presentation to investorshugegroup.com/.../09/2018-09...presentation-final.pdf · •increased our...

Copyright ©HUGE GROUP 2018

PRESENTATION TO INVESTORS


PRESENTATION CONTENTS#1 Our huge story a. Our huge business model

b. The growing huge strategy

c. Historical strategic performance

d. Key personnel and contributors

e. Our shareholder base

#2 Competitive environment a. Our operational universe

b. Our current and potential markets

c. Our unique proposition

d. Moving beyond fixed infrastructure

e. IoT and Fintech in the huge proposition

f. Competitor and SWOT analysis

g. The huge value proposition

#3 Performance review a. Financial performance for the 2018 financial year

b. Our huge financial growth

#4 Defining the huge future a. Our organic growth story

b. Our acquisitive story

c. Our huge future

d. Metcalfe’s law

#5 Conclusion


OUR HUGE STORY


OUR SERVICE PROVIDERS

Working with a common base of suppliers, the group operates within a decentralised management model where each subsidiary company takes control of their own operations

OUR HUGE BUSINESS MODEL

Our huge story Competitive environment Performance review Defining the huge future Conclusion Appendices

Our outputs are the solutionsthat we provide to customers to strengthen their connectivity

We provide value-added data services using GSM-based cellular data networks for business-to-business & machine-to-machine applications

We provide a wireless full suite telephony service that gives our customers a replacement for their traditional “telco” fixed line services

We provide customers with a complete solution to all their current and future data, internet, communications & private network needs

OU

R B

USI

NES

SES

OUR VISIONBuilding a group that positions itself to realise extraordinary opportunities

OUR MISSIONWe invest in and grow companies that provide solutions which are simple, innovative and fit for purpose

OUR BUSINESS PARTNERSThe Group then works with select Business Partners who drive the sales of our products and services by designing customer solutions that unlock value using a customised selection of the various, yet complementary, company offerings

OUR CUSTOMERSSMEs | Corporates |Individuals

OUR SOLUTIONS

Technical &customer support

systems

OUR BUSINESS ENABLERSAll our solutions are locally designed, developed & produced – means our people can create & implement bespoke, customer-specific solutions at highly competitive tariffs

Extensive distribution capacity

Critical scale of operations

National footprint

iECNS and iECS licences

Wholesale agreementswith mobile network

operators


THE GROWING HUGE STRATEGY

Our huge story Defining the huge future Conclusion AppendicesCompetitive environment Performance review


THE GROWING HUGE STRATEGY


Expand the existing real estate of customers

Expand the existing network of Business Partners

Leverage existing product and service offering

Identify new strategic partners to expand into new products and services

Create people centric operations

Advance measurements and data collection

Implement automation in key areas of the operations

Improve internal process management

Review and refine operating models

Develop and implement comprehensive B-BBEE plans

Invest in earnings accretive businesses

Deliver bolt-on acquisitions at subsidiary company level

Increase investor base and share liquidity

Add service diversification and amass customer real estate

Expand the Huge brand


HISTORICAL STRATEGIC PERFORMANCE

Our past shows a strong track record of delivering on what we set out to achieve

Our huge story Defining the huge future Conclusion AppendicesSt

rate

gic

targ

ets

Wh

at w

e d

eliv

ered

2011 2014 2015

We said that we would • re-engineer the business model

We said that we would• build a distribution capability• build critical mass• increase the number of installed

telephone lines• settle material litigation• strengthen the balance sheet

We said that we would• continue to grow our distribution

footprint• build critical mass• increase the number of installed

telephone lines

• Conclusion of first wholesale agreement for wireless GSM based telephony services

• Business Partner Agreement No. 287• Increased our real estate of customers

to 5 000• Installed our 20 800th telephone line•Undertook a Rights Offer of

20 000 000 shares at 100c per share, fully subscribed• Settled material litigation• Strengthened the balance sheet


to 6 500• Installed our 28 300th telephone line

2016

We said that we would• continue to grow our distribution

footprint• Build critical mass• increase the number of installed

telephone lines• increase profitability


to 9 900• Installed our

33 400th telephone line• Increased our gross margin above 40%• Increased PAT by 75% from

R11 million to R20 million

Competitive environment Performance review


HISTORICAL STRATEGIC PERFORMANCE

Our past shows a strong track record of delivering on what we set out to achieve

Our huge story Defining the huge future Conclusion Appendices

2017 2018

We said that we would•move our listing to the Main Board of the JSE• continue to grow our distribution footprint• continue to increase the size of our customer real estate• increase the number of installed telephone lines• substantially increase our gross margin• increase profitability• strengthen our management team• grow our shareholder base

