Howden Africa Final Results Presentation 1 st April 2016

Transcription

1 Howden Africa 2015 Final Results Presentation 1 st April 2016 Howden Group 2014

2 Housekeeping In case of an emergency - Do not run - Proceed to the nearest exit - Wait for instructions at assembly points Refreshments are available after the meeting We expect the presentation to last for approximately 1 hour. Please hold your questions for the end of the presentation. We ask that you please turn off your mobile telephones. Howden Group

3 Forward-Looking Statements The material in this presentation is general background information about Howden s activities as at the date of this presentation. This information is given in summary form and does not purport to be complete and has been prepared solely for informational purposes. Information in this presentation should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities. This presentation or statements made during the presentation may contain forward looking information including statements regarding our intent, belief or current expectations with respect to Howden s businesses and operations, market conditions, results of operation and financial condition, capital adequacy, specific provisions and risk management practices. Investors/shareholders are cautioned not to place undue reliance on these forward looking statements. Forward-looking statements are based on Howden's current expectations and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forward-looking statements. These statements are based on a number of assumptions that are subject to change. The slides speak only as of this date. Howden disclaims any duty to update the information herein. The term Howden" in reference to the activities described in these slides may mean one or more of Howden's South African operating subsidiaries and/or their internal business divisions. Howden Group

4 2015 Results Highlights Thomas Barwald - CEO Howden Group

5 2015 Howden Africa Highlights Howden Group

6 2015 Howden Africa Highlights Howden Group

7 2016 ESAB Distribution Howden Group

8 Howden Africa 2015 Financial Performance Revenue Revenue (Aftermarket vs. New Build) R 1,800,000 R 1,600,000 R 1,400,000 1,588,022 1,483,276 R 1,200,000 34% Aftermarket R 1,000,000 R 800,000 R 600,000 R 400,000 66% New Build R 200,000 R 0 FY 2014 FY 2015 Revenue by Industry 7% Revenue of R million for 2015 is 6.6% behind % 3% The split of our business between Aftermarket and New Build remains similar to 2014 (In 2015 approximately 66% vs 68% in 2014). Our customers appetite across all industries for major original equipment manufacturing capital investment remains subdued, due to persistent slow economic activities and funding shortages. 54% 17% 3% Steel/Cement Transport HVAC Mining Petrochemical Industrial Power Power Generation work as a percentage of our business dropped 6% to 54% due largely to reduced sales volumes and discounts provided to Eskom. 14% Howden Group

9 Environmental Control Division Howden Group

10 Environmental Control Division ORDERS ORDERS R 350, ,200 R 300,000 R 250,000 R 200, ,300 R 150,000 R 100,000 R 50,000 51,747 67,305 R 0 H H FY 2014 FY 2015 Environmental Control division order intake was R311.2 million compared to R166.3 million in The business received some large orders in the first half of 2015 which resulted in this improvement. The division continues to have a large opportunity list but the award of orders from customers in the second half of 2015 has been slow. Howden Group

11 Environmental Control Division SALES SALES R 400, ,974 R 350,000 R 300, ,336 R 250, ,993 R 200,000 R 150, ,460 R 100,000 R 50,000 R 0 H H FY 2014 FY 2015 The Environmental Control division delivered an improved performance with revenue rising 25.6% to R366.0 million (2014: R291.3 million) as it successfully executed its opening order book and new orders awarded in the first half of Howden Group

12 Fan and Heat Exchanger Division Howden Group

13 Fan and Heat Exchanger Division ORDERS ORDERS R 1,600,000 R 1,400,000 1,421,400 R 1,200,000 1,106,500 R 1,000,000 R 800, ,946 R 600, ,905 R 400,000 R 200,000 R 0 H H FY 2014 FY 2015 Fans and Heat Exchangers division orders received during 2015 have decreased by 22.2% to R million compared to the corresponding period (2014: R million). There has been reduced order intake experienced in all key market segments in South Africa as customers engage in cost-minimisation strategies and defer all nonessential expenditure. Howden Group

14 Fan and Heat Exchanger Division SALES SALES R 1,400,000 1,296,686 R 1,200,000 1,117,302 R 1,000,000 R 800,000 R 600, , ,814 R 400,000 R 200,000 R 0 H H FY 2014 FY 2015 The Fans and Heat Exchangers division saw a decline in revenue of 13.8% to R million (2014: R million). The decline is a result of the challenging market conditions being faced in South Africa across our key market segments as customers seek to minimise or delay expenditure until conditions improve. Howden Group

