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HOWDEN AFRICA HOLDINGS LIMITED
DIRECTORS
JW HERBERT
(NON-EXECUTIVE CHAIRMAN)* **
CJ FERREIRA
(MANAGING DIRECTOR)
S MEYER
AG MACLACHLAN* **
TV MAPHAI**
R MOKATE**
JC MOODIE**
NWR SMITH* **
* BRITISH
** NON-EXECUTIVE
COMPANY SECRETARY: MJM LAKE
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 96/02982/06)
("HOWDEN AFRICA")
REGISTERED OFFICE
1A BOOYSENS ROAD, BOOYSENS, 2091
POSTAL ADDRESS
PO BOX 2239, JOHANNESBURG, 2000
TRANSFER SECRETARIES
RAND REGISTRARS LIMITED,
1ST FLOOR - BLOCK C, CROWNWOOD,
100 NORTHERN PARKWAY,
ORMONDE, JOHANNESBURG .2091
HOWDEN AFRICA HOLDINGS LIMITED
PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 DECEMBER 1998
COMMENTS
THIS IS THE FOURTH PRELIMINARY STATEMENT OF HOWDEN AFRICA HOLDINGS LIMITED
FOLLOWING THE LISTING ON THE JOHANNESBURG STOCK EXCHANGE ON 3 MAY 1996.
HOWDEN AFRICA IS PART OF AN INTERNATIONAL GROUP OF BUSINESSES WITH LEADING
MARKET POSITIONS SERVING INDUSTRIAL CUSTOMERS. THE GROUP'S CORE BUSINESS
DIVISIONS ARE FANS AND HEAT EXCHANGERS, AIR AND GAS CLEANING AND PUMPS AND
REFRIGERATION
RESULTS
OPERATING RESULTS FOR THE YEAR ENDED 31 DECEMBER 1998 WERE BELOW EXPECTATIONS
WITH FLAT ECONOMIC CONDITIONS AND HIGH INTEREST RATES MAKING FOR A DIFFICULT
TRADING ENVIRONMENT. GROUP TURNOVER FROM CONTINUING OPERATIONS OF R 396.6
MILLION REDUCED BY 11.5% COMPARED TO THE FULL YEAR TO DECEMBER 1997.
THE COMPARISONS BELOW REFER TO THE CORRESPONDING TWELVE MONTH PERIOD TO
DECEMBER 1997 (UNAUDITED).
* ORDER INTAKE AMOUNTED TO R 316 MILLION COMPARED TO R 321 MILLION IN THE
CORRESPONDING PERIOD
* TURNOVER WAS R 409 MILLION COMPARED TO R 453 MILLION
* OPERATING PROFIT OF R26.7 MILLION COMPARED TO R 41.4 MILLION
* EARNINGS PER SHARE INCREASED BY 43% TO 30.37 CENTS COMPARED TO AN
ANNUALISED 21.21 CENTS
* AT 31 DECEMBER 1998 THE GROUP HAD A NET POSITIVE CASH POSITION OF R 35
MILLION
* DIVIDENDS TOTALLING 14 CENTS PER SHARE HAVE BEEN DECLARED FOR THE
PERIOD
BOARD OF DIRECTORS
DURING THE YEAR UNDER REVIEW, JOHAN VAN DEN BERGH RESIGNED AS A DIRECTOR OF THE
BOARD AND CHIEF EXECUTIVE OFFICER OF THE GROUP AND COLIN FERREIRA WAS APPOINTED
MANAGING DIRECTOR OF HOWDEN AFRICA HOLDINGS LIMITED. THERE WERE NO OTHER
CHANGES TO THE BOARD.
DIVIDENDS
AN INTERIM DIVIDEND OF 5 CENTS PER SHARE WAS PAID OUT ON 30 OCTOBER 1998 (DEC
1997: 4 CENTS). THE DIRECTORS HAVE RECOMMENDED A FINAL DIVIDEND OF 9 CENTS PER
SHARE PAYABLE ON 28 MAY 1999 TO MEMBERS REGISTERED AS SUCH ON 7 MAY 1999. THIS
WILL RESULT IN A TOTAL DIVIDEND FOR THE YEAR OF 14 CENTS PER SHARE (DEC 1997: 9
CENTS).
OUTLOOK
THE ECONOMIC ENVIRONMENT IN 1999 WILL DEPEND AMONGST OTHER THINGS ON EVENTS IN
EMERGING MARKETS, THE LOCAL ELECTIONS, INTEREST RATE MOVEMENTS, LEVELS OF
DESTOCKING, BENEFITS OF DEMUTUALISATION AND EXPORT GROWTH. EARLY INDICATIONS
ARE THAT THE YEAR WILL PROVE TO BE AT LEAST AS TOUGH AS 1998.
