Preference Share Issue August 2005 Preference Share Issue August 2005.

Preference Share Issue

August 2005


August 2005


August 2005

Grindrod is:

a diversified provider of shipping, freight and financial services

which competes in the international shipping market with a total fleet of 96 ships

90% of group revenue is derived from $-denominated activities

It is a group that has successfully transformed itself over the last 5 years

as evidenced by the growth in market capitalisation from R250m in August 2000 to R4,6bn in August 2005

Executive summary


August 2005

Grindrod is proposing the issue of preference shares to the value of R500m

The preference shares are cumulative, non-redeemable, non-participating and will be listed on the JSE

The preference share dividend will be a fixed percentage of prime

The issue will be privately placed through a book-build to institutions and selected distributors

The dividend rate will be determined by the book-build exercise

Grindrod directors will have the option of extending the issue size to a maximum of R750m

The proposed listing date is 18 August 2005

Executive summary


August 2005

History

Current Position

The Future

Preference share issue

AgendaAgenda


August 2005 History

Profit History - Strong performance despite relative strength of the Profit History - Strong performance despite relative strength of the RandRand

618

550

165

74

127

240

65

175

HEPS 4-year CAGR = 76% p.a.

2000 20032001 2002

122

251

+43%

+43%

+88%

R / US$Exchange Rate

Shippingmarkets

+72%

+45%

+30%

2004

+146%

+130%Earnings (Rm)

HEPS (c)


August 2005 History

How have we achieved this earnings performance?How have we achieved this earnings performance?

Bought back shares

PurchasedUnicorn

PurchasedIVS

Partnered withfirst class

playersPurchased ships

RohligPartnership

Share price

HEPS

De-listedGriffin

Sold Griffin ships

Long termship charters

KusasaCMC Grindrod

Strongcashflow

Randstrengthens

Shippingmarkets

turnaround

‘N’ shareabolished

Announcedland-based

growthplans

Announced further ship purchases

1998 20032001 2002 20041999 2000


August 2005

61,0

106,6

29,2

105,5

49,2

20042001 2002 20032000

Debt / Equity ratio (%)Debt / Equity ratio (%)

75,8

19,914,711,010,6

37,7

20042001 2002 20032000

42,4

26,720,2

16,1

RONA

ROE

Annualised returns (%)Annualised returns (%)Trading profit (Rm)Trading profit (Rm)

335268

206212

644

20042001 2002 20032000

230,4169,4156,5

81,5

841,7

20042001 2002 20032000

Cash earnings per share (cents)Cash earnings per share (cents)

History


August 2005

History

Current Position

The Future


AgendaAgenda


August 2005

Effect of 10c move in R/US$ exchange rate:

• Earnings R12m

• NAV R20m

• Market NAV per share 60c / share

Current position

Potential effect of R/US$ rate on earningsPotential effect of R/US$ rate on earnings


August 2005

0

20,000

40,000

60,000

80,000

100,000

120,000

20042004

20052005

BCI$/day

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

20042004

20052005

BHMI$/day

Current position

Source: Clarksons

20042004

20052005

$/day

0

10,000

20,000

30,000

40,000

50,000

60,000BPI

Baltic dry indicesBaltic dry indices


August 2005

Products / Chemical tankersContainer ships

Handysize - Parcel Service

Handysize - ITAS vesselsCapesize / Panamax

Handysize - LB / IVS Pool

Current position

Total fleet = 96 ships22 Owned34 Chartered (long-term)40 Chartered (short-term)

Global positionGlobal position


August 2005

Trading update:

HEPS expected to be 65% - 75% higher than H1 2005

which equates to HEPS between 423c and 448c

Current position

Extrapolation to F2005 year-end:

If the historical trend of a 50:50 split between H1 and H2 is maintained, then

HEPS of 846c to 896c could be achieved, placing Grindrod on a forward PE to December 2005 of 5,5


August 2005

F2003F2003

(Rm)(Rm)

