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VYSARN LIMITED Interim / Quarterly Report 2020

Feb 27, 2020

66029_rns_2020-02-27_1cae4962-d8d5-4877-8b91-3e4167ce6b75.pdf

Interim / Quarterly Report

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Half Year Results Presentation February 2020

Disclaimer

This presentation has been prepared by Vysarn Limited ("Vysarn" or the "Company") ("Presentation") and contains general and background information about Vysarn activities current as at the date of the Presentation. The Presentation should not be considered to be comprehensive or to comprise all the information that an investor should consider when making an investment decision. The information in the Presentation should be read in conjunction with Vysarn's other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange, available at www.asx.com.au.

The Presentation contains statements, opinions, projections, forecasts and other material ("forward-looking statements") with respect to the financial condition, business operations and competitive landscape of the Company and certain plans for its future management. The words anticipate, believe, expect, project, forecast, estimate, likely, should, could, may, target, plan and other similar expressions are intended to identify forward-looking statements. Such forward-looking statements are not guarantees of future performance and include known and unknown risks, uncertainties, assumptions and other important factors which are beyond the Company's control and may cause actual results to differ from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements. Any forwardlooking statements contained in this document are qualified by this cautionary statement. The past performance of the Company is not a guarantee of future performance. None of the Company, or its officers, employees, agents or any other person named in the Presentation makes any representation, assurance or guarantee as to the accuracy or likelihood of fulfilment of any forward-looking statements or any of the outcomes upon which they are based.

The Presentation is not financial product, investment advice or a recommendation to acquire Vysarn securities and has been prepared

without taking into account the objectives, financial situation or needs of individuals. Each recipient of the Presentation should make their own enquiries and investigations regarding all information in the Presentation including, but not limited to, the assumption, uncertainty and contingencies which may affect future operations of Vysarn and the impact that different future outcomes may have on Vysarn. Before making an investment decision prospective investors should consider the appropriateness of the information having regard to their own objectives, financial situation and needs, and seek legal, taxation and financial advice appropriate to their jurisdiction and circumstances. Vysarn is not licensed to provide financial product advice in respect of its securities or any other financial products. Cooling off rights do not apply to the acquisition of Vysarn securities. Each investor must make its own independent assessment of Vysarn before acquiring any securities in Vysarn.

Vysarn Limited results are reported under International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The Company discloses certain non IFRS measures that are not prepared in accordance with IFRS and therefore are considered non-IFRS financial measures. The non-IFRS measures should only be considered in addition to and not as a substitute for, other measures of financial performance prepared in accordance with IFRS.

To the maximum extent permitted by law, the Company and its directors and advisers give no warranty, representation or guarantee as to the accuracy, completeness or reliability of the information contained in the Presentation. Further, none of the Company, or its officers, employees or agents accepts, to the extent permitted by law, any liability for any loss, claim, damages, costs or expenses arising from the use of the Presentation or its contents or otherwise arising out of, or in connection with it. Any recipient of the Presentation should independently satisfy themselves as to the accuracy of all information contained herein.

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2

VYSARN LIMITED ASX:VYS

Contents
Section Pages
Board, Management and Corporate Snapshot 4
Major Milestones 5
Operational and Financial Indicators 6
Reconciliation of Consolidated Statement of Profit or Loss 7
Reconciliation of Net Cash Movement 8
Operational Outlook 9
Growth Strategy 10
VYSARN LIMITED ASX:VYS

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3

Board, Management and Corporate Snapshot

The Company aims to provide shareholders with strong capital returns over the short, medium and long term and consistent income returns over the medium to longer term by ensuring fundamentally driven investment decisions are managed by competent and experienced executives and a motivated and aligned board.

