Wrap Text
HWN - Howden Africa Holdings Limited - Reviewed Financial Results for the year
ended 31 December 2010
Howden Africa Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/002982/06)
Share code: HWN
ISIN Code: ZAE000010583
("the Company" or "the Group")
Reviewed Financial Results for the year ended 31 December 2010
Condensed consolidated statement of comprehensive income
for the year ended 31 December 2010
31 December 31 December
2010 2009
(Reviewed) Change (Audited)
R`000 % R`000
Revenue 868 841 (11,0) 976 332
Gross profit 226 808 (8,5) 247 834
Operating profit 102 637 (21,0) 129 480
Finance income 12 184 14 682
Finance costs (5 761) (9 460)
Profit before income tax 109 060 (19,0) 134 702
Income tax expense (39 705) (34 481)
Profit for the year 69 355 (30,8) 100 221
Other comprehensive income
Pension fund plan surplus 4 732 20 112
Income tax relating to components (1 325) (5 631)
of other comprehensive income
Other comprehensive income for the 3 407 14 481
year, net of tax
Total comprehensive income for the 72 762 114 702
year
Cents Cents
Earnings per share
- basic and diluted 105,52 (30,8) 152,48
Condensed consolidated statement of financial position
as at 31 December 2010
31 December 31 December
2010 2009
(Reviewed) (Audited)
R`000 R`000
ASSETS
Non-current assets 208 264 202 109
Property, plant and equipment and 121 767 121 219
intangible assets
Pension fund plan surplus 30 390 25 334
Cash and cash equivalents 19 229 18 313
Other non-current assets 36 878 37 243
Current assets 466 552 481 896
Inventories 119 947 144 701
Trade and other receivables 239 370 235 780
Cash and cash equivalents 107 235 101 415
Total assets 674 816 684 005
EQUITY
Capital and reserves
Shareholders` funds 172 606 170 174
LIABILITIES
Non-current liabilities 172 114 156 944
Current liabilities 330 096 356 887
TOTAL LIABILITIES 502 210 513 831
TOTAL EQUITY AND LIABILITIES 674 816 684 005
Condensed consolidated statement of changes in equity
for the year ended 31 December 2010
Pension
fund
Share Retained plan
capital earnings surplus
R`000 R`000 R`000
Balance at 1 January 2009 657 72 218 2 766
Total comprehensive income for the - 100 221 14 481
year
Reclassification of foreign - (2 423) -
currency translation reserve
Dividends paid - (17 746) -
Balance at 31 December 2009 657 152 270 17 247
Balance at 1 January 2010 657 152 270 17 247
Total comprehensive income for the - 69 355 3 407
year
Dividends paid - (70 330) -
Balance at 31 December 2010 657 151 295 20 654
Foreign
currency
translation
reserve Total
R`000 R`000
Balance at 1 January 2009 (2 423) 73 218
Total comprehensive income for the - 114 702
year
Reclassification of foreign 2 423 -
currency translation reserve
Dividends paid - (17 746)
Balance at 31 December 2009 - 170 174
Balance at 1 January 2010 - 170 174
Total comprehensive income for the - 72 762
year
Dividends paid - (70 330)
Balance at 31 December 2010 - 172 606
Other group salient features
for the year ended 31 December 2010
31 December 31 December
2010 2009
(Reviewed) Change (Audited)
R`000 % R`000
Net asset value per share (cents)1 262,60 1,4 258,90
Depreciation 5 928 5 423
Amortisation 2 162 2 150
Capital expenditure 9 059 14 963
Capital commitments
- Authorised and contracted 2 263 570
Number of shares in issue (`000) 65 729 65 729
Earnings per share (cents) 105,52 (30,8) 152,48
Headline earnings per share (cents) 105,85 (30,6) 152,50
Dividends per share
- dividend paid (cents) 20,00 15,00
- special dividend paid (cents) 75,00 -
- interim dividend paid (cents) 12,00 12,00
Reconciliation of headline earnings
attributable to the equity holders
of the Company
Net profit attributable to equity 69 355 100 221
holders
Loss on disposal of property, plant 217 19
and equipment
Headline earnings 69 572 (30,6) 100 240
Condensed consolidated statement of cash flows
for the year ended 31 December 2010
31 December 31 December
2010 2009
(Reviewed) (Audited)
R`000 R`000
Cash flows from operating
activities
Cash generated from operations 135 023 146 060
Interest paid (5 761) (9 460)
Income tax paid (40 525) (68 943)
Net cash generated from operating 88 737 67 657
activities
Cash flow from investing activities
Interest received 12 184 14 682
Purchases of property, plant and (8 608) (14 692)
equipment
Purchases of intangible assets (451) (271)
Proceeds from disposal of property, 204 759
plant and equipment
Net cash generated from investing 3 329 478
activities
Cash flow from financing activities
Repayment of borrowings (15 000) -
Dividends paid (70 330) (17 746)
Net cash used in financing (85 330) (17 746)
