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HOWDEN AFRICA HOLDINGS LIMITED - Announcement regarding HAHL Dividend policy and recent company development

Release Date: 01/06/2015 13:20
Code(s): HWN     PDF:  
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Announcement regarding HAHL Dividend policy and recent company development

Howden Africa Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/002982/06)
Share code: HWN
ISIN: ZAE000010583
("HAHL" or “the Company”)

ANNOUNCEMENT REGARDING HAHL DIVIDEND POLICY AND RECENT COMPANY
DEVELOPMENTS

Following recent deliberations by the board of directors of the Company (“the Board”), the
directors have resolved to update shareholders as regards the following matters.

Philosophy and continuing Commitment to Shareholders

HAHL has over a period of many years been an important player in the engineering
developments that have taken place during the growth of Africa’s industrial infrastructure. It
has also delivered pronounced returns to shareholders and other stakeholders and
continues to pursue operational improvements and developments that it believes will help to
navigate a challenging macro-economic and marketplace environment.

Cessation of ordinary cash dividends based on Market Imperatives and need for
Strategic Flexibility and Vision

As a necessity of the times and as the marketplace for our products and services in Africa
evolves, the Board has developed a strategic plan that takes into account market realities,
our threats, our risks, our opportunities and most importantly, our vision going forward. In
addition to identifying potential growth opportunities and operational improvements, this
planning has also included consideration of various structural alternatives intended to
position HAHL with additional strategic flexibility. This may result in the consummation of a
BEE transformation arrangement or similar transaction, share buy-backs, acquisitions,
and/or other such investments and changes.

Taking cognisance of the above and with a particular emphasis to the prevaling challenging
trading conditions in our key market segment, namely, the mining and power generations
markets, the Board considers it crucial to maintain an appropriate capital structure coupled
with the financial wherewithal to enable the Company to rapidly pursue and implement any
meaningful opportunity that it determines will benefit the Company’s customers,
shareholders and stakeholders. In order to ensure such strategic flexibility, and following a
substantive internal process of deliberation, the Board has resolved that it is in the best
medium to long term interests of the Company and all stakeholders that the payment of
ordinary cash dividends be discontinued for the foreseeable future.

As regards strategic imperatives, the Board and executive management are presently
engaging with relevant advisors regarding initial aspects and courses of action that may
result in actions leading to long term value for all stakeholders.
Against the backdrop of these developments the Board is aiming to continue to deliver value
to all stakeholders by being able to position the Company for the long term. In this regard,
the Board looks forward to working with all shareholders to ensure that both customers and
HAHL grow and succeed on a sustainable basis and, to this end, will ensure that the
Company hosts investor results presentations at least twice a year to enable shareholders to
better understand the strategy and performance of HAHL and provide a venue at which any
potential shareholder concerns can be adequately addressed.

Howden Management Services and Support Agreements

HAHL is part of the global Howden business, whose parent company, Colfax Corporation, is
a global manufacturing and engineering company. As a result, HAHL is able to draw on the
resources of the larger Howden team to achieve its operational goals and ensure that
customer demands are met. As the HAHL business has grown and prospered over the past
decade the level of management, IT, and operational support, as well as technological and
software licenses, received from the Howden business has increased substantially. In order
to ensure continued access to these resources HAHL views it prudent to retain the support,
services and license contracts, which includes a technology license agreement, an
enterprise software development license agreement and a management services
agreement. The agreements secure necessary resources and support and are charged on
the same basis as the fees for such services incurred by other Howden businesses around
the world. HAHL would be unable to operate efficiently in the absence of such services.

Charges are made on an arms-length basis. As reported in the integrated report issued on
31 March 2015 in respect of the financial year ended 31 December 2014, the fees incurred
were:

   -   R17,969 million under the management service agreement (vs. R20,059 million in
       2013)

   -   R4,525 million under the ERP software license agreement (vs. R8,118 million in
       2013)

   -   R2,702 million under the technology license agreement (vs. R4,138 million in 2013)

In an effort to evidence our commitment to reasonable and necessary arrangements for the
continued success of HAHL we plan to adopt a formal 10% market cap on these contracts.
Howden’s support and knowledge have enabled HAHL to draw on a broad range of
capabilities that have directly contributed to the historical success of our business, and we
view these contracts and our partnership with Howden as essential to our achievements and
future.

Booysens, Johannesburg

1 June 2015

Sponsor:
PricewaterhouseCoopers Corporate Finance (Proprietary) Limited

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