Hudaco Industries Limited · JSE:HDC
Hudaco Industries — FY2021 Earnings Presentation
55 slides from Hudaco Industries's earnings presentation, Nov 30, 2021
Slide 1: Results Presentation for the Year Ended 30 November 2021
RESULTS PRESENTATION FOR THE YEAR ENDED 30 NOVEMBER 2021
Slide 2: Agenda
AGENDA § Overview § General business environment § Results summary § Exchange rates § Business model and operating segments § Financial review § Outlook 2
Slide 3: Overview
OVERVIEW § A challenging year § Hudaco has once again shown its resilience § Return on Equity 19,5% § Cash generated from operations R910m § Debt down to R469m § Excellence in the management team 3
Slide 4: General Business Environment
GENERAL BUSINESS ENVIRONMENT 4
Slide 5: General Business Environment
GENERAL BUSINESS ENVIRONMENT § Three waves of Covid § July unrest § 3-week NUMSA metal industry strike § Intermittent load shedding § Supply chain constraints § Worldwide shortage of semiconductors and certain raw materials 5
Slide 6: Hudaco in this Environment
HUDACO IN THIS ENVIRONMENT § Management of the entire value chain § Increased stock levels stood us in good stead § Hudaco clearly has pricing power § Gained market share 6
Slide 7: Results Summary 2021 vs 2019
RESULTS SUMMARY 2021 VS 2019 Turnover 8,3% to R7,3bn Operating profit 17,9% to R826m Profit for year 16,7% to R549m Comparable earnings per share 30,1% to 1 613 cps Headline earnings per share 21,1% to 1 641 cps Total dividend per share 26,7% to 760 cps Cash generated from operations R910m 7
Slide 8: Major Shareholders / Fund Managers
MAJOR SHAREHOLDERS / FUND MANAGERS § Government Employees Pension Fund 12% § PSG Asset Management 10% § Ninety One 8% § Old Mutual 7% § Foord Asset Management 5% § Bateleur Capital 5% § Aylett & Co Fund Managers 5% § Abax Investments 4% § Sanlam Investments 4% § Alexander Forbes 4% 64% 8
Slide 9: Exchange Rates
y 4 Hudaco 4a EXCHANGE RATES
Slide 10: Exchange Rate Volatility ZAR to US$
R13,0 R14,0 R15,0 R16,0 R17,0 R18,0 R19,0 2018/11/30 2019/01/31 2019/03/31 2019/05/31 2019/07/31 2019/09/30 2019/11/30 2020/01/31 2020/03/31 2020/05/31 2020/07/31 2020/09/30 EXCHANGE RATE VOLATILITY ZAR TO US＄ 2020/11/30 2021/01/31 2021/03/31 2021/05/31 2021/07/31 2021/09/30 10 2021/11/30
Slide 11: Exchange Rate Environment
EXCHANGE RATE ENVIRONMENT § We import directly 65% of group cost of sales § On average these cost 9% less in 2021 than in 2020 and 4% more than in 2019 § We do not take a house view on exchange rates § We hedge all liabilities and on average 30% of orders Import currencies USD* 68% Euro 25% Yen 6% G
Slide 12: Business Model and Operating Segments
BUSINESS MODEL AND OPERATING SEGMENTS 12
Slide 13: The Hudaco Business Model
THE HUDACO BUSINESS MODEL § Hudaco’s main business is the importation and distribution of high-quality branded automotive, industrial and electronic consumable products. § The concept of “value-added distribution” is core to our business model. § Agency agreements generally restrict our activities t
Slide 14: Features of Value-Added Distribution
FEATURES OF VALUE-ADDED DISTRIBUTION § Focused business units with application advice § Technical specification and product knowledge § Training § Credit provision § Drives customer retention and supplier loyalty Inventory R2 004m § Instant availability § 28 warehouses § 800 international suppliers
Slide 15: Reporting Segments
REPORTING SEGMENTS Consumer-related products segment imports and distributes branded products driven by consumer spending and generally sold to installers. Consumer-related products (11 businesses) § Automotive aftermarket products § Power tools and fasteners § Data networking equipment § Batteries