activities
Net increase in cash and cash 6 736 50 389
equivalents
Cash and cash equivalents at the 119 728 69 339
beginning of the year
Cash and cash equivalents at the 126 464 119 728
end of the year
Condensed consolidated segmental analysis by operating division
for the year ended 31 December 2010
31 December 31 December
2010 2009
(Reviewed) Change (Audited)
R`000 % R`000
Revenue
Fans and Heat Exchangers 731 827 605 997
Environmental Control 137 014 370 335
868 841 (11,0) 976 332
Orders received
Fans and Heat Exchangers 704 669 751 114
Environmental Control 127 328 239 337
831 997 (16,0) 990 451
Operating profit
Fans and Heat Exchangers 134 174 103 220
Environmental Control (22 982) 32 136
111 192 135 356
Central operations (8 555) (5 876)
Total operating profit 102 637 (20,1) 129 480
Inter-segmental sales
Fans and Heat Exchangers 32 669 45 375
Environmental Control 12 867 20 040
45 536 (30,4) 65 415
Commentary
We report that despite the challenging economic conditions, Howden Africa has
operated profitably and generated strong cash flows for the year ended 31
December 2010. The Fans and Heat Exchangers division, in particular, concluded
another successful year of solid results with increases in both revenue and
operating profit compared to 2009.
OVERVIEW
Although the economy showed signs of recovery in the third quarter of 2009 and
gathered pace up to the first quarter of 2010, the outlook for fixed investment
continued to remain uncertain, resulting in a postponement of order placing in
industries where the Environmental Control division is most active. Despite
this, the strong performance in the Fans and Heat Exchangers division resulted
in order book levels declining just 5% compared to those that were reported at
the end of last year.
RESULTS
In 2010 revenue of R868,8 million is reported compared to R976,3 million in
2009, a reduction of 11,0%. A low opening order book and continuing delay in
prospects associated with corporate capital expenditure budgets impacted
negatively on the Environmental Control division. Work connected to Eskom`s new
build programme, and an improvement in exports of new equipment into Africa,
assisted in generating higher revenue volumes in the Fans and Heat Exchangers
division.
Profit before tax of R109,1 million (2009: R134,7 million) is reported. Lower
revenue volumes at reduced margin in the Environmental Control division impacted
negatively during the year. Net financial income of R6,4 million compares to
R5,2 million reported last year, a favourable outcome given the payment of a
special dividend in July 2010.
A tax charge of R39,7 million (2009: R34,5 million) has been accrued, equivalent
to 36,4% (2009: 25,6%) of profit before tax. The higher charge includes an STC
amount of R4,9 million paid in respect of the special dividend of R49,3 million.
The tax charge for 2009 benefited from an amount of R5 million allowed by the
authorities for the write-off of intellectual property acquired when the Company
listed in 1996.
The comparisons below refer to the corresponding year to December 2009:
- Order intake amounted to R832 million compared to R990 million in the
corresponding period
- Operating profit of R102,6 million compared to R129,5 million
- Earnings per share of 105,52 cents compared to 152,48 cents
- At 31 December 2010 the Group`s cash less borrowings resulted in a net cash
position of R90,8 million compared to R68,6 million last year
ACCOUNTING POLICIES
The condensed consolidated financial statements for the year ended 31 December
2010 have been prepared in accordance with International Financial Reporting
Standards (IFRS), the AC 500 series of Accounting Standards, JSE Listings
Requirements and the Companies Act of South Africa. The accounting policies are
consistent with those applied in the prior year annual financial statements.
REVIEW OF OPERATIONS
Fans and Heat Exchangers
Order intake for fans and heat exchangers totalled R705 million, which
represents 85% of the total order intake, compared to R751 million the previous
year.
The standard fan business reported another good performance with export orders
contributing 35% to its revenue in the year. In the domestic market conditions
proved to be tough but the supply of ventilation equipment connected to stadia
and support structures for the 2010 World Cup, assisted in supporting a healthy
financial outcome. Tender activity has remained solid through the year,
including for supply into export markets, and this should offer opportunity
through 2011.
