Slide 1: Unaudited interim results for the six months ended 31 May 2015
Unaudited interim results for the six months ended 31 May 2015
Slide 2: Overview
OVERVIEW Comparable earnings 32% up Results commendable under tough economic conditions Portfolio of existing businesses weathering economic conditions HUDACO unaudited interim results May 2015 well Acquisition strategy continues to pay off and we continue to reduce dependence on the mining
Slide 3: Overview continued
OVERVIEW continued 1 year since successful transition to new CEO Experienced management team focused on the job at hand HUDACO unaudited interim results May 2015 Cash flow is strong and the group is in good shape Dividend increased 16% to 180 cents 3
Slide 4: Agenda
AGENDA General business environment Results summary and operating segments HUDACO unaudited interim results May 2015 Financial review Outlook 4
Slide 5: General business environment
GENERAL BUSINESS ENVIRONMENT
Slide 6: General business environment
GENERAL BUSINESS ENVIRONMENT South Africa’s weakening economy continues to be plagued by depressed business confidence due to ongoing power outages, policy uncertainty, stifling bureaucracy, low commodity prices, rand volatility and inflexible labour markets HUDACO unaudited interim results May 20
Slide 7: Hudaco results – H1 2015
HUDACO RESULTS – H1 2015 Unsurprisingly engineering consumables segment struggled Mining dependent businesses impacted most severely Mining and manufacturing sectors accounted for 30% of Hudaco’s HUDACO unaudited interim results May 2015 sales in H1 2015 – down from 50% five years ago Bearin
Slide 8: Hudaco results – H1 2015
HUDACO RESULTS – H1 2015 Consumer-related segment performed well Partquip performing to expectations Security business underperformed - mainly projects HUDACO unaudited interim results May 2015 Communication equipment contract secured and delivered in first half Exports into Africa growing
Slide 9: Results summary and operating segments
RESULTS SUMMARY AND OPERATING SEGMENTS
Slide 10: Results summary
RESULTS SUMMARY Turnover 21% to R2,5bn Operating profit 46% to R292m Operating margin up 2% to 11,5% HUDACO unaudited interim results May 2015 Comparable earnings per share up 32% to 548cps Headline earnings per share 20% to 548cps Cash flow from operations up 190% to R328m Dividends per share 16% t
Slide 11: The Hudaco business model
THE HUDACO BUSINESS MODEL Hudaco’s main business is the importation and distribution of branded industrial and electronic consumable products generally used in the repair and maintenance of machinery The concept of “value-added distribution” is core to our business HUDACO unaudited interim resul
Slide 12: Segment contributions
SEGMENT CONTRIBUTIONS Contribution to FY 2014 turnover 61% HUDACO unaudited interim results May 2015 39% Engineering consumables Consumer-related products 12
Slide 13: Segment contributions – significant shift
SEGMENT CONTRIBUTIONS – SIGNIFICANT SHIFT Contribution to 2015 H1 turnover Contribution to FY 2014 turnover 61% 39% 50% HUDACO unaudited interim results May 2015 50% Engineering consumables Consumer-related products 13
Slide 14: Operating segments
OPERATING SEGMENTS Consumer-related products This segment of our business is distribution of consumer-related products generally sold to installers Automotive aftermarket products Power tools Batteries HUDACO unaudited interim results May 2015 Security equipment Professional communication
Slide 15: Sales by market sector - diversified
SALES BY MARKET SECTOR - DIVERSIFIED 2010 2014 (incl. Partquip) Manufacturing 26 22 Automotive 10 18 Wholesale/retail 13 17 HUDACO unaudited interim results May 2015 Mining 24 15 Exports 5 11 Security 10 8 6 4 Construction 4 2 Agriculture 2 Public Sector 2 1 Other 15 15
Slide 16: 2015 Acquisitions: Partquip Group
2015 ACQUISITIONS Partquip Group Distributor of: automotive spares and accessories wheels HUDACO unaudited interim results May 2015 Ironman 4X4 accessories (50% held by Ironman 4X4 in Australia) Price R440m (net) 16
Slide 17: Partquip
PARTQUIP 17 HUDACO unaudited interim results May 2015 17
Slide 18: A-Line
A-LINE HUDACO unaudited interim results May 2015 18
Slide 19: Ironman X
IRONMAN 4 X 4 HUDACO unaudited interim results May 2015 19
Slide 20: 2015 Acquisitions: Berntel
2015 ACQUISITIONS Berntel Importer and distributor of pneumatic and process components Bolt-on to Ernest Lowe Estimated price R15m HUDACO unaudited interim results May 2015 2 year earn-out 20
Slide 21: Segment results – consumer-related products shines
SEGMENT RESULTS – CONSUMER-RELATED PRODUCTS SHINES Turnover Op Margin Operating Profit Rm 2015 % ch 2014 2015 2014 2015 % ch 2014 Ongoing HUDACO unaudited interim results May 2015 973 19 819 14.5% 10.5% 141 64 86 operations New businesses 312 17.0% 53 Segment total 1 285 57 819 15.1% 10.5% 194 126 8