We said that we would• continue to grow our distribution footprint• continue to increase the size of our customer real estate• increase the number of installed telephone lines• close our first acquisition• lower our existing cost structures• launch a new telephony service• build a holding company structure• substantially grow revenue, gross margin and profitability• strengthen our Board• launch a new strategy for growth

• Listed on the Main Board of the JSE• Signed Business Partner Agreement No. 648• Increased our real estate of customers to 12 300• Installed our 37 400th telephone line• Increased our gross margin substantially from 40% to 48% • Increased PAT by 36% from R20 million to R27 million•Appointed Duarte da Silva as Chairman and Zunaid Bulbulia as Chief Financial

Officer

• Signed Business Partner Agreement No. 719• Increased our real estate of customers to 45 415• Installed our 39 100th telephone line•Acquired Huge Connect and Huge Networks• Concluded a wholesale agreement for the substantial lowering of base costs• Launched full suite telephony• Created a holding company structure• Implemented the Growing Huge Strategy•Grew revenue by 63%• Increased gross margin from 48% to 56%•Grew PAT by 188%, from R27 million to R77 million•Appointed Craig Lyons and Brian Armstrong to the Board

Competitive environment Performance reviewSt

rate

gic

targ

ets

Wh

at w

e d

eliv

ered


KEY PERSONNEL AND CONTRIBUTORS

DUARTE DA SILVA Non-Executive Chairman

BSc (Mech Eng), PhD

25 years of investment experience

Previously Africa Regional Head of Macquarie Group Limited

JAMES HERBST Chief Executive OfficerBCom, BAcc, CFA, CA(SA)

20 years of investment experience and 14 years of telecommunications experience

ZUNAID BULBULIA Chief Financial Officer

BCom, BCompt, CTA, CA(SA)

24 years telecommunications experience

Previously Chief Executive Officer of MTN SA & Chief Operations Executive of MTN Group

BOARD OF DIRECTORS

• Steve Tredoux Lead Independent Director

• Vincent Mokholo Non-executive director

• Dennis Gammie Independent non-executive director

• Craig Lyons Independent non-executive director

• Brian Armstrong Independent non-executive director

EXECUTIVE COMMITTEE

• Andre Lessing MD: Huge Connect

• Marius Oberholzer MD: Huge Networks

• Craig Rowan MD: Huge Software

• Gunter Engling MD: Huge Telecom

• Elsabe Van Heerden Group Financial Executive

• Karen Robinson Company Secretary



OUR SHAREHOLDER BASE

1.20%

10.35%

11.26%

28.35%

31.56%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Element Capital

Sentio

Stanlib

Management

Praesidium Capital



COMPETITIVE ENVIRONMENT


OUR OPERATIONAL UNIVERSE


Connecting customers

and devices

Building an eco-system for service

and product delivery


OUR CURRENT AND POTENTIAL MARKETS


2017

15 000SME customers

2018

45 000SME customers

Providing Fintech & IoT connectivity to

+450 000 SMEs in South Africa*


Potential markets

Current markets

*67% of forma SME market Bureau for Economic Research, Research Note 2016, No.1


OUR UNIQUE PROPOSITION

T h e m o st re c e nt g l o b a l b i l l i o n a i re s o r i g i n at e d f ro m e nt e r p r i s e s , w i t h n o

f i xe d i n f rast r u c t u re .

T h e ex t ra o rd i n a r y s u c c e s s o f t h e s e e n d e av o u rs h a s b e e n t h e i r a b i l i t y t o

a s s i m i l a te c u sto me rs a n d d e l i ve r b e s p o ke a n d s i m p l e s e r v i c e s .

Our huge story Financial highlights Competitive environment Defining the huge future Conclusion Appendices


MOVING BEYOND FIXED INFRASTRUCTURE

I n s p i re d b y t h i s i n d u st r i a l re v o l u t i o n , H u g e h a s d e v e l o p e d i t s

p h i l o s o p hy o f S M E c u stome r re a l e s tate a n d c o l l a b orat i ve e co - syste ms .

I n a w o r l d m o v i n g t o w a rd s s e r v i c e p ro v i s i o n b e yo n d d e p e n d e n c e o n

f i xe d i n f ra s t r u c t u re , H u g e h a s b e e n a g g re s s i v e l y b u i l d i n g a n d

a g g re gat i n g a s i ze a b l e S M E c u st o m e r re a l e s ta t e .

I n i t i a l l y fo c u s s i n g o n m o b i l i t y a n d c o n n e c t i v i t y - b a s e d s o l u t i o n s , H u g e i s

n o w e vo l v i n g i n t o t h e re a l m o f m a c h i ne t o m a c h i ne co mmuni cat i o n ( I o T )

a n d d i s r u pt i ve f i n a n c i a l s o l u t i o n s ( F i n t e c h ) .



