annual and special meeting of shareholders · 2016 to account for timing differences in taxes paid...

33
Annual Meeting of Shareholders 1 Annual and Special Meeting of Shareholders May 1, 2017

Upload: others

Post on 20-May-2020

1 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

1

Annual and Special Meeting of Shareholders

May 1, 2017

Page 2: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

JIM PANTELIDIS CHAIRMAN

Page 3: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

Business of the Meeting

3

Receive 2016 Audited Financial Statements

Re-Appointment of Auditors

Rights Plan Resolution

Election of Directors

3

3

3

3

Page 4: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

JOHN MACDONALD President & CEO

Page 5: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

Forward-Looking Statements

Our discussion may include forecasts, projections, estimates or other information that are forward-looking statements within the meaning of

applicable securities laws.

While these forward-looking statements represent our current judgment on what the future may hold, they are based on material factors and

assumptions that could cause actual results to differ materially. These factors and assumptions include, but are not limited to:

• the view of management regarding current and anticipated market conditions;

• the financial and operating attributes of Enercare and Service Experts as at the date hereof and the anticipated future performance of Enercare

and Service Experts;

• assumptions regarding the volume and mix of business activities remaining consistent with current trends;

• the extent to which the Service Experts acquisition is accretive, which may be impacted by the realization and timing of synergies and the

operating performance of Enercare and Service Experts;

• assumptions regarding future selling, general and administration costs estimated to be incurred by Enercare, including in connection with the

running of the Service Experts segment; and

• the number of common shares outstanding remaining constant.

These forward-looking statements are also subject to risks and uncertainties, including, but not limited to:

• actual future market conditions being different than anticipated by management;

• the failure to realize the anticipated benefits of the Service Experts acquisition, strategic initiatives and tax efficiencies; and

• the risk that the pilot of rental HVAC offerings in 4 states in the United States does not realize anticipated results as the rental model is a new

concept in this industry in the United States.

There can be no assurance that the anticipated strategic benefits and operational, competitive and cost synergies from the Service Experts

acquisition will be realized. There can be no assurance that recent results from the introduction of the rental model to Service Experts in Canada are

indicative of future results.

You are cautioned not to place undue reliance on these forward-looking statements. These statements are made only as of the date of this

presentation. Please keep in mind that, except as required by applicable securities laws, we are not obligating ourselves to revise or publicly release

the results of any revision to these forward-looking statements in light of new information, future events or otherwise. Throughout today’s discussion,

we will attempt to present some material factors relating to our business that may affect our forward-looking statements.

Additional information about these (and other) material factors and risks, and our underlying assumptions, is available in our current AIF and annual

MD&A, particularly under the headings “Forward-Looking Statements”, “Forward-Looking Information” and “Risk Factors”, all of which are available

on SEDAR at www.sedar.com. Dollar amounts are expressed in millions of Canadian dollars, except “Per Share” amounts, or unless specified

otherwise. 5

Page 6: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

VISION To be the premier provider of essential

home and commercial services and energy

solutions in North America

6

Page 7: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

7

Outstanding 2016 Results & Performance

Increase in

revenue to

$996M (compared to

$564M 2015)

+77% 8,000 Units

30%

+20%

(1)

Increase in

Enercare Home

Services net rental

unit growth (compared to

-2,000 units in 2015)

Increase in

EBITDA1 to

$266M (compared to

$222M in 2015)

Accretion

exceeded for

2017 Normalized

Pro Forma

Distributable

Cash per Share(2)

(1) See “Non-IFRS Financial and Performance Measures” found in Enercare’s MD&A dated March 6, 2017.

(2) Normalized Pro Forma Distributable Cash per common share excludes transaction costs and synergies and has been normalized by $19 million in 2015 and

2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial services business. Gives

effect to the 2016 bought deal offering, excluding the over-allotment option.

