Hudaco Industries Limited · JSE:HDC

Hudaco Industries — H1 2016 Earnings Presentation

36 slides from Hudaco Industries's earnings presentation, July 2016

  1. Slide 1: Results Presentation: Six Months Ended 31 May 2016

    RESULTS PRESENTATION SIX MONTHS ENDED 31 MAY 2016

  2. Slide 2: Overview

    OVERVIEW § Ini5a5ves over the past few years to reduce dependence on the mining and manufacturing sectors have proved successful § Revenues and earnings from sectors of the economy that have beJer prospects con5nue to grow § PorLolio of businesses s5ll delivering very respectable returns under ex

  3. Slide 3: Agenda

    AGENDA § General business environment and results drivers § Results summary and opera5ng segments § Financial review § Outlook 3

  4. Slide 4: General Business Environment and Results Drivers

    GENERAL BUSINESS ENVIRONMENT AND RESULTS DRIVERS 4

  5. Slide 5: General Business Environment

    GENERAL BUSINESS ENVIRONMENT § South Africa, right now, is a difficult place to do business § Trading condi5ons were extremely tough with the drought, anaemic economy and low commodity prices § Rand vola5lity and weakness have made pricing extremely challenging § This tough environment resulted in

  6. Slide 6: Results Drivers – H1 2016

    RESULTS DRIVERS – H1 2016 § Engineering consumables segment con5nues to struggle § Automo5ve businesses performing well § Security businesses performed well – mainly projects § Exports into Africa under pressure § Remain strongly cash genera5ve notwithstanding Rand weakness, tough condi5ons, pa

  7. Slide 7: Results Summary and Operating Segments

    RESULTS SUMMARY AND OPERATING SEGMENTS 7

  8. Slide 8: Results Summary

    RESULTS SUMMARY Turnover 1.6% to R 2.5bn Opera5ng profit 15.8% to R 246m Basic and headline earnings per share 13.9% to 472 cps Comparable earnings per share 19.7% to 440 cps Dividends per share 5.6% to 170 cps Net borrowings R 137m to R 1 153m 8

  9. Slide 9: The Hudaco Business Model

    THE HUDACO BUSINESS MODEL § Hudaco’s main business is the importa5on and distribu5on of high quality branded automo5ve, industrial and electrical consumable products § The concept of “value added distribu5on” is core to our business model § Agency agreements generally restrict our ac5vi5es to Afr

  10. Slide 10: Operating Segments

    OPERATING SEGMENTS Consumer-­‐related products (9 businesses) § Automo5ve acermarket products § Power tools § BaJeries § Professional communica5on equipment § Security equipment § Data networking equipment Engineering consumables (20 businesses) § Mechanical power transmission § Electrical p

  11. Slide 11: Segment Contributions

    SEGMENT CONTRIBUTIONS ContribuVon to 2010 operaVng profit (before shared services and head office) 64% 36% Consumer-­‐related products Engineering consumables 11

  12. Slide 12: Segment Contributions

    SEGMENT CONTRIBUTIONS 2010 ContribuVon to 2016 operaVng profit 64% (before shared services and head office) 36% 38% 62% Consumer-­‐related products Engineering consumables 12

  13. Slide 13: % Sales by Market Sector - Diversified

    % SALES BY MARKET SECTOR -­‐ DIVERSIFIED 2010 2015 Manufacturing 26 18 Automo5ve 10 18 Wholesale and retail 13 18 Mining 24 13 Exports 5 10 Security 10 8 Alterna5ve energy 0 6 Construc5on 6 3 Public sector 0 3 Agriculture 4 2 Other 2 1 13 13

  14. Slide 14: 2016 Acquisitions

    2016 ACQUISITIONS Hydraulic Engineering Repair Services § " Distributor of: • Hydraulic cylinder repairs • Drivetrain repairs § Es5mated price R64m § 2 year earn-­‐out 14

