2014 PRESENTATION TO INVESTORS (Unaudited) For the year ended 30 September 2014

Transcription

1 2014 PRESENTATION TO INVESTORS (Unaudited) For the year ended 30 September November 2014

2 Agenda Overview of the year Alan Dickson, Chief Executive Officer Financial results Manuela Krog, Chief Financial Officer Segment discussion Nashua Mark Taylor Segment discussion Reutech Peter van der Bijl Segment discussion CBI-electric Alan Dickson The way forward Alan Dickson 2

3 2014 OVERVIEW Alan Dickson, Chief Executive Officer 19 November 2014

4 The year in review challenges 2014 financial performance characterised by tough local operational environment Slow economic growth Significant industrial action Delays in the award and roll-out of certain infrastructure projects Increased competition continues to put pressure on margins Rand weakness, that resulted in increased product prices, had a significant impact on Nashua Office Automation Other contributing factors Underperformance resulted in goodwill impairments The long-expected Fuchs order was not received in FY2014 Restructuring costs incurred in Nashua Communications and ATC Telecommunications 4

5 The year in review positive impacts Benefit has been derived from strategic investments made High-voltage cable line at African Cables ECN VoIP network continues to reflect pleasing growth High-frequency radio export sales continue to grow Operational efficiency indicators maintained Significant improvement in free cash flow Effective working capital management sustained Fixed-cost increases have been well contained Dividend Dividend maintained at 370c per share 5

6 Nashua Mobile disposal transaction Transaction made unconditional by the Competition Tribunal in late September The project has been meticulously executed Staff remained focused and delivered excellent customer service Anticipated proceeds from the networks are approximately R200m lower than expected in April 2014 due to revenue base erosion Net cash flows from the transaction are estimated at R2bn, which is in line with our expectations at the deal date 6

7 Segmental contributions continuing operations Revenue 2014 R7.7bn Operating profit 2014 Reutech R1,0bn CBIelectric R3,3bn Reutech R170m CBIelectric R429m Nashua R3,4bn Nashua R454m Revenue 2013 R7.3bn Operating profit 2013 Reutech R1,0bn CBIelectric R3,2bn Reutech R 207m CBIelectric R 490m Nashua R3,1bn Nashua R 436m Segmental analysis excludes Other 7

8 2014 FINANCIAL RESULTS Manuela Krog, Chief Financial Officer 19 November 2014

9 Salient features % change Revenue from continuing operations Rm 7 773, ,7 7%! Revenue from discontinued operation Rm 3 348, ,2 9% " Operating profit from continuing operations Rm 1 017, ,5 8% " Operating profit from discontinued operation Rm 183,7 212,1 13% " EPS cents 1 201,6 587,6 104%! HEPS cents 505,6 583,2 13% " NHEPS from continuing operations cents 439,0 469,9 7% " NHEPS cents 553,3 569,1 3% " Dividend per share cents 370,0 370,0 # EBITDA % 14,5 16,8 Operating profit % 13,1 15,2 Dividend yield % 6,2 5,1 9

10 Revenue movement (20) CBI-electric Nashua Reutech Other 2014 Improved revenue performance due to Higher commodity prices (African Cables) Renewable energy contracts (CBI Solutions) Rental asset book growth in Quince (Nashua) Export orders for HF radios (Reutech Communications) Successful tracker project on Touws River Solar Plant (Reutech Radar Systems) Offset by Effect of industrial action Significant direct strike action within CBI-electric Indirect impact of mining industry strike throughout Reunert Weak local currency and increased competition affected sales volumes of new units by Nashua Office Automation Anticipated export orders in Fuchs not received in FY

