1 / 35

Preference Share Issue August 2005

Preference Share Issue August 2005. Executive summary. Grindrod is: a diversified provider of shipping, freight and financial services which competes in the international shipping market with a total fleet of 96 ships 90 % of group revenue is derived from $-denominated activities

elma
Download Presentation

Preference Share Issue August 2005

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Preference Share Issue August 2005

  2. Executive summary • Grindrod is: • a diversified provider of shipping, freight and financial services • which competes in the international shipping market with a total fleet of 96 ships • 90% of group revenue is derived from $-denominated activities • It is a group that has successfully transformed itself over the last 5 years • as evidenced by the growth in market capitalisation from R250m in August 2000 to R4,6bn in August 2005

  3. Executive summary • Grindrod is proposing the issue of preference shares to the value of R500m • The preference shares are cumulative, non-redeemable, non-participating and will be listed on the JSE • The preference share dividend will be a fixed percentage of prime • The issue will be privately placed through a book-build to institutions and selected distributors • The dividend rate will be determined by the book-build exercise • Grindrod directors will have the option of extending the issue size to a maximum of R750m • The proposed listing date is 18 August 2005

  4. Agenda History Current Position The Future Preference share issue

  5. HEPS (c) +146% Earnings (Rm) 618 +130% 550 R / US$ Exchange Rate +43% +45% Shipping markets 251 240 +43% +30% 175 +72% +88% 165 127 122 74 65 2000 2001 2002 2003 2004 HEPS 4-year CAGR = 76% p.a. History Profit History - Strong performance despite relative strength of the Rand

  6. Partnered withfirst classplayers Purchased ships Strongcashflow Long termship charters RohligPartnership KusasaCMC Grindrod Randstrengthens PurchasedIVS Announcedland-basedgrowthplans PurchasedUnicorn Shippingmarketsturnaround Announced further ship purchases HEPS ‘N’ shareabolished Share price Bought back shares De-listedGriffin Sold Griffin ships 1998 1999 2000 2001 2002 2003 2004 History How have we achieved this earnings performance?

  7. Trading profit (Rm) Annualised returns (%) 75,8 644 RONA ROE 42,4 37,7 335 268 26,7 212 206 20,2 19,9 16,1 14,7 11,0 10,6 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 Cash earnings per share (cents) Debt / Equity ratio (%) 841,7 106,6 105,5 61,0 49,2 230,4 29,2 169,4 156,5 81,5 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 History

  8. Agenda History Current Position The Future Preference share issue

  9. Current position Potential effect of R/US$ rate on earnings • Effect of 10c move in R/US$ exchange rate: • Earnings R12m • NAV R20m • Market NAV per share 60c / share

  10. BCI BPI $/day $/day 2004 2004 2005 2005 $/day BHMI 2004 2005 Current position Baltic dry indices Source: Clarksons

  11. Handysize - Parcel Service Capesize / Panamax Handysize - ITAS vessels Handysize - LB / IVS Pool Products / Chemical tankers Container ships Current position Global position Total fleet = 96 ships 22 Owned 34 Chartered (long-term) 40 Chartered (short-term)

  12. Current position Trading update: HEPS expected to be 65% - 75% higher than H1 2005 which equates to HEPS between 423c and 448c Extrapolation to F2005 year-end: If the historical trend of a 50:50 split between H1 and H2 is maintained, then HEPS of 846c to 896c could be achieved, placing Grindrod on a forward PE to December 2005 of 5,5

  13. Current position Abridged Income Statement

  14. Current position Abridged Balance Sheet

  15. Current position Abridged Cash Flow Statement

  16. Current position Good Products / Services / Customers / Partners Sheltam Atlas Sea Munye

  17. Current value per share • Book NAV • Excess of MV over BV of ships • Value of charters • Value of options • Unrecognised value of other businesses R 11 5 21 5 6 48 Current position Mark to Market valuation of Grindrod pre Pref share issue • Assumptions • Used PV of long term charter rates on remaining open charter periods to value charters • Used current MV of owned fleet to obtain excess fleet value • Forecast MV at end of charters used to value options • Unrecognised value of other businesses at estimated MV

  18. Current position Issuer pro-forma effect of R500m issued in different funding classes * Assuming shares issued at 4500 cps ** Assume proceeds invested in productive assets

  19. Agenda History Current Position The Future Preference share issue

  20. The future The outlook for shipping rates: 2005 - 2007 2005 • Bearish during Q2, normalising in later part of Q3 and Q4 • Chinese production output key to iron ore imports • Coking coal continues to grow, Steam coal growth to meet power generation needs, increase with industrialisation and urbanisation • 2006 • Key driver remains Chinese steel demand • Continued long term demand growth • Low growth in developed world economies; moderate growth in developing world economies • 2007& beyond • Consistent long-term demand in base commodities • Ageing fleet profile • Scrappings to increase with “softer” freight rates • Add. shipyard capacity expansions to be on-stream 2010 and beyond • Marginal demand to be higher than marginal supply • Possible boom in 2009 Source: Clarksons

