Zeder Investments Limited · JSE:ZED
Zeder Investments — H1 2014 Earnings Presentation
49 slides from Zeder Investments's earnings presentation, Oct 8, 2013
Slide 1: Interim results
Interim results Presented by: Norman Celliers Chief executive officer 8 October 2013
Slide 2: Thank you.
Thank you.
Slide 3: Agenda
AGENDA • Interim results • Strategy review • Portfolio overview • Select investments
Slide 4: Executive summary
INTERIM RESULTS Executive summary Aug 13 Aug 12 Feb 13 Sum of the parts R4,253m R3,238m R3,903m Sum of the parts per share (c) 8,8% (31,0%) R4.34 R3.31 R3.99 See-through sum of the parts R4,632m R3,486m R4,259m See-through sum of the parts per share (c) 8,7% (32,8%) 4.73 3.56 4.35 Recurring headline
Slide 5: Sum-of-the-parts
INTERIM RESULTS Sum-of-the-parts As on 4 October 2013: SOTP = R4.53 See-through SOTP = R4.99
Slide 6: Agenda
AGENDA • Interim results • Strategy review • Portfolio overview • Select investments
Slide 7: We reconfirmed our business definition
STRATEGY REVIEW We reconfirmed our business definition • Long term value investor with a primary focus on Agribusiness, specifically the food and beverage sectors • Listed on the JSE – ZED - hybrid private equity vehicle • Key characteristics of investment considerations: – Growth sectors or subsect
Slide 8: Opportunity for PE rerating has diminished; earnings growth drives value
STRATEGY REVIEW We recognized that the opportunity for PE rerating has diminished and that longer term value will be derived from earnings growth... ngs SOTP & Share price SOTP & Share price Recurring headline earnings (Cents per share) (Cents per share) (Cents per share) 35 450 450 399 399 400 400
Slide 9: Focus on agribusiness; non-food sectors as growth areas
STRATEGY REVIEW We reconfirmed our focus on the AGRIBUSINESS industry but identified “non-food” sectors as areas of potential growth… Upstream Midstream Downstream Services and support Food Primary Beverages Secondary Marketing Inputs Processing Distribution Retail production production and sales Bi
Slide 10: We expanded our strategy accordingly
STRATEGY REVIEW We expanded our strategy accordingly… Historically Going forward Industry: • Agribusiness • Agribusiness Sub-sector: • Food and Beverages • Food and Beverages • Bio Fuels • Non-food (i.e. Rubber, timber) Geography: • South Africa (Direct) • South Africa (Direct) • Rest of World (via
Slide 11: Agenda
AGENDA • Interim results • Strategy review • Portfolio overview • Select investments
Slide 12: See-through value of portfolio touches R5 billion
PORTFOLIO OVERVIEW The see-through value of portfolio currently touches R5 billion (R4.99 per share). 6 000.00 Other financial instruments 4.99 Nett Cash 4.15 Chayton 5 000.00 4.53 CHAY Outspan 4.34 4.15 4.08 Senwes 3.99 Pioneer 4 000.00 3.40 CS Tuinroete Agri BKB SOTP 3.15 OA Share 2.57 OVK ZAAD 3
Slide 13: Corporate and consumer brand exposure
PORTFOLIO OVERVIEW Corporate and consumer brand exposure • Strong assets • Leading brands • Good management • Growth potential
Slide 14: Big decisions in line with revised strategy
PORTFOLIO OVERVIEW We made big decisions in line with revised strategy… Investment Decision Reason Pioneer Core Perfect fit with strategy Zeder influence high Will emerge from margin compression Significant opp for efficiency improvement End of capex cycle – improved dividends Distell Non-core No in
Slide 15: Increased influence over portfolio companies
PORTFOLIO OVERVIEW We focused and increased our influence over a number of portfolio companies and critically reviewed remainder… 100.0% 92.0 80.0 76.5 71.7 60.0 50.1% 46.8 39.7 40.0 24.1 25.1% 19.0 18.6 20.0 5.1 0.0 Agricol Chayton Capespan AVB Kaap Agri Suidwes Overberg NWK CVH Core portfolio Non-
Slide 16: Invested R970m while disposing of R1,26b since Feb 2012
PORTFOLIO OVERVIEW Since Feb 2012 we have invested R970m while disposing of R1,26b… R’m 500 360 292 250 206 72 40 Suidwes Other NWK CVH 0 Capespan Chayton ZAAD AVB Kaap Agri -97 -154 -250 -204 -500 -750 -807 -1,000
Slide 17: Larger interests in fewer investments with healthy cash
PORTFOLIO OVERVIEW We now have larger interests in smaller number of investments with a healthy cash balance. Effective cash balance: R’m • Cash on hand = R220m • NWK sale = R222m 3,000 • Suidwes sale = R 97m R539m 2,046 Plus: 2,000 • CVH = R312m 1,000 Effective cash = R851m 742 539 453 369 312 291
Slide 18: Direction and influence beginning to show
PORTFOLIO OVERVIEW We believe our direction and influence over portfolio is beginning to show and that results will be derived in medium term. • Significant progress has been made but results will only be visible in medium term - it takes time to turn a big ship • Project internal focus remains very
Slide 19: Driving thought leadership through portfolio
PORTFOLIO OVERVIEW We are in the process of driving thought leadership through portfolio to deliver results over medium-long term. • Long-term sustainable competitive advantage is derived from core repeatable processes • Relative market share drives scale advantage and corresponding margin leadershi
