enx group limited results presentation...improve working capital management ›new product...
TRANSCRIPT
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enX GROUP LIMITED RESULTS PRESENTATIONfor the year ended 31 August 2017
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DISCLAIMER
Certain statements in this presentation regarding enX’s business operations may constitute “forward looking
statements.” All statements other than statements of historical fact included in this presentation, including, without
limitation, those regarding the financial position, business strategy, management plans and objectives for future
operations of enX are forward looking statements. Forward-looking statements are not intended to be a guarantee of
future results, but instead constitute enX’s current expectations based on reasonable assumptions. Actual results could
differ materially from those projected in our forward-looking statements due to risks, uncertainties and other factors.
enX neither intends to nor assumes any obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. In preparation of this document we used certain publicly
available data. While the sources we used are generally regarded as reliable we did not verify their content. enX does
not accept any responsibility for using any such information.
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AG
END
A
1. Overview
2. Track record
3. Building our segments
4. Financial review
5. Outlook
6. Q&A
4
OV
ERV
IEW
1. Transformed into a pure
play industrial company
2. Our quality businesses
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TRANSFORMED INTO A PURE-PLAY INDUSTRIAL COMPANY
EQUIPMENT FLEET PETROCHEMICALS
Materials handlingequipment distributor
in SSA
Full servicefleet management
and logistics
ExxonMobilpetrochemicals distributor
Largest independent producerof oil lubricants
#1 #2 #1
REVENUE:
R6.22 bn
ADJ EBIT:
R736m
ADJ HEADLINE EARNINGS:
R281m
REVENUE: R3.06bn
ADJ PBT: R197m
REVENUE: R1.65bn
ADJ PBT: R181m
REVENUE: R1.54bn
ADJ PBT: R77m
NAV per share:
R15.06
NAV per share (excl. EXG):
R13.87
NET DEBT/EBITDA (RSA):
2,3x
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EQUIPMENT FLEET PETROCHEMICALS
OUR QUALITY BUSINESSES
• Strong OEM partnership
with ExxonMobil
• Products are an industrial
necessity
• Largest independent
lubricant blender and
distributer in SSA
• Customer contracts with
leading OEM’s
• Scalable platform
• Strong OEM partnerships
with Toyota and Mitsubishi
• Market leader in SA
• Annuity revenues, self
funding
• 13 000 strong fleet
• Own the value chain
• Platform to grow in the UK
• Market leading suite of
VAPs
• 14 000 leased units,
130 000 VAPs
• Annuity revenues
• Cutting edge data and
technology
• Scalable platform
7
TRA
CK
REC
OR
D
1. Creating shareholder
value
2. Delivered in 2017
3. Decoupled from eXtract
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CREATING SHAREHOLDER VALUE
• Listed Austro
• Power business
acquired
• Post financial
crisis downturn
• Wild Rose
introduced as
shareholders of
reference
• Turnaround of
Wood
• Establishment of
Petrochemicals
segment through
acquisition
of Centlube
• Group renamed
enX
• Awarded
ExxonMobil
distributorship
• Acquisition
of Genmatics,
WAI and AGL
• Empowerment
transaction and
capital raise
• Acquisition of EFML
and EIE
• Decoupled from
eXtract
• Growing
Petrochemicals
segment
0
50
100
150
200
FY2012 FY2013 FY2014 FY2015 FY2016 FY2017
ADJUSTED HEPS (cps)#
2007 2009-12 2013 2014 2015^ 2016 2017
# Adjusted for 11:1 consolidation ^ Excluding once-off foreign exchange loss
Incl. 6 months
of EIE and EFML
Incl. 4 months
of EIE and EFML
Total return to shareholders
since 2013
CAGR = 33%
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DELIVERED IN 2017
CATEGORY WHAT WE SAID WHAT WE DID
Strengthen
OEM
partnerships
• Grow market share with Toyota aspiration
• Local production of ExxonMobil
lubricants
• New product distribution opportunities
• Toyota commitment for a further 3-year
distribution agreement
• LOI signed with ExxonMobil to blend
lubricants at Cera plant
• Exploring opportunities to vertically
integrate lubricants supply chain
Different with
scale
• Acquisitions fully integrated
• Quest
• New blending plant
• New product revenue for Chemicals
