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HDC - Hudaco Industries Limited - Unaudited interim group results for the six
months ended 31 May 2012
HUDACO INDUSTRIES LIMITED
Incorporated in the Republic of South Africa
Registration number 1985/004617/06
JSE code: HDC ISIN: ZAE000003273
UNAUDITED INTERIM GROUP RESULTS for the six months ended 31 May 2012
- Sales up 13% to R1,6 billion
- Operating profit up 21% to R181 million
- Headline earnings per share up 17% to 441 cents per share
- Interim dividend increased by 19% to 155 cents per share
Hudaco Industries is a South African group whose principal activity is the
importation and distribution of high quality branded industrial products in the
southern African region. Hudaco businesses serve markets that fall into two
primary categories. The bearings, powered transmission and diesel engine
businesses supply engineering consumables mainly to mining and manufacturing
customers whilst the security, power tool and automotive aftermarket businesses
supply products into markets reliant on consumer spending. Adding value to the
product sold by offering instant availability, advice and technical training, is
a key part of Hudaco`s business model.
Results
The group has delivered pleasing results in the first half of 2012.
Demand for Hudaco`s product offering was particularly strong in the closing
months of the 2011 financial year, no doubt partly due to customers buying ahead
of anticipated price increases following the sudden weakening of the Rand in
September 2011. In the event, price increases did not materialise as the Rand
strengthened again in the beginning of 2012. Demand nevertheless remained
reasonably strong until the end of March, after which there was a noticeable
weakening. We attribute the weakening to lower demand from platinum mines
following extended strike action and a general drop in confidence resulting from
the ongoing crisis in Europe.
Sales at R1,6 billion were up 13%. The gross profit margin at 38,5% is slightly
down on last year. Operating expenses as a percentage of sales declined to 27,1%
from 28,4% last year.
Operating profit grew 21% to R181 million with operating margin improving to
11,3% of sales. Headline and basic earnings per share of 441 cents are up 17% on
last year. The interim dividend has been increased by 19% to 155 cents per
share.
Working capital (inventories, accounts receivable and accounts payable) has
increased as replacement stock has been bought at higher Rand prices, but this
cash outlay will be recouped through price increases in the second half if the
Rand remains at current levels. The group has net borrowings of R17 million at
31 May 2012.
Engineering consumables segment
This segment is the biggest profit contributor to the group. Hudaco`s
acquisition activity over the past few years has added significantly to this
segment`s sales base and it is pleasing to note that all new businesses are
performing in line with or ahead of expectations.
Sales of R1 064 million were up 9% on last year whilst operating profit
increased 24% to R122 million as Bearings International and Bosworth, both
underperformers last year, returned to normal.
Consumer related products segment
Sales of power tools have remained strong but trading conditions in the rest of
the segment were again muted during the period under review, particularly in the
security business. Global Communications, consolidated here for the full six
months (2011: four months), is mainly a tender business, so we expect sales and
profits to be erratic.
Segment sales were up 23% to R533 million of which R39 million or 9% was due to
the inclusion of Global and Pentagon for the full period. Operating profit
increased 6% to R69 million.
Prospects
A significant percentage of Hudaco`s sales are derived from the South and
southern African mining industry and the manufacturing and service sectors
supporting that industry. Constrained by insufficient infrastructure,
particularly electricity and rail capacity, and policy uncertainty, mining
investment in South Africa has stagnated over the past 10 years with some
observers (including the DTI) arguing that the country is de-industrialising.
Mining investment in neighbouring countries is growing strongly however, albeit
off a low base, and Hudaco will continue to look beyond South Africa`s borders
for organic sales growth.
We anticipate that economic growth in South Africa will continue to remain weak
over the next few years until new infrastructure comes on stream and a policy
environment is created which encourages private sector investment. Although
achieving meaningful earnings growth in such an environment is challenging, the
group`s acquisition programme will continue to supplement earnings. We expect
further successes in the months ahead.
The group`s financial position is strong and we are confident about future
earnings prospects.
Declaration of interim dividend no 51
Interim dividend number 51 of 155 cents per share (gross) is declared payable on
Monday, 20 August 2012 to ordinary shareholders recorded in the register at the
close of business on Friday, 17 August 2012.
The timetable for the payment of the dividend is as follows:
Last day to trade cum dividend Friday, 10 August 2012
Trading ex dividend commences Monday, 13 August 2012
Record date Friday, 17 August 2012
Payment date Monday, 20 August 2012
Share certificates may not be dematerialised or rematerialised between Monday,
13 August 2012 and Friday, 17 August 2012, both days inclusive. The certificated
register will be closed for this period.
