To view the PDF file, sign up for a MySharenet subscription.

HOWDEN AFRICA HOLDINGS LIMITED - Unaudited Interim Financial Results for the six months ended 30 June 2014

Release Date: 04/09/2014 13:52
Code(s): HWN     PDF:  
Wrap Text
Unaudited Interim Financial Results for the six months ended 30 June 2014

Howden Africa Holdings Limited (HAHL)
(Incorporated in the Republic of South Africa)
(Registration number 1996/002982/06)
Share code: HWN 
ISIN: ZAE 000010583
(“Howden” or “the Company” or “the Group”)
Unaudited interim financial results for the six months ended 30 June 2014


- Earnings per share 173,80 cents
  Increased by 7% from 162,44 cents in 2013

- Operating profit R159,2 million
  Increased by 9,2% from R145,8 million in 2013 

- Cash and cash equivalents R477,6 million
  Increased by 73,9% from R274,6 million in 2013 

  
COMMENTARY
OVERVIEW
Howden Africa delivered a solid performance in the first half with operating profits up 9,2% and earnings per share
increasing by 7,0%. The Company has benefited from an exceptional improvement in performance from its Environmental
Control division which delivered an 82,2% increase in operating profit to R16,6 million. The Fan and Heat Exchanger division,
despite weakening demand for new build mining equipment, has diversified into other market segments including
aftermarket (spares and service supply) to mitigate the shortfall.

Highlights for June 2014 when compared to the corresponding period in 2013 are:
- Earnings per share of 173,8 cents have increased by 7,0%.
- Orders received of R783,0 million have increased by 10,6%.
- Cash and cash equivalents at the end of the period increased by 73,9% to R477,6 million.

RESULTS
Revenue of R752,1 million for the first half of 2014 is 8,8% ahead of the equivalent period in 2013 of R691,3 million.
The performance of the Environmental Control division was particularly strong with a 73,3% increase in revenue compared
to the first half of 2013. The Fan and Heat Exchanger division saw a modest growth in revenue of 0,5% to R615,2 million
as it experienced a similar volume of activity as the corresponding period in 2013.

Orders received of R783,0 million for the first half of 2014 are 10,6% ahead of the corresponding period last year.
There has been good order intake experienced by the Group, especially within the Environmental Control division which is
62,3% ahead of the corresponding period in 2013. 

Operating profit (EBIT) of R159,2 million is an increase over the R145,8 million to June 2013; this is as a result of
increased sales volume, project execution efficiencies and our focus on continuous improvement. The results include a
management service fee payable of R17,1 million (June 2013: nil) to Howden Group Limited in terms of a management service
agreement entered into by Howden Africa Holdings Limited in 2013.  

Headline earnings per share and earnings per share of 173,84 cents (June 2013: 162,46 cents) and 173,80 cents  
(June 2013: 162,44 cents) respectively are both 7,0% up on the corresponding period last year, reflecting improved revenue 
and efficiency gains.

Howden’s continuing focus on sustainable working capital management has resulted in another sound cash flow
performance in the first half of 2014. Cash generated from operations was R214,1 million and cash and cash equivalents were 
R477,6 million, a 73,9% improvement over the corresponding period in 2013. 

Net asset value per share has increased by 73,2% to 1 023,17 cents (June 2013: 590,85 cents) mainly due to the
increase in cash and cash equivalents.

ACCOUNTING POLICIES
The condensed consolidated interim financial statements for the period ended 30 June 2014 have been prepared in
accordance with International Financial Reporting Standards (IFRS), IAS 34 Interim Financial Statements, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the
Financial Reporting Standards Council, JSE Listings Requirements and the Companies Act of South Africa, 2008. The
accounting policies and methods of computation followed in the most recent annual financial statements have been used in the
preparation of the interim financial statements.

REVIEW OF OPERATIONS
Fan and Heat Exchanger
The Fan and Heat Exchanger division had a solid first six months in 2014, increasing both revenue and operating profit
compared to the corresponding period in 2013. Revenue was up by 0,5% to R615,2 million and operating profit (EBIT) by
4,5% to R150,7 million compared to the corresponding period in 2013. 

Orders received during the first half of 2014 have increased to R668,5 million, an increase of 4,9% compared to the
corresponding period in 2013. There has been good order intake experienced, especially for spares and service within power
generation and mining, and less so for new build which has experienced a slowdown when compared to the corresponding
period in 2013. 

Environmental Control
Revenue increased to R136,9 million, a 73,3% increase on the first half of 2013. The division, as a result of the
increased revenue, improved its operating profit by 82,2% to R16,6 million. Operating profit margins have improved from
11,6% to 12,2%. 

Order intake was R114,6 million compared to R70,6 million in the first half of 2013. Large-scale environmental control
legislation and general environmental pressure and awareness in Africa continues and should improve opportunities in
the future.

