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Howden Interim financial results for the 6 months ended 30 June 2016
Howden Africa Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/002982/06)
Share code: HWN
ISIN: ZAE000010583
(“Howden” or “the Company” or “the Group”)
Unaudited interim financial results for the six months ended 30 June 2016
Howden Africa is a market-driven, customer-orientated company. Its main business activities are the design, manufacture
and marketing of specialised air and gas-handling solutions for a wide range of industries. The Group’s major industries
supplied include power generation, petrochemical, mining, construction, refrigeration, water treatment and general industry.
Howden Africa is also a distributor of ESAB welding and cutting equipment and consumables (reported under our new
Fabrication Technology division).
Howden Africa is committed to environmental awareness. Accordingly, all product designs and manufacturing are scrutinised
for environmental friendliness. Design and drawing activities are computerised and manufacturing is concentrated on
producing key components. Manufacturing facilities are located in Booysens (Johannesburg) and Struandale (Port Elizabeth).
HIGHLIGHTS
- Revenue of R702.8 million increased by 3.7%
- Earnings per share of 140.85 cents increased by 1.2%
- Operating profit of R102.4 million decreased by 7.1%
COMMENTARY
OVERVIEW
Howden Africa experienced challenging trading conditions due to a slow-down in expenditure for environmental and
mining capital equipment projects within the first six months of 2016 which resulted in the Group’s operating profits
declining 7.1% when compared to the corresponding period in 2015.
RESULTS
Orders received of R673.9 million for the first half of 2016 is 19.0% behind the corresponding period in 2015. There
has been reduced order intake within the Environmental Control division with orders reducing to R42.8 million. The Fans
and Heat Exchangers division is 0.8% ahead of the corresponding period in 2015 due to improved aftermarket (spares and
service supply). The new Fabrication Technology division commenced trading in the first quarter and received orders of
R38.7 million.
Revenue was R702.8 million for the first half of 2016 and is 3.7% ahead of the equivalent period in 2015 of R677.5 million.
The Fans and Heat Exchangers division increased revenue 11.5% to R588.2 million due to improved aftermarket. The
Environmental Control division revenue decreased 46.7% due to customers delaying decisions on environmental control
projects due to economic conditions. The new Fabrication Technology division had revenue of R34.7 million.
Operating profit of R102.4 million is a reduction of 7.1% over the R110.2 million to June 2015; the performance in the
Fans and Heat Exchangers division was robust with the reduction resulting from a decline within the Environmental
Control division. The Fabrication Technology division made a loss of R1.8 million in its first few months of trading.
Central operation costs are in line with the prior year.
Earnings per share of 140.85 cents is 1.2% up on the corresponding period last year due primarily to improved
investment income.
Cash generated from operations was R61.8 million - an improvement over the corresponding period (2015: R8.2 million).
Net asset value per share has increased by 23.4% to 1 718.98 cents (June 2015: 1 392.98 cents) mainly due to the
increase in cash and cash equivalents to R764.2 million.
ACCOUNTING POLICIES
The condensed consolidated interim financial statements for the period ended 30 June 2016 are prepared in accordance
with the requirements of the JSE Limited Listings Requirements for interim reports and the requirements of the Companies
Act of South Africa. The Listings Requirements require interim reports to be prepared in accordance with the framework
concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued
by Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim
Financial Reporting. The accounting policies applied in the preparation of the condensed consolidated financial statements
are in terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements.
OUTLOOK
Capital project spend within power generation, mining and general industry is expected to remain subdued. The Fans and
Heat Exchangers division will continue to focus its strategy on the supply of services and spares to key industries.
Market conditions within the Environmental Control division are expected to remain challenging. The Fabrication Technology
division is expected to grow.
EVENTS AFTER REPORTING DATE
Mrs C Koopman resigned on 29 July and Mr C Masson was appointed as Company Secretary.
DIVIDENDS
The directors have resolved not to declare a dividend (2015: nil).
