Audited Group Results

1
Hudaco Industries Limited
Audited Group Results for the 12 months ended 30
November 2007
Value added distribution our core competency
2
Agenda

• Introduction
• Review of operations
• Divisional analysis
• BEE ownership transaction
• Financials - income statement /balance sheet
• Outlook and conclusion

3
Introduction
4
Results Highlights
Introduction
5
Review of operations
6
Value added distribution
Exposure to diversified markets
Broad mostly exclusive product range
Cash generative
Provide technical solutions to customers
Acquisitive
Off-the-shelf delivery and credit provider
5-yr CAGR 19 EPS 20 DPS
Strong financial controls (working capital cash
management)
Established businesses long supplier
relationships
High RONA
Outlook Conclusion
7
Operating Background to the Results

• Consumer spending slows
• Investment spending starts
• Sales increase of 21 evenly split between volume
  and price
• Stand-out profit growth in Powermite DDP. BI
  and Bosworth follow closely
• Lower margins in Rutherford offset strong growth
  in power tool sales

Introduction
8
Operating profits and margin analysis
Sales-linked expenses rose local inflation is
closer to 10 due to shortage of skills and rent
rises
Operations
9
Margin Analysis
Hand out only
Year ended November 30 2007
Increased input costs successfully passed on
Sales rising faster than expenses
Higher margin reflects robust trading conditions
Operations
10
Operating profit
Longer term margin performance
Strong growth
Operations
11
Divisional Analysis
12
Divisional Contributions
Contribution to Operating Profit (before HO)
Bearings and Power Transmission Powered
Products Security Equipment
Segmentals
13
Divisional Markets Bearings Transmission
BEARINGS POWER TRANSMISSION DIV. (51 of
group operating profit)

• Used for
• Repairs
• Maintenance
• Expansion
• Resale
• New capex

Principal Businesses
Principal Brands
Competitors

• Bearingman
• SKF
• Altech
• S.E.W.
• Hytec
• Zest

• Some customers
• Amplats
• Sandvik
• Toyota
• Eskom
• Impala Plats.
• Imperial Auto Parts
• Cash sales

• Main markets
• Manufacturing
• Mining
• Automotive

Exports 3.6
14
Segmental Analysis Bearings Transmission
Year ended November 30 2007 - Rm

• Volume price growth roughly equal
• Customer capex spending in early stages
• Pulleys, electric motors and electrical cable
  sales performance particularly good
• Buoyant sales of general consumables

Segmentals
15
Segmental Analysis Bearings Transmission
Year ended November 30
Market in 2007
Steady
Decline
Growth
Boom
Recession
Anticipated for 2008
Segmentals
16
Divisional Markets - Powered products
POWERED PRODUCTS (36 of group operating
profit)

• Used for
• Underground equipment
• Gen. sets
• Woodworking
• Grinding
• Renovations
• Boating

Principal Businesses
Principal Brands
Competitors

• Caterpillar
• Cummins
• Perkins
• Bosch
• Hitachi
• Metabo
• Yamaha

• Some customers
• Valfrira
• Longyear
• Sandvik
• Builders Warehouse
• Bell Equipment

• Main markets
• Mining
• Power generation
• Building finishing
• Building additions
• Leisure

Exports 2
17
Segmental Analysis Powered products
Year ended November 30 2007 - Rm

• Sales volumes up in diesel engines power tools
  and down in outboard motors
• Diesel engine growth driven by platinum mines
  power generation
• Power tool growth from building
• Marine decline from interest rates Credit Act

Segmentals
18
Segmental Analysis Powered Products
Year ended November 30
Market in 2007
Steady
Decline
Growth
Boom
Recession
Anticipated for 2008
Steady
Decline
Growth
Boom
Recession
Segmentals
19
Divisional Markets Security equipment
SECURITY EQUIPMENT (13 of group operating
profit)
Principal Businesses
Principal Brands
Competitors

• Used for
• Intruder detection at home and work
• Access control
• Video monitoring (CCTV)

• ADI
• Inhep
• Texacom
• Sony

• Some customers
• ADT
• Chubb
• FNB
• Installers

• Main markets
• Residential and commercial security
• Armed response providers

Exports 1
20
Segmental Analysis Security equipment
Year ended November 30 2007 - Rm

