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HWN - Howden Africa Holdings - The Reviewed Financial Results for the year ended
31 December 2008 and dividend declaration
Howden Africa Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/002982/06)
Share code: HWN
ISIN: ZAE000070660
"the Company")
The reviewed financial results
For The Year Ended 31 December 2008
Abridged consolidated balance sheet
Year ended Year ended
31 December 31 December
2008 2007
(Reviewed) (Audited)
R`000 R`000
ASSETS
Non-current assets 175 879 125 904
Property, plant and equipment 56 393 43 217
Intangible assets 58 214 58 933
Deferred income tax assets 27 908 21 044
Amounts due from customers for 24 875 -
contract work
Trade and other receivables 8 489 2 710
Current assets 324 994 241 605
Inventories 44 816 32 197
Trade and other receivables 169 750 114 507
Amounts due from customers for 41 089 74 860
contract work
Derivative financial instruments - 139
Cash and cash equivalents 69 339 19 902
Total assets 500 873 367 509
EQUITY
Capital and reserves attributable to 65 706 88 049
equity holders of the Company
Total equity 65 706 88 049
LIABILITIES
Non-current liabilities 136 542 29 022
Borrowings 50 000 20 000
Deferred income tax liabilities 5 118 5 342
Amounts due to customers for contract 74 550 -
work
Provisions and other liabilities and 6 874 3 680
charges
Current liabilities 298 625 250 438
Trade and other payables 165 961 172 712
Amounts due to customers for contract 100 339 65 727
work
Current income tax liabilities 21 479 5 082
Borrowings 1 759 616
Derivative financial instruments - 102
Provisions and other liabilities and 9 087 6 199
charges
Total liabilities 435 167 279 460
Total equity and liabilities 500 873 367 509
Abridged consolidated income statement
Year ended Year ended
31 December 31 December
2008 % 2007
(Reviewed) change (Audited)
R`000 R`000
Revenue 849 795 23,8 686 367
Operating profit 95 833 7,7 88 979
Net finance 770 (1 776)
income/(costs)
Foreign exchange 2 552 (132)
profits/(losses)
Loss on disposal of - (1 028)
associate
Share of profit of - 1 153
associate
Profit before income 99 155 13,7 87 196
tax
Income tax expense 38 414 24 753
Profit for the year 60 741 (2,7) 62 443
Attributable to:
Equity holders of the 60 741 61 684
Company
Minority interest - 759
60 741 62 443
Number of shares in (000`s) 65 729 65 729
issue
Earnings per share (cents) 92,41 93,85
Headline earnings per (cents) 93,22 95,42
share
Dividends per share
- dividend paid (cents) 15,0 -
- special dividend paid (cents) 100,0 -
- interim dividend paid (cents) 10,0 -
Reconciliation of
headline earnings
attributable to the
equity holders of the
Company
Profit attributable to 60 741 61 684
equity holders
Loss on disposal of 532 8
property, plant and
equipment
Loss on disposal of - 1 028
associate
61 273 62 720
Abridged consolidated cash flow statement
Year ended Year ended
31 December 31 December
2008 2007
(Reviewed) (Audited)
R`000 R`000
Cash flow from operating activities
Cash generated from operations 144 904 80 424
Interest paid (9 988) (11 228)
Income tax paid (29 105) (18 523)
Net cash generated from operating 105 811 50 673
activities
Cash flow from investing activities
Foreign exchange profit 2 552 -
Acquisition of minority interest of - (26 320)
subsidiary
Interest received 10 758 7 558
Proceeds on disposal of associate - 32 718
company
Purchases of property, plant and (18 879) (11 311)
equipment and intangible assets
Proceeds from disposal of property, 212 -
plant and equipment and intangible
assets
Net cash (used in)/generated from (5 357) 2 645
investing activities
Cash flow from financing activities
Proceeds from/(repayments of) 31 143 (68 709)
borrowings
Dividends paid (82 160) -
Dividends paid to minority interests - (7 006)
Net cash used in financing activities (51 017) (75 715)
Net increase/(decrease) in cash and 49 437 (22 397)
cash equivalents
Cash and cash equivalents at beginning 19 902 42 299
of year
Cash and cash equivalents at end of 69 339 19 902
year
Abridged consolidated statement of changes in equity
Attributable
to equity
holders of the Minority
Company interest Total
R`000 R`000 R`000
Balance at 1 January 2007 26 166 8 850 35 016
Currency translation 199 - 199
differences
Profit for the year 61 684 759 62 443
Acquisition of subsidiary from - (2 603) (2 603)
minorities
Dividends paid - (7 006) (7 006)
Balance at 31 December 2007 88 049 - 88 049
Balance at 1 January 2008 88 049 - 88 049
Currency translation (924) - (924)
differences
Profit for the year 60 741 - 60 741
Dividends paid (82 160) - (82 160)
