Hydrodec Group plc 2014 Results Presentation Re-emerging Stronger Ian Smale , Chief Executive Chris Ellis , Chief Financial Officer 24 March 2015 www.hydrodec.com
2014 performance highlights Re-emerging stronger with a sound base platform for growth Final and comprehensive insurance settlement for Canton; impacts results but still positive with improvement in key measures Full year trading with OSS, plus oil trading in US, delivers sales up 31%; income up 36% Despite challenging market conditions, gross margin and Operating EBITDA both increased after accounting for business interruption income Real strategic progress in technology – CEP UK license and collaboration; two new provisional patent applications Successful refinancing of US business to create an appropriate funding structure capable of supporting the development of the business, and a positive statement of intent 2 Hydrodec Group plc
Positive platform for growth Canton: 6 ‘trains’ in 3 modules on site in situ; commissioning during April, with production building through May Feedstock in hand alongside an expect minimum 10% improvement in effective operating capacity. On track for 2015 at ca. 19m litres Young relocation to Southern Oil’s Re -refinery, Bomen – on track, on time Feedstock in hand and outsource schedule starts tolling with Southern Oil on 1 April OSS – reacting to challenging environment Rationalised operations and cost; restructured business will focus on the customer and delivering a compliant, competitive, convenient offer UK re-refining – de-risked technical development; FEED in progress Classification as a Nationally Significant Infrastructure Project extends planning but provides more certainty on process and timing 3 Hydrodec Group plc
Business model – growth through two business streams 4 Hydrodec Group plc
2015 – strategic priorities To deliver the rebuild and expansion of our transformer oil re-refinery at Canton, Ohio. To deliver the relocation of our Australian operations to the Southern Oil Re- Refinery, Bomen, New South Wales. Leverage and consolidate UK feedstock collection; drive OSS performance through re-structuring. Translate exclusive CEP technology licence into UK base oil re-refining plant through NSIP planning process. Relocate and reinforce technology programme to the UK; focus on distinctive yield and product quality in re-refining lubricant base oil. Work to ensure an appropriate UK regulatory framework to support investment. Identify and deliver value-chain consolidation opportunities in the UK; other options to deploy the business model. 5 Hydrodec Group plc
Financial Highlights Impacted by full year OSS and insurance settlement Total Revenue Target - to grow revenue year-on-year 60 Performance: Total revenue up 36% to US$54.7m 50 (2013: US$40.1m) despite margin based insurance income in US and pricing 40 USD Millions pressure in the UK with lower oil prices. 30 Recycling Supplementary oil trading in US added Re-refining 7.8m litres generating US$4.5m revenue 20 Total oil sales grew 31% to 48.6m litres 10 (2013: 37.0m litres) despite closure of Canton, driven by full year trading at 0 OSS 2011 2012 2013 2014 Year 6 Hydrodec Group plc
Insurance Settlement On 11 November 2014, Hydrodec . Insurance proceeds and its insurers settled its 2014 insurance claim arising from the USD'000 incident at Canton in December 2013. 7,596 Proceeds recognised in 2013 The total gross value of the claim 9,658 Proceeds recognised in 2014 was agreed at US$20m, which 1,496 Proceeds to be recognised in 2015 after deduction of property 18,750 damage and business interruption insurance excesses of US$1.25m in aggregate, 9,658 Recognised in 2014 resulted in cash payments of (409) Less asset disposal costs US$18.75m to the Group. (697) Less insurance claim related costs 8,552 Net Income recognised in 2014 7 Hydrodec Group plc
Total volumes and gross margin Total oil sales grew to 48.6 Total volumes million in 2014, up 31% on 60 2013. 50 Million Litres Lost volume in Canton 40 supplemented by traded oil of 30 Recycling 7.8 million litres. 20 Re-refining 10 Full year of OSS at 36.2 0 million litres. 2011 2012 2013 2014 Year Comparison difficult due to Gross margin business interruption income 35 settlement. 30 On a pro forma basis re- 25 Margin % refining margin would have 20 increased to 30% (2013: 23%) Re-refining 15 Recycling 10 OSS contributed US$4.9 5 million gross margin at 14.4%, 0 down from 16% in 2013. 2011 2012 2013 2014 Year 8 Hydrodec Group plc
2014 Operating EBITDA Key performance measure, non-statutory, reconciled to operating loss . Operating EBITDA USD’000 Operating EBITDA* 1,610 2 1.5 Growth costs (2,278) 1 0.5 Depreciation (3,123) 0 USD Million 2011 2012 2013 2014 -0.5 Amortisation (3,513) -1 Share based payment costs (324) -1.5 -2 Foreign Exchange Loss (227) -2.5 -3 (7,855) Statutory operating loss -3.5 Year *Includes US$1.5 million (less associated lease rentals) from the gain on disposal of assets in Hydrodec (UK) Limited 9 Hydrodec Group plc
Canton – operational update All three modules installed and being connected/wired All equipment and materials required for start up substantially onsite or available Expansion “trains” 1&2 (Module 1): o Mechanically complete/partially powered; accessible for training o Pre-commissioning from 5 April o “oil in plant” from 4 May o Production from 10 May Replacement “trains” 3 -6 (Modules 2&3): o Pre-commissioning from 20 April o “oil in plant” from 18 May o Production from 20 May 10 Hydrodec Group plc
Canton – two trains, one module: old vs. new building and footprint 11 Hydrodec Group plc
Bomen – operational update All plant successfully decommissioned at Young and transported to Southern Oil’s Re -refinery at Bomen, NSW. Plant re-configuration to fit Southern Oil site, re-connections, tank farm, piping, electrical and instrumentation is on track for end March re- commissioning and start up beginning of April. QA Laboratory transfer to Southern Oil completed. Operational staff transfer to Southern Oil underway and due to complete in first week of April. First Oil sales, after QA certification of initial oil production on schedule for April. 12 Hydrodec Group plc
In-situ, Bomen site, Southern Oil 13 Hydrodec Group plc
Bomen – view to relocated plant through new tank farm 14 Hydrodec Group plc
Delivering a strategy to grow the business Targeting outstanding growth and profitability To drive returns and organic growth through profitable US and Australian transformer oil businesses To develop a general lubricant oil re-refining opportunity in the UK, including through supporting an appropriate UK regulatory framework for that investment To focus on reducing business, technology and financial risk through new and successful partnership models To secure our intellectual property, including through patent protection To drive business growth through identifying and delivering value-chain consolidation across the business models Drive performance, efficiency and growth with responsible balance sheet management and a relentless focus on EBITDA 15 Hydrodec Group plc
Contact Hydrodec Group plc 6 Hay’s Lane London SE1 2HB United Kingdom +44 (0)20 3300 1643 www.hydrodec.com Hydrodec Group plc
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