Transcription
REUNERT ICT INVESTORS DAY6 June 2018
AGENDA01Welcome and Overview[Alan Dickson]10:00-10:3002ICT strategy execution[Mark Taylor]10:30-11:0003Communications cluster[Andy Openshaw]11:00-11:3004Walk-about[Andy Openshaw]11:30-12:0012:00-12:45: lunch break05Office Automation cluster[Mark Taylor]12:45-13:3006Finance cluster[Zahir Mahomed]13:30-14:0007Conclusion[Alan Dickson]14:00-14:20Reunert ICT Investors Day June 20182
OVERVIEWAlan Dickson3
REUNERT OVERVIEWKEY FACTS Established in 1888 70 years listed on the JSE Included in the electronic and electrical equipmentsector Corporate headquarters in Woodmead, Sandton,South Africa International operations in Australia, Lesotho, Sweden,USA, Zambia and Zimbabwe Financial year-end 30 September Three segments Electrical Engineering Information Communication Technologies (ICT) Applied R9,8bnR1,5bn10Testing laboratories12Innovation centres46 315EmployeesData centres14Manufacturing plants37Nashua franchises320 Independent ECNchannel partners*4 June 2018All other numbers based on 30 Sep 2017Reunert ICT Investors Day June 20184
ELECTRICALENGINEERINGCBI-electric:African OFFICE AUTOMATIONCOMMUNICATIONSNashuaCBI-electric:Telecom CablesPanSolutionsCBI-electric:Low 15Reutech SolutionsReutech RadarSystemsOmnigoFuchs ElectronicsNashuaCommunicationsFINANCEQuince Capital20yySECURE COMMS2016NanoteqRyonicRobotics2017Terra FirmaSolutions2017Acquisitions: Funded mainly from Nashua Mobile proceedsReunert ICT Investors Day June 20185
REVIEW WHAT WE SET OUT TO DOConcentrationrisk2014:84% revenuegenerated in South Africa(R1,2 billion non-ZAR)Growing competitionLate life cycle productsSlowtop-linegrowthMargin pressuresReunert ICT Investors Day June 20186
DIVERSIFICATION GEOGRAPHICNON-ZAR REVENUE GROWTH (Rm) 31% CAGR in non-ZAR revenue to R2,8 billion (2014: R1,2 billion) Electrical Engineering 28% of revenue from non-ZAR (FY2017)Applied Electronics 3 000Export revenues increased by 72% since 20142 500 31%(2014: R490 million to 2017: R843 million) Export order books at record levels at year-end2018 non-ZAR revenue expected to increase further, subject to theRand exchange rate2 0001 5001 00050002014AfricaAustraliaAmericasReunert ICT Investors Day June 2018201520162017Middle East and AsiaEurope7
DIVERSIFICATION ICT SEGMENTICT SEGMENT The segment’s customer base creates a strong opportunity for both scale and newrevenue streams 9102622656855 000 customers with only a 20% cross sellThe cluster now provides vertically integrated communications and connectivitysolutions to the ICT segment Voice: ECN is the largest independent VoIP provider in the country. The customer basegrew by 500 customers per monthData/Internet: The ECN network upgrade now allows for the provision of broadbandinternet connectivity over fibre, wireless and copperBroadband connectivity: SkyWire acquisition now provides a national footprint with anexcellent overlap with our 300 dealers and 37 franchise partnersMicrowave licensed and unlicensed spectrum: provides a backhaul for integratedvoice and data offerings2014Office Automation36Material improvement in evolving to a total office provider New annuity revenue streams launched over the last 24 months now comprise13% of Office Automation’s revenue552017TargetCommunicationsFinanceOFFICE AUTOMATIONREVENUE COMPOSITION (%)52544633OFFICE AUTOMATION 9Successful strategy execution is resulting in financial performance gaining momentumCOMMUNICATIONS ICT SEGMENT REVENUE SPLIT (%)46261322014Services2017Hardware28TargetAnnuity8
ICT: 1H2018 RESULTSREVENUE (Rm) Operating profit increased by 14% Increased volumes due to improved market share 8% growth in units sold including higher capacity MFPs Growth in number of voice customers1 5721 8671 7331 6431 7051 6981 6891 6021 6702015201620172018 Lower average usage per customer 3 000 new customers added YOY Good uptake on cloud PBX Doubled during period to 8 000 ports Improved margins 2014*1H 2HStronger ZAR benefited office automationQuince finance book increased to R2,6 billion on backof strong sales in the franchise channel Quality of book remains excellentOPERATING PROFIT (Rm)% 014*1HReunert ICT Investors Day June 201820152H201620172018FY Operating profit margin %* Continuing operations9
VIDEO
ICT STRATEGY EXECUTIONMark Taylor