OUTLOOK
The trading outlook for the Company remains cautiously optimistic despite the metal workers strike in July 2014 that
has affected the timing of contracts. The Fan and Heat Exchanger division continues to identify new opportunities for the
supply of services and spares in key industries, while capital project spend within the mining industry is expected to
remain subdued. The Environmental Control division has secured some good order intake for water treatment and industrial
de-dusting and its opportunity pipeline remains stable. 

EVENTS AFTER REPORTING DATE
There are no known material events under this category.

DIVIDENDS
The directors have resolved not to declare a dividend until such time as the Company has fully considered the
implications of the B-BBEE Codes of Good Practice.

DIRECTORATE
There have been no directorate changes for the six months ended 30 June 2014.

UNAUDITED INTERIM FINANCIAL RESULTS
The Company’s auditors, Ernst & Young Inc., have not reviewed or audited the interim financial results for 
the six months ended 30 June 2014.

The Group financial results were prepared under the supervision of the Chief Financial Officer, Mr K Johnson FCPA (Aust.).

For and on behalf of the board of directors

IH Brander            T Bärwald
Chairman              Chief Executive Officer

4 September 2014


Condensed consolidated statement of comprehensive income
for the period ended 30 June 2014                                                                                                                         
                                                          Six months     Six months             Twelve months   
                                                               ended          ended                     ended   
                                                             30 June        30 June                31 December    
                                                                2014           2013                       2013   
                                                          (Unaudited)    (Unaudited)    Change        (Audited)  
                                                               R’000          R’000          %           R’000   
Revenue                                                      752 104        691 251        8,8       1 682 832       
Cost of sales                                               (501 312)      (473 606)                (1 037 761)      
Gross profit                                                 250 792        217 645       15,2         645 071         
Operating profit                                             159 181        145 800        9,2         448 885         
Investment income                                              8 978          6 041                     14 623          
Finance costs                                                 (3 002)        (2 458)                    (1 700)          
Profit before income tax                                     165 157        149 383       10,6         461 808         
Income tax expense                                           (50 919)       (42 615)                  (149 811)        
Profit for the period                                        114 238        106 768        7,0         311 997         
Other comprehensive income*                                                                                          
Currency translation differences                                   -             56                          -                
Pension fund plan loss                                        (2 490)             -                    (19 078)         
Income tax relating to components of 
other comprehensive income                                       697              -                      5 342           
Other comprehensive income for the period net of tax          (1 793)            56                    (13 736)         
Total comprehensive income for the period                    112 445        106 824       5,26         298 261                                                                                                                            
                                                               Cents          Cents                      Cents           
Earnings per share                                                                                                   
- basic and diluted                                           173,80         162,44         7,0         474,67          
Headline earnings per share                                   173,84         162,46         7,0         475,27           
*Items in other comprehensive income are of such a nature that they will never be recycled through profit or loss.                                                            


Condensed consolidated statement of financial position
as at 30 June 2014                                                                                                             
                                                          Six months     Six months    Twelve months   
                                                               ended          ended            ended   
                                                             30 June        30 June      31 December    
                                                                2014           2013             2013   
                                                          (Unaudited)    (Unaudited)        (Audited)  
                                                               R’000          R’000            R’000   
ASSETS                                                                                                       
Non-current assets                                           209 203        219 304          207 432         
Property, plant and equipment and intangible assets          148 391        149 184          147 364         
Pension fund plan asset                                        3 575         27 972            7 911           
Other non-current assets                                      57 237         42 148           52 157          
Current assets                                             1 087 712        956 572        1 098 945       
Inventories                                                  297 145        372 432          330 335         
Trade and other receivables                                  303 620        306 096          422 566         
Cash and cash equivalents                                    486 947        278 044          346 044                                                                                                                         
TOTAL ASSETS                                               1 296 915      1 175 876        1 306 377       
EQUITY                                                                                                       
Share capital and reserves                                                                                   
Share capital and reserves                                   672 520        388 357          560 075         
Total equity                                                 672 520        388 357          560 075         
LIABILITIES                                                                                                  
Non-current liabilities                                       87 808        128 415          110 245         
Current liabilities                                          527 278        655 696          633 084         
Bank overdraft                                                 9 309          3 408            2 973                                                                                                                           
Total liabilities                                            624 395        787 519          746 302         
TOTAL EQUITY AND LIABILITIES                               1 296 915      1 175 876        1 306 377       


Condensed consolidated statement of changes in equity
for the period ended 30 June 2014                                                                                           
                                                          Six months     Six months    Twelve months   
                                                               ended          ended            ended   
                                                             30 June        30 June      31 December    
                                                                2014           2013             2013   
                                                          (Unaudited)    (Unaudited)        (Audited)  
                                                               R’000          R’000            R’000   
Share capital and reserves at the beginning                     
of the period                                                560 075        301 252          301 252                                          
Total comprehensive income for the period                    112 445        106 824          298 261   
Dividends                                                          -        (19 719)         (39 438)   
Share capital and reserves at the end                           
of the period                                                672 520        388 357          560 075                                          


