Zimplow Holdings Limited HY 2014 financial results presentation

BRIEFINGANALYST

AGENDA

• Strategic and Operational Overview

• Financial Overview

Chief Executive Officer

Zondi Kumwenda

Francis RwakondaFinance Director

• Future Outlook

Zondi Kumwenda

Francis Rwakonda

Zondi Kumwenda

STRATEGIC ANDOPERATIONAL OVERVIEW

Zondi Kumwenda

OUR MISSION

To provide agricultural, mining and infrastructural engineering solutions throughinternationally acclaimed dominant brands.

OUR VALUES

INTEGRITY –Act honestly, responsibly and respectfully towards others at all timesTEAMWORK –Trust, support and motivate each other to increase the company’s ability to deliver valueto its customers.WISDOM –Work on the ability to discern what is true, right and lasting.POSITIVITY –Envision the future and focus efforts on services, excellence and competitiveness. Createvalue and optimism and make a difference to both the customers and the employees.SAFETY –We commit to provide a healthy and safe working environment and remind each otherto “take care”.

We pride ourselves on values based on integrity, teamwork, wisdom andpositivity... these are our pillars which will serve as a basis for all our actions.

OUR BUSINESS UNITS

1. Significant reduction in the level of borrowings andassociated costs by quarter 3.

2. Aim to reduce operating costs in some units and improveefficiencies through the workshops and factories.

3. Improve revenues in the tractor division through assetbased finance.

4. Complete the CT Bolts/Tassburg marriage by Quarter

“ We strive to be our customers’ first choice by establishing long-lasting,fruitful relationships based on trust and mutual respect. ”

MEALIE BRAND

Manufacturer and distributor ofagricultural implements

PRODUCTS

Ploughs, cultivators, planters, harrows, hoes and parts

Manufacturer and distributorof fastenersPRODUCTS

• Mild Steel Bolts and Nuts

• Mild Steel Hex Sets

• Mild Steel Studding

• High Tensile Bolts and Nuts

• Aluminium Blind Riverts

• Screws

• Washer Products

• Nails and Nail Products

Distributor of mechanised farming equipmentPRODUCTS

• Tractors: Massey Ferguson, Valtra, Challenger

• Generators: Perkins, Massey Ferguson

• Combine Harvesters: Massey Ferguson

• Implements and Planters: Massey Ferguson, Monosem, Falcon

Distributor of farming equipment.• PRODUCTS

• CASE tractors and implements

• CASE Combine Harvesters

• Baldan implements

• TCM Forklifts

Earthmoving and miningequipmentPRODUCTS

• Trucks

• Compactors

• Draglines

• Hyster Forklifts

• Wheel Dozers

• Wheel Loaders

• Scrappers

• CAT Generator sets

OPERATIONS

FARMING – ANIMAL DRAWN BUSINESS

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Local implements Export implements Local hoes Export hoes

Axis

Title

Animal drawn business volumes

15% up

59% down

6% down 24% down

KeyJune 2014

June 2013

FARMING – ANIMAL DRAWN BUSINESS

-

20,000

40,000

60,000

80,000

100,000

120,000

Local Spares Export Spares

Uni

ts

Spares volumes - Animal drawn business

137% up

5% up

KeyJune 2014

June 2013

FARMING – ANIMAL DRAWN BUSINESS

Volumes were affected by the following:

• Low disposable income, with customers opting to purchase spares rather thannew implements.

• Price competition from the East.

• Donor fatigue

FARMING – MECHANICAL AND TRACTOR BUSINESS

0

10

20

30

40

50

60

Tractors Combines Gensets Motorbikes Implements

Axis

Title

Unit volumes - Tractor business

No change

Down 22%

Up 283%

Up 900%

Down 5%

FARMING – MECHANICAL AND TRACTOR BUSINESS

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

June 2014 June 2013

Axis

Title

Service hours - Tractor business

Down 50%

FARMING – MECHANICAL AND TRACTOR BUSINESS

Volumes and turnover were affected by the following:

• To reduce credit risk, the business units operated on a near-cash model duringthe first six months of the year.

• Delayed off-take of the secured financing facilities. Volumes are expected toimprove in the second half of the year, as these are now in place.

MINING AND INFRASTRUCTURE BUSINESS

0

2

4

6

8

10

12

14

16

Earthmoving Liftrucks Gensets

Uni

ts

Barzem unit sales

78% down

58% down

60 % down

KeyJune 2014

June 2013

MINING AND INFRASTRUCTURE BUSINESS

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

June 2014 June 2013

Axis

Title

Barzem service hours

60% down

Volumes and turnover were affected by:• Delays in target projects that were imminent.

• Decline in the traditional exported labour which has also negatively impactedservice hours.

• Low activity on road construction, mining and infrastructure development inthe country.

MINING AND INFRASTRUCTURE BUSINESS

FASTENERS BUSINESS

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

Mild Steel Units High Tensile (Bolts)Units

Screws (Units) Miscellaneous Factory Stock

Uni

ts

Fasteners Business Volumes

15 % down34 % down

42 % down

19 % down26 % down

KeyJune 2014

June 2013

FASTENERS BUSINESS

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

June 2014 June 2013

Kilo

gram

s

Fasteners Business Volumes

33 % up

42 % up

KeyJune 2014

June 2013

The fastener business continues to be affected by:• Closures of formal businesses that were high fastener consumers.

