may differ materially from those projected in forward-looking statements.

DISCLOSURE OF NON- IFRS FINANCIAL INFORMATION

Throughout this presentation, there are occasions where financial information is presented not in accordance with accounting standards. There are a number of reasons why the Company has chosen to do this including to maintain a consistency of disclosure across reporting periods

ROUNDING

Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided.

NOT INVESTMENT ADVICE

This presentation is not intended and should not be considered to be the giving of investment advice by the Company or any of its shareholders, Directors, officers, agents, employees or advisers. The information provided in this presentation has been prepared without taking into account the recipient’s investment objectives, financial circumstances or particular needs. Each party to whom this presentation is made available must make its own independent assessment of the Company after making such investigations and taking such advice as may be deemed necessary.

NO LIABILITY

To the maximum extent permitted by law, neither the Company nor its related bodies corporate, Directors, employees or agents, nor any other person, accepts any liability, including without limitation any liability arising from fault or negligence, for any direct, indirect or consequential loss arising from the use of this presentation or its contents or otherwise arising in connection with it.

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GRES Locations

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