Hydrodec Group plc “ Re- emerging stronger” Strategy update Ian Smale , Chief Executive Chris Ellis , Chief Financial Officer 20 January 2015 www.hydrodec.com
Precautionary Statement This presentation has been issued by Hydrodec Group plc (“ Hydrodec ”) and is personal to the recipient. This presentation and these slides may not be reproduced or published in whole or in part for any purpose. This presentation and associated discussion includes forward-looking statements. Certain information contained in this presentation relating to Hydrodec has been compiled from public sources. All statements other than statements of historical fact included in this presentation, including without limitation those regarding the plans, objectives and expected performance of Hydrodec, are forward- looking statements. Hydrodec has based these forward-looking statements on its current expectations and projections about future events, including numerous assumptions regarding its present and future business strategies, operations, and the environment in which it will operate in the future. All information in this presentation is only accurate as at the date of this presentation. Forward-looking statements generally can be identified by the use of forward-looking terminology such as 'ambition', 'may', 'will', 'could', 'would', 'expect', 'intend', 'estimate', 'anticipate', 'believe', 'plan', 'seek' or 'continue', or negative forms or variations of similar terminology. Such forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors related to Hydrodec. By their nature, forward-looking statements involve risks, uncertainties and assumptions and many relate to factors which are beyond the control of Hydrodec, such as future market and economic conditions, external factors affecting operations and the behaviour of other market participants. Actual results may differ materially from those expressed in forward-looking statements. Given these risks, uncertainties, and assumptions, you are cautioned not to put undue reliance on any forward-looking statements. In addition, the inclusion of such forward-looking statements should under no circumstances be regarded as a representation by Hydrodec that Hydrodec will achieve any results set out in such statements or that the underlying assumptions used will in fact be the case. Other than as required by applicable law or the applicable rules of any exchange on which securities of Hydrodec may be listed, Hydrodec has no intention or obligation to update or revise any forward-looking statements included in this presentation. This presentation is for information only and does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase, any shares in Hydrodec or any other securities, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied upon in connection with, any contract or investment decision related thereto. 1 Hydrodec Group plc
Re-emerging stronger - set to grow A relevant, technology based, disruptive business model, reset to expand from a proven base 2 Hydrodec Group plc
Global markets; ubiquitous feedstock - access critical. Re-refining used oil to re-use for original purpose; focus on product quality Transformer Oil Lubricant Oil • • Patented, unique technology Feedstock secure: UK re-refinery by end 2016 • Cash generating businesses in US • $30bn. global base oil market – local and Australia re-engineered supply exclusivity • Fundamentally short global market • ($1.6bn, growing 9% to 2017) Exclusive licence and technical collaboration; patented opportunities • Oil that tests “better than new” with for improvement extraordinary recoveries (>99%) • Priced against base oil imports – • Quality gross margins of 25% offers 30% plus gross margin opportunity 3 Hydrodec Group plc
Adapting to changing market conditions, where base oil (and especially high quality base oil / transformer oil) remains resilient High quality base oils resilient Group III Base Oil Group I/II Base Oil UK pricing linked to fuel oil Fuel Oil (3.5%) OSS ASP (PFO) OSS APP Adapting to changing markets Margin Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 4 Hydrodec Group plc
Strategy – growth and returns Drive returns and organic growth through cash generating US and Australian transformer oil businesses Develop a unique general lubricant oil re-refining opportunity in UK Focus on reducing business, technology and financial risk through new and successful established partnership models Secure and robust patent, IP protection Support an appropriate UK regulatory framework to support investment Drive business growth through identifying and delivering value-chain consolidation across the business models Drive performance, efficiency and growth; responsible balance sheet development and relentless focus on EBITDA. 5 Hydrodec Group plc