In terms of the Listings Requirements of the JSE Limited regarding the new
dividends tax effective 1 April 2012, the following additional information is
provided: The dividend has been declared out of income reserves. The local
dividends tax rate is 15% but STC credits of 155 cents per share will be
utilised to cover the full dividend. Accordingly, all shareholders who are not
exempt from dividends tax will receive a net local dividend of 155 cents per
share. The company has 34 153 531 shares in issue (which includes 2 507 828
treasury shares) and its income tax reference number is 9400/159/71/2.
Results presentation
Hudaco will host presentations on the financial results in Johannesburg and Cape
Town on Friday 29 June 2012 and Monday 2 July 2012 respectively. Anyone wishing
to attend should contact Margaret Griffiths at 011 657 5000.
The slides which form part of the presentation will be available on the
company`s website on Tuesday 3 July 2012.
For and on behalf of the board
RT Vice SJ Connelly
Independent non-executive chairman Chief executive
28 June 2012
Group statement of financial position
31 May 31 May 30 Nov
R million 2012 2011 2011*
ASSETS
Non-current assets 3 011 2 946 2 939
Property, plant and equipment 183 173 182
Investment in preference shares 2 181 2 181 2 181
Goodwill 575 513 516
Intangible assets 56 57 49
Deferred taxation 16 22 11
Current assets 1 486 1 317 1 598
Inventories 913 780 813
Trade and other receivables 551 436 616
Cash and cash equivalents 22 101 169
TOTAL ASSETS 4 497 4 263 4 537
EQUITY AND LIABILITIES
Equity 1 558 1 354 1 525
Interest of shareholders of the group 1 541 1 336 1 494
Non-controlling interest 17 18 31
Non-current liabilities 2 335 2 383 2 306
Subordinated debenture 2 181 2 181 2 181
Finance leases 2
Amounts due to vendors of businesses 154 202 123
acquired
Current liabilities 604 526 706
Trade and other payables 452 430 586
Bank borrowings 39 1
Amounts due to vendors of businesses 104 91 111
acquired
Taxation 9 5 8
TOTAL EQUITY AND LIABILITIES 4 497 4 263 4 537
Group statement of comprehensive income
Six months Six months Year
ended ended ended
31 May % 31 May 30 Nov
R million 2012 change 2011 2011*
Turnover 1 593 13 1 406 3 182
- Ongoing operations 1 424 8 1 314 2 936
- Acquired in 2011 and 2012 169 92 246
Cost of sales 980 857 1 910
Gross profit 613 12 549 1 272
Operating expenses 432 400 846
Operating profit 181 21 149 426
- Ongoing operations 156 17 133 384
- Acquired in 2011 and 2012 25 16 42
Dividends received on 101 100 201
preference shares
Interest received 3 4
Finance costs (124) (123) (247)
Profit before taxation 158 22 129 384
Taxation 16 9 46
PROFIT FOR THE PERIOD 142 18 120 338
Other comprehensive income
Movement on fair value of 3 (1) (1)
cash flow hedges
TOTAL COMPREHENSIVE INCOME 145 22 119 337
FOR THE PERIOD
Profit attributable to:
Shareholders of the group 140 119 325
Non-controlling shareholders 2 1 13
142 120 338
Total comprehensive income
attributable to:
Shareholders of the group 143 118 324
Non-controlling shareholders 2 1 13
145 119 337
Headline earnings per share 441 17 377 1 024
(cents)
Basic earnings per share 441 17 377 1 026
(cents)
Diluted headline earnings 434 371 1 010
per share (cents)
Diluted basic earnings per 434 371 1 012
share (cents)
Reconciliation to headline
earnings
Profit attributable to 140 119 325
shareholders of the group
Adjusted for:
- Profit on disposal of (1)
property,plant and equipment
Headline earnings 140 119 324
Dividends
- Per share (cents) 155 19 130 440
- Amount (Rm) 49 41 139
Shares in issue 31 646 31 634 31 646
- Total (000) 34 154 34 142 34 154
- Held by subsidiary (000) (2 508) (2 508) (2 508)
Weighted average shares in
issue
- Basic (000) 31 646 31 592 31 617
- Diluted (000) 32 131 32 077 32 058
Group statement of cash flows
Six months Six months Year
ended ended ended
31 May 31 May 30 Nov
R million 2012 2011 2011*
Cash generated from trading 203 171 458
Increase in working capital (162) (79) (129)
Cash generated from operations 41 92 329
Taxation paid (25) (20) (46)
Net cash flow from operating 16 72 283
activities
Net investment in new operations (49) (87) (164)
Net investment in property, plant (13) (45) (64)
and equipment
Dividends and interest received 101 103 205
Net cash flow from investing 39 (29) (23)
activities
Proceeds from issue of shares 2 2
Change in finance leases (2) 3
Finance costs (124) (116) (234)
Dividends paid (114) (90) (124)
Net cash flow from financing (240) (204) (353)
activities
Net decrease in cash and cash (185) (161) (93)
equivalents
Group statement of changes in equity
Six months Six months Year
ended ended ended
31 May 31 May 30 Nov
R million 2012 2011 2011*
Equity at the beginning of the 1 525 1 314 1 314
period
Comprehensive income for the period 145 119 337
Increase (decrease) in equity 2 3 (3)
compensation reserve
Issue of shares 2 2
Dividends (114) (84) (125)
Equity at the end of the period 1 558 1 354 1 525
Supplementary information
The consolidated financial statements have been prepared in accordance with IAS
34: Interim Financial Reporting, International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB), the AC
500 Standards as issued by the Accounting Practices Board, the requirements of
the South African Companies Act and the JSE Limited Listings Requirements. The
principal accounting policies set out in the group`s 2011 annual financial
statements have been consistently applied throughout the current year. These
results have been compiled under the supervision of the financial director, CV
Amoils CA(SA).