Slide 16: Reporting Segments
REPORTING SEGMENTS Engineering consumables segment imports and distributes branded products generally used in the repair and maintenance of machines. Engineering consumables (18 businesses) § Bearings and belting § Diesel engines and spares § Electrical power transmission § Filtration § Hydraulics a
Slide 17: Contribution by Segment
CONTRIBUTION BY SEGMENT Contribution to 2021 operating profit (before shared services and head office) 67% 33% 2020 40% 60% Consumer-related products Engineering consumables 17
Slide 18: Consumer-Related Products: Automotive Aftermarket
CONSUMER-RELATED PRODUCTS AUTOMOTIVE AFTERMARKET Principal Businesses Principal Brands Main markets Used for § Automotive aftermarket § Automotive oil seals § Automotive parts and accessories § Ignition leads § Construction machinery § Light duty clutch kits § Spares shops § Truck clutch components
Slide 19: Consumer-Related Products: Power Tools and Fasteners
CONSUMER-RELATED PRODUCTS POWER TOOLS AND FASTENERS Principal Businesses Principal Brands Main markets Used for § Agriculture § Building § D.I.Y. § D.I.Y. § Commercial marine § Fastening in all industries § Construction § Installations § Manufacturing § Propulsion of boats § Mining § Surveying § Rec
Slide 20: Consumer-Related Products: Data Networking Equipment
CONSUMER-RELATED PRODUCTS DATA NETWORKING EQUIPMENT Principal Businesses Principal Brands Main markets Used for § Security § Data solutions § Technology resellers § Fibre optic networks § Telecommunications operators § Network infrastructure § Transport § Outdoor wireless network § Wireless, interne
Slide 21: Consumer-Related Products: Security and Communication Equipment
CONSUMER-RELATED PRODUCTS SECURITY AND COMMUNICATION EQUIPMENT Principal Businesses Principal Brands Main markets Used for § Commercial security § Access control § Military and police § Control centres § Mining § Fire detection § Municipal § Intrusion detection § Residential security § Mobile commun
Slide 22: Consumer-Related Products: Batteries and Sustainable Energy
CONSUMER-RELATED PRODUCTS BATTERIES AND SUSTAINABLE ENERGY Principal Businesses Principal Brands Main markets Used for § Alternative energy § Back-up power (UPS, inverters, § Battery bays alarms) § Mining § Distribution centres § Motor industry § Energy load shifting § Security § Generator starting
Slide 23: 2021 Consumer-Related Products Sales by Market Sector
2021 CONSUMER-RELATED PRODUCTS SALES BY MARKET SECTOR 40 Wholesale and retail 35 30 Automotive 30 9 Security 13 7 Exports 7 7 Alternative energy 7 4 Manufacturing 4 2 Mining 2 1 Agriculture 1 0 Public sector 1 2021 2019 23
Slide 24: Segment Results 2021 Consumer-Related Products
SEGMENT RESULTS 2021 CONSUMER-RELATED PRODUCTS Turnover Op Margin Operating Profit Rm 2021 % ch 2019 2020 2021 2019 2021 % ch 2019 2020 Segment 3 777 5,2 3 589 3 360 14,6 11,7 552 31,1 421 369 total 24
Slide 25: Engineering Consumables: Bearings and Belting
ENGINEERING CONSUMABLES BEARINGS AND BELTING Principal Businesses Principal Brands Main markets Used for § Automotive OEM’s § Automotive OE supply § Construction § Conveyor systems § Food processing § General machinery and equipment § General industry § Maintenance § Manufacturing § Mining equipment
Slide 26: Engineering Consumables: Electrical Power Transmission