F2004F2004

(Rm)(Rm)Objectives/ Strategy/ CommentsObjectives/ Strategy/ Comments

Revenue 1,976 3,012Double Revenue to R6bn through acquisition and organic growth

Operating profit 280 617Continued growth. Reinvestment of profits key

Interest cover (x) 4,2 9,9 Minimum = 3,0

Tax rate (%) 2% 8%

Profit after tax 208 508

Associate income 32 42

Attributable profit 240 550

HEPS 251c 618cContinued growth from current levels

Dividend cover 4,2 3,5 3,5 times

Current position

Abridged Income StatementAbridged Income Statement


August 2005

F2003F2003

(Rm)(Rm)

F2004F2004

(Rm)(Rm)

Objectives/ Strategy/ Objectives/ Strategy/ CommentsComments

Non-current assets 1,321 1,828 Ships at historical cost

Current assets 773 790

Total assets 2,094 2,618

Shareholder’s funds 616 851

Non-current liabilities 642 771 All financing on Balance Sheet

Current liabilities 836 996

Total equity and liabilities 2,094 2,618

Net Debt / Equity ratio 61 49 Objective = 80%

Current position

Abridged Balance SheetAbridged Balance Sheet


August 2005

F2003F2003

(Rm)(Rm)

F2004F2004

(Rm)(Rm)

Objectives/ Strategy/ Objectives/ Strategy/ CommentsComments

Cash generated from operations

121 635 Objective: Increase by R100m pa from F2005 to +- R900m by F2007

Capital expenditure (348) (706) 1/3 of profit from non-shipping operations

Proceeds on disposal of assets

481 121 Will look to lock in profits through ship sales if appropriate

Net finance repaid 254 50

Current position

Abridged Cash Flow StatementAbridged Cash Flow Statement


August 2005 Current position

Good Products / Services / Customers / PartnersGood Products / Services / Customers / Partners

SeaMunye

Sheltam

Atlas


August 2005

Assumptions Used PV of long term charter rates on remaining open

charter periods to value charters Used current MV of owned fleet to obtain excess fleet value Forecast MV at end of charters used to value options Unrecognised value of other businesses at estimated MV

R

11

5

21

5

6

48

Current value per share Book NAV Excess of MV over BV of ships Value of charters Value of options Unrecognised value of other businesses

Mark to Market valuation of Grindrod pre Pref share issueMark to Market valuation of Grindrod pre Pref share issue

Current position


August 2005

DebtDebt PrefPrefsharesshares

EquityEquity

Before issue

Permanent capital (Rm) 851 851 851

Net Debt (Rm) 417 417 417

Debt % permanent capital (%) 49% 49% 49%

Profit Attributable to Ord Shareholder (Rm) 550 550 550

No. of ordinary shares in issue (m) 91 91 91

Earnings per Share (Cents) 604 604 604

After issue

Permanent capital (Rm) 851 1351 1351

Debt (Rm) 917 417 417

Debt % permanent capital (%) 108% 31% 31%

Profit Attributable to Ord Shareholder (Rm) 595 581 625

No. of ordinary shares in issue (m) 91m 91m 102m

Earnings per Share (Cents) 654 638 612

* Assuming shares issued at 4500 cps ** Assume proceeds invested in productive assets

Current position

Issuer pro-forma effect of R500m issued in different funding classesIssuer pro-forma effect of R500m issued in different funding classes


August 2005

History

Current Position

The Future


AgendaAgenda


August 2005

2005• Bearish during Q2, normalising in later part of Q3 and Q4

• Chinese production output key to iron ore imports

• Coking coal continues to grow, Steam coal growth to meet power generation needs, increase with industrialisation and urbanisation

Source: Clarksons

The future

The outlook for shipping rates: 2005 - 2007The outlook for shipping rates: 2005 - 2007

2006• Key driver remains Chinese steel demand

• Continued long term demand growth

• Low growth in developed world economies; moderate growth in developing world economies

2007& beyond• Consistent long-term demand in base commodities

• Ageing fleet profile

• Scrappings to increase with “softer” freight rates

• Add. shipyard capacity expansions to be on-stream 2010 and beyond

• Marginal demand to be higher than marginal supply

• Possible boom in 2009


August 2005 The future

How the new Grindrod addresses sustainability of earnings, given How the new Grindrod addresses sustainability of earnings, given the cyclical nature of Shipping the cyclical nature of Shipping