• New power related revenues
• EIE, EFML, WAI and AGL
• Quest system implemented and
operational
• Commissioned Cera inland blending
plant, resulting in increased capacity
• Began distributing polypropylene
• Entered prime-power market with
confirmed orders
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CATEGORY WHAT WE SAID WHAT WE DID
DELIVERED IN 2017
Geographical
diversification
• Expand UK footprint • Advanced discussions with multiple
UK dealers
Financial
discipline
• R1.87 Industrial adj. HEPS forecast
• Improve capital structure
• Group cost
• Achieved R1.81
• R70m/5-year bond
• New R550 million financing facility
• Redeemed notes R447 million
• Group function right sized
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DECOUPLED FROM EXTRACT
STRATEGICREVIEW
RECAPITALISATIONAGREEMENT
THARISASALE
PPMTERMINATION
UNBUNDLINGINVESTMENT
VEHICLEPPM
TERMINATIONUNBUNDLING
INVESTMENTVEHICLE
STATUS
enX loan receivable from eXtract R250m
Expected timing of repaymentR100m by March 2018R150m by August 2019
Share equivalent value for enX shareholders R1.39 per share
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BU
ILD
ING
OU
R
SEG
MEN
TS
1. enX Equipment
2. enX Fleet
3. enX Petrochemicals
4. The way we do things
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enX EQUIPMENT
LATENT VALUE
• Industrial Equipment
› Growing our UK operations with the supportof our global OEM partners
› Growth in selected African markets on an export, dealer basis
› Operational efficiencies
• Power: Grow contract manufacturing volumes,
prime power and new power related revenues
• Wood: Build leasing and rental book
DEFENSIVE CHARACTERISTICS
• Market leaders in all businesses
• Long-term relationships and support from leading
global OEMs
• Stable blue-chip client base
• Industry diversification
• Annuity income streams
• Asset backed leasing contracts
• Conservative approach to RVs, maintenance and
provisions
• Control all parts of the distribution value chain:
› Distribution, leasing, after-market, used
equipment
› Strong after-market support teams
Growing our UK operations with the support of our global OEM partners
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enX FLEET
LATENT VALUE
• Monetising data and technology (R)evolution
- Quest offers ability to scale and use data to
enhance customer value proposition
• Leasing book
› Approved capex to retain existing clients and
support new business for growth
› Sales team investment
• Value-added products
› Continue to grow VAPs revenue
› Non-capital intensive
DEFENSIVE CHARACTERISTICS
• Market leading position
• Annuity income streams
• Asset backed leasing contracts
• Stable blue-chip client base
• Industry diversification
• Unmatched portfolio of fleet management value-
added products
• Base interest rate pass-through
• Conservative approach to RVs, risk funds and
provisions
• Experienced management team
Leveraging data to differentiate our offering
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enX PETROCHEMICALS
LATENT VALUE
• Lubricants
› Growth in ExxonMobil distribution volumes
› Growth in contract manufacturing volumes with Puma
› ExxonMobil local production to drive margin and improve working capital management
› New product distribution opportunities with ExxonMobil
› New plant to carry highest global quality standards
• Chemicals
› Surplus capacity for new products
› Volume growth in polymer and speciality chemicals on the back of excess volumes fromUSA refineries
› New distributorships
DEFENSIVE CHARACTERISTICS
• Products are an industrial necessity
• Contract to service global strategic customers of
ExxonMobil (Toyota, Volvo, UD Trucks, Cat
Equipment)
• Strong operational, marketing, product and
technology support from ExxonMobil
Building a leading independent petrochemicals business in partnership with ExxonMobil
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THE WAY WE DO THINGS
CAPITAL FLOWS
• Central cash pool
• Disciplined allocation
with board oversight
• Focused investment
criteria and hurdle rates
CULTURE
• Entrepreneurial
• Common set of values
• Diverse opco cultures
GOVERNANCE
• Experienced, diverse board
• Focused on creating value, the right way
• Transformation
OPERATIONAL DECISIONS
• Decentralised
• Agile
• Cost efficient centre?
