Hudaco Industries Limited · JSE:HDC
Hudaco Industries — FY2023 Earnings Presentation
64 slides from Hudaco Industries's earnings presentation, November 2023
Slide 1: Results Presentation 2023
Hudaco RESULTS PRESENTATION 2023 1
Slide 2: Agenda
AGENDA ❑ General business environment and overview ❑ Hudaco in the general business environment ❑ Exchange rates ❑ Business model ❑ Reporting segments ❑ Operating profit and margins ❑ Financial review ❑ Outlook 2
Slide 3: General Business Environment
GENERAL BUSINESS ENVIRONMENT ❑ Pleasing set of results in another challenging year ❑ South Africa’s economic environment is dire - 11th year of economic growth below population growth - steady degradation of South Africa’s national and municipal infrastructure - load-shedding hours in 2023 more than
Slide 4: Overview
OVERVIEW ❑ Hudaco has once again shown its resilience ❑ Benefit of a defensive, robust portfolio of diverse businesses ❑ Management focused on - day-to-day basis: margins, expenses and working capital - medium term: capital allocation - long term: finding new growth areas ❑ Return on equity 20% ❑ Ca
Slide 5: Hudaco in the General Business Environment
HUDACO IN THE GENERAL BUSINESS ENVIRONMENT 5
Slide 6: Hudaco in this Environment
HUDACO IN THIS ENVIRONMENT ❑ Stuck to our strategy and core business model ❑ Managed the elements within our control ❑ Made sure we did the basics right ❑ Defensive balance within our portfolio of businesses - Consumer-related products v engineering consumables ❑ Capital allocation - Invested in our
Slide 7: Results Summary 2023 vs 2022
RESULTS SUMMARY 2023 VS 2022 Turnover 9,1% to R8,9bn Operating profit 5,1% to R1,1bn Attributable earnings 2,4% to R611m Comparable earnings per share 10,1% to 2148 cents Headline earnings per share 7,0% to 2148 cents Total dividend per share 10,8% to 1025 cents Cash generated from operations 1% to
Slide 8: Major Shareholders / Fund Managers
MAJOR SHAREHOLDERS / FUND MANAGERS ❑ PSG Asset Management 10% ❑ Government Employees Pension Fund 10% ❑ Ninety-One 8% ❑ Aylett 7% ❑ Invesco Advisers 6% ❑ Abax Investments 5% ❑ Bateleur Capital 4% ❑ Sanlam Investments 3% 53% 8
Slide 9: Exchange Rates
Hudaco EXCHANGE RATES
Slide 10: Exchange Rate v US$
R14,0 R15,0 R16,0 R17,0 R18,0 R19,0 R20,0 R13,0 Nov 21 Dec 21 Jan 22 Feb 22 Mar 22 Apr 22 EXCHANGE RATE v US$ May 22 Jun 22 Jul 22 Aug 22 Sep 22 Oct 22 Nov 22 Dec 22 Jan 23 Feb 23 Mar 23 Apr 23 May 23 Jun 23 Jul 23 Aug 23 Sep 23 Oct 23 Nov 23 10
Slide 11: Exchange Rate Environment
EXCHANGE RATE ENVIRONMENT ❑ We import directly 70% of the group cost of sales ❑ On average, these cost 13% more in 2023 than in 2022 ❑ We don’t take a house view on exchange rates ❑ We hedge all liabilities and on average, 30% of orders Import currencies ❑ USD* 60% EUR 31% YEN 4% CNY 3% GBP 1% ❑ *Im
Slide 12: Business Model
Hudaco ® DEUTZ BUSINESS MODEL
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 key to our business model ❑ Agency agreements generally restrict our activities to A
Slide 14: Features of Value-Added Distribution
FEATURES OF VALUE-ADDED DISTRIBUTION asdfd ❑ Focused business units Inventories R2 693m Receivables Fo R1 490m with application advice ❑ 30 000 active ❑ Instant availability ❑ Technical customers ❑ 29 warehouses specification and ❑ Generally low-value product knowledge ❑ 800 international transa
Slide 15: 2023 Sales by Market Sector (Rands)
2023 SALES BY MARKET SECTOR (RANDS) Wholesale and retail +16% Automotive +1% Manufacturing +7% +16% Mining Exports +4% Security +4% Alternative energy +7% Construction +7% +4% Agriculture 2023 2022 15
Slide 16: 2023 Sales by Market Sector (%)
2023 SALES BY MARKET SECTOR (%) Wholesale and retail 29 27 Automotive 17 18 Manufacturing 15 15 15 Mining 15 Exports 9 10 Security 6 6 Alternative energy 5 5 Construction 2 2 2 Agriculture 2 2023 2022 16
Slide 17: Reporting Segments
Hudaco Sustainable Power and Storage REPORTING SEGMENTS
