Wrap Text
Reviewed Condensed Annual Financial Results for the year ended 31 December 2014
Howden Africa Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/002982/06)
JSE code: HWN
ISIN: ZAE000010583
(“the Company” or “the Group”)
REVIEWED CONDENSED ANNUAL FINANCIAL RESULTS for the year ended 31 December 2014
Operating profit
R326.8 million
decreased 27.2%
Earnings per share
409.54 cents
decreased 13.7%
Cash and cash equivalents
R627.7 million
increased 82.9%
Commentary
OVERVIEW
Howden Africa generated a solid set of results in 2014 in difficult market circumstances. During 2014 the Company
faced a number of challenges. These included the National Union of Metalworkers of South Africa (Numsa) strike and weakening
demand for new-build mining and environmental control equipment.
RESULTS AND REVIEW OF OPERATIONS
Revenue of R1 588.0 million for 2014 is 5.6% behind the equivalent period in 2013 of R1 682.8 million. The
Environmental Control division delivered a significant performance with revenue rising 57.9% to R291.3 million (2013:
R184.5 million) as it successfully executed orders awarded in 2013 and the first half of 2014. The Fans and Heat Exchangers
division saw a decrease in revenue of 13.5% to R1 296.7 million (2013: R1 498.3 million). This is largely the result of the
division not benefiting from the one-off projects on which revenue was reported in 2013 (R255.8 million).
Orders received during 2014 amounted to R1 587.7 million compared with the corresponding period in 2013 (R1 757.9 million).
The Environmental Control division order intake was R166.3 million compared with R396.3 million in 2013. The
division continues to see high levels of tender activity but the awarding of orders from customers is slow. Fans and Heat
Exchangers division orders received during 2014 have increased to R1 421.4 million (2013: R1 361.6 million), an increase of
4.4% compared with the corresponding period in 2013. There has been good order intake experienced, especially for
spares and services within power generation and mining and less so for new build which has experienced a slow down when
compared with the corresponding period in 2013.
Operating profit of R326.8 million was reported compared to the corresponding period in 2013 (R448.9 million). The
Environmental Control division’s operating profit was 30.8% higher at R30.6 million when compared with the corresponding
period as a result of increased revenue. The Fans and Heat Exchangers division’s operating profit reduced by 29.0% to
R317.7 million (2013: R447.5 million). The key change was that this division’s operating profit in 2013 included a one-off
gain of R109.0 million.
Earnings per share was 409.54 cents (2013: 474.67) as a result of the decrease in revenue partially mitigated by
improved net finance income.
Cash and cash equivalents has increased by 82.9% to R627.7 million compared with the corresponding period in 2013
(R343.1 million). Howden’s continuing focus on sustainable working capital management has resulted in improved cash flow
performance in 2014. Cash generated from operations for the year of R404.8 million (2013: R388.9 million) is up on the
prior year by 4.1%. The business remains focused on managing its working capital and generating operating cash.
BASIS OF PREPARATION
The information disclosed in the SENS is derived from the information contained in the reviewed annual consolidated
financial statements and does not contain full or complete disclosure details. Any investment decisions by shareholders
should be based on consideration of the audited annual consolidated financial statements when available.
ACCOUNTING POLICIES
The condensed consolidated financial statements for the year ended 31 December 2014 have been prepared in accordance
with International Financial Reporting Standards (IFRS), IAS 34 Interim Financial Reporting, 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 have been updated to take into account the change in the following standards:
- IAS 32 Financial Instruments: Presentation (Amendment) - Offsetting of Financial Assets and Financial Liabilities
(1 January 2014)
The amendment has no effect on the presentation and disclosure for the Group, since none of the entities
in the Group have any offsetting arrangement.
- IAS 36 Disclosure Requirements for the Recoverable Amount of Impaired Assets (1 January 2014)
The amendments to IAS 36 Impairment of Assets clarify the disclosure requirements in respect of fair value less
costs of disposal. The amendments remove the requirement to disclose the recoverable amount for each cash-generating unit
for which the carrying amount of goodwill or intangible assets with indefinite useful lives allocated to that unit is
significant.
