Hudaco Industries Limited · JSE:HDC
Hudaco Industries — H1 2021 Earnings Presentation
38 slides from Hudaco Industries's earnings presentation, May 31, 2021
Slide 1: Unaudited Interim Results for the Six Months Ended 31 May 2021
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MAY 2021
Slide 2: Chairman's Overview
CHAIRMAN’S OVERVIEW § Worldwide economic recovery from Covid shutdowns has been faster than expected § But supply chain constraints now felt in all Hudaco businesses – stock is king & pricing power lies with suppliers § RSA threats: 3rd wave COVID-19, electricity supply, port delays, degradation of
Slide 3: Agenda
AGENDA § H1 results summary § General business environment § Business model and operating segments § Financial review § Outlook 3
Slide 4: Results Summary H1 2021 v H1 2020
RESULTS SUMMARY H1 2021 V H1 2020 Turnover 28,3% to R3,4bn Operating profit 351,9% to R357m Basic earnings per share 193,1% to 686 cps Headline earnings per share 252,2% to 686 cps Comparable earnings per share 899,4% to 686 cps Interim dividend per share 240 cps Cash generated from operations R393m
Slide 5: Results Summary H1 2021 v H1 2019
RESULTS SUMMARY H1 2021 V H1 2019 Turnover 6,5% to R3,4bn Operating profit 20,2% to R357m Basic earnings per share 28,9% to 686 cps Headline earnings per share 28,9% to 686 cps Comparable earnings per share 32,1% to 686 cps Interim dividend per share 26,3% to 240 cps Cash generated from operations R
Slide 6: General Business Environment
GENERAL BUSINESS ENVIRONMENT 6
Slide 7: General Business Environment
GENERAL BUSINESS ENVIRONMENT § Momentum from H2 2020 continued § Increase in mining, manufacturing and agriculture sectors § Decrease in security sector § Load shedding disruptive § Serious challenges in supply chain § Increased delays at inefficient ports § Rand strengthening created pricing pressu
Slide 8: Business Model and Segments
BUSINESS MODEL AND SEGMENTS 8
Slide 9: 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 to
Slide 10: Reporting Segments: Consumer-related products
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 a
Slide 11: Reporting Segments: Engineering consumables
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 an
Slide 12: H1 2021 Sales by Market Sector (%)
H1 2021 SALES BY MARKET SECTOR (%) 27 Wholesale and retail 27 19 Automotive 19 16 Manufacturing 14 14 Mining 13 10 Exports 9 5 Security 8 4 Alternative energy 4 2 Construction 3 3 Agriculture 2 0 Public sector 1 H1 2021 H1 2019 12
Slide 13: Contribution by Segment
CONTRIBUTION BY SEGMENT Contribution to H1 2021 operating profit (before shared services and head office) 35% 65% H1 2019 37% 63% Consumer-related products Engineering consumables 13
Slide 14: Segment Results for H1: Consumer-related Products
SEGMENT RESULTS FOR H1 CONSUMER-RELATED PRODUCTS Turnover Op Margin Operating Profit Rm 2021 % ch 2019 2021 2019 2021 % ch 2019 Segment total 1 773 3,3 1 717 13,8 11,9 245 19,1 205 • Power tools and marine had an excellent H1 • Fastener business is now firing on all cylinders • Automotive businesses
Slide 15: Segment Results for H1: Engineering Consumables
SEGMENT RESULTS FOR H1 ENGINEERING CONSUMABLES Turnover Op Margin Operating Profit Rm 2021 % ch 2019 2021 2019 2021 % ch 2019 Segment total 1 616 10,2 1 467 8,9 7,4 143 31,9 109 • Fantastic result from our steel businesses • Bearings International going from strength to strength • Belting Supply Ser
Slide 16: Segment Results for H1
SEGMENT RESULTS FOR H1 Turnover Op Margin Operating Profit Rm 2021 % ch 2019 2021 2019 2021 % ch 2019 Consumer- related 1 773 3,3 1 717 13,8 11,9 245 19,1 205 products Engineering 1 616 10,2 1 467 8,9 7,4 143 31,9 109 consumables Head office, shared (6) (9) (31) (17) services and eliminations Total
Slide 17: Turnover
TURNOVER R billion 4,0 3,5 3,6 3,4 3,5 3,4 3,0 3,2 3,2 3,0 3,0 2,5 2,7 2,7 2,6 2,6 2,5 2,0 1,5 1,0 0,5 0,0 2015 2016 2017 2018 2019 2020 2021 H1 H2 17
Slide 18: Operating Margin
OPERATING MARGIN % 14 12 13,0 12,5 11,9 11,411,7 11,4 10 10,7 10,6 9,8 10,1 9,8 9,3 8 6 4 2 3,0 0 2015 2016 2017 2018 2019 2020 2021 H1 H2 18
Slide 19: Financial Review
FINANCIAL REVIEW 19
Slide 20: Profit for H1
