Hudaco Industries Limited · JSE:HDC
Hudaco Industries — FY2020 Earnings Presentation
60 slides from Hudaco Industries's earnings presentation, February 2021
Slide 1: Results Presentation for the Year Ended 30 November 2020
RESULTS PRESENTATION FOR THE YEAR ENDED 30 NOVEMBER 2020
Slide 2: Agenda
AGENDA § General business environment and overview § Results summary § H2 Results summary § Covid-19 impact on Hudaco businesses § Business model and operating segments § Financial review § Outlook 2
Slide 3: General Business Environment
GENERAL BUSINESS ENVIRONMENT § 2020 was a year of great trauma and hardship for South Africa § Rising government debt and rising unemployment § December 2019 stage 6 load shedding § 23 March Covid-19 lockdown announcement § Moody’s downgrade 27 March § Very restricted trading until end May § Beginni
Slide 4: Overview
OVERVIEW § Lockdown was used to strategise, plan and organise § Management of our businesses through this crisis and H2 performance is commendable § Impact on the first half numbers was so overwhelming that it also dominates the results for the full year § A better understanding of performance and b
Slide 5: Results Summary
RESULTS SUMMARY Turnover 6,7% to R6,3bn Operating profit 27,2% to R510m Basic earnings per share 91,7% to 113 cps Headline earnings per share 22,5% to 1 050 cps Comparable earnings per share 35,5% to 800 cps H2 Comparable earnings per share 1,5% to 731 cps Total dividend per share 31,7% to 410 cps C
Slide 6: 6
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Slide 7: Results Summary for H2
RESULTS SUMMARY FOR H2 Turnover 2,5% to R3,6bn Operating profit 6,9% to R431m Basic earnings per share 3,5% to 851 cps Headline earnings per share 4% to 855 cps Comparable earnings per share 1,5% to 731 cps Final dividend per share 410 cps Cash generated from operations R740m 7
Slide 8: Major Shareholders / Fund Managers
MAJOR SHAREHOLDERS / FUND MANAGERS § Government Employees Pension Fund 11% § PSG Asset Management 10% § Old Mutual 7% § Foord Asset Management 6% § Ninety One 5% § Nedbank 5% § Citigroup 5% § Bateleur Capital 4% § Aylett & Co Fund Managers 4% § Alexander Forbes 4% § Prudential Investments Managers 3
Slide 9: Covid-19 Impact on Hudaco Businesses
COVID-19 IMPACT ON HUDACO BUSINESSES 9
Slide 10: Covid-19 Impact on Hudaco Businesses
COVID-19 IMPACT ON HUDACO BUSINESSES § Rationalisation of branches and some businesses, especially back-office § Retrenchments § Delays at ports § Rand exchange very volatile 10
Slide 11: Exchange Rate Volatility ZAR to US
R13,0 R14,0 R15,0 R16,0 R17,0 R18,0 R19,0 2018-11-30 2019-02-28 2019-05-30 2019-08-30 2019-11-29 2020-02-29 EXCHANGE RATE VOLATILITY ZAR TO US 2020-05-31 2020-08-31 11 2020-11-30
Slide 12: Business Model and Operating Segments
BUSINESS MODEL AND OPERATING SEGMENTS 12
Slide 13: Operating Segments
OPERATING SEGMENTS Consumer-related products (11 businesses) § Automotive aftermarket products § Power tools and fasteners § Data networking equipment § Batteries § Security and communication equipment Engineering consumables (18 businesses) § Bearings and belting § Diesel engines and spares § Elect
Slide 14: Features of Value-Added Distribution
FEATURES OF VALUE-ADDED DISTRIBUTION § Instant availability § Focused business units with application advice § Technical specification and product knowledge § Training § Credit provision § Drives customer retention and supplier loyalty Inventory R1 598m § 32 warehouses § 800 international suppliers
Slide 15: Contribution by Segment
CONTRIBUTION BY SEGMENT Contribution to 2020 operating profit (before shared services and head office) 44% 56% H2 2020 67% 33% Consumer-related products Engineering consumables 15
