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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
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