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FIN
AN
CIA
L R
EVIE
W
1. Highlights
2. Segmental analysis
3. Condensed statement of
profit and loss
4. Condensed statement of
financial position
5. Condensed statement of
cash flows
6. Liquidity and funding
7. Capital markets evolution
Other
EIE / EFML 4 months
6 months
Reporting periods
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H1 2017 H2 2017
6 months
6 months
12
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HIGHLIGHTS
Key performance indicators
*Previous period had been represented to take into account the share consolidation of 11:1
R’000 FY2017 FY2016
Revenue 6 281 342 1 150 951
Adjusted earning before interest and taxation (EBIT) 735 626 40 122
Adjusted headline earnings 281 072 21 135
Adjusted headline earnings per share (cents) * 181.2 41.1
Number of shares in issue* 180 439 427 54 562 187
Weighed average number of shares in issue (net of treasury)* 155 154 559 51 477 830
Net asset value per share (cents) 1 506.4 1 259.9
> Net Asset Value, excluding eXtract Assets held for sale (cents) 1 387.1 -
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HIGHLIGHTS
Adjustments to EBIT and Headline Earnings explained
R’000 EBITHeadline Earnings
Earnings before interest and taxation (EBIT)/ Headline Earnings (66 080) (467 332)
IFRS 2 – charges 6 708 6 708
Restructuring and transaction costs 28 720 28 720
Amortisation of intangible assets 27 311 27 311
eXtract adjustments (FV adjustments and associate losses) 738 967 738 967
Interest received - eXtract - (60 800)
Taxation effects - 7 498
Adjusted EBIT (1st column) / Headline Earnings (2nd Column) 735 626 281 072
Adjusted EBIT % / Headline Earnings % 12 5
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EQUIPMENT
SEGMENTAL ANALYSIS
REVENUE
R3 063million
ADJ EBIT
R346million
ADJ PBT
R197million
LEASING ASSETS
R2 494million
FY 2017
Industrial Equipment
• Y-on-y growth in forklift market
• Market share maintained in line with expectations
• Overhead recovery from aftermarket growing
• Marginal increase in leasing book
Wood
• Subdued wood industry trading conditions
• Revenue declined 8% whilst margins increased by 2%
• Profit growth on prior year
Power
• Market share growth in subdued economy
• Stability brought through rebalanced cost structures, working
capital management and refocus on revenue growth
• Strong free cash flow generation
31%
27%5%
37%
Lease/rent
Value add
Sell
Distribute
REVENUE VALUE CHAIN
AUGUST 2017
21
51%
30%
19%
Lease/rent
VAPs
Remarketing
SEGMENTAL ANALYSIS
FLEET
REVENUE
R1 650million
ADJ EBIT
R327million
ADJ PBT
R181million
LEASING ASSETS
R2 583million
FY 2017
EFML
• Stabilising leasing book after multiple years of decline
on the back of capital constraints
• VAPs and remarketing showed continued traction
increasing to 49% Revenue contribution
• Adj. PBT margin of 11%
• Investment into sales teams, increasing pipeline
• Large VAPs business awarded as a result
• End of term residual values continued to be profitable
VALUE CHAIN
AUGUST 2017
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SEGMENTAL ANALYSIS
PETROCHEMICALS
REVENUE
R1 539million
ADJ EBIT
R101million
ADJ PBT
R77million
INVENTORY
R392million
FY 2017
Lubricants
• Production volumes increased
• New Cera facility significantly increased capacity
• CAT Lubricants integrated into Centlube business across
14 SADC countries
• Maintained contracts with all major principles and
customers
Chemicals
• Sales volumes declined due to lower demand of plastic
polymers - declining consumer spend
• Chemicals, rubber and additives volume growth
• Began distribution of polypropylene
• Strong cash generation though efficient working capital
management
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CONDENSED STATEMENT OF PROFIT AND LOSS
R’000 FY2017 FY2016
Revenue 6 218 342 1 150 951
Net operating expenses (4 485 094) (1 111 076)
Profit before depreciation and amortisation 1 733 248 39 875
Depreciation and amortisation (1 026 379) (9 799)
Profit on disposal of property, plant and equipment 27 376
IFRS 2 charges (6 708) (6 323)
Foreign exchanges losses (27 085) (876)
Operating profit 673 103 23 256
Fair value adjustment of investments (736 563) -
Impairment of property plant and equipment - (2 941)
Impairment of goodwill - (78 205)
Share of (losses)/ profit from associates (2 620) 293
Net finance costs (291 679) (8 484)
Loss before taxation (357 759) (66 081)
Taxation (103 368) (5 312)
Loss after taxation (461 127) (71 393)
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CONDENSED STATEMENT OF FINANCIAL POSITION
R’000 FY2017 FY2016
Property, plant and equipment 374 470 121 928
Leasing assets 5 077 814 -
Goodwill and intangibles 933 453 279 729
Other investments and loans 237 323 -
Inventories 1 229 624 542 626
Trade, other receivables and derivatives 1 213 608 400 537