- IAS 39 Novation of Derivatives and Continuation of Hedge Accounting - Amendments to IAS 36 (1 January 2014)
The amendments provide an exception to the requirement to discontinue hedge accounting in certain circumstances in
which there is a change in counterparty to a hedging instrument in order to achieve clearing for that instrument. The
amendment has no effect on the presentation and disclosure for the Group
- IFRIC 21 Levies (1 January 2014)
IFRIC 21 is applicable to all levies other than outflows that are within the scope of other standards (eg IAS 12
Income Taxes) and fines or other penalties for breaches of legislation. Levies are defined in the interpretation as outflows
of resources embodying economic benefits imposed by government on entities in accordance with legislation
- Investment Entities (amendments to IFRS 10, IFRS 12 and IAS 27) (1 January 2014)
These amendments provide an exception to the consolidation requirement for entities that meet the definition of an
investment entity under IFRS 10 Consolidated Financial Statements and must be applied retrospectively, subject to certain
transition relief. The exception to consolidation requires investment entities to account for subsidiaries at fair
value through profit or loss. These amendments have no impact on the Group, since none of the entities in the Group qualify
to be an investment entity under IFRS 10.
- IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interest in Other Entities and IAS 27 Separate
Financial Statements
- Amendments to IAS 32 Financial Instruments - Offsetting Financial Assets and Financial Liabilities
- Recoverable amount disclosures for non-financial assets (amendments to IAS 36 Impairment of Assets)
The adoption of new and amended standards and interpretations has not had a significant impact on the financial
position and results, and will mainly have an impact on disclosures presented in the integrated annual report.
The accounting standards and amendments issued to accounting standards and interpretations which are relevant to the
Group, but not yet effective at 31 December 2014, have not been adopted. It is expected that, where applicable, these
standards and amendments will be adopted on each respective effective date, except where specifically identified. The Group
continuously evaluates the impact of these standards and amendments.
OUTLOOK
The Fans and Heat Exchangers 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 continues to see a high level of enquiries from customers.
EVENTS AFTER REPORTING DATE
There are no known material events under this category.
DIVIDENDS
In light of the potential BEE ownership transaction the board has resolved not to declare a dividend.
DIRECTORATE
Suleman Badat resigned as a director effective 31 October 2014.
Mitesh Patel was appointed as a non-executive director effective 15 December 2014 and was appointed as the Audit and
Risk Committee Chairman on 17 March 2015.
REVIEWED FINANCIAL RESULTS
These condensed consolidated financial statements for the year ended 31 December 2014, that comprises the condensed
consolidated statements of financial position and the consolidated statement of comprehensive income, changes in equity
and cash flows, have been reviewed by Ernst & Young Inc., who expressed an unmodified review conclusion. A copy of the
auditor’s review report is available for inspection at the Company’s registered office together with the financial
statements identified in the auditor’s report.
The Group financial results were prepared by Mary-Anne Musekiwa (CA)SA under the supervision of the Chief Financial
Officer, Kevin Johnson FCPA (Aust.).
For and on behalf of the board of directors
IH Brander T Bärwald
Chairman Chief Executive Officer
23 March 2015
Condensed consolidated statement of comprehensive income
for the year ended 31 December 2014
2014 2013
(Reviewed) Change (Audited)
R’000 % R’000
Revenue 1 588 022 (5.6) 1 682 832
Cost of sales (1 086 529) (1 037 761)
Gross profit 501 493 (22.3) 645 071
Distribution costs (37 191) (0.8) (37 490)
Administrative expenses (141 395) (14.2) (164 819)
Other income/(expense) 3 940 6 123
Operating profit 326 847 (27.2) 448 885
Investment income 23 961 14 623
Finance costs (23) (1 700)
Profit before income tax 350 785 (24.0) 461 808
Income tax expense (81 596) (149 811)
Profit for the period 269 189 (13.7) 311 997
Other comprehensive income
Net loss on cash flow hedges (net of tax)* (761) -
Pension fund plan loss (net of tax)** (6 759) (13 736)
Other comprehensive income for the period, net of tax (7 520) (13 736)
Total comprehensive income for the period 261 669 (12.24) 298 261
Number of shares in issue (000’s) 65 729 65 729
Reconciliation of headline earnings attributable to the
equity holders of the Company
Net profit attributable to equity holders 269 189 311 997
Loss on disposal of property, plant and equipment 173 395
Write off of property, plant and equipment 272 -
Headline earnings attributable to equity holders 269 634 (13.7) 312 392
Cents Cents
Earnings per share
- basic and diluted 409.54 (13.7) 474.67
Headline earnings per share 410.22 (13.7) 475.27
* This item of other comprehensive income is to be reclassified to profit or loss in subsequent periods.
