ILIAD AFRICA LIMITED UNAUDITED RESULTS FOR THE PERIOD ENDED 30 JUNE 2014
AGENDA Strategic alignment Building industry perspec ve Key industry trends Financial overview Divisional overview Current market trends Prospects 2
Strategic alignment DRIVING FORCE Our strategy is to meet the product needs DRIVING FORCE of the building industry through focused sourcing, retailing and redistribu on of goods into selected markets Top of the Industry profitability 3
Strategic alignment PHILOSOPHY Maximise stakeholder value, through a decentralised front end, supported by an integrated back office DRIVING FORCE PHILOSOPHY Top of the Industry profitability 4
Strategic alignment CORE COMPETENCIES To prosper we must excel at: Customer orienta on Market intelligence DRIVING FORCE PHILOSOPHY Product knowledge Procurement CORE COMPETENCIES Trading skills Leadership/Managerial excellence Top of the Industry profitability 5
Strategic alignment STRATEGIC THEMES Market and brand Sales Procurement DRIVING FORCE PHILOSOPHY Effec ve cost base Human capital / Stakeholders B- BBEE STRATEGIC CORE COMPETENCIES Governance THEMES Top of the Industry profitability 6
Strategic alignment VALUES Customer focus Entrepreneurial Responsible DRIVING FORCE PHILOSOPHY Integrity Diversity Respect VALUES CORE COMPETENCIES STRATEGIC Engaging THEMES Energy and passion Top of the Industry profitability 7
Group Structure GROUP STRUCTURE ILIAD GROUP CEO - Eugene Beneke GENERAL BUILDING MATERIALS SPECIALISED BUILDING MATERIALS INLAND MD - Gerrit du Preez MD George Sentoo COASTAL MD - Rowland Meek 8
Strategic themes and detailed planning STRATEGIC ROADMAP Balanced por olio contribu on Growth through a combina on of organic and acquisi ve expansion (RSA) Consolidated brand por olio Consolidated IT pla orm Sustainable top of the industry profitability Integrated approach to procurement Decentralised front- end trader focus Back- office consolida on and efficient support 9
Project Keystone PROJECT KEYSTONE ke ston noun a central stone at the summit of an arch, locking the whole together. The term KEYSTONE is used figura vely to refer to the suppor ng element of a large structure, without it the whole structure would fail. 10
Project Keystone PROJECT KEYSTONE Project Keystone 1 IT Strategy 2 Shared Services 3 Procurement Alignment of the IT strategy through the implementation of an integrated IT platform Re-evaluate the current back-office processes & structure to support the strategy To enhance the current procurement model in order to support the business strategy The founda on for Keystone with joint collabora on from leadership & staff 11
Project Keystone IT STRATEGY OBJECTIVE Alignment of the IT strategy through the implementa on of an integrated ERP pla orm PROGRESS Single ERP pla orm - Kerridge 100 % of the conversions completed by August 2014 Focus on op misa on ini a ves Pla orm for various projects in support of the business strategy Total cost within the budget of R55 million 12
Project Keystone SHARED SERVICES OBJECTIVE To re- evaluate the current back- office processes & structure to support the strategy PROGRESS IT pla orm integra on an enabler Payroll 80% consolidated Group treasury, integrated accounts payable and administra on under review Scoping of addi onal work streams in progress 13
Project Keystone PROCUREMENT OBJECTIVE To enhance the current procurement model in order to support the business strategy PROGRESS Ini al review completed Centre- led procurement model ini ated Approved supplier list ra onalised Significant progress on rebatable purchase objec ves Next level of review ini ated 14
