Hello everyone, and welcome to a briefing on Austin Engineering's acquisition of Mainetec. Those on the call will be able to ask questions later in the briefing. Instructions will follow at that time. As a reminder, this conference is being recorded. On today's call, we have Austin Engineering CEO and Managing Director, David Singleton, as well as Brett Hampson, Founder, and MD of Mainetec. I'll now hand over to David Singleton. Please go ahead. Hi. Good morning to everybody. It's David Singleton here, and I'm sat here with Brett Hampson, who is the Founder and MD of Mainetec. Our purpose of today is just to give you a little bit more color on the announcement this morning. I'd like to thank you all for ringing in. I know this is a very congested period in terms of market announcements, so for you to take the time to call in is very much appreciated and gives us a chance to just explain things to you in a little bit more detail. I've got five or six points I would like to go through this morning. I'd like to just quick overview of the strategy of the business and why Mainetec fits well into that. Secondly, just talk to you tactically about what the benefits of this are from a market point of view. I'll talk about synergies and how we deliver those synergies in the business. I will also talk a little bit about the deal structure as well. I'll banter through that and then there'll be a time for some conversation at the end, Q&A at the end. Just let me open up by saying that, Brett, with his partners, founded this business about 13 years ago in Mackay in Queensland. The business was initially focused on the maintenance and rebuild of mining buckets from that region. That gave them a unique insight into how buckets were performing, how they were wearing and how they were getting damaged in use. Over a period of time, they started to use that information as a way of improving the design of buckets so that they performed more effectively in the field. That led to them designing their first bucket for operational use, which is the HULK bucket, which you can see on their website. Then, afterwards, went into further developments, including the ARMADILLO bucket, which is a bucket for the rope shovel dipper market. Those markets and those buckets are very complementary to what we do. I'll also say that when we started this process with Mainetec many months ago one of the drivers for it was that one of our key customers contacted us and indicated that they'd like to see Austin and Mainetec work more closely together in some way because they valued very highly the innovative entrepreneurship of Mainetec and the quality of the products that they were delivering and what it was doing to their operations. They were a great supporter also of Austin and its ability to support their operations and they saw it as a very key link. That was kind of a key first driver to get this process underway. I'd like to think quickly about the strategy of the business. As I've said to many of you in the past, Austin is the world leader in customized truck trays around the world. These are truck trays which are specifically designed for mine site conditions, different ore types and different operational requirements that are required. The impact of those truck tray designs on the efficiency of the mine site can be quite dramatic out of all proportion to the cost of the tray itself. In addition to that, we intend to be the leader in mining buckets, and it's a very complementary part of the market, of course, because it's the mining bucket that loads the tray. We had a big push on mining buckets a year ago, and many of you will know that we were able to increase our market share quite dramatically through FY 2022. Sorry, FY 2022. This acquisition of Mainetec really takes us along that journey of becoming the market leader in buckets as well. From a tactical point of view, the way this fits together is that the HULK bucket range that Mainetec have designed from all of that rebuild and refurbishment knowledge that they have, the HULK bucket is essentially a premium high-performance bucket that's used in some of the most demanding applications around us, including, of course, in the iron ore industry, in lithium, those kind of very high performance markets. They are buckets which have been tested by many of the majors and are being used increasingly by the majors in those very premium applications. The second area that Mainetec have carved themselves out a very strong positioning is in the dipper bucket market. Now, for those of you who are not familiar with dipper buckets, these are essentially the largest buckets on the market, are used in coal fields, in oil sands and other applications around the world. These are. Just to give you a feel for it, these are buckets that the cost of these buckets from OEMs are AUD 1.5 million to AUD 2.5 million a piece, all up to their significant acquisition. There are 31 of those in Australia, and Mainetec have got their upgrade systems on 26 out of 31 of those buckets. If you consider that Australia is the most sophisticated market for mining in the world, the fact that they have broken into that market is of huge significance. What's interesting to us and is a primary focus for us is that the dipper market, the dipper bucket market in South America, where we have our operations