Mader Group Deep Dive

Last updated: October 2024

Mader is a leading contracting company that specializes in mobile and fixed plant equipment maintenance and support. They offer a one-stop shop of services to keep equipment powering 24/7. Mader was originally providing mechanical assistance to Australian mining clients but tends to diversify its activities across geographies and industries (US, Canada, electrical, rail, truck, marine, oil & gas, ancillary). 

Mader Group was created in 2005 by Luke Mader, a former mechanic on the field in the Australian mining region. He worked for an OEM (Caterpillar) until he realized that only the OEMs were providing maintenance to miners and that some issues were not taken care of. They decided to take the company public in 2019 to scale the business.

Summary investment thesis

Mader’s top strength lies in its faculty to provide timely and prime maintenance directly on the ground. The simplicity of the business model and their ability to replicate it across geographies and ranges of services is the key factor in their development and future growth. The decentralized corporate organization acts as a backbone to their expansion and their people-centric culture as a strong barrier to entry.

Opportunities and risks 

• Sticky business 
• Strong competitive advantages: less costly and quicker repair than competitors/OEMs
• The agility of the group thanks to the culture, the way the organization is built => decision making and capital allocation skills 
• Future growth prospects: addressable market is very large and they are willing to diversify from their core business (mine maintenance)
• 59% of the capital is owned by employees 

• Cyclicality of the business
• The key to everything at Mader is people. However, it is still hard to retain them (30% staff turnover). If upcoming recession there might be some inflationary pressure that erodes margins 
• The price advantage/discount (20-30%) they offer to their client might not be sustainable on the long term and while they see new entrants entering the markets

Investment rationale

Maintenance experts 

Mader Group stands out from its competitors and original equipment manufacturers (OEMs) by offering onsite maintenance services that are both timely and of exceptional quality. They specialize in servicing fixed and mobile equipment for miners and industrial operators, regardless of the brand or model. Since the beginning, the company has invested in technology to better protect employees against work accidents while serving customers quicker thanks to proprietary software.

Massive addressable market 

Mader occupies a large share of the mining equipment maintenance market (gold, iron ore, and coal) in Australia where they are engaged in ~70% of the sites. However, they still have room to grow both in their core markets and new verticals. One of their strongest growth drivers has been North America where they have increased their revenue exponentially. Yet, they were present in less than 3% of the sites in 2024. The diversification strategy across industries and services is another growth pillar that helps them strengthen their positioning as a maintenance services pure player in Australia. The industrial maintenance services market is expected to grow at 6-8% per year for the next 10 years. The integration of digital technologies creates new opportunities for maintenance services operators. 

Outstanding culture

The founder (also chairman since May 2023) built the company around its people which can still be observed today through the highly decentralized organization, exceptional safety tools for employees, and relatively high staff retention rate (~70%). The management team is only here to assist and to help branch managers develop their activity on the ground. Each of them is responsible for its own “P&L”. The company is still 50% owned by the founder and employees. The management kept a conservative vision throughout the years on debt levels and still makes sure the balance sheet stays healthy despite the high revenue growth (see below for more information on debt ratios).

Risks

International & services expansion 

Mader Group’s growth prospects depend mainly on its ability to address new markets and, ultimately, generate top-line expansion. There is a risk that their model cannot be replicated in larger markets (ie. the US) which would largely cut their addressable market and growth potential. The same applies to the different types of services they are trying to develop.

Clients’ cyclicality

The client base is mainly composed of industrial companies subject to cyclicality linked to CAPEX cycles and economic conditions. In the case of an economic downturn or a wave of consolidation among market participants, Mader could see its client base reduced significantly. However, their effort to diversify their service offering across countries and industries should help them reduce this risk.

People risk

The company was built around people, meaning that there are also their biggest risks. The staff turnover remains quite high (~30%) and in the case of inflationary pressures, margins could suffer from wage inflation. 

Short term discount

The discount on the price (20-30%) they offer compared to competitors (OEMs) they offer to their clients might not be sustainable in the long run especially if they see incumbents entering the market. 

Business model

What do they do? 

Provide onsite, timely & prime maintenance for fixed and mobile equipment to miners and other industrial operators through a flexible work environment using technology as a tool to improve the safety of their employees and the satisfaction of their clients.

On the road to diversification … 

• Energy market: mechanical maintenance for the production and transportation of natural gas. 
• Infrastructure maintenance – processing infrastructure (crushers, screens, conveyors, stackers) & non-processing infrastructure (workshops, mining camps, project management)
• Rail services: maintenance on locomotives and wagons, track maintenance, signaling 
• Road transport & logistics
• Power generation & marine: resources industry, technology sector, emergency services, remote communitiES

Source: Mader’s FY24 Results Presentation

Who are the clients? 