Page 8: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

8

Successful execution

of post-merger

integration

Achieve targeted

accretion

Successfully Delivered Our 2016 Strategic Priorities

Achieve net rental

unit growth

Grow HVAC rentals

Re-energize and

grow protection plan

portfolio

Unit growth

Enhance customer

service

Add new products

and services

Enercare

Home Services Sub-metering Service Experts

Increased consolidated EBITDA by 20%

Page 9: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

9

10 11

Q4 2015 Q4 2016

8.8 8.3

Q4 2015 Q4 2016

5.6%

Reduction

Six Consecutive Quarters of Net Rental Unit Growth

Additions (thousands)

Attrition (thousands)

Bill 59 – Putting Consumers First Act – to completely ban door-to-door sales in

Ontario of certain household appliances, including water heaters and HVAC

33 38

2015 2016

Attrition (thousands)

35 30

2015 2016

Additions (thousands)

Page 10: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

10

Protecting Our Rental Business

2002-Present

1 million customers billed by Enbridge Gas

Distribution Inc. (“Enbridge”), which mitigates

credit risk – Enercare is entitled to receive

payment in 21 days of 99.5% of billed revenue

2009-Present

Customer education programs

2010-Present

The Buyout Contract: Approximately 68% of net

book value is protected by a buyout contract,

growing as new equipment is installed

01-Jan-2014

Enhancements to the billing program with

Enbridge

01-Apr-2015

Bill 55 – The Stronger Protection for Ontario

Consumers Act

01-Jan-2017

Door-to-door Energy Sales Ban (AB)

April-2017

Bill 59 – Putting Consumers First Act (ON)

Page 11: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

Delivering Excellent Customer Service:

A Cornerstone of Customer Loyalty

Delivering Excellent Service

• Focusing on the metrics that matter

• Requesting immediate customer feedback

• Investing in technology for customers, technicians and agents

• Measuring every front line customer facing employee

2014 2015 2016

Source: Enercare Net Promoter Score Database, December 2016.

Improvements in

Net Promoter

Scores

11

Ratings by BBB and Google

Home

Services A to A+ 4.3

Page 12: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

12

Increased HVAC Rental Additions by 31%

10,309 9,027

19,336

13,489

7,079

20,568

Rental Sale Total

HVAC Transaction Mix

Rental vs Sale

2016 2015

$17.20

$24.03 $26.15

$30.99

$40.83 $43.01

2014 2015 2016

Average Monthly Rental

Rate Changes

Additions Attrition

31%

6%

Difference

$13.79

Difference

$16.80

Difference

$16.86

HVAC rental is worth 2.5x that of an outright sale

Page 13: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

2015 2016

545,000 -3,000 542,000

66,000 +8% 71,000

74,000 - 74,000

13

Focused on Growing Protection Plans

Approximately two thirds of Enercare’s HVAC originations come from a protection plan relationship

Protection

Plan Contracts

(year end)

Additions

Attrition

9,300 Attrition from

HVAC

Rental

Additions

Page 14: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

Geographic &

Product Growth

Whole Home Innovation

Continue growth across Ontario,

launch new products that

complement existing services and

build on our strengths in heating, cooling and plumbing

Become trusted service adviser, deliver

multi-product value offering and increase

our share of the household

Lead in Connected Home; leverage

strengths in service delivery to build

customer value

What’s Next for Enercare Home Services?

14

Electrical Services

Connected Home Hub (coming soon)

Air Conditioning

Duct Cleaning

Air Quality

Plumbing

Furnace or Boiler

Water Heater

Water Treatment

More to come in 2017

Connected

Home Pilot

Scheduled

Enhancements

to

Mobile App

Page 15: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

15

235

165

116

Contracted Installed Billable

Achieving Scale in Sub-metering

Q4 2015 Unit Continuity (In thousands)

205

155

103

Contracted Installed Billable

Q4 2016 Unit Continuity (In thousands)

Contract to bill backlog: 119,000 units Contract to bill backlog: 102,000 units

50% improvement in sales in 2016 compared to the prior year

Page 16: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

16

Contracted

services

growth

Billable

unit

conversion

New

products

New

markets

Economies

of scale

Growth Drivers

Page 17: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

17

Service

Experts

Service Experts Exceeds our Accretion Target

(1) See “Non-IFRS Financial and Performance Measures” found in Enercare’s MD&A dated March 6, 2017.

(2) Normalized Pro Forma Distributable Cash per common share excludes transaction costs and synergies and have been normalized by $19 million in 2015 and

2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial services business. Gives

effect to the 2016 bought deal offering, excluding the over-allotment option.

(3) Reflecting results from May 11, 2016 to December 31, 2016.

