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enX Group Limited results presentation€¦ · R’000 2018 2017 Revenue 7 429 294 6 218 342...

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  • enX Group Limited results presentationfor the year ended 31 August 2018

  • 2

    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.

  • 3

    Agenda

    01 Who we are

    02 Our track record

    03 Financial review

    04 Outlook

    05 Q&A

  • 4

    Who we are1. Why invest in enX

    2. Who is enX

    3. Who we represent

    4. Our long term strategies

    01

  • 5

    Why invest in enX

    • Preferred custodian of leading global brands

    • Entrepreneurial and committed management team

    • Diversity across geographies, customers, products

    and services

    • Dynamic allocation of capital at attractive rates

    of return - a core competence

  • 6

    EQUIPMENT# FLEET PETROCHEMICALS

    Who is enX

    Manufacturing and distribution of

    petrochemicals

    • Oil lubricants

    • Chemicals

    • Base oils

    Distribution, leasing, rental,

    after-market and value-added

    services for:

    • Forklifts

    • Port and crane equipment

    • Materials handling equipment

    Full fleet of Fleet management

    solutions across all vehicle classes:

    • Leasing

    • Fleet management products and

    services

    • Tracking

    • Insurance and remarketing

    An entrepreneurial, diversified industrial company

    with the ambition to be the preferred custodian of leading global brands

    # Excludes smaller equipment distribution businesses that we intend to divest of

  • 7

    Who we represent

    Brand Recognition

    Research and Development

    Marketing Expertise

    Growth Opportunities

    GLOBAL BRAND MARKET POSITION

    1

    3

    1

    1

    1

    1

  • 8

    Our long term strategies

    • Divest:

    - Fleet

    - Wood

    - Power

    • Invest:

    - Forklift

    - Petrochemicals

    • Strengthen social licence

    • Continue building market leading OEM partnerships

  • 9

    Our track record1. Highlights

    2. Our journey

    3. Our experienced non-executive directors

    4. Our entrepreneurial management team

    5. Delivering on our long term priorities

    02

  • 10

    Highlights

    • First full year of trading since the Eqstra acquisition delivered

    adjusted headline earnings of R337 million

    • Adjusted HEPS growth of 4% in subdued markets: 188.5 cps

    compared to 181.2 cps

    • zaA- long-term credit rating from S&P, 2 notches

    improvement vs. GCR

    • Stabilised fleet leasing book

    • Renewed access to debt capital markets, deleveraging and

    improved maturity profile in South African leasing businesses

    • Acquired three new bolt-on forklift dealers in the UK.

    ~R76 million investment

    • ExxonMobil accreditation for local blending

    • Acquired minority interest in a ExxonMobil base oil

    distributor, including strategic storage capacity in Durban port

    • Recovered all monies, R250 million, due by eXtract

  • 11

    Our journey

    # Adjusted for 11:1 consolidation ^ Excluding once-off foreign exchange loss

    2013 to 20183.5x or 28% compound growth in ADJUSTED HEPS (cps)#

    2007

    • Listed Austro

    • Power business

    acquired

    2013

    • Wild Rose

    Capital

    introduced as

    shareholder

    of reference

    2014

    • Establishment of

    Petrochemicals

    segment

    through

    acquisition

    of Centlube

    • Group renamed

    enX

    2015^

    • Awarded

    ExxonMobil

    distributor-ship

    2016

    • Acquisition

    of Genmatics,

    WAI and AGL

    • Empowerment

    transaction and

    capital raise

    2017

    • Acquisition

    of established

    EFML and EIE

    • Decoupled from

    eXtract

    • Growing

    Petrochemical

    segment

    2018

    • Expand UK

    footprint

    • 10 months of

    results for EIE

    and EFML

  • 12

    Our experienced non-executive directors

    • Mpho Makwana assumed the role of independent non-executive Chair effective 1 January 2018

