Hudaco Industries Limited · JSE:HDC
Hudaco Industries — H1 2012 Earnings Presentation
28 slides from Hudaco Industries's earnings presentation, July 2012
Slide 1: Interim results for the six months ended 31 May 2012
Interim results For the six months ended 31 May 2012
Slide 2: Agenda
Agenda Introduction and results summary Segment information Financial statements Outlook and conclusion 2
Slide 3: General business environment
General business environment Trading conditions erratic Rand strengthened after year end but weakened again in May – for an importing business this means higher prices if maintained Global political and economic landscape keeps prospects uncertain 3
Slide 4: Results summary
Results summary Turnover 13% to R 1 593m Operating profit 21% to R 181m Headline earnings 18% to R 140m HEPS 17% to 441 cps Dividends per share 19% to 155 cps Net cash borrowings R17m 4
Slide 5: Operating background to the results
Operating background to the results Trading conditions were good at beginning of period but slowed down from April Sales to platinum mines well down Like for like volume sales up only slightly Acquisitions in 2011 and 2012 add R25m to operating profit Bearings International and Bosworth back to norm
Slide 6: Segment information
Segment information
Slide 7: Operating segments
Operating segments Largest segment imports and distributes branded engineering consumables generally used in the repair and maintenance of machines About one third of our business is distribution of consumer related products generally sold to installers Concept of “value added distribution” is core
Slide 8: Operating segments
Operating segments Engineering consumables Bearings Power transmission products Diesel engines and spares Consumer related products Power tools Security equipment Automotive aftermarket products Professional communication equipment 8
Slide 9: Acquisitions 2011 and 2012
Acquisitions 2011 and 2012 2012 Engineering consumables Keymak 2011 Consumer related products Global Communications Pentagon Distribution 9
Slide 10: Keymak
Keymak Manufacturer of PVC flexible hose Fits well with Astore’s distribution network Main market is mining sector Effective date 1 May 2012 Initial payment R52m 3 year earn-out Maximum price R112m 10
Slide 11: 2011 segment sales by market sector
2011 segment sales by market sector Engineering consumables Consumer related products (%) Manufacturing 35 8 Mining 33 5 Security 0 68 32 Wholesale/retail 9 16 Automotive 6 12 Exports 5 12 Construction 5 6 Agriculture 4 2 Public sector 1 7 Other 2 0 11
Slide 12: Segment contributions
Segment contributions Contribution to Operating Profit (before shared services and head office) 64% 36% Engineering consumables Consumer related products 12
Slide 13: Segment results
Segment results Turnover Op Margin(%) Operating Profit 2012 % ch 2011 2012 2011 2012 % ch 2011 Rm Engineering 1 064 9% 977 11.5% 10.0% 122 24% 98 consumables Consumer 533 23% 432 12.9% 15.0% 69 6% 65 related products Head office, shared services -4 -3 -10 -14 & eliminations Total Group 1 593 13% 1 4
Slide 14: Profit for H1
Profit for H1 Rm 2012 % Ch 2011 Turnover 1 593 13 1 406 - Ongoing businesses 1 424 8 1 314 - Acquisitions in 2011 and 2012 169 92 Gross profit 613 12 549 Operating expenses (432) 8 (400) Operating profit 181 21 149 - Ongoing businesses 156 17 133 - Acquisitions in 2011 and 2012 25 16 Margin (%) Turn
Slide 15: Financial statements: Income, financial position and cash flow
Financial statements: Income, financial position and cash flow
Slide 16: Profit for the year
Profit for the year Rm 2012 % Ch 2011 Operating profit 181 21% 149 Net interest on working capital (2) 3 Interest paid to vendors (imputed) (5) (7) Interest paid on sub. debentures (117) (116) Preference dividend received 101 100 Profit before taxation 158 22% 129 Taxation (Rate ’12:10% ’11:7%) (16)
Slide 17: Earnings per share and dividends
Earnings per share and dividends 2012 % Ch 2011 Earnings per share Basic EPS 441c 17% 377c Headline earnings per share 441c 17% 377c Dividends per share Interim 155c 19% 130c Final 310c Total 440c Dividend policy: annual dividends = approximately 40% of heps 17
Slide 18: Statement of financial position
Statement of financial position Rm May 12 Oper Div Acq Nov 11 Working capital 1 012 163 6 843 Property plant equipment 183 1 182 Goodwill and intangibles 631 (6) 72 565 Tax 7 9 (5) 3 Net operating assets 1 833 167 73 1 593 Cash (17) (20) (114) (49) 166 Investment in pref shares 2 181 2 181 Net asset
Slide 19: Working capital
Working capital One month of sales: H1 2012 = R 269m; H1 2011 = R 241m assumes all acquisitions in for full 6 months Working capital traditionally peaks end of H1 to cope with anticipated increased seasonal demand in H2 - sales are generally split 45:55 between H1 and H2 (2011 45:55) 19
Slide 20: Cash flow – for the six months
Cash flow – for the six months 20 Rm May 12 May 11 Cash from trading 203 171 (Increase) decrease in working capital (162) (79) Cash from operating activities 41 92 Net finance costs (23) (13) Tax paid (25) (20) Cash flow from operations (7) 59 Dividends paid (114) (90) Invested in new businesses and
Slide 21: Taxation Laws Amendment Act
Taxation Laws Amendment Act Preference dividends to become taxable from October 2012 Still awaiting revised legislation Potential exposure R5m-R56m per annum Expect impact to be well below the maximum Considering whether current preference share investment remains the most appropriate investment for
Slide 22: Outlook and conclusion
Outlook and conclusion
Slide 23: Outlook - reminders
Outlook - reminders Hudaco sales are predominantly driven by GDP activity GDFI adds cream (and adds capacity for future GDP activity) Rand exchange rate has a big impact on pricing 23
Slide 24: Outlook by segment: Engineering consumables
Outlook by segment Engineering consumables Paucity of investment in mining industry likely to lead to long- term low (or no) growth economy Shortage of electricity and rail capacity in South Africa still constrains mining expansion but improvements now within sight Investment in coal mines for new p
Slide 25: Outlook by segment: Consumer related products
Outlook by segment Consumer related products Industrial power tool sales remain strong Analogue to digital migration continues Buying down in the automotive parts aftermarket but a return to quality suppliers is inevitable Security equipment market remains muted and price driven 25
Slide 26: Business outlook for 2012+
Business outlook for 2012+ Getting organic earnings growth from the local economy will be difficult so look to: growth in neighbouring countries acquisitions - balance sheet investment capacity about R500m The group’s financial position is strong and we are confident about future earnings prospects
Slide 27: Contact details
Contact details Stephen Connelly Clifford Amoils Chief executive Financial director Tel +27 (11) 657 5001 Tel +27 (11) 657 5002 Fax +27 (86) 532 9524 Fax +27 (86) 681 7862 sjc@hudaco.co.za camoils@hudaco.co.za www.hudaco.co.za 27
Slide 28: Disclaimer
Disclaimer 28 The preceding presentation contains forward looking statements about the Hudaco Group’s operations and financial condition. 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 t