LaserBond (ASX:LBL) Presentation, FNN Online Investor Event, March 2021

Company Presentations

LaserBond Limited (ASX:LBL) CEO Wayne Hooper presents on the company's surface engineering technologies for reducing, and improving quality and efficiency.

Thanks everyone for joining us. Could you bring on the first slide? Okay. That's the introduction, then the next slide.

So, why LaserBond? Just a quick introduction. We've had specialised technology that's in demand across a range of industries globally. We are consistently delivering strong growth, and profits, and shareholder returns. We have a demonstrated history of growing fully franked dividends, whilst we balance the need for growth funding. We have low debt and strong cash flow. We have recently expanded to Victoria via an acquisition. We're building our technology in down there, and we expect accelerated growth in FY21 this year and beyond, and we're well positioned to continue that growth both organically and via geographic expansion.

Next slide. So, there's a quick slide of our shareholder return over the last three years. Share price is up 480%, compared to about 18% for the All Ordinaries, so bigger return. Next slide.

So, what are we about? Capital intensive industries often have equipment that's operating in quite severe conditions. So, parts wear out basically, and when they wear out it causes loss of production because we've got to replace those parts, they have to pull components out of service. It's often high costs in doing that, but most importantly, they lose production. And by losing production, then it costs money. So, we deliver reduced operating costs by increasing the wear life of wearing components, through techniques that we generically call surface engineering. And importantly, we assist industries to reduce their carbon footprint by recycling, and we're using worn components as well as preventing the wear in the first place, that are reducing the wear.

Next slide. So, what is Surface engineering? All wear occurs at the surfaces. All we're about is improving the working surfaces to provide a much longer wear life and longer performance. So, we have a range of surface engineering techniques and technologies. We've developed those in-house over many years, and through extensive and ongoing R&D. We have a large range of materials of that provide different properties depending on the wear applications. So, it includes resistance to all forms of wear, including abrasion, erosion, corrosion, and, you know, thermal cycling effects as well. So we optimise the materials and our processes to deliver the best results for our customers. And that's what makes us, it gives us our competitive advantage.

Next slide. So, the benefits. We remanufacture worn parts, usually develop delivering ‘better than new’ wear performance, and typically up to 10 times that where life of the original part. So, that means that the customers have reduced costs of the replacement that keep it running longer, and shorter lead times for the parts. We also manufacture a whole range of new replacement components using surface engineering to make sure that they last longer in service. So, these are typically the components that are considered to be consumable in a range of industries, but by making them last longer, we can keep the equipment running longer. We export products directly. We also export products through our OEM customers around the world, and we have a number of global OEM customers. The end users benefit from longer maintenance cycles and reduce downtime. Much of equipment can be kept running for much longer, and just reducing their costs overall, lower supply chain risks, the whole kid and kaboodle. So, the image here on the right is slurry pumps components in those pumps wear out regularly. Keep the equipment running longer, it keeps producing much longer. Importantly on some sites, these large pieces of equipment, you're talking about mine sites and minerals processing, as well as heavy transport rail. There are significant workplace health and safety benefits by reducing the amount of maintenance that needs to be done. The reduced scrap of worn out components improves efficiency of processes and delivers significant reductions in energy usage and wastage. Importantly, for our OEM customers, your equipment manufacturers, they can differentiate their product offering and grow their own market share. So, it's about keeping and growing their business.

Thank you. Next slide. So, these are the divisions of the company. The services' division is the division that actually reclaims worn components. So, the components have to come to our sites, we can, when you're talking about small and very large components, we can deal with parts that are up to 30 tons or quite small ones that are a few kilos. The components come, we repair them, make them better than new, as I mentioned before. Down in the bottom right, it's a products' division, which is about those new components that we ship to our customers, both domestically and globally, and supporting those have been our R&D effort. Now, we've got that as a division because we do spend about 4% of our revenue on R&D to keep growing our business. And importantly, the divisions, actually, the services' division actually, by doing work for some customers, we can see that certain products are repeat offenders or need to be reclaimed regularly, and they will often feed into the products' division through the R&D. So, the R&D is about providing the best results in every circumstance, and every wearing situation is different. So, it's not a one size fits all. Out of that all has our technology division, where we recognise that we have some global, globally leading technology, and we can expand internationally by licensing our technology in certain areas. So, we have, currently have a licensee in the UK and we're working towards other licensees that, that will give us ongoing revenue. So, we have partnerships with OEMs and large end users that continue to keep their costs down.