Board of Directors
Peter Hutchinson Non-Executive Chairman VYS Top Shareholders
James Clement Managing Director and CEO (VYS)
Sheldon Burt Executive Director (MD Pentium Hydro)
Chris Brophy Non-Executive Director 12.7%
4.9%		 2.9%
Kyla Garic CompanySecretary 2.2%
Management (Pentium)
Colin Mackenzie		 GM of Operations 65.7% 2.1%
2.0%
Toby Genillard
Quentin Hayes		 Commercial Manager
HSE Manager		 2.0%
2.0%
Matt Power Finance Manager 1.9%
1.6%
Corporate
Share Price (1) $0.058
Shares on Issue ~297.7m
Market Capitalisation ~$17.26m Notes:
Net Debt(2) ~$3.88m 1. Share price at the close of market on 27th February 2020
Enterprise Value ~$21.14m 2. Debt less cash and cash equivalents within the Appendix 4D

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Molonglo Pty Ltd

Invia Custodian Pty Ltd

Mr Anastasios Karafotias

Garrison Holdings Pty Ltd

AH Super Pty Ltd

Mr Anthony John Power & Mrs Susan Janet Power

BNP Paribas Nominees Pty Ltd

Mr Mark John Bahen & Mrs Margaret Patricia Bahen Richcab Pty Ltd

Precision Opportunities Fund Ltd

Other Shareholders

4

Major Milestones Since Inception

Vysarn has achieved a number of major milestones since its relisting in September 2019. From a standing start the company has been able to establish a business servicing top tier resource clients, with growing demand for its assets and services.

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  • Ausdrill acquisition on the 29th August 2019 and the subsequent Vysarn relisting on the 9th September 2019.

  • Quickly established an experienced board and management team with a history of success in mining and water well services.

  • Entered into 7 contracts to provide rigs and/or provide borefield and construction services. One contract already completed.

  • Awarded Master Services Agreements (MSA) with Roy Hill Iron Ore (RHIO), Fortescue Metals Group (FMG) and Hancock Prospecting (HP) to provide borefield and construction services.

  • 6 Rigs are currently deployed under contact. These contracts are to provide:

  • The appointment of James Clement as Vysarn Managing Director and Chief Executive Officer, and the appointment of Matt Power as Finance Manager in Pentium Hydro. Both commenced in their roles on the 3rd February 2020.

  • Establishment of new premises in Wangara WA that comprises of 13,300 sq.m of hardstand and a 500 sq.m office facility enabling the centralisation of all managerial, operational and administrative functions as well as the housing of the company’s comprehensive plant and equipment.

  • Establishment of detailed business and safety systems and the subsequent training of staff as required by major clients. This has fast tracked the transition of the business from an asset acquisition in August to a fully functioning operating business by December of the same year.

  • 2 rigs and auxiliary equipment on dry hire for Easternwell at BHP’s Olympic Dam mine;

  • EBITDA positive for November and December after start up costs from August to October while ramping up to meet water well services demand.

  • 2 rig suites to perform borefield and construction services to Roy Hill Iron Ore;

  • 1 rig suite to perform borefield and construction services for FMG; and

  • 1 rig suite to perform borefield and construction services for Iluka.

5

Highlights

Vysarn’s wholly owned subsidiary, Pentium Hydro, has gone through a significant start up phase during the reporting period.

The company is experiencing strong demand for its assets and services from top tier resource clients.

Significant contracts in the water well services space were won and executed during the period. Further tenders have been submitted or requested.

New business premises were established, and teams of operational personnel were appointed and trained.

Subsequent ramp up of overheads to meet this demand was required.

Operational and Financial Indicators

▪ Costs incurred during start up period included rig ready R&M, premobilisation costs, corporate start up costs, other office set up costs and general expenses.

▪ In the extremely short window since the Ausdrill assets were acquired on the 29th August 2019, the company has managed to establish a management team, an operational team and operating systems that has enabled the tendering, winning and

▪ Maintainable overheads (excluding interest and depreciation) has been established with expectations in-line with previous forecasts of approximately $360,000 per month on average for the period November – June 2020.

execution of water well services to top tier resource clients.

▪ Pentium had 6 rigs working in February 2020. This is on top of the completion of a contract for 1 rig with AngloGold Ashanti.

▪ Repairs & maintenance trends will be established in the months to 30 June 2020.

▪ It is anticipated that up to 8 rigs will be working by June 2020 resulting from purchase orders under the current Master Services Agreements with FMG, HP and RHIO, and the outstanding tenders.

▪ 2 rigs are still not equipped for immediate mobilisation. The company intends to preserve the working capital required to bring the rigs into working readiness until there is a purchase order for their services.

▪ The outlook for rig demand and water well services is positive with the company currently in discussions regarding further tenders and projects.

▪ There have been early losses during the start up phase from August - October, with the company earnings positive during the months of November and December.