11 Operating profit movement (61) 18 (37) (6) CBI-electric Nashua Reutech Other 2014 Negative profit impact caused by Labour disruption impacted operating profit by an estimated R62m Overruns on renewable energy projects resulted in disappointing returns from CBI-electric: Solutions Inability by Nashua OA to pass on cost increases for consumables and spares Lack of orders in Fuchs affected profitability Slowdown in global mining industry affected volume of mining surveillance radar sales Offset by Improved volumes on sale of HV cable (product mix) in African Cables Margin gains by ECN due to interconnect rate drop in April Increased rental asset book size in Quince Export sales within Reutech Higher volume Margin expansion due to the weak rand 11

12 Group balance sheet Rm Restated Non-current assets Current assets Current assets discontinued operation Total assets Total equity Non-current liabilities Non-current liabilities discontinued operation 250 Current liabilities Current liabilities discontinued operation 652 Total equity and liabilities Total liabilities to shareholders funds % 51,3 47,9 Current ratio (times) 2,6 1,8 Normalised return on ordinary shareholders funds % 16,3 19,9 12

13 Cash flow and efficiency indicators Rm (44) (99) (332) (122) 718 (612) (367) EBITDA Balance sheet Increase in working capital Interest, dividends and other Taxation paid Capital expenditure Free cash flow Dividends paid Investing activities Financing activities Increase in cash resources Trade receivables (days) Inventory turnover (times) 5,8 4,7 Net worth per share (R) 38,16 29,80 Income statement Gross profit (%) 33,8 36,0 Bad debts as a % revenue 0,27 0,37 Operating costs as a % of revenue 21,6 21,4 Cash flow statement Cash generated from operations vs operating profit (%)

14 Capital investment into organic growth Replacement capex Expansion capex Research & development Investment in future capacity has been funded from internal cash resources Expansion capex mainly related to high-voltage cable line installed by African Cables Research and development in the current year was principally within the Reutech segment 14

15 Nashua Mark Taylor 19 November 2014

16 Nashua salient features m Nashua total document volume All operations (Rm) % change Revenue 6 787, ,4 1 Operating profit 637,5 647,7 (2) Profit margin 9,4% 9,6% m ECN minutes Includes Nashua Mobile Inbound Outbound 16

17 Nashua commentary Office Automation Pressure on unit sales volumes and margin due to competitive market and currency devaluation Annuity revenues held up well Large installed base supported growth in print volumes Purchased 60% of Prodoc Svenska AB in January 2014 Quince Quince grew book by 8% to R2bn Retained A+ national credit rating Credit growth driven across all Nashua segment companies ECN Good growth in ECN network traffic Almost new customer sites and 18% increase in traffic Interconnect reductions in April 2014 assisted with margin improvements Realigned PABX business towards SME market 17

18 Nashua focus areas 1. Drive market share growth and resultant annuity revenues Single brand to be offered through the franchise network Maintain benefits of entrepreneurial flair through shareholder restructuring in key franchises to allow for a minimum 20% ownership by management Extension of B2B product lines through distribution network (Virtual PABX, ISP, financial services) 2. Cross-selling of selected products across segment e.g. ECN voice product through Nashua-branded franchises 3. Extract efficiencies across group companies Shared services: logistics, technical support and back-office functions 4. Measured expansion into new African territories 5. Extract value from Prodoc 18

19 Reutech Peter van der Bijl 19 November 2014

20 Reutech salient features Market sector (Rm) % change SOEs 30% Commercial 27% Revenue 1 000, ,9 (2) Operating profit 169,7 207,0 (18) Defence 43% Profit margin 16,9% 20,3% % Revenue exports Local 51% Exports 49% 20

21 Reutech commentary Preserved revenue despite lack of Fuchs export sales, due to market penetration in HF radio sales and commercial product offerings Delivery of coastal surveillance radars First sales in South Africa Planned further expansion in the Middle East Radar and Solutions businesses are well supported with R&D funding for new products Radio communications long-term project expected to commence in mid-2015 Moving Unify (Siemens) into Reutech Solutions will aid future extraction of synergies Business restructured Sales effort refocused towards enterprise market All divisions achieved transformation targets 21