THE ICT SEGMENT IN A NUTSHELL We aim to be a preferred partner to our customers, enabling their purpose by offering integrated information andcommunication business solutions Our vertically integrated strategy is executed through The Office Automation cluster providing total office solutions designed to make businesses efficient The Communications cluster offering unified communications, connectivity and cloud solutions meeting the needs of abroadening ICT customer base The Finance cluster arranging customised financial services that further strengthens our value propositionOur goal is to Provide a full spectrum of office business solutions to existing and new customers, fulfilling their needs as technologiesevolve Build a strong targeted annuity base and increase our service revenue Maximise margins through our vertically integrated segment structureWe have A legacy of trusted brands on which we can build: Nashua, ECN, Nashua Communications and Quince A strong customer base which allows for cross selling of products Suppliers relationships running deep Skilled and caring employees An extensive network of channel partners throughout Southern Africa Business models that are scalable Reunert ICT Investors Day June 201812
TRANSFORMATION OF THE ICT SEGMENTDiversify office automation and voice revenues Nashua product offeringexpanded Repositioning Nashua brandfrom printer supplier to totaloffice provider (TOP) Nashua franchises nowECN’s largest channel tomarket Strong growth in annuityrevenuesOffer connectivity (last mile and internet access) ECN network upgraded tocarry high volume dataservices ECN data and last mileconnectivity launched SkyWire acquisition willspeed up rollout of datawireless services tocustomersMaximise free cash flow Focused effort on reducingworking capital andincreasing cash-flows Specific attention paid toPanSolutions and NashuaCommunications Digitise workflow to maximiseefficiency and ensure uniformcustomer experienceReunert ICT Investors Day June 201813
GO-TO-MARKET STRATEGYSOENashua E/SMMEDirectWholesalersDealersCustomer LayerShared ServicesGovernmentDistribution LayerFactory LayerOEMsReunert ICT Investors Day June 2018Software VendorsOther VendorsTelco’sSupplier Layer14
COMMUNICATIONS CLUSTERAndy Openshaw
Expand the Communications cluster to provide unifiedcommunications, connectivity and cloud solutions,meeting the needs of a broadening ICT customer base.connect.communicate.contentIncreasing the products offered through the existing segmentbusinesses and actively searching for additional complementarybusinesses either through acquisition or partnershipReunert ICT Investors Day June 201816
THE COMMUNICATIONS, CONNECTIVITY ENVIRONMENT The completion of the interconnect glide-path led to relatively stable pricing in the market Disruptive technologies (e.g. WhatsApp Calling, FaceTime etc.) and a tendency for users to call from mobile insteadof desk-phone Physical PBX to Cloud PBX Growing demand for faster business broadband products, however the roll-out of fixed infrastructure not keepingpace Broadband usage (fixed and wireless) continues to accelerate, adding new revenue streams to telecoms providers. Emergence of new players, Fibre and Wireless Potential impact of regulatory proposals such as WOAN IOT development from buzz word to revenue New BBBEE ICT codes, higher costs of compliance and increased levels of complexity. ICASA reviewing licencerequirementsReunert ICT Investors Day June 201817
COMMUNICATIONS CLUSTER
HISTORY Founded in 2005 and acquired by Reunert in 2011 The fastest growing telecommunications network in SA servicing any sizebusiness customers covering all towns in South Africa Has ECS and ECNS licences Interconnected with all major operators Head office and NOC in Midrand with branches in Durban and Cape Town 190 employees, very low churn sinceReunert ICT Investors Day June 201819
EVOLUTIONVoice Pure VoIP business takingadvantage of theinterconnect asymmetry VoIP a new home for Mobileleast cost routing Voice an additional serviceto the Panasonic PABXcustomer base LTE VoIP, taking savings tothe SMMEData / Internet access ECN network upgraded tohigh capacity data capablenetwork ECN data or broadbandinternet services availableover copper Fibre andWireless connectivity Bundled Voice and DataofferingsCloud Voice call recording as aservice VBX, cloud based PABX soldper extension Migration of onsite PABXbase to cloud based annuityVBX offering Data back up / storageReunert ICT Investors Day June 201820
