Ioco Limited · JSE:IOC
Ioco — FY2020 Earnings Presentation
47 slides from Ioco's earnings presentation, Dec 2, 2020
Slide 1: FY 2020 Annual Results Presentation
FY 2020 ANNUAL RESULTS PRESENTATION 02 DECEMBER 2020
Slide 2: Agenda
AGENDA 01 02 03 Strategic & Financial Looking operational overview Forward overview Stephen van Coller Megan Pydigadu Stephen van Coller Group CEO Group CFO Group CEO
Slide 3: Strategic & Operational Overview
STRATEGIC & OPERATIONAL OVERVIEW Stephen van Coller Group CEO
Slide 4: Delivering on our promises
DELIVERING ON OUR PROMISES ENSafrica investigation completed Established Internal ENSafrica Enhanced King Agreed Audit function Leadership investigation IV compliant 70% sale agreement deleverage plan changes initiated Board between CCS & RIB with lenders PwC appointed as auditors Exceeded R1 billio
Slide 5: Business stabilised
BUSINESS STABILISED 2-year turnaround plan on target REVENUE STABILISED IMPROVEMENT IN QUALITY OF EARNINGS LIQUIDITY PROGRESS TOTAL DEBT NET WORKING Total Revenue of BALANCE CAPITAL up 2%pts up 4%pts POSITIVE R11.3bn GP to 22% to 7% NORMALISED down to R2,04bn CASH BALANCE improved by R337m MARGIN EB
Slide 6: Resilient business model
RESILIENT BUSINESS MODEL Driven by high margin Services & Software categories REVENUE EXPOSURE BY INDUSTRY PRODUCT MIX Financial Services 22% Hardware 10% 11% Services Public Sector 21% Software Health 9% Other Manufacture & Logistics 7% Telecoms 7% SOEs Information Technology 6% 17% Central Constru
Slide 7: Well positioned post-strategic review
WELL POSITIONED POST-STRATEGIC REVIEW CORE REVENUE Sales & Advisory Technology 59% contribution to iOCO Services Total Revenue Digital 67% Manage and Operate contribution to iOCO Technologyns & Network Solutions Normalised EBITDA Digital Industries Sales & Advisory iOCO Digital Jul-19 Sep-19 Nov-19
Slide 8: Stabilised
STABILISED Self sustaining on a cash basis focused on two main pillars H1 30% contribution to EBITDA -R60m > Normalised H2 Normalised EBITDA Total Revenue Intelligent People R158m Infrastructure Outsourcing Solutions Solutions H1 EBITDA Designing, installing, managing and creating bespoke data platf
Slide 9: IP businesses remain resilient
IP BUSINESSES REMAIN RESILIENT IP cluster key to deleverage strategy and currently outperforming budget COVID-19 REVENUE IMPACT -9% 11% 26% contribution to contribution to Total Revenue Normalised EBITDA Sybrin & Syntell disposal Information completed Services disposals Info 18 Nov 2020 Services wel
Slide 10: Creating a fit-for-purpose cost structure
CREATING A FIT-FOR-PURPOSE COST STRUCTURE Sustainable reduction in costs of 3-5% anticipated TAX PEOPLE PROPERTY OPTIMISATION RATIONALISATION Reduction in employees from 10 279 81 buildings R102m to 7 333 & c.57 000 sqm reduction in tax payments in 2020 exited to date due to: COVID-19 MEASURES Busin
Slide 11: Employees a key priority
EMPLOYEES A KEY PRIORITY Enhanced EVP to ensure talent attraction and retention Racial & Gender Diversity Wellness Volunteerism WOMEN IN LEADERSHIP Wednesdays GEAR UP A responsible PROGRAMME employer. SOCIAL COHESION UNCONSCIOUS BIAS Instilling purpose Recognition Socio- & motivation. CEO Economic P