    • Allan Joffe appointed as non-executive director on 5 September 2018

    NameMpho

    MakwanaNopasika

    LilaAnthony Phillips

    Paul O’Flaherty

    Steve Booysen

    Paul Baloyi

    LeratoMolefe

    AllanJoffe

    PositionIndependent

    non-executive Chair

    Audit and risk committee

    Chair

    Remuneration committee

    Chair

    IT steering committee

    Chair

    Asset and liability

    committee Chair

    Investment committee

    Chair

    Independent non-executive

    director

    Non-executive director

  • 13

    Our management team

    • Steven Joffe* appointed as Chief Executive Officer effective 1 January 2018

    • Paul Mansour^ appointed Chief Investment Officer effective 1 January 2018

    • Jarrod Friedman appointed Chief Financial Officer effective 1 September 2018

    * previously non-executive Chairman^ previously Executive Deputy Chairman

    NameSteven Joffe

    Paul Mansour

    Jarrod Friedman

    GaryNeubert

    Trevor Williams

    ChristianNeuberger

    JacquiCarr

    Brent Hean

    Clint Nickall

    Position CEO CIO CFO EIE Wood Power EFML Chemicals Lubricants

    Segment enX Group enX Industrial enX Fleet enX Petrochemicals

  • 14

    Delivering on our long term priorities

    STRATEGY GOALS ACHIEVED

    • 5-year lubricant blending agreement signed with

    ExxonMobil

    • 3-year renewal of distributor agreement with

    ExxonMobil

    • Invested in a ExxonMobil base oil distributor

    • Sales reward recognition from Toyota Industrial

    Corporation

    • Quest bedded down

    • New revenues generated from ExxonMobil

    chemical products

    • Acquired three additional forklift dealers in the UK

    which expanded footprint and grew leasing book

    Preferred custodian

    of OEM brands

    Strengthen OEM partnerships

    • Local production of ExxonMobil

    lubricants

    • Grow market share in line with

    OEM aspirations

    • New product distribution

    opportunities

    Differentiate with scale

    • Quest, in house Fleet ERP system

    • Increase volumes through new

    blending plant

    • New chemical product revenues

    Geographical diversification

    • Expand European footprint

  • 15

    Delivering on our long term priorities

    STRATEGY GOALS ACHIEVED

    • EIE level 4 contributor

    • Lubricants level 3 contributor

    • EFML level 3 contributor

    • Amasondo level 2 contributor

    Strengthen social

    licence

    • Achieve minimum level 4 BBBEE

    contribution at operational level

    • Initiatives underway to focus capital deployment

    • 4% y-o-y growth in HEPS

    • Net debt to equity ratio reduced to 154%

    • ‘A-’ credit rating from S&P

    • R360 million raised in debt capital markets

    • Refinanced R510 million of bank amortisations

    • Sufficient liquidity for next 18 months of

    maturities

    Financial discipline • Optimal allocation of capital

    • Consistent growth in earnings

    • Strengthen capital structure

    • Improve credit rating

    • Active management of

    re-financing risk

  • 16

    Financial review1. Financial summary

    2. Segmental analysis

    3. Condensed statement of profit and loss

    4. Condensed statement of financial position

    5. Condensed statement of cash flows

    6. Gross interest-bearing borrowings

    7. Capital market evolution

    8. Liquidity and funding

    03

  • 17

    Financial summary

    Key performance indicators

    R’000 2018 2017

    Revenue 7 429 294 6 218 342

    Adjusted earning before interest and taxation (EBIT) 815 185 735 626

    Adjusted headline earnings 337 073 281 072

    Adjusted headline earnings per share (cents) 188.5 181.2

    Number of shares in issue 181 317 725 180 439 427

    Weighed average number of shares in issue (net of treasury) 178 851 235 155 154 559

    Net asset value per share (cents) - excluding eXtract asset held for sale in 2017 1 537.9 1 387.4

    Net tangible asset value per share (cents) - excluding eXtract asset held for sale in 2017 1 110.1 928.6

  • 18

    Financial summary

    Adjustments to EBIT and Headline Earnings explained

    R’000 EBITHeadline Earnings

    Earnings before interest and taxation (EBIT)/Headline Earnings 686 287 282 652

    Share-based payment expense 26 110 26 110

    Restructuring and transaction costs 7 382 7 382

    Amortisation of intangible assets 33 586 33 586

    Retrenchments costs 5 636 5 636

    Impairment of goodwill 56 184 -

    Taxation effect on adjustments - (18 293)

    Adjusted EBIT/Headline Earnings 815 185 337 073

    Adjusted EBIT cps/Headline Earnings cps 455.8 188.5

  • 19

    0

    1 000 000

    2 000 000

    3 000 000

    Leasing assets Interest-bearing liabilities

    Segmental analysis

    47%

    41%

    12%

    Adj. PBT

    August 2018

    enX Equipment

    enX Fleet

    enX Petrochemicals

    43%

    40%

    17%

    Adj. PBT

    August 2017

    enX Equipment

    enX Fleet

    enX Petrochemicals

    0

    1 000 000

    2 000 000

    3 000 000

    Leasing assets Interest-bearing liabilities

    Fleet Equipment

  • 20

    Segmental analysis

    * Excludes Power and Wood.

