DGL Group Limited Half Year Financial Report

ASX RELEASE

25 February 2022

DGL reports strong first half FY22 result and highlights growth Key highlights of the first half included:

1. DGL has delivered strong growth in revenue, EBITDA and NPAT with results exceeding expectations, as pre-announced on 9 February 2022
- $143 million of sales revenue (up 55% on pro-forma prior comparable period1)
- Normalised2 EBITDA of $23 million achieved, (up 77% on pro-forma prior comparable period))
- Statutory NPAT of $8.5 million (up 70% on pro-forma prior comparable period) (includes $2.3m of acquisition costs)

2. Delivered a significant increase in scale and diversified earnings in the first half of FY22 through acquisitions and organic growth
- Successfully delivering on our strategy of investing for growth
- 7 acquisitions successfully integrated to expand and diversify DGL’s scale, geographies, expertise and offerings
-Stronger than anticipated quarter 2 growth across all 3 operating segments
- This momentum is forecast to continue into the second half
3. Financial position with flexibility to support continued growth
- Net debt of $35 million
4. Outlook: reconfirm earnings guidance for FY22 with forecast revenue of ~$343 million and forecast EBITDA of ~$54 million (before acquisition costs); revenue and earnings guidance is significantly better than Prospectus forecasts.

Melbourne, Australia - DGL Group Limited (ASX:DGL) (NZX:DGC), (“DGL” or the
“Company”), a specialist chemicals business that manufactures, transports, stores and processes chemicals and hazardous waste, today confirmed the strong result for the first half of the 2022 financial year, including material earnings growth.
In commenting on today’s results announcement, DGL Chief Executive Officer, Simon Henry, said:

“Our first half FY22 results are excellent. The results are evidence of DGL’s ability to successfully execute our strategy to sustainably grow through organic growth and acquisitions of strategically positioned businesses.

“All three operating segments performed exceedingly well and is a testament to the efforts of our employees across the entire DGL Group. Despite the number of pandemic-related challenges faced, including disrupted supply chains and lock downs, we are navigating them well. Worker safety is always paramount to our activities, and we have a COVID-19 safe plan implemented across all operations. All staff have responded in outstanding fashion
helping DGL to prosper over the last six months.

“The continuing trend in onshoring of international supply in response to the pandemic, is benefiting DGL. We are seeing customers forward ordering and implementing long-term
supply planning. This highlights the benefit of being a locally operated, vertically integrated speciality chemicals and dangerous goods Company that can assist across the supply chain.

“We expect DGL’s Q2 momentum to carry into Q3 and Q4 with greater contributions from completed acquisitions. DGL is well positioned to continue to take advantage of opportunities across the speciality chemicals and dangerous goods value chain to continue to deliver growth in shareholder value.”

Group Revenue and EBITDA

DGL delivered $143 million of sales revenue and $23 million of normalised EBITDA in the first six months of FY22. All 3 operating segments contributed to the Group’s revenue and EBITDA growth.

Manufacturing

Since June 2021, DGL has acquired and integrated into the Manufacturing segment six strategically positioned businesses (Labels Connect, Opal, Profill, Aquapac, Austech and Ausblue) expanding the Chemical Manufacturing segment’s manufacturing capabilities further into Agricultural, Automotive and Industrial sectors. These businesses have been successfully integrated into the DGL Group and are performing in line with management’s expectations. With the knowledge, experience and intellectual property gained, the wider manufacturing segment is now able to offer additional turn-key solutions across more industries and markets.

Continued organic growth is an ongoing focus as we realise synergies from the acquisitions and further develop the business to meet the needs of our customers. Selling to our customers our expanded products, capabilities and processes will help maximise our manufacturing plant utilisation throughout Australia and New Zealand. In addition, we are continuing to see increased onshoring of chemical manufacturing in response to global supply chain issues including shipping delays, packaging constraints and various other challenges.

Warehousing and Distribution

Significant demand for DGL’s warehousing and distribution services continues. In response to issues around supply chain including shipping delays, we have seen an increase in the stock holdings of DGL’s customers.

In addition to the ongoing high utilisation of our existing assets, DGL successfully integrated the acquisition of Shackells Transport into the Group in December. As part of the purchase, we grew our fleet of trucks and tankers as well as our bulk liquid expertise across the Group. A customs clearance service is being developed which aligns with DGL’s strategy to increase our offering of services.


Environmental
DGL successfully commissioned the Victoria lead smelter in June 21. This has enabled DGL to convert intermediate lead materials into high value end products. The lead smelter was in operation throughout the first half.

Despite experiencing shipping and logistical challenges in the dispatch of battery materials to offshore customers, the segment recorded strong conversion of finished goods to sales.

Balance Sheet and Cash

The strong result has delivered an underlying operating cashflow of $15 million (down 8% on prior comparable period). There has been a considerable build in net working capital requirements. Inventory values have increased with seasonal inventory growth and the general trading environment. The strong trailing quarter also contributing to an increase in receivables at the end of December.

$41 million of cash investment in the 7 acquisitions and $21 million of property acquisitions have resulted in DGL having a net debt position of $35 million at the end of the first half of FY22 (compared to a net cash position of $23 million at June 21).

Trading Outlook

We expect the momentum from Q2 to carry into the second half of FY22. We reconfirm our upgraded earnings guidance of:
- FY22 revenue forecast at ~$343 million
- FY22 EBITDA forecast at ~$54 million (before deducting acquisition costs).

This guidance is significantly better than Prospectus forecasts.

Live Webcast

As previously announced, Founder and CEO, Simon Henry, will be joined by CFO, Ben Halsey, to present the 1H FY2022 results via a live webcast.

When: Friday, 25 February 2022
Time: 11:30am - 12:30pm AEDT

To attend the video briefing, please register via the following link
https://webcast1.boardroom.media/watch_broadcast.php?id=620c6f9248e20

Registered participants will receive a calendar invite and a link to the event.

There will be a live Q&A function where investors can submit their questions. Questions will be moderated.

Approved for release by the Board of DGL.

CONTACT

Barbara Furci
DGL Group Limited
+64 9 309 9254 or [email protected]

MEDIA ENQUIRIES
Kylie FitzGerald
Cannings Strategic Communications
+61 401 895 894 or [email protected]

ABOUT DGL GROUP LIMITED

DGL is a long-established, founder-led, end to end chemicals business that manufactures, transports, stores and manages the processing of chemicals and hazardous waste. The Company operates a network of 54 sites, both owned and leased, across Australia and New Zealand. The Company has a strong track record of revenue and earnings growth.

---

Announcement PDF