PROFIT FOR H1 Rm 2021 % ch 2019 2020 Turnover 3 383 6,5 3 175 2 636 Gross profit 1 247 9,0 1 144 854 Operating expenses 890 5,1 847 775 Operating profit 357 20,2 297 79 Margin (%) Turnover 100,0 100,0 100,0 Gross profit 36,9 36,0 32,4 Operating expenses 26,3 26,7 29,4 Operating profit 10,6 9,3 3,0 2
Slide 21: Profit for H1
PROFIT FOR H1 Rm 2021 % ch 2019 2020 Operating profit 357 20,2 297 79 Net interest on funding (34) (55) (62) Impairment of goodwill and intangibles (348) Fair value adjustment to amounts due to (3) 44 vendors -Adjustment for time-value of money (8) (3) (imputed interest) -Adjustment to estimated cap
Slide 22: Comparable Earnings for H1
COMPARABLE EARNINGS FOR H1 Rm 2021 % ch 2019 2020 Attributable earnings 210 24,4 169 (233) Impairment of goodwill and 348 intangibles Taxation (1) Non-controlling interest (52) Headline earnings 210 24,4 169 62 Fair value adjustment to estimated (5) (47) capital value of vendor liabilities Non-contr
Slide 23: Comparable Earnings
COMPARABLE EARNINGS R million 250 243 225 231 230 227 200 215 210 197 175 173 150 164 165 153 125 139 100 75 50 25 22 0 2015 2016 2017 2018 2019 2020 2021 H1 H2 23
Slide 24: Earnings per Share and Dividends
EARNINGS PER SHARE AND DIVIDENDS Cents 2021 % ch 2019 2020 Earnings per share Comparable 686 32,1 520 69 Basic 686 28,9 533 195 Headline 686 28,9 533 (738) Dividends per share - Interim 240 26,3 190 0 - Final 410 410 Total 600 410 Dividend cover (times) 2,86 2,74 n/a 24
Slide 25: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm May 21 May 19 May 20 Working capital 1 915 2 164 2 052 Property, plant and equipment 266 297 295 Right-of-use assets 362 395 Goodwill and intangibles 1 195 1 548 1 178 Investment in joint venture 10 12 Tax 38 51 96 Net assets 3 776 4 070 4 028 Equity 2 737 2 637 2
Slide 26: Working Capital Elements
WORKING CAPITAL ELEMENTS In months of sales 6 5 4 3 2 1 0 -1 H2 15 H2 16 H2 17 H2 18 H1 19 H2 19 H2 20 H1 21 -2 -3 Inventory Payables Receivables Net W Cap One month of sales (in H2) 2015 = R447m 2018 = R571m 2021 (H1) = R564m 2016 = R505m 2019 = R559m 2017 = R538m 2020 = R439m 26
Slide 27: Inventory
INVENTORY In months of sales 4,4 4 3,9 3,5 3,4 3 3,2 3,1 3,2 3,3 3,0 3,1 3,1 2,9 2,7 2 1 0 2015 2016 2017 2018 2019 2020 2021 H1 H2 27
Slide 28: Cash Flow for H1 2021
CASH FLOW FOR H1 2021 Rm 2021 2019 2020 Cash from trading 458 408* 189 Increase in working capital (65) (47) (21) Cash from operations 393 361 168 Finance costs paid (19) (55) (43) Tax paid (62) (68) (59) Cash generated after tax 312 238 66 Share-based payments (4) (18) (1) Repurchase of shares (36)
Slide 29: Key Financial Points
KEY FINANCIAL POINTS § Margins up § Expenses tightly managed § Inventories lower than we would like at this time of year § Cash generation strong § Borrowings well down § All capital allocation options are considered 29
Slide 30: Outlook
OUTLOOK 30
Slide 31: Outlook for H2 2021
OUTLOOK FOR H2 2021 § Third wave biggest risk to H2 performance § Synergies and benefits from consolidations to continue § Better performance from our security business § Despite the supply chain issues, we expect H1 momentum to continue in H2 § Expect strong cash generation in H2 § Acquisition acti
Slide 32: IFRS16: Leases
IFRS16: LEASES 32
Slide 33: Impact of IFRS 16: Leases
IMPACT OF IFRS 16: LEASES § Initial date of application – 1 December 2019 § At Hudaco, affects only property leases § Incremental borrowing rate at initial date – 8,13% § At 1 December 2019 • Recognised lease liabilities of R466m and • Right-of-use assets of R454m § For six months • Repaid R62m to M
Slide 34: Profit if IFRS 16: Leases Was Not Adopted
PROFIT IF IFRS 16: LEASES WAS NOT ADOPTED IFRS16 Effect of No IFRS16 Rm 2021 IFRS16 2021 % ch 2019 Operating profit 357 8 349 17,5 297 Net interest on funding (19) (19) Imputed interest on leases (IFRS 16) (15) (15) (55) Fair value adjustment to amounts (3) due to vendors - Adjustment for time-value
Slide 35: Contact Details and Disclaimer
CONTACT DETAILS AND DISCLAIMER 35
Slide 36: 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 36
Slide 37: 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 38: Slide 38