6

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Reconciliation of Consolidated Statement of Profit or Loss

The relisting of the company’s securities following the acquisition of the Ausdrill waterwell assets during the 1HFY2020 saw various transactions of a non operating nature that are summarised below.

Vysarn Limited - Adjusted Operational EBITDA

Consolidated Statement of Profit or Loss
and Other Comprehensive Income		 31-Dec-19(4) Less Dep &
Interest & Tax		 Prospectus
transactions		 Sub Total(5) Vysarn Corporate
Costs
Pentium Hydro
Start up Costs(6)
Appendix
4D Notes(1)
($)
($)
($)
($)
($)
($)
4
Revenue from contracts with customers
1,778,969
-
-
1,778,969
-
1,778,969
5
Other income
7,034,825
-
7,034,825
-
-
-
6
Material expense
(509,970)
-
-
(509,970)
-
(509,970)
Labour costs
(1,165,717)
-
-
(1,165,717)
-
(1,165,717)
18
Share based payment expense(2)
(1,622,772)
-
(1,622,772)
-
-
-
6
Depreciation expense
(1,589,501)
(1,589,501)
-
-
-
-
6
Finance costs
(148,707)
(148,707)
-
-
-
-
6
Transaction costs(3)
(431,642)
-
(431,642)
-
-
-
6
Other expenses from ordinary activities
(549,585)
-
-
(549,585)
(179,585)
(370,000)
Profit/(Loss) before income tax
2,795,900
(1,738,208)
4,980,411
(446,303)
(179,585)
(266,718)
Income tax benefit
513,314
513,314
-
-
-
-
Profit/(Loss) for the half year
3,309,214
(1,224,894)
4,980,411
(446,303)
(179,585)
(266,718)

Notes:

  1. Notes refer to specific notes outlined within the Appendix 4D

  2. Costs that relate to sections 1.2, 1.8 and 8.3 of the Vysarn Prospectus

  3. Costs that relate to section 1.7 of the Vysarn prospectus.

  4. Statutory numbers from the consolidated statement of Profit or Loss within the Appendix 4D

  5. Refer to slide 8 – management accounts EBITDA to 31 Dec 2019 less prospectus transactions

  6. Operating entity (Pentium Hydro) EBITDA to 31 Dec 2019 less prospectus transactions

7

h Movement
Profit and Loss - Reconciliation to
Adjusted Operational EBITDA
July
($)
August
($)
Sept
($)
Oct
($)
Nov
($)
Dec
($)
Total
($)
Vysarn Pty Ltd
(7,946)
(23,124)
(6,984)
(97,859)
(21,735)
(21,936)
(179,585)
Pentium Hydro Pty Ltd
-
(13,718)
(275,877)
(119,939)
70,649
72,168
(266,718)
Consolidated P&L
(7,946)
(36,842)
(282,861)
(217,799)
48,913
50,231
(446,303)		 h Movement
Profit and Loss - Reconciliation to
Adjusted Operational EBITDA
July
($)
August
($)
Sept
($)
Oct
($)
Nov
($)
Dec
($)
Total
($)
Vysarn Pty Ltd
(7,946)
(23,124)
(6,984)
(97,859)
(21,735)
(21,936)
(179,585)
Pentium Hydro Pty Ltd
-
(13,718)
(275,877)
(119,939)
70,649
72,168
(266,718)
Consolidated P&L
(7,946)
(36,842)
(282,861)
(217,799)
48,913
50,231
(446,303)		 h Movement
Profit and Loss - Reconciliation to
Adjusted Operational EBITDA
July
($)
August
($)
Sept
($)
Oct
($)
Nov
($)
Dec
($)
Total
($)
Vysarn Pty Ltd
(7,946)
(23,124)
(6,984)
(97,859)
(21,735)
(21,936)
(179,585)
Pentium Hydro Pty Ltd
-
(13,718)
(275,877)
(119,939)
70,649
72,168
(266,718)
Consolidated P&L
(7,946)
(36,842)
(282,861)
(217,799)
48,913
50,231
(446,303)		 h Movement
Profit and Loss - Reconciliation to
Adjusted Operational EBITDA
July
($)
August
($)
Sept
($)
Oct
($)
Nov
($)
Dec
($)
Total
($)
Vysarn Pty Ltd
(7,946)
(23,124)
(6,984)
(97,859)
(21,735)
(21,936)
(179,585)
Pentium Hydro Pty Ltd
-
(13,718)
(275,877)
(119,939)
70,649
72,168
(266,718)
Consolidated P&L
(7,946)
(36,842)
(282,861)
(217,799)
48,913
50,231
(446,303)		 h Movement
Profit and Loss - Reconciliation to
Adjusted Operational EBITDA
July
($)
August
($)
Sept
($)
Oct
($)
Nov
($)
Dec
($)
Total
($)
Vysarn Pty Ltd
(7,946)
(23,124)
(6,984)
(97,859)
(21,735)
(21,936)
(179,585)
Pentium Hydro Pty Ltd
-
(13,718)
(275,877)
(119,939)
70,649
72,168
(266,718)
Consolidated P&L
(7,946)
(36,842)
(282,861)
(217,799)
48,913
50,231
(446,303)		 h Movement
Profit and Loss - Reconciliation to
Adjusted Operational EBITDA
July
($)
August
($)
Sept
($)
Oct
($)
Nov
($)
Dec
($)
Total
($)
Vysarn Pty Ltd
(7,946)
(23,124)
(6,984)
(97,859)
(21,735)
(21,936)
(179,585)
Pentium Hydro Pty Ltd
-
(13,718)
(275,877)
(119,939)
70,649
72,168
(266,718)
Consolidated P&L
(7,946)
(36,842)
(282,861)
(217,799)
48,913
50,231
(446,303)		 h Movement
Profit and Loss - Reconciliation to
Adjusted Operational EBITDA
July
($)
August
($)
Sept
($)
Oct
($)
Nov
($)
Dec
($)
Total
($)
Vysarn Pty Ltd
(7,946)
(23,124)
(6,984)
(97,859)
(21,735)
(21,936)
(179,585)
Pentium Hydro Pty Ltd
-
(13,718)
(275,877)
(119,939)
70,649
72,168
(266,718)
Consolidated P&L
(7,946)
(36,842)
(282,861)
(217,799)
48,913
50,231
(446,303)		 h Movement
Profit and Loss - Reconciliation to
Adjusted Operational EBITDA
July
($)
August
($)
Sept
($)
Oct
($)
Nov
($)
Dec
($)
Total
($)
Vysarn Pty Ltd
(7,946)
(23,124)
(6,984)
(97,859)
(21,735)
(21,936)
(179,585)
Pentium Hydro Pty Ltd
-
(13,718)
(275,877)
(119,939)
70,649
72,168
(266,718)
Consolidated P&L
(7,946)
(36,842)
(282,861)
(217,799)
48,913
50,231
(446,303)
Profit and Loss - Reconciliation to
Adjusted Operational EBITDA		 July
($)		 August
($)		 Sept
($)		 Oct
($)		 Nov
($)		 Dec
($)		 Total
($)
Vysarn Pty Ltd
(7,946)
(23,124)
(6,984)
(97,859)
(21,735)
(21,936)
(179,585)
Pentium Hydro Pty Ltd
-
(13,718)
(275,877)
(119,939)
70,649
72,168
(266,718)
Consolidated P&L
(7,946)
(36,842)
(282,861)
(217,799)
48,913
50,231
(446,303)

Reconciliation of Net Cash Movement

Management accounts show early start up losses for August, September and October following the successful relisting of the company’s securities in September 2019. The initial start up phase has been followed by positive operating EBITDA in November and December.

Reconciliation of Adjusted Operational EBITDA to Net Cash Movement $
Adjusted operational EBITDAper above(1)
(446,303)
Share capital and reserves movement(2) (3)
8,498,996
Borrowings movement(2) (4)
8,182,535
Increase in trade and otherpayables(2) (5)
1,415,147
Purchase ofplant and equipment(2) (6) (7)
(15,573,589)
Purchase of inventory (2) (7)
(2,257,325)
Increase in trade receivables and other current assets(2)
(1,558,392)
Increase in contract fulfilment costs(2) (8)
(294,105)
Payment of transaction costs(9)
(431,642)
Share basedpayments(10)
(1,622,772)
Interest, depreciation and tax(11)
(1,224,894)
Deferred tax liability (2)
2,653,323
Changes to Cash at Bank
(2,659,021)
Opening balance 1 July 2019
6,983,931
Closing balance 31 December 2019(12)
4,324,910