Slide 12: Strong deleveraging performance
STRONG DELEVERAGING PERFORMANCE 1 997 Liabilities for acquisitions Debt R’m
Slide 13: Credibility: Governance, risk & compliance roadmap
CREDIBILITY Governance, Risk & Compliance Roadmap OCTOBER 2020 MAY 2019 STRONG 2% 6% 7% 12% CULTURE OF Code Conflict Conflict COMPLIANCE of conduct Sustainability of Interest of Interest training training training declaration Complete 98% 94% 93% 88% Not complete 13
Slide 14: Legacy contracts risk mitigated
LEGACY CONTRACTS RISK MITIGATED Limited risk now, despite ongoing media speculation 8 problematic Special legacy Investigations contracts Unit (SIU) 5 settled Repayment 1 in arbitration settlement reached in 2 contracts 1 contract ending April 2021 Resolution on remaining contract 1 contract in fina
Slide 15: Corporate citizenship
CORPORATE CITIZENSHIP Committed to enabling to our society ICT 15
Slide 16: Business stabilised
BUSINESS STABILISED 2-year turnaround plan on target REVENUE STABILISED IMPROVEMENT IN QUALITY OF EARNINGS LIQUIDITY PROGRESS TOTAL DEBT NET WORKING Total Revenue of BALANCE CAPITAL up 2%pts up 4%pts POSITIVE R11.3bn GP to 22% to 7% NORMALISED down to R2,04bn CASH BALANCE improved by R337m MARGIN EB
Slide 17: Financial Overview
FINANCIAL OVERVIEW Megan Pydigadu Group CFO
Slide 18: Highlights
HIGHLIGHTS REVENUE GP NORMALISED CASH* (R’m) (R’m) EBITDA (R’m) (R’m) 23% 27% 25% 35% 2 586 673 203 329 11 277 2 469 827 946 8 690 1 796 625 618 77% 73% 75% 65% GP MARGIN EBITDA MARGIN Continuing Up from 20% to 22% Up 4% from 4% to 8% Medium term target Medium term target > Discontinued mid 20% 10%
Slide 19: 2020 priorities
2020 PRIORITIES 1 2 3 4 DELEVERAGE IMPROVED SYSTEMS, WORKING CAPITAL FIT FOR PURPOSE BALANCE SHEET FINANCIAL DISCIPLINE MANAGEMENT COST STRUCTURE FURTHER & CONTROLS Additional R292m Cognos controller live for Inventory Balances c.R74m realized from consolidation reduced by property optimization paid
Slide 20: Improved systems, financial discipline and controls
IMPROVED SYSTEMS, FINANCIAL DISCIPLINE AND CONTROLS BU & LEGAL CDM ATTESTATION STRUCTURE PLATFORM PROCESS RATIONALISATION To automate To embed a culture of To reduce costs the generation of financial accountability and oversight and improve transparency statements and notes REPLACE FINANCE COMBINED
Slide 21: Income statement
INCOME STATEMENT FY 2020 FY 2020 FY 2020 FY 2019 FY 2019 FY 2019 R’m Audited Continuing Discontinued Restated Audited Continuing Discontinued Revenue 11,277 8,690 2,586 14,949 10,746 4,203 Gross Profit 2,469 1,796 673 2,931 1,767 1,164 Net financial asset impairment losses (332) (321) (12) (979) (60
Slide 22: Gross revenue & EBITDA
GROSS REVENUE & EBITDA Revenue Normalised EBITDA 8% 17% 7% 25% 12% 7% -8% 2% 26% MARGIN MARGIN MARGIN MARGIN MARGIN MARGIN MARGIN MARGIN MARGIN 3 376 2 030 1 543 1 524 1 201 460 587 339 267 289 310 120 67 181 41 74 33 (23) 0 (315) Digital Technology Digital Industries Advisory and M&O and NS HQaaS C
Slide 23: Gross revenue
GROSS REVENUE BY DIVISION (R’m) BY SECTOR PUBLIC SECTOR PRODUCT MIX 14 949 BREAKDOWN 2 111 10% 11% 18% 21% 11 277 -12% 39% 39% 7 246 0% 0% 6 700 83% 81% 82% 37% 79% 44% -18% 4 111 3 376 23% 17% 1 481 1 201 7% 7% 1% 2% FY2019 FY2020 FY2019 FY2020 FY2019 FY2020 FY2019 FY2020 Sold entities Public Secto