  15. Slide 15: Acquisitions

    ACQUISITIONS All-­‐Trade Distributors § Distributor of: • Industrial fasteners • Rivets • Bolts and nuts • Springs and clips • Machined parts § Es5mated price R24m § 2 year earn-­‐out 15

  16. Slide 16: 2016 Acquisitions

    2016 ACQUISITIONS MiRO § Distributor of data networking equipment including: " • Broadband wireless products • Surveillance products • Wi-­‐Fi and Hotspot equipment § Es5mated price R254m § 3 year earn-­‐out 16

  17. Slide 17: 2016 Acquisitions

    2016 ACQUISITIONS Brewtech Engineering § Distributor of: " • Plas5c and steel products for conveyors • Customer base is in the food and beverage market, especially boJling industry § Es5mated price R47m § 3 year earn-­‐out 17

  18. Slide 18: Segment Results – Consumer-Related Products

    SEGMENT RESULTS – CONSUMER-­‐RELATED PRODUCTS OperaVng Turnover OperaVng Profit Margin Rm 2016 % ch 2015 2016 2015 2016 % ch 2015 Ongoing opera5ons 1 200 (6.6) 1 285 13.0% 15.1% 156 (19.6) 194 New businesses 38 -­‐ -­‐ 10.5% -­‐ 4 -­‐ -­‐ Segment total 1 238 (3.7) 1 285 12.9% 15.1% 160 (17.5) 194 §

  19. Slide 19: Segment Results – Engineering Consumables

    SEGMENT RESULTS – ENGINEERING CONSUMABLES OperaVng Turnover OperaVng Profit Margin Rm 2016 % ch 2015 2016 2015 2016 % ch 2015 Ongoing opera5ons 1 187 (6.2) 1 265 7.2% 9.5% 85 (29.2) 120 New businesses 84 -­‐ -­‐ 15.5% -­‐ 13 -­‐ -­‐ Segment total 1 271 0.5 1 265 7.7% 9.5% 98 (18.3) 120 § The majorit

  20. Slide 20: Segment Results for the Six Months

    SEGMENT RESULTS FOR THE SIX MONTHS Turnover OperaVng Margin OperaVng Profit Rm 2016 % ch 2015 2014 2016 2015 2014 2016 % ch 2015 2014 Consumer-­‐ related 1 238 (3.7) 1 285 819 12.9% 15.1% 10.5% 160 (17.5) 194 86 products Engineering consumables 1 271 0.5 1 265 1 293 7.7% 9.5% 9.6% 98 (18.3) 120 124 H

  21. Slide 21: Monthly PBITA

    MONTHLY PBITA Dec Jan Feb Mar Apr May 2014 2015 2016 21

  22. Slide 22: Financial Review

    FINANCIAL REVIEW 22

  23. Slide 23: Profit for the Six Months

    PROFIT FOR THE SIX MONTHS Rm 2016 % ch 2015 2014 Turnover 2 507 (1.6) 2 549 2 111 -­‐ Ongoing opera5ons 2 385 (6.4) 2 549 2 111 -­‐ New businesses 122 Gross profit 902 (2.3) 924 753 OperaVng expenses 656 3.8 632 553 OperaVng profit 246 (15.8) 292 200 -­‐ Ongoing opera5ons 229 (21.6) 292 200 -­‐ New bu

  24. Slide 24: Profit for the Six Months

    PROFIT FOR THE SIX MONTHS Rm 2016 % ch 2015 2014 OperaVng profit 246 (15.8) 292 200 Fair value adj to amounts due to 12 15 vendors Net interest on funding (44) (38) (15) Interest paid to vendors (imputed) (4) (1) (2) Profit before taxaVon 210 (17.0) 253 198 Taxa5on 57 71 51 (Rate 2016 : 27% 2015 : 28%