Routed over 1,2 billion minutes in FY2017 ECN has 1,6 million of its own numbers and hasover 140 000 ported numbers on its network Over 300 channel partners selling ECN productsand services A distributor of Panasonic PABX includingancillary devices Successful roll-out of VBX and currently has over8 000 ports installed at customer sitesThousands NUMBER OF VOICE H2018NUMBER OF VBX PORTSThousandsPRODUCTSECN has a competitive Business Internet Accessproduct over any mechanism (ADSL, Fibre andWireless)8642020142015NUMBER OF BIA CUSTOMERSHundreds864202015Reunert ICT Investors Day June 2018201620171H201821
NETWORK Upgraded its network in FY2017 with a capex investmentof R12 million Fully redundant network, hosted in carrier neutral DataCentres. Midrand DR site Maintains a core network uptime of over 99,9% Customer satisfaction levels are network quality are inline with international carrier standards An in-house development team developed our ownrouting, customer management and billing software aswell as the VBXReunert ICT Investors Day June 201822
COMMUNICATIONS CLUSTER
EVOLUTIONPABX 2009 Reunert purchasedthe balance of SiemensTelecommunications Branded NashuaCommunications Large enterprise customerPABX base Siemens globally sold andrebranded as UnifySystems Integrator Risk of dependence onsingle brand identified Skill set and customer baseallowed for shift to a trustedfull service systemsintegrator Channel model changed toenterprise service focus Digital media and controlcentre capability addedPhysical to Cloud Microsoft Skype for businessidentified as next step inunified communications in theenterprise space Investment in skills anddevelopment to IP capableentity Leading the space in thishighly complex migrationprocessReunert ICT Investors Day June 201824
COMMUNICATIONS CLUSTER
NETWORK COVERAGEReunert ICT Investors Day June 201826
EVOLUTIONHistory 2004: 1st ADSL customer fordata back up 2005: 1st wireless customer 2009/10: ICASA Licenseand first Telkom co-locationServices and Infrastructure Licenced and unlicensedspectrum capabilitySynergies/opportunities Voice, Data and Cloud PBX 2015: Presence in all nineprovinces Services hosted in all threeTeraco data centers 2018: Acquired by Reunert Hosting within our owncontainers on Telkom sites Co-location and own towerinfrastructure Owned last mile connectivity Capital to grow directcustomer connectivity National coverage of ReunertICT dealer and franchiseareas and customer bases African expansion,negotiations underway inBotswana, eSwatini, Lesotho,ZambiaReunert ICT Investors Day June 201827
EQUIPMENT AND SUPPORT Licensed & unlicensed spectrum options Tailored speeds (1Meg to 1 Gig) High availability, guaranteed 99,5% uptimeper calendar month Synchronous lines, low latencyReunert ICT Investors Day June 2018 The NNOC is the heart of our business, 22 000 end points monitored to ensure service, uptime 24/7/365 Network Management and Monitoring(Client, Tower and Backhaul) Support, Ticket Logging (SysAid) and WebPortal28
ECN NOCTOUR &LUNCH29
OFFICE AUTOMATION CLUSTERMark Taylor
NASHUA HISTORYReunert ICT Investors Day June 201832
ICT KEY TRENDS IN OFFICE AUTOMATION Significant pressure on OEMs in the international market Consolidation and mergers of many players Xerox and Fuji Samsung printers and HP OCE and Canon Concern that some of this pressure may be transferred to distributors in terms of higher pricing As these changes unfold in the local market could provide an opportunity for Nashua to benefitStrengthening of Rand has decreased customer pricing as most products are imported Reduction in turnover per unit sale Margins will be maintained in absolute terms Will allow opportunities to cross-sell/up-sell customers to higher specificationsReunert ICT Investors Day June 201833
EVOLUTIONPrint Basic print services thecore Managed print serviceswith strong governance Managed documentsolutions enabling thedigital office8 Lines of business introduced Customers use Nashua forthe Voice solutions Nashua now largest resellerof PABX in the SME space Bundled voice and dataofferings over copper, fibreand wireless connectivity Provide access andsurveillance solutionsReunert ICT Investors Day June 2018Total Office Provider Offer all the IP basedservices that our customersuse All IP office services providedon a single bill Very strong relationshipthrough local presence forsales, services and support34
PROGRESSION TO TOP (OAAS)Traditional8 LinesFull ICT ServiceOaaSOffice SpaceOffice SpaceOffice SpaceOffice SpaceISP Cloud ServicesISP Cloud ServicesISP Cloud ServicesISP Cloud ServicesPC & ServerPC & ServerPC & ServerPC & vityAccess ControlAccess ControlAccess ControlAccess lancePBX, VoicePBX, VoicePBX, VoicePBX, VoiceMDS, MPSMDS, MPSMDS, MPSMDS, MPSPrint, Copy, ScanPrint, Copy, ScanPrint, Copy, ScanPrint, Copy, ScanNashuaReunert ICT Investors Day June 2018Other Provider35
