howden africa africa 2016... · the material in this presentation is general background information...
TRANSCRIPT
© Howden Group 2014
Howden Africa
2016 Final Results Presentation
13th April 2017
© 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
30mins. Please hold your questions for the end of
the presentation.
• We ask that you please turn off your mobile
telephones.
© Howden Group 2014 3
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.
Forward-Looking Statements
© Howden Group 2014 4
Howden Vision & Values
© Howden Group 2014 5
Howden & Colfax Update on Global Product offerings
New/Improved Products New Applications
UMAF for Mining
EMTEC 3-Screw Pump
VA/VE MR/MRX 400 2-S 580 Screw
Recips for LNG
Ti Turboblower for MVR
ALLFUEL® 3- Screw Pump
HS Enameled Elements
IVT ATEX Oil Mist Generator
SolySmart ® SimSmart ® SmartExec ® IN-1000 Smart Control
© Howden Group 2014 6
Howden Africa Strategies
The Company focus is on our key strategies of :
Maintaining an high level of customer service across industries
Expanding export sales into the Rest of Africa
Investing in our people
Develop and maintaining flexibility of technical skills across the business
Identifying opportunities to grow our aftermarket both organically and through
acquisition
© Howden Group 2014 7 © Howden Group 2014 7
2016 Results Highlights
William Thomson - CEO
© Howden Group 2014 8
2016 Howden Africa Highlights
© Howden Group 2014 9 © Howden Group 2014 9
Fan and Heat Exchanger Division
© Howden Group 2014 10
Fan and Heat Exchanger Division ORDERS
Fans and Heat Exchangers division orders received during 2016 increased by 11.9%
to R1 238.3 million compared to the corresponding period (2015: R1 106.5 million).
Order intake was in line with the strategy of growing aftermarket revenue, with
increase in order intake in Aftermarket and Retrofit business in our key market
segments.
ORDERS
518 905
646 009
1 106 500
1 238 348
R 0
R 200 000
R 400 000
R 600 000
R 800 000
R 1 000 000
R 1 200 000
R 1 400 000
H2 2015 H2 2016 FY 2015 FY 2016
© Howden Group 2014 11
Fan and Heat Exchanger Division SALES
The Fans and Heat Exchangers division saw a increase in revenue of 19.8% to
R1 338.8 million (2015: R1 117.3 million).
The increase is a result of expanding our offerings into the Rest of Africa and,
although customers delayed new capital projects, there was an improvement
in aftermarket and retrofit activity.
SALES
589 814
750 570
1 117 302
1 338 783
R 0
R 200 000
R 400 000
R 600 000
R 800 000
R 1 000 000
R 1 200 000
R 1 400 000
R 1 600 000
H2 2015 H2 2016 FY 2015 FY 2016
© Howden Group 2014 12 © Howden Group 2014 12
Environmental Control Division
© Howden Group 2014 13
Environmental Control Division ORDERS
Environmental Control division order intake was R239.9 million compared to R311.2
million in 2015.
The business received some large orders in the second half of 2016.
The division continues to have a large opportunity list, but due to economic conditions
the award of orders has been slow.
ORDERS
67 305
197 145
311 200
239 949
R 0
R 50 000
R 100 000
R 150 000
R 200 000
R 250 000
R 300 000
R 350 000
H2 2015 H2 2016 FY 2015 FY 2016
© Howden Group 2014 14
Environmental Control Division SALES
The Environmental Control Division revenue dropped to R178.6m reflecting
the drop in bookings in H1 2016, with economics conditions and no strong
legislative driver resulting in delays in order placement.
SALES
215 993
98 658
365 974
178 610
R 0
R 50 000
R 100 000
R 150 000
R 200 000
R 250 000
R 300 000
R 350 000
R 400 000
H2 2015 H2 2016 FY 2015 FY 2016
© Howden Group 2014 15 © Howden Group 2014 15
Fabrication Technology Division
(ESAB)
© Howden Group 2014 16
Fabrication Division / ESAB PEFORMANCE
The new Fabrication Technology Division commenced trading during H1 2016.
As this business is a start-up this was a solid performance for it first year of trading.
This Division presents a new revenue stream with growth opportunities for the business
which has a relatively low market share in the region.
ORDERS
34 658
52 485
87 143
R 0
R 10 000
R 20 000
R 30 000
R 40 000
R 50 000
R 60 000
R 70 000
R 80 000
R 90 000
R 100 000
H1 2016 H2 2016 FY 2016
38 719
55 661
94 380
R 0
R 10 000
R 20 000
R 30 000
R 40 000
R 50 000
R 60 000
R 70 000
R 80 000
R 90 000
R 100 000
H1 2016 H2 2016 FY 2016
SALES
© Howden Group 2014 17
70%
30%
Aftermarket
New Build
Revenue of R1 604.5 million for 2016 is 8.2% up on 2015.
Aftermarket growth and a drop in new build projects during the year
increased our ratio of Aftermarket v New Build . (2015 was
approximately 66% Aftermarket).
Our customers’ appetite across all industries for major new build or
upgrades requiring new capital investment remained subdued but
picked up in H2.
Power business increased by 5% to 59% of our total revenue mainly
as a result in the drop in revenue from large value Environmental
projects.