Slide 20: Controlling influence over ~R30b in turnover
PORTFOLIO OVERVIEW Zeder currently has controlling influence over ~R30b in turnover representing ~R1b in recurring profits – big but suboptimal ratio’s Pioneer Kaap Pioneer Agri Capespan Kaap Agri Capespan Overberg Overberg Zaad Chayton Zaad Bluegreen Chayton Bluegreen Total TotalTotal Revenue Reven
Slide 21: ~R300m committed towards likely transactions
PORTFOLIO OVERVIEW We have committed ~R300m towards highly likely transactions within our existing portfolio - subject to due-diligence. R'm 1,000 850 800 -130 -30 600 550 -75 -65 400 200 0 Opening Zaad Zaad Chayton Chayton Remaining balance KKSB Africa 1 2 balance
Slide 22: Agenda
AGENDA • Interim results • Strategy review • Portfolio overview • Select investments
Slide 23: Existing investments: Pioneer Foods R1,666m/2,216m
EXISTING INVESTMENTS CORE INVESTMENT R1,666m/2,216m Salient features: • Earnings remains under pressure – high commodity cycle • Influence ~ 30% • Significant capacity for recovery , growth and efficiencies • Turnover = R18,6b • Phil Roux heavily engaged with many initiatives underway • Adjusted HE
Slide 24: Select investments: Capespan R743m
SELECT INVESTMENTS CORE INVESTMENT R743m Salient features: • Underlying performance encouraging • Influence = 71.7% • Presents both challenges and opportunities • Turnover = R5.5b • Increased interest from 37.3% to 71.7% since YE • Adjusted HE = R99m • Johan Dique and team implementing new strategy
Slide 25: Capespan's two complementary divisions
Over 70 years, the Capespan Group has developed two large and complimentary divisions which are increasingly less interdependent. FRUIT LOGISTICS Normalised PBT = ~R80m Normalised PBT = ~R80m
Slide 26: Fruit division produces, procures, markets and distributes fresh produce
The fruit division produces, procures, markets and distributes fresh produce from more than 12 countries to more than 60 countries. FRUIT Salient features • Capespan markets and delivers exceptional fruit from the orchard to international retail, wholesale and food service partners • Procures fruit
Slide 27: Largest South African fruit exporter with diversified customers
FRUIT Capespan remains the largest South African exporter of fruit and has a diversified customer base with emerging market growth. South African Exporters Capespan Exports Fruit volumes (million cartons) Fruit volumes (million cartons) 15 47 Non-SA 20.4m 9 8 5 SA 11 4 3 26.2 8 3 6 1 Capespan #2 #3
Slide 28: Globally recognised brands for emerging markets
FRUIT Capespan has globally recognised brands that can be leveraged in emerging markets.
Slide 29: Entry into Chinese market via Golden Wing Mau
FRUIT Through its investment in Golden Wing Mau, Capespan has established a credible entry into the growing Chinese market. • Capespan has 25% interest in Golden Wing Mau • Company started trading in Shenzhen in 1997 • Delivered Sustained Annual Growth-average 35% P.A • Turnover in 2012- 2.10 Billio
Slide 30: Fruit opportunities and challenges
FRUIT While there are exciting opportunities to grow the fruit business, challenges remain. Opportunities Challenges • Maintain SA leadership position • Labour implications • Explore consolidation/expansion • Agricultural volatility options • Exchange rate exposures • Support/invest for growth in •
Slide 31: Logistics: landside and port services
LOGISTICS Through FPT and MCT, Capespan offers a broad range of landside and port logistic services in South African and Mozambique. Salient features • Owns and operates four multipurpose terminals in Southern Africa situated in the ports of Cape Town, PE, Durban and Maputo • Terminals handle ~ 1 mi
Slide 32: Durban and MCT largest operations
LOGISTICS Durban and MCT remains Capespan’s largest operations and jointly generates almost R100m in EBIT before group allocations. Operating Profit before group Percentage of CS fruit pallets costs (R’m) 59% 50 43 25% 11% 5% 5 5 1 DBN CT PE ADDO MOZ DBN CT PE ADDO
Slide 33: Logistics opportunities and challenges
LOGISTICS Capespan needs to creatively leverage its core assets in order to ensure that it remains relevant and grows. Opportunities Challenges • Leverage existing competitive • Political factors in SA positioning and ensure • Sufficient lease extensions to sustainable future in SA ports justify nee
Slide 34: Select investments: Kaap Agri R343m
SELECT INVESTMENTS CORE INVESTMENT R343m Salient features: • Underlying performance strong • Influence = 59% • Zeder made voluntary offer to minorities • Turnover = R3.2b • Zeder increased interest to >39,7% since YE • Adjusted HE = R103m • Sean Walsh and team driving strategy • Agri retail and rela
Slide 35: Kaap Agri retail services group
KAAP @AGRI is a retail services group which supplies a variety of products and services mainly to the agricultural sector, but also to the general public.
