Hudaco Industries Limited · JSE:HDC

Hudaco Industries — H1 2017 Earnings Presentation

37 slides from Hudaco Industries's earnings presentation, July 2017

  1. Slide 1: Results Presentation: Six Months Ended 31 May 2017

    RESULTS PRESENTATION SIX MONTHS ENDED 31 MAY 2017

  2. Slide 2: Agenda

    AGENDA § Results summary § General business environment and results drivers § Business model and opera5ng segments § Financial review § Outlook 1

  3. Slide 3: Results Summary - H1

    RESULTS SUMMARY -­‐ H1 Turnover 7% to R 2,7bn Opera5ng profit 9% to R 269m Comparable earnings 10% to 483 cps Basic and headline earnings 2% to 483 cps Dividends per share 6% to 180 cps Cash generated from opera5ons R247m 2

  4. Slide 4: General Business Environment and Results Drivers

    GENERAL BUSINESS ENVIRONMENT AND RESULTS DRIVERS 3

  5. Slide 5: General Business Environment

    GENERAL BUSINESS ENVIRONMENT § South Africa is a extremely challenging place to do business § Signs were encouraging un5l end March -­‐ cabinet reshuffle § Trading condi5ons were par5cularly tough with the economy in recession and business confidence at a 10 year low § Rand world’s most vola5le cur

  6. Slide 6: Results Driver – H1 2017

    RESULTS DRIVER – H1 2017 § Engineering consumables had a good start to the year § Consumer-­‐related segment under pressure § Automo5ve businesses performed well § African business remains moribund § Par5cularly bad April with all the public holidays and the ra5ngs downgrade § May was up on 20

  7. Slide 7: Business Model and Operating Segments

    BUSINESS MODEL AND OPERATING SEGMENTS 6

  8. Slide 8: 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

  9. Slide 9: Operating Segments

    OPERATING SEGMENTS § Consumer-­‐related products segment distributes products driven by consumer spending and generally sold to installers § Engineering consumables segment imports and distributes branded engineering consumables generally used in the repair and maintenance of machines 8

  10. Slide 10: Operating Segments

    OPERATING SEGMENTS Consumer-­‐related products (10 businesses) § Automo5ve aWermarket products § Power tools § BaXeries § Professional communica5on equipment § Security equipment § Data networking equipment Engineering consumables (21 businesses) § Mechanical power transmissions § Electrical

  11. Slide 11: Contribution by Segment

    CONTRIBUTION BY SEGMENT ContribuTon to 2017 operaTng profit (before shared services and head office) 38% 62% Consumer-­‐related products Engineering consumables 10

  12. Slide 12: 2016 Sales by Market Sector (%)

    2016 SALES BY MARKET SECTOR (%) Consumer-­‐related products Engineering consumables Manufacturing 2 30 AutomoTve 31 6 Wholesale and retail 26 17 Mining 2 25 Exports 11 10 Security 18 0 AlternaTve energy 7 1 ConstrucTon 1 5 Public sector 2 0 Agriculture 0 5 Other 0 1 11

  13. Slide 13: 2016 Sales by Market Sector (%)

    2016 SALES BY MARKET SECTOR (%) Wholesale and retail 22 AutomoTve 19 Manufacturing 16 Mining 13 Exports 10 Security 9 AlternaTve energy 4 ConstrucTon 3 Agriculture 2 Public sector 1 Other 1 12

  14. Slide 14: Acquisitions

    AQUISITIONS Successful acquisi5ons in stronger economic sectors are con5nuing to diversify our revenue base 2016 § All-­‐Trade § MiRO § Brewtech Engineering 2017 § SS Telecoms § Commercial ICT § The Dished End Company 13

  15. Slide 15: Impact of Acquisitions

    IMPACT OF ACQUISITIONS MiRO Turnover (Rm) Brewtech HERS SS Telecoms 6 000 All-­‐Trade Sanderson 5 500 Berntel Donsteel Partquip 5 000 Three-­‐D S.B.S Dosco Group 4 500 Keymak Proof Deltec 4 000 M.S.S. Pentagon 3 500 FHS Global 3 000 2 500 2 000 2009 2010 2011 2012 2013 2014 2015 2016 14

  16. Slide 16: 2017 Acquisitions

    2017 ACQUISITIONS SS Telecoms § Supplier of: " • Voice and data solu5ons, specialising in PBX, communica5on management soWware and telephone management § Es5mated price R60m § 3 year earn-­‐out § Compe5tors : Mia Telecoms, Arbalest 15

  17. Slide 17: 2017 Acquisitions

    2017 ACQUISITIONS The Dished End Company § Manufacture of dished ends eg for cylinders and pressure " vessels § Es5mated price R71m § 3 year earn-­‐out 16

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

    SEGMENT RESULTS – CONSUMER-­‐RELATED PRODUCTS Turnover Op Margin OperaTng Profit Rm 2017 % ch 2016 2017 2016 2017 % ch 2016 Ongoing 1 114 (7,2) 1 200 13,8% 13,0% 154 (1,5) 156 opera5ons New 229 38 10,0% 10,8% 23 4 businesses Segment total 1 343 8,5 1 238 13,2% 12,9% 177 10,0 160 § Power tool sales u

  19. Slide 19: Segment Results – Engineering Consumables

    SEGMENT RESULTS – ENGINEERING CONSUMABLES Turnover Op Margin OperaTng Profit Rm 2017 % ch 2016 2017 2016 2017 % ch 2016 Ongoing 1 300 2,3 1 271 7,8% 7,7% 101 2,9 98 opera5ons New 30 20,0% 6 businesses Segment total 1 330 4,6 1 271 8,0% 7,7% 107 9,3 98 § Encouraging first half performance § Improved

