VERIS LIMITED — M&A Activity 2014

Aug 27, 2014

Acquisition of Bosco Jonson A Premier Victorian Surveying Business August 2014

Disclaimer

This Document should not be considered as an offer or invitation to subscribe for or purchase any securities in OTOC Limited (“OTOC” or “The Company”) or as an inducement to make an offer or invitation with respect to those securities. No agreement to subscribe for securities in OTOC should be entered into on the basis of this Document.

This Document contains high level information only and does not purport to be all inclusive or to contain all information which its recipients may require in order to make an informed assessment of OTOC and its prospects. Any forecasts and forward looking information contained in this Document are subject to risks and uncertainties and are not a guarantee of future performance. Actual performance will almost certainly differ from those expressed or implied.

OTOC makes no representation or warranty, express or implied, as to the accuracy, currency or completeness of the information presented herein. Information contained in this Document may be changed, amended or modified at any time by OTOC. OTOC is under no obligation to update any information or correct any error or omission which may become apparent after this Document has been issued.

To the extent permitted by law, OTOC and its officers, employees, related bodies corporate and agents (‘Associates’) disclaim all liability, direct, indirect or consequential (and whether or not arising out of the negligence, default or lack of care of OTOC and/or its Associates) for any loss or damage suffered by recipients of this Document or other persons arising out of, or in connection with, any use of or reliance on this Document or information contained herein. By accepting this Document, the recipient agrees that it shall not hold OTOC or its Associates liable in any such respect for the provision of this Document or any other information provided in relation to this Document.

Recipients of this Document must make their own independent investigations, consideration and evaluation of the information contained herein. Any recipient that proceeds further with its investigations, consideration or evaluation of the information described herein shall make and rely solely upon its own investigations and inquiries and will not in any way rely upon this Document. Recipients of this Document should not act or refrain from acting in reliance on material in this Document.

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Contents

1	Executive Summary	4
2	Overview of Bosco Jonson	7
3	Strategic Rationale	11
4	Acquisition Terms	19
5	Conclusion	21

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1. Executive Summary

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Executive Summar y

• OTOC has agreed to acquire Bosco Jonson, a leading Victorian surveying, town planning and urban design business ( Acquisition )

TRANSACTION HIGHLIGHTS

• First acquisition as part of OTOC’s strategy to create a premium national surveying business

• Provides OTOC with an entry into Victorian surveying market and diversifies and enhances the quality of group earnings

• Acquisition consideration: up-front consideration of $14m[1] and performance consideration of up to $3m subject to the achievement of financial hurdles

• Acquisition expected to be earnings per share accretive in FY15

• Established in 1997, Bosco Jonson is a Melbourne based surveying company with approximately 80 staff and longstanding reputation for quality

• Recognised leader in large scale urban and broad-acre developments

BOSCO JONSON OVERVIEW

• Blue-chip, long-term client base including Australand, Parklea, Peet, Stockland, Lend Lease, MAB, Satterley and Salta

• Consistently delivered strong financial results, with average EBITDA margin of 33% over FY09 – FY14 and FY14 EBITDA of $4.5m

• Vendors/principals will enter into long-term employment contracts prior to Completion

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Note 1: Cash $13m, OTOC shares $1m

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Executive Summar y

• Strategic-fit: consistent with OTOC’s stated strategy of expanding the group’s surveying, town planning and urban design capabilities to create a premium national surveying business

• Clients: high levels of repeat business from diversified blue-chip client base

• Management : experienced management team with proven track record

ACQUISITION RATIONALE

• Geographic expansion : entry into attractive Victorian property market

• Diversification : further diversification away from resources sector and contracting work

• Financial : diversifies and enhances the quality of OTOC’s earnings with the addition of high-margin repeatable earnings

• EPS accretive : expected to be EPS accretive in FY15

• Valuation metrics: up-front consideration implies a FY14 EBITDA multiple of 3.1x

• Acquisition is on a cash/debt free basis

FUNDING

• Up-front cash consideration of $13m will be funded from existing cash reserves and debt facilities

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2. Overview of Bosco Jonson

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Back round g

• Melbourne based surveying company with approximately 80 staff

• Established in December 1997 after a management buy-out of the surveying division of WBCM Group

• Five key executives have been with the company since inception and will remain with the business post Acquisition

• Long standing reputation in the industry for quality surveying and property services. Bosco Jonson has won numerous industry awards and is a recognised leader in large scale urban and broad-acre developments

• Consistently delivered strong financial results through the property cycle

• Diversified blue-chip customer base including:

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Service Offerin s g

• Integrated surveying, town planning and urban design capabilities

CONSTRUCTION SURVEYING SURVEYING

TOWN PLANNING

URBAN DESIGN

• Survey project • Ground control management placement & coordination

• Legal boundary surveys

• Horizontal grid set out & vertical control

• Land tenure advice & reporting

• Monitoring and

• • Apartment and dilapidation surveys townhouse subdivision • Industrial measurements and

• • Hydrographic surveys high precision set out & measurement

• Engineering and construction surveys

• • ~50 staff • ~10 staff

• Prepare applications for planning permits & rezoning

• • Sub-consultant briefing & appointments

• • Planning appeals, panel hearings and workshops

• Services include site analysis

• Context plans

• Master plans

• Sub-division design &

• panel hearings and layout

• workshops

• • Negotiations with • Land use plans and regional context plan

• councils & service agencies

• • Development plan applications

• • ~5 staff • ~5 staff

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Historical Financial Performance

• Consistently strong financial performance with Industry-leading profit margins

• Premium business with good cost controls

• Capital-light business model generating strong free cash flow

Revenue & EBITDA

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16 15.2 45%
14.0
13.7
14 40%
12.0 12.2
35%
12
10.3
30%
10
25%
8
5.9 20%
6
4.7 4.5 15%
4.0
4 3.3 3.5
10%
2 5%
0 0%
2009 2010 2011 2012 2013 2014
$m
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Revenue (LHS) EBITDA (LHS) EBITDA margin (RHS)

Source: Bosco Jonson Unaudited Management Accounts

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3. Strategic Rationale

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Ac uisition Hi hli hts q g g

Consistent with OTOC’s stated strategy of expanding the group’s surveying, town  planning and urban design capabilities

 Creation of a premium national surveying business

 Geographic diversification – entry into the attractive Victorian property market

 Experienced Management team with proven track record and stellar industry reputation

 Consistently strong financial performance

 High levels of repeat business from diversified blue-chip customer base

 Diversifies and enhances the quality of OTOC’s earnings

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OTOC Grou – Post Ac uisition p q

• Acquisition strengthens OTOC’s surveying, aerial surveying and town planning business

• Bosco Jonson management team and brand will be retained

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Surveying, Aerial Surveying & Town Planning
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Resources
Infrastructure
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Facilities
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A National Leader in Surveying, Aerial Surveying & Town Planning

• The Australian Surveying sector is highly fragmented and has an estimated addressable market of $3.4bn (source: IBIS World)

Award Winning Brands

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• OTOC has the opportunity to be the first-mover in a national consolidation strategy to create a premium national surveying business

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• Following the proposed acquisition of Bosco Jonson, over 230 staff with offices in Perth, regional WA and Melbourne. Experienced Management teams and award-winning professional staff

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Locations
Port Hedland
Karratha
Perth
Melbourne
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• Advantages of national strategy:

• Better service clients which have national operations

• Leverage individual relationships into national clients of the group

• Sufficient scale to offer specialised services and capture high-margin work in aerial surveying, hydro, urban design and technology

• Flexible, mobile work force to better manage utilisation and provide employee development opportunities

• Strong financial platform for further expansion

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Increased Ex osure to the Surve in Sector p y g

• The Surveying and Mapping Services industry is highly fragmented, comprising many small-scale firms contesting narrow geographic or specialist markets

• According to IBIS World, the industry consists of over 3,500 small businesses. The industry’s four largest companies account for less than 10% of annual industry revenue

• $3.4bn in industry revenue in the year ended 30 June 2013, forecast to grow by an annualised 1.4% over the five years to 2018-19 to $3.6 billion

• EBIT margins of ~14% in the year ended 30 June 2013, forecast to grow by an annualised 3.0% in the five years 2018-19 to 15.0% of revenue

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Major Markets
Mining
15%
Building &
Construction
40% Government and
Public Authorities
20%
Engineers &
Architects
25%
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• The industry generates about 40% of its annual revenue from the provision of services to building companies and real estate property developers, with input from surveyors at most stages of the development and construction process

• The recent upswing of investment into new housing construction has resulted in demand for building surveying on new housing subdivisions

• Mining sector surveying comprises an estimated 15% of the market and often involves specialised, higher-margin services

Revenue Growth

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3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%
-1.0%
2012-13a 2013-14f 2014-15f 2014-15f 2015-16f 2016-17f 2017-18f
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Source: IBIS World

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Victorian Pro ert Market p y