Condensed consolidated statement of cash flows
for the period ended 30 June 2014                                                                                                     
                                                         Six months      Six months    Twelve months   
                                                              ended           ended            ended   
                                                            30 June         30 June      31 December    
                                                               2014            2013             2013   
                                                         (Unaudited)     (Unaudited)        (Audited)  
                                                              R’000           R’000            R’000   
Cash flow from operating activities                                                                        
Cash generated from operations                              214 055         214 012          388 890         
Interest paid                                                (3 002)         (1 050)          (1 700)          
Income tax paid                                             (77 447)        (34 218)        (118 823)        
Net cash generated from operating activities                133 606         178 744          268 367         
Cash flow from investing activities                                                                        
Interest received                                             8 978           6 041           14 623          
Purchases of property, plant and equipment                   (8 028)        (17 530)         (27 409)         
Purchases of intangible assets                                    -             (48)            (383)            
Proceeds from disposal of property,                                       
plant and equipment                                              11               -              163                                              
Net cash generated/(used) from investing activities             961         (11 537)         (13 006)         
Cash flow from financing activities                                                                        
Dividends paid                                                    -         (19 719)         (39 438)         
Net cash used in financing activities                             -         (19 719)         (39 438)         
Net increase in cash and cash equivalents                   134 567         147 488          215 923         
Cash and cash equivalents at the beginning                              
of the period                                               343 071         127 148          127 148                                              
Cash and cash equivalents at the end of the period          477 638         274 636          343 071         


Other group salient features
for the period ended 30 June 2014                                                                                                              
                                                    Six months     Six months            Twelve months   
                                                         ended          ended                    ended   
                                                       30 June        30 June              31 December    
                                                          2014           2013                     2013   
                                                    (Unaudited)    (Unaudited)   Change       (Audited)  
                                                         R’000          R’000         %          R’000   
Net asset value per share (cents)                     1 023,17         590,85      73,2         852,10          
Depreciation                                             6 027          4 505      33,8         10 573          
Amortisation                                               938            937       0,1          1 914           
Capital expenditure                                      8 028         17 578     (54,3)        27 792          
Capital commitments                                                                                             
- Authorised and contracted                              6 041              -                    5 197           
Number of shares in issue (000’s)                       65 729         65 729                   65 729          
Earnings per share (cents)                              173,80         162,44       7,0         474,67          
Headline earnings per share (cents)                     173,84         162,46       7,0         475,27          
Dividends per share                                                                                             
- dividend paid (cents)                                      -          30,00                    30,00           
- interim dividend paid (cents)                              -              -                    30,00 
                                                                                                                  
Reconciliation of headline earnings                                                                             
Profit for the period                                  114 237        106 768                  311 997         
 Loss on disposal of property, plant and equipment          25             16                      395              
Headline earnings                                      114 262        106 784       7,0        312 392         


Segmental analysis by operating division
for the period ended 30 June 2014                                                                                 
                                  Six months     Six months              Twelve months   
                                       ended          ended                      ended   
                                     30 June        30 June                31 December    
                                        2014           2013                       2013   
                                  (Unaudited)    (Unaudited)    Change        (Audited)  
                                       R’000          R’000          %           R’000   
Revenue                                                                                      
Fan and Heat Exchanger               615 228        612 290                  1 498 348       
Environmental Control                136 876         78 961                    184 484         
                                     752 104        691 251        8,8       1 682 832       
Orders received                                                                              
Fan and Heat Exchanger               668 454        637 533                  1 361 598        
Environmental Control                114 553         70 562                    396 296          
                                     783 007        708 095       10,6       1 757 894        
Operating profit                                                                             
Fan and Heat Exchanger               150 696        144 160                    447 526         
Environmental Control                 16 638          9 131                     23 385          
                                     167 334        153 291                    470 911         
Central operations                    (8 153)        (7 491)                   (22 026)        
Total operating profit               159 181        145 800        9,2         448 885         
Inter-segmental sales                                                                        
Fan and Heat Exchanger                 7 028          8 225                     52 104           
Environmental Control                  7 630          5 999                      2 854            
                                      14 658         14 224        3,1          54 958           


Directors
IH Brander (Chairman)#**, T Bärwald (Chief Executive Officer)†, J Brown#**, M Malebye**, S Badat**, 
K Johnson#, H Mathe**  (#British †German and Australian **Non-executive)

Company Secretary
C Koopman

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

www.howden.co.za
Date: 04/09/2014 01:52:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Share This Story