PRESENTATION TO FUND MANAGERS & FINANCIAL ANALYSTS. 25 November 2013

Transcription

1 1 PRESENTATION TO FUND MANAGERS & FINANCIAL ANALYSTS Business update 25 November 2013

2 2 Agenda SECTION 1 SECTION 2 SECTION 3 SECTION 4 Focusing on growth Group Five business model Business Update Outlook and management focus

3 3 01 SECTION 1 Focusing on growth

4 MOST RECENT GLOBAL AND REGIONAL SURVEYS INDICATE A RETURN TO GROWTH 2013 growth forecast by region Group Five geographical strategy focused on high growth Africa and CEE 22% 19% 15% 12% Central/South America Africa Rest of Europe Asia 11% North America 9% 9% Australia United Kingdom Sample size : 165 companies, 10 from South Africa 8% Middle East

5 MOST RECENT GLOBAL AND REGIONAL SURVEYS INDICATE A RETURN TO GROWTH M t positive Most iti countries: ti Central/South America and Africa

6 MOST RECENT GLOBAL AND REGIONAL SURVEYS INDICATE A RETURN TO GROWTH X The IMF growth forecasts for sub-saharan Africa: 5% in % in 2014 Growth remains robust in most parts of the region.

7 MOST RECENT GLOBAL AND REGIONAL SURVEYS INDICATE A RETURN TO GROWTH L Least t positive iti countries: ti A t li U Australia, United it d Kingdom and Middle East

8 MOST RECENT GLOBAL AND REGIONAL SURVEYS INDICATE A RETURN TO GROWTH Group Five solid experience and positioning for public infrastructure and energy gy 66% 42% 38% Main market drivers 3 % 37 29% Government infrastructure plans Global economic growth Population growth Urbanization Access to new energy resources 28% Privatization via Public Public Private Partnerships p

9 MOST RECENT GLOBAL AND REGIONAL SURVEYS INDICATE A RETURN TO GROWTH 54% Top priorities for new industry sectors Group Five strategy is based on building technical skills to service seven sectors which correlate with the priority sectors. s Power Oil + Gas Wt Water Mining i Transport Industrial Real estate tt 27% 25% 23% 17% 17% 15% 14% 13% 11% 7% Power/ energy Mining Water Related Rail Office/ Roads/ Industrial retail Educational bridges Other Healthcare Housing

10 MOST RECENT GLOBAL AND REGIONAL SURVEYS INDICATE A RETURN TO GROWTH Survey Relevance to SA construction strong correlation with global themes TOP priorities for new industry sectors: Overall SA (n = 10) Power/energy 57% Power/energy Water related 28% Water related 50% Mining 27% Mining 40% Rail 24% Rail 30% Roads/bridges 18% Roads/bridges 20% Industrial 16% Industrial 0% Healthcare 15% Healthcare 10% Office/retail 13% Office/retail 10% Housing 12% Housing 20% 70% Educational 7% Educational 10% Other 18% Other 10% N = KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. *Low base findings are directional in nature Figures do not add up to 100% because multiple responses were allowed 10

11 MOST RECENT GLOBAL AND REGIONAL SURVEYS INDICATE A RETURN TO GROWTH Impediments to the themes Impediments that will most negatively impact the global infrastructure and construction industry 2.3 Prioritization Of Market Impediments Impacting The Global Infrastructure Overall SA (n = 10) And Construction Industry Over The Next Performance Year Budget deficits and public funding crisis 9% 72% 0% 80% Private sector financing availability 15% 43% 10% 30% Regulation 7% 24% 10% 40% Increased complexity and size of projects 3% 13% 0% 20% Sustainable development N = 156 3% 4% First Priority 0% 10% Second Priority 2013 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Figures do not add up to 100% because multiple responses were allowed 11

12 12 02 SECTION 2 Group Five business model

13 Our business model services the full infrastructure lifecycle in seven sectors 13 Mining Industrial Power Oil & Gas Water Real Estate Transport Develop Invest Design Supply Build Operate Service Investments + Transport Transport Transport Transport Concessions Real Estate Real Estate Real Estate Real estate E+C Power Power Power Power Power Oil & Gas Oil &Gas Oil & Gas Industrial Manufacturing Water All sectors Build &Housing Real Estate Real Estate All excl Civil All excl Real Engineering Real estate estate Projects Mining Mining Industrial Industrial Mining Multiple revenues and improved blended margin

14 The group s strategy has four components 14 * Total secured contracting order book at October 2013

15 The group s strategy has four components 15

16 16 03 SECTION 3 Business Update

17 Financial performance 17 H1 F2014 Trading performance Revenue Trading In line with order book forecast some delay in housing roll out Margins still under pressure affected by weak building & housing trading environment slow down in profit recognition on selected civil engineering contracts early stage of completion on some contracts t margin guidance updated

