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2001
HOWDEN AFRICA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1996/002982/06)
Share code: HWN ISIN: ZAE000010583
Preliminary Results for the year ended 31 December 2001
The summarised audited results
for the year ended 31 December 2001 are as follows:
Abridged Consolidated Income Statement
2001 2000
R'000 R'000
REVENUE 376 466 336 440
Operating profit 6 962 6 384
Net financial
(costs)/income (965) 2 403
Foreign exchange gains 6 677 1 069
Exceptional item - loan written-down (4 303) -
Share of results of associate (3 225) -
Profit before taxation 5 146 9 856
Taxation (9 520) (3 687)
(Loss)/Profit after taxation (4 374) 6 169
Outside shareholders' interest (787) (1 253)
Net (loss)/profit for the year (5 161) 4 916
Number of shares:
In issue (000's) 65 729 65 729
Weighted average (000's) 65 729 64 695
Earnings per share: (cents) (7,85) 7,60
Headline earnings per share (cents) (2,13) 7,33
Dividends per share: (cents) - 14,00
Interim - 5,00
Final - 9,00
Headline earnings reconciliation
Net (Loss)/profit for the year (5 161) 4 916
Profit on sale of subsidiary (336) -
Profit on sale of property, plant
and equipment (538) (171)
Amortisation of goodwill 332 -
Exceptional item - loan written-down 4 303 -
(1 400) 4 745
Other Group Salient Features
2001 2000
R'000 R'000
Net asset value per share (cents) 145,55 156,83
Depreciation 5 244 4 459
Capital expenditure 4 590 4 153
Capital commitments
Authorised and contracted 556 1 095
Authorised not contracted 626 650
Abridged Consolidated
Statement of Changes in Equity
2001 2000
R'000 R'000
Opening balance 103 083 106 245
Currency translation differences (1 349) (210)
Net (loss)/profit (5 161) 4 916
Issue of share capital - share options - 1 363
Revaluation of land and buildings net of
deferred taxation - 136
Changes in subsidiary holdings (904) (165)
Dividends - (9 202)
Closing balance 95 669 103 083
Abridged Consolidated Balance Sheet
2001 2000
R'000 R'000
ASSETS
Non-current assets 43 840 43 181
Property, plant and equipment 33 841 34 729
Intangible assets 1 329 -
Investment in associate company 4 521 -
Non-current loan 4 149 8 452
Current assets 161 484 165 130
Inventories 57 090 52 405
Receivables and pre-payments 99 900 81 842
Amounts owing by fellow subsidiaries 116 576
Cash and cash equivalents 4 378 30 307
Total assets 205 324 208 311
EQUITY AND LIABiLITIES
Capital and reserves 95 669 103 083
Outside shareholders' interest 4 227 9 978
Non-current liabilities 5 152 4 856
Post-retirement medical obligations 3 164 3 164
Deferred tax liabilities 1 988 1 692
Current liabilities 100 276 90 394
Trade and other payables 93 742 82 642
Current tax liabilities 5 050 1 023
Amounts owing to fellow subsidiaries 1 484 814
Shareholders for dividend - 5 915
Total liabilities 105 428 95 250
Total equity and liabilities 205 324 208 311
Abridged Consolidated Cash Flow Statement
2001 2000
R'000 R'000
Cash flow from operating activities
Cash generated by operations 18 009 11 741
Utilised to increase working capital (11 304) (12 579)
Cash generated by operating activities 6 705 (838)
Financial (cost)/income (965) 2 403
Dividends paid (5 915) (9 067)
Taxation paid (5 321) (7 045)
(5 496) (14 547)
Cash utilised in investing activities (14 433) (4 130)
Cash effects of financing activities (6 000) (260)
(Decrease) in cash and cash equivalents (25 929) (18 937)
Comments
This is the seventh preliminary statement of Howden Africa.
The 2001 financial year has proven to be another difficult year for
suppliers of capital equipment. Certain improvements have been achieved in a
number of the group's South African based operations, but others have failed
to meet expectations. Results of the offshore companies have proved
disappointing and losses have been incurred in both the United Kingdom and
in the United States of America.
General economic forecasts for South Africa at the beginning of the year
suggested growth in the overall economy of 3,5% and 6,0% in gross domestic
fixed investment. These predictions proved optimistic with growth of 2,2%
and 3,3% respectively, having been achieved. These lower growth rates have
had an effect on the Group's domestic business. Nonetheless, the Group
achieved orders totalling R447 million (2000: R315 million) during the year.
This represents an 18% underlying improvement, even before the exceptionally
large R73 million long-term Hendrina fabric filter contract is taken into
account.