Slide 36: Kaap Agri divisions and services
KAAP @AGRI Services Trade Production inputs Packing material Hardware Fuel Outdoor life Tractors and combine harvesters Tillage Parts Workshops Convenience stores Providing a complete range of production inputs, mechanisation equipment and services, and other goods to agricultural producers as well
Slide 37: Retail and trading divisions represent 78% of group profits
The retail and trading divisions represent 78% of group profits.
Slide 38: Kaap Agri strategy, opportunities and challenges
Kaap Agri has a well defined strategy and should be able to achieve satisfactory growth and results in medium term. Opportunities Challenges • Maintain leadership position in • Balance sheet optimisation current markets remains a challenge given underlying core Agri profile • Explore consolidation/e
Slide 39: Select investments: ZAAD Holdings R370m
SELECT INVESTMENTS CORE INVESTMENT ZAAD Holdings R370m Salient features: • ZAAD created as holding company for seed investments • Acquired 49% of Klein Karoo Saad Bemarking and has option • Influence = 92% to acquire remaining 51% • Turnover = R700m • Antonie Jacobs and team driving clear growth str
Slide 40: ZAAD: Agricol and Klein Karoo Seed Marketing
ZAAD ZAAD currently has investments in Agricol and Klein Karoo Seed Marketing - two established companies with trusted heritage. • Agricol est. 1957 • KKSB est. 1947 Niche seed categories • In-market operations in: - South Africa - Zambia - Zimbabwe - Mozambique - Holland
Slide 41: Solid foundation to build upon and grow
ZAAD Through Agricol and KKSB, the group has a solid foundation to build upon and grow from. Strong footprint + Broad product range + Trusted brands • Vegetable seeds • Forage seeds • Pasture seeds • Agronomy seeds • Horticulture seeds • Lucerne seeds • Lawn seeds • Turf seeds • Bird seeds • Confect
Slide 42: Existing revenues approaching R700m
ZAAD Existing revenues are approaching R700m and non-RSA revenues representing and ever increasing portion. 600'm R696m 504 Agricol 400 200 KKSB 95 61 R47m 30 11 0 Revenue PAT SA Africa Middle East EU Other
Slide 43: Africa's seed market and arable land
ZAAD Africa’s existing seed market is estimated at US$ 1 billion with exponential growth expected outside of South Africa. Existing Seed Markets Available Arable Land US$ ‘million Hectares (millions) South Africa 250 South Africa 14,5 Morocco 140 Egypt 140 Angola 57,6 Nigeria 120 Algeria 70 Zimbabwe
Slide 44: ZAAD opportunities and challenges
ZAAD Despite challenges, ZAAD is facing an industry full of opportunities and Zeder is optimistic about its medium-term prospects. Opportunities Challenges • Maintain leadership position in • Legislation current markets • Competition commission • Explore consolidation/expansion • Competitive “buying
Slide 45: Select investments: Chayton R293m
SELECT INVESTMENTS CORE INVESTMENT R293m Salient features: • Holding company for grain related operations in Sub Saharan Africa • Zeder acquired 73.4% during 2012 in Partnership with Norfund • Start-up company in rapid development phase (3-5 years) • Double cropping (wheat and soya) for local demand
Slide 46: Zeder's role in execution and strategic alignment at Chayton
Since investing, Zeder has played a significant role in ensuring effective execution and strategic alignment. • Fund structure to operating company • Zeder effective management control Somawhe - W Meyer seconded to Chayton - Stuart Kearns /Phil Nicol • Zambian operations streamlined Mkushi • Two cur
Slide 47: 4,169 irrigated hectares developed in under 18 months
A total of 4,169 irrigated hectares have been developed in less than 18 months and are currently actively planted. Irrigated hectares • Operations under Original budget 10,000 10,000 10,000 control and efficiency 9,000 8,265 improvements being 8,000 implemented • Harvested yields 6,000 5969 ahead of
Slide 48: Chayton opportunities and challenges
Despite the obvious challenges, Chayton is operating in an industry and sector full of opportunities and global interest. Opportunities Challenges • Complete development on • Normal agri-volatility existing farms • Political instability and policy • Acquire “bolt-on” farms to scale- changes up exist
Slide 49: Conclusion: Questions?
CONCLUSION • Questions?