31 May 31 May 30 Nov
2012 2011 2011
Average net operating assets (NOA) (Rm) 1 710 1 377 1 469
Operating profit margin (%) 11,3 10,6 13,4
Average NOA turn (times) 2,1 2,0 2,2
Return on NOA (%) 21,1 21,7 29,0
Average net tangible operating assets 1 137 900 951
(NTOA) (Rm)
PBITA margin (%) 11,8 11,0 13,8
Average NTOA turn (times) 2,8 3,1 3,3
Return on average NTOA (%) 33,0 34,4 46,1
Net asset value per share (cents) 4 869 4 223 4 721
Return on average equity (%) 18,4 18,0 23,8
Operating profit has been determined after
taking into account the following charges
(Rm):
- Depreciation 13 13 24
- Amortisation 7 6 13
Capital expenditure (Rm)
- Incurred during the period 16 49 69
- Authorised but not contracted for 31 35 38
Commitments and contingencies (Rm)
- Operating lease commitments on 139 136 123
properties
Acquisition of new businesses
The group acquired 100% of the businesses
of Keys Makin Plastics and Quality
Compounding ("Keymak"). The final
consideration will depend on the average
profits over a three-year earn-out period
with a maximum of R112 million. The
results since acquisition date (1 May
2012) included in consolidated results for
the period are as follows:
- Turnover (Rm) 7
- Profit after tax (Rm) 2
If the acquisition had been included from
thebeginning of the financial year,
consolidated results for the group would
have been as follows:
- Turnover (Rm) 1 616
- Profit after tax (Rm) 146
Segment information
Turnover
Six months Six months Year
ended ended ended
31 May % 31 May 30 Nov
R million 2012 change 2011 2011*
Engineering consumables 1 064 9 977 2 187
- Ongoing operations 1 057 8 977 2 187
- Acquired in 2012 7
Consumer related products 533 23 432 1 006
- Ongoing operations 371 9 340 760
- Acquired in 2011 162 92 246
Total operating segments 1 597 1 409 3 193
Head office, shared (4) (3) (11)
services and eliminations
Total group 1 593 13 1 406 3 182
Operating profit
Six months Six months Year
ended ended ended
31 May % 31 May 30 Nov
R million 2012 change 2011 2011*
Engineering consumables 122 24 98 274
- Ongoing operations 120 22 98 274
- Acquired in 2012 2
Consumer related products 69 6 65 163
- Ongoing operations 46 (6) 49 121
- Acquired in 2011 23 16 42
Total operating segments 191 163 437
Head office, shared (10) (14) (11)
services and eliminations
Total group 181 21 149 426
Average net operating assets
Six months Six months Year
ended ended ended
31 May % 31 May 30 Nov
R million 2012 change 2011 2011*
Engineering consumables 1 210 21 996 1 093
- Ongoing operations 1 200 20 996 1 093
- Acquired in 2012 10
Consumer related products 457 53 298 366
- Ongoing operations 210 14 184 201
- Acquired in 2011 247 114 165
Total operating segments 1 667 1 294 1 459
Head office, shared 43 83 10
services and eliminations
Total group 1 710 24 1 377 1 469
* Audited
Transfer secretaries:
Computershare Investor Services Pty Limited
PO Box 61051, Marshalltown, 2107
Registered office:
Building 9, Greenstone Hill Office Park
Emerald Boulevard, Greenstone Hill, Edenvale
Tel +27 11 657 5000
E-mail info@hudaco.co.za
Directors:
RT Vice (Chairman)*, SJ Connelly (Chief executive), CV Amoils (Financial
director), GR Dunford, DD Mokgatle*, SG Morris*, D Naidoo*.
* Independent non-executive
Group secretary
R Wolmarans
Sponsor
Nedbank Capital
These results are available on the Internet
www.hudaco.co.za
"Value-added distribution - our core competency"
Date: 29/06/2012 08:00:01 Supplied by www.sharenet.co.za
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