1 483 276
1 604 535
R 0
R 200 000
R 400 000
R 600 000
R 800 000
R 1 000 000
R 1 200 000
R 1 400 000
R 1 600 000
R 1 800 000
FY 2015 FY 2016
Howden Africa 2016 Financial Performance
Revenue Revenue (Aftermarket vs. New Build)
Revenue by Industry
2% 4% 2%
20%
3%
10%
59%
Steel/Cement
Transport
HVAC
Mining
Petrochemical
Industrial
Power
© Howden Group 2014 18 © Howden Group 2014 18
Financial Overview
Marinella Vigouroux - CFO
© Howden Group 2014 19
Financial Overview Financial Performance 2016 – Segment analysis by operating division
Operating profit of R247.6.0 million is a 5.5% decline.
The Fans and Heat Exchangers division saw operating profit % increase from 19.1% to 21.2% on the back of
product mix of projects executed in the period.
The Environmental Control division’s operating profit decreased from a profit in 2015 to a loss in 2016. Pricing
pressure from customers together with warranty issues on plant installed has resulted in this significant decline for the
period.
Central operations costs have increased largely due to the recognition of the one-off gain in 2015 within the defined
benefit scheme (R19.8 million).
The Fabrication Technology division contributed with the growth in revenue with a profit in the first year of trade of
R1.3million.
© Howden Group 2014 20
Financial Overview Financial Position 2016
Assets increased to R1861 million. The major changes during 2016 have been a further increase in the business’s
cash and cash equivalents balance which has increased to R909.3 million and increase in Inventory required for the
new fabrication division together with work-in-progress on large projects.
Liabilities increased to R606.1 million. The major change during 2016 has been in trade and other payables to ESAB
Middle East for the new Fabrication Division Purchases.
© Howden Group 2014 21
2016 has been challenging for the Howden Africa business especially in the Environmental
Control division which experienced a squeeze on project margins and significant warranty issue
on installed plant.
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 both organically and through
acquisition
maintaining flexibility
Howden Africa has established itself as the distributor for ESAB welding and consumable
products in South Africa and has had a solid peformance in 2016. The expectation is to
grow this division and capture greater market share in the future.
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.
Financial Overview Conclusion
© Howden Group 2014 22 © Howden Group 2014 22
Trading Outlook
William Thomson
© Howden Group 2014 23
Trading Outlook
Capital spend within power generation and general industry is
expected to remain subdued but with some positive movement
within Rest of Africa mining.
Fans and Heat Exchangers division continues to focus on the
supply of spares and service to key industries.
Market conditions within the Environmental Control division are
expected to remain challenging although the positive signs from
H2 are indicating more activity in this market.
Fabrication Technology division is expected to grow.
© Howden Group 2014 24 © Howden Group 2014 24
Questions?
© Howden Group 2014 25
Q1. Has the Company any plans to declare a special dividend ?
There are no plans for a dividend payment.
Q2. Provide an update on B-BBEE status and update on a B-BBEE deal
We achieved Level 4 rating under the amended codes with focus on supplier
development and training. We have nothing new to report on a BBE deal.
Q3. What are the plans for the cash ?
The Board are actively investigating options to utilise the cash. Board options
are share buy-backs, acquisitions or investment in a transformation arrangement.
Q4. Provide update on the current business relationship with ESKOM.
ESKOM remain one of our key customers. We continue to focus on providing
excellent service and support to the Power Plants. We are also addressing
increasing demands to support supplier development and CSI spending in
communities local to the Power Plants.
Shareholder Q&A’s
© Howden Group 2014 26
Shareholder Q&A’s
Q5. How active is your acquisition pipeline ?
We continue to seek attractive acquisition opportunities. In 2016 we were
working on a potential “bolt-on” deal, however the seller’s Parent Company
decided to withdraw from the selling process.
Q6. Please explain the Shared Service Centre referenced in the
Related Party Transactions This is a clerical finance support team, based in Central Europe, servicing
multiple Howden businesses. This provides a more resilient and efficient
service than previous use of local resource. For Howden Africa this is a like for
like cost compared to previous arrangements. Note the shared service charges
for 2016 cover a nine month period.
Q7. Will the Company consider hedging the management charge to
reduce risk of currency exposure ?
As reported at the 2016 Interim Results presentation, the Board made the
decision not to hedge the management fees. Management charges are
payable in GBP.
© Howden Group 2014 27
Shareholder Q&A’s
Q8. Why are salaries & wages increasing 16% y/y whereas number of
employees only increased by 3.1% over the same period. ? Salaries & Wages include the costs of employing temporary labour whereas the
employee numbers stated are only our own permanent employees. We utilise a
significant number of temporary labour for on site activities.
Q9. What is the expectation from the Fabrication Technology Division
and what margin is expected from this part of the business?
Our expectations are to grow market share and return double digit margins.
Q10. Explain the large increase in distribution costs (+56%). The increase relates to the new Fabrication Technology Division.
© Howden Group 2014 28
Shareholder (supplementary Q&A’s)
Q11. What type of acquisition is of interest to the Company Acquisitions which can offer synergies, require similar professional skills and
offer growth and double digit margins.
Q12. Is there an ability to increase prices with your major customers Some service agreements have index linked formulae incorporated. Other
project pricing is dependant on the competitive nature of individual projects. For
smaller aftermarket business we
Q13. Have you seen any changes in Plant maintenance requirements
compared to prior years ?
We have seen better planning from customers but no major change in volume.
Q14. Are there any major debtor issues in the business ? There are no major issues, we have a robust cash collection process and utilise
key account management.
© Howden Group 2014
Thank You