IN THE STANDARD FAN BUSINESS PROSPECTS EXIST FOR THE SUPPLY AND INSTALLATION OF
VENTILATION AND AIR-CONDITIONING FANS IN A NUMBER OF CONSTRUCTION SITES
THROUGHOUT THE COUNTRY.
THE GROUP WILL CONTINUE TO FOCUS ON AFTERMARKET SERVICE IN THE POWER GENERATION
MARKET AND PROSPECTS ARE GOOD FOR THE FANS AND HEAT EXCHANGER BUSINESS
ESPECIALLY CUSTOM DESIGNED FANS FOR THE MINING INDUSTRY.
THE REFRIGERATION BUSINESS STARTS THE YEAR WITH A GOOD ORDER BOOK AND PROSPECTS
FOR FURTHER ORDERS FOR SURFACE WATER CHILLERS TO THE MINING INDUSTRY LOOK GOOD.
GOOD PROSPECTS EXIST FOR THE PUMP BUSINESS WITH NEGOTIATIONS UNDERWAY WITH A
MAJOR INTERNATIONAL PARTNER FOR THE MANUFACTURE AND SUPPLY OF PROCESS PUMPS
INTO THE SOUTH AFRICAN MARKET. THIS, COUPLED WITH THE ACQUISITION OF PUMPMAKER
AND MERGER OF THE PUMPMAKER AND HOWDEN PUMPS OPERATIONS, IS LIKELY TO RESULT IN
AN IMPROVEMENT IN OPERATING EFFICIENCY IN 1999.
THE GROUP IS IN THE PROCESS OF DEVELOPING ITS AIR AND GAS CLEANING BUSINESS
WITH THE CREATION OF AN ENVIRONMENTAL CONTROL DIVISION. A NUMBER OF FLUE GAS
CONDITIONING PLANTS ARE IN THE PIPELINE FOR THE POWER GENERATION INDUSTRY AND
THE DIVISION IS WELL POSITIONED TO BENEFIT FROM THESE CONTRACTS.
THE EXPORT ORIENTATION WILL CONTINUE WITH A SPECIAL DRIVE TO INCREASE LEVELS OF
EXPORT TO DECREASE DEPENDENCE ON THE STATIC MARKET IN SOUTH AFRICA. POTENTIAL
EXISTS FOR STANDARD FANS, PUMPS AND GAS CLEANING PRODUCT LINES.
YEAR 2000 COMPLIANCE
SITE SPECIFIC TEAMS ARE IN PLACE TO ADDRESS THE POTENTIAL IMPLICATIONS OF THE
YEAR 2000 UPON GROUP COMPUTER SYSTEMS AND BUSINESS PROCESSES.
INTERNAL YEAR 2000 READINESS REVIEWS HAVE TAKEN PLACE WHICH HIGHLIGHT THE
TESTING, AND UPGRADING WHERE NECESSARY, OF BOTH COMPUTER HARDWARE AND SOFTWARE
SYSTEMS AND LIAISON WITH THIRD PARTIES MATERIAL TO THE GROUP'S BUSINESSES. THE
BOARD AND AUDIT COMMITTEE ARE KEPT REGULARLY INFORMED OF DEVELOPMENTS IN THIS
REGARD. BASED ON ASSESSMENTS TO DATE AND SUBJECT TO COMPLIANCE BY MATERIAL
ENTITIES WITH WHOM THE GROUP TRANSACTS, IT IS NOT EXPECTED THAT THE YEAR 2000
WILL HAVE A MATERIALLY ADVERSE EFFECT ON OPERATIONS OR FINANCIAL RESULTS.
COST INCURRED TO DATE TOTAL R 350 000 WITH R 100 000 BUDGETED FOR FUTURE
EXPENDITURE. IT IS THE INTENTION TO ACHIEVE YEAR 2000 COMPLIANCE THROUGHOUT ALL
BUSINESS OPERATIONS BY JUNE 1999.
