Energy Services Industrials

CERF Incorporated
Growth with Yield
Energy Services &
Industrials
March 31, 2015
TSX-V: CFL
11
Forward Looking Statements
Certain information with respect to CERF Incorporated (the “Company”) in this presentation herein contain certain forward-looking statements and
forward looking information which are based upon the Company’s current internal expectations, estimates, projections, assumptions and beliefs. In
some cases, words such as “plan”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate”, “may”, “will”, “potential”, “proposed” and other
similar words, or statements that certain events or conditions “may” or “will” occur, are intended to identify forward-looking statements and forwardlooking information. These statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other
factors that may cause actual results or events to differ materially from those anticipated in the forward-looking statements or information. In
addition, this presentation may contain forward-looking statements and information attributed to third party industry sources. Undue reliance should
not be placed on these forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are
based will occur. By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both
general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward looking statements will not occur.
Forward-looking statements and information in this presentation herein include, but are not limited to, statements with respect to:
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results of various projects of the Company;
growth expectations within the Company;
the performance and characteristics of the Company’s rental fleet;
capital expenditure programs;
realization of the anticipated benefits of acquisitions and dispositions; and
pro forma estimates for 2015 based on analyst consensus
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that
such expectations will prove to be correct. The Company cannot can guarantee future results, levels of activity, performance or achievements.
Consequently, there is no representation by the Company that actual results achieved will be the same in whole or in part as those set out in the
forward-looking statements and information. Some of the risks and other factors, some of which are beyond the Company’s control, which could
cause results to differ materially from those expressed in the forward-looking statements and information contained in this presentation herein
include, but are not limited to:
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general economic conditions in Canada, the United States and globally;
failure to realize anticipated benefits of acquisitions;
stock market volatility and market valuations;
competition for, among other things, capital and skilled personnel;
the availability of capital on acceptable terms; and
the need to obtain required approvals from regulatory authorities;
Readers are cautioned that the foregoing list of factors is not exhaustive.
P.O Box 1326
Vernon, BC, V1T 6N6
2
Financial Snapshot
Leveraged to Northern Alberta’s Industrial and Commercial
Construction and Oil and Gas Sectors
As at March 31, 2015
Trading Symbol TSX-V
Shares outstanding
Share price
52 week high / low
Volume (30 day avg.)
Yield
Market Capitalization
Net Debt (Q4)
Enterprise value (EV)
CFL
36.2 mm
$1.76
$3.90 / $1.42
35,761
14%
$64 mm
$29 mm
$93 mm
3
Two Platforms for Growth
Energy Services and Industrials
Fiscal year ended December 31, 2014
Energy Services
Industrials
$19 mm
EBITDA*
$58 mm Revenue
$22 mm Revenue**
$10 mm EBITDA**
$36 mm Revenue
$11 mm EBITDA
*CERF EBITDA post $2.4 mm in unallocated corporate fees
**Includes Winalta for 4 months of 2014 and Empire for 7 months of 2014
4
Track Record
As at March 31, 2015
Current Price
Share Price
Total Return
$1.76
Cumulative Dividend
Since IPO
$5.00
Total Returns
Dist.
$4.00
$3.34
$3.81
$3.00
Winalta
$2.00
$1.00
38 qrts.
Smart-Way
MCL
TRAC
Empire Tool
$0.00
2009
Equity Issues
Consec. Dividends
2010
$0.65 mm
0.2 mm @ $3.00 per
2011
2012
$2.2 mm
8.9mm @ $2.50 per
$6.5 mm
2.5 mm @ $2.50 per
2013
2014
2015
$11.5 mm
4.3 mm @ $2.70 per
$6.0 mm
$50.6 mm
2.0 mm @ $3.00 per
14.5 mm @ $3.49 per
TTM
EPS
$0.22
5
Full-Year 2014
($000)
2014
2013
% Change
Revenue
57,967
46,757
24
Gross Margin
17,395
12,070
44
5,073
3,129
62
0.22
0.23
(4)
18,527
13,027
42
72%
52%
Net Income
Net Income Per Share - Basic
Adjusted EBITDA
Payout Ratio
6
Management and Board of Directors
Own ~18%
Management
Wayne Wadley
President, CEO and
Chairman
Derrek Wong
CFO
2005
Skip Kerr
COO
Former President and CEO of
GEOCAN Energy Inc.
Over 25 years financial
2014 management and capital
markets experience
Austin Fraser
EVP Corporate
Development
Independent Directors
Joined
J. Blair Goertzen
Director
Bill Guinan
Director
2014
Former President of
Winalta Inc.
David Maplethorpe
2013
30 years of waste industry
and management experience
Brad R. Munro
Director
Director
Alfred Sailer
Director
Ken Stephens
Director
Joined
2014
President and CEO of
Enerflex Ltd.
2005 Partner at BLG LLP
2011
Former CEO of MCL
2014
President and CEO of
Bittercreek Capital Corp.
Executive VP Corporate
2014 Development at ATK
Oilfield Transportation Inc.
