Investor Presentation
Vunani Securities Conference
26 February 2013
Agenda
I.
Introduction to Torre
I.
The Torre Business Model
II.
Recent Developments
III.
Looking Forward
Introduction to Torre
About Torre
•
•
A listed industrial holding company that provides a platform to build a scalable group
•
Operating segments
Providing a diverse range of capital equipment and engineering solutions to our
customers in selected emerging markets
– Plant and Equipment
– Engineering Services
– Trade and Asset Finance
•
Adding value for our shareholders through
– Smart acquisitions (both standalone and bolt-on)
– Optimising and growing subsidiary companies
•
Cohesion through group executive committee and involved board of directors
About Torre (cont’d)
•
•
Earnings growth and turnaround strategy, underpinned by quality fixed assets
Dividends
– Not planned for next 3-5 years
– Utilise extensive assessed losses
– Capital is expensive to raise
•
Commitment
– Board and senior management are materially invested
•
Differentiators
– Quality branded products with spare parts stocked in SA
– Financing solutions
– Exceptional after sales service from technically skilled staff
– Entrepreneurial approach at all levels of the group
History
Torre emerged out of SA French Ltd through a mirror listing on the JSE
...SA French – Road to restructuring
•
Substantial revenue growth in “pre-crisis” period
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Lead times on new equipment constrains growth as pre-crisis demand reaches a peak
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Pre-order strategy fails as major orders cancelled as the financial crisis hits SA
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SA French left with severe cash constraints and debt burden
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Major World Cup contracts conclude and bank lending dries up
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Construction slow down and delayed Infrastructure roll-out
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Vulnerability of business model focussed on construction sector and based on limited
product line
History (cont’d)
…AfrAsia Corporate Finance (ACF) takes on restructuring mandate
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Negotiates settlement agreement of R50m with major supplier Potain
•
Restructured asset backed finance arrangements with major South African banks
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Bridging finance from AfrAsia Special Opportunities Fund (ASOF)
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Settlement of key creditors (including SARS) and shareholder loan write-down
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R20m rights issue
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Total debt restructured or repaid in excess of R100m
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New products introduced along with a focus on Africa and the mining sector
•
SA French de-listed from the JSE on 26 November 2012 with interest bearing debt
reduced to R30m
Establishment of Torre
•
Torre established and via a scheme of arrangement acquired 100% of SA French in a 1-
for-10 share swap
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R30m of new equity raised via a private placement to institutional and HNW investors
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Torre acquired 100% of Forktech (Pty) Ltd, the Cape-based distributor of Nissan forklifts
for R16m
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Mirror Listing of Torre on the JSE on Monday 26 November 2012
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The name “Torre” chosen out of respect for the history of SA French as a leader in the
Tower crane market in SA, but also as a signal to our stakeholders that we are intent on
building a strong, defensive business
Directors
Charles Pettit
CEO
Peter van Zyl
Non Exec Chairman
Roy Midlane
Financial Director
Craig Lyons
Non Executive
Quentin van Breda
New Business
Sandile Swana
Non Executive
Joe Fizelle
Non Executive
Market Information
JSE Code
:
TOR
Shares in issue
:
103 506 390
Market Cap
:
R113 857 029 (@ R1.10)
ADTV (# shares)
:
263 861
Dividend Yield
:
N/A
NAV Underpin
:
R0.90 per share
EPS
:
Will report 1 month to 31 December 2012 and 7 months to
30 June 2013. This is the key metric for TOR going forward
Shareholders
•
AfrAsia and Associates
28.9%
•
Management
26.4%
•
Mowana Investments
11.5%
•
Momentum Asset Management
6.3%
•
Stanlib Asset Management
5.8%
•
Others / Free Float
21.1%
100.0%
The Torre Business Model
Business Model
Torre’s business is the value added distribution of branded capital equipment, industrial
consumable products and tailored financing solutions for selected customers
•
Rapid growth via a systematic acquisition strategy
– Earnings accretive
– Identified market sectors
– Established market position with clear growth prospects
– Retention of key management and delivery of forward earnings targets
– Focus on “de-risking” exposure post acquisition
•
Expansion and optimisation of acquired businesses
– Focus on product mix and business model
– Customer spread and sector diversification