in Chile and in North America, where we have our operations, that market is about 10 times the size of Australia in terms of number of buckets used. It's a different kind of philosophy that drives that. The opportunity for us to offer these customized non-OEM bucket systems and complete buckets is a real opportunity over there. The other thing is that from a tactical point of view, you will see that we will operate Mainetec as a separate business unit. That's to make sure that all the things that have made Mainetec great up until this point, all the things that have driven the 26% per annum growth rates that we've seen in this business over the last few years, the entrepreneurship and the innovation doesn't change and continues through that period of time. The three founders of this business are very committed to the future of Mainetec and its position inside Austin. I'm just gonna go now to synergies, and these are obviously an important part of the acquisition metrics. The synergies for this business really fall into two categories. One is about cost reduction, and the other one is about market enhancement. Now, from a purely financial point of view, I have only included a conservative estimate of the cost reduction synergy in the accretion levels that were in the announcement. The 20%+ FY23 accretion includes only a proportion of cost reduction synergies, not market improvement synergies. The reason that I've done that is that cost reduction synergies are obviously straightforward to understand and clear to implement. We still have the market synergies as a potential upside. Those cost down synergies fall into three categories. One is the reduction in overhead duplication. You know that this business a year ago went through a major overhead reduction program that we implemented very quickly and have been very successful. Where there is duplication between the businesses, and there are obvious ones like insurance and banking and certain support areas, we will be able to reduce the overheads, the overhead cost of the Mainetec business. The second area for cost reduction is our ability to use steel that has been sourced by Austin Engineering direct from mills, direct steel mills around the world, rather than buying from stockists. The reason that we're able to do that is because we're a much bigger business and we buy a lot of steel every year, we are able to get much cheaper steel from the mills than you can just buying it from stockists. That ratio can be easily 2-to-1, as in we buy steel for half the price, processed steel for half the price you can get from steel stockists. That's a major synergy for us to deliver, and we have already taken steps to deliver that so that cost reduction should start to come through very, very quickly. The third element of cost reduction is our ability to use our facilities in Batam, in Indonesia, where, as you know, we've been reducing our cost base and our access to labor through getting sub-assemblies and parts built in Batam and then incorporated into our operations overseas, particularly here in Australia. That's something we'll be able to do for the Mainetec business as well. That will reduce the labor cost in that business as well. Those cost reductions are all straightforward type reductions and things that we have already been doing inside the Austin business, so nothing kind of revolutionary in terms of our application of those. As I said, there are market enhancement synergies as well about selling dipper buckets overseas and our ability to broaden the market for the HULK buckets overseas as well as here in Australia. They are not, as I said, synergies that we've counted in our cost base. Just to remind you of the deal dynamics, and I did see one or two comments which suggested there's a little bit of confusion maybe in one or two people. The acquisition price for this business, including debt of about AUD 1.5 million. The acquisition price is AUD 19.6 million, of which AUD 11.5 million will be paid from a new term loan facility from HSBC, which is credit approved. We're just going through the final documentation of that loan. We expect that payment to be made sometime in the next 45 days. That's AUD 11.5 million of the acquisition price. There's a further AUD 3.5 million dollars which gets paid in cash in one year's time, and then a further AUD 3.5 million which gets paid a year after that, i.e., two years' time. There's a staged payment of the AUD 19.6 million over the next two years. In addition to that, we have put in place for the three founders of this business, Brett Hampson, Steve Mounty, and Dan Sanderson, we put in place a AUD 6 million dollar incentive plan. Now, this is fundamentally a self-funded plan in that the targets that we have identified are over and above the targets that we have used in the acquisition metrics and in the accretive analysis that has been carried out. Those targets over the next three years are based on revenue enhancement above the targets that have already been set for the business. They include delivery of the market synergies that we've talked about, but not valued previously for Dippers. That would be typically overseas in North America and South America. A third element, which we're not disclosing because of commercial confidentiality around that, in that we see this as a market-leading