Group Features GENERAL BUILDING MATERIALS Locally sourced Non- differen ated Wide range of products Focused choice per range SPECIALISED BUILDING MATERIALS Differen ated or value- added products Significant percentage imported Range of specialist products Extensive choice per range 15
Building Industry BUILDING INDUSTRY PERSPECTIVE 35% Residen al 30% Addi ons, altera ons and refurbishments 35% Non- residen al Total building industry R194 billion Labour R78 bn Materials R116 bn Direct R46 bn 40% Distribu on R70 bn 60% 16
Key Industry Trends KEY INDUSTRY TRENDS Building plans passed (BPP) Building plans completed (BC) Mortgage loans Lending criteria Lumber sales 17
Key Industry Trends TOTAL BUILDING PLANS PASSED AND BUILDINGS COMPLETED BPP & BC Total Building (Including A&A): 1993-2014 by month: m2 (Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: TOTAL BLDNG BC&BPP R) 2 200 000 2 000 000 1 800 000 The m2 of Total Building BC has decreased by some 40% since 2009. The decline has been arrested and trend is moving sideways following the trend in BPP. 1 600 000 1 400 000 1 200 000 m2 1 000 000 800 000 600 000 400 000 200 000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 BC TOTAL BUILDING: M2 BPP TOTAL BUILDING: M2 12 per. Mov. Avg. (BC TOTAL BUILDING: M2) 12 per. Mov. Avg. (BPP TOTAL BUILDING: M2) 18 BMI-BRSCU
Key Industry Trends TOTAL RESIDENTIAL BUILDING PLANS PASSED AND BUILDINGS COMPLETED BPP & BC Total Residential (Including A&A): 1993-2014 by month: m2 (Source: StatsSA; BMI-BRSCU: BC by Month and Type of Building: Chart 28(14)) 1 700 000 1 600 000 1 500 000 1 400 000 1 300 000 The BC m2 of Total Residential has decreased by some 50% since 2007. The decline has been arrested and trend is moving sideways. 1 200 000 Square Metres 1 100 000 1 000 000 900 000 800 000 700 000 600 000 500 000 400 000 300 000 200 000 100 000 0 1993 1994 1995 1996 1997 1998 1999 BC TOTAL RESIDENTIAL: M2 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 BPP TOTAL RESIDENTIAL: M2 12 per. Mov. Avg. (BC TOTAL RESIDENTIAL: M2) 12 per. Mov. Avg. (BPP TOTAL RESIDENTIAL: M2) 2011 2012 2013 2014 19 BMI-BRSCU
Key Industry Trends TOTAL NON- RESIDENTIAL BUILDING PLANS PASSED AND BUILDINGS COMPLETED 600 000 500 000 BPP & BC Total Non Residential (Including A&A): 1993-2014 by month: m2 (Source: StatsSA; BMI-BRSCU: BC by Month and Type of Building: Chart 29(14)) The BC m2 of Total Non Residential has decreased by some 50% since 2009. The decline has been arrested and trend is tending upward. Square Metres 400 000 300 000 200 000 100 000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 BC TOTAL NON RESIDENTIAL: M2 BPP TOTAL NON RESIDENTIAL: M2 12 per. Mov. Avg. (BC TOTAL NON RESIDENTIAL: M2) 12 per. Mov. Avg. (BPP TOTAL NON RESIDENTIAL: M2) 20 BMI-BRSCU
Key Industry Trends MORTGAGE LOANS 400 000 Cum Actual New Mortgage Loans and Readvances applied on Existing Buildings: FC 2014 vs 2013 and 2007 by month (Source: SARB, BMI-BRSCU Workings) 45% 350 000 CUM YTD ACTUAL CUM YTD FORECAST 40% R Millions (Current Values) 300 000 250 000 200 000 150 000 100 000 35% 30% 25% 20% 15% 10% 50 000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Y/Y Cum Actual 2007 25 978 62 107 100 948 132 633 173 165 202 794 234 730 266 502 294 231 326 922 358 811 384 052 Y/Y Cum Actual 2013 14 495 31 481 49 143 68 348 88 688 107 717 128 769 149 209 168 310 192 131 213 266 230 454 Y/Y Cum Forecast 2014 18 193 42 775 69 259 87 735 108 355 128 099 148 048 169 090 189 653 212 581 234 671 252 274 5% 0% BMI-BRSCU Y/Y Cum Forecast 2014 vs 2013 % Change 25.51% 35.88% 40.93% 28.36% 22.18% 18.92% 14.97% 13.32% 12.68% 10.64% 10.04% 9.47% 21