Balance at 31 December 2008 65 706 - 65 706
Other group salient features
Year ended Year ended
2008 2007
R`000 R`000
Net asset value per share (cents) 99,97 133,96
Depreciation 3 511 3 312
Amortisation 2 167 1 881
Capital expenditure 18 879 11 311
Capital commitments
- Authorised and contracted 2 842 4 685
Segmental analysis by operating division
Year ended Year ended
31 December 31 December
2008 2007
(Reviewed) (Audited)
R`000 R`000
Revenue
Fans and Heat Exchangers 587 662 458 031
Environmental Control 262 133 228 336
849 795 686 367
Orders receivable
Fans and Heat Exchangers 849 264 556 785
Environmental Control 406 976 216 915
1 256 240 773 700
Total assets
Fans and Heat Exchangers 340 329 223 381
Environmental Control 94 676 59 818
Other 65 868 84 310
500 873 367 509
Operating profit
Fans and Heat Exchangers 84 086 77 434
Environmental Control 9 665 8 564
Other 2 082 2 981
95 833 88 979
Commentary
OVERVIEW
It is pleasing to report another satisfactory set of results for the year ended
31 December 2008, with increases in both revenue and order intake volumes
resulting in an improved operating profit and a record order book at year-end.
RESULTS
In 2008 revenue of R849,8 million is reported compared to R686,4 million in
2007, an increase of 23,8%, and operating profit increased by 7,7% to R95,8
million (2007: R89,0 million). The increase in revenue in both divisions,
improved margins in the environmental control division, offset by increased
costs to support business growth, have resulted in an improved operating profit.
Profit margins are slightly reduced due to increased environmental control
revenue volumes and infrastructure costs, but remain at healthy levels.
A key milestone has been reached with the Group reporting order intake levels
above one billion Rand for the first time since listing. A number of large value
orders were converted through the year connected to Eskom`s new build programme
and a significant order was received from ArcelorMittal for an environmental
control system. These orders result in a record year-end order book at a time
when much uncertainty prevails in industry nationwide. The delivery of this
order book is spread over the next few years but gives encouragement moving into
2009.
Profit before taxation of R99,2 million (2007: R87,2 million) is reported, the
main contributing factors being improved finance income and foreign exchange
profits.
A taxation charge of R38,4 million (2007: R24,8 million) has been accrued,
equivalent to 38,7% (2007: 28,4%) of profit before tax. The higher charge this
year includes an STC amount of R8,2 million paid in respect of dividends of
R82,2million. Excluding this charge the rate calculates to 30,5%.
The comparisons below refer to the corresponding twelve-month period to December
2007:
- Order intake amounted to R1 256 million compared to R774 million
- Operating profit of R95,8 million compared to R89,0 million
- Earnings per share of 92,4 cents compared to 93,9 cents
- At 31 December 2008 the Group`s cash less borrowings resulted in a net cash
position of R17,6 million compared to net borrowings of R0,7 million last year.
COMPARATIVES
The comparative figures for deferred tax have been amended to show the net
deferred tax asset or liability per underlying entity.
REVIEW OF OPERATIONS
FANS AND HEAT EXCHANGERS
Order intake for fans and heat exchangers totalled R849 million, which
represents 67,6% of the total, compared to R557 million (72,0%) in the previous
year.
The standard fan business enjoyed another year of improved results supported by
growth in export markets and activities associated with the 2010 FIFA World Cup
infrastructure build programme. Improved business activity in the industrial
sector was achieved compared to last year despite evidence of a slow down
towards the end of year. Tender activity overall remains robust and the business
is well placed to maintain operating results at levels which have been built
over recent years.
The fan business focusing on the mining market started the year with a strong
opening order book and this, together with normal repeat business, resulted in
further improvements in results compared to last year. This business unit also
markets cooling tower fans and successfully converted a large value order for
supply to Medupi Power Station over the life of the build programme at this
site. A satisfactory closing order book, repeat business, and success in
converting select new build opportunities should result in performance levels
being maintained through the year.