• Low infrastructural activity within the market.

• Competition from the east .

• Arbitrage opportunities for small traders with very low overheads.

FASTENERS BUSINESS (CONTINUED)

FINANCIAL OVERVIEW

Francis Rwakonda

STATEMENT OF COMPREHENSIVE INCOMEGROUP

30 June 2014 30 June 2013

Revenue 13 336 445 20 064 255

Operating profit/(loss) (1 649 047) 762 388

Restructuring expenses (45 616) (295 024)

Gain on disposal of subsidiaries - 1 813 999

Exchange loss - -

Share of loss from joint venture (29 770) (79 118)

Net finance costs (359 253) (34 854)

Profit/(Loss) before tax from continuing operations (2 083 686) 2 167 391

Income tax credit/ (expense) 350 133 (215 852)

Profit/(Loss) after tax from continuing operations (1 733 553 ) 1 951 539

Loss from discontinued operations - (489 378)

Profit/(Loss) for the year (1 733 553) 1 462 161

Non controlling interests (273 206) 285 520

Attributable (Loss)/profit (1 460 347) 1 176 642

OPERATING SEGMENT REVIEWFarming Mining and

InfrastructureProperty Adjustments* Total

Revenue 8,487,170 4,685,809 165,807 24,518 13,363,304

Intersegment revenue (26,859) - - - (26,859)

TOTAL REVENUE 8,460,311 4,685,809 165,807 24,518 13,336,445

SEGMENT OPERATING (LOSS) / PROFIT (230,736) (726,977) 158,425 (849,759) (1,649,047)

Unallocated items:

Restructuring expenses (45,616)

Share of loss of Northmec JV (29,770)

Net finance costs (359,253)

GROUP LOSS BEFORE TAX (2,083,686)

Income taxes 350,133

GROUP LOSS AFTER TAX (1,733,553)

SEGMENT ASSETS 25,837,118 10,959,949 6,008,939 6,508,914 49,314,920

SEGMENT LIABILITIES 7,482,713 1,665,375 1,066,209 9,907,822 20,122,119

* Adjustments for intersegment transactions and the Corporate office

• Group revenue down 34% from US $ 20 million to $ US 13.3 million

• Group operating profit down from $ US 762 388 to a loss of $ US 1 649 047

• Group profit after tax from continuing operations down $ US 1 951 539 to aloss of $ US 1 733 553

• Agriculture businesses have increased activity in the second half of the year inline with the farming season and are likely to recover.

• The Group is likely to recover in the second half.

GROUP RESULTS

STATEMENT OF FINANCIAL POSITION

ASSETS

• Total assets down by 1.5%• US $ 222 850 spent on capital expenditure

BORROWINGS

• US $ 586 002 net borrowings repaid from December 2013.

STRATEGY ONBORROWINGS

• Buyer for $ US 3.5 million asset held for sale now secured and transaction to be completeby the third quarter. Proceeds to be used to reduce borrowings level.

STATEMENT OF FINANCIAL POSITIONASSETS GROUP

30 June 2014 31 Dec 2013

Property, plant and equipment 13 229 607 13 469 288

Other non current assets 5 603 229 5 950 658

Current assets 26 982 084 27 151 205

Assets held for sale 3 500 00 3 500 000

TOTAL ASSETS 49 314 920 50 071 151

EQUITY AND LIABILITIES

Share capital and reserves 25 962 289 27 429 365

Non Controlling interest 3 230 512 3 508 276

Total equity 29 192 801 30 937 641

Long term interest bearing liabilities 1 379 543 1 116 485

Deferred tax 2 883 378 3 121 494

Current liabilities 15 859 198 14 895 531

TOTAL EQUITY AND LIABILITIES 49 314 920 50 071 151

STATEMENT OF CASHFLOWSGROUP

30 June 2014 30 June 2013

Cash outflow from operations (847 630) (351 329)

Tax paid (202 068) (674 603)

Net finance costs paid (359 253) (34 854)

NET CASH OUTFLOW FROM OPERATING ACTIVITIES (1 408 951) (1 060 786)

Acquisition of property, plant and equipment (222 850) (275 776)

Proceeds from disposal of PPE 34 572 29 252

Net cash inflow from disposal of subsidiaries 74 249 100 000

CASH USED IN INVESTING ACTIVITIES (114 029) (146 524)

Increase in Borrowings - 4 131 117

Repayment of Borrowings (586 002) -

Acquisition of NCI - (3 374 495)

NET CASH (OUTFLOW) / INFLOW FROM FINANCING ACTIVITIES (586 002) 756 622

Decrease in cash and cash equivalents (2 108 982) (450 688)

Effects of exchange rate changes on the balance of cash held in foreign operations (23 755) (84 321)

Cash and cash equivalents at the beginning of the year 98 260 2 293 182

CASH AND CASH EQUIVALENT AT THE END OF THE YEAR (net of overdrafts) (2 034 477) 1 758 173

FUTURE OUTLOOK

Zondi Kumwenda

• Agricultural units expected to be stable and will recover from the first half losses.August volumes have been encouraging.

• The fastener business will post a loss which will be lower than the first half loss

• Mining and infrastructure business will somewhat recover to post a breakeven orloss position as most capital projects have been pushed into 2015.

FUTURE OUTLOOK

QUESTIONS?