step, and it's something I'll be able to talk to you about later. There are very clear targets around all three of those incentive targets. The AUD 6 million is payable at the end of a three-year period in stock in Austin, priced at the 30 day VWAP at the end of the three-year period of the incentive plan. Finally, before I hand it over to you for questions, I just want to thank the advisors that were involved. I did miss a couple of advisors off the announcement that I did this morning, and they were the advisors for Mainetec. I will correct that in this. I personally I'd like to thank UBS in Perth, who have been part of this deal from the get-go and the great work that they have done. The advisors for Mainetec out of Sydney were LCC and I did miss those off the announcement this morning, but I'd just like to call them out. Mainetec were represented legally by Squire Patton Boggs out of Sydney. They were the Mainetec lawyers. The lawyers to Austin were Johnson Winter Slattery out of Perth. That's me complete. I'd like to hand it back to the operator now for any Q&A. As I say, Brett Hampson's in the room, and if you'd like to address any questions to him, feel free to do so. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from James Lennon from Petra Capital. Please go ahead. Hi, David. Can you hear me? Hi, James. Yep, we can hear you. Great. Now, look, on this acquisition, I've two questions. Firstly, in terms of the buckets you're acquiring, can you give us a sort of rough breakdown of the commodity exposures and also, you know, what you could potentially, you know, is it effectively, applicable to all your commodity set or is there certain commodities it's best suited to? Yeah, I can give you a couple of comments there on commodity exposure, James. The Mainetec business started out in Queensland, so a lot of that exposure initially was to coal. The analysis that we've done is less than 3% of their current exposure is to steaming coal, and the rest of it to metallurgical coal. Well, not the rest of it, but the rest of the coal exposure is to metallurgical coal, so quite a small exposure to steaming coal. These days, a lot of their expansion is here on the West Coast, and that's into iron ore and other hard rock commodities. Right. Just one other one, Yeah. Sorry? No. Go ahead, James. I don't know. Were you gonna say something? No, no. Okay. Sorry. The last one was just a quick one on just the financial terms there. You mentioned there that you get economic exposure from the nineteenth of August. Just wanted to clarify that's not just for. Is that essentially the acquisition's gonna finalize in late September, but you're effectively gonna start benefiting from mid-August, i.e., a couple of days ago? Yes, that's right. Financial control from Friday, even though we won't complete for another three or four weeks. Great. Thank you. Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Trent Barnett from Euroz Hartleys. Please go ahead. Hi, David. Great acquisition. I assume it's a pretty capital light business. Just based on my modeling, what sort of D&A is in there and is there sort of any or what sort of CapEx do you think this business has? Yeah, thanks for the question, Trent. It's a good question. The business is very similar in many ways to the Austin business in that it's a pretty capital light business. The nature of the facilities and the equipment that we need are relatively standard, and therefore that doesn't drive any big capital expenditure. Of course, some of the things that they would like to get access to, we already have inside the Austin business, so that will cut their capital expenditure anymore. We haven't finalized on D&A, but I believe it will be circa AUD 0.4 million per annum for the Mainetec business. Okay, excellent. Very good. Thanks. Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We'll now pause a moment to allow for any final questions. Your next question comes from Tony Mitchell from Ord Minnett. Please go ahead. Congratulations, David. Very good acquisition. Can you just fill us in terms of the dipper bucket market in America, for example, who are the major players in that market? There's quite a lot. There are a few areas where dippers are used quite extensively. First of all, the Powder River Basin, which is the big coal region, of course, in the Wyoming central Midwest. Now that's where we have our facility in Casper in Wyoming. That would be a big region. Oil sands region in western Canada, in Alberta, would be another region where we already deliver a lot of truck bodies into that region. Then down in Chile and more broadly in South America, a lot of dipper buckets used in that region as well. Of course, we literally have a facility in Antofagasta in northern Chile. In actual fact, when we kind of map where all the dipper buckets are compared to where our facilities are or we already have customers or exposure, there's a really good match to that in North America. Precisely, who are your competitors? Who are the manufacturers of these dipper buckets over in the States? Primarily, like a lot of things for us, the major competitors are the OEMs themselves. The Caterpillar, Komatsu- Right. Type organizations. As you know, our entire business is based on the fact that we customize products which are not customized by the OEM. We customize