Brookfield Business Corporation Class A · TSX:BBUC
Brookfield Business Corporation Class A — Brookfield Business Partners — Investor Day (September 2019)
64 slides from Brookfield Business Corporation Class A's investor day presentation, Sep 26, 2019
Slide 1: Brookfield Business Partners Investor Day
Brookfield Business Partners I N V E S T O R D AY SEPTEMBER 26, 2019
Slide 2: Agenda
Agenda Positioning Our Business for Growth 3 Cyrus Madon, Chief Executive Officer Drivers of Value Enhancement 26 Denis Turcotte, Chief Operating Officer Financial Performance and Our View of Value 43 Jaspreet Dehl, Chief Financial Officer 2
Slide 3: Positioning Our Business for Growth
Positioning Our Business for Growth Cyrus Madon Chief Executive Officer 3
Slide 4: Business Services and Industrials company focused on long-term capital appreciation
Business Services and Industrials company focused on long-term capital appreciation BBU $5.8B $48B NYSE MARKET CAP 1 ASSETS 1. As at September 25, 2019. 4
Slide 5: Consistent Strategy
Consistent Strategy Target 15% to 20% return on investments with a focus on capital appreciation Operations- Acquire Monetize Mature Oriented Businesses on a Businesses & Approach to Value Basis Recycle Capital Enhance Value 5
Slide 6: Three operating segments with significant size and scale
Three operating segments with significant size and scale Business Services $12B ASSETS Company EBITDA1,2 16% BUSINESS SERVICES Infrastructure Services 42% $12B INDUSTRIALS $975M ASSETS 42% INFRASTRUCT URE SERVICES Industrials $24B ASSETS 1. Company EBITDA for the twelve-month period ended June 30, 2
Slide 7: Polling Question #1: most underappreciated about BBU
POLLING QUESTION #1 What do you think is most underappreciated about BBU? a. Resiliency of our businesses b. Ability to find value opportunities in a frothy market c. Appropriate use of leverage d. Other 7
Slide 8: We have been active over the last twelve months
We have been active over the last twelve months 8
Slide 9: Continued execution of our strategy: capital deployed
Continued execution of our strategy Deployed $6 billion of equity capital1 Industrials Business Services ~$800M ~$1B CAPITAL INVESTED BY BBU CAPITAL INVESTED BY BBU2 1. Represents equity invested by BBU and institutional partners. Includes $1.8 billion of equity capital committed to the acquisition
Slide 10: Continued execution of our strategy: sold three mature businesses
Continued execution of our strategy Sold three mature businesses for $1.7 billion1 $130M $170M $230M AUSTRALIAN ENERGY GLOBAL FACILITIES GLOBAL RELOCATION OPERATIONS2 MANAGEMENT BUSINESS2 SERVICES BUSINESS2 ~40% 3.0x ~45% 3.5x 20%+ IRR MOC IRR MOC IRR 1. Total proceeds include BBU’s and institutiona
Slide 11: Acquisition of Clarios
Acquired world scale businesses… Acquisition of Clarios in April 2019 $13.2B • Leading global manufacturer of advanced ENTERPRISE VALUE automotive battery technologies $3B • Global scale with high barriers to entry EQUITY CAPITAL • Consistent stable, earnings growth profile • Carve out from a large
Slide 12: Acquisition of Healthscope
… that play to our strengths Acquisition of Healthscope Limited in June 2019 $4.1B • Second largest private hospital operator in Australia ENTERPRISE VALUE • Leading pathology services provider in $1B New Zealand EQUITY CAPITAL • Aligns with existing hospital construction and facilities management c
Slide 13: Recapitalized Ouro Verde
While also investing in new growth platforms Recapitalized Ouro Verde Locação e Seviços in July 2019 $130M • Leading Brazilian heavy equipment fleet management company EQUITY CAPITAL • Stable contracted cash flows with inflation- linked, multi-year contracts • Diversified, long-term corporate client
Slide 14: Positioning the business for continued growth
Positioning the business for continued growth… Company EBITDA ($M) ~$1,400 $975 $570 June 20181 June 2019 1 Current Run Rate 2 1. Represents BBU’s proportionate share for the twelve-month periods ended June 30, 2018 and June 30, 2019, respectively. Figures rounded for presentation purposes. 2. Compa
Slide 15: Delivering substantial growth in cash flow
… and delivering substantial growth in cash flow Company FFO per Unit1 Company FFO per Unit1 Excluding Gains Including Gains $8.20 $5.70 $5.25 $4.70 $2.20 $1.50 2017 2018 2019 2 2017 2018 2019 2 1. Company FFO per unit based on average number of units outstanding on a fully diluted time weighted ave
