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HOWDEN AFRICA HOLDINGS LIMITED - RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2004
HOWDEN AFRICA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1996/002982/06)
Share code: HWN ISIN: ZAE000010583
SUMMARISED UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2004
abridged consolidated income statement
Actual Actual
6 months ended 6 months ended
30 June 30 June
2004 2003
(Unaudited) (Unaudited)
R"000 R"000
Turnover 217 643 281 284
Operating profit 14 894 14 646
Net financial revenue 2 379 2 739
Foreign exchange losses (1 070) (2 920)
Share of results
of associate 697 -
Profit before taxation 16 900 14 465
Taxation (9 191) (5 308)
Profit after taxation 7 709 9 157
Minority interest (2 397) (2 146)
Net profit for the period 5 312 7 011
Number of shares
in issue (`000) 65 729 65 729
Earnings per share (cents) 8,08 10,67
Headline earnings
per share (cents) 8,30 15,49
Dividends per share (cents) 52,00 -
Reconciliation of
headline earnings
Net profit for the period 5 312 7 011
Amortisation of goodwill 145 147
Loss on sale of subsidiary - 3 080
Profit on sale of property,
plant and equipment - (57)
Loss on conversion of
subsidiary to associate - -
Headline earnings 5 457 10 181
Actual
12 months ended
31 December
Actual 2003
change (Audited)
% R"000
Turnover (22,6) 554 925
Operating profit 1,7 34 124
Net financial revenue 5 029
Foreign exchange losses (6 243)
Share of results
of associate -
Profit before taxation 16,8 32 910
Taxation (73,2) (11 138)
Profit after taxation (15,8) 21 772
Minority interest (3 242)
Net profit for the period 18 530
Number of shares
in issue (`000) 65 729
Earnings per share (cents) 28,19
Headline earnings
per share (cents) 29,47
Dividends per share (cents) 3,00
Reconciliation of
headline earnings
Net profit for the period 18 530
Amortisation of goodwill 290
Loss on sale of subsidiary 3 080
Profit on sale of property,
plant and equipment (3 453)
Loss on conversion of
subsidiary to associate 925
Headline earnings 19 372
other group salient features
Actual Actual Actual
6 months 6 months 12 months
ended 30 June ended 30 June ended 31 December
2004 2003 2003
(Unaudited) (Unaudited) (Audited)
R"000 R"000 R"000
Net asset value
per share (cents) 137,46 166,11 181,78
Depreciation 2 344 3 446 6 370
Capital expenditure 870 2 735 5 192
Capital commitments
Authorised and
contracted - 896 78
Authorised not
contracted - 80 287
abridged consolidated
statement of changes
in equity
Opening balance 119 483 101 215 101 215
Currency translation
differences (265) 959 1 710
Net profit 5 312 7 011 18 530
Dividend paid (34 179) (1 972)
Subsidiary costs
written off - - -
Closing balance 90 351 109 185 119 483
abridged consolidated balance sheet
Actual Actual Actual
6 months 6 months 12 months
ended 30 June ended 30 June ended 31 December
2004 2003 2003
(Unaudited) (Unaudited) (Audited)
R"000 R"000 R"000
ASSETS
Non-current assets 61 436 34 274 62 174
Property, plant and
equipment 22 218 33 063 23 701
Intangible assets 436 724 581
Investment in
associate 34 755 - 33 865
Non-current loans - - -
Deferred tax 4 027 487 4 027
Current assets 156 481 248 112 190 833
Inventories 35 876 65 263 48 447
Receivables and
pre-payments 73 747 134 490 67 011
Cash and cash
equivalents 46 858 48 359 75 375
Total assets 217 917 282 386 253 007
EQUITIES AND
LIABILITIES
Capital and reserves 90 351 109 185 119 483
Minority interest 5 054 4 188 5 289
Non-current
liabilities - 3 164 -
Post retirement
medical
benefit obligations - 3 164 -
Current liabilities 122 512 165 849 128 235
Trade and other
payables 117 933 161 079 115 157
Taxation 4 579 4 770 13 078
Total liabilities 122 512 169 013 128 235
Total equity and
liabilities 217 917 282 386 253 007
abridged consolidated cash flow statement
Actual Actual Actual
6 months 6 months 12 months
ended 30 June ended 30 June ended 31 December
2004 2003 2003
(Unaudited) (Unaudited) (Audited)
R"000 R"000 R"000
Cash flow from
operating activities
Cash generated by
operations 16 865 18 195 34 803
Utilised to
decrease/(increase)
working capital 8 611 (37 470) 8 851
Cash generated
from/(utilised in)
operating activities 25 476 (19 275) 43 654
Financial revenue 2 379 2 739 5 029
Dividends paid (34 179) - (1 972)
Taxation paid (17 480) (8 072) (11 626)
(23 804) (24 608) 35 085
Cash flow from
investing activities (4 183) (5 061) 13 233
Cash flow from
financing activities (530) (4 500) (4 500)
Net
increase/(decrease)
in cash
and cash equivalents (28 517) (34 169) 43 818
segmental analysis by operating division
Actual Actual Actual
6 months 6 months 12 months
ended 30 June ended 30 June ended 31 December
2004 2003 2003
R"000 R"000 R"000
Turnover
Fans and heat
exchangers 120 330 116 817 232 024
Environment control 97 313 98 230 190 044
Pumps - 66 237 132 857
217 643 281 284 554 925
It should be noted that Howden Pumps was part of a merger with Orbit Pumps and
it is now shown as an associate.
OVERVIEW
The conversion of project quotations into orders continues to be both
difficult and elusive. The level of orders booked in the half year were R250,3
million against R295,4 million in 2003, a 15,3% decline. The market sectors
which have shown order consistency are energy and petrochemicals with
resources, manufacturing and general industry impacted by the weight of the
robust Rand.