15 Financial Overview Kevin Johnson - CFO Howden Group

16 Financial Overview Financial Performance 2015 Operating profit of R262.0 million is a 19.8% decline. The Environmental Control division s operating profit increased due to improved sales volumes. The Fans and Heat Exchangers division saw margins decrease from 24.5% to 19.1% on the back of reduced revenue volumes and increased pricing pressure. Central operations had the benefit of a one-off gain for the Company s defined benefit scheme (R19.8 million). Howden Group

17 Financial Overview Financial Performance 2015 Assets increased to R million. The major changes during 2015 have been a further increase in the business s cash and cash equivalents balance which has increased to R730.2 million. Liabilities decreased to R545.2 million. The major change during 2015 has been in trade and other payables as a result of paying amounts owed to Howden Group Limited that related to prior years after receiving the required approvals. Howden Group

18 Financial Overview Conclusion The performance for 2015 has been challenging for our key customers The Company remains focused on its strategies of expanding export sales into the rest of Africa investing in our people identifying opportunities to grow our aftermarket maintaining flexibility reacting quickly to any deterioration within our markets Howden Africa has established itself as the distributor for ESAB welding and consumable products in South Africa and this presents an additional revenue stream for The Company remains debt-free with significant cash reserves and is well placed to take advantage of any opportunities that present themselves in the future. Howden Group

19 Trading Outlook Thomas Barwald Howden Group

20 Trading Outlook Howden Group

21 Questions? Howden Group

22 Shareholder Q&A s The Board s position re surplus cash held on the balance sheet? (Thomas)The board options for the cash are either consummation of a BEE transformation arrangement or similar transaction, share buy-backs, acquisitions, and/or other such investments and changes. How long can a mining customer hold back on maintenance spend before they have to engage Howden to perform after-market work? (Thomas) The company has improved its mining after-market share over the last number of years in response to the decline in New Build. Many of our mining customers are aggressively engaged in cost cutting measures in response to pressures on their own bottom line and this includes the indefinite deferment of aftermarket expenditure. Howden Group

23 Shareholder Q&A s Detailed business review and as much as possible on the outlook with express focus on the relationship and business volume with Eskom. (Thomas) We believe that we continue to hold our market share across our key market segments. The major challenge we face with most of our customers including Eskom is that spend is reduced as a result of a combination of funding constraints and cost reduction measures they have implemented. The company has not declared a dividend despite sitting on a substantial amount of cash. What is the reason? (Thomas) In order to ensure strategic flexibility, and following a substantive internal process of deliberation, the Board has resolved that it is in the best medium to long term interests of the company and all of its stakeholders that the payment of ordinary cash dividends be discontinued for the foreseeable future. Howden Group

24 Shareholder Q&A s How are you managing fixed running costs as your clients hold back on environmental control capital outlays? At what point do you rightsize the business for the current economic environment? (Kevin) During 2015 the company made the difficult decision to reduce headcount as a result of the economic realities we faced. The companies strategy going forward is to focus on expanding export sales into the rest of Africa investing in our people identifying opportunities to grow our aftermarket organically and through acquisitions maintaining operational flexibility reacting quickly to any deterioration within our markets Could you elaborate on your competitors in the fans and heat exchangers division? (Kevin) There is no one competitor for each business unit within this division and our market share varies across our product range. We compete against a wide number of both international and local companies across our product mix within the division. Howden Group

25 Shareholder Q&A s Management Remuneration - why is management s remuneration not also linked to factors pertaining to minority shareholder interests - such as Howden Africa s total shareholder return over a 3 year period? (Kevin) Managements cash incentives are linked to the performance of the company over a 12 month period. The key KPI s of Bookings, Operating Profit and Working Capital performance of the Howden Africa business. Update on thoughts re BEE status and progress on that project. (Kevin) The company has determined it is in the best interests of all our shareholders to take our time to complete this process. Unfortunately we cannot provide any further details on the reason for the delay due to confidentiality reasons but please be assured the matter is being treated as a key priority. Howden Group

26 Thank You Howden Group 2014