Key Industry Trends LENDING CRITERIA BANKS' LENDING CRITERIA for HOUSEHOLDS Percentage of respondents VERY EASY < EASIER < > STRICTER > VERY STRICT 100 90 80 70 60 50 40 Average 68 EASY National Credit Act Introduced Global Financial Crisis VERY STRICT STRICT EASY NORMAL 30 02 03 04 05 06 07 08 09 10 11 12 13 Source: BER; Ernst & Young; MFA DATABASE (Economic upswings shaded) 22
Key Industry Trends LUMBER SALES Lumber Sales by End-use: Local Building: Cum Y/Y 2014 vs 2013 (May) (Source: Crickmay & Associates, BMI-BRSCU Workings) 1400 000 18% Cubic Metres 1200 000 1000 000 800 000 600 000 400 000 200 000 CUM YTD ACTUAL CUM YTD FORECAST % Change Cum Y/Y Local Building: 2014 vs 2013 16% 14% 12% 10% 8% 6% 4% 2% - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2013 Cum Y/Y Local Building 79 559 172 349 262 215 352 292 447 929 545 255 655 341 771 901 878 457 1009 80 1127 56 1185 17 2014 Cum Y/Y FC Local Building 93 078 199 060 299 608 403 134 510 846 617 908 727 037 841 904 953 182 1070 367 1190 491 1259 978 % Change Cum Y/Y FC Local Building: 2014 vs 2013 16.99% 15.50% 14.26% 14.43% 14.05% 13.32% 10.94% 9.07% 8.51% 6.00% 5.58% 6.31% 0% 23
Key Industry Trends OBSERVATIONS Industry infla on rate increased to approximately 4,5% Residen al building plans con nuing to show signs of gradual recovery Consumer confidence levels nega vely impacted by macro economic factors - Low GDP growth - Challenges in the labour environment - Increasing consumer infla on - Increasing interest rates Building industry confidence levels gradually improving Bank s lending criteria con nues to impact the industry The industry remains highly compe ve 24
Financial Overview SALIENT FEATURES 2014 INTERIM Revenue (Group) down 3,3% Revenue (Comparable stores) up 4,6% Gross margin percentage 27,8% 2013: 26,7% Gross margin (Rand) up 0,7% Opera ng expenses down 4,4% Opera ng margin 2,8% 2013: (2,8%) Adjusted opera ng margin 2,8% 2013: 2,9% Opera ng profit/(loss) before interest and tax R58,7m 2013: (R61,9m) Earnings /(Loss) per share (cents) 30,3 2013: (39,0) Headline earnings per share (cents) 30,0 2013: 0,4 25
Financial Overview SALIENT FEATURES 2014 INTERIM (CONTINUED) Net overdra R68,2m 2013: R127,1m Proceeds on disposals of business assets R18,2m 2013: Nil Working capital to sales ra o 9,2% 2013: 9,3% Share buy- back 1,8% 2013: 0% Capex R20,4m 2013: R21,9m 26
Financial Overview IMPACT OF PORTFOLIO ADJUSTMENT - REVENUE R 000 30 June 2014 30 June 2013 % Change Comparable stores 2 111 327 2 018 687 4,6 Affected opera ons - 165 807 - Group Revenue 2 111 327 2 184 494 (3,3) 27
Financial Overview IMPACT OF PORTFOLIO ADJUSTMENT - EXPENSES R 000 30 June 2014 30 June 2013 % Change Expenses (Excl. deprecia on and amor sa on) 509 139 623 334 (18,3) Normalised expenses 509 139 532 417 (4,4) Por olio adjustment expenses - 90 917-28
Financial Overview IMPACT OF PORTFOLIO ADJUSTMENT - PROFITABILITY (EBITDA) R 000 30 June 2014 30 June 2013 % Change Comparable stores 78 191 77 672 0,7 Affected opera ons - (26 793) - Group EBITDA 78 191 50 879 53,7 29
Financial Overview Gross Margin Percentage (%) 30 25 20 15 10 5 0 2010 2011 2012 2013 2014 30
Financial Overview Working Capital (Rm) 1000 900 800 700 600 500 400 Accounts Receivable Accounts Payable Inventory 300 200 100 0 2010 2011 2012 2013 2014 31
Financial Overview Earnings per share (cents) 60 50 40 30 Interim Final 20 10 0 2009 2010 2011 2012 2013 2014 * Excluding restructuring and impairment costs 32