IOT AND FINTECH IN THE HUGE PROPOSITION

F i n t e c h , a s a H u g e p ro p o s i t i o n , i s t h e d e l i v e r y o f s i m p l e , d i s r u pt i ve a n d

i n n ovat i ve s o l ut i o ns t o o u r c u s t o m e rs , i n p a r t n e rs h i p w i t h f i n a n c i a l

i n s t i t u t i o n s .

C u r re nt l y, t h e H u ge e co - syste m co ns i s t s o f o ve r 1 2 0 0 0 0 d e v i c e s , m a k i n g

t h e H u g e c u st o m e r re a l e s ta t e o n e o f t h e l a rge st p l a t fo r ms fo r m a c h i n e

t o m a c h i n e c o m m u n i c at i o n i n S o u t h e r n A f r i c a .

D i s s e c t i n g t h e c u st o m e r b a s e u s i n g d e ta i l e d d ata a n a l y t i c s , c o u p l e d w i t h

o u r c o n n e c t i v i t y ex p e r t i s e , p o s i t i o n s H u g e t o c o n c e i v e , d e v e l o p a n d

d i s t r i b u t e a s u i te o f b e s po ke I o T a n d F i nte ch o f fe r i ngs w h i c h w i l l u n l o c k

va l u e fo r a l l s ta ke h o l d e rs .



COMPETITOR & SWOT ANALYSIS


OUR COMPETITORS HUGE

• Larger companies • SME customer real estate of +45 000

• Broader product offering • 120 000 devices in communication

• Infrastructure dependent • Cross-selling into Huge customer real estate

• Superior B-BBEE profile • Extensive distribution network

• Independent of infrastructure

• Ability to scale

• Proven track record in financial services

• Proven ability to innovate


THE HUGE VALUE PROPOSITION



PERFORMANCE REVIEW


FINANCIAL PERFORMANCE FOR THE 2018 FINANCIAL YEAR


Basic earnings pershare increased by

80%26.30 cents to 47.40 cents

Headline earningsper share increased by

76%26.30 cents to 46.34 cents

Net profit aftertaxation increased by

188%R26.8 million to R77.1 million

EBITDAincreased by

145%

Net asset value increased by

198% R376 million to R744 million

Operating profitincreased by

168%R42.2 million to R112.9 million

Total revenue increased

63%R245.9 million to

R401.3 million

Key ratios 2017 2018

Current ratio 2.37 0.98 times

Acid test ratio 2.36 0.97 times

Return on equity 8% 14% percent

Return on real assets 13% 21% percent

Return on invested capital 11% 15% percent

Net debt to EBITDA (1.15) 0.58 times

Earnings yield 3% 5% percent

PE ratio (R8.50 share price) 32.32 (R8.70 share price) 18.35 times



OUR HUGE FINANCIAL GROWTH

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DEFINING THE HUGE FUTURE


OUR ORGANIC GROWTH STORY

Creating a platform for organic growth

Delivering bolt-on acquisitions and creating platforms for organic growth, Huge is building a substantial SME customer real estate and developing bespoke offerings for the SME market


Leveraging the 120 000 connected devices to create an IoT presencethrough Huge Connect

Increasing the SME customer real estate of Huge Telecom from 15 000to 100 000 customers in the next three years

Invest in aggressive growth of Huge Networks through complementaryacquisitions, targeting R100 million revenue in the next three years


OUR ACQUISITIVE GROWTH STORY

Growing the Group by acquisition

Potential acquisition targets

• Earnings accretive

• Service diversification

• Significant customer real estate

• Offer depth to current Huge offerings

• Low cost base, with proven operational efficiencies

• Ability to scale rapidly through bolt-on acquisitions

• Cross-selling opportunities from current and future Huge offerings

• Operate in the mobile connectivity space, with Fintech and IoT prospects

• Financial profile of annuity income and high conversion from EBITDA to cash

• Entrepreneurial management teams with expertise and capacity to create sustainable value



OUR HUGE FUTURE

What does the Huge future look like?

Successfully executing the Growing Huge Strategy, resulting in a huge future

• Enter the JSE Top 100 listed companies

• Show consistent, above average growth in excess of 20% per annum

• Participate in the Fintech and IoT industrial revolution

• Remain independent of fixed network infrastructure

• Create a machine-to-machine connected network in

excess of half a million devices

• SME customer real estate of over 200 000

• Aggregate cross-selling opportunities

• Sustain low cost operating structures



METCALFE’S LAW

Metcalfe’s law suggests that the community value of a network grows as the square of the number of its users increases.

As Huge grows its customer real estate, value to its stakeholders will expand exponentially.



CONCLUSION


GROWING HUGE TOGETHER


presentation to investorshugegroup.com/.../09/2018-09...presentation-final.pdf · •increased our...

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