those products to meet the particular requirements of those customers. That's, you know, that's what drives our whole business. That's exactly the way that. Yes. Mainetec have approached the dipper bucket in Australia by producing a better product that is suited to the particular ore conditions or mine conditions that they have. We will do exactly the same in North America and South America as well. Short answer would be in the customized part of the business, very little competition in the large dipper bucket market. The other thing is I just did a quick calculation. If you say that the consensus numbers for you for 2023 or AUD 22.6, if you add on the synergies, call it AUD 2, that's AUD 24.6. Oh, sorry, the profit, AUD 24.6. Add on the synergies, you come up with a figure for 2023, about AUD 26.6. Is that accurate? Well, I don't know. What's the 26 number? No. In your footnote two, you say that the consensus NPAT for Austin this year is AUD 22.6 million. Oh, okay. Yeah. If you allow for the profitability of Mainetec, say AUD 2 million, and then if you get AUD 2 million synergies after tax, it's about AUD 26.6 million. Doesn't sound like an unreasonable point. It's not something I can confirm, though. I suppose the other thing is with this, I mean, how long will it take you to consolidate all this? Yeah. That's a good question. The answer to that is, we would expect to have, if you meant by the synergies, by that, do you mean the synergies extracted? We're already underway on this process. There's work gone on in terms of how we will deliver the steel synergies already, over the last week or two in preparation for this. We've started thinking about the latest synergies out of Batam as well. We've worked together to start to think about the overhead analysis. You will know from previous experience that we have driven synergy savings in our own business really quickly. Yep. That we get those benefits out, and we will move in exactly the same way here so that we can get the other side of the synergies quickly, and we can start to focus on the market synergies. Does this mean now, David, that does this preclude you doing anything else from an acquisition point of view in the short term? Or is it potentially possible you can do another acquisition? No, I mean, we've done this on an all-cash basis. I don't think we could do an all-cash one for a while. Yeah. You know, we haven't used any equity in this deal. Right. If you look at the mining situation around the world now, compared to, let's say, you've been there for, what? A year or so, haven't you? Yep, yep. If you look at the mining situation today around the world in your key markets compared to a year ago, are you more bullish or the same? I would say, generally speaking, and remarkably really, when you think about big macro things that are going on around the world, I would say that the market is at least as strong today as it was a year ago. You know. Okay. We're seeing, you know, huge strength in the coal market for reasons that we would understand. We're seeing strength in the oil sands market for reasons that we would understand around energy. Although there was a little bit of a blip in the battery metals market, for want of a better description. You know, lithium, you know, has been racing back and we're see continued strength there. Iron ore, you know, I think the iron ore market's pretty well-known. We haven't seen any negative, particularly negative reaction in the iron ore market. You know, I'll say something that I often say to people. Our business is not exposed to the capital cycles, the capital investment cycles, particularly. Our products are wear products, and they have to be replaced continuously. If tons mined reduces dramatically, that would have an impact, but we don't typically see that, particularly in the, you know, in the iron ore markets and some of the hard rock markets. We're not particularly exposed to capital investment. If you know mine extensions and new mines slow, that isn't a major impact on our business. Right. Okay. Yeah. Okay. Thank you very much. Thanks. Thank you. Thank you. There are no further questions at this time. I'll now hand back to Mr. Singleton for closing remarks. I'd just like to thank you for spending the time. I can tell you that I personally am very excited about the future of Mainetec inside Austin. I think there are great benefits that we can give to Mainetec to allow them to continue on that entrepreneurial, innovative approach that has really marked them out as one of the leading and high-growth companies of this type in this country. I'm really excited to see what the founders of this business will be able to achieve with the market access that we have and the investment access that we have to allow them to continue to grow. I think, you know, this is a market we understand very well. It's a business that we've learned and got to know very well. We've had plenty of time to do that. I think the world's our oyster now that we have Mainetec as part of the group. Thank you very much for listening. I'm sure I will talk to many of you in a week's time when we come to do our full results roadshow we announce next Monday. I will be in Sydney on Tuesday next week and Melbourne on Wednesday next week. Thank you very much. Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.