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

Transcription

2014
PRESENTATION TO INVESTORS
(Unaudited)
For the year ended 30 September 2014
19 November 2014
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
© Copyright 2014 Reunert Limited
19 November 2014
2
2014
OVERVIEW
Alan Dickson, Chief Executive Officer
19 November 2014
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
19 November 2014
4
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
19 November 2014
5
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
19 November 2014
6
Segmental contributions | continuing operations
Revenue 2014 – R7.7bn
Reutech
R1,0bn
Operating profit 2014
CBIelectric
R3,3bn
Nashua
R3,4bn
Reutech
R170m
Nashua
R454m
Revenue 2013 – R7.3bn
Reutech
R1,0bn
Nashua
R3,1bn
CBIelectric
R429m
CBIelectric
R3,2bn
Operating profit 2013
Reutech
R 207m
CBIelectric
R 490m
Nashua
R 436m
Segmental analysis excludes Other
19 November 2014
7
2014
FINANCIAL RESULTS
Manuela Krog, Chief Financial Officer
19 November 2014
Salient features
2014
2013
% change
Revenue from continuing operations
Rm
7 773,8
7 246,7
7%
!
Revenue from discontinued operation
Rm
3 348,1
3 695,2
9%
"
Operating profit from continuing operations
Rm
1 017,0
1 102,5
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
#
19 November 2014
9
Revenue movement
(20)
7 247
157
2013
CBI-electric
4
7 774
386
Nashua
Improved revenue performance due to
•  Higher commodity prices (African Cables)
Reutech
Other
2014
Offset by
•  Effect of industrial action
•  Renewable energy contracts (CBI Solutions)
›  Significant direct strike action within CBI-electric
•  Rental asset book growth in Quince (Nashua)
›  Indirect impact of mining industry strike
throughout Reunert
•  Export orders for HF radios (Reutech
Communications)
•  Successful tracker project on Touws River
Solar Plant (Reutech Radar Systems)
•  Weak local currency and increased
competition affected sales’ volumes of new
units by Nashua Office Automation
•  Anticipated export orders in Fuchs not
received in FY2014
19 November 2014
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Operating profit movement
(61)
18
(37)
(6)
1 103
1 017
2013
CBI-electric
Nashua
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
Reutech
Other
2014
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
19 November 2014
11
Group balance sheet
Rm
2013
2014
Restated
Non-current assets
3 128
3 237
Current assets
3 846
4 136
Current assets – discontinued operation
2 609
Total assets
9 583
7 373
Total equity
6 333
4 878
Non-current liabilities
547
156
Non-current liabilities – discontinued operation
250
Current liabilities
Current liabilities – discontinued operation
Total equity and liabilities
Total liabilities to shareholders’ funds %
Current ratio (times)
Normalised return on ordinary shareholders’ funds %
1 801
2 279
652
9 583
7 373
51,3
47,9
2,6
1,8
16,3
19,9
19 November 2014
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Cash flow and efficiency indicators
Rm
(44)
(99)
(332)
(122)
(612)
1 315
718
EBITDA
Increase in Interest,
working dividends
capital
and other
Taxation
Capital
Free cash Dividends
paid
expenditure
flow
paid
(367)
Investing
activities
434
173
Financing Increase in
activities
cash
resources
2013
2014
Balance sheet
Trade receivables (days)
43
43
Inventory turnover (times)
5,8
4,7
38,16
29,80
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
116
116
Net worth per share (R)
Income statement
Cash flow statement
Cash generated from operations vs operating profit (%)
19 November 2014
13
Capital investment into organic growth
300
250
200
150
100
50
0
2005
2006
2007
Replacement capex
2008
2009
2010
Expansion capex
2011
2012
2013
2014
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
19 November 2014
14
Nashua
Mark Taylor
19 November 2014
Nashua salient features
m
500
Nashua total document volume
All operations
(Rm)
2014
2013
Revenue
6 787,2
6 748,4
1
Operating profit
637,5
647,7
(2)
Profit margin
9,4%
9,6%
% change
421
400
300
200
100
0
2009
2010
2011
2012
2013
2014
Includes Nashua Mobile
ECN minutes
m
100
80
60
40
20
0
2011
2012
Inbound
2013
2014
Outbound
19 November 2014
16
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 2 000 new customer sites and 18% increase in traffic
•  Interconnect reductions in April 2014 assisted with margin improvements
•  Realigned PABX business towards SME market
19 November 2014
17
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
19 November 2014
18
Reutech
Peter van der Bijl
19 November 2014
Reutech salient features
Market sector
(Rm)
2014
2013
% change
1 000,0
1 019,9
(2)
169,7
207,0
(18)
16,9%
20,3%
Commercial
27%
SOEs
30%
Revenue
Operating profit
Defence
43%
Profit margin
% Revenue exports
Local
51%
Exports
49%
19 November 2014
20
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
19 November 2014
21
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
19 November 2014
22
CBI-electric
Alan Dickson
19 November 2014
CBI-electric
% Factory capacity utilisation
(Rm)
2014
2013
% change
3 610,9
3 505,7
3
Operating profit
427,6
505,5
(15)
Profit margin
11,8%
14,4%
100
Revenue
50
0
Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14
Low voltage
Copper telecom cables
Energy cables
Fibre telecom cables
Copper price
R’000 per tonne
85
80
avg R78k
75
avg R72k
70
avg R67k
65
60
Sep-11
Sep-12
Sep-13
Sep-14
19 November 2014
24
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
19 November 2014
25
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
19 November 2014
26
The way forward
Alan Dickson
19 November 2014
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
19 November 2014
28
The way forward
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)
19 November 2014
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The way forward
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-2015
19 November 2014
30
The way forward
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
19 November 2014
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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’
19 November 2014
32
2014
RESULTS PRESENTATION
For the year ended 30 September 2014
19 November 2014

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

Transcription

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