Notes:

  1. Adjusted operational EBITDA – management accounts EBITDA to 31 Dec 2019 less prospectus transactions

  2. Period movements as per consolidated Statement of Financial Position reported in Appendix 4D

  3. Inclusive of proceeds from capital raising under the terms of the Vysarn prospectus and non-cash share based payments

  4. Inclusive of borrowings related to section 7.2 of the Vysarn prospectus

  5. Inclusive of contract liabilities and provisions

  6. Other income (inclusive of gain on bargain purchase as referenced at note 5 of Appendix 4D), less plant and equipment and assets classified as held for sale

  7. PP&E and inventory acquired as outlined within the Vysarn prospectus as well as normal operations to 31 December 2019

  8. Relates to costs incurred for works in progress that start post the reporting period to 31 December 2019

  9. Transaction costs incurred as outlined within section 1.7 of the Vysarn prospectus

  10. Costs that relate to sections 1.2, 1.8 and 8.3 of the Vysarn Prospectus

  11. Income tax benefit less finance and depreciation expense

  12. Closing balance of cash as at 31 December 2019 inclusive of restrictive cash balance as per Statement of Financial Position reported in Appendix 4D

8

Operational Outlook

Vysarn is experiencing strong demand for its assets and services with over half of the current rig fleet deployed. Management expects further rigs to be utilised within the current financial year.

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  • Management believes that the total of 6 rigs currently utilised to fulfill borefield and construction services will remain deployed and under contract for the remainder of FY20.

  • The company advised in the 28th November ASX announcement of the FMG MSA contract that Pentium anticipated the mobilisation of a second rig under the contract during the month of January. While management still anticipates a second rig being deployed under the terms of the FMG MSA, the January timing has been delayed.

  • The company is currently participating in a tender to provide borefield and construction services to a top tier resource client. The tender is expected to be awarded within 1QCY20. Management believes the company is well placed to be strongly considered for the award of this contract.

  • It is anticipated that up to 8 rigs will be under contract and deployed by 30 June 2020 subject to the successful award of a current tender and the issue of a further purchase orders under the terms of the MSA’s with RHIO, FMG and HP.

  • The foreseeable outlook and demand for the company’s water well services and assets is strong. Management continues to field multiple enquiries regarding the availability for rigs to provide borefield and construction services. Management expects to participate in several material tenders within the months to 30 June 2020.

  • The Pentium Hydro business has been EBITDA positive for November and December 2019 after a significant ramp up period. Management intends to be in a position by the end of FY20 where a monthly average maintainable EBITDA is ascertained and achieved

  • While management’s prime focus is on operational and financial excellence, growth opportunities will be pursued. This will consist of acquisition opportunities (horizontal and vertical) as well as organic business development. Management is currently considering a range of growth opportunities beyond the current business

9

Growth Strategy

Diversification vs Specialisation

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----- Start of picture text -----

Acquisition 1 Acquisition 2
DR drilling & Pump, pipe, Design,
borefield fabricate, storage & engineering flow
construction installation control & monitoring
Stage 1 Stage 2 Stage 3
----- End of picture text -----

Pentium Hydro’s initial focus is on water management in the production phase of mining operations NOT drilling in the exploration phase, however the company will consider horizontal & diversified growth opportunities should it provide significant increase in shareholder value.

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----- Start of picture text -----

DR drilling & Pump, pipe, Design,
borefield fabricate, storage & engineering flow control
construction installation & monitoring
Stage 1 Stage 2 Stage 3
----- End of picture text -----

Vysarn Ltd may transition into Pentium Hydro Ltd should the strategic direction of the company continue organically and become a specialised whole of life water service provider. This may come about via acquisition and/or business development.

The outlook for water services is strong with management currently considering a range of organic, horizontal and vertical growth opportunities in the space.

10

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Key Contacts

Mr Peter Hutchinson Chairman

Registered Office

Pentium Hydro Office

108 Outram Street, West Perth WA 6005

11 Gavranich Way, Wangara WA 6065 Telephone: +61 8 6144 9777 Website: www.pentiumhydro.com.au

Mr James Clement Managing Director

Telephone: +61 8 9486 7244 ASX Code: VYS Website: www.vysarn.com.au

Mr Sheldon Burt Pentium Hydro (MD)

11

VYSARN LIMITED ASX:VYS

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