Investor presentation for the half-year ended 31 December 2018 2019
agenda Introduction 01 Lindsay Ralphs Financial review 02 Mark Steyn Operational updates 03 Lindsay Ralphs Strategic overview and outlook 04 Lindsay Ralphs Appendices 05 2 THE BIDVEST GROUP LIMITED Unaudited Results for the half-year ended 31 December 2018
01 introduction Lindsay Ralphs CE 3 THE BIDVEST GROUP LIMITED Unaudited Results for the half-year ended 31 December 2018
Introduction we are Bidvest A strong 30-year track record of consistent delivery, returns and growth ➢ Highly diversified portfolio spanning broad economic spheres: A leading B-2-B services, wholesale and distribution group operating › Services – 62% of trading profit in the areas of commercial and › Trading and distribution – 38% of trading profit industrial products, electrical ➢ Strongly cash generative assets that are relatively capital light products, financial services, freight ➢ Highly entrepreneurial and decentralised management teams management, office and print supported by a small corporate office solutions, outsourced hard and soft services and automotive retailing ➢ Leading positions in our markets with a broad product offering ➢ Strong “Proudly Bidvest” culture ➢ Outperforming through the cycle ➢ Embracing change through innovation 4 THE BIDVEST GROUP LIMITED Unaudited Results for the half-year ended 31 December 2018
Introduction diversified portfolio No one segment dominant in profit contribution Contribution to revenue Contribution to trading profit 5% 8% 6% 3% 25% 30% Services 9% Freight Commercial Products Office & Print 7% 29% Financial Services 8% Automotive Electrical 12% Namibia Properties 11% 20% 3% 10% 12% 5 THE BIDVEST GROUP LIMITED Unaudited Results for the half-year ended 31 December 2018
Introduction our strategy and progress Maximise Maintain strong Invest capital Stewardship diverse portfolio financial position for future growth Internationalisation: Trading profit +6.3% 80% of businesses achieved Tight asset management Evaluating opportunities despite frail economic backdrop between level 1-4 B-BBEE ratings None executed in H1 Invest in SA: Governance entrenched in our DNA, LPG project on track; Efficient Stand-out results in Services, Debt burden low at 8.2x interest cover; it is how we do business. Freight and Office and Print divisions 1.1x net debt/EBITDA distribution centres; technology Effective structures in place to lower cost of doing business Acceptable cash generation Noonan performing Several bolt-on acquisitions. Sustainability initiatives during the period. Large working ahead of expectations Additional R566mn post December continue across the Group capital absorption at period end Ongoing investments Ongoing discussions on non-core assets. Development and growth to lower the cost of doing business Bidcorp shares sold of talent pool continues 6 THE BIDVEST GROUP LIMITED Unaudited Results for the half-year ended 31 December 2018
Introduction highlights for the year HEPS HEPS up by 9.6% to 629 cents (Cents per share) 629 Interim DPS of 282 cents (+10.6%) 574 Trading profit up 6.3% to R3 billion 1HFY2018 1HFY2019 Stand-out results from Freight, Services, Office & Print and Properties Commercial Products and Financial Services delivered acceptable performances DPS Electrical and Automotive in line with weak markets (Cents per share) 282 R4 billion cash generated from operations pre working capital Seasonal working capital absorption greater than last year 255 Exceptional balance sheet Invested R2 billion in capex to expand infrastructure, modernise 1HFY2018 1HFY2019 and increase capacity across our businesses 7 THE BIDVEST GROUP LIMITED Unaudited Results for the half-year ended 31 December 2018
02 financial review Mark Steyn CFO 8 THE BIDVEST GROUP LIMITED Unaudited Results for the half-year ended 31 December 2018
Financial Review financial highlights Interim ended 31 December Interim ended 31 December R billion 2018 2017 Change Revenue 40.0 39.9 0.2% Gross profit margin* 29.3% 28.1% ↑ Expense margin* 21.5% 20.6% ↓ EBITDA 4.2 4.0 4.3% Trading profit 3.3 3.1 6.3% Trading profit margin 8.4% 7.9% ↑ Headline earnings 2.1 1.9 10.0% HEPS (cents) 629.1 574.0 9.6% Normalised HEPS (cents) 635.7 591.7 7.4% DPS (cents) 282.0 255.0 10.6% EBITDA interest cover (times) 8.2x 7.6x ↑ Net debt/EBITDA (times) 1.1x 1.1x - Cash generated from operations before working capital 4.1 3.9 6.0% ROFE 22.8% 22.8% - * As % of Revenue 9 THE BIDVEST GROUP LIMITED Unaudited Results for the half-year ended 31 December 2018