**This item of other comprehensive income will not be reclassified to profit or loss in subsequent periods.
Condensed consolidated statement of financial position
as at 31 December 2014
2014 2013
(Reviewed) (Audited)
R’000 R’000
ASSETS
Non-current assets 201 818 207 432
Property, plant and equipment and intangible assets 152 389 147 364
Pension fund plan surplus - 7 911
Other non-current assets 49 429 52 157
Current assets 1 227 645 1 098 945
Inventories 225 405 330 335
Trade and other receivables 374 552 422 566
Cash and cash equivalents 627 688 346 044
TOTAL ASSETS 1 429 463 1 306 377
EQUITY
Share capital and reserves
Share capital and reserves 821 744 560 075
Total equity 821 744 560 075
LIABILITIES
Other non-current liabilities 113 534 110 245
Pension fund plan deficit 4 875 -
Current liabilities 489 310 636 057
Total liabilities 607 719 746 302
TOTAL EQUITY AND LIABILITIES 1 429 463 1 306 377
Condensed consolidated statement of changes in equity
for the year ended 31 December 2014
2014 2013
(Reviewed) (Audited)
R’000 R’000
Share capital and reserves at the beginning of the period 560 075 301 252
Total comprehensive income for the period 261 669 298 261
Dividends - (39 438)
Share capital and reserves at the end of the period 821 744 560 075
Condensed consolidated statement of cash flows
for the year ended 31 December 2014
2014 2013
(Reviewed) (Audited)
R’000 R’000
Cash flow from operating activities
Cash generated from operations 404 774 388 890
Interest paid (23) (1 700)
Income tax paid (131 877) (118 823)
Net cash generated from operating activities 272 874 268 367
Cash flow from investing activities
Interest received 23 961 14 623
Purchases of property, plant and equipment (19 156) (27 409)
Purchases of intangible assets (633) (383)
Government grant received 7 448 -
Proceeds from disposal of property, plant and equipment 123 163
Net cash generated from investing activities 11 743 (13 006)
Cash flow from financing activities
Dividends paid - (39 438)
Net cash used in financing activities - (39 438)
Net increase in cash and cash equivalents 284 617 215 923
Cash and cash equivalents at the beginning of the period 343 071 127 148
Cash and cash equivalents at the end of the year 627 688 343 071
Other Group salient features
for the year ended 31 December 2014
2014 2013
(Reviewed) Change (Audited)
R’000 % R’000
Net asset value per share (cents) 1 250.2 46.7 852.10
Depreciation 12 296 10 573
Amortisation 1 900 1 914
Capital expenditure 19 789 27 792
Capital commitments
- authorised and contracted 899 5 197
Operating profit to revenue (%) 20.58 26.67
Number of shares in issue (000’s) 65 729 65 729
Earnings per share (cents) 409.54 (13.7) 474.67
Headline earnings per share (cents) 410.22 (13.7) 475.27
Dividends per share
- dividend paid (cents) - 30.00
- interim dividend paid (cents) - 30.00
Reconciliation of headline earnings
Profit for the period 269 189 311 997
Loss on disposal of property, plant and equipment 173 395
Write off of property, plant and equipment 272 -
Headline earnings 269 634 (13.7) 312 392
Fair value information
for the year 31 December 2014
Fair value
through profit
or loss Total
R’000 R’000
FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE
THROUGH PROFIT OR LOSS
The accounting policies for financial instruments
have been applied to the items below:
CONSOLIDATED
31 December 2014
Financial assets carried at fair value
Forward exchange contracts 18 18
Forward exchange contracts in cash flow hedges 573 573
Total 591 591
CONSOLIDATED
31 December 2014
Financial liabilities carried at fair value
Forward exchange contracts 279 279
Forward exchange contracts in cash flow hedges 2 129 2 129
