Summarised unaudited consolidated results for the six months ended - - PowerPoint PPT Presentation

Summarised unaudited consolidated results

for the six months ended 31 December 2018

Disclaimer

Forward-looking statements

This presentation which sets out ARB’s results for the six months ended 31 December 2018 contains 'forward-looking statements‘ with respect to, inter alia, ARB’s financial condition, results of

• perations and certain of its plans, strategies and objectives, which have not been reviewed or

reported on by ARB’s auditors. By their nature, forward-looking statements are not guarantees of future performance but are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future, involve known and unknown risks, uncertainties and other facts or factors which may cause ARB’s actual results, performance or achievements to be materially different from any results, performance or achievements expressed

• r implied by such forward-looking statements.

Agenda

▪ Group financial review ▪ Divisional reviews

• Electrical
• Lighting
• Corporate

▪ Strategy and outlook ▪ Q&A

1

FINANCIAL REVIEW

Six month review

Lack of business confidence Perilous state of construction industry Power cable supply challenges More stable Rand Copper Price Lack of consumer confidence ZAR exchange rate remained volatile

Group financial review

94 105 105 107 92 25 50 75 100 125 HY2015 HY 2016 HY 2017 HY 2018 HY 2019

R'm

Operating Profit

24,22 27,79 28,07 37,62 23,17 5 10 15 20 25 30 35 40

HY2015 HY 2016 HY 2017 HY 2018 HY 2019

HEPS

131 099 190 877 174 762 226 562 147 775 50 000 100 000 150 000 200 000 250 000 HY2015 HY 2016 HY 2017 HY 2018 HY 2019

Cash

Cents R’m

1 100 1 236 1 274 1 342 1 357 250 500 750 1 000 1 250

'14 '15 '16 '17 '18

R'm

Revenue

Key drivers of revenue

▪ General maintenance spend ✓ Ongoing repairs and maintenance “Annuity income” ▪ GDFI ✓ Government infrastructure spend ✓ Private infrastructure spend ✓ Domestic DIY spend ▪ Confidence ✓ Business confidence –

✓ private infrastructure spend

✓ Consumer confidence – retail DIY spend ▪ Government Electrification ✓ Eskom ✓ Municipalities

Key drivers of costs

Product category Cost drivers Source Customers Cable & wire Copper / Aluminium Mainly local Cable - large Steel / PVC

(can be imported)

contractors & projects Labour Wire - Small OHL Steel / Wire Mainly local Eskom

Overhead line

Silicone

"designated products"

Municipalities labour Import some Mines / exports Low voltage Copper / Steel Local manufacture All customers Forex Local agents of

international brands

Lighting Forex Imported All customers

Group financial review

‘000 % change Six months ended 31 December 2018 Six months ended 31 December 2017 Year ended 30 June 2018 Revenue 1,1% 1,356,730 1,342,403 2,590,150 Gross profit 2,0% 318,784 312,537 615,186 Gross profit margin 23,5% 23,3% 23,8% Operating Profit (14.7)% 91,609 107,430 204,326 Operating profit margin 6,8% 8,0% 7,9% Profit for the year (36,8)% 63,696 100,802 191,647

Normalised earnings

‘000 % change Six months ended 31 December 2018 Six months ended 31 December 2017 Year ended 30 June 2018 Normal earnings attributed to

• rdinary share holders

(6,1)% 63,851 67,990 137,633 Net effect of IFRS adjustments (9,204) 20 600 30,914

• Change in Put Option valuation

assumptions (10,121) 13,828 26,000

• Dividends paid no Non-

Controlling Interests (NCI’s) (3,600) (4,800) (4,800)

• Net present value reversal of Put

Liability (1,586)

• (1,558)
• NCI’s share of the results

6,103 6,772 11,272 Earnings attributed to ordinary shareholders as reported in terms

• f IFRS

(38,3)% 54,647 88,590 168,496

Group financial review

19% 34% 2% 10% 2% 13% 14% 7% 8%

Sales by customer type H1 '19

Cash Contractors Government Industry Mining Wholesale Retail Export Other 17% 39% 2% 6% 4% 9% 15% 10% 6%

Sales by Customer type H1 '18

Group financial review

34% 12% 22% 24% 8%

Sales by Product H1 '19

Cable OHL Lighting Low Voltage Buy outs

39% 13% 24% 16% 8%

Sales by product H1 '18

Cable OHL Lighting Low Voltage Buy outs

Group financial review

85,72 92,80 96,31 85,44 89,30 90,19 87,30 79,15 78,68 83,56 90,74 91,68 98,34 101,2 60,00 65,00 70,00 75,00 80,00 85,00 90,00 95,00 100,00 105,00 June July Aug Sept Oct Nov Dec

RCP (Kg) 1st half comparison

RCP '19 RCP '18

Group financial review

12,93 13,17 13,24 13,17 13,73 14,10 13,93 13,33 13,41 14,06 14,81 14,49 14,14 14,15 10,00 11,00 12,00 13,00 14,00 15,00 16,00 June July Aug Sept Oct Nov Dec

Average R/$ 1st half comparison

US$ '19 US$ 18

Group financial review

200 000 250 000 300 000 350 000 400 000 450 000 500 000 550 000 Inventory Receivables Payables