Locking in shipping incomeLocking in shipping income

59% by dwt fixed out59% by dwt fixed outLow fleet costLow fleet cost

Expandng fleetExpandng fleet


August 2005

Owned Fleet (39% of total Grindrod fleet)

eg Product Tankers

- BV R 972m

- MV R1,266m

Chartered Fleet (61% of total Grindrod fleet)

eg Handysize Bulk Carriers

- 7 year charter rate payable $ 7,500 pd

- 7 year market rate $12,500 pd

eg Capesize Bulk Carriers

- 3 year charter rate payable $15,000 pd


eg Panamax Bulk Carriers

- 5 year charter rate payable $ 9,250 pd


The future

Locking in shipping incomeLocking in shipping incomeLow fleet costLow fleet cost


August 2005

eg Capesize Bulk Carriers

• Contracted Earnings Earn $32,000 pd vs

• Current Market Spot Earnings $28,000 pd

eg Panamax Bulk Carriers

• Contracted Earnings Earn $21,000 pd vs

• Current Market Spot Earnings $19,000 pd

The future

Locking in shipping incomeLocking in shipping income 40% of total fleet dwt fixed out on average for 2 40% of total fleet dwt fixed out on average for 2 1/21/2 years years


August 2005 The future

How the new Grindrod addresses sustainability of earnings, given How the new Grindrod addresses sustainability of earnings, given the cyclical nature of Shipping the cyclical nature of Shipping

Locking in shipping incomeLocking in shipping income

45% of fleet fixed out45% of fleet fixed outLow fleet costLow fleet cost

Expanding fleetExpanding fleet

Non-shipping expansionNon-shipping expansion

Logistics / TerminalsLogistics / Terminals

Bulk product tradingBulk product trading

RailRail


August 2005

Shipping currently contributes 90% of Operating Profit

Objective: To be reduced to 67% by 2008

Why can Grindrod successfully expand its non-shipping operations in the face of fierce competition?

• Existing skills base and additional skills acquired

• Partnerships with industry experts

• Complementary to shipping

• Cross marketing of customer base

The future

Diversifying the earnings stream:Diversifying the earnings stream: Expansion of non-shipping activities Expansion of non-shipping activities


August 2005

Ships AgencyAuto CarriersBoltt GrindrodCMC GrindrodGrindrod PCAGrindrod J&J

Picpack GrindrodRohlig-Grindrod

Ocean AfricaSheltam

IVSUnicorn ShippingSouthern Tankers



Ocean AfricaUnicorn ShippingSouthern Tankers

Ships AgencyCMC GrindrodGrindrod J&J

Rohlig-GrindrodOcean Africa

SheltamUnicorn ShippingSouthern Tankers

Ships AgencyAuto CarriersGrindrod J&J

Rohlig-GrindrodOcean Africa

Unicorn ShippingSouthern Tankers

Ships AgencyRohlig-Grindrod

APIOcean Africa

Unicorn ShippingIVS

Southern Tankers

CAPETOWN

PORTELIZABETH

EASTLONDON

MAPUTOJOHANNESBURG

WALVISBAY

Ships AgencyAPI

Ocean AfricaUnicorn ShippingSouthern Tankers

RICHARDS BAY

Ships AgencyKusasa BT

Kusasa LogisticsSea MunyeNavitrade

Rohlig-GrindrodStar BiomassOcean Africa

SheltamIVS

DURBAN



Sheltam

The future

Non-shipping strategy:Non-shipping strategy: Southern Africa coverage Southern Africa coverage


August 2005

FOREIGNCOUNTRYFOREIGNCOUNTRY WAREHOUSEWAREHOUSEWAREHOUSEWAREHOUSE

FOREIGNEND

USER

FOREIGNEND

USER

SEASEA

AIRAIR

HARBOURHARBOUR

AIRPORTAIRPORT

ROADROAD

RAILRAIL

CANALSCANALS

FACTORYFACTORY WAREHOUSEWAREHOUSEWAREHOUSEWAREHOUSELOCAL

ENDUSER

LOCALEND

USER

SEASEA

AIRAIR

ROADROAD

RAILRAIL

TRANSPORTTRANSPORT

The future

Non-shipping strategy:Non-shipping strategy: Supply Chain - “Cradle to grave” service Supply Chain - “Cradle to grave” service