• Operators: miners mostly 
• OEMs: more recently developing the business through OEMs, acting as subcontractors due to changes in market dynamics (work with Sandvik for instance)
• Diverse client base: 350 customers across the world, work with all the major names in Australia, in America have two or three and the rest are smaller operators
• Canada: mix of larger and smaller clients 

Why clients would (& not) use MAD? 

• Clients use Mader for most of the work but would use OEM in the first hours within the warranty period of the machine, or for something very technical on the machine 
• Maintenance for all brands and models (vs OEM provide maintenance only for their own brands) across states (especially for the US where the OEMs are limited to regions)
• Timely response thanks to flexible workforce (can repair the machine within 3 days VS 1 month for OEMs) => help client optimize the operation efficiency of the machine, in fine avoid loss due to a broken machine
• Very specialized & high-quality services

How do they earn money? 

• Contracted model: flat rate: client signs a contract of 3-5 years, but the rate is reviewed yearly. In the meantime, the client can use MAD’s services an unlimited number of times and staff. 
• Offer 20% discount to OEMs’ price in the US and 30% in Australia (more competitive market)
• Price is fixed depending on the trade and services but usually try to maintain the profit margin around 20-30%.
• Uncontracted model: more pricey, ad hoc service 
• US: margin is higher because:
  • Operating at 20% discount vs 30% in Australia (competition is tougher in their home country where they have seen more new entrants)
  • Costs are lower in America except for the service vehicle because have to use bigger trucks (because of tooling and also because the client expects a maintenance truck to be bigger on average than in Australia)

What are the focus areas for development? 

• Expanding geographically in the US and Canada + in terms of segments (new start ups for diversification)
• Main focus of development for the next years :
  • Infrastructure maintenance: big addressable market (only 5% of their revenue as of today)
  • US market 
  • Ancillary: auto electricians, supporting trade, etc 
• Secondary markets:
  • Energy sector: equipment maintenance
  • Rail industry: locomotive engine maintenance, truck maintenance
  • Road transports: commercial truck maintenance 

How do they manage the workforce? 

• FIFO: fly in fly out model that allows the staff to be on the ground in a timely manner and gives them the chance to spend more time with their families when they are home. Depending on where they are located, they can be called in for a job (they can go by car or plane depending on the distance), stay a couple of hours/days on the ground and then come back home. It is common in Australia but not so much in the US so they try to educate the workforce to this type of flexible work schedule there. 
• Try to hire people from OEMs so they get the latest training available on different brands machines => how can they be able to repair machines if they don’t get the training from OEMs anymore ?
  • Training at MAD is not as good as the OEMs but can update their knowledge by hiring new people 
  • Now that they are subcontracted by OEMs, they are able to get the knowledge from them when they intervene on the ground alongside OEMs’ mechanics 
  • However, machines don’t change so often, the only limitation is if mechanics changes (electrical vehicles)
• Experience labor shortages at the moment in the US, subject to mining cycles and flows. Though it has always been hard to find people so they constantly try to find new ways to attract talents (training programs, flexibility, …)
• The training/apprenticeship lasts 4 years, in their facilities in Perth so they have limited spots every year 
• Staff turnover is 30%

How do Mader’s infrastructure systems are a competitive advantage?

• MAD’s rostering system gives complete visibility of where the staff is, fills in every gap on the agenda, custom built a while ago and owns the IP for this particular system; 
• Custom mobile app that improves communication with and within employees, can submit timesheets, videos on how to stay safe when using technical engines
• Prior to the rostering systems, all was made through the excel sheet
• Continue to invest in vehicle equipment and monitoring so it becomes easier to see if something is going wrong and provide immediate assistance

Market & competition

Which market/industry?

• Have diversified from mechanical maintenance to electrical maintenance, and complementary industries:
  • rail and track, 
  • Marine, 
  • oil & gas (only entered through the gas compression for now) maintenance
  • specialized in shutdown (when the facility is shut down)
• More competition in Australia, are now implementing business in the US where OEMs are dominating the market so more room to grow and grab market shares. In the US, OEMs are restricted by the region when MAD offers to cover all states and types of customers
• In the North American market, sales engagement is heavily required but once the client starts to use the product it is very sticky. 
• Have the willingness to enter different industries to diversify the client base

What is the TAM? 

