WestStar Industrial : Appendix 4C - quarterly

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WestStar Industrial Limited March 2021 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 March 2021 (Quarter).

Highlights

• Strong Cash balance maintained at $6.12M.
• WestStar subsidiaries (the Group) delivered stronger quarter with cash receipts of $12.06M.
• Record Quarter Awards totalling $41M.
• FY21 YTD Awarded projects of $77M.
• The Group is well positioned for a strong Q4 FY21 with Tendering activities expected todeliver further rewards and strengthened Pipeline of projects for the group moving into FY22.

Company Financial Overview

During the Quarter, WestStar maintained its objective to deliver sustainable growth and profitability with a focus on newly awarded contracts, increased revenue and the provision of strong cash reserves.

The company continued to maintain a strong Cash Balance of $6.12M.

The Company banked total cash receipts of $12.06M which is an increase of 20% on the previous quarter. This trend is expected to continue as the record Quarterly awards of $41M are being rapidly commenced and as the business nears completion of the heavy up front procurement phase of the projects. All projects are now underway, successfully maintaining budget and in accordance with program cycles.

Operating receipts for Q3 FY2021 were slightly lower than operating payments which is a reflection of the early onboarding process of Blue and White-collar workforce, early fabrication procurement accompanied by increased CAPEX to mobilise the recently awarded large-scale projects. The projects continue to be a healthy blend of turnkey projects and cost reimbursable works.

This result follows on from the recently awarded projects of circa $41M announced during the Quarter and $77M total for FY21, demonstrating reward for increased tenders submitted during the year.

The Group continues to deliver and manage organic growth whilst maintaining strong cash reserves as demonstrated over the last two years commensurate with its growth trajectory. The Company currently funds its own contractual guarantees and working capital without the need for external funding which reinforces the project profitability, sophisticated cash management controls and on time successful delivery of its projects. As revenue and contract awards continue to grow the Company will monitor its requirement for alternate funding in line with the growth trajectory

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

The aggregate amount of payments to related parties and their associates included in the current quarter totalled ~ $31k. 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.

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Alltype Engineering Operations

Alltype Engineering continues to be busy for Q3 FY2021, with tendering opportunities continuing to grow in volume, size and complexity. The Company was also successful with the award of new contracts and extensions to existing contracts.

Notable achievements during the Quarter were:

• Award of rail infrastructure fabrication project for International Tier One contractor.
• Award of Pilgangoora pipe spooling package by SIMPEC / Ironmerge JV, demonstrating synergies between the WestStar Group.
• Accelerated major structural steel and modularisation package for the Rio Tinto Koodaideri iron ore mine development, inclusive of additional scope.
• Achieved Practical Completion on schedule of two turnkey multidiscipline gas metering facilities in the Pilbara region, including the turnkey fabrication of 8 off gas processing skids.
• Mobilisation and offsite fabrication and E&I work of a gas delivery treatment station involving skid fabrication, brownfield debottlenecking and capacity expansion in the Pilbara region.
• Ongoing works for gas, water and transport infrastructure sectors in both regional and metropolitan areas.
• Ongoing works for the Waste to Energy plants being constructed in Kwinana, WA.
• Submission of construction proposals and budgets for works in South Australia, Victoria and Queensland, building brand awareness and expanding capabilities nationally.

Alltype Engineering continues to tender and secure an increasing range of works across multiple industries, both locally and interstate.

Alltype Engineering's managing director Kelvin Andrijich quoted:

"The start of 2021 is in stark contrast to the uncertainty the industry faced just 12 months ago, with significant project opportunities being presented, tendered and executed. Alltype Engineering continues to deliver against time critical and aggressive schedules and grow industry presence in size and complexity of project offerings, both for site construction and workshop fabrication capabilities. We have a motivated team and are excited about the upcoming opportunities being presented in the market."

SIMPEC Operations

During the Quarter SIMPEC continued to execute existing contracts while mobilising its newly awarded contracts for new and existing clients.

Highlights during the Quarter included:

• SIMPEC forming Joint Venture with IronMerge Pty Ltd - a Nyamal family business.
• IronMerge is SIMPEC's first Indigenous JV Partner representing a milestone achievement in SIMPEC's Aboriginal Engagement Strategy. The IronMerge SIMPEC JV is well positioned as a project and service delivery partner of choice in the Pilbara.
• Newly formed JV delivered immediate success with a $15M award for Pilgangoora Stage 1 Improvement (Pilbara Minerals) in the SIMPEC Iron Merge JV announced in March.
• Successful recruitment and onboarding activities in order to deliver the newly awarded projects, workforce has now increased to circa 250 people. Whilst the blue-collar market remains challenging SIMPEC continues to implement strategic employment techniques to achieve its targets.

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• All projects have now been mobilised safely and all Management onboarded. Execution and the support of the execution teams have been at the focus of all our personnel.
• The number of Tender Proposals for the period was at record highs, with submissions to a variety of Tier 1 high profile projects both locally and within the Pilbara region. SIMPEC continue to tender high value projects commensurate with its desire to grow its contract value Pipeline.

New Contracts Mobilised for:

Pilgangoora Stage 1 Improvement (Pilbara Minerals) Iron Merge SIMPEC JV

During the period, the following milestones were successfully completed on time and on budget for the project:

• Site Mobilisation commenced with facilities and batch plant installed,
• Management team commenced mobilisation to site, and
• First personnel onsite with 50% indigenous employment for SIMPEC employees.

Fortescue's Hopper 5 Jaw Crusher Replacement at Cloudbreak.

SIMPEC was contracted to replace two C160 jaw crushers at Cloudbreak mine.

It has been a long-term goal of SIMPEC to work directly for Fortescue and to break into the field of sustaining capital works. During the period SIMPEC continued pre-shutdown planning works and mobilized to site with both dayshift and nightshift operations handing the area over to the civil contractor. The shutdown was completed ahead of schedule with remaining works to be completed at the end of April as scheduled.

Solomon Central facilities (Centrals).

SIMPEC was awarded a $7M contract by Central Systems for Fortescue's Solomon Hub Central Facilities project.

Under the contract, SIMPEC will supply and install the electrical work for Fortescue Metals Group's Solomon Hub central facilities in the Pilbara, Western Australia. The contract has commenced and is expected to be delivered by the completion of FY21.

Existing Contracts continued at:

First Quantum Minerals at the Ravensthorpe Nickel Operations

SIMPEC was awarded a $9M contract by First Quantum Minerals at the Ravensthorpe Nickel Operations. During the period works continued to progress successfully with overall project completion nearing 50%.

Acciona - Waste to Energy Kwinana.

SIMPEC continues to carry out varied scopes and variation works to Acciona Waste to Energy project in Kwinana. The general scopes include boiler making rigging and fabrication works and are ongoing.

Outlook

During the Quarter the Company was awarded $41M in new contracts, a record for the Group.

This is a function of increased tender book opportunities; strengthening reputations of both business subsidiaries and a buoyant contracting environment currently being experienced in the Western Australian economy. There appears to be no signs of the growing opportunities slowing as the Group prepares for the FY22 forward order book.