Working Capital trend - Mid year

2014 2015 2016 2017 2018 2019 22,8% 20,9% 24,3% 21,3% 21,6% 15,0% 16,0% 17,0% 18,0% 19,0% 20,0% 21,0% 22,0% 23,0% 24,0% 25,0% 2015 2016 2017 2018 2019

Working capital as a % of revenue

Group financial review

49 613 80 196 56 398 120 239 77 699

• 20 000

40 000 60 000 80 000 100 000 120 000 140 000 1H 15 1H 16 1H 17 1h 18 1h 19

Cash generated by operations

2

DIVISIONAL REVIEW

Divisional contribution

77,3% 20,5% 2,2%

Contribution to revenue 1H 19

Electrical Lighting Corporate 79,7% 18,3% 2,1%

Contribution to revenue 1H '18

Electrical Lighting Corporate 54,4 28,5 17,1

Contribution to operating profit 1H 19

Electrical Eurolux Corporate 70,9 26,9 14,4

Contribution to operating profit 1H 18

Electrical Eurolux Corporate

3

ELECTRICAL

Electrical division

Increase in revenue from CraigCor Copper supply challenges Lack of infrastructure and development projects Entry of direct competitor into the cable market Continued reduction in Eskom spend

Electrical division

892 999 1 018 1 107 1 087 848 1 007 978 1 013

• 500

1 000 1 500 2 000 2 500 '15 '16 '17 '18 '19

Revenue (R’m)

1st half 2nd half 1 876 2 006 1 996 2 120 59 64 63 71 52 64 71 71 58

• 20

40 60 80 100 120 140 160 '15 '16 '17 '18 '19

Operating profit (R’m)

1st half 2nd half 123 129 134 135

Electrical division

‘000 % change

Six months ended 31 December 2018 Six months ended 31 December 2017 Year ended 30 June 2018

Revenue (1,8)% 1,087,614 1,107,263 2,119,913 Operating profit (26,8)% 51,870 70,875 129,036 Profit margin 4,8% 6,4% 6,1%

• Craigcor contributes positively to this division
• Cable supplier challenges with:
• copper supply shortage locally with fire at Phalaborwa
• major supplier continues direct to market strategy
• smaller manufacturers not as reliable to date
• Low Voltage cable in short supply for period
• Low Voltage sales flat, impact of LV cable supply shortage

Electrical division

• OHL sales still impacted by ESKOM challenges
• Bad debts remain a challenge, despite debtors insurance
• ESKOM Contractors now severely cash strapped
• Municipalities slow at paying/VBS effect
• Key focus placed on streamlining existing operations and gaining better efficiencies

4

LIGHTING

Lighting division

Inclusion of Crabtree retail sales Increased inventory to meet customer requirements Reduced consumer confidence “Hardware” revenue decline in Retail

Lighting division

214 256 271 254 288 212 251 240 248

• 100

200 300 400 500 600 '15 '16 '17 '18 '19

Revenue (R’m)

1st half 2nd half 426 502 511 507 23 30 32 26 27 20 30 25 20

• 10

20 30 40 50 60 70 '15 '16 '17 '18 '19

Operating profit (R’m)

1st half 2nd half 46 57 60 43

Lighting division

• Crabtree product sales continue to grow and are included in revenue
• Increased stock levels improve fill rate to retailers
• Rechargeable stock significantly reduced and fully provided against
• Packaging plant now operational and performing
• Challenges with consistent supply of Low Voltage cables

‘000 % change

Six months ended 31 December 2018 Six months ended 31 December 2017 Year ended 30 June 2018

Revenue 13,4% 288,350 254,180 501,876 Operating profit 1,1% 27,225 26,942 45,882 Profit margin 9,4% 10,6% 9,1%

5

CORPORATE

Corporate division

• This division always in line with expectations
• Property portfolio
• 16 properties valued at R331 million, completely ungeared
• Given beneficial occupation of Lords View site from 12 December 2018

‘000 % change

Six months ended 31 December 2018 Six months ended 31 December 2017 Year ended 30 June 2018

Revenue 7,0% 30,581 28,579 45,882 Operating profit 13,3% 16,317 14,397 33,698

6

STRATEGY AND OUTLOOK

Outlook

Electrical division

• Little to no improvement in trading environment
• Low economic growth forecast
• Trading margins to remain under pressure
• Lords View completed and operational as a DC
• ESKOM with national elections
• Proposed changes to LAP list

Outlook and strategy

Lighting division

• Expand product offering to existing customers
• Consolidation of the Radiant acquisition

Radiant acquisition

Radiant acquisition

• Effected 1 January 2019
• Paid R96,4m subject to finalisation once audit completed
• Properties still to be transferred - fixed amount of R88 million
• Eurolux have low representation in wholesale market
• Opportunity to put through Eurolux infrastructure
• Property and infrastructure savings R15m
• S189 causing negativity in short term

For further information please contact: Billy Neasham CEO +27 31 910 0203 Lynne Behrens Keyter Rech Investor Solutions +27 87 351 3815 www.arbhold.co.za

Q&A