FOR AND ON BEHALF OF THE BOARD
JW HERBERT
16 MARCH 1999
THE SUMMARISED AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 1998 ARE AS
FOLLOWS: -
CONSOLIDATED INCOME STATEMENT
ACTUAL ACTUAL
YEAR ENDED 8 MONTHS ENDED
31 DEC 1998 31 DEC 1997
(AUDITED) (AUDITED)
R'000 R'000
TURNOVER 409 168 298 894
OPERATING PROFIT 26 655 21 822
NET FINANCIAL REVENUE 3 768 2 671
PROFIT BEFORE TAXATION 30 423 24 493
TAXATION (9 331) (12 113)
PROFIT AFTER TAXATION 21 092 12 380
ATTRIBUTABLE TO
OUTSIDE SHAREHOLDERS (1 634) (3 340)
NET PROFIT ATTRIBUTABLE
TO ORDINARY SHAREHOLDERS 19 458 9 040
ORDINARY DIVIDENDS (8 990) (5 752)
RETAINED PROFIT FOR THE YEAR 10 468 3 288
NUMBER OF SHARES: (000'S)
IN ISSUE 64 215 63 910
WEIGHTED AVERAGE 64 063 63 910
EARNINGS PER SHARE: (CENTS) 30.37 14.14
DIVIDENDS PER SHARE: (CENTS) 14.00 9.00
INTERIM 5.00 4.00
FINAL 9.00 5.00
OTHER GROUP SALIENT FEATURES
NET ASSET VALUE PER SHARE (CENTS) 175.46 170.79
DEPRECIATION 4 737 3 225
CAPITAL EXPENDITURE 4 029 4 120
ACQUISITION OF NEW BUSINESSES 15 834 7 408
CAPITAL COMMITMENTS
AUTHORISED AND CONTRACTED 426 190
AUTHORISED NOT CONTRACTED 60 200
ABRIDGED CONSOLIDATED BALANCE SHEET
ACTUAL ACTUAL
YEAR ENDED 8 MONTHS ENDED
31 DEC 1998 31 DEC 1997
(AUDITED) (AUDITED)
R'000 R'000
CAPITAL EMPLOYED
SHAREHOLDERS' FUNDS 112 671 109 150
OUTSIDE SHAREHOLDERS' INTEREST 8 158 12 215
LOAN FROM HOLDING COMPANY 323 571
DEFERRED TAX 2 346 5 646
123 498 127 582
EMPLOYMENT OF CAPITAL
FIXED AND NON-CURRENT ASSETS 38 572 38 987
CURRENT ASSETS
STOCK AND WORK IN PROGRESS 66 951 65 173
ACCOUNTS RECEIVABLE 90 887 87 851
AMOUNTS OWING BY FELLOW
SUBSIDIARIES 1 334 1 661
BANK AND CASH BALANCES 34 739 41 378
193 911 196 063
CURRENT LIABILITIES
ACCOUNTS PAYABLE 92 229 93 351
TAXATION 8 185 7 630
AMOUNTS OWING TO FELLOW
SUBSIDIARIES 2 792 735
SHAREHOLDERS FOR DIVIDEND 5 779 5 752
108 985 107 468
NET CURRENT ASSETS 84 926 88 595
123 498 127 582
ABRIDGED CONSOLIDATED CASH FLOW
CASH FLOW FROM OPERATING ACTIVITIES
CASH GENERATED BY OPERATIONS 30 579 24 890
UTILISED TO INCREASE WORKING
CAPITAL 1 910 178
CASH GENERATED BY OPERATING
ACTIVITIES 32 489 25 068
FINANCIAL COSTS 3 768 2 671
DIVIDENDS PAID (8 963) (5 113)
TAXATION PAID (12 166) (14 819)
15 128 7 807
CASH UTILISED IN
INVESTING ACTIVITIES
FIXED ASSETS ACQUIRED (4 029) (4 120)
BUSINESSES ACQUIRED (15 834) -
PROCEEDS ON DISPOSAL OF
FIXED ASSETS 3 344 577
(16 519) (3 543)
CASH EFFECTS FROM
FINANCING ACTIVITIES
SHARE CAPITAL AND SHARE
PREMIUM RAISED 1 217 -
DIVIDENDS PAID TO MINORITIES (5 000) -
INCREASE IN LONG TERM LOAN (1 465) -
(5 248) -
(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (6 639) 4 264
PRESS RELEASE - HOWDEN AFRICA PUSHES UP EPS BY 43%
HOWDEN AFRICA PUSHES UP EPS BY 43% DESPITE DIFFICULT TRADING ENVIRONMENT
(16 MARCH 1999)
HOWDEN AFRICA HOLDINGS LIMITED, THE LISTED SPECIALIST AIR AND GAS HANDLING
EQUIPMENT GROUP, INCREASED EPS BY 43% TO 30,37 CENTS FOR THE YEAR TO DECEMBER
1998 (DEC 1997- ANNUALISED: 21.21 CENTS), DESPITE A DIFFICULT TRADING
ENVIRONMENT WITH FLAT ECONOMIC CONDITIONS AND HIGH INTEREST RATES.