Slide 16: 2020 Sales by Market Sector (%)
2020 SALES BY MARKET SECTOR (%) 27 Wholesale and retail 26 18 Automotive 19 15 Manufacturing 15 13 Mining 13 11 Exports 11 6 Security 7 4 Alternative energy 4 2 Construction 2 2 Agriculture 2 0 Public sector 1 2020 2019 16
Slide 17: 2020 Sales by Market Sector (%)
2020 SALES BY MARKET SECTOR (%) Consumer-related products Engineering consumables Manufacturing 3 27 Automotive 29 5 Wholesale and retail 37 16 Mining 2 27 Exports 8 15 Security 12 0 Alternative energy 8 0 Construction 0 5 Other 0 1 Agriculture 1 4 17
Slide 18: Segment Results for H2 Consumer-Related Products
SEGMENT RESULTS FOR H2 CONSUMER-RELATED PRODUCTS Turnover Op Margin Operating Profit Rm 2020 % ch 2019 2020 2019 2020 % ch 2019 Segment 1 919 2,5 1 872 13,3% 11,5% 255 18,1 216 total 18
Slide 19: Consumer-Related Products: Automotive Aftermarket
CONSUMER-RELATED PRODUCTS AUTOMOTIVE AFTERMARKET Principal Businesses Principal Brands Main markets Used for § Automotive aftermarket § Automotive oil seals § Automotive parts and accessories § Ignition leads § Construction machinery § Light duty clutch kits § Spares shops § Truck clutch components
Slide 20: 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 § Propulsion of boats § Mining § Surveying § Recr
Slide 21: 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 operators § Network infrastructure § Transport § Outdoor wireless network § Wireless, interne
Slide 22: Consumer-Related Products: Security and Communication Equipment
CONSUMER-RELATED PRODUCTS SECURITY AND 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 commun
Slide 23: Consumer-Related Products: Batteries
CONSUMER-RELATED PRODUCTS BATTERIES Principal Businesses Principal Brands Main markets Used for § Alternative energy § Back-up power (UPS, inverters, § Battery bays alarms) § Mining § Distribution centres § Motor industry § Energy load shifting § Security § Generator starting § Surface motive power
Slide 24: Segment Results for H2 Engineering Consumables
SEGMENT RESULTS FOR H2 ENGINEERING CONSUMABLES Turnover Op Margin Operating Profit Rm 2020 % ch 2019 2020 2019 2020 % ch 2019 Segment total 1 711 3,5 1 653 11,5% 10,6% 197 12,6 175 24
Slide 25: Engineering Consumables: Bearings and Belting
ENGINEERING CONSUMABLES BEARINGS AND BELTING 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 § Mining equipment
Slide 26: Engineering Consumables: Electrical Power Transmission
ENGINEERING CONSUMABLES ELECTRICAL POWER TRANSMISSION Principal Businesses Principal Brands Main markets Used for § Automation § Automation and control of electric § Manufacturing motors § Materials handling § Connection of electrical power in § Mining industry § Ports § Electrical panel building §
Slide 27: 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 & control § Manufacturing § Industrial automation § Mining § Mining equipment § Process automation 27
Slide 28: 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 29: Engineering Consumables: Other
ENGINEERING CONSUMABLES OTHER Principal Businesses Principal Brands Main markets Used for § Agri equipment § Condensate drain management § Construction § Industrial air filtration § Earthmoving equipment § Generator sets § Irrigation § Materials handling § Mining § Mining equipment § On and off-road
Slide 30: Segment Results for H2
SEGMENT RESULTS FOR H2 Turnover Op Margin Operating Profit Rm 2020 % ch 2019 2020 2019 2020 % ch 2019 Consumer- related 1 919 2,5 1 872 13,3% 11,5% 255 18,1 216 products Engineering 1 711 3,5 1 653 11,5% 10,6% 197 12,6 175 consumables Head office, shared (12) 4 (21) (13) services, and eliminations T