SUSTAINABLE GROWTH Add products used in the office thatuse IP connections New cloud GL system for allfranchises Add complementary services andproducts to existing services Rolled-out New cloud-based stock forecastingsystem to improve working capital andreduce wastage Single bill and point of contact for allservices in the office Constant development of all franchisestaff to take advantage of the newservices and improved productivity voice services totalling 130 millionminutes data services cloud and physical PABX servicesto 2 700 customers Smart office solutions likeconference call and collaborationservice surveillance services New web-based front end for ease ofuse and training New cloud-based service desk forexisting and new services Enhance technical staff skills toimplement and support new productsand improve efficiency for morevolumeNext to roll out will be desk-topsolutions, planned during 2018Reunert ICT Investors Day June 201836
THE NASHUA ADVANTAGE A well-known brand with a solid footprint across Southern Africa that will be difficult and expensive to replicate More that 28 000 customers Customer-centric model – based on personal relationships Substantial focus on customers in the SME marketA strong service ethic 650 technical staff and 180 service controllers On average 15 years service experience per technician Continued training and development of technical staff as we add new service offeringsExpanding our sales force Over 530 sales staff Initial focus was to improve efficiency in all areas of the business and we achieved close to flat expense growth Office print is at the heart of what we do We print over 5 billion prints per year on over 91 000 machines This allows us to offer more products and services to existing and new customers and to get a bigger share of the wallet We offer products and services in the office that the customer already has or needs to secure the bigger spend with usThere are many new types of print services evolving and not just paper. Mass customisation of 1 is a big part of the futureprint services and offerings. Customised wall papers is just one example.Reunert ICT Investors Day June 201837
CUSTOMERS MAPPINGReunert ICT Investors Day June 201838
STREET VIEWReunert ICT Investors Day June 201839
PRODUCT LINESReunert ICT Investors Day June 201840
PRODUCTSReunert ICT Investors Day June 201841
SERVICE THROUGH PERSONAL RELATIONSHIPSReunert ICT Investors Day June 201842
THE TOTAL OFFICEReunert ICT Investors Day June 201843
OUR STRATEGIC INTENT 2019 - 2023Scalable and adaptable solutions to future-proof your businessMISSIONABOUT USVISION Ensuring customers are at thecore of innovative ideas andtechnology that drive businesschangeReunert ICT Investors Day June 2018Enabling people, places andspaces to work smarter withscalable and adaptable solutionsA leading provider of total officesolutions designed to makebusinesses work better44
SOUTH AFRICAN MARKET SIZE OF THE TOTAL OFFICE The office print industry is estimated at about R12 billion per annum The PC market is estimated to be over R25 billion per annum The IT services, software and hardware markets are estimated to be overR100 billion per annum. There are a lot of components to this area The IT connectivity and associated services are around R28 billion per annum The voice market still have about 9 billion minutes to migrate to VoIP The surveillance systems market is currently at about R1,8 billion growing at anestimated 20% per yearReunert ICT Investors Day June 201845
Reunert ICT Investors Day June 201846
PRODOC Nashua acquired a 60% stake in Prodoc in 2014 Prodoc has direct sales offices in Stockholm, Malmö,Helsingborg and Gothenburg It is an independent reseller of office systems with a strongsales and services culture as well as extensive ITbackground Investments has been made in new technologies/products Prodoc provides its suite of products and services throughselected dealers and IT outsourcing partners in Scandinaviaand the Baltics The business was recently restructured, focusing on twonew business lines DocumentationCommunication and CollaborationFurther diversification incorporates higher margin businessand potential expansion into Norway and FinlandReunert ICT Investors Day June 201847
FINANCECLUSTERZahir Mahomed