Enercare Customer Locations Service Experts Locations EENA Commercial National Accounts

YTD 2016 Acquisition

Adjusted EBITDA:

$50.5M(3)

Achieved

30%

Accretion in

Distributable

Cash(1)(2)

5 percentage points in

excess of target

Rating

4.5 – 4.6

Page 18: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

18

Advancing the Integration of Service Experts

Reiterating cost synergies in the range of $0.05 to $0.08

per common share on an annualized basis by the end of 2017

2017 2016 2017

Q2 Closed Service

Experts transaction

Q3 Commenced negotiations

with large suppliers as part of synergy

initiative

Complete and realize cost synergies

Execute on procurement

savings

Continued focus on accretive acquisitions

Commence roll-out of HVAC rentals in U.S. in select states

Q4 Launched HVAC

rentals program in Canada

Page 19: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

19

Expanding Rentals to Service Experts

Water heater and HVAC rental products available

Roll out complete in Ontario, Manitoba and Alberta

Useful life contract with customers

Preliminary rental mix of total water heater and

HVAC originations:

~20% in ON, and

~10% in MB & AB

Only HVAC rental products currently

available

Launched HVAC rental program in 4

states

Defined term contract with customers

Rollout expected to be completed by

end of 2018

2016 2017 2018

COMMENCES COMPLETE COMPLETE

U.S. Rental Rollout Canada Rental Rollout

CANADA USA

Page 20: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

EVELYN SUTHERLAND CFO

Page 21: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

21

Total Revenue(2)

($ millions)

426.7 439.0

137.2 146.0

410.7

2015 2016

Enercare Home Services Sub-metering

76.6%

Service Experts

Enercare Home Services

Sub-metering

Service Experts

6th consecutive

quarter of

net rental

unit growth

Achieved

30%

Accretion(1)

13%

increase

in billable

units

Successfully Growing Long-Term Recurring Revenues

(1) Normalized Pro Forma Distributable Cash per common share excludes transaction costs and synergies and have been normalized by $19 million in 2015 and

2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial services business. Gives

effect to the 2016 bought deal offering, excluding the over-allotment option.

(2) Excludes corporate investment income of $192,000 and $0, respectively.

Page 22: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

22

$563.8

$995.9

2015 2016

$12M in additional EBITDA would have been recorded in 2016

had there been no rental HVAC originations

Revenue ($ millions)

~$33.8

+97%

+100%

$33.8

million

deferral of

revenue in

2016 due

to success

of HVAC

rental

initiative

11%

25%

53%

66%

89%

75%

47%

34%

2013 2014 2015 2016

Split Between HVAC Rentals & Sales

Rentals Sales

Successful HVAC Rental Initiative Has

Short-term Impact and Long-Term Benefits

Page 23: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

23

Double-Digit EBITDA Growth

Enercare Home Services Sub-metering Service Experts

(1) See “Non-IFRS Financial and Performance Measures” in Enercare’s MD&A dated March 6, 2017.

Acquisition Adjusted EBITDA(1) (excluding corporate)

($ millions)

244.2 253.0

50.5 13.0

13.4

2015 2016

23%

EBITDA(1) (excluding corporate)

($ millions)

229.7 245.1

39.0 15.1

13.5

2015 2016

22%

Page 24: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

24

Q4 2016

10%

60%

39%

Q4 2015 Q4 2016

Sub-metering

EBITDA Margin

as % of Net Revenue

Focused on EBITDA(1)

Margin Expansion

54% 55%

Q4 2015 Q4 2016

Enercare Home Services EBITDA Margin

as % of Revenue

Service Experts EBITDA Margin

as % of Revenue

Range: 50%-55% EBITDA Margin

Roll-out of HVAC rental strategy in the U.S. provides opportunity

to expand Service Experts’ margins over the long-term

(1) See “Non-IFRS Financial and Performance Measures” in Enercare’s MD&A dated March 6, 2017.

(2) EBITDA included a one-time buy-out for a terminated contract.

Range: 40%-50% EBITDA Margin Range: 8%-10% EBITDA Margin

(2)

Page 25: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

25

66% 94%

2015 2016

46% 51%

2015 2016

Payout Ratio(1)

Payout Ratio – Maintenance(1)

Improving Tax Normalized Payout Ratios

80% 77%

2015 2016

51% 45%

2015 2016

Tax Normalized Payout Ratio(2)

Tax Normalized Payout Ratio

– Maintenance(2)

(1) Payout Ratio – Maintenance and Payout Ratio are Non-IFRS financial measures. Refer to the “Non-IFRS Financial and Performance Measures” section in

Enercare’s MD&A dated March 6, 2017.