Slide 31: Operating Margin for H2
OPERATING MARGIN FOR H2 2020 2019 Margin (%) Turnover 100,0 100,0 Gross profit 36,5 36,7 Operating expenses 24,6 25,3 Operating profit 11,9 11,4 31
Slide 32: Operating Margin
OPERATING MARGIN % 14 12 13,0 12,4 12,5 11,9 11,411,7 11,4 10 10,7 9,8 10,1 9,8 9,5 9,3 8 6 4 2 3,0 0 2014 2015 2016 2017 2018 2019 2020 H1 H2 32
Slide 33: Turnover
TURNOVER R billion 4,0 3,5 3,6 3,4 3,5 3,0 3,2 3,2 3,0 3,0 2,5 2,7 2,7 2,6 2,6 2,5 2,4 2,0 2,1 1,5 1,0 0,5 0,0 2014 2015 2016 2017 2018 2019 2020 H1 H2 33
Slide 34: Financial Review
FINANCIAL REVIEW 34
Slide 35: Profit for H2
PROFIT FOR H2 Rm 2020 % ch 2019 Turnover 3 618 2,5 3 529 Gross profit 1 321 1,8 1 297 Operating expenses 890 (0,4) 893 Operating profit 431 6,9 404 35
Slide 36: Profit for Full Year
PROFIT FOR FULL YEAR Rm 2020 % ch 2019 Turnover 6 254 (6,7) 6 704 Gross profit 2 175 (10,9) 2 441 Operating expenses 1 665 (4,3) 1 740 Operating profit 510 (27,2) 701 36
Slide 37: Adjustments Arising from Covid-19 and Consequential Economic Conditions
ADJUSTMENTS ARISING FROM COVID-19 AND CONSEQUENTIAL ECONOMIC CONDITIONS § Fully explained in interim results § Expected credit loss increased § Inventory net realisable value allowance up § Goodwill impaired by R345m (22,8%) § Intangible assets impaired by R3m § Foreign deferred tax asset impaired b
Slide 38: Profit for H2
PROFIT FOR H2 Rm 2020 % ch 2019 Operating profit 431 6,9 404 Damages settlement 35 Net interest on funding (26) (48) Imputed interest on leases (IFRS 16) (16) Fair value adjustment to amounts due to 4 33 vendors - Adjustment for time-value of (1) (4) money (imputed interest) - Adjustment to estimate
Slide 39: Profit for Full Year
PROFIT FOR FULL YEAR Rm 2020 % ch 2019 Operating profit 510 (27,2) 701 Damages settlement 35 Net interest on funding (69) (103) Imputed interest on leases (IFRS 16) (35) Fair value adjustment to amounts due to 48 30 vendors - Adjustment for time-value of (4) (12) money (imputed interest) - Adjustmen
Slide 40: Headline and Comparable Earnings for H2
HEADLINE AND COMPARABLE EARNINGS FOR H2 Rm 2020 % ch 2019 Attributable earnings 269 3,3 260 Loss of disposal of PPE 1 Non-controlling interest and tax (1) Headline earnings 269 3,5 260 Fair value adjustment to estimated (5) (37) capital value of vendor liabilities Damages settlement (35) Non-control
Slide 41: Headline and Comparable Earnings Full Year
HEADLINE AND COMPARABLE EARNINGS FULL YEAR Rm 2020 % ch 2019 Attributable earnings 36 (91,7) 429 Impairment of goodwill and intangibles 348 Loss of disposal of PPE 1 Non-controlling interest (54) Headline earnings 331 (22,8) 429 Fair value adjustment to estimated (52) (42) capital value of vendor li
Slide 42: Comparable Earnings
COMPARABLE EARNINGS R million 250 243 225 231 230 227 200 215 197 175 181 173 150 164 165 153 125 139 131 100 75 50 25 22 0 2014 2015 2016 2017 2018 2019 2020 H1 H2 42
Slide 43: Earnings per Share
EARNINGS PER SHARE H2 cents 2020 % ch 2019 Earnings per share Comparable 731 1,5 720 Basic 851 3,5 822 Headline 855 4,0 822 § If 2019 had been adjusted for IFRS 16: Leases, comparable earnings would have been 704 cents and the increase 3,8% Full year cents 2020 % ch 2019 Earnings per share Comparabl
Slide 44: Returned to Shareholders
RETURNED TO SHAREHOLDERS Rm 2020 2019 Dividends Interim 60 Final 126 130 Total 126 190 Repurchase of shares 82 208 190 44