    EIE (SA):

    • 12 months vs. 10 months results

    • Leasing assets ↑ 11%

    • Improvement in overhead recovery from aftermarket

    • Successful implementation of Mobile Mechanic

    FY 2018Rm 2018 2017

    Revenue 3 166 2 441

    Adj. EBIT 397 332

    Adj. PBT 219 184

    Leasing assets 2 762 2 494

    Total assets 4 231 3 857

    Interest-bearing liabilities 2 493 2 305

    EIE*

    32%

    25%5%

    38%

    REVENUE VALUE CHAIN

    August 2018

    New equipment

    Value added services

    Used equipment

    Rental

    EIE (UK):

    • Grew national footprint with 3 acquisitions

    • Leasing assets ↑ 10%

    • Success with the Konecrane brand breaking into key portsand terminals

    • Grew dealer network

  • 21

    Segmental analysis

    EFML:

    • 12 month vs 10 months of results

    • Leasing book growth ↑ 1% after multi-year decline

    due to capital constraints

    • Strong remarketing profits

    • Growth in value add product revenues

    • Quest stable and efficiencies materialising

    FY 2018

    FLEET

    Rm 2018 2017

    Revenue 2 134 1 650

    Adj. EBIT 380 327

    Adj. PBT 197 181

    Leasing assets 2 614 2 583

    Total assets 3 050 3 117

    Interest-bearing liabilities 1 875 1 885

    42%

    36%

    22% REVENUE VALUE CHAIN

    August 2018

    Lease/rent

    VAPs

    Remarketing

  • 22

    47%

    28%

    16%

    9%

    Segmental analysis

    Lubricants:

    • Growth in ExxonMobil volumes

    • ExxonMobil blending accredited

    • Profitability materially impacted by lower blending

    volumes due to a customer’s temporary over stock

    position

    Chemicals:

    • Sales volumes and margin increased compared to

    prior year

    • Results benefited from new products introduced

    during the year

    FY 2018

    PETROCHEMICALS

    Rm 2018 2017

    Revenue 1 625 1 539

    Adj. EBIT 80 101

    Adj. PBT 56 77

    Inventory 462 392

    Total assets 998 840

    Interest-bearing liabilities 285 290

    REVENUE VALUE CHAIN

    August 2018

    Lubricants

    Polymers

    Rubber

    Chemicals & additives

  • 23

    Condensed statement of profit and loss

    R’000 2018 2017

    Revenue 7 429 294 6 218 342

    Net operating expenses (5 479 869) (4 485 094)

    Profit before depreciation and amortisation 1 949 425 1 733 248

    Depreciation and amortisation (1 141 121) (1 026 379)

    Loss/(profit) on disposal of property, plant and equipment (1 036) 27

    IFRS 2 – Share based payment expense (26 110) (6 708)

    Foreign exchanges losses (39 933) (27 085)

    Operating profit 741 225 673 103

    Fair value adjustment of investments - (736 563)

    Impairment of goodwill (56 184) -

    Share of profit/(loss) from associates 1 246 (2 620)

    Net finance costs (377 176) (291 679)

    Profit/(loss) before taxation 309 111 (357 759)

    Taxation (78 448) (103 368)

    Profit/(loss) after taxation 230 663 (461 127)

  • 24

    Condensed statement of financial position

    R’000 2018 2017

    Goodwill 478 746 504 510

    Leasing assets 5 377 858 5 077 814

    Inventories 1 352 939 1 229 624

    Trade, other receivables and derivatives 1 125 091 1 216 748

    Other assets 923 533 1 092 186

    Bank and cash balances 451 305 317 806

    Assets held for sale - eXtract - 212 176

    Total assets 9 709 472 9 650 864

    R’000 2018 2017

    Total shareholders’ interests 2 793 220 2 715 250

    Interest-bearing borrowings, overdraft, vendor loans 4 782 282 4 890 064

    Deferred taxation 524 922 507 653

    Trade, other payables and derivatives 1 548 604 1 500 073

    Other liabilities 60 444 37 824

    Total equity and liabilities 9 709 472 9 650 864

  • 25

    Condensed statement of cash flows

    R’000 2018 2017

    Cash generated from operations before working capital movements 1 893 662 1 699 545

    Working capital movements 559 935 391 735

    Cash generated from operations 2 453 597 2 091 280

    Net cash flows from interest and taxation (446 179) (450 559)

    Net cash flows from operating activities 2 007 418 1 640 721

    Net cash flows from investing activities (1 656 842) (2 636 043)