Financial Review income statement analysis ➢ Revenue flat Revenue ➢ Accounting change in Tradeflow (June 2018), disposal of Bidfish, lower luxury vehicle sales and implementation of MBSA agency model, reduced trading across Electrical ➢ Gross margin improve 120bps to 29.3% Gross income ➢ Most divisions reflected improvement ➢ Margin mix impact from Noonan ➢ Operating expenses only increased by 4.7% Expenses ➢ Good expense management across the businesses ➢ Strong trading profit growth reported by Services, Freight, Office & Print and Properties Trading profit ➢ Acceptable performances from Commercial Products and Financial Services excluding the insurance portfolio returns ➢ Tough trading conditions evident in Electrical and Automotive results ➢ Acquisition costs of R3 million Other costs ➢ Amortisation of acquired customer contracts of R22 million (Noonan) ➢ R123 million uptick in fair value of associates Net capital items ➢ Insurance compensation for damaged Freight assets 10 THE BIDVEST GROUP LIMITED Unaudited Results for the half-year ended 31 December 2018
Financial Review income statement analysis ➢ Flat net interest charge despite full period of Noonan debt and capital expenditure Net finance charges ➢ Indication of good cash management focus throughout the period ➢ Interest cover of 8.2x EBITDA ➢ Share of current period earnings decreased by 7.4% Associate income ➢ Adcock Ingram performed well. Comair hit by higher fuel price ➢ Implied tax rate lower than statutory rate Taxation ➢ Reduced by income from associates, MIAL m-t-m and capital items ➢ Statutory rate in offshore entities Non-controlling ➢ Predominantly Namibia interest ➢ Reduced on disposal of Bidfish, Zonke closure ➢ 9.6% growth despite tough trading conditions HEPS ➢ Normalised HEPS 636 cents ➢ Interim dividend 282 cents, up 10.6% Dividend ➢ Cover ratio of 2.25x consistent with policy 11 THE BIDVEST GROUP LIMITED Unaudited Results for the half-year ended 31 December 2018
Financial Review debt and funding A conservative approach to gearing ➢ Net debt of R8.9 billion Interest cover & net debt (1HFY18 R9.0 billion) 10 7.6 8.2 8.0 ➢ EBITDA interest cover of 8.2 times 7.5 8 7.2 vs. 7.6 times in 2017 6 ➢ Net debt/EBITDA 1.1 times ➢ 44% of gross debt long-term 4 ➢ Ample headroom to fund organic 2 or acquisitive expansion Net debt (Rbn) 8.4 5.6 9.0 6.3 8.9 EBITDA interest cover (x) 0 1HFY2017 FY2017 1HFY2018 FY2018 1HFY2019 Moody’s Investors Service credit rating Long term Short term Outlook The Bidvest Group Limited National scale Aa1.za (unchanged) P-1.za (unchanged) Stable Global scale Baa3 (unchanged) P-3 (unchanged) Stable 12 THE BIDVEST GROUP LIMITED Unaudited Results for the half-year ended 31 December 2018
Financial Review cash flow Cash generative businesses that are capital light Free cash flow Cash generated vs working capital (Rbn) (Rbn) 4.1 (3.1) 106% 4.1 4.0 3.9 3.7 3.5 80% 2.6 (1.6) 1.5 0.2 (0.5) (0.6) 51% (1.0) 0.4 21% -0.6 Cash generated from ops pre WC Working capital Capex investing activities Net Finance charges Taxation Distributions financing activities (absorbed)/released Cash effects of Cash effects of -18% -1.9 -3.1 1H2017 2H2017 1H2018 FY2018 1H2018 Cash generated from ops pre wc Net wc Cash conversion ➢ Flat interest expense reflects good, consistent cash generation despite negative cash conversion ➢ Working capital absorbed of R3.1 billion (2017: R0.6 billion) › Timing of disbursements in Freight – slower exports for 2 significant clients › Limited inflow of bank deposits and an increase in bank advances › Strategic inventory build-up in Electrical (wire and cable); Office & Print (automation) › Debtors book remains well managed and adequately provided for ➢ Capex spend continues in SA 13 THE BIDVEST GROUP LIMITED Unaudited Results for the half-year ended 31 December 2018
03 operational updates Lindsay Ralphs CE 14 THE BIDVEST GROUP LIMITED Unaudited Results for the half-year ended 31 December 2018
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