18 Competition commission -status update 18 The evidentiary and technical issues remain The group is not unwilling to settle provided the terms are reasonable On-going engagement and negotiation with the Commission Provision for Commission administrative fine the fine quantum has not been disclosed due to the sensitivity of negotiations the group is not aware of any additional information or change in circumstances or events which necessitates an increase to this provision We have received limited enquiries from clients and these relate to specific projects that have been mentioned in the public domain* These enquiries have been addressed and responses have been provided * referred to in the consent agreements concluded with other construction entities

19 Financial performance Secured contracting order book at October Total Building & Housing Civil Engineering Projects E+C Total order book Rm * % Over-border 19% 1% 42% 43% 16% Public over-border 5% - 22% - - Private over-border 14% 1% 20% 43% 16% % Local 81% 99% 58% 57% 84% Public local 31% 42% 39% 20% 8% Private local 50% 56% 20% 37% 76% 1 year order book - Rm year order book as % of F2013 revenue 113% 129% 97% 55% 198% Total order book as % of F2013 revenue 157% 189% 114% 87% 289% * Total R14,7bn order book Stable against June 2013 order book of R14,2bn Values include only Group Five s portion of fully secured contracting construction work

20 Financial performance Secured contracting order book at October 2013 product and geographic diversity 20 By geography West Africa Central Africa East Africa 1% 12% 5% R14,665 bn 1% By sector Mining Industrial Power 35% 10% 8% 1% 26% R14,665 bn South Africa Rest of Southern Africa R14,233 81% bn Oil & gas Water Real estate 8% 13% Transport Decrease in relative weighting in over-border book as a result of large SA REIPP* & real estate contracts awarded Key sector penetration progressing well: Power up from 22% to 26% Mining down from 10% to 8% * Renewable Energy Independent Power Producer Programme

21 Financial performance Secured operations and maintenance order book at October 2013 annuity income 21 Actual revenue Order book Rm F2011 F2012 F2013 F2014 (Q2-Q4) 3-year to F2017 Total secured * Transport O+M ** Industrial, Oil & Gas O+M ** Power O+M ** Total * Total secured O+M** order book is conservative valuation to first review date of secured contracts only ** O+M = Operations & Maintenance Services

22 Financial performance Multi-year target opportunity pipeline at October Total as at October 2013: R213bn International split Local split By sector (Rbn) Total Private Public Total Private Public Total Pre- Tender & Tender^ Mining Industrial Power Oil and gas Water Real estate - Building Real estate - Housing Transport Total Pre-Tender & Tender^ R213bn potential pipeline up from R179bn at June % = International opportunities 36% = Public sector focused * These are the projects targeted by the group not to be confused with the Contracting (Construction and E+C) order book ^ Value within the multi-year opportunity pipeline in pre-tender and tender stage

23 Financial performance Margin review 23 Investments and Engineering and Manufacturing Concessions Construction Guidance at June 15 20% range including fair value 3 5% range 2013 adjustments Updated Unchanged 3 5%, short term low end of range 6 8% range Unchanged

24 Financial performance 24 Margin review Construction Building & Housing Civil Engineering Projects Guidance at June % short term low end of range 4 6% range short term could be low end of range 5 8% range Updated 2 4% short term low end or below range 4 6% range short term will be low end of range Unchanged

25 Financial position Balance sheet Balance sheet largely unchanged Net ungeared position maintained Capital expenditure monitored and contained Cash flow and liquidity Local credit rating review rating unchanged National Long-term A - (Stable) National Short-term A1- (Stable) Cash position largely in line with forecast working capital unwind focus on continued working capital cycle management client collection of past due but not impaired debtors middle east quarterly payments received according to payment schedule 25

26 26 04 SECTION 4 Outlook and management focus

27 Business outlook 27 Domestic SA markets showing tentative signs of improvement in certain sectors Margins still low SA Market No visibility on timing of new public sector infrastructure cycle spend Sector strategies gaining momentum, particularly in power Labour activism on-going concern Anti-competitive revelations impacting government s confidence in the industry and holding back spend until resolved CEE Current concessions portfolio performing well with value growth Concessions market returning new territories, new partners New project pipeline emerging Rest of Africa Market share gain vs peers Experience in 18 counties, investigating 4 more Growing African pipeline in buildings, housing, roads, rail, ports, power, oil and gas. Concession demand improving; takes time to develop 56% of pipeline ex-sa, robust in mining, power, transport; water improving 19% of Contracting (Construction and E+C) order book in Africa 42% of Civil Engineering order book 43% of Projects order book

28 Business outlook 28 Order books Total reported order book now R19,2bn Construction and E+C order book at R14,7 bn Non-construction, annuity-type, multi-year secured order book now R4.6bn Expected revenue growth in F2014 Group margin Execution excellent loss maker ratio at all time low at 8 % supports margin. Margin guidance per segment of operations updated Cash and balance sheet Working capital enhancements & retained cash on hand of R2,9bn at June 2013 Unwind expected in short term against advance payments and WC cycle Strong balance sheet - net ungeared Returns Improving as per targets Slow market recovery Corrective action taken in F2012/3 Business strategy and transition to higher return model Earnings Modest improvement expected in F2014