ENGINEERING CONSUMABLES ELECTRICAL POWER TRANSMISSION Principal Businesses Principal Brands Main markets Used for § Automation § Automation and control of electric § Manufacturing motors § Materials handling § Connection of electrical power in § Mining industry § Ports § Electrical panel building §
Slide 27: Engineering Consumables: Hydraulics and Pneumatics
ENGINEERING CONSUMABLES HYDRAULICS AND PNEUMATICS Principal Businesses Principal Brands Main markets Used for § Food processing plants § Breweries § Industrial § Fluid conveyance & control § Manufacturing § Industrial automation § Mining § Mining equipment § Process automation 27
Slide 28: Engineering Consumables: Specialised Steel
ENGINEERING CONSUMABLES SPECIALISED STEEL Principal Businesses Principal Brands Main markets Used for § General industry § Aerators and mixing § Manufacturing § Conveyor systems § Mining § Fabrication § Pressure vessels § General steel applications § Road tankers § Mining equipment § Sugar industry
Slide 29: Engineering Consumables: Other
ENGINEERING CONSUMABLES OTHER Principal Businesses Principal Brands Main markets Used for § Agri equipment § Condensate drain management § Construction § Industrial air filtration § Earthmoving equipment § Generator sets § Irrigation § Materials handling § Mining § Mining equipment § On and off-road
Slide 30: 2021 Engineering Consumables Sales by Market Sector
2021 ENGINEERING CONSUMABLES SALES BY MARKET SECTOR 28 Manufacturing 27 28 Mining 25 16 Wholesale and retail 15 12 Exports 16 6 Automotive 6 5 Construction 5 4 Agriculture 4 0 Alternative energy 1 1 Other 1 2021 2019 30
Slide 31: Segment Results 2021 Engineering Consumables
SEGMENT RESULTS 2021 ENGINEERING CONSUMABLES Turnover Op Margin Operating Profit Rm 2021 % ch 2019 2020 2021 2019 2021 % ch 2019 2020 Segment 3 501 12,2 3 120 2 907 10,4 9,1 366 28,9 284 178 total 31
Slide 32: 2021 Sales by Market Sector (%)
2021 SALES BY MARKET SECTOR (%) 28 Wholesale and retail 26 19 Automotive 19 15 Manufacturing 15 15 Mining 13 10 Exports 11 5 Security 7 4 Alternative energy 4 2 Construction 2 2 Agriculture 2 0 Public sector 1 2021 2019 32
Slide 33: Segment Results 2021
SEGMENT RESULTS 2021 Turnover Op Margin Operating Profit Rm 2021 % ch 2019 2020 2021 2019 2021 % ch 2019 2020 Consumer- related 3 777 5,2 3 589 3 360 14,6 11,7 552 31,1 421 369 products Engineering 3 501 12,2 3 120 2 907 10,4 9,1 366 28,9 284 178 consumables Head office, shared (20) (5) (13) (92) (4
Slide 34: Operating Margin 2021
OPERATING MARGIN 2021 2021 2019 2020 Margin (%) Turnover 100% 100% 100% Gross profit 37,0% 36,4% 34,8% Operating expenses 25,6% 26,0% 26,6% Operating profit 11,4% 10,4% 8,2% 34
Slide 35: Operating Margin
OPERATING MARGIN % 12 12,5 11,9 12,1 11,4 10 10,7 10,6 10,1 9,8 9,3 8 6 4 2 3,0 0 2017 2018 2019 2020 2021 H1 H2 35
Slide 36: Turnover
TURNOVER R billion 4,0 3,9 3,5 3,6 3,4 3,5 3,4 3,0 3,2 3,2 3,0 2,5 2,7 2,6 2,0 1,5 1,0 0,5 0,0 2017 2018 2019 2020 2021 H1 H2 36
Slide 37: Financial Review
y 4 Hudaco 4a FINANCIAL REVIEW
Slide 38: Profit
PROFIT Rm 2021 % ch 2019 2020 Turnover 7 258 8,3 6 704 6 254 Gross profit 2 687 10,1 2 441 2 175 Operating expenses 1 861 7,0 1 740 1 665 Operating profit 826 17,9 701 510 38
Slide 39: Profit
PROFIT Rm 2021 % ch 2019 2020 Operating profit 826 17,9 701 510 Net interest on funding (36) (103) (69) Imputed interest on leases (IFRS 16) (32) (35) Impairment of goodwill and intangibles (348) Damages settlement 35 Fair value adjustment to amounts due to 10 30 48 vendors Profit before taxation 76
Slide 40: Comparable Earnings