Slide 18: Contribution by Segment
CONTRIBUTION BY SEGMENT 2022 Contribution to 2023 operating profit 42% (before shared services and head office) 58% 50% 50% Consumer-related products Engineering consumables 18
Slide 19: Consumer-Related Products
CONSUMER-RELATED PRODUCTS ❑ The consumer-related products segment imports and distributes branded products driven by consumer spending and generally sold to installers. Consumer-related products (12 businesses) ❑ Automotive aftermarket products ❑ Power tools and fasteners ❑ Data networking equipment
Slide 20: Consumer-Related Products Sales by Market Sector (Rands)
2023 CONSUMER-RELATED PRODUCTS SALES BY MARKET SECTOR (RANDS) Wholesale and retail +14% -4% Automotive +4% Security Alternative energy +1% -2% Exports Manufacturing -11% -18% Mining 2023 2022 20
Slide 21: Consumer-Related Products Sales by Market Sector (%)
2023 CONSUMER-RELATED PRODUCTS SALES BY MARKET SECTOR (%) 41 Wholesale and retail 37 Automotive 27 30 12 Security 12 Alternative Energy 9 9 7 Exports 7 Manufacturing 3 3 Mining 1 2 2023 2022 21
Slide 22: Consumer-Related Products: Automotive Aftermarket
CONSUMER-RELATED PRODUCTS AUTOMOTIVE AFTERMARKET Principal businesses Principal brands Main markets Used for ❑ Automotive aftermarket ❑ Automotive oil seals ❑ Automotive alloy and steel wheels ❑ Ignition leads ❑ Automotive parts and accessories ❑ Light duty clutch kits ❑ Construction machinery ❑ Tru
Slide 23: 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 ❑ Propulsions of boats ❑ Mining ❑ Surveying ❑ Re
Slide 24: 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 operations ❑ Network infrastructure ❑ Transport ❑ Outdoor wireless network ❑ Wireless, intern
Slide 25: Consumer-Related Products: Batteries and Alternative Energy
CONSUMER-RELATED PRODUCTS BATTERIES AND ALTERNATIVE ENERGY Principal businesses Principal brands Main markets Used for ❑ Alternative energy ❑ Back-up power (UPS, inverters, alarms) ❑ Battery bays ❑ Distribution centres ❑ Mining ❑ Energy load shifting ❑ Motor industry ❑ Generator starting ❑ Security
Slide 26: Consumer-Related Products: Security & Communication Equipment
CONSUMER-RELATED PRODUCTS SECURITY & 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 communic
Slide 27: Consumer-Related Products: Gas and Outdoor
CONSUMER-RELATED PRODUCTS GAS AND OUTDOOR Principal businesses Principal brands Main markets Used for ❑ Camping and outdoor living ❑ Cooking ❑ Alternative energy ❑ Lighting ❑ Household and residential ❑ Heating ❑ Catering ❑ Braaiing ❑ Hiking and outdoor recreation ❑ Coolers ❑ Camping 27
Slide 28: Segment Results for Consumer-Related Products
SEGMENT RESULTS FOR CONSUMER-RELATED PRODUCTS Turnover Op Margin Operating Profit Rm 2023 % ch 2022 2023 2022 2023 % ch 2022 Ongoing 4 055 0,5 4 034 13,4 15,7 544 (14,1) 634 operations Acquisitions 371 235 12,9 11,6 48 27 Segment total 4 426 3,7 4 269 13,4 15,5 592 (10,4) 661 ❑ Security division and
Slide 29: Engineering Consumables
ENGINEERING CONSUMABLES Engineering consumables segment imports and distributes branded products generally used to repair and maintain machines. Engineering consumables (19 businesses) ❑ Bearings, belting and power transmission ❑ Diesel engines and spares ❑ Electrical power transmission ❑ Filtration
Slide 30: Acquisition: Brigit Fire
ACQUISITION ❑ Brigit Fire was acquired on 1 September 2023 ❑ Distributor of fire detection, containment and suppression systems ❑ Brigit distributes several products that it has developed itself, along with leading international products ❑ Focused on fire security and safety disciplines, specificall
Slide 31: Acquisition: Plasti-Weld
ACQUISITION ❑ Plasti-Weld was acquired on 1 December 2023 ❑ Importer and distributor of plastic welding equipment, hot-air tools, specialised test and inspection equipment and thermo cutters ❑ Also manufactures plastic welding rods ❑ Estimated price R52 million ❑ Opportunity for growth and synergies