2005
Former CFO CERF
Incorporated (Retired)
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Our Strategy
① Organic Growth
o
Strategic opportunities within the business segments
o
Target top-line growth rate of 10%
② Accretive, complimentary acquisitions
o
Six accretive acquisitions to date
o
o
o
3 energy services / 3 industrials
Balanced cash and share – CFL insider ownership 39%
Target - high margin / low head count
③ Dividend
o
o
Diversified model provides dividend stability
$25 mm paid in dividends to date
o
38 consecutive quarterly dividends
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Industrials
Construction
Rentals
Waste
Management
o Heaters
o Manage 5 government landfills
o Reach Equipment
o Manage 1 private landfill
o Compressors
o Contracted transfer services
o Materials handling
o Commercial waste collection
o And other equipment
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Construction Rentals
Industrials
Provide equipment to facilitate large
and small construction projects
400 plus active customers
o
o
Major construction contractors
o
Home builders
o
Government and infrastructure
35K sq. ft. facility on 6 Acres
Fleet Composition
85% repeat customers
o
Compressors
8%
Top 10 customers
o
o
1/3 revenue
o
Average relationship 14 years
Strong economic growth in Alberta
o
Materials Handling
8%
Reach Equipment
o
Value of Alberta TTM building permits up 18%*
o
Alberta Government forecasts a 2% population
13%
Heaters
17%
growth (82,000 people) in 2015
* Alberta Finance and Enterprise
Other
54%
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Waste Management
Industrials
MCL provides heavy equipment and
personnel to operate landfills / transfer
stations
o
6 regional facilities
o 5 government, 1 private
o Long term contracts
AB
Rose Ridge
Edmonton
Hinton
Drayton
Valley
Commercial waste collection
o Roll-off bin and collections services
Leduc
Camrose
Red Deer
Calgary
EBITDA margins of 18% to 22%
Opposite seasonality to Equipment Rental
Business
Landfills
Cities
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Growth Opportunities
Industrials
Construction Rentals
o
Organically grown since 1998
o
Large and growing market in Canada
Acquisition strategy
o
Geographic expansion
o
Undercapitalized targets
Waste Management
o
Provide additional services for existing on
existing facilities
o
Add new contracts
o
Acquisitions
o
Vertically integrate waste management
services
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Energy Services
Surface Rentals
Downhole Equipment
Accommodations
Modern, diverse rental fleet
Specialty pipe
High-quality modular
accommodations
o
400 bbl. Tanks
o
Heavy weight drill pipe
o
Wellsite accommodations
o
Floc Tanks
o
Drill pipe
o
Integrated Wellsite System (IWS)
o
Generators
o
Drill collars
o
Drill Camps
o
Full complement of surface rentals
o
Related handling equipment
o
Dedicated Geo labs (DGL)
$54 mm
Energy
Services
Net Book
Value
Surface Rentals
$13 mm / 24%
Downhole Equipment
$6 mm / 11%
Accommodations
$35 mm / 65%
13
2014 Acquisitions
TRAC adds Accommodations and Heavy Weight Drill Pipe
to its rental offering becomes full service rentals provider
August 27, 2014
May 28, 2014
Purchase Price: $70.6 mm
Purchase Price: $9.3 mm
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Tripled size of rental fleet
Operational and marketing synergies
New operating areas: GP, AB & Estevan, SK
New customer base
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Enters high margin business
Larger presence in Niche market
Marketing synergies
New customer base
Both acquisitions operating as TRAC Energy Services
14
Putting it Together
Floc Tanks
400 bbl Tanks
Drill Pipe
Light Towers
Shale Tanks
Specialty
Drill Pipe
Generators
Wellsite
Accommodation
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Growth Opportunities
Energy Services
o
Leveraging existing client relationships and expanding
product offering
o
CAPEX allocation to assets required for customers
operating longer-term, less seasonal
o
Operational efficiencies through better utility of services
technicians
o
Acquisitions that expand operational footprint and reach
P.O Box 1326
Vernon, BC, V1T 6N6
16
Financial Performance
$80
Consensus
Estimates
$70
$64
$58
$60
$47
($MM)
$50
$40
$34
$30
$27
$21
$20
$10
$19
$15
$13
$5
$8
$8
$0
2010
2011
2012
Revenue
2013
EBITDA
2014
2015 Analyst
Est.
P.O Box 1326
Vernon, BC, V1T 6N6
Note: 2015 CERF consensus includes estimates by Global Securities and Alta Corp, Industrial Alliance and Mackie
Research
17
Pro forma Balance Sheet
Assets
$35
4.5
$144 mm
Net Bank Debt
$29
$30
4.0
3.5
Liabilities
$48 mm
$24
$25
3.0
$20
2.5
Net Debt / EBITDA
$15
$15
2.0
$12
$10
1.5
$9
1.0
$5
0.5
$0
0.0
2010
2011
2012
2013
2014
18
Why CERF
Compelling organic growth opportunity in Northern
Alberta’s diversified energy services and industrial sectors
o
Organic growth
o
Disciplined acquisition strategy
o
o
Robust pipeline of complementary business targets
Diversified cash flow supports dividend
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Contact Us
Energy Services &
Industrials
Wayne Wadley, President and CEO
403 850 4095
wwadley@cerfcorp.com
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TSX-V: CFL