29 Management focus value creation 29 Strong drive into energy and primary infrastructure sectors, being high growth We will invest in a Sector focused champions and capacity building Use industry leading best employer status to attract and retain new talent Preserve Level 2 BBBEE status as differentiator Regional growth targeted organic, but joint venturing or acquisitions not ruled out, in sectors that drive specific high growth countries/regions in Africa, CEE Technology uplift sector focused incremental acquisition of technology through partnerships, but acquisitions could be considered Expand full range of technical O+M services in support of annuity income streams, real estate, transport, power and industrial, Oil + gas Geographically diverse PPP and concessions business of scale off Intertoll and expanding O+M services order-book Manufacturing going deeper into infrastructure components and securing technology Complete internal fitness programme, restructure of operations and support and risk and control rigor

30 Forward looking statements 30 This presentation which sets a business update for Group Five Limited as at November 2013 contains forward-looking statements, which have not been reviewed or reported on by the Group s auditors, with respect to the Group s financial condition, results of operations and businesses and certain of the Group s plans and objectives. In particular, such forward looking statements include statements relating to, amongst others, the Group s future performance; future capital expenditures, acquisitions, divestitures, expenses, revenues, financial conditions, dividend policy, and future prospects; business and management strategies relating to the expansion and growth of the Group; the effects of regulation of the Group s businesses by governments in the countries in which it operates; expectations regarding the operating environment and market conditions. Forward-looking statements t t are sometimes, but not always, identified d by their use of a date in the future or such words as will, anticipates, aims, could, may, should, expects, believes, intends, plans or targets. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future, involve known and unknown risks, uncertainties and other facts or factors which may cause the actual results, performance or achievements of the Group, or its industry to be materially different from any results, performance or achievement expressed or implied by such forward-looking statements. Forward-looking statements are not guarantees of future performance and are based on assumptions regarding the Group s present and future business strategies and the environments in which it operates now and in the future. Undue reliance should not be placed on such statements and opinions because by nature, they are subjective to known and unknown risk and uncertainties and can be affected by other factors that could cause actual results and Group plans and objectives to differ materially from those expressed or implied in the forward looking statements. Neither the Group nor any of its respective affiliates, advisors or representatives shall have any liability whatsoever (based on negligence or otherwise) for any loss howsoever arising i from any use of this presentation ti or its contents t or otherwise arising in connection with this presentation and do not undertake to publicly update or revise any of its opinions or forward looking statements whether to reflect new information or future events or circumstances otherwise.

31 Questions & answers 31

32 For more information please contact: 32 Mike Upton Chief Executive Officer Telephone: p Cristina Teixeira Our website: Chief Financial Officer Telephone: cteixeira@groupfive.co.za

33 Appendix 1 - Secured contracting order book at June Total Building & Housing Civil Engineering Projects E+C Total order book Rm * % Over-border 21% 2% 44% 63% 15% Public over-border 7% - 27% - - Private over-border 14% 2% 17% 63% 15% % Local 79% 98% 56% 37% 85% Public local 31% 44% 45% 29% - Private local 48% 54% 11% 8% 85% 1 year order book - Rm year order book as % of F2013 revenue 119% 135% 97% 62% 225% Total order book as % of F2013 revenue 153% 173% 110% 69% 350% * Total R14,2bn order book +26% from R11,3bn at June % from R13,5bn at Dec 2012 Values include only Group Five s portion of fully secured construction work, order book independently assured

34 Appendix 2 - Product and geographic diversity- secured order book at June By geography West Africa Central Africa East Africa South Africa Rest of Southern Africa 2% 1% By sector 12% 6% 11% 10% 1% Mining R14,233 bn Industrial 22% R14,233 bn Power 34% Oil & gas 79% Water 7% 15% Real estate Transport Decrease in relative weighting in over-border book as a result of large SA REIPP* & real estate contracts awarded in the period Key sector penetration progressing well: Oil & Gas up from 8% to 15% Power up from 20% to 22% Mining down from 20% to 10% * Renewable Energy Independent Power Producer Programme

35 Appendix 3 - Secured operations & maintenance order book at June 2013 annuity income 35 Actual revenue Rm F2011 F2012 F2013 F2014 Order book 3-year to F2017 Total secured * Transport O+M ** Industrial, Oil & Gas O+M ** Power O+M ** Total During the period the power annuity-type revenue stream was added * Total secured O+M** order book is conservative valuation to first review date of secured contracts only ** O+M = Operations & Maintenance Services

36 Appendix 4 - Multi-year target opportunity pipeline at June 2013 Total as at 30 June 2013: R179bn International split Local split By sector (Rbn) Total Private Public Total Private Public Total Pre- Tender & Tender^ Mining Industrial Power Oil and gas Water Real estate - Building Real estate - Housing Transport Total Pre-Tender & Tender^ R179bn potential pipeline up from R124bn at Dec % = International opportunities 39% = Public sector focused 64% of group awards during the period came from the pipeline presented in Jun 2012 * These are the projects targeted by the group not to be confused with the Contracting (Construction and E+C) order book ^ Value within the multi-year opportunity pipeline in pre-tender and tender stage 36