• Australia: 2.2bn ROM, sites engaged in 1H FY24: 350+ vs total mines and projects: 538
  • Mader has a foot on ~70% of the Australian sites but did not include potential rail and energy or fixed plant infrastructure maintenance. Meaning they can still increase volumes on the mining sites and volume and number of sites on infrastructure maintenance, rails, ancillary services etc. 
• US : 7.8bn ROM, sites engaged in 1H FY24: 105+ vs total mines and projects: 3545
  • <3% penetration rate only on mines and energy sector 

Who are the main competitors? 

• US : no direct competitor, OEMs (Caterpillar, L&H Industrial, Bulk Equipment Corp), very small mom and dads businesses 
• Western Australia: where they see the most of competitors, similar companies with up to 150/200 staff but for some reason they have not developed as well as MAD mostly because they did not invest in their infrastructure systems. Abundance of small to medium-sized heavy mobile equipment repairers available like Santrix Diesel, Superservice, BTP Group, CJD Equipment and Elite Heavy Equipment.
• Rest of Australia: sub-contractors, small Mum and dads 
• Canada: mix of sub-contractors and similar business

Culture

The business was created around employees’ well-being to guarantee satisfaction and safety for the people. Knowing the great turnover and struggle to retain talents in the industry, it is a true competitive advantage. One of the hardest things in this industry is to ensure that employees are safe even in remote & buried areas. Mader constantly tries to improve their tracking technology to make sure people are safe.

The values supported by MAD people: kindness, venture-driven, enthusiasm, and passion.

KPIs used to assess the culture of MAD : 

• Track team events, 
• Interactions between managers & employees, 
• Number of interviews & how many candidates go to stage 2/3/4 interviews (track the recruiting funnel to make sure they get only the right people)
• Live display of 40 different dashboards showing safety metrics, candidate counts, managers/employees interactions, etc.

General organization 

• 1 division, 1 lead, 1 team 
• At Mader, each sector manager is responsible for its own profit, margin, and metrics, so the businesses are run independently from each other. They are incentivized like if they were their own bosses => “Quarterback packages”
• Each new service launch is called and considered as a start-up with a dedicated team and manager. Top management (CEO & CFO) are here to ensure capital allocation and to provide support to the divisions. Every month they sit with the managers and ask the question “What do you need from us?”, they review all the KPIs, ask for feedback on what happens on the ground. A lot of managers are technicians and need guidance on various subjects like management.
• Every year they have an internal meeting called AGM that lasts 1-2 weeks where every head of department/key people (50 people) present their own strategic outlook for the years ahead. 

Management

Luke Mader, Founder & Chairman

He was appointed Chairman in March 2023 (replacing Jim Walker). 

Founder of Mader Group, Luke is trade qualified with 20 years of experience in the mining services industry. Luke has built Mader Group for over 2,200+ employees after realizing an underserviced ‘niche’ in the industry while working in marketing for an Original Equipment Manufacturer (OEM).

Justin Nuich, CEO 

Justin has over 20 years of experience in the mining and oil and gas industries in Australia and globally. Currently Mader Group’s Executive Director and CEO, Justin is well-versed with the business having sat on the Board since October 2018. He formerly held senior roles with Fortescue Metals Group Limited (ASX: FMG), Mineral Resources Limited (ASX: MIN), and BHP Group Ltd (ASX:BHP).

Paul Hegarty, CFO

Paul has been with Mader Group since August 2020 and has a depth of experience across the mining, resources, and exploration sectors. Paul is a Chartered Accountant and Chartered Company Secretary with a Bachelor of Commerce from the Curtin University of Technology.

Ownership

A large share of the company (50%) is owned by insiders or founders. 

=> Maidment Bridge Farm : Luke & Amy Mader controlled entities

=> Skye Alba : Craig Burton controlled entity, investor at Upswell Ventures* & non executive director of Mader Group

*About Upswell Ventures : Make investments in Australian technology companies at the Seed and Series A 

Competitive advantages

• Maintenance for all brands and models (vs OEM provide maintenance only for their own brands) across states (especially for the US where the OEMs are limited to regions)
• Timely response thanks to flexible workforce (can repair the machine within 3 days VS 1 month for OEMs) => help client optimize the operation efficiency of the machine, in fine avoid loss due to a broken machine 
• Price advantage vs OEMs (20% discount in the US & 30% in Australia)
• Culture: agility, people-centric

Barriers to entry

• Culture & business organization 
• Patent on IT, proprietary infrastructure system in roadsters & key metrics tracking that allow them to be agile & always on the ground when the client needs it 
• Know-how for maintenance across geographies & industries