DIRECTORATE
Mr W Thomson joined the board on 1 February 2016 and became CEO on 1 June 2016 with Mr T Bärwald resigning as a
director.
UNAUDITED INTERIM FINANCIAL RESULTS
The Company’s auditors Ernst & Young Inc., have not reviewed or audited the interim financial results for the six
months ended 30 June 2016.
The Group financial results were prepared by Mr Kulani Mlambo CA(SA) under the supervision of the Chief Financial
Officer, Mr K Johnson FCPA (Aust.).
For and on behalf of the board of directors
IH Brander W Thomson
Chairman Chief Executive Officer
25 August 2016
Condensed consolidated statement of comprehensive income
for the period ended 30 June 2016
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2016 2015 2015
(Unaudited) (Unaudited) Change (Audited)
R’000 R’000 % R’000
Revenue 702 823 677 469 3.7 1 483 276
Cost of sales (511 284) (485 562) 5.3 (1 071 717)
Gross profit 191 539 191 907 (0.2) 411 559
Distribution costs (24 088) (19 246) (37 583)
Administrative expenses (65 769) (64 017) (117 460)
Other income 737 1 567 5 481
Operating profit 102 419 110 211 (7.1) 261 997
Investment income 25 861 17 152 40 510
Finance costs (61) (617) (27)
Net finance income 25 800 16 535 56.0 40 483
Profit before income tax 128 219 126 746 302 480
Income tax expense (35 639) (35 283) (86 927)
Profit for the period 92 580 91 463 1.2 215 553
Other comprehensive income for the period:
Cash flow hedge (loss)/gain (1 921) 1 505 1 009
Pension fund plan gain - 882 901
Other comprehensive (loss)/income for the period, net of tax (1 921) 2 387 1 910
Total comprehensive income for the period 90 659 93 850 (3.4) 217 463
Earnings per share
- basic and diluted (cents) 140.85 139.15 1.2 327.94
Condensed consolidated statement of financial position
as at 30 June 2016
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2016 2015 2015
(Unaudited) (Unaudited) (Audited)
R’000 R’000 R’000
ASSETS
Non-current assets 196 635 191 854 196 763
Property, plant and equipment and intangible assets 137 179 146 890 142 290
Pension fund plan surplus 19 675 - 17 712
Deferred tax assets 25 200 28 564 24 452
Trade and other receivables and construction contracts 14 581 16 400 12 309
Current assets 1 510 254 1 288 625 1 387 607
Inventories 357 838 223 225 235 163
Trade and other receivables and construction contracts 335 704 427 509 384 800
Loans issued 7 500 - 7 500
Current income tax asset 45 028 33 342 29 954
Cash and cash equivalents 764 184 604 550 730 190
TOTAL ASSETS 1 706 889 1 480 480 1 584 370
EQUITY
Share capital and reserves
Share capital and reserves 1 129 866 915 594 1 039 207
Total equity 1 129 866 915 594 1 039 207
LIABILITIES
Non-current liabilities 96 887 152 257 108 933
Pension fund plan deficit - 5 815 -
Deferred tax liabilities 9 272 1 034 9 272
Other payables and construction contracts 75 434 121 194 87 626
Provisions 12 181 24 214 12 035
Current liabilities 480 136 412 629 436 230
Trade and other payables and construction contracts 457 692 403 191 417 564
Current income tax liabilities - 277 -
Provisions 22 444 9 161 18 666
Total liabilities 577 023 564 886 545 163
TOTAL EQUITY AND LIABILITIES 1 706 889 1 480 480 1 584 370
Condensed consolidated statement of changes in equity
for the period ended 30 June 2016
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2016 2015 2015
(Unaudited) (Unaudited) (Audited)
R’000 R’000 R’000
Share capital and reserves at the beginning of the period 1 039 207 821 744 821 744
Total comprehensive income for the period 90 659 93 850 217 463
Profit for the period 92 580 91 463 215 553
Cash flow hedge (1 921) 1 505 1 009
Pension fund plan loss - 882 901
