Wrap Text
Unaudited Interim Financial results for the six months ended 30 June 2015
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 2015
Our vision is to be Africa’s leading application engineer, providing lifetime solutions in air and gas-handling
solutions.
Howden Africa is a market-driven, customer-orientated company. Its main business activities are the design,
manufacture and marketing of specialised air and gas-handling solutions for a wide range of industries. The Group’s major
industries supplied include power generation, petrochemical, mining, construction, refrigeration, water treatment and general
industry. Howden Africa is committed to environmental awareness. Accordingly, all product designs and manufacturing are
scrutinised for environmental friendliness. Design and drawing activities are computerised and manufacturing is
concentrated on producing key components. Manufacturing facilities are located in Booysens (Johannesburg) and Struandale
(Port Elizabeth).
Earnings per share
139.15 cents
Decreased by 19.9% from 173.80 cents in 2014
Operating profit
R110.2 million
Decreased by 30.8% from R159.2 million in 2014
Overview
Howden Africa experienced challenging trading conditions in the first six months of 2015 with operating profits
declining 30.8% and earnings per share decreasing by 19.9% when compared to the corresponding period in 2014. The Fans and
Heat Exchangers division experienced weakening demand from mining, power generation and industrial markets and as a result
operating profit declined 35.1% to R97.7 million. This decline has been partially mitigated by an improvement in
performance from the Environmental Control division which delivered a 38.2% increase in operating profit to R23.0 million.
Highlights for June 2015 when compared to the corresponding period in 2014 are:
- Earnings per share of R139.15 cents has decreased by 19.9%.
- Operating profit of R110.2 million has decreased by 30.8%.
Results
Revenue of R677.5 million for the first half of 2015 is 9.9% behind the equivalent period in 2014 of R752.1 million.
The Fans and Heat Exchangers division saw a decline in revenue of 14.3% to R527.5 million as it experienced a reduction
in volumes of activity as compared to the corresponding period in 2014. The performance of the Environmental Control
division was good with a 9.6% increase in revenue compared to the first half of 2014.
Orders received of R831.5 million for the first half of 2015 is 6.2% ahead of the corresponding period last year.
There has been reduced order intake by the Fans and Heat Exchangers division with orders reducing 12.1% to R587.6 million
which has been offset by improvements within the Environmental Control division which is 112.9% ahead of the corresponding
period in 2014.
Operating profit of R110.2 million is a reduction of 30.8% over the R159.2 million to June 2014; this is a result of
decreased sales volume, changes in product mix and increased pressure on sales prices within the Fans and Heat Exchangers
division. Central operating costs are up 29.0% due to costs associated with professional advice for the potential BEE