  20. Slide 20: Segments Results for the Six Months

    SEGMENTS RESULTS FOR THE SIX MONTHS Turnover Op Margin OperaTng Profit Rm 2017 % ch 2016 2017 2016 2017 % ch 2016 Consumer-­‐ related 1 343 8,5% 1 238 13,2 12,9 177 10,0 160 products Engineering 1 330 4,6 1 271 8,0 7,7 107 9,3 98 consumables Head office, shared services (2) (2) (15) (12) & elimina5ons

  21. Slide 21: Financial Review

    Hudaco FINANCIAL REVIEW is

  22. Slide 22: Profit for the Six Months

    PROFIT FOR THE SIX MONTHS Rm 2017 % ch 2016 Turnover 2 671 6,5 2 507 -­‐ Ongoing opera5ons 2 412 (2,3) 2 469 -­‐ New businesses 259 38 Gross profit 987 9,4 902 OperaTng expenses 718 9,5 656 OperaTng profit 269 9,4 246 -­‐ Ongoing opera5ons 240 (0,8) 242 -­‐ New businesses 29 4 Margin (%) Turnover 100,

  23. Slide 23: Profit for the Six Months

    PROFIT FOR THE SIX MONTHS Rm 2017 % ch 2016 OperaTng Profit 269 9,4 246 Fair value adjustment to amounts due 12 to vendors Net interest on funding (42) (44) Interest paid to vendors (imputed) (10) (4) Profit before taxaTon 217 3,4 210 Taxa5on 62 57 (Rate 2017 : 28,4% 2016: 27%) Profit aeer tax 155 1,3

  24. Slide 24: Comparable Earnings for the Six Months

    COMPARABLE EARNINGS FOR THE SIX MONTHS Rm 2017 % ch 2016 Afributable and headline earnings 153 2,3 149 Fair value adjustment of vendor liability 12 Non-­‐controlling interest (2) Comparable earnings 153 9,8 139 23

  25. Slide 25: Comparable Earnings for the Six Months

    COMPARABLE EARNINGS FOR THE SIX MONTHS 250 225 231 200 197 175 188 181 175 172 173 150 153 125 139 139 131 123 100 103 75 50 25 0 2011 2012 2013 2014 2015 2016 2017 1st half 2nd half 24

  26. Slide 26: Earnings per Share and Dividends

    EARNINGS PER SHARE AND DIVIDENDS Cents 2017 % ch 2016 Earnings per share Comparable eps 483 9,8 440 Basic eps 483 2,3 472 Headline eps 483 2,3 472 Dividends per share -­‐ Interim 180 5,9 170 -­‐ Final 355 Total 525 Dividend cover (Tmes) at midyear 2,68 2,58 25

  27. Slide 27: Statement of Financial Position

    STATEMENT OF FINANCIAL POSITION Rm May 17 May 16 Working capital 1 735 1 710 Property, plant equipment 260 262 Goodwill and intangibles 1 413 1 315 Investment in joint venture 8 5 Tax 12 33 Net assets 3 428 3 325 Equity 2 186 1 941 Bank borrowings 973 1 153 Due to vendors 269 231 Total equity and li

  28. Slide 28: Working Capital

    WORKING CAPITAL In months of sales 4.5 § Working capital 4.0 tradi5onally peaks end of 3.5 H1 to cope with 3.0 an5cipated 2.5 increased 2.0 seasonal demand in H2 1.5 1.0 0.5 § Sales generally split 45/55 0.0 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 between H1 and H2 (2016 : 2011 2012 2013 2014 2015

  29. Slide 29: Cash Flow for the Six Months

    CASH FLOW FOR THE SIX MONTHS Rm 2017 % ch 2016 Cash from trading 317 10,5 287 Increase in working capital (70) (29) Cash from operaTons 247 (4,3) 258 Fair value adjustment of cash flow hedges & 3 (2) transla5on Finance costs (42) (44) Tax paid (52) (83) Cash generated aeer tax 156 20,9 129 Dividends

  30. Slide 30: Operating Margin per Half Year

    OPERATING MARGIN PER HALF YEAR % 18 16 15.6 14 13.6 12 12.9 13.0 12.4 11.4 11.4 11.7 10 10.6 10.8 9.8 10.1 9.5 8 6 4 2 0 2011 2012 2013 2014 2015 2016 2017 H1 H2 29

  31. Slide 31: Turnover by Half Year

    TURNOVER BY HALF YEAR R Billion 3.5 3.0 3.0 2.5 2.7 2.7 2.6 2.5 2.4 2.0 2.1 2.1 1.9 1.8 1.8 1.5 1.6 1.4 1.0 0.5 0.0 2011 2012 2013 2014 2015 2016 2017 H1 H2 30

  32. Slide 32: Summary

    SUMMARY § Hudaco is resilient and its businesses generate strong cash flows § We use surplus cash to invest successfully in new businesses § Exchange rate impacts working capital requirements § Bank facili5es are available § Capacity remains for acquisi5ons § 2nd half performance is usually con

  33. Slide 33: Outlook

    Hudaco OUTLOOK

  34. Slide 34: Outlook - Reminders

    OUTLOOK -­‐ REMINDERS § Hudaco sales are predominantly driven by GDP ac5vity § GDFI adds capacity for future GDP ac5vity § Rand exchange rate has a big impact on pricing and profitability § Hudaco is a diversified group that is made up of 31 separate businesses § There are 10 businesses in our co

  35. Slide 35: Outlook for H2 2017

    OUTLOOK FOR H2 2017 § We have had a good start to the year § We are expec5ng strikes in July § Our second half is generally our stronger half § The management team is experienced and focused § We will con5nue to manage the rela5onship between sales, gross margin and expenses § We have been suc

  36. Slide 36: 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

  37. Slide 37: 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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