Next slide. So, here are some of our customers. You may recognise some of these names, so we deal with some quite large global companies.

Next slide. So, just a quick case study, one thing we have been working on more recently over the last few years, we have developed a replacement for Hard Chrome and Hard Chrome you may be aware of, it's very common around the world. It's a US$1.2 billion market for components such as hydraulic cylinders, hydraulic rods. The problem is that it uses Hexavalent Chrome, which is carcinogenic, and environmentally hazardous. So, some of you who have been around a while might remember a movie called Erin Brockovich? Well, that was about Hexavalent Chrome and a true story. So, people are looking for alternatives. The main thing that Chrome has had in its favour is it works adequately, and it's a relatively low cost. So, we developed our, an alternative what we're calling our E-Clad process, which has lower costs and superior performance on cylindrical components. We have had independent wear testing through the universities and others. It's confirmed that it performs better than commercially available Hard Chrome, and we got the cost down to compete very well with Hard Chrome. So, we can actually process components a lot quicker. So, we're rolling that out as an export in domestic market opportunity for our technology division, licensing other Hard Chroming plants and people that have a market well and truly built up in Hard Chrome. We see tremendous opportunities and we're working on those at the moment. That's one case study where R&D has been involved extensively.

Next slide, please. Steel mills. Steel mills have literally hundreds, if not thousands of rolls transporting hot billets of steel and large, we're talking many tons, sometimes the components have high-speed. They're aware the rolls in those plants wear out and of course, downtime to actually replace them. So, it's not so much the cost of the roll that's the issue, it's the cost of the maintenance, of the staff and the downtime to replace them. So, our proprietary product, the main issue there is you have high impact as well as thermal Stipe in very high temperatures, very high impact, as well as all the forms of where we've come up with a solution using a constant carbide. We have proven it performs over several years in the Australian market, and we're now developing export markets for our steel mill rods concentrating on, at this stag, on North America, where there certainly are other markets and our customers are very happy with the results that they're getting. So, that's a big market for us coming up or that we're working on right now.

Next slide, please. So, about our performance. We've had very strong growth, despite COVID, which did have an effect on our services division revenue recently, because sites were basically being locked down. So, in other words, be reducing the amount of maintenance that they were doing by keeping maintenance staff off the sites. They had to get a COVID lockdown. So, we did see a little bit of a slowdown in that area, but our products division continued to grow strongly during last calendar year and continues now. So, we've, this is with our large, our end customers, as well as our own products that we're developing. So, as a result of that, we've had great compound growth rates over the last several years, with profits up 30% and revenue up 16% per annum over the last three years. So, that's a compound annual growth rate. We, in our technology division, we have been discussing licenses with a number of licensees, of potential licensees. We've reached an agreement with a North American company for licensing and solution to them, subject to their final testing. We're very confident that that testing will yield good results, and we expect those results within, within April. They did say that they should have been done by the middle of April. Their initial testing showed that they wanted to proceed. So, we're getting all the contracts drawn up right now. So, we've had a great deal of confidence in there.

Next slide, please. Our growth strategy. We're the largest surface engineering business in Australia, and we've got significant economies of scale. We remain committed to the targets that we set a few years ago at $40 million revenue in FY22. We now have three major operations. Sydney is where we started and where I am now. Our operation in Adelaide, and the new one in Melbourne. We, we have reassessed our business strategy to FY25 and we'll continue along the same route. They include, expansion plans for the services' division, with acquisitions in Queensland and WA are our key targets. And the reason we have the acquisitions is that we need to support infrastructure for our surface engineering business. In other words, and machine shop and people, and we bolt our technology on there. That's what we're doing in Victoria as we speak. We'll continue growth to the products' division through increased international marketing, marketing, and distribution of our products. Whereas from the technology division, through licensing the new E-Clad and our traditional technologies, continuing investment in appropriate resources to both equipment and human, to keep, keep the company growing. So, we do, self-fund a lot of our growth, and obviously we continue with our R&D, which is a key part of us continuing to grow.

So, next slide. If any further information you'd like, certainly there are independent analyst reports available, and you can see them on our website or contact the analysts directly. So, they've been produced over the last few months and please don't hesitate to contact me, the email address is there, or our CFO, Matthew Twists. And thank you very much for the opportunity to present.

Next slide. That's the usual disclaimer. Thank you everyone.
 

Ends