• Volumes increased by about 11 in RSA during the
  period
• High property crime rate
• New building activity
• Overall sales declined in UK two branches
  closed

Segmentals
21
Segmental Analysis Security equipment
Year ended November 30
SA Market in 2007
Steady
Decline
Growth
Boom
Recession
Anticipated for 2008 (in SA)
Steady
Decline
Growth
Boom
Recession
Segmentals
22
Operating profit - overview
Operations
23
BEE Ownership Transaction
24
Outline of BEE ownership transaction

• A strategic imperative.
• Hudacos objective was to introduce substantial
  BEE shareholder participation, while seeking to
• ensure the BEE shareholding is sustainable
• facilitate immediate transfer of share ownership
  to beneficiaries
• avoid excessive returns required by banks for
  equity participation
• work within the framework of the DTI scorecard
  to achieve the maximum ownership points
  available
• implement a simple transaction that can be easily
  communicated to stakeholders
• keep the cost to existing shareholders within
  reasonable parameters

25
Outline of BEE ownership transaction

• Process had 2 phases
• 1 Internal restructure into a Newco 1 August
  2007 objectives
• To collect all SA wholly owned operations into
  one company Hudaco Trading (Pty) Ltd
• To fund the purchase by debt in order to retain
  nominal value of equity in Hudaco Trading (Pty)
  Ltd
• 2 15 of shares in Hudaco Trading (Pty) Ltd
  issued to BEE partners for R300 on 28 August 2007

26
Outline of BEE ownership transaction phase1
the boxes
Hudaco Industries Ltd
100
Hudaco Investment Co
3. HIC invests R2,2b - in Pref.
shares
100
Hudaco Trading (Pty) Ltd (Newco)
2b -15 New divisions cost R2,2b
Debenture and Preference Share Terms - 10 years
- interest quarterly - bullet settlement of
capital HIC provides and receives
credit protection
27
Outline of BEE ownership transaction phase 1
The numbers
Hudaco Industries Ltd Group
No set off - but Hudaco Inv Co will assist
Hudaco Trading should latter not be able to meet
its debenture interest obligations
Hudaco Trading (Pty) Ltd
28
Outline of BEE ownership transaction phase 2
the boxes
Hudaco has a deemed 10 BEE shareholding through
its current mandated investors
10
Hudaco Industries Ltd
100
Hudaco Investment Co
3 BEE groups
BRI -R2,2b Invested
100
85
10
70
DDPower
Hudaco Trading (Pty) Ltd 15 divisions
This structure gives Hudaco Trading the full 23
points available under the DTI ownership code
100
29
Outline of BEE ownership transaction the numbers
Hudaco Industries Ltd
100
100
85
Hudaco Investment Co
Quadrant Group
R2,2b debenture
BRI -R2.2b Invested
70
DDPower
30
Outline of BEE ownership transaction
Hudaco Industries Ltd
100
100
85
Quadrant Group Foreign interests
Hudaco Investment Co
BRI -R2.2b Invested
Hudaco Industries Ltd current shareholders give
up 15 of the growth in Hudaco
Trading from 2007 (Cost to introduce BEE
shareholding - per IFRS 2 R38m
1.5 of then market cap )
Given certain
assumptions
70
DDPower
31
Outline of BEE ownership transaction the
shareholders
5 - Trust for education of black staff and family
A trust to assist in the education of Hudacos
black staff and their children. Focus on tertiary
education. 50 of all benefits will be
distributed to black women.
5 - B-B BEE Foundation
A trust to provide broad based enterprise and
socio economic development to black people not
necessarily staff 50 of all benefits will be
distributed to black women
The Education Trust and Broad Based Trust will be
structured to meet the recognition requirements
set out in Annex 100(B) of the Codes.
Members of the of Ulwazi Consortium
-all of whom are new entrants to BEE
ownership SIPHO THOMO CEO Armscor B.Sc. Mech
Engineering UCT NENE MATHEBULA MD Bukubuhle
Wire B.Sc Elect. Engineering UCT CYRIL GAMEDE
Ops Dir. African Explosives Limited B.Sc Mech
Engineering UCT, MSc Industrial Engineering
UCT MERAFE RAMONO Dir. Brookhouse Cooper BA
LLB UCT PRINCESS ZENANI DLAMINI Chairperson of
her Marketing and Public Relations Co. Bachelor
of Science (Boston University, Mass) Ms NENE
MOLEFI MD Mandate Molefi HR Consultants BA in
Social Work UFH B Soc Sc (Honours) UCT
5 - Consortium of Black Entrepreneurs
This structure gives Newco the full 23 points
available under the ownership code 100
32
Financials - Income statement, balance sheet
and cash flow
33
Income Statement
Pref div currently not taxable
DDP had exceptional year MSI in Hudaco Trading
R1m
Financials
34
Income Statement
Std dividend cover annual dividends covered /-
3 times by normalised HEPS
Cover 2007- 2.9 x 2006 - 2.8 x
Financials
35
Balance Sheet
Financials
36
Working Capital months of sales
2.8
2.2
3.1
2.6
3.2
2.4
3.0
2.5
Net WC
Inventory
Net WC Target
Receivables
1R206m
1R174m
Payables