Financial Overview CONDENSED SEGMENT CONTRIBUTION Divisions General Building Materials Specialised Building Materials Revenue 81% Revenue 19% 33
Financial Overview CONDENSED STATEMENT OF COMPREHENSIVE INCOME R 000 30 June 2014 30 June 2013 % Change Revenue 2 211 327 2 184 494 (3,3) Opera ng profit before restructuring costs Opera ng profit/(loss) before interest and taxa on Comprehensive income/(loss) for the period 58 685 29 006 102,3 58 685 (61 911) 194,8 41 065 (53 925) 176,2 Earnings/(loss) per share (cents) 30,3 (39,0) 177,7 34
Financial Overview CONDENSED STATEMENT OF FINANCIAL POSITION R 000 30 June 2014 30 June 2013 EQUITY AND LIABILITIES Total equity 742 811 708 379 Non- current liabili es 5 962 6 088 Current liabili es 911 718 *1 132 923 Total equity and liabili es 1 660 491 1 847 390 *Incl. liabili es directly associated with assets held for sale 35
Financial Overview CONDENSED STATEMENT OF FINANCIAL POSITION R 000 ASSETS 30 June 2014 30 June 2013 Property, plant and equipment 140 945 130 358 Intangible assets 232 241 233 521 Long term receivable 5 270 5 573 Deferred taxa on 52 559-60 041 Current assets 1 229 476 *1 417 897 Total assets 1 660 491 1 847 390 *Incl. assets directly associated with assets held for sale 36
Financial Overview CONDENSED STATEMENT OF CASH FLOWS R 000 30 June 2014 30 June 2013 Cash flows from opera ng ac vi es (58 889) 2 128 Cash flows from inves ng ac vi es (702) (26 847) Cash flows from financing ac vi es (47 351) (25 478) Decrease in cash and cash equivalents (106 942) (50 197) Cash and cash equivalents at the beginning of the period 38 783 (76 917) Cash and cash equivalents at the end of the period (68 159) (127 114) 37
Divisional Overview - GBM GENERAL BUILDING MATERIALS OVERVIEW 38
Divisional Overview - GBM GENERAL BUILDING MATERIALS GENERAL BUILDING MATERIALS 46 OUTLETS INLAND 24 CENTRAL 6 EAST 9 NORTH/WEST 9 COASTAL 22 WESTERN CAPE 7 EASTERN CAPE 6 KWAZULU- NATAL 3 NORTHERN CAPE/FREE STATE 6 39
Divisional Overview - GBM REVENUE UP 1,8% Revenue growth achieved by both Inland and Coastal regions Improvement on gross margin percentages Consolidated divisional procurement contributed to this result BUCO marke ng campaign and brand equity building ini a ves in progress ERP conversion 100% completed Well posi oned to capitalise on the gradual improvement in the market 40
GBM Inland REVENUE UP 4,9% An improved 2014 performance, compared to a challenging 2013 first half result Sa sfactory performance in Mpumalanga Subdued trading ac vity in Limpopo Cash & Carry stores Certain regions, to an extent, impacted by the challenges faced in the mining industry New Acornhoek store profitable New Koma poort store to be opened by end October 2014 41
GBM Coastal REVENUE UP 0,7% (COMPARABLE STORES) 2014 to date reflects a subdued but profitable result Muted trading environment in the Western Cape Commendable performance in the Eastern Cape Kathu store reloca on (Northern Cape) completed in March 2014 New Western Cape store to be opened by January 2015 42
Divisional Overview - SBM SPECIALISED BUILDING MATERIALS OVERVIEW
Divisional Overview - SBM SPECIALISED BUILDING MATERIALS SPECIALISED BUILDING MATERIALS 26 OUTLETS IRONMONGERY 11 WHOLESALE PLUMBING & HARDWARE 3 BOARDS 11 EQUIPMENT HIRE 1 44
Divisional Overview - SBM REVENUE UP 9,9% (COMPARABLE STORES) Commendable revenue growth Recovery in gross margin percentages Sa sfactory profitability improvement Por olio adjustments (disposals) implemented in 2013 and benefits realised Ceramics Cash & Carry (Na onal Tile Traders) Ceramics (Ferreiras) Timber Wholesale (Thorpe Timber and Timber Preserva on Services) ERP conversion completed by the end of July 2014 45
