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HOWDEN AFRICA HOLDINGS LIMITED - FINANCIAL REPORT

Release Date: 07/03/2003 17:15
Code(s): HWN
Wrap Text

HOWDEN AFRICA HOLDINGS LIMITED - FINANCIAL REPORT HOWDEN AFRICA HOLDINGS LIMITED (Incorporated in the Republic of South Africa) (Registration number 1996/002982/06) Share code: HWN ISIN: ZAE000010583 Audited financial Results for the year ended 31 December 2002 * the summarised audited results for the year ended 31 December 2002 are as follows: abridged consolidated income statement 2002 2001 R`000 R`000 TURNOVER 522 598 38,8% 376 466 Operating profit 23 872 242,9% 6 962 Net financial revenue/(cost) 734 (965) Foreign exchange (losses)/gains (7 196) 6 677 Exceptional item - loan written-down (112) (4 303) Diminution in value of investment in a subsidiary (152) - Amortisation of goodwill on acquisition (827) - Share of results of associate (1 397) (3 225) Profit before taxation 14 922 190,0% 5 146 Taxation (10 286) (9 520) Profit/(Loss) after taxation 4 636 (4 374) Outside shareholders` interest (2 393) (787) Net profit/(loss) for the year 2 243 (5 161) Number of shares In issue (000`s) 65 729 65 729 Weighted average (000`s) 65 729 65 729 Earnings per share (cents) 3,41 (7,85) Headline earnings per share (cents) 7,87 (2,13) Dividends per share (cents) - - Reconciliation of headline earnings Net profit/(loss) for the period 2 243 (5 161) Amortisation of goodwill 248 332 Loss/(Profit) on sale of subsidiary 2 110 (336) Profit on sale of property, plant and equipment (518) (538) Exceptional item - loan written-down 112 4 303 Diminution in value of investment in a subsidiary 152 - Amortisation of goodwill on acquisition 827 - 5 174 (1 400) other group salient features 2002 2001
R`000 R`000 Net asset value per share (cents) 153,99 145,55 Depreciation 6 557 5 244 Capital expenditure 6 984 4 590 Capital commitments Authorised and contracted 811 556 Authorised not contracted - 626 abridged consolidated statement of changes in equity 2002 2001 R`000 R`000 Opening balance 95 669 103 083 Currency translation differences 2 393 (1 349) Net profit/(loss) 2 243 (5 161) Changes in subsidiary holdings 910 (904) Closing balance 101 215 95 669 abridged consolidated balance sheet 2002 2001 R`000 R`000 ASSETS Non-current assets 35 957 43 840 Property, plant and equipment 34 601 33 841 Intangible assets 871 1 329 Investment in associate company - 4 521 Non-current loan - 4 149 Deferred tax 485 - Current assets 209 353 161 484 Inventories 54 663 57 090 Receivables and pre-payments 123 105 99 900 Amounts owing by fellow subsidiaries 28 116 Cash and cash equivalents 31 557 4 378 Total assets 245 310 205 324 equity and liabilities Capital and reserves 101 215 95 669 Outside shareholders` interest 6 556 4 227 Non-current liabilities 3 164 5 152 Post-retirement medical benefit obligations 3 164 3 164 Deferred tax - 1 988 Current liabilities 134 375 100 276 Trade and other payables 123 124 93 742 Taxation 7 550 5 050 Amounts owing to fellow subsidiaries 3 701 1 484 Total liabilities 137 539 105 428 Total equity and liabilities 245 310 205 324 abridged consolidated cash flow statement 2002 2001 R`000 R`000 Cash flow from operating activities Cash generated by operations 24 825 18 009 Utilised to decrease/(increase) working capital 13 632 (11 304) Cash generated from operating activities 38 457 6 705 Financial revenue/(cost) 734 (965) Dividends paid - (5 915) Taxation paid (10 170) (5 321) 29 021 (5 496)
Cash utilised in investing activities (5 879) (14 433) Cash effects of financing activities 4 037 (6 000) Increase/(Decrease) in cash and cash equivalents 27 179 (25 929) segmental analysis by operating division 2002 2001 R`000 R`000 Turnover Fans and heat exchangers 213 694 170 408 Environmental control 194 106 104 016 Pumps 114 798 102 042 522 598 376 466
Comments Generally favourable market conditions have been experienced by Group companies based in South Africa and a good degree of success was achieved against intense competition. The growth rate being witnessed in gross domestic fixed investment has impacted positively on operations, resulting in a good order book at year- end. A disappointing exception to this has been the investment in Hertz Technologies where results have not met expectations. It was stated last year that operational bases were in a strong position to win a larger share of available market. This has been borne out by circumstances, providing a stronger platform moving into 2003. A good share of business was obtained via the offshore business operations with two large environmental control projects helping increase the ratio of offshore business to total orders from 5% in 2001 to 13% this year. Operating results achieved over the second half of the year, represent a healthy improvement over both the second half of 2001 and the first half of 2002. Operations based in South Africa are well placed in their respective markets but further focus will be given to turning the position around in Hertz Technologies. Results Orders of R597,0 miliion were received (2001: R446,5 million) representing a 33,7% improvement. This was achieved against a background of a significantly strong recovery in the value of the Rand against major currencies, instability in oil and resource prices internationally and the threat of war in the Middle East. Group turnover is reported at R522,6 million (2001: R376,5 million) which represents an improvement of 38,8% over the previous year. A number of large orders were completed during the year in both the mining and export sectors. Exports as a percentage of total sales increased from 12,5% last year to 22,2% in the year under review. Operating profit of R23,9 million (2001:R7,0 million) is reported, after making