Workload in the business unit focused on the mining and heavy industrial markets
remains at acceptable levels despite the lower activity in industrial metals
processing markets. High aftermarket business in the mining market, and an
increase in new equipment orders for supply to the central Africa region, has
been key in generating a good supply of business. Good progress continues to be
reported in the production of cooling tower fans connected to Eskom`s new build
programme, with supply of product remaining in line with original contractual
requirements. Assuming no unforeseen postponements to the aforesaid programme,
and success in converting select new build opportunities, performance levels in
this business should at least be maintained.
The five year National Draught Plant Framework Agreement with Eskom, covering
the supply of spares and maintenance on air heaters and draught plant fans
installed at Eskom`s coal fired power stations, has been operational for
eighteen months as at end December 2010. In terms of the agreement, Howden`s
performance shall be measured against agreed key performance indicators for each
power station on an annual basis. The first assessment should be concluded
through the course of 2011.
Work on Eskom`s new build programme connected to the Medupi and Kusile power
stations is progressing on schedule, as per the contractual delivery dates. The
Kusile primary air fan will be the largest fan of its type installed in a South
African power station. The Company will establish a site presence at Medupi in
the third quarter of 2011, when erection activities are scheduled to begin.
Strong order book levels have been maintained through the year and existing
prospects support the view that another good year of earnings should be
forthcoming in the Fans and Heat Exchangers division in 2011.
Environmental Control
The Environmental Control division recorded orders of R127 million, representing
15% of the total order intake, compared to R239 million in the previous year.
This is the lowest contribution in the last 10 years and reflects the trying
times being experienced by local environmental control companies generally.
In 2010 the division completed the order received from ArcelorMittal for the
supply and erection of a meltshop dedusting system, the first of its kind to be
installed in South Africa. The Group is justifiably proud of the installed plant
and its improvement to environmental conditions at site, but cost containment
issues and penalties resulted in a loss being incurred on this contract. In a
year dominated by just one or two larger value orders, this outcome had a big
influence on the division`s results for 2010.
The division operates in diverse markets covering gas cleaning, combustion
systems, furnaces, cooling and refrigeration plant; all backed up by in-house
electrical, control and instrumentation capability to provide a full turnkey
service to industry. The mix of product and technology capability has
traditionally resulted in dips in certain market segments being recovered by
improved market conditions in other markets. In 2010, restricted private sector
capital budgets have resulted in all areas of the business experiencing
difficult conditions.
The division is run as a project management business with resources fluctuating
according to order book levels and available prospects. Certain staff reductions
were effected during the year but the need to retain key staff, with the
required core competencies, resulted in a relatively high overhead base having
to be maintained against a declining revenue stream.
Environmental legislation will continue to call for an increase in cleaning
standards and the Group remains optimistic that the dust extraction and gas
treatment technologies in our possession will play an active part in meeting
future requirements.
The Group, however, understands the long-term nature of this business and that
its potential will be more fully realised over an extended period of time. The
division has budgeted for a challenging year ahead with focus on conversion of
current prospects to orders.
OUTLOOK
Order book levels in the Fans and Heat Exchangers division have remained largely
in line with the position reported at the end of December 2009. The slowdown in
private sector fixed investment, however, has affected the Environmental Control
division which presently has a relatively low order book despite a number of
promising prospects. Recovering market conditions and firm commodity prices
would need to be sustained to give support to the Group remaining cautiously
optimistic looking ahead.
DIVIDEND
The directors have resolved to declare a final dividend of 15 cents per share
payable to shareholders for the year ended 31 December 2010. The last date to
trade cum dividend is Friday, 8 April 2011. Shares start trading ex dividend on
Monday, 11 April 2011. The record date is Friday, 15 April 2011. Payment will be
on Monday, 18 April 2011. No share certificates are to be dematerialised or
rematerialised between Monday, 11 April 2011 and Friday, 15 April 2011, both
days inclusive.
DIRECTORATE
There were no changes in directorate during the period reported. Subsequent to
year end the Group Financial Director left the Group by mutual agreement with
effect from 8 March 2011.
REVIEWED RESULTS
PricewaterhouseCoopers Inc., the Group`s independent auditors, have reviewed the
condensed consolidated financial statements for the year ended 31 December 2010,
that comprise the condensed consolidated statement of financial position as at
31 December 2010, and the condensed consolidated statements of comprehensive
income, changes in equity, and cashflows for the year then ended and have
expressed an unqualified opinion on these reviewed condensed consolidated
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 T Barwald
Chairman Chief Executive Officer
18 March 2011
Directors:
RJ Cleland (Chairman)#**
T Barwald (Chief Executive Officer)+
AB Mashiatshidi**
J Brown#**
M Malebye**
(#British +German **Non-executive)
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: 18/03/2011 17:00:01 Supplied by www.sharenet.co.za
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