(2) Tax Normalized Payout Ratio – Maintenance and Tax Normalized Payout Ratio are Non-IFRS financial measures which have been calculated by normalizing

the distributable cash in both the Payout Ratio – Maintenance and Payout Ratio for the impact of the one year tax deferral in 2015, arising from the DE

Acquisition, of approximately $4,750 during the fourth quarter. On a full year basis, total tax expense was approximately $19,001 lower, during 2015, as a

result of this one year deferral which will reverse in 2016.

Normalized

for tax

deferral

Normalized

for tax

deferral

Page 26: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

4.9% 4.3% 3.9% 3.5% 3.3%

2012 2013 2014 2015 2016

9%

Weighted Average Interest Rate

3.2x 3.0x 3.4x

3.0x 3.3x

2012 2013 2014 2015 2016

9%

Improving Credit Metrics

26

Net Debt / Acquisition Adjusted EBITDA(1)

Key Statistics

BBB (Stable) – S&P

BBB (Stable) – DBRS

3.3%

Weighted Average

Interest Rate

3.3x(1)

Net Leverage Ratio

9.4x(1)

Interest Coverage Ratio

(1) Calculated using debt less cash dividend by Acquisition Adjusted EBITDA (for a definition, please refer to the Non-IFRS Financial and Performance Measures

section in Enercare Inc.’s MD&A dated March 6, 2017. Debt excludes the balances associated with pension, other post-employment benefit liabilities and

capital lease obligations. The interest expense excludes interest paid on subscription receipts and bridge financing.

Page 27: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

Optimize mix of USD/CAD debt

Reduce exposure to floating rate debt

Extend debt maturities

Ladder debt maturities

Maintain debt rating

27

Considerations for Our Debt Refinancing

Page 28: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders 225

200

170

30 275

225

2017 2018 2019 2020 2021 2022 2023 2024

New Bonds

Drawn Revolver

Revolver

USD Term Debt

Existing Bonds

3.99%

Pro Forma Maturity Schedule (2)

Capital Structure After our Successful Debt Refinancing

(1) Excludes pension and post-employment benefit liabilities and capital leases.

(2) As at March 6, 2017. Excludes pension and other post-employment benefit liabilities and capital lease obligations and the Notes (2012) that were paid down

on March 23, 2017. 28

Maturity Schedule at December 31, 2016 (1)

250 225 210

200

185

15

2017 2018 2019 2020 2021 2022 2023 2024

Drawn Revolver

Revolver

USD Term Debt

Term Debt

Existing Bonds

In February 2017, Enercare Solutions refinanced its $210M term debt and its Notes (2012) $250M + upsized the offering for total proceeds of $500M

3.38%

Page 29: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

Q&A

Page 30: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

JOHN MACDONALD President & CEO

Page 31: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

31

Dec-14 Jun-15 Dec-15 Jun-16 Dec-16R

ela

tive P

erf

orm

ance (

%)

Composite Index Small Cap Index Enercare

$2.9B enterprise value

$0.96 annual dividend (paid monthly)

48% increase since 2011

S&P/TSX indices:

(i) Composite Index

(ii) Small Cap Index

(iii) Low Volatility Index

(iv) Dividend Aristocrats Index

(v) High Dividend Growth Index

Superior 2-Year Total Shareholder Return

2-Year Total Shareholder Return December 31, 2014 – December 30, 2016

Successful execution of strategies over the last two years

led to outperformance of indices

37%

11%

20%

Page 32: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

32

Another 4% increase in dividends to $0.96 per share on an annualized basis

Returning Significant Capital to Shareholders

0.65 0.66 0.67 0.68 0.70 0.73 0.84 0.92 0.96

Jan 2011 Dec 2011 Mar 2012 Mar 2013 Sept 2013 Mar 2014 Mar 2015 Mar 2016 Apr 2017

+2%

48% since 2011

Enercare’s Annualized Dividend Per Common Share

+2% +2%

+4%

+16%

+10%

+4%

+2%

Page 33: Annual and Special Meeting of Shareholders · 2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial

Annual Meeting

of Shareholders

33

Annual and Special Meeting of Shareholders

May 1, 2017