a provision against slow-moving stock of R2,5 million in the Engart group of businesses. An amount of R2,1 million was written-off being associated with the loss on sale of shares in Engart Australasia. Despite the higher level of business achieved in the offshore companies, operating results proved disappointing with a combined operating loss of R3,6 million (2001: R4,5 million). The recovery in the Rand over the year gives rise to exchange losses totalling R7,2 million which compares to the exchange gain of R6,7 million reported in 2001. A taxation charge of R10,3 million has been accrued, equivalent to 68,9% of profit before tax, it being deemed prudent not to raise any deferred tax assets associated with companies carrying assessed losses until such time as they return to a sustainable level of profit making. The Group net cash position of R31,6 million compares with the R4,4 million net cash as at December 2001. Net profit for the period of R2,2 million compares with a loss of R5,2 million in 2001 after the charge for taxation and the apportionment of profits attributable to outside shareholders. Headline earnings per share of 7,87 cents compares with a headline loss 2,13 cents last year. Review of operations Fans and Heat Exchangers The pattern of improved order intake has continued with a 41% increase over 2001. The standard fan business improved on its strong position in the local market and enjoyed a relatively successful year in its efforts to expand export territories. Business in the United Kingdom market remains difficult and opportunities are being explored to operate more effectively in that market. Good results were reported in the engineered fan and heat exchanger business with a strong order book in place moving into the year 2003. A number of large orders were received from the mining sector. A high level of work was carried out in the power generation and industrial boiler markets with the installation and modification of airheater element packs in particular playing a dominant role. The Engart businesses did not enjoy a good year. The Group`s interest in Engart Australasia has been sold to the minority shareholder. In future, business in the territory will be carried out through a network of distributors. Progress in the American market has been slower than anticipated but a small, yet solid, base is being established which should produce positive results over the medium term. The disappointing level of orders obtained in export markets has raised challenges for the Engart operation. Engart has sought to replace volumes by moving into markets beyond traditional coal mining. A strategic decision was taken mid year to refocus the operations of Hertz Technologies to that of an original equipment manufacturer and refurbisher of high voltage motors. This gave rise to rationalisation costs totalling R2,8 million. A number of prospects are being targeted in the redefined market against strong competitive pressures. Environmental Control Business activity has been robust with both orders and invoicing improving by 38% and 87% respectively over 2001. The 3T`s business in Australia received its first project order, which was commissioned during the year. There were record orders received in the mine refrigeration and process gas divisions. The environmental control division`s results continue to take on a more meaningful role in terms of contribution to Group results. These results are expected to continue in the foreseeable future given the strength shown in the local mining, steel and petrochemical industries. Pumps Order intake and sales are respectively 14% and 12% up over the prior year. Results in the pump business continue to show impressive improvement and the company remains a key player in the local market. The proposed merger negotiations with Orbit Pumps were terminated during the year. Exports remained in line with the achievement in 2001 with much attention being given to marketing beyond the confines of the SADC region. Efforts to improve the ratio of exports to total sales will continue. Outlook The outlook for the resources, utilities and petrochemicals industries is that growth is anticipated to continue in 2003. There is the expectation for a decline in inflation and a reduction in interest rates, which should facilitate spending and growth within the economy. The South African economy weathered the past year well and there is a mood of anticipation for further progress to be made. We are starting the year positively with an improved order position, 55% above the prior year. Board of directors During the year Mr John Feek was appointed as non-executive director and Chairman and Mr David Gawler and Dr Vincent Maphai, non-executive directors, resigned from the board. Dividend In light of the modest earnings per share the board has adopted a conservative view and resolved not to declare a dividend for the year ended 31 December 2002. Basis of preparation These annual financial statements have been audited by PricewaterhouseCoopers Inc. and the audit report is available for inspection at the company`s registered office. The accounts have been prepared in accordance with Statements of Generally Accepted Accounting Practice in South Africa. There has been no change in accounting policies since the annual report of 31 December 2001. For and on behalf of the Board of Directors. J S Feek (Chairman) 7 March 2003 Directors: J S Feek (Chairman) **, C J Ferreira (Managing Director), R J Cleland # **, S Meyer, Dr 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: Computershare Limited 70 Marshall Street Johannesburg 2001
Date: 07/03/2003 05:15:00 PM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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