22 Reutech focus areas 1. Expand direct product sales into the Middle East and Asian markets Long-term supply contracts for remote turret systems (Rogue) HF radios (SAAB acquisition) move into new territories Mining surveillance radar sales into large new markets explore new geographies 2. Bring new products into portfolio Client funded research and development projects are nearing completion New generation airborne radio 3. Large European partner sales of Reutech products Remote turrets, radars, fuzes 4. Systems bids to SOEs and municipalities Communications networks, key-point security systems 22

23 CBI-electric Alan Dickson 19 November 2014

24 CBI-electric % Factory capacity utilisation Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Low voltage Energy cables Copper telecom cables Fibre telecom cables (Rm) % change Revenue 3 610, ,7 3 Operating profit 427,6 505,5 (15) Profit margin 11,8% 14,4% Copper price R 000 per tonne avg R78k avg R72k 65 avg R67k 60 Sep-11 Sep-12 Sep-13 Sep-14 24

25 CBI-electric commentary SA labour unrest dominated financial performance on average 6 weeks of disruption Local market performance continued Awarded primary SOE agreements Strong market shares in renewable energy and distribution International operations yielded lower volumes Telecommunications circuit breakers into the United States and Europe decreased Asian rail markets improved Value-added initiatives had mixed results Photo-voltaic conversion boxes did not achieve desired results New HV line has been commissioned and successfully delivered two projects Accessory business grew by 25% with an export component of 30% Transformation targets were achieved by all companies Excellent working capital management 25

26 Focus areas 1. Margin control Production efficiency improvements Improved Solutions performance within Low Voltage 2. Continued growth in value added segment Installation and maintenance of power cable circuits Accessory business 3. Indicators point to a softening in local demand Increased drive into Africa 26

27 The way forward Alan Dickson 19 November 2014

28 The way forward 1. Elimination of once-off costs in 2014 Direct labour unrest o Three-year wage agreements were signed in July 2014 Impairments o Projected future cash flows for remaining goodwill provides sufficient headroom In principle settlement agreement reached with the Competition Commission 2. Improved segmental results Nashua segment Double digit growth expected in Nashua ECN o Rapidly increasing minutes carried by the network o Margin enhancement due to drop in interconnect rate expected to provide continued benefit 28

29 The way forward 2. Improved segmental results Nashua segment continued Nashua Office Automation o Prodoc has returned to profits due to appropriate cost cutting and improved sales» Significant deals since year-end of SEK41m o Improved business model efficiency in South Africa» Shared service implementation o Better leverage the advantages of a franchise model» Nashua brand strength to be consolidated» Improve product offering to the Nashua distribution channel, by taking advantage of full product set offered under the Nashua banner (such as ECN s VoIP offering) 29

30 The way forward 2. Improved segmental results Reutech Increased US dollar based revenue streams o USD27m order received from the Middle East o HF radio sales to the Far East continue to accelerate SANDF radio communications capital project commences mid

31 The way forward 2. Improved segmental results CBI-electric Project based business will accelerate o Orders on hand for the power installations division amount to R197m o CBI Solutions has completed the low margin renewables business South African SOE long-term frame agreements have been secured o Current order book for cable sales stands at R736m Dollar based Africa sales are expected to increase significantly Increased operational efficiencies are being achieved o Procurement initiatives o Manufacturing efficiencies 31

32 The way forward 3. Allocation of capital Capital is available Net cash proceeds from the Nashua Mobile transaction are expected to amount to approximately R2bn Facilities in place to further leverage the Quince balance sheet Low current leveraging of the Reunert balance sheet Process A detailed strategic review has commenced The outcome will be approved by the Reunert board in March 2015 The review will deliver o Targeted strategic acquisitions o Degree of investment required into existing businesses o Consideration of a share buy-back o Unlikely to be a fourth leg 32

33 2014 RESULTS PRESENTATION For the year ended 30 September November 2014