    Net cash flows from financing activities (248 827) 1 288 782

    Net increase in cash and cash equivalents 101 749 293 460

  • 26

    Gross interest-bearing borrowingsFunding facilities (R’million) Facility size Utilised Unutilised

    enX Leasing (EIE and EFML) – South Africa 4 233 3528 705

    General banking facility 400 10 390

    Term facility 2 583 2 583 -

    Liquidity facility 344 29 315

    Capital market 906 906 -

    enX Leasing (EIE and EFML) - Rest of world 1 256 995 261

    Asset backed funding UK (EIE) 1 213 960 253

    General banking facility UK (EIE) 5 - 5

    General banking facility Zambia (EFML) 38 35 3

    enX Trading 378 283 95

    General banking facility 150 130 20

    Term facility 180 105 75

    Deferred vendor consideration 35 35 -

    Other 13 13 -

    Total funding 5 867 4 806 1 061

    enX Leasing SA Covenants ZAR (x) Level FY2018 HY2018 FY2017

    Net total debt : EBITDA Improving ≤ 3.00 2.27 2.27 2.34

    EBITA : Net finance charges Improving ≥ 1.20 1.75 1.74 1.60

    Net total debt : Equity Improving ≤ 3.37 1.88 2.06 2.32

    Loan to Value Improving ≤ 0.85 0.63 0.69 N/A

  • 27

    Capital market evolution

    EIE and FML facilities separated from eXtract

    Debt restructure alleviates short term liquidity challenges

    BBB Investment grade credit rating secured

    Note maturities:

    R493m

    maturing notes redeemed

    Notes issued:R70m 5 year

    Syndicated loan:

    R200m 3 year

    Note maturities:

    R612m maturing

    notes redeemed

    Note specific

    liquidity facility:

    R315m 3.5 year

    Notes issued:R260m 3 year

    Bank term facility refinance:

    R510m bank term facility

    amortisation refinance

    Notes issued:

    R96m 4 year

    Credit rating:

    zaA- from S&P

    FY2019 goals:

    • Redeem/refinance R413m

    April 2019 maturities

    • Future funding strategy

    dependent on outcome

    of EFML process

  • 28

    0

    300

    600

    900

    1 200

    2019 2020 2021 2022 2023

    Bond Debt Term Facility A

    Term Facility C Liquidity Facility Repmt

    0

    300

    600

    900

    1 200

    2019 2020 2021 2022 2023

    Bond Debt Term Facility A

    Term Facility C Liquidity Facility Repmt

    Liquidity and funding

    Funding developments post Aug 2018

    • Received a zaA- long-term credit rating

    from S&P

    • R96m 4yr listed notes issued 55bps

    tighter margin than April 2018 issue

    • R510m refinance of bank term debt

    amortisations

    • Early redemption of R45m EQS05 that

    mature in April 2019

    Funding outlook

    • Depends on outcome of EFML process

    • Sufficient liquidity to meet next 18

    months’ maturities

    • Continuous drive to identify ways to

    reduce cost of funding

    Long-term funding objectives

    1. Diversify funding sources

    2. Ample liquidity buffers for trading and

    upcoming maturities

    3. Target ‘A’ credit rating

    4. Spread the maturity profile

    5. Manage and reduce cost of funding

    Feb 2018 - SA maturity profile (R’m)

    Active management

    of refinance risk

    Oct 2018 - SA maturity profile (R’m)

  • 29

    Outlook1. EFML cautionary announcement

    2. Segmental outlook

    04

  • 30

    EFML cautionary announcement

    • Board completed a review of strategic options

    in respect of ownership interest of EFML

    • Concluded that new owner may potentially be able

    to optimize EFML value proposition

    • Divestment process has commenced

    • Ultimate outcome will be dependent on price

    received

  • 31

    EQUIPMENT# FLEET PETROCHEMICALS

    • Grow ExxonMobil distribution

    volumes, supported by local

    blending

    • Toll blending volume

    anticipated to recover

    • Increase volumes of

    polyethylene supplied by

    ExxonMobil

    • Increase synthetic rubber

    market share following

    closure of local manufacturer

    • Introduction of cleaner base

    oil grades to SA market

    • Organic and acquisitive UK

    growth

    • Stable SA performance and

    market share growth

    underpinned by healthy order

    book

    • Grow in selected African

    markets on an export,

    capital-lite, dealer basis

    • Improve efficiencies through

    use of technology

    • Focus on organic growth of

    lease book

    • Increase revenues from VAPs

    • Explore opportunities to

    invest in complementary

    businesses

    • Utilise IP and technology to

    improve competitiveness

    Segmental outlook

  • 32

    Q&AContactsSteven Joffe, CEO

    [email protected]

    Jarrod Friedman, CFO

    [email protected]

    Paul Mansour, CIO

    [email protected]

    05

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