COMPARABLE EARNINGS Rm 2021 % ch 2019 2020 Attributable earnings 499 16,3 429 36 Impairment of goodwill and intangibles 348 (Profit) loss of disposal of PPE (1) 1 Non-controlling interest (54) Headline earnings 498 16,1 429 331 Fair value adjustment to estimated capital (10) (42) (52) value of vendo
Slide 41: Comparable Earnings
COMPARABLE EARNINGS R million 280 280 240 243 227 230 200 215 210 160 165 164 153 120 80 40 22 0 2017 2018 2019 2020 2021 H1 H2 41
Slide 42: Earnings per Share and Dividends
EARNINGS PER SHARE AND DIVIDENDS Cents 2021 % ch 2019 2020 Earnings per share Comparable 1 613 30,1 1 240 800 Basic 1 643 21,3 1 355 113 Headline 1 641 21,1 1 355 1 050 Dividends per share Interim 240 26,3 190 Final 520 26,8 410 410 Total 760 26,7 600 410 42
Slide 43: Returned to Shareholders
RETURNED TO SHAREHOLDERS Rm 2021 2019 2020 Dividends Interim 73 60 Final 156 130 126 Total 229 190 126 Repurchase of shares 69 82 Total 298 190 208 43
Slide 44: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm 2021 2019 2020 Working capital 1 977 2 021 1 857 Property, plant and equipment 285 302 265 Right-of-use assets for leased premises 422 414 Goodwill and intangibles 1 196 1 535 1 203 Investment in joint venture 12 Tax 75 48 45 Assets 3 955 3 918 3 784 Equity 2 976 2
Slide 45: Working Capital Elements
WORKING CAPITAL ELEMENTS In months of sales 5 4 3 2 1 0 H2 17 H2 18 H2 19 H2 20 H2 21 -1 -2 Inventory Payables Receivables Net W Cap One month of sales (in H2) 2017 = R538m 2018 = R571m 2019 = R559m 2020 = R439m 2021 = R 646m 45
Slide 46: Inventory
INVENTORY In months of sales 4,4 4 3,5 3,4 3 3,2 3,3 3,1 3,1 3,1 2,9 2,7 2 1 0 2017 2018 2019 2020 2021 H1 H2 46
Slide 47: Cash Flow
CASH FLOW Rm 2021 2019 2020 Cash from trading 1 026 794 726 (Increase) decrease in working capital (116) 59 182 Cash from operations 910 853 908 Finance costs paid (36) (103) (69) Tax paid (220) (196) (113) Damages settlement 35 Cash generated after tax 654 554 761 Share-based payments (16) (22) (4)
Slide 48: Outlook
y 4 Hudaco 4a OUTLOOK
Slide 49: Acquisition
ACQUISITION § CADAC acquired from February 2022 § Distributor of a wide range of outdoor cooking and heating products including gas cylinders, stoves, cookers, braais, skottels, heaters, lamps, blowtorches and accessories in southern Africa. § No exposure to Cadac pension fund § Estimated price R100
Slide 50: Outlook for 2022
OUTLOOK FOR 2022 § We are quietly optimistic about the year ahead and believe that the momentum and market share gains our businesses built up in 2021 will continue § Positive results from the security and communications businesses § Automotive aftermarket should benefit from the bigger second hand
Slide 51: Outlook for 2022
OUTLOOK FOR 2022 § We are excited about CADAC, its growth potential and the contribution it will make to our group § Hudaco is resilient and agile, and our businesses are well placed to take advantage of any improvement in the economy. In the meantime, we will manage the elements within our control
Slide 52: Contact Details and Disclaimer
CONTACT DETAILS AND DISCLAIMER 52
Slide 53: Contact Details
CONTACT DETAILS Graham Dunford Clifford Amoils Chief executive Financial director Tel +27 11 657 5004 Tel +27 11 657 5002 grahamd@hudaco.co.za camoils@hudaco.co.za www.hudaco.co.za 53
Slide 54: Disclaimer
DISCLAIMER The preceding presentation contains forward looking statements about the Hudaco Group’s operations and financial position. They are prepared in good faith and are based on Hudaco’s best estimates and information at the time of preparing the presentation. They are nonetheless subject to si
Slide 55: Hudaco
Hudaco