Divisional Overview - SBM IRONMONGERY Another consistent performance Con nued market share leadership Real growth delivered by most opera ons Design Hardware targeted for improved results WHOLESALE PLUMBING AND HARDWARE Sa sfactory revenue and profitability growth Significant importer impacted by the exchange rate vola lity Compe ve trading environment resulted in gross margin pressure 46
Divisional Overview - SBM BOARDS Commendable profitability performance driven by the Chipbase businesses Aggressive compe tor ac vity within the Ci wood segment of the business Scope for Chipbase expansion EQUIPMENT HIRE (B- One) Sa sfactory revenue growth Significant Gauteng market share Ongoing sales mix adjustment 47
Market Trends CURRENT MARKET TRENDS Affordability Confidence Ac vity 48
Affordability TOTAL HOUSING INVESTMENT vs HOUSEHOLD DEBT RATIO Rm AT CONSTANT 2012 PRICES 60000 50000 40000 30000 20000 10000 DEBT LEVELS HAVE REACHED A PEAK, BUT REMAIN HIGH 90 80 70 60 50 40 30 HHOLD INDEBTEDNESS % OF DISPOSABLE INCOME 0 70 73 76 79 82 85 88 91 94 97 20 03 06 09 12 Source: SARB; MFA DATABASE 20 TOTAL HOUSING Rm HOUSEHOLD DEBT RATIO 49
Affordability PRIME RATE COMPARED TO BPP NUMBER OF HOUSES (>80m²) BPP ANNUAL PERCENTAGE CHANGE 80 8 10 60 12 BPP HOUSES ANNUAL PERCENTAGE CHANGE 40 20 0-20 14 16 18 20 22 24 PRIME RATE (INVERTED) -40 Introduction of National Credit Act 26 Banks' stricter lending criteria applied -60 28 81 84 87 90 93 96 99 02 05 08 11 14 Source: Stats SA; SARB; MFA DATABASE BPP NO OF HOUSES PRIME RATE 50
Confidence MFA COMPOSITE LEADING INDICATOR (CLIBI) FOR THE SOUTH AFRICAN BUILDING INDUSTRY 100 90 80 Shaded areas represent the upswing phases of the business cycle OPTIMISM PESSIMISM < 50 > OPTIMISM 70 60 50 40 30 20 10 0 71 74 77 80 83 86 89 92 95 98 01 04 07 10 13 Source: FNB / BER; SARB; MFA DATABASE PESSIMISM 51
Ac vity YEAR- ON- YEAR SALES RETAIL 52
Ac vity ANNUAL GDP GROWTH RATE IN SOUTH AFRICA 53
Ac vity TOTAL VEHICLE SALES & TOTAL REAL RESIDENTIAL PLANS PASSED ANNUAL PERCENTAGE CHANGE ANNUAL PERCENTAGE CHANGE 100 80 60 40 20 0-20 Shaded areas represent the upswing phases of the business cycle -40-60 71 74 77 80 83 86 89 92 95 98 01 04 07 10 13 Source: NAAMSA; STATS SA; SARB, MFA DATABASE (Economic upswings shaded) TOTAL VEHICLE SALES TOTAL RESIDENTIAL BPP 54
Ac vity TRANSFER DUTY PAID ANNUAL PERCENTAGE CHANGE in REAL TERMS ANNUAL PERCENTAGE CHANGE 80 60 40 20 0-20 ARROWS BELOW HIGHLIGHT CYCLICAL LEAD TIMES ECONOMIC UPSWINGS SHADED Thresholds Sharply Raised NCA Thresholds again raised in Feb 2011 Budget -40-60 DEMOCRATIC ELECTIONS ASIAN CRISIS GLOBAL CRISIS 90 91 92 93 94 95 96 97 98 99 20 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Source: DEEDS OFFICE; TREASURY; SARB; MFA DATABASE (Economic upswings shaded) 55
Ac vity INVESTMENT IN TOTAL HOUSING 1946-2020 AT CONSTANT 2012 PRICES 70 60 50 LONG TERM GROWTH 2 % p.a. 2nd 3rd 4th KUZNETS CYCLE RAND BILLION 40 30 1st 20 10 0 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 Source: SARB; MFA DATABASE 56
Ac vity 57
Prospects Market indicators reflect an opportunity for gradual growth Business growth a key focus area various feasibilities under review The balance sheet structure is a key growth enabler Further progress targeted on key strategic projects Leveraging the BUCO brand Use of IT as a strategic business enabler The business is well positioned as we move into the second half of 2014 and beyond 58
Questions 59
Thank You 60