Slide 24: Analysis of revenue
ANALYSIS OF REVENUE R725m lost to COVID-19, with a sharp recovery expected 368 182 175 2 111 239 475 122 COVID-19 Impact (R725m) 14 949 11 277 FY2019 iOCO NEXTEC IP Sold entities Pia Solar Hardware sales Other FY2020
Slide 25: Fit for purpose cost structure
FIT FOR PURPOSE COST STRUCTURE 45% -1 165 6 214 2 284 565 131 Sold Entities Total OPEX 2 419 -41% -48% 3 403 1 119 557 838 -5% 2 154 Non-core business lines OPEX 2 476 2 358 Once offs Non-cash OPEX Sold Entities Normalised OPEX FY2019 FY2020 H1’20 H2’20 Note: Opex includes continuing and discontinue
Slide 26: Property savings/optimization
PROPERTY SAVINGS/ OPTIMIZATION Savings realized from property optimsation 28 38 142 12 3 16 15 61 3 R74m rent expense R10m additional 27 savings to date annual savings Property Portfolio Exits FY19 Exits FY20 Disposals Property sales Property Portfolio Exits FY21 Exits FY22 Exits FY23 Property Portf
Slide 27: Simplified legal structure
SIMPLIFIED LEGAL STRUCTURE Rationalization of BU and legal entity structure 18 5 76 9 15 272 29 39 173 47 99 reductions in legal entities 34 August 2018 Deregistered* Majority Sale processes July 2020 Dormant entity Mthombo Phase 3 Sale processes January 2022: Targeted number of stake sold concluded
Slide 28: Headcount
HEADCOUNT Reduction of almost 3000 in headcount 129 1 228 805 476 308 11 423 10 279 (2 817) 7 333 Structural Jul-18 Jul-19 Business as Contractors not Sold Retrenchments Liquidations Jul-20 usual renewed businesses 28
Slide 29: Normalised EBITDA
NORMALISED EBITDA Continuous improvement between H1 and H2 271 405 H1 349 (214) (991) 776 -17% +4% 233% -125% R’m -28% 225 +72% (89) 422 286 H2 562 (276) Operating Loss EBITDA adjustments EBITDA Once-off costs Non-core businesses to close Normalised EBITDA Normalised EBITDA refers to core normalised
Slide 30: Non-core business lines
NON-CORE BUSINESS LINES Legacy Public Sector Legacy EPC 8 Pia Solar Autospec net onerous outflow of contracts Net Net outflow of R20m expected outflow of R25m R2.5m expected expected 5 closed 1 council approval 1 in Arbitration R45m Project substantially 1 runs out in April Bond outstanding complete
Slide 31: Balance Sheet
BALANCE SHEET
Slide 32: Balance sheet: assets
BALANCE SHEET Assets FY 2020 FY 2019 R’000 Audited Restated Audited PPE Non-current Assets Property, plant, equipment and right-of-use assets Intangible assets 544,846 112,967 481,674 488,974 R367m right of use IFRS 16 Goodwill 916,743 1,850,854 Equity-accounted investments 6,689 228,067 asset capit
Slide 33: Balance sheet: equity & liabilities
BALANCE SHEET Equity & Liabilities FY 2020 FY 2019 R’000 Audited Restated Audited Equity Stated capital 4,250,219 4,239,621 Shares to be issued to vendors 15,300 20,257 Other reserves 924,862 742,597 Borrowing Retained earnings (4,680,506) (3,077,996) classified as Equity attributable to the owners
Slide 34: Strong deleveraging performance
STRONG DELEVERAGING PERFORMANCE 1 997 Liabilities for acquisitions Debt R’m
Slide 35: Working capital management