Other assets 54 590 19 347
Bank and cash balances 317 806 60 150
Assets held for sale - eXtract 212 176 -
Total assets 9 650 864 1 424 317
R’000 FY2017 FY2016
Total shareholders’ interests 2 715 250 687 420
Interest-bearing borrowings, overdraft and deferred vendor consideration 4 890 064 293 148
Deferred taxation 507 653 36 304
Trade, other payables, provisions and derivatives 1 500 073 405 962
Other liabilities 37 824 1 483
Total equity and liabilities 9 650 864 1 424 317
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CONDENSED STATEMENT OF CASH FLOWS
R’000 FY2017 FY2016
Cash generated from operations before working capital movements 1 699 545 42 178
Working capital movements 391 735 (20 016)
Cash generated from operations 2 091 280 22 162
Net cash flows from interest and taxation (450 559) (9 868)
Net cash flows from operating activities 1 640 721 12 294
Net cash flows from investing activities (2 636 043) (276 701)
- Capital expenditure (1 384 740) (20 135)
- Business combinations (1 315 228) (257 320)
- Other 63 925 754
Net cash flows from financing activities 1 288 782 259 770
- Capital raise (net of costs) 1 441 551 256 203
- Interest-bearing borrowings and deferred vendor consideration (150 182) 12 907
- Other (2 587) (9 340)
Net increase/(decrease) in cash and cash equivalents 293 460 (4 637)
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LIQUIDITY AND FUNDING
Overview of interest-bearing borrowings
Funding facilities (R’million) Facility size Utilised Unutilised
enX Leasing (EIE and EFML) - SA Banking 4 522 3 822 700
General banking facility 400 - 400
Term facility 2 383 2 383 -
Liquidity facility 506 206 300
BBB notes 1233 1 233 -
enX Leasing (EIE and EFML) - Rest of world 1 408 828 580
Asset backed funding UK (EIE) 1 344 807 537
General banking facilities UK (EIE) 26 5 21
General banking facility Zambia (EFML) 38 16 22
enX Trading 401 240 161
General banking facility 150 89 61
Term facility 200 100 100
Deferred vendor consideration 51 51 -
Total funding 6 331 4 890 1 441
enX Leasing (EIE and EFML) - SA Banking Covenants (x) Level FY2017
Net Total Debt : EBITDA ≤ 3 2.34
EBITA : Net Finance Charges ≥ 1.2 1.60
Net Total Debt : Equity ≤ 3.37 2.32
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LIQUIDITY AND FUNDING
Liquidity and funding
Funding outlook
• Total debt levels to remain stable
• Planned refinancing of upcoming maturities in line
with market appetite
• Ring-fenced UK facility – renewed until FY2020
Long-term funding objectives
• Diversify funding sources
• Ample liquidity buffers for trading and upcoming
maturities
• A rated credit target
• Resilient maturity profile
0
200
400
600
800
1 000
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023
SA (term facility)
SA (bonds)
SA (GBF)
Offshore (GBF)
Other
SA maturity profile (R’m)
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enX CAPITAL MARKETS EVOLUTION
EIE and EFML
facilities separated
from Contract
Mining
Bank and bond debt
restructure to
alleviate short term
liquidity challenges
Investment grade
credit rating secured
(BBB)
R447 million
note maturities
redeemed
Bond market access:
R70 million (EQS10)
5-year money
300bps 3M Jibar
A-RATING
29
OU
TLO
OK
1. Outlook
2. Investment proposition
30
OUTLOOK
PETROCHEMICALS
Forklifts
• 12 vs. 10 months
• Organic and acquisitive UK
growth as planned
• Profit growth expected
• Improved efficiencies through
use of technology
Power
• Prime power projects
Wood
• Profit growth expected
• Growth of packaging products
and adhesives
• Continued investment in leasing
book
• 12 vs. 10 months
• Stabilise and then grow the
leasing book through
improved retention and new
business
• Increase revenues from VAPs
• Utilise IP to improve
competitiveness by
developing more services
• Monetisation of data and
technology
Lubricants
• Commencement of ExxonMobil
blending
• Growth of ExxonMobil distribution
volumes
• Supply chain integration
Chemicals
• Increased volumes through ExxonMobil Chemical distribution network
• Performance polyethylene resinand speciality chemicals growth opportunities
• Growth on the back of new distributorships
EQUIPMENT FLEET
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enX INVESTMENT PROPOSITION
Three distinct industrial clusters with
market leading market positions
Strong partnerships with
leading global brand owners
Attractive growth narrative
for each industrial cluster
Significant annuity revenue streams
Serving a broad range
of economic sectors
Sustainable capital structure
unlocks cash flow
for investment in growth
Experienced board and
established management
in place to drive delivery
of projections
Returns in excess of WACC, with
further opportunities to widen spread
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Q&
A
IR contacts
Paul Mansour, Dep Exec Chairman
Irwin Lipworth, CFO
Frank Ford