August 2005

INDUSTRY SERVICE PROVIDED SERVICE PROVIDER

Automotive Road transport & logistics

Paper / Forestry products

Seafreight logistics

Mining Shipping terminals

Steel / Aluminium / Heavy industry

Storage, Warehousing & Logistics

Shipping services

Oil Shipping services

FMCG Warehousing & Logistics

Sugar Seafreight logistics

INDUSTRY SERVICE PROVIDED SERVICE PROVIDER

Beverage, Wine, Canning

Seafreight logistics

Fruit / Perishable products

Airfreight / Logistics

Shipping lines Ships Agency

Fertiliser Bulk cargo logistics

General container / Import / Export

Feeder service

Food / Maize / Wheat

Shipping, Trading

Textile

Pharmaceuticals

Aeronautical

IT / Telecoms

Sea Munye

Atlas

Ships Agents

The future

Non-shipping strategy:Non-shipping strategy: Customers and products moved Customers and products moved


August 2005

AcquisitionAcquisition Type of businessType of business

African Portland Industries Bulk Terminal Operator

Sheltam Rail Rail Operator

Grindrod J&J - Uniroute facilities

Bulk Warehousing / Logistics

Sea Munye Bulk Warehousing

Atlas Trading & Shipping Grain / Soya Trading

Cockett Marine Bunker Trading

Oreport Mining Product Trading

The future

Diversifying the earnings stream:Diversifying the earnings stream: Acquisition of non-shipping activities - 1 Acquisition of non-shipping activities - 1stst 6 months of 2005 6 months of 2005


August 2005

Preference shares will not dilute HEPS, as Grindrod’s target ROE > cost of servicing the preference shares

Have good income base to ensure preference share serviceability

R500m raised from preference share issue to be spent on:

• Growing rail operations

• Public / Private partnerships

• Further non-shipping expansion / possible major acquisitions

• Shipping opportunities in low markets

The future

Why does the preference share issue make sense?Why does the preference share issue make sense?


August 2005

History

Current Position

The Future


AgendaAgenda


August 2005

Issued by way of private placement with selected investors

Cumulative, non-redeemable,non-participating

Listed on the JSE

Preference dividend rate determined by book building exercise

• Standard book building approach used

• Issue split between Institutions and Private Individuals through selected distributors

Maximum additional issuance of R250 million taking issue size to R750 million

Partially underwritten by Investec Securities


Salient features of preference sharesSalient features of preference shares


August 2005

Subscription price per preference share R100

Minimum subscription value per applicant R100 000

Number of Preference shares 5 000 000 to 7 500 000

Amount to be raised in this placement R500 – R750 million

Submission of Irrevocable undertakings and allocation of shares to investors

Friday 12 August 2005

Issue of shares to investors Tuesday 16 August 2005

Anticipated Listing Date Thursday 18 August 2005


Details of issue and proposed timetableDetails of issue and proposed timetable


August 2005

NedbankNedbank Investec Investec BankBank

Investec Investec LimitedLimited ABILABIL SteinhoffSteinhoff GrindrodGrindrod

(indicative)(indicative)

Issue date Jan 03 Jul 03 Feb 05 Mar 05 Jun 05 Aug 05

Approx market cap at issue R28 bn R10 bn R7,6 bn R8 bn R15 bn R4,5 bn

Preference finance raised R2,8 bn R1,5 bn R2,3 bn R500 m R650 m R500 m

Dividend as a % of prime at issue

75% 75% 67% 69% 75% 75-80%

Current price as a % of prime (excludes div accrual)

62,7% 66% 69,2% 73,2% 75,2% 75-80%

Current post tax yield 6,58% 6,94% 7,27% 7,69% 7,90% 7,88-8,40%


Selected comparison of after-tax yieldsSelected comparison of after-tax yields


August 2005 Preference share issue

Investor perspectiveInvestor perspective High yield

Tax free

Low risk

Issuer perspectiveIssuer perspective Part of permanent capital

Low cost compared to rights issue

Favourable impact on debt ratio

Preference Share Issue August 2005 Preference Share Issue August 2005.

Documents

Transcript of Preference Share Issue August 2005 Preference Share Issue August 2005.