Slide 22: Segment results – engineering consumables resilient
SEGMENT RESULTS – ENGINEERING CONSUMABLES RESILIENT Turnover Op Margin Operating Profit Rm 2015 % ch 2014 2015 2014 2015 % ch 2014 HUDACO unaudited interim results May 2015 Ongoing 1 259 (3) 1 293 9.4% 9.6% 118 (5) 124 operations New businesses 6 33.3% 2 Segment total 1 265 (2) 1 293 9.5% 9.6% 120 (
Slide 23: Segment results 2015 – operating profit up
SEGMENT RESULTS 2015 – OPERATING PROFIT UP Turnover Op Margin Operating Profit Rm 2015 % ch 2014 2015 2014 2015 % ch 2014 HUDACO unaudited interim results May 2015 Consumer- 1 285 57 819 15.1% 10.5% 194 126 86 related products Engineering 1 265 (2) 1 293 9.5% 9.6% 120 (3) 124 consumables Head office
Slide 24: Strong growth in profit for the six months
STRONG GROWTH IN PROFIT FOR THE SIX MONTHS Rm 2015 % Ch 2014 Turnover 2 549 21 2 111 - Ongoing operations 2 231 6 2 111 - New businesses 318 Gross profit 924 23 753 HUDACO unaudited interim results May 2015 Operating expenses 632 14 553 Operating profit 292 46 200 - Ongoing operations 237 19 200 - N
Slide 25: Financial review
FINANCIAL REVIEW
Slide 26: Profit for the six months
PROFIT FOR THE SIX MONTHS Rm 2015 % Ch 2014 Operating profit 292 46 200 Fair value adj to amounts due to 15 vendors Net interest on funding (38) (15) HUDACO unaudited interim results May 2015 Interest paid to vendors (imputed) (1) (2) Profit before taxation 253 28 198 Taxation 71 51 (Rate 2015:28% 2
Slide 27: Comparable earnings for the six months up 32%
COMPARABLE EARNINGS FOR THE SIX MONTHS UP 32% Rm 2015 % Ch 2014 Operating profit 292 46 200 Net interest on funding (38) (15) Interest paid to vendors (imputed) (1) (2) HUDACO unaudited interim results May 2015 Profit before taxation 253 38 183 Taxation (Rate 2015:28% 2014:28%) (71) (51) Profit afte
Slide 28: Comparable earnings by half year
COMPARABLE EARNINGS BY HALF YEAR 200 180 160 140 HUDACO unaudited interim results May 2015 120 100 80 60 40 20 91 128 103 188 124 176 139 172 131 181 173 0 2010 2011 2012 2013 2014 2015 1st half 2nd half 28
Slide 29: Earnings and increased dividends per share
EARNINGS AND INCREASED DIVIDENDS PER SHARE 2015 2014 Earnings per share Comparable 548c 416c Basic 548c 456c HUDACO unaudited interim results May 2015 Headline 548c 456c Dividends per share Interim 180c 155c Final 310c Total 465c Dividend policy: annual dividends = approximately 2,5x covered 29
Slide 30: Statement of financial position is healthy
STATEMENT OF FINANCIAL POSITION IS HEALTHY Rm May 15 May 14 Nov 14 Working capital 1 429 1 355 1 286 Property, plant equipment 264 240 257 Goodwill and intangibles 1 075 777 766 Investment in joint venture 2 HUDACO unaudited interim results May 2015 Tax in advance 80 Tax normal 17 7 Net assets 2 770
Slide 31: Working capital at right level
WORKING CAPITAL AT RIGHT LEVEL 4.5 4.0 In months of sales 3.5 3.0 2.5 2.0 HUDACO unaudited interim results May 2015 1.5 1.0 0.5 0.0 H1 11 H2 11 H1 12 H2 12 H1 13 H2 13 H1 14 H2 14 H1 15 One month of sales: H1 2015 = R 425m; H1 2014 = R 352m Working capital traditionally peaks end of H1 to cope wit
Slide 32: Cash flow used for acquisitions and tax settlement
CASH FLOW USED FOR ACQUISITIONS AND TAX SETTLEMENT Rm 2015 2014 Cash from trading 331 231 Increase in working capital (3) (118) Cash from operating activities 328 113 HUDACO unaudited interim results May 2015 Net finance costs (38) (15) Tax paid (including settlement) (265) (116) Cash flow from oper
Slide 33: Outlook
OUTLOOK
Slide 34: Outlook reminders
OUTLOOK REMINDERS Hudaco sales are predominantly GDP driven GDFI adds capacity for future GDP activity Exposure to mining and manufacturing in the first half down to HUDACO unaudited interim results May 2015 30% Rand exchange rate has a big impact on pricing and profitability 34
Slide 35: Outlook by segment
OUTLOOK BY SEGMENT Consumer-related products Battery sales very good Partquip expected to continue to perform well Industrial power tool sales remain strong HUDACO unaudited interim results May 2015 Engineering consumables Mining and manufacturing represent 54% of this segment’s sales Gene
Slide 36: Challenging outlook for H2 2015
CHALLENGING OUTLOOK FOR H2 2015 Consumer-related products segment to continue to perform well - Partquip to add to earnings in the second half Engineering consumables segment should have a stronger second half HUDACO unaudited interim results May 2015 Exports growing steadily Cash flow norma
Slide 37: Contact details
CONTACT DETAILS Graham Dunford Clifford Amoils HUDACO unaudited interim results May 2015 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 37
Slide 38: 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