COLIN FERREIRA, MANAGING DIRECTOR, SAID THAT THE OPERATING RESULTS WERE BELOW
EXPECTATIONS WITH GROUP TURNOVER FROM CONTINUING OPERATIONS DOWN BY 11,5% TO
R396,6M. ORDER INTAKE WAS R316M (DEC 1997 - ANNUALISED : R321M) AND OPERATING
PROFIT WAS R26,7M (DEC 1997 - ANNUALISED : R41,4M). THE GROUP HAD A NET
POSITIVE CASH POSITION OF R35M AT YEAR END.
A FINAL DIVIDEND OF 9 CENTS A SHARE HAS BEEN DECLARED, MAKING A TOTAL DIVIDEND
PAYOUT FOR THE YEAR OF 14 CENTS A SHARE.
ACCORDING TO MR FERREIRA, EARLY INDICATIONS ARE THAT TRADING CONDITIONS WILL BE
JUST AS TOUGH IN 1999. THE ECONOMIC ENVIRONMENT WILL DEPEND ON SEVERAL FACTORS,
INCLUDING DEVELOPMENTS IN EMERGING MARKETS, THE LOCAL ELECTIONS, INTEREST RATE
MOVEMENTS, DESTOCKING LEVELS, THE BENEFITS OF DEMUTUALISATION AND GROWTH IN
EXPORTS.
"IN THE STANDARD FAN BUSINESS THERE ARE PROSPECTS FOR THE SUPPLY AND
INSTALLATION OF VENTILATION AND AIR-CONDITIONING FANS FOR THE JOHANNESBURG
INTERNATIONAL AIRPORT AS WELL AS PROPOSED MEGA SHOPPING CENTRES AND CASINOS
ACROSS THE COUNTRY.
"THE GROUP WILL CONTINUE TO FOCUS ON AFTER-MARKET SERVICE IN THE POWER
GENERATION INDUSTRY, AND GOOD PROSPECTS EXIST FOR THE FANS AND HEAT EXCHANGER
BUSINESS FOR THE REFURBISHMENT AND ENHANCEMENTS OF CUSTOM-DESIGNED FANS FOR THE
MINING INDUSTRY.
"THE REFRIGERATION BUSINESS STARTS THE YEAR WITH A HEALTHY ORDER BOOK WITH GOOD
PROSPECTS FOR THE SUPPLY OF SURFACE WATER CHILLERS TO THE MINING INDUSTRY.
"THE OUTLOOK FOR THE PUMP DIVISION IS PROMISING. NEGOTIATIONS ARE UNDER WAY
WITH A MAJOR INTERNATIONAL PARTNER FOR THE SUPPLY OF PROCESS PUMPS IN LOCAL
MARKETS. THIS, COUPLED WITH THE ACQUISITION AND SUBSEQUENT INTEGRATION OF
PUMPMAKER WITH EXISTING OPERATIONS, IS EXPECTED TO IMPROVE THE CONTRIBUTION
FROM THE PUMP DIVISION IN THE FORTHCOMING YEAR.
"HOWDEN AFRICA CONTINUES TO FOCUS ON DEVELOPING EXPORT MARKETS, PARTLY WITH A
VIEW TO LESSENING DEPENDENCE ON STATIC LOCAL MARKETS. IT IS CONSIDERED THAT
GOOD POTENTIAL EXISTS FOR EXPORTS OF STANDARD FANS, PUMPS, AND GAS-CLEANING
PRODUCT LINES.
"FINALLY, THE GROUP CONTINUES TO ENHANCE EARNINGS BY IMPROVING MARGINS AND
BUILDING ON THE SOUND PLATFORM OF ITS ACKNOWLEDGED ENGINEERING STRENGTHS,
WELL-KNOWN PRODUCTS, MARKET LEADERSHIP POSITIONS AND SOUND CUSTOMER RELATIONS,"
CONCLUDED MR FERREIRA.
ENDS
CONTACT DETAILS
COLIN FERREIRA - MANAGING DIRECTOR
CELL : 083 675 6000
TEL : (011) 240 4075
SHANE MEYER - FINANCIAL DIRECTOR
TEL : (011) 240 4076
REINA CULLINAN - CORPORATE AFFAIRS DIRECTOR
TEL : (011) 240 4068
CELL : 082 901 2274
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