– Integration with existing businesses to share resources and infrastructure
Business Model (cont’d)
•
Decentralised operational management:
– Operational responsibility to MD’s, encouraging entrepreneurial thinking
– Monitored monthly against agreed KPI’s
– Focus on margin and earnings as well as longer term strategic initiatives
•
Key functions centralised:
– Capital allocation and treasury
– Reporting, systems and processes
– M&A
– Investor and regulator relations
•
Head office support to maximise performance and shareholder value
Operating segments
•
Plant and Equipment
– Value added distribution of high quality branded capital equipment
KEY INDUSTRIES
Infrastructure
Manufacturing
Construction
Transport
Mining
Agriculture
Power Generation Logistics
KEY CUSTOMERS
Operating segments (cont’d)
•
Engineering Services
– Distribution of engineering consumables used in the repair and maintenance of
machines
– Maintenance, refurbishing and machine rebuild as value added service
– In advanced negotiations with Tractor and Grader Supplies (as announced on SENS
on 25 February 2013). Other possibilities are under consideration
•
Trade and Asset Finance
– Tailored financing solutions for selected customers to enhance product offering and
flexibility and efficiency within the group companies
– Initial phase will predominantly service internal group demand and be focussed on
trade and asset finance
– It is envisaged that Torre will capitalise an entity and provide deal-flow, while
management will be outsourced
Recent Developments
Tractor and Grader Supplies
•
Advanced negotiations for acquisition of 100% of Tractor and Grader Supplies
(“TGS”)
•
TGS specializes in repair parts and components for earthmoving equipment in
the mining and construction sectors, including wear and undercarriage solutions
•
TGS has a Rebuild Centre which is fully equipped for complete machine rebuilds
and component repairs
•
•
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7 branches across SA, Swaziland and Zimbabwe with new branches planned
Estimated market share of 15%
Over 15 year track record of profitability
Scope to increase penetration and introduce wider product offerings
Strong and ambitious management team
The deal is consistent with Torre’s strategy of building a diversified portfolio of
quality industrial business via both acquisitive and organic growth
Group Structure – 30 June 2013
Plant and Equipment
Engineering Services
Trade and Asset Finance
Trade and
Asset Finance
Appointment of Alan Keschner
•
Alan Keschner was appointed as an independent nonexecutive director with effect from 25 February 2013.
•
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BSc in Mechanical Engineering
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He was an executive and main board member of the
Hudaco Group from 1997-2004
•
In additional to Hudaco, he has worked in a wide range
of industrial and trading industries, including the spare
parts, capital equipment and services sectors
•
Alan has broad experience in mergers and acquisitions,
turnarounds, restructurings, growth initiatives, team
development and business and asset sales
Post-Graduate Diploma and Masters Degree in
Industrial Administration
Looking Forward
Outlook
•
Current capital equipment portfolio is highly dependent on domestic, and by extension
global, economic growth
•
Initiatives underway to develop a more defensive bias in the portfolio through
investment into the aftermarket spare parts and financing segments
•
•
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Forktech client mix also has a strong bias towards the agriculture sector
•
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Exposure to Rand exchange rates
Infrastructure and mining projects in Africa are a key target
Construction, infrastructure, agriculture, power generation and mining sectors are key
for the group
Coming off a relatively low base, earnings will be materially driven by acquisitions in
the coming periods, although organic growth and margin improvement will be a key
focus for management
Outlook (cont’d)
•
A rights issue is envisaged before 30 June 2013 to fund the TAGS transaction and to
provide balance sheet capacity for the Group
•
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This will not be the beginning of a series of dilutive capital raisings
•
Thereafter it is intended to limit share issues and fund future deals with acquisition
debt, deferred consideration and retained earnings
•
We are targeting the completion of the TAGS deal before 30 June 2013, with another
transformational deal to be completed before 31 December 2013
•
In 2013 we also aim to commence operations in the trade and asset finance segment
and complete 1 -2 small bolt on deals via existing subsidiaries
The intention will be to raise sufficient funding to complete the TAGS deal and provide
balance sheet capacity in respect of identified bolt-on and organic growth
opportunities
Contact Details
Charles Pettit
Roy Midlane
Chief Executive Officer
Tel: +27 (21) 417 6400
Fax: +27 (86) 506 1167
charles@torreindustrial.com
Financial Director
Tel: +27 (82) 414 3396
Fax: +27 (86) 625 0890
roy@torreindustrial.com
www.torreindustrial.com