WestStar Industrial : Appendix 4C - quarterly

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WestStar Industrial Limited December 2020 Quarterly Report

WestStar Industrial Limited (Company or WestStar) (ASX: WSI), an Australian industrial services company, operating in the energy, resources, utility and infrastructure sectors, in metropolitan and remote areas, across Australia, is pleased to report on the Company's performance for the quarter ended 31 December 2020 (Quarter).

Highlights

• Strong cash balance maintained at $7.3M.
• Awarded Contracts for the quarter totalling $21M.
• WestStar subsidiaries (the Group) continue to deliver strong tendering activity with ~$200M of new live tenders added to the project pipeline for potential award.
• The Group is well positioned for a strong Q3 FY2021 with tendering activities expected to deliver further rewards and a strengthened Pipeline of projects for the Group in the near future.

Company Financial Overview

During the Quarter, WestStar's objective to deliver sustainable growth and profitability continued to be met.

The Company continued to maintain a strong cash balance of $7.3M.The Company banked total cash receipts of $10.3M that continues on from its strong FY2020 performance.

Operating receipts for Q2 FY2021 were slightly lower than operating payments. This is a result of heavy upfront procurement on significant contracts awarded during the Quarter. The Company also took advantage of its strong cash reserves to reduce its financing facilities with the repayments of circa $150k.

This result follows on from the recently awarded projects of circa $21M announced during the Quarter, demonstrating reward for increased tenders submitted during this period.

WestStar continues to display its ability to manage its organic growth objectives whilst maintaining strong cash reserves as it has done over the last two years, commensurate with its growth trajectory. The Company materially funds its own contractual guarantees and working capital without the need for external funding which reinforces its projects' profitability, sophisticated cash management controls and on time successful delivery of its projects.

The result was strongly contributed to by both Alltype Engineering and SIMPEC.

Alltype Engineering Operations

Alltype Engineering (Alltype) had a busy close to calendar 2020, with tendering opportunities exceeding capacity to bid and execute and the award of new contracts and extensions to existing contracts.

Some key achievements were:

• Commenced major structural steel and modularisation package for the Rio Tinto Koodaideri iron ore mine development
• Award and commencement of an additional two fabrication and construction turnkey multidiscipline gas metering facilities in the Pilbara region, including the turnkey fabrication of 8 off gas processing skids
• Water Corporation utility relocation works on MRWA, bridge and Metronet road modification projects
• Award of a major power station piping fabrication package for a major power station expansion for a Tier One Iron ore producer

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• Award and execution of a complex plate and launders package for the Newmont Boddington Gold mine
• Award of a gas delivery treatment station involving brownfield debottlenecking and capacity expansion in the Pilbara region
• Completion of end of line gas pipeline facilities for a Goldfields process plant to an aggressive completion schedule
• Ongoing works for the Waste to Energy plants being constructed in Kwinana, WA

Alltype continues to tender and secure an increasing range of works across multiple industries, both locally and interstate, with current and renewed travel restrictions and border closures continuing to drive an increase in local fabrication opportunities and service demands, particularly in the iron ore sector.

The execution team has grown, requiring facility and office capacity expansion which has now been established without major CAPEX expenditure, allowing better utilisation of existing infrastructure. Furthermore, the Alltype achieved certification to ISO45001, reflecting the proactive and contemporary approach taken to HSE, required for Tier Two contracting and fabrication services.

Alltype Engineering's Managing Director Kelvin Andrijich noted:

"Despite the busy conditions of the market, we have been able to grow our pre award and execution teams commensurate with both workload and capability. We are fortunate to have in house material processing equipment that is key to meeting aggressive fabrication schedules and optimising material utilisation. We currently have an engaged, experienced and tenured workforce that has allowed us to reliably deliver against our contractual milestones within a resource constrained environment."

SIMPEC Operations

During the Quarter SIMPEC continued to execute existing contracts and mobilise new contracts whilst performing a number of new tender submissions for new and existing clients. The Quarter highlights include:

Continued works on the following projects:

• Sydney WestConnex New M5 Project with the CPB Dragados Samsung JV Sydney M5 Project. The team performing commissioning activities safely on site with zero injuries.
• Completion of the FMG Power station project.
• Completion of the Rio Tinto RDSS project.

Mobilised new contracts for:

• First Quantum Minerals - Ravensthorpe Nickel Operations Shoemaker Levy Project
• Avertas Energy - Kwinana Waste to Energy Project
• CBH - Kwinana Jetty CP works
• Tianqi Lithium Australia - Onsite completions work
• BVCJV Woodman Point Wastewater Shutdown

Other highlights:

• Tendering and proposals for the quarter was at record levels. Several of the submissions were for new clients within the mining and infrastructure sectors, the results of which are expected to deliver positive outcomes for the business in the near term.
• Engagement of our first indigenous JV
• SIMPEC focused on increasing its recruitment capabilities and streamlining recruitment processes.

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Outlook

The Company increased its tenders by circa ~ $200M of new live project opportunities during the Quarter.

There is a definitive shift in 'Individual High Value' project opportunities that continue to be offered to both Alltype Engineering and SIMPEC for tender. The Group remains confident that these opportunities will continue to convert into contractual commitments in the near term.

Commenting on WestStar Industrial Outlook for the Quarter, WestStar Industrial Chief Executive Officer, Robert Spadanuda noted:

"During the second quarter of FY2021, we continued to demonstrate the ability to tender and win large scale projects that will deliver meaningful revenue and profitability to the group throughout the second half of the year.

Milestones to note:

• The Increasing Opportunity Pipeline of tendered projects increased by ~$200M in recent tenders.
• $21M of contract wins announced during the quarter, an improvement on the $15M in contract wins from the previous quarter.
• Total contract wins of $36M for the half year expected to be completed during FY2021.
• Tendered work to increase sales further in the Q3 FY2021 with further imminent / near-term contract wins expected.
• The Company has an impressive track record and growing reputation with Tier 1 Resource Companies: SIMPEC and Alltype Engineering have delivered contracts across projects owned by BHP, Rio Tinto and FMG to name but a few with an impressive array of Oil and Gas clients now being added to the list of satisfied customers.
• Recent Supply chain disruption to overseas and interstate fabrication options continue to deliver short term contractual opportunities and increased scope potential to current contracts.
• New tender opportunities are being presented in NSW demonstrating our ability and focus to continue delivering on a greater Geographical footprint."

Commenting further, Mr Spadanuda also noted:

"We continue to pursue and deliver our organic growth milestones within the Group.

WestStar continued to win and deliver large scale projects this quarter. Despite heavy upfront procurement expenses on recently awarded projects and repayment of debt to lower levels have delivered another strong and enviable closing cash position of $7.3M.

WestStar will continue to self-fund these opportunities as a direct result of its profitability across the subsidiaries.

WestStar Industrial achieved a significant increase in revenue in FY2020, increasing revenue by $29.5M to $62.5M on the back of a stellar year from SIMPEC and the integration of Alltype contributing $16.5 M in the last 5 months of FY2020. WestStar has now positioned itself with far greater capabilities and financial strength than at any other point in its operating history which looks likely to continue improving with further awards and delivery of major contracts over the second half of the year.

We look forward to updating the market upon execution of some of these opportunities as the company positions itself to sign a number of contracts that will deliver a diversified portfolio across a wide variety of sectors and geographical locations in Australia."

The aggregate amount of payments to related parties and their associates included in the Quarter totalled ~ $22,000.

These payments consisted of Directors' fees and salaries paid to directors, accounting and bookkeeping fees and

corporate advisory fees. All payments were on normal commercial terms.

-Ends-