  25. Slide 25: Comparable Earnings for the Six Months

    COMPARABLE EARNINGS FOR THE SIX MONTHS Rm 2016 % ch 2015 2014 Headline earnings 149 (13.9%) 173 144 FV adjustment of vendor liability (12) (15) Non-­‐controlling interest 2 2 Comparable earnings 139 (19.7%) 173 131 25

  26. Slide 26: Comparable Earnings for the Six Months

    COMPARABLE EARNINGS FOR THE SIX MONTHS 225 200 197 175 188 176 181 172 173 150 125 139 139 131 124 100 103 75 50 25 0 2011 2012 2013 2014 2015 2016 1st half 2nd half 26

  27. Slide 27: Earnings per Share and Dividends

    EARNINGS PER SHARE AND DIVIDENDS Cents 2016 % ch 2015 Earnings per share Basic 472 (13.9) 548 Headline 472 (13.9) 548 Comparable 440 (19.7) 548 Dividends per share -­‐ Interim 170 180 -­‐ Final 345 Total 525 Dividend cover (Vmes) 2.59 2.23 27

  28. Slide 28: Statement of Financial Position

    STATEMENT OF FINANCIAL POSITION Rm May 16 May 15 Working capital 1 710 1 429 Property, plant equipment 262 264 Goodwill and intangibles 1 315 1 075 Investment in Joint Venture 5 2 Taxa5on 33 Net assets 3 325 2 770 Equity 1 941 1 774 Bank borrowings 1 153 965 Taxa5on 10 Due to vendors 231 21 Total eq

  29. Slide 29: Working Capital

    WORKING CAPITAL In months of sales 4.5 4.0 3.5 § Working capital 3.0 tradi5onally peaks end 2.5 of H1 to cope with 2.0 an5cipated increased 1.5 seasonal demand in H2 1.0 0.5 0.0 § Sales were generally H1 H2 H1 H2 H1 H2 H1 H2 H1 split 45/55 between H1 2012 2013 2014 2015 2016 and H2 (2015: 49/51) O

  30. Slide 30: Cash Flow for the Year

    CASH FLOW FOR THE YEAR Rm 2016 2015 Cash from trading 287 331 Increase in working capital (31) (3) Cash from operaVng acVviVes 256 328 Tax paid (excluding tax seJlement) (83) (73) Cash from operaVons before tax sedlement 173 255 Tax seJlement (192) Cash flow from operaVons 173 63 Dividends paid (115)

  31. Slide 31: Summary

    SUMMARY § Although the market is tough our businesses are resilient § We are cash genera5ve § Expenses are being 5ghtly controlled § There is capacity in our borrowing facili5es § We are well within our banking covenants § The financial posi5on of the group is strong and there is no significant

  32. Slide 32: Outlook

    OUTLOOK 32

  33. Slide 33: Outlook Reminders

    OUTLOOK REMINDERS § Hudaco sales are predominantly GDP driven § GDFI adds capacity for future GDP ac5vity § Reposi5oning and diversifica5on are increasing revenues and earnings from sectors that have beJer prospects § Rand vola5lity has a big impact on pricing and profitability 33

  34. Slide 34: Outlook for H2 2016

    OUTLOOK FOR H2 2016 § South Africa and neighbouring countries’ economic recovery may be delayed given global macro condi5ons § Consumer-­‐related products segment to con5nue to perform well § Engineering consumables segment should have a stronger second half § Acquisi5ons to add to earnings § E

  35. Slide 35: Contact Details

    CONTACT DETAILS Graham Dunford Clifford Amoils Chief execu5ve Financial director Tel +27 (11) 657 5004 Tel +27 (11) 657 5002 grahamd@hudaco.co.za camoils@hudaco.co.za www.hudaco.co.za 35

  36. Slide 36: Disclaimer

    DISCLAIMER The preceding presenta5on contains forward looking statements about the Hudaco Group’s opera5ons and financial posi5on. They are prepared in good faith and are based on Hudaco’s best es5mates and informa5on at the 5me of preparing the presenta5on. They are nonetheless subject to significant

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