Slide 45: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm 2020 2019 Working capital 1 857 2 021 Property, plant and equipment 265 302 Right-of-use assets for leased premises 414 Goodwill and intangibles 1 203 1 535 Investment in joint venture 12 Tax 45 48 Net assets 3 784 3 918 Equity 2 669 2 843 Bank borrowings 643 1 008
Slide 46: Working Capital Elements
WORKING CAPITAL ELEMENTS In months of sales 4 3 2 1 0 H2 16 H2 17 H2 18 H2 19 H2 20 -1 -2 -3 Inventory Payables Receivables Net W Cap One month of sales (in H2) 2016 = R505m 2018 = R571m 2020 = R603m 2017 = R539m 2019 = R588m 46
Slide 47: Inventory
INVENTORY In months of sales 4,4 4 3,9 3,4 3,5 3,5 3,4 3 3,3 3,2 3,1 3,2 3,3 3,1 3,1 3,0 2,9 2,9 2,9 2,7 2 1 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 H1 H2 47
Slide 48: Cash Flow for H2
CASH FLOW FOR H2 Rm 2020 2019 Cash from trading 537 446 Decrease in working capital 203 106 Cash from operations 740 552 Damages settlement 35 Finance costs (26) (48) Tax paid (54) (128) Cash generated after tax 695 376 Share-based payments (3) (4) Repurchase of shares (82) Dividends paid (66) Inves
Slide 49: Cash Flow for Full Year
CASH FLOW FOR FULL YEAR Rm 2020 2019 Cash from trading 726 794 Decrease in working capital 182 59 Cash from operations 908 853 Damages settlement 35 Finance costs (69) (103) Tax paid (113) (196) Cash generated after tax 761 554 Share-based payments (4) (22) Repurchase of shares (82) Dividends paid (
Slide 50: Exchange Rate Environment
EXCHANGE RATE ENVIRONMENT § We import directly 65% of group Import currencies: cost of sales § USD* 68% § On average these cost 14% more in § Euro 25% H2 2020 than H2 2019 § Yen 6% § The average cost for the full year § GBP 1% was 14% up on 2019 § We do not take a house view on *Imports from China,
Slide 51: Impact of IFRS 16: Leases
IMPACT OF IFRS 16: LEASES § Statement of financial position at November 2020 • Lease liabilities R455m • Right-of-use assets R414m § Statement of comprehensive income • Depreciation on right-of-use assets of R119m • Imputed interest R35m • Operating profit up R9m • Profit before tax down R26m § Furt
Slide 52: Summary
SUMMARY § Working capital down R164m from November 2019 § Net borrowings down R365m since November 2019, after share repurchased R82m § Exchange rate impacts working capital requirements § Expenses and capex have been tightly managed § We are within our banking covenants and committed facilities are
Slide 53: Outlook
OUTLOOK 53
Slide 54: Outlook for 2021
OUTLOOK FOR 2021 § We urge the President to lead the meaningful action needed from the government on the economic front to kick-start the economy § Planning is based on no regression to level 4 or 5 lockdown § Very difficult for us to accurately predict what lies ahead § Trading in H2 2020 was encou
Slide 55: IFRS 16: Leases
IFRS 16: LEASES 55
Slide 56: 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 R454m § For year • Repaid R125m on lease lia
Slide 57: Profit if IFRS 16: Leases Was Not Adopted
PROFIT IF IFRS 16: LEASES WAS NOT ADOPTED IFRS16 Effect of No IFRS16 Rm 2020 IFRS16 2020 % ch 2019 Operating profit 510 (9) 501 (28,5) 701 Damages claim 35 35 Net interest on funding (69) (69) (103) Imputed interest on leases (IFRS 16) (35) 35 Fair value adjustment to amounts 48 48 30 due to vendors
Slide 58: Financial Position if IFRS 16 Was Not Adopted
FINANCIAL POSITION IF IFRS 16 WAS NOT ADOPTED IFRS16 Effect of No IFRS16 Rm Nov 20 IFRS16 Nov 20 Nov 19 Working capital 1 857 (15) 1 842 2 021 Property, plant and equipment 265 265 302 Right-of-use assets for leased premises 414 (414) Goodwill and intangibles 1 203 1 203 1 535 Investment in joint ve
Slide 59: 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 59
Slide 60: 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