Year on year organic growth through proprietary, integrated oil re- refining solutions – highly competitive but feedstock critical USA: Canton, Ohio UK Australia: NSW • • Acquired OSS 3Q13 – • Re-engineered; Relocated 1Q15 expanded T-oil plant – leading collector/ • 6.5ml capacity:1 “train” processor of used oil commissioning 1Q15 • Turnkey operating • 45ml capacity: 6 “trains” • 40+ml core feedstock agreement with supply for unique UK re- 3 integrated modules Southern Oil Company, refinery by end 2016 • Wagga Wagga offers Strategic partnership • Leading PFO/RFO significant efficiencies with G&S Technologies integrates supply chain producer; low value/low • Full commercial margin • stewardship/brand G&S 25% at $3.4m, • Integrated, compliant retained plus 24.9% with further expansion service offer based on convenience • Highest quality product • Consolidation in US; access to opportunity voluntary carbon offset 6 Hydrodec Group plc
Protected technology, better engineered; safer, more efficient, higher quality – with carbon accreditation Single processing train – Australia, 6.5m litre p.a. capacity Composite re-refining module for Canton; two 3-phase processing “trains,” 15m litres p.a. capacity 7 Hydrodec Group plc
Hydrodec (UK): the platform for investment, re-rating technology; creating a market virtue from price volatility Aligning to the customer: UK Used Oil “competitive, compliant, convenient” 180 Market opportunity significant 160 140 120 Litres (millions) 100 139.5 129.5 80 60 40 20 25.5 19.5 Fleet re-financed; logistics 0 Automotive Industrial efficiencies being delivered OSS Remaining Oil 8 Hydrodec Group plc
Creating the UK re-refining hub for used oil Advantaged UK location End 2016 Phase 1 – re-refinery 2017 Phase 1a – T-oil re-refinery Petrochemical heartland; adjacent to existing End 2018 infrastructure Phase 2 – re-refinery Hydrodec Group plc
Hydrodec trading performance Strong revenue growth drives progress towards positive EBITDA Total Revenue Underlying Operating EBITDA 2 30,000 1,500 1 1,000 25,000 500 20,000 0 USD '000 USD '000 H1 H2 H1 H2 H1 H2 H1 2011 2011 2012 2012 2013 2013 2014 15,000 -500 -1,000 10,000 -1,500 5,000 -2,000 -2,500 0 Year 2011 2011 2012 2012 2013 2013 2014 H1 H2 H1 H2 H1 H2 H1 Year 1 including estimated receipts for business interruption coverage under Group insurance policy 2 EBITDA adjusted for growth expenditure of US$1.1 million (H1 2013: US$1.7 million) 10 Hydrodec Group plc
Trading Update (January 2015) Re-emerging, positioned for growth Trading Performance Revenues up 36% to $54m - full year impact of OSS acquisition outweighing reduced income from US; US revenues: business interruption income and oil trading Total sales volumes up 26% to 48.6ml - trading sales only in US Group EBITDA - expected to improve over 2013 Milestones Insurance settlement delivered $18.75m net; created a “profit on disposal” of $1.4m US$10m, 7 year asset financing facility for Hydrodec of North America Submission of patent applications - Protecting patents, IP Exclusive UK licence and collaboration agreement for used oil re-refining in the UK with CEP – Basic engineering delivered, FEED commissioned 11 Hydrodec Group plc
Hydrodec: Proven, profitable disruptive business model underpinned by proprietary technologies now set for . substantial growth Delivering “the circular economy;” supported by the EU waste directive hierarchy Proven, successful businesses; clear, materially de-risked paths to growth; experienced board and management Proprietary, world leading technology; multi-feedstock applications; high value products Integrated business models; secure feedstock; offer options for consolidation Re-refined oils, returning oils for original purpose, “better than new” not reliant on subsidy; qualifying for carbon offset credits Expansion into base oil re-refining offers substantial organic growth with scope for market consolidation using proven technology 12 Hydrodec Group plc
Contact Hydrodec Group plc. 50 Curzon Street London W1J 7UW United Kingdom +44 (0)20 79079220 www.hydrodec.com Hydrodec Group plc
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