Total 2 408 2 408
CONSOLIDATED
31 December 2013
Financial assets carried at fair value
Forward exchange contracts 957 957
Total 957 957
CONSOLIDATED
31 December 2013
Financial liabilities carried at fair value
Forward exchange contracts 500 500
Total 500 500
Quoted prices Significant Significant
in active observable observable
markets inputs inputs
Level 1 Level 2* Level 3 Total
R’000 R’000 R’000 R’000
FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE
THROUGH PROFIT OR LOSS (continued)
Fair value hierarchy
CONSOLIDATED
31 December 2014
Financial assets carried at fair value
Forward exchange contracts - 18 - 18
Forward exchange contracts in cash flow hedges - 573 - 573
Total - 591 - 591
CONSOLIDATED
31 December 2014
Financial liabilities carried at fair value
Forward exchange contracts - 279 - 279
Forward exchange contracts in cash flow hedges - 2 129 - 2 129
Total - 2 408 - 2 408
CONSOLIDATED
31 December 2013
Financial assets carried at fair value
Forward exchange contracts - 957 - 957
Total - 957 - 957
CONSOLIDATED
31 December 2013
Financial liabilities carried at fair value
Forward exchange contracts - 500 - 500
Total - 500 - 500
* The fair value of these recurring financial instruments, is determined through valuation techniques based on observable
inputs, either directly, such as quoted prices, or indirectly, such as derived from quoted prices. The level 2 instruments
are valued based on the forward exchange rates as at 31 December 2014.
Segmental analysis by operating division
for the year ended 31 December 2014
2014 2013
(Reviewed) Change (Audited)
R’000 % R’000
Revenue
Fans and Heat Exchangers 1 296 686 (13.5) 1 498 348
Environmental Control 291 336 57.9 184 484
1 588 022 (5.6) 1 682 832
Inter-segmental revenue
Fans and Heat Exchangers 17 506 (66.4) 52 104
Environmental Control 22 558 690.4 2 854
40 064 (27.1) 54 958
Orders received
Fans and Heat Exchangers 1 421 384 4.4 1 361 598
Environmental Control 166 325 (58.0) 396 296
1 587 709 (9.7) 1 757 894
Operating profit
Fans and Heat Exchangers 317 663 (29.0) 447 526
Environmental Control 30 580 30.8 23 385
348 243 470 911
Central operations (21 396) (2.9) (22 026)
Total operating profit 326 847 (27.2) 448 885
Assets
Fans and Heat Exchangers 1 131 941 20.9 935 905
Environmental Control 176 801 (14.8) 207 417
1 308 742 1 143 322
Central operations 120 721 (25.9) 163 055
1 429 463 9.4 1 306 377
Liabilities
Fans and Heat Exchangers 442 415 (11.0) 497 256
Environmental Control 81 352 (46.0) 150 776
523 767 648 032
Central operations 83 952 (14.6) 98 270
607 719 (18.6) 746 302
Our vision
Is to be Africa’s leading application engineer, providing lifetime solutions in air and gas-handling solutions.
Our values
It takes focus, dedication and living our values to achieve success for our customers.
We all play a crucial role in driving our company forward.
Corporate information
Registered office
1A Booysens Road
Booysens
South Africa
2019
(PO Box 2239, Johannesburg, 2000)
Telephone: +27 11 240 4000
Telefax: +27 11 493 0545
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
Ground Floor
70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown 2107)
Sponsor
PricewaterhouseCoopers Corporate Finance (Proprietary) Limited
2 Eglin Road
Sunninghill
2157
External Auditors
Ernst & Young Inc.
102 Rivonia Road
Sandton
2194
Shareholder contact information
Investor Relations
Carmen Koopman
Company Secretary
+27 11 240 4000
carmen.koopman@howden.co.za
Publication date: 25 March 2015
www.howden.com
Date: 25/03/2015 03:34:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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