WORKING CAPITAL MANAGEMENT 90% reduction in net working capital since H2’18 4 733 3 879 4 074 3 329 1 549 2 640 690 513 359 176 378 287 287 204 137 Gross Receivables -2 602 Inventory -3 475 -3 174 Payables -3 562 -3 848 Working Capital *Un-restated. H2’18* H1’19* H2’19 H1’20 H2’20 As presented in Fi
Slide 36: Liquidity management sound
LIQUIDITY MANAGEMENT SOUND Significant initiatives to secure sustainability Cash Contingent Management Liabilities Liquidity forecasting & weekly R353m of guarantees issued management implemented in prior year Limited issuance Cash management system implemented in of corporate guarantees current yea
Slide 37: FY2020 cash flow bridge
FY2020 CASH FLOW BRIDGE Significantly lower one-off payments and stronger operational cashflow 363 821 211 151 296 443 396 R87m restricted 115 cash 77 54 7 5 12 1 359 R292m R247m (R692m) (R248m) 946 Sources of Business as Debt cash One offs funding usual flows Opening Sale Operational Net capital Ta
Slide 38: Priorities 2021
PRIORITIES 2021 APPROPRIATE Continue with Incorporate ROIC Refinancing CAPITAL balance sheet into performance STRUCTURE management of debt deleverage Project management Finance Data office to optimize optimization OPTIMISED projects project strategy SYSTEMS & CONTROLS Continue with the Align perform
Slide 39: Building platform for future growth
DOWNSIDE RISKS CONTAINED 1 PWC audit completed Building 2 Legacy public sector contracts largely resolved platform for future 3 NEXTEC stabilized growth 4 SARS 5 SIU settlement 39
Slide 40: Business stabilised
BUSINESS STABILISED Revenue EBITDA Cash Debt stabilised improvement generative reduced
Slide 41: Looking Forward
LOOKING FORWARD Stephen van Coller Group CEO
Slide 42: The EOH value proposition
THE EOH VALUE PROPOSITION Digital Services Intelligent People CUSTOMER Infrastructure Outsourcing CENTRIC Solutions Solutions Advisory & Consulting Technology 42 42
Slide 43: Strategic partnerships underpin stability
STRATEGIC PARTNERSHIPS UNDERPIN STABILITY Provide robust platform for future growth GO-TO PARTNER for international OEMs RENEWED major partnership deals: 43
Slide 44: Market opportunity
MARKET OPPORTUNITY UK Austria Switzerland Prague Opportunity lies in Digital, Services & Digital Industries businesses GDP Egypt GROWTH Saudia Arabia UAE Egypt business to enable move into the Middle East & complement expansion Mid-market of certain solutions into Cost segment focus Europe advantage
Slide 45: Thank you
THANK YOU
Slide 46: Appendix 1: H1 2020 cash flow bridge
APPENDIX 1 H1:2020 CASH FLOW BRIDGE Large one-off payments and large tax payments, weaker operational cashflow 186 263 126 181 171 166 100 115 66 39 7 1 1 359 R55m (R94m) (R266m) (R229m) 826 Sources of Business as Debt cash One-offs funding usual flows Opening Sale Cash gone Operational Net capital
Slide 47: Appendix 2: H2 2020 cash flow bridge
APPENDIX 2 H2:2020 CASH FLOW BRIDGE Significantly lower one-off payments and stronger operational cashflow 177 40 558 130 296 25 262 0 11 15 6 0 12 946 826 R237m R341m (R426m) (R20m) Sources of Business as Debt cash One-offs funding usual flows Opening Sale Cash gone Operational Net capital Taxation
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