Slide 16: Well positioned for the future
Well positioned for the future 16
Slide 17: Largest businesses generate consistent and stable cash flows
Our largest businesses generate consistent and stable cash flows… Our existing portfolio is resilient Longstanding, sticky customer relationships Critical services provider Long-term municipal inflation-linked contracts Multi year take-or-pay contracts Highly recurring demand 17
Slide 18: We provide essential products and services
…because we provide essential products and services Clarios Historical Battery Volumes (M units) 200 150 100 50 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Johnson Controls Incorporated segment reporting. 18
Slide 19: Significant global scale and capability
Significant global scale and capability NORTH AMERICA EUROPE & MIDDLE EAST $18B ASSETS $16B ASSETS 60,000+ OPERATING EMPLOYEES SOUTH AMERICA ASIA PACIFIC $6B ASSETS $8B ASSETS Note: as at June 30, 2019. 1. Corporate offices. 19
Slide 20: Great opportunities in a competitive environment
In a competitive environment we still find great opportunities ~20 ~$20B POTENTIAL OPPORTUNITIES EQUITY CAPITAL Deal Pipeline by Region Deal Pipeline by Opportunity North Europe APAC South Market Partner of Corporate Stressed America America Mispricing Choice Carve Out Seller 20
Slide 21: Focused on businesses with high quality attributes
…focused on businesses with high quality attributes Large Scale High Barriers Resilient Risk with Operating to Entry Profiles Leverage 21
Slide 22: Building on our long-term strategy: Genworth Canada
Building on our long-term strategy Definitive agreement to acquire a 57% controlling interest in Genworth Canada1 $1.8B TRANSACTION VALUE • Acquiring a high-quality business for value • Market leader for an essential service • High barriers to entry • Stable long-term cash flows • Long-term value co
Slide 23: Overview of Genworth Canada
Overview of Genworth Canada Largest private sector residential mortgage insurer in Canada Homebuyer Mortgage Lender Mortgage Insurer First time buyers Banks and other Mandatory for mortgage lenders <20% down payment Geographically diverse Mortgage originator Non-refundable, ~C$350k average upfront p
Slide 24: Leveraging expertise to enhance returns
Leveraging our expertise and capabilities to enhance returns Focus on enhancing returns through operations, investments and capital flexibility ~15%+ + + Strengthen and 12-13% + Enhance optimize capital structure Leverage investment customer portfolio returns relationships Current Long-Term Target R
Slide 25: Long-term value compounder ideally suited for BBU
Long-term value compounder ideally suited for BBU Provides BBU steady cash flow to reinvest and further compound value Genworth Historical Shareholder Value Creation (C$/share) $65 $19 IPO 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q2 2019 Book Equity per Share Dividend Reinvestment per Share
Slide 26: Drivers of Value Enhancement
Drivers of Value Enhancement Denis Turcotte Chief Operating Officer 26
Slide 27: Value enhancement through operational improvement
Value enhancement through operational improvement 27
Slide 28: Scalable, integrated operations team
Scalable, integrated operations team Hands-on approach from due diligence to monetization BBU Investment Teams Business Infrastructure Industrials Services Services BBU Business Ops Team North South Europe APAC America America Acquisition Operations Monetization PORTFOLIO COMPANY 28
Slide 29: A proven, repeatable model for enhancing value
A proven, repeatable model for enhancing value Applying the same methods across our businesses Ensure standard operating procedures and best practices are in place Assessing our requirements and developing our talent pool Developing frameworks and models to ensure rigor and consistency Incorporating
Slide 30: Closely interacting with our portfolio companies
Closely interacting with our portfolio companies Operating Core Work Processes Company and Initiatives Board Governance Strategy Development Executive Team Business Planning Performance Improvement Management Cadence – “MOS” 30
Slide 31: Acquired Westinghouse Electric Company