Results
Group turnover at R376,5 million (2000: R336,4 million) represents an
improvement of 11,9% over the previous year. A number of significant
prospects were converted into sales towards the year-end and several large
value contracts were also completed successfully during the year. The Group
also benefited from the R24,1 million of sales under the Hendrina contract.
Operating profit for the year of R7,0 million (2000: R6,4 million) is after
a R6,5 million charge against inventories in the pump business.
Actions taken during the year to expand beyond the Southern African
Development Community ("SADC") borders have progressed significantly in all
operating divisions. However, initial trading from these activities have
been disappointing with combined operating losses of R4,5 million being
reported. Executive management is targeting to increase its export business
to at least 25% of total sales and remain confident that acceptable returns
from such activities are achievable in the short to medium term. The
consolidated income statement, in accordance with generally accepted
accounting practice, reflects exceptional exchange gains totalling R6,7
million (2000: R1,1 million) that have been recognised on foreign currency
denominated inter-company loans to the offshore loss-making companies.
Executive management is satisfied that the repayment of these foreign
currency denominated loans will occur according to plan.
With effect from 1 March 2001 the Group acquired a 49,98% interest in
Hertz Technologies (Pty) Limited, a manufacturer and refurbisher of custom-
built electric motors. The cost of the initial investment in this Company
together with loans advanced to it since 1 March total some R7,7 million.
Due to the poor performance of this investment, its carrying value has been
written-down by R3,2 million during the year. Ongoing measures have been
taken to restructure the operations of Hertz Technologies with the aim of
improving its performance. The Group has an option to acquire a further 25%
of the equity of this company for R2,002. In the event that this option is
exercised, it would be the Group's intention to subsequently sell this 25%
interest on to a black economic empowerment group.
An amount of R4,3 million (2000: nil) was written-off in the year as an
exceptional item due to the impairment of non-current loans to the Howden
Africa Holdings Limited Employees Share Trust.
Net financial costs in the year were R1,0 million (2000: income R2,4
million) and profit before taxation was R5,1 million (2000: R9,9 million).
A taxation charge of R9,5 million has been accrued (2000: R3,7 million),
equivalent to 185,0% (2000: 37,4%) of profit before tax. It is deemed
prudent not to raise a deferred tax asset associated with the Pump company's
assessed loss until a sustainable level of profit making has been achieved.
Other contributing factors to the high charge this year include secondary
tax of R1,5 million and disallowable expenditure of R11,2 million.
At 31 December 2001 the Group had a net positive cash position of R4,4
million (2000: R30,3 million).
Potential merger of the Pumps business
In December 2001 a cautionary announcement was published advising
shareholders to exercise caution in dealing in the company's shares.
Negotiations in progress at the time related to the proposed merger between
the Group's wholly-owned subsidiary, Howden Pumps (Pty) Ltd, and Liquid
Movers Holdings NV, the controlling shareholder of the Orbit Pump group of
companies. Discussions are continuing in respect of this potential merger
and a further announcement will be made at the appropriate time.
Outlook
General forecasts of economic growth, given in South Africa positively at
the beginning of each new year, regularly fail to materialise.
Developments to the north of the country also do not provide much
encouragement. Meanwhile, the Group will continue its drive into export
markets beyond the SADC region.
The Board, therefore, takes a cautious view looking forward and enters 2002
with some measure of confidence, recognising the continuing dedication,
experience and loyalty of its employees.
Board of directors
During the year Mr Jeffrey Herbert, Mr Nigel Smith and Mr Jan Moodie, all of
whom were non-executive directors, resigned from the Board and Mr David
Gawler replaced Mr Jeffrey Herbert as non-executive Chairman of the Company.
Dividends
In view of the policy adopted in March 2001 to set dividends in the light of
earnings and cash flow, the Board has decided not be declare a dividend for
the year ended 31 December 2001.
Basis of Preparation:
These Financial Statements have been prepared in accordance with Statements
of Generally Accepted Accounting Practices. There has been no change in
accounting policies since the annual report of 31 December 2000.
For and on behalf of the Board
D Gawler (Chairman)
25 March 2002
Directors:
D Gawler (Chairman) **, R J Cleland # **, C J Ferreira (Managing
Director),
S Meyer, T V Maphai **, R Mokate **, (# British) (** Non-executive)
Company secretary:
M J M Lake
Registered office:
1a Booysens Road, Booysens, 2091
Postal address:
PO Box 2239, Johannesburg, 2000
Transfer secretaries:
Mercantile Registrars Limited, 11 Diagonal Street, Johannesburg, 2001
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