preference share issue august 2005 preference share issue august 2005
Post on 30-Dec-2015
234 Views
Preview:
TRANSCRIPT
Preference Share Issue
August 2005
Preference Share Issue
August 2005
Preference Share Issue
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 $-denominated activities
It is a group that has successfully transformed itself over the last 5 years
as evidenced by the growth in market capitalisation from R250m in August 2000 to R4,6bn in August 2005
Executive summary
Preference Share Issue
August 2005
Grindrod is proposing the issue of preference shares to the value of R500m
The preference shares are cumulative, non-redeemable, non-participating and will be listed on the JSE
The preference share dividend will be a fixed percentage of prime
The issue will be privately placed through a book-build to institutions and selected distributors
The dividend rate will be determined by the book-build exercise
Grindrod directors will have the option of extending the issue size to a maximum of R750m
The proposed listing date is 18 August 2005
Executive summary
Preference Share Issue
August 2005
History
Current Position
The Future
Preference share issue
AgendaAgenda
Preference Share Issue
August 2005 History
Profit History - Strong performance despite relative strength of the Profit History - Strong performance despite relative strength of the RandRand
618
550
165
74
127
240
65
175
HEPS 4-year CAGR = 76% p.a.
2000 20032001 2002
122
251
+43%
+43%
+88%
R / US$Exchange Rate
Shippingmarkets
+72%
+45%
+30%
2004
+146%
+130%Earnings (Rm)
HEPS (c)
Preference Share Issue
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
Preference Share Issue
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
Preference Share Issue
August 2005
History
Current Position
The Future
Preference share issue
AgendaAgenda
Preference Share Issue
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
Preference Share Issue
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
Preference Share Issue
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
Preference Share Issue
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
Preference Share Issue
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
Preference Share Issue
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
Preference Share Issue
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
Preference Share Issue
August 2005 Current position
Good Products / Services / Customers / PartnersGood Products / Services / Customers / Partners
SeaMunye
Sheltam
Atlas
Preference Share Issue
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
Preference Share Issue
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
Preference Share Issue
August 2005
History
Current Position
The Future
Preference share issue
AgendaAgenda
Preference Share Issue
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
Preference Share Issue
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
Preference Share Issue
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
- 3 year market rate $25,000 pd
eg Panamax Bulk Carriers
- 5 year charter rate payable $ 9,250 pd
- 5 year market rate $16,000 pd
The future
Locking in shipping incomeLocking in shipping incomeLow fleet costLow fleet cost
Preference Share Issue
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
Preference Share Issue
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
Preference Share Issue
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
Preference Share Issue
August 2005
Ships AgencyAuto CarriersBoltt GrindrodCMC GrindrodGrindrod PCAGrindrod J&J
Picpack GrindrodRohlig-Grindrod
Ocean AfricaSheltam
IVSUnicorn ShippingSouthern Tankers
Ships AgencyAuto CarriersBoltt GrindrodCMC GrindrodGrindrod PCAGrindrod J&J
Picpack GrindrodRohlig-Grindrod
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
Ships AgencyAuto CarriersBoltt GrindrodCMC GrindrodGrindrod PCAGrindrod J&J
Picpack GrindrodRohlig-Grindrod
Sheltam
The future
Non-shipping strategy:Non-shipping strategy: Southern Africa coverage Southern Africa coverage
Preference Share Issue
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
Preference Share Issue
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
Preference Share Issue
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
Preference Share Issue
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?
Preference Share Issue
August 2005
History
Current Position
The Future
Preference share issue
AgendaAgenda
Preference Share Issue
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
Preference share issue
Salient features of preference sharesSalient features of preference shares
Preference Share Issue
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
Preference share issue
Details of issue and proposed timetableDetails of issue and proposed timetable
Preference Share Issue
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%
Preference share issue
Selected comparison of after-tax yieldsSelected comparison of after-tax yields
Preference Share Issue
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
top related