RESULTS
In the six months ended 30 June 2004 turnover of R217,6 million was 22,6%
lower than the corresponding period in 2003. The major factor in this
reduction is the exclusion from turnover of the Howden Pumps merged business.
Our investment in the Pump business is now reflected as an associate. The 2004
turnover reflects a 1,8% improvement over the adjusted 2003 figure. The group
sales performance continues to closely track inflation which is consistent
with last year. This situation is repeated with operating profits of R14,9
million, against
R14,6 million in the same period last year, a 1,7% improvement.
Net financial revenue has reduced against the prior period as a function of
lower interest rates and the return of cash to shareholders through the payout
of the special dividend of 47 cents per share. Foreign Exchange losses
declined in line with our reduced offshore exposure.
Profit before tax in the period amounted to R16,9 million against R14,5
million for the same period last year, a 16,8% improvement. Against this
profit, taxation has arisen as follows:-
Normal Company Tax R5 051 (29,9%)
Net STC on final dividend R 279
R5 330 (2003 R5 308)
STC on special dividend R3 861 -
Charge in the period R9 191 (2003 R5 308)
Profit after taxation for the period amounts to R7,7 million against R9,2
million last year, a 15,8% decline. The impact of STC in respect of the
special dividend is evident and required the publication of the earlier
cautionary.
ACTIONS REGARDING GROUP STRUCTURE
*The Pumps merger to create the Pump Brands Group with an operating subsidiary
Denorco has been accomplished during the past six months. Management of both
entities has followed a difficult and arduous timetable and Howden Africa
records its appreciation. The future holds good prospects for the merged
entity.
*Negotiations have continued for the sale of Engart Inc. (USA) and were
finalised during July 2004.
*During the period discussions were held with our BEE minority partners in an
underlying subsidiary. Agreement was reached whereby their interest was
converted into equity in Howden Africa Holdings. Effectively the Howden Group
interest reduced by 1 343 333 shares, 2,04%.
*In preparation for the above transaction Computershare were engaged to
undertake an audit review of our shareholder profile to establish the
empowerment holdings within our share register. The analysis revealed that a
total of 85 historically disadvantaged shareholders held 11,12%. To this
figure can be added the above transaction for a present empowerment percentage
of 13,16%.
REVIEW OF OPERATIONS
Fans and heat exchangers
Order intake for fans and heat exchangers totalled R136,6 million compared to
R131,4 million in the corresponding period last year. Tough conditions persist
in customer markets traditionally reliant on export earnings, the strong Rand
exchange rate resulting in a number of projects being postponed or even
cancelled. This has reduced the number of large value tenders on offer but
focus on the aftermarket associated with our installed base has neutralised
the lack of new equipment business. Second quarter achievements in the
standard fan business have been encouraging and should hold through to year
end.
Unless prospects improve for new equipment business, orders receivable over
the balance of the year will be at a lower level than achieved in the first
half.
Environmental control
The environmental control business received orders totalling R113,6 million
compared to R95,8 million last year. This achievement included an order worth
R57 million received by Bateman Howden for the supply of fabric filters to
Hendrina Power Station. The division started the year with an order book 35%
down on the same time last year. Prospects in the industrial gas cleaning
business unit, in particular, have been lean and the low level of the order
book gives concern. Conversion of available tenders is proving difficult but
competitive bids have been placed on a selective basis and may yet result in
business improving over the latter part of the year.
Business in the second half of the year, excluding the aforementioned fabric
filter order, is expected to be similar to that achieved in the first half.
Pumps
As reported above, the results of the Pumps business are no longer
consolidated as a subsidiary but as an associate company. Focus on merging the
pumps businesses and exceptional rains over the end of the summer season,
contributed to results in the first half of the year being lower than reported
last year. The position is expected to improve over the second half of the
year with good export orders on hand.
Outlook
The Group remains on track to achieve results in line with 2003. Focus over
the second half of the year will be on improving the order book carried
forward to 2005. The strong Rand continues to affect the export revenue
streams of our major customers which in turn has a negative impact on their
capital expenditure or refurbishment programmes. Should the local currency
continue to display its current strength through the balance of the year,
tough market conditions will persist with business levels remaining passive.
DIVIDEND
Earnings per share for the period are 8,08 cents. The special dividend of 47
cents paid on 8 March 2004 attracted STC amounting to R3,8 million and based
on an adjusted earnings per share of 13,86 cents your directors have resolved
to declare an interim dividend of 4 cents per share, 3.5 times covered against
the adjusted earnings. The last date to trade cum dividend is Thursday, 16
September 2004. Shares start trading ex dividend on Friday, 17 September 2004.
The record date is Thursday, 23 September 2004. Payment will be Monday, 27
September 2004. No share certificates are to be dematerialised or
rematerialised between Friday, 17 September 2004 and Thursday, 23 September
2004, both days inclusive.
DIRECTORATE
There has been no change to the composition of the Board since the annual
report as at 31 December 2003.
BASIS OF PREPARATION
These financial statements have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice. There has been no change
in accounting policies since the annual report of 31 December 2003. The
results for the six months ended 30 June 2004 have not been reviewed or
audited.
For and on behalf of the Board.
J S Feek
(Chairman)
27 August 2004
Directors: J S Feek (Chairman), Dr R Mokate**,
S Meyer, R J Cleland # **, A B Mashiatshidi **
(# 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 Investor
Services 2004, (Pty) Limited 70 Marshall Street,
Johannesburg, 2001
Sponsor: PricewaterhouseCoopers
Corporate Finance (Pty) Limited
Date: 27/08/2004 05:15:08 PM Supplied by www.sharenet.co.za
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