  21. Locking in shipping income Low fleet cost 59% by dwt fixed out Expandng fleet The future How the new Grindrod addresses sustainability of earnings, given the cyclical nature of Shipping

  22. The future Locking in shipping incomeLow fleet cost • Owned Fleet (39% of total Grindrod fleet) eg Product Tankers - BV R 972m - MV R1,266m • Chartered Fleet (61% of total Grindrod fleet) eg Handysize Bulk Carriers - 7 year charter rate payable $ 7,500 pd - 7 year market rate $12,500 pd eg Capesize Bulk Carriers - 3 year charter rate payable $15,000 pd - 3 year market rate $25,000 pd eg Panamax Bulk Carriers - 5 year charter rate payable $ 9,250 pd - 5 year market rate $16,000 pd

  23. The future Locking in shipping income 40% of total fleet dwt fixed out on average for 2 1/2 years • eg Capesize Bulk Carriers • Contracted Earnings Earn $32,000 pd vs • Current Market Spot Earnings $28,000 pd • eg Panamax Bulk Carriers • Contracted Earnings Earn $21,000 pd vs • Current Market Spot Earnings $19,000 pd

  24. Non-shipping expansion Logistics / Terminals Bulk product trading Rail The future How the new Grindrod addresses sustainability of earnings, given the cyclical nature of Shipping Locking in shipping income Low fleet cost 45% of fleet fixed out Expanding fleet

  25. The future Diversifying the earnings stream: Expansion of non-shipping activities • Shipping currently contributes 90% of Operating Profit • Objective: To be reduced to 67% by 2008 • Why can Grindrod successfully expand its non-shipping operations in the face of fierce competition? • Existing skills base and additional skills acquired • Partnerships with industry experts • Complementary to shipping • Cross marketing of customer base

  26. Ships Agency API Ocean Africa Unicorn Shipping Southern Tankers Ships Agency Rohlig-Grindrod API Ocean Africa Unicorn Shipping IVS Southern Tankers Ships Agency Auto Carriers Boltt Grindrod CMC Grindrod Grindrod PCA Grindrod J&J Picpack Grindrod Rohlig-Grindrod Sheltam WALVISBAY JOHANNESBURG MAPUTO Ships Agency Kusasa BT Kusasa Logistics Sea Munye Navitrade Rohlig-Grindrod Star Biomass Ocean Africa Sheltam IVS RICHARDS BAY Ships Agency Auto Carriers Grindrod J&J Rohlig-Grindrod Ocean Africa Unicorn Shipping Southern Tankers Ships Agency CMC Grindrod Grindrod J&J Rohlig-Grindrod Ocean Africa Sheltam Unicorn Shipping Southern Tankers Ships Agency Auto Carriers Boltt Grindrod CMC Grindrod Grindrod PCA Grindrod J&J Picpack Grindrod Rohlig-Grindrod Ocean Africa Sheltam IVS Unicorn Shipping Southern Tankers Ships Agency Auto Carriers Boltt Grindrod CMC Grindrod Grindrod PCA Grindrod J&J Picpack Grindrod Rohlig-Grindrod Ocean Africa Unicorn Shipping Southern Tankers DURBAN EASTLONDON CAPETOWN PORTELIZABETH The future Non-shipping strategy: Southern Africa coverage

  27. FACTORY WAREHOUSE SEA WAREHOUSE LOCALENDUSER AIR TRANSPORT ROAD RAIL HARBOUR FOREIGNCOUNTRY WAREHOUSE WAREHOUSE FOREIGNENDUSER ROAD SEA RAIL AIRPORT AIR CANALS The future Non-shipping strategy: Supply Chain - “Cradle to grave” service

  28. Atlas Sea Munye Ships Agents The future Non-shipping strategy: Customers and products moved

  29. The future Diversifying the earnings stream: Acquisition of non-shipping activities - 1st 6 months of 2005

  30. The future Why does the preference share issue make sense? • Preference shares will not dilute HEPS, as Grindrod’s target ROE > cost of servicing the preference shares • Have good income base to ensure preference share serviceability • R500m raised from preference share issue to be spent on: • Growing rail operations • Public / Private partnerships • Further non-shipping expansion / possible major acquisitions • Shipping opportunities in low markets

  31. Agenda History Current Position The Future Preference share issue

  32. Preference share issue Salient features of preference shares • Issued by way of private placement with selected investors • Cumulative, non-redeemable,non-participating • Listed on the JSE • Preference dividend rate determined by book building exercise • Standard book building approach used • Issue split between Institutions and Private Individuals through selected distributors • Maximum additional issuance of R250 million taking issue size to R750 million • Partially underwritten by Investec Securities

  33. Preference share issue Details of issue and proposed timetable

  34. Preference share issue Selected comparison of after-tax yields

  35. Investor perspective • High yield • Tax free • Low risk Issuer perspective • Part of permanent capital • Low cost compared to rights issue • Favourable impact on debt ratio Preference share issue

More Related