Acquired Westinghouse Electric Company in August 2018 Why we like this business Mission critical service provider High barriers to entry in a regulated industry Technology leader Profitability driven by regularly recurring service outages Long-term contracts 31
Slide 32: Executing on Westinghouse business plan priorities
Executing on key priorities of our business plan for Westinghouse What we said last year Where we are today Strategy Review • New product/market strategies identified Set a new tone and operating framework • Managing M&A pipeline Operating Model • New operating model Focus on customer-centric • CEO,
Slide 33: Executing on Westinghouse business plan priorities (continued)
Executing on key priorities of our business plan for Westinghouse What we said last year Where we are today Supply Chain • New Chief Procurement Officer Optimize cost and delivery capabilities • Supply chain review, material savings identified Transformation • Margin improvement plan in place Improv
Slide 34: Progressing against our performance targets
Progressing against our performance targets Annualized EBITDA1 ($M) $700M - $800M Approaching $600M $550M - $600M $440M LTM Medium-Term Run Rate 2019 Year-End Long-Term March 31, 2018 Estimated at Sept. 2018 Run Rate Upside Potential 1. Information presented is illustrative only. Actual results may
Slide 35: Polling Question #2: right multiple for Westinghouse
POLLING QUESTION #2 What is the right multiple to value Westinghouse? a. 11x b. 11x -12x c. 13x -14X d. >15x 35
Slide 36: Spotlight on Clarios
Spotlight on Clarios Acquired Clarios in April 2019 16,000+ 56 154M EMPLOYEES GLOBAL FACILITIES BATTERIES SOLD LAST YEAR 36
Slide 37: Why we like Clarios
Why we like this business Market Leader High Barriers to Entry Stable Cash Flows #1 global supplier and Vertically integrated global ~75% aftermarket technology leader manufacturing footprint 37
Slide 38: An essential product
An essential product… 1:3 CARS +30% WITH A CLARIOS LONG-TERM GROWTH BATTERY OF CAR PARC New Replace Replace Replace Replace Average 2 to 4 battery replacements per car over a 20-year lifecycle 38 38
Slide 39: Executing on operational improvements at Clarios
Executing on operational improvements Targeting over $300 million in EBITDA enhancements1 Manufacturing & Strategic Recycling Sourcing Transportation & Organizational Logistics Structure 1. Information presented is illustrative only. Actual results may vary materially and are subject to market condi
Slide 40: Optimizing U.S. manufacturing operations
Focused on optimizing the U.S. manufacturing operations… Manufacturing & Recycling • Increase management focus on productivity $300M+ • Consolidate manufacturing & distribution footprint • Debottleneck production and assembly • Minimize waste through better process controls Note: Information present
Slide 41: Global supply chain efficiencies
… and global supply chain efficiencies Transportation & Logistics • Increase use of intermodal freight to reduce costs • Improve on-time delivery • Reduce dependency on international shipments $300M+ Strategic Sourcing • Consolidate global sourcing capabilities • Close regional gaps in direct materi
Slide 42: Creating long-term value in the business
Creating long-term value in the business Annualized EBITDA1 ($B) $1.9B+ Target ~$1.9B ~$1.6B Long-term value Medium-term creation value creation 2018 Medium-Term Long-Term EBITDA Run Rate Run Rate 1. Information presented is illustrative only. 2018 EBITDA represents consolidated EBITDA including min
Slide 43: Financial Performance
Financial Performance Jaspreet Dehl Chief Financial Officer 43
Slide 44: Strong recent financial performance
Strong recent financial performance Company EBITDA1 Company FFO1 Company FFO ($M) ($M) per Unit1,2 $1,060 $975 $8.20 $570 $5.70 $430 2018 2019 2018 2019 2018 2019 1. Represents BBU’s proportionate share for the twelve-month periods ended June 30, 2018 and June 30, 2019, respectively. Figures rounded
Slide 45: Segment performance driven by our largest businesses
Segment performance driven by our largest businesses Business Services Infrastructure Services Industrials $170M $440M $450M COMPANY EBITDA COMPANY EBITDA COMPANY EBITDA Multiplex Westinghouse Clarios Healthscope Teekay Offshore GrafTech Note: Represents BBU’s proportionate share for the twelve-mont