The return to service (RTS) project in Eskom covering the Camden, Komati and
Grootvlei power stations continues to support high levels of business activity
in Howden Power. Manning levels have increased accordingly and the business
continues to provide every assistance in supporting Eskom`s capacity expansion
programme. A higher cost structure has been necessitated in maintaining this
support and it is therefore satisfying to report orders totalling R176 million
for the supply of product to Medupi Power Station over the next few years. Work
associated with the RTS programme is coming to an end but the business is
budgeting to replace this reduction in business with new build activities and
additional aftermarket work moving forward.
Strong order book levels and existing prospects support the view that another
good year of earnings should be forthcoming in the fan and airheater division in
2009.
ENVIRONMENTAL CONTROL
The environmental control division recorded orders of R407 million, representing
32,4% of the total, compared to R217 million (28,0%) in the previous year.
The division continues to look for opportunity to expand its portfolio of
environmental control technologies and in this regard successfully concluded an
order to the value of R140 million for a meltshop dedusting system at
ArcelorMittal. This contract was won in partnership with BSE, a German-based
company, which is an international leader in modelling meltshop environments and
designing systems for the ventilation and cleaning of gases produced during
melting and charging. A focus on dust extraction technologies has broadened to
cover gas treatment as well, leading to the signing of a licence agreement with
GEA Niro, a Denmark-based company, for the supply of its dry FGD technology into
southern African markets.
An order was processed in the year to retrofit the remaining two boilers at
Camden Power Station with fabric filters in order to improve stack emissions.
This contract has largely been seen through to completion, resulting in the
successful retrofit of all precipitators to fabric filters at the Camden site
and increasing the installed base of this technology to five power stations,
both Eskom and municipal. We are extremely proud of these installations and the
improvements they have brought to the immediate environments in which they
operate.
Changes in market conditions resulting from the global financial crisis have
resulted in many customers reviewing their larger value capital expenditure
programmes and this could raise challenges for the division in maintaining the
order book at existing levels.
ACCOUNTING POLICIES
The financial results for the year ended 31 December 2008 have been prepared in
accordance with International Financial Reporting Standards (IFRS) and
International Accounting Standard (IAS)34. The accounting policies are
consistent with those applied in the prior year.
OUTLOOK
It is pleasing to report that a fair measure of success has been achieved in
generating a positive outcome connected to Eskom`s new build programme.
Sales for 2009 will be underpinned by the order book which as at 1 January 2009
included orders worth R450 million for delivery in 2009. The order book
continued to grow in January.
Management remains vigilant to any softening of demand. The Group has worked
extensively to ensure that its growth in recent years has been built on flexible
supply chains and relatively low levels of fixed cost. With the visibility of a
strong order book, the group will be able to respond pro-actively to any
slowdown in order intake.
DIRECTORATE
In August 2008 it was announced that Mr. Thomas Barwald would be appointed to
the board as Chief Executive Officer when he formerly takes on the position in
January 2009. I am pleased to confirm that this appointment has been made.
DIVIDEND
The directors have resolved to declare a dividend of 15 cents per share payable
to shareholders for the year ended 31 December 2008. The last date to trade cum
dividend is Friday, 27 March 2009. Shares start trading ex dividend on Monday,
30 March 2009. The record date is Friday, 3 April 2009. Payment will be on
Monday, 6 April 2009. No share certificates are to be dematerialised or
rematerialised between Monday, 30 March 2009 and Friday, 3 April 2009, both days
inclusive.
REVIEWED RESULTS
PricewaterhouseCoopers Inc., the Group`s independent auditors, have reviewed the
abridged financial statements that comprise the abridged consolidated balance
sheet at 31 December 2008, abridged consolidated income statement, abridged
consolidated statement of changes in equity and abridged consolidated cash flow
statement for the year then ended, and have expressed an unqualified opinion on
these reviewed abridged financial statements. The review report is available for
inspection at the Company`s registered office.
For and on behalf of the Board of Directors
RJ Cleland
(Non-Executive Chairman)
4 March 2009
RJ Cleland (Chairman)#**
T Barwald (Chief Executive Officer)+
S Meyer (Group Financial Director)
AB Mashiatshidi**, J Brown #**, M Malebye**
(# British ** Non-executive + German)
Company secretary: M Luthuli
Registered office: 1a Booysens Road, Booysens, 2091
Postal address: PO Box 2239, Johannesburg, 2000
Transfer secretaries: Computershare Investor Services (Pty) Limited, 70 Marshall
Street
Johannesburg, 2001
Sponsor: PricewaterhouseCoopers
Corporate Finance (Pty) Limited
Date: 04/03/2009 17:15:02 Supplied by www.sharenet.co.za
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