• Victorian property market expected to experience solid growth, underpinned by demographic and population growth factors and low interest rate environment

• Land sales and residential dwelling approvals have trended upward since 2013

Melbourne Land Sales

Victorian Residential Dwelling Approvals

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2,000 20,000
Monthly Sales Rate (LHS) Annual Sales (RHS)
1,800 18,000
1,600 16,000
1,400 14,000
1,200 12,000
1,000 10,000
800 8,000
600 6,000
400 4,000
200 2,000
0 0
Av. Monthly Sales (Lots p.c.m.) Annual Sales (Lots p.a.)
Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14
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7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Jul-2009 Jan-2010 Jul-2010 Jan-2011 Jul-2011 Jan-2012 Jul-2012 Jan-2013 Jul-2013 Jan-2014
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Source: National Land Survey Program, Australian Bureau of Statistics

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FY14 | Diversified Revenue Base Percentage %

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FY2013
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FY2014
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Communications
2% Facilities
Bosco Jonson 2%
10%
Resources
Government
45%
19%
Whelans
23%
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Facilities
Communications
2%
3%
Bosco Jonson
11%
Government
Whelans 40%
20%
Resources
24%
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• Diversified revenue model, with reduced reliance on Resources sector activity

• Pro-forma FY14 surveying revenue > 30% of total group revenue

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Pro-Forma Financials

• Enhanced scale, repeatable earnings and improved profit margins

• Pro-forma FY14 EBITDA $17.3m of which combined surveying business (Whelans and Bosco Jonson) is approximately 30% of pro-forma revenue and approximately 40% of pro-forma EBITDA

• Acquisition expected to be earnings per share accretive in FY15

Pro-Forma EBITDA

Pro-Forma EBITDA Margin

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20
18
16
$4.5
14
$3.5
12 $4.7
10
8 +
6 $12.8
$10.9 +
$9.6
4
2
0
2012 2013 2014
OTOC Bosco Jonson
$m
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16%
14%
13.6%
12%
11.5% 11.3%
10%
9.6%
8.6%
8%
6% 6.3%
4%
2%
0%
2012 2013 2014
OTOC OTOC Pro-forma for Acquisition
EBITDA margin
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Source: OTOC analysis, Bosco Jonson Unaudited Management Accounts

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4. Acquisition Terms

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Ac uisition Terms q

• OTOC has agreed to acquire the business and assets of Bosco Jonson:

• Up-Front Consideration:

$13.0m cash and new shares in OTOC with a value of $1.0m

• Performance Consideration:

Up to $3.0m cash payable on achievement of financial hurdles in the two annual periods post completion[1]

• Long-Term Employment Contracts:

The vendors/principals will enter long term employment contracts prior to Completion

• Completion:

Expected to be completed by late September 2014, subject to satisfaction of customary conditions precedent (refer to OTOC announcement released on ASX)

• Up-front consideration for the Acquisition implies transaction multiples of:

• 3.4x FY14 EBIT

3.1x FY14 EBITDA

• OTOC is considering its options for funding the up-front consideration which includes using cash and existing debt facilities

• GMP Securities is acting as Financial Advisor and Steinepreis Paganin is acting as Legal Advisor to OTOC

• Note 1: Annual performance payment: $0.75m if EBITDA is no less than $3.5m and $1.5m if EBITDA is greater than $4.25m. If EBITDA is between $3.5m and $4.25m, the performance payment will be on a sliding scale on a $1 for $1 basis

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5. Conclusion

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Conclusion

Acquisition of Bosco Jonson is expected to provide strategic and financial benefits

• Ideal first step in terms of size, existing capabilities and geographic reach in OTOC’s strategic goal of creating a premium national surveying business.

• Strategic rationale:

• Strategic-fit : consistent with OTOC’s strategic goal of creating a premium national surveying business

• Scale : greater scale in surveying, town planning and urban design

• Clients: diversified blue-chip client base

• Management : experienced management team with proven track record

• Geographic expansion : entry into attractive Victorian property market

• Diversification: further diversification away from resources sector and contracting work

• Financial : diversifies and enhances the quality of OTOC’s earnings

• The Acquisition is expected to be EPS accretive in FY15

OTOC Business Update

• OTOC FY14 results: revenue $113m, EBITDA $12.8m (up 16%), EBIT $9.1m (up 19%)

• Good profit growth in the context of subdued conditions in the resources sector led by improved operating margins on construction projects through better internal controls, management systems and experienced management team

• Initiatives including government infrastructure and growth of telecommunications has contributed to higher margins and a much greater degree of lower risk cost-plus work

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