Howden Africa Africa 2016... · The material in this presentation is general background information...

© 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.


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 Vision & Values


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 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


2016 Howden Africa Highlights


Fan and Heat Exchanger Division


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


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


Environmental Control Division


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


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


Fabrication Technology Division

(ESAB)


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


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


Financial Overview

Marinella Vigouroux - CFO


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.


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.


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


Trading Outlook

William Thomson


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.


Questions?


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


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.


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.


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 Africa Africa 2016... · The material in this presentation is general background information...

Documents

Transcript of Howden Africa Africa 2016... · The material in this presentation is general background information...