Slide 32: Engineering Consumables Sales by Market Sector (Rands)
2023 ENGINEERING CONSUMABLES SALES BY MARKET SECTOR (RANDS) +17% Mining +9% Manufacturing Wholesale and retail +22% +8% Exports +37% Automotive Agriculture +6% +6% 2023 2022 Construction 32
Slide 33: Engineering Consumables Sales by Market Sector (%)
2023 ENGINEERING CONSUMABLES SALES BY MARKET SECTOR (%) 29 Mining 28 27 Manufacturing 28 17 Wholesale and retail 16 12 Exports 12 6 Automotive 6 3 Construction 5 4 Agriculture 4 2 2023 2022 Other 1 33
Slide 34: Engineering Consumables: Bearings, Belting & Power Transmission
ENGINEERING CONSUMABLES BEARINGS, BELTING & POWER TRANSMISSION 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
Slide 35: Engineering Consumables: Electrical Power Transmission
ENGINEERING CONSUMABLES ELECTRICAL POWER TRANSMISSION Principal businesses Principal brands Main markets Used for ❑ Automation ❑ Automation and control of electric motors ❑ Manufacturing ❑ Connection of electrical power in industry ❑ Materials handling ❑ Electrical panel building ❑ Mining ❑ Electrif
Slide 36: 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 and control ❑ Manufacturing ❑ Industrial automation ❑ Mining ❑ Mining equipment ❑ Process automation ❑ Trackless mining m
Slide 37: 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 38: Engineering Consumables: Fire Suppression, Detection & Containment
ENGINEERING CONSUMABLES FIRE SUPPRESSION, DETECTION & CONTAINMENT Principal businesses Principal brands Main markets Used for ❑ Mining ❑ Fire detection ❑ Data centres ❑ Fire suppression ❑ Commercial properties ❑ Fire containment ❑ Industrial ❑ Fire education ❑ Warehouses 38
Slide 39: Engineering Consumables: Other
ENGINEERING CONSUMABLES OTHER Principal businesses Principal brands Main markets Used for ❑ Agri equipment ❑ Condensate drain management ❑ Construction and mining ❑ Industrial air filtration ❑ Earthmoving equipment ❑ Generator sets ❑ Irrigation ❑ Materials handling ❑ On and off-road trucks ❑ Mining
Slide 40: Segment Results for Engineering Consumables
SEGMENT RESULTS FOR ENGINEERING CONSUMABLES Turnover Op Margin Operating Profit Rm 2023 % ch 2022 2023 2022 2023 % ch 2022 Ongoing 4 434 13,5 3 907 12,8 12,0 569 21,0 470 operations Acquisitions 54 22,9 12 Segment total 4 488 14,9 3 907 12,9 12,0 581 23,7 470 ❑ Most businesses performed well, with g
Slide 41: Combined Segment Results
COMBINED SEGMENT RESULTS Turnover Op Margin Operating Profit Rm 2023 % ch 2022 2023 2022 2023 % ch 2022 Consumer- related 4 426 3,7 4 269 13,4 15,5 592 (10,4) 661 products Engineering 4 488 14,9 3 907 12,9 12,0 581 23,7 470 consumables Head office, shared services (17) (25) (102) (112) and eliminati
Slide 42: Operating Profit and Margins
OPERATING PROFIT AND MARGINS 42
Slide 43: Turnover
TURNOVER R billion 4,6 4,6 4,1 4,4 4,3 3,6 3,9 3,8 3,5 3,6 3,1 3,4 3,4 3,2 3,0 2,6 2,6 2,1 1,6 1,1 0,6 0,1 -0,4 2018 2019 2020 2021 2022 2023 H1 H2 43
Slide 44: Operating Profit Margin
OPERATING PROFIT MARGIN 2023 2022 Margin (%) Turnover 100% 100% Gross profit 36,0% 36,7% Sundry income 0,3% Operating expenses (24,0%) (24,5%) Operating profit 12,0% 12,5% 44
Slide 45: Operating Expenses to Turnover
OPERATING EXPENSES TO TURNOVER % 30,0 25,0 26,1 26,0 26,6 25,6 24,5 24,0 20,0 15,0 10,0 5,0 0,0 2018 2019 2020 2021 2022 2023 45
Slide 46: Operating Profit Margin
OPERATING PROFIT MARGIN % 14,0 13,0 13,0 12,0 11,9 12,1 12,0 11,4 10,0 10,7 10,6 10,9 9,8 9,3 8,0 6,0 4,0 3,0 2,0 0,0 2018 2019 2020 2021 2022 2023 H1 H2 46
Slide 47: Financial Review
Hudaco i BEARINGS INTERNATIONAL FINANCIAL REVIEW
Slide 48: Profit
PROFIT Rm 2023 % ch 2022 Turnover 8 897 9,1 8 151 Ongoing operations 8 472 7,0 7 916 Acquisitions 425 235 Gross profit 3 203 7,1 2 992 Sundry income – insurance proceeds 27 Operating expenses (2 132) 6,6 (2 000) Ongoing operations (2 043) 4,5 (1 954) Acquisitions (89) (46) Operating profit 1 071 5,1