Slide 46: Solid Financial Position
Solid Financial Position CORPORATE CORPORATE WEIGHTED AVG. LIQUIDITY1 DEBT NON-RECOURSE DEBT MATURITY2 $2.4B $0 6 YRS 1. Pro-forma liquidity as at June 30, 2019 adjusted for the funding of closed acquisitions. 2. Debt held at the operating company level non-recourse to BBU or other operating compani
Slide 47: Key financial objectives
Key financial objectives Maximize unitholder value Improve operating performance and grow through efficient capital allocation Maintain a strong balance sheet and ample liquidity 47
Slide 48: Focused on maintaining appropriate leverage
Focused on maintaining appropriate leverage for our business… Net proportionate Run-rate Net proportionate non-recourse EBITDA1 leverage borrowings $5.4B ~$1.4B ~4X 1. Company EBITDA for the twelve-month period ended June 30, 2019 adjusted for acquisitions and divestitures. Information presented is
Slide 49: Sustainable operating performance at Westinghouse
…based on our view of sustainable operating performance Highlighted by improvements at Westinghouse since acquisition Acquisition Today Upside Potential $440MLTM EBITDA $600M CY19E RUN-RATE EBITDA $800M UPSIDE EBITDA POTENTIAL1 ~6.8X LEVERAGE ~5X LEVERAGE ~3.8X LEVERAGE Achieved 50bp+ reduction in b
Slide 50: Significant liquidity at the corporate level
Significant liquidity at the corporate level….. Corporate Liquidity $2.4B $2.2B $1.1B 2017 2018 20191 1. Pro-forma liquidity as at June 30, 2019 adjusted for the funding of closed acquisitions. 50
Slide 51: Several levers to support liquidity
With several levers to support liquidity 1 2 3 Distributions Asset sales and Capital from investments monetizations markets 51
Slide 52: Businesses with significant cash generation
Businesses with significant cash generation… ~$850M ~$300M RUN-RATE COMPANY ESTIMATED RUN- RATE MAINTENANCE ~$550M FFO 1 CAPEX 2 1. Company FFO for the twelve-month period ended June 30, 2019 adjusted for acquisitions and divestitures. Information presented is illustrative only. Actual results may v
Slide 53: Monetization potential
…and monetization potential 40% EARLY STAGE 40% MATURE STAGE 20% DEVELOPING STAGE Generated ~$2.2 billion of proceeds from asset sales over the last 3 years Note: Based on Company FFO for the twelve-month period ended June 30, 2019 adjusted for acquisitions and divestitures. Actual results may vary
Slide 54: Polling Question #3: measuring financial performance
POLLING QUESTION #3 How do you measure our financial performance? a. EBITDA b. FFO c. Available corporate liquidity d. Net Asset Value growth 54
Slide 55: Supporting our view of value
Supporting our view of value 55
Slide 56: Our view of value today
Our view of value today… EBITDA 2019 ($M, except per unit) Multiple Estimate1,2 • Construction & Other 9 – 10x $1,400 – $1,600 Business Services • Healthscope3 Cost $250 • Westinghouse 9 – 10x $1,100 – $1,400 Infrastructure Services • Teekay Offshore4 Market Price ~$150 • GrafTech4 Market Price ~$1,
Slide 57: Growth in intrinsic value
..building on a track record of growth in intrinsic value Our View of Value Per Unit $43 - $47 $41 - $46 $29 - $34 $24 - $28 2016 2017 2018 2019 57
Slide 58: Let's frame the bull case
Let’s frame the bull case Brookfield
Slide 59: Potential value of existing businesses
Potential value of existing businesses $60+ + + Other $43 - $47 + Clarios Westinghouse View of Unit Potential Embedded Value Today Unit Value 1 1. Information presented is illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks that are
Slide 60: Wrap-up
Brookfield | co
Slide 61: Takeaways
Takeaways 1 2 3 Executing a High quality Substantial consistent value collection of opportunities for creation strategy businesses growth 61
Slide 62: Brookfield
Brookfield 62
Slide 63: Notice to Recipients
Notice to Recipients All amounts in this presentation are in U.S. dollars unless factors, many of which are beyond our control, which may CAUTIONARY STATEMENT REGARDING USE OF otherwise specified. Unless otherwise indicated, the cause our and our subsidiaries’ actual results, NON-IFRS MEASURES stati
Slide 64: Brookfield Business Partners Investor Day
Brookfield Business Partners I N V E S T O R D AY SEPTEMBER 26, 2019
Brookfield Business Partners — Investor Day (September 2019) on 6ix