Share capital and reserves at the end of the period 1 129 866 915 594 1 039 207
Condensed consolidated statement of cash flows
for the period ended 30 June 2016
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2016 2015 2015
(Unaudited) (Unaudited) (Audited)
R’000 R’000 R’000
Cash flow from operating activities
Cash generated from operations 61 755 8 220 156 760
Interest paid (61) (617) (27)
Income tax paid (50 713) (45 542) (81 536)
Net cash generated from/(utilised in) operating activities 10 981 (37 939) 75 197
Cash flow from investing activities
Interest received 25 861 17 334 37 521
Loans issued - - (7 500)
Purchases of property, plant and equipment (2 814) (2 537) (7 192)
Government grant received - - 4 209
Purchases of intangible assets (48) (72) (17)
Proceeds from disposal of property, plant and equipment 14 76 284
Net cash generated from investing activities 23 013 14 801 27 305
Net increase/(decrease) in cash and cash equivalents 33 994 (23 138) 102 502
Cash and cash equivalents at the beginning of the period 730 190 627 688 627 688
Cash and cash equivalents at the end of the period 764 184 604 550 730 190
Other Group salient features
for the period ended 30 June 2016
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2016 2015 2015
(Unaudited) (Unaudited) Change (Audited)
R’000 R’000 % R’000
Net asset value per share (cents) 1 718.98 1 392.98 23.4 1 581.00
Depreciation 6 962 6 952 - 14 035
Amortisation 1 009 999 1.0 1 886
Capital expenditure 2 862 2 609 9.7 7 209
Capital commitments
- Authorised and contracted 335 512 (34.6) 598
Operating profit to revenue (%) 14.57 16.27 (10.4) 17.66
Number of shares in issue (000’s) 65 729 65 729 65 729
Earnings per share - basic and diluted (cents) 140.85 139.15 1.2 327.94
Headline earnings per share (cents) 140.83 139.29 1.1 329.62
Reconciliation of headline earnings
Profit for the period 92 580 91 463 215 553
(Profit)/loss on disposal of property, plant and equipment (12) 88 59
Impairment of property, plant and equipment - - 1 044
Headline earnings 92 568 91 551 1.1 216 656
Segmental analysis by operating division
for the period ended 30 June 2016
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2016 2015 2015
(Unaudited) (Unaudited) Change (Audited)
R’000 R’000 % R’000
Orders received
Fans and Heat Exchangers 592 339 587 595 0.8 1 106 500
Environmental Control 42 804 243 895 (82.4) 311 200
Fabrication Technology 38 719 - - -
673 862 831 490 (19.0) 1 417 700
Revenue
Fans and Heat Exchangers 588 213 527 488 11.5 1 117 302
Environmental Control 79 952 149 981 (46.7) 365 974
Fabrication Technology 34 658 - - -
702 823 677 469 3.7 1 483 276
Inter-segmental sales
Fans and Heat Exchangers 11 412 6 087 87.5 18 242
Environmental Control 16 276 14 764 10.2 22 249
Fabrication Technology 560 - - -
28 248 20 851 35.5 40 491
Operating profit/(loss)
Fans and Heat Exchangers 118 403 97 740 21.1 213 642
Environmental Control (3 941) 22 987 (117.1) 51 377
Fabrication Technology (1 781) - - -
112 681 120 727 (6.7) 265 019
Central operations (10 262) (10 516) (2.4) (3 022)
Total operating profit 102 419 110 211 (7.1) 261 997
Investment income 25 861 17 152 50.8 40 510
Finance costs (61) (617) (90.1) (27)
Profit before tax 128 219 126 746 1.2 302 480
Corporate information
Directors
IH Brander (Chairman)#**, W Thomson (Chief Executive Officer)#, J Brown#**, M Malebye**,
K Johnson# (Chief Financial Officer), H Mathe**, M Patel**
(#British **Non-executive)
Company secretary
C Masson
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg, 2001
Sponsor
PricewaterhouseCoopers Corporate Finance Proprietary Limited
www.howden.co.za
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