Slide 49: Profit
PROFIT Rm 2023 % ch 2022 Operating profit 1 071 5,1 1 019 Fair value adjustments (4) (1) Loss on disposal of business (3) Net interest on funding (112) (58) Imputed interest on leases (38) (29) Profit before taxation 914 (1,8) 931 Taxation (245) (256) (Rate 2023: 26,8 % 2022: 27,6%) Profit after tax
Slide 50: Comparable Earnings
COMPARABLE EARNINGS Rm 2023 % ch 2022 Attributable earnings 611 2,4 596 Net loss on disposal of PPE and business 2 Headline earnings 613 2,8 596 Insurance proceeds (27) Non-controlling interest and tax 10 Comparable earnings 613 5,7 579 50
Slide 51: Comparable Earnings
COMPARABLE EARNINGS R million 350 348 300 322 280 250 265 257 227 230 200 215 210 150 164 165 100 50 22 0 2018 2019 2020 2021 2022 2023 H1 H2 51
Slide 52: Earnings per Share and Dividends
EARNINGS PER SHARE AND DIVIDENDS Cents 2023 % ch 2022 Earnings per share Comparable 2 148 10,1 1 951 Basic 2 142 6,7 2 007 Headline 2 148 7,0 2 007 Dividends per share - Interim 325 8,3 300 - Final 700 12,0 625 Total 1 025 10,8 925 Dividend cover (times) 2,1 2,1 52
Slide 53: Share Repurchase Programme (Excludes Treasury Shares)
SHARE REPURCHASE PROGRAMME (EXCLUDES TREASURY SHARES) No. of Weighted Cost % shares avg shares Rm 30 Nov 2019 31 645 703 100% 31 645 703 2020 Repurchases 1 024 600 82 30 Nov 2020 30 621 103 96,8% 31 529 399 2021 Repurchases 609 211 69 30 Nov 2021 30 011 892 94,8% 30 356 525 2022 Repurchases 928 740
Slide 54: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm 2023 2022 Working capital 2 904 2 399 - Inventories 2 693 2 355 - Receivables 1 490 1 366 - Payables (1 279) (1 322) Property, plant and equipment 363 309 Right-of-use assets 406 382 Goodwill and intangibles 1 417 1 221 Tax 43 83 Net assets 5 133 4 394 54
Slide 55: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm 2023 2022 Equity 3 481 3 254 Net borrowings 1 013 621 Lease liabilities 470 440 Due to vendors 136 24 Tax 33 55 Total equity and liabilities 5 133 4 394 55
Slide 56: Working Capital Elements
WORKING CAPITAL ELEMENTS In months of sales 5 4 3 2 1 0 H2 18 H2 19 H2 20 H2 21 H1 22 H2 22 H1 23 H2 23 -1 -2 Inventory Payables Receivables Net W Cap One month of sales 2022 = R630m (H1) 2023 = R708m (H1) 2022 = R728m (H2) 2023 = R774m (H2) 56
Slide 57: Inventory
INVENTORY In month of sales 5 4,4 4 3,8 3,6 3,5 3,4 3,3 3 3,2 3,2 3,1 3,1 3,1 2,7 2 1 0 2018 2019 2020 2021 2022 2023 H1 H2 57
Slide 58: Cash Flow
CASH FLOW Rm 2023 2022 Cash from trading 1 294 1 249 Increase in working capital (392) (356) Cash from operations 902 893 Tax paid (260) (244) Cash from operating activities 642 649 Invested in new businesses (171) (81) Invested in software and ppe (104) (76) Cash flow after investing activities 367
Slide 59: Cash Flow
CASH FLOW Rm 2023 2022 Cash flow after investing activities 367 492 Share-based payments (101) (36) Repurchase of shares (112) (133) Lease payments (144) (143) Finance costs paid (112) (58) Dividends paid (290) (276) Net movement (392) (154) Foreign exchange translation gain 2 Opening borrowings (62
Slide 60: Key Financial Points
KEY FINANCIAL POINTS ❑ Operating margin healthy ❑ Expenses tightly managed ❑ Strategic increase in inventories ❑ Businesses remain cash-generative ❑ Borrowings well within capacity and covenants ❑ Capital allocation likely to focus on debt repayment but maintain dividend policy and good acquisitions
Slide 61: Outlook
Hudaco elve’ Security Technologies OUTLOOK
Slide 62: Outlook for 2024
OUTLOOK FOR 2024 ❑ Expect much of the same up to the elections, and then much of the same ❑ Interest rates coming down in H2 (CRP historically perform better) ❑ Drop in commodity prices likely to impact mining (EC) ❑ Reduced load-shedding ❑ Full-year Brigit Fire ❑ Growth in alternative energy 62
Slide 63: 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
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