• Working capital traditionally peaks end of H1 to
  cope with anticipated increased seasonal demand
  in H2 - sales are generally split 4060 between
  H1 and H2
• Target working at capital at H2 - range of 2.4 to
  2.7 months of sales

Financials
37
Balance Sheet
Financials
38
Return on Net Operating Assets
Hudacos 20 hurdle rate for new investments
pre-tax cost of capital at current interest and
income tax levels
Financials
39
Outlook Conclusion
40
F2007 Sales by Market Sector
Outlook Conclusion
41
Market Outlook in Key Markets

• Manufacturing Construction (26)
• Relative exchange rate strength and higher
  interest rates inhibits manufacturing activity
  for export
• However, benefits from infrastructure spend
  starting to manifest
• /- R631bn is projected to be spent on
  infrastructure over the next 3 years, stimulated
  by 2010 World Cup infrastructure spend and GDP
  growth
• The infrastructure spend up-cycle should last for
  more than a decade, stimulated by the need to
  catch up past under-spend and to support GDP
  growth

Estimate as per Macquarie First South
Securities report - 25 September 2007 Source
SAFCEC
Outlook Conclusion
42
Market Outlook in Key Markets

• Mining (20)
• Sustained growth in BRICs , particularly China
  has seen commodity prices increase - gold, oil,
  coal, uranium, platinum, copper, nickel, cobalt
• Power generation requires investment in coal
  mines
• Strong mining demand both in SA and up Africa
• Large increase in exploration and mining spend
• Multiplier effect on housing, power, industrial
  and infrastructure spend

Outlook Conclusion
43
Market Outlook in Key Markets
Outlook Conclusion
Source Massmart, Woolworths and Shoprite
44
Exchange Rate Drivers

• We import directly 75 of group cost of sales (as
  do our competitors)
• On ave. these cost 10,5 more in 2007 105/95
  than in 2006
• We do not take a house view on exchange rates
• We hedge all liabilities and 20 - 30 of orders
• Demand not price sensitive in short term.

Import currencies USD 46 Euro 31 Yen 15 GBP
6 Imports from China, Korea etc are priced in
USD
Outlook Conclusion
45
Some of the issues facing us in 2008
Outlook Conclusion
46
Outlook for F2008

• Infrastructure investment, public and private,
  now replacing consumption as the engine of growth
  in South Africa
• Hudacos markets are expected to deliver
  sustained volume growth
• Albeit at a slower rate than previously thought
  due to infrastructure constraints
• Acquisitions (Astore and others) could add 25
  cents
• 2007 Normalised HEPS of R7.50 is the base
• F2007 is a high base off which to grow
• NHEPS 44 in H1 2007 38 in H2 2007

Given the above, F2008 NHEPS is expected to grow
but at a slower rate than achieved in F2007
Outlook Conclusion
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Hudaco Industries Limited
Audited Group Results for the 12 months ended 30
November 2007
Value added distribution our core competency
48
Peter Poole Group Financial Director
2711 345 8203 pmp_at_hudaco.co.za
Stephen Connelly Group Chief Executive
2711 345 8201 sjc_at_hudaco.co.za
Our website www.hudaco.co.za