QUINCE AT A GLANCE Quince provides asset-based financial solutions to the Reunert ICT segment Strong distribution channel: 37 franchises and 192 dealers Access to over 35 000 customers Trades as Quince Capital and Nashua Finance Major competitors: Sasfin, Mercantile Bank GCR Rating (August 2017): National A (ZA) (Long term) Affirms quality of the business and the finance book Financing products offered in the ICT segment Examples of approved products MFP, printers, software solutions, PABX, CCTV, displays etc. Backed up by service contracts for duration of rental agreementReunert ICT Investors Day June 201849
PRODUCT OFFERING Primary customer relationship vests with the distribution channel Reduced bad debts (local presence, redeploy equipment) Single invoice seen by customer: major competitive advantage Providing convenience to the customerChannel has the option to discount with Quince Quince discounts 90% of available Nashua franchise business Channel signs customers up on own agreements (designed andapproved by Quince) Factor sheets (pricing is partly risk based) Channel acts as collection agents on behalf of Quince Quince leverages national collections infrastructure of channelReunert ICT Investors Day June 2018PRODUCT CHARACTERISTICS Operating leases, i.e. rentals Maximum contract terms of60 months Averaging 36-39 months Rental and service agreementsare separate and a rentalcannot be withheld based onservice Lessees contractuallyresponsible for insurance No balloon-, residual- or bulletpayments50
STRATEGY ALIGNMENT Providing segment access to annuityincome Our people, our asset Adapting to rapidly changing ICTlandscape Digitalisation of processes Paperless environment End–to-end workflowInvestment in IT platforms Credit vetting Customer experience PrivacyReunert ICT Investors Day June 2018 Making our people act withintegrity and take ownership foractions and decisions Working as a team to achieveexcellence Training and development of staff Best in industry turnaround time Credit decisions within 3 to 4hours Cost to income ratio 20%-25% High quality book evidenced by lowlevels of credit losses Make the most of each Rand earnedBuilding strong and trustedrelationships with channel partners Leading to low credit losses Satisfied customers51
OUR COMPETITIVE ADVANTAGERiskMitigatorVISIONTo offer niche financial solutions toenable sales in the ICT segment, byproviding specialised capabilities,allowing and supporting growth atcustomer levelQuinceCapitalEfficiencyFundingBUSINESS MODELReunert ICT Investors Day June 201852
BUSINESS SNAPSHOT Advances book of R2,6bn (1H2018) Key financial metrics: Five year CAGRsRENTAL BOOK (Rm)3 000 0005-year CAGR: 6.7% Interest income: 11% Operating Profit: 13% 2 500 000Five year averages Credit loss ratio: 60bps2 000 000 Cost to income ratio: 25%1 500 0001 000 000500 0002013Reunert ICT Investors Day June 20182014201520162017 1H201853
CREDIT VETTING Objective Credit decisions through a matrix model scoring selected variables to determine risk of failureSources of information Existing user reference Audited financial statements (grading tool) TransUnion SME scorecard and Dynamic Rating Experian score Industry and legal entity type (CIPC) Years trading Bank codeReunert ICT Investors Day June 201854
BOOK ANALYSISCREDIT LOSSES (BPS)817957463820132014CUSTOMER CONCENTRATION (% OF BOOK)26201520162017APPROVAL RATIO (%)7073717070201320142015201620172011Top 10Reunert ICT Investors Day June 2018Top20Top 10055
FUNDING Current funding a blend of Reunert cash and banks R2,2 billion Reunert Remainder from external sourcesLong-term strategy To reduce reliance on Reunert for funding Reunert’s current excess cash position limited opportunity to implement long-term funding plans Work in progress: exploration of alternative sources of funding, including capital marketsAlternative sources of funding Available approved overnight facilities: just over R1,0 billionReunert ICT Investors Day June 201856
VALUE PROPOSITION One-stop solution: Gives ICT segment companies a considerable competitive advantage Base protection Flat decision making structure: allows quick decisions Ease of use and industry leading service Reliability and consistency Competitive offerings Online credit application: moving into paperless environmentReunert ICT Investors Day June 201857
WRAP-UPAlan Dickson
7 31% CAGR in non-ZAR revenue to R2,8 billion (2014: R1,2 billion) Electrical Engineering 28% of revenue from non-ZAR (FY2017) Applied Electronics Export revenues increased by 72% since 2014 (2014: R490 million to 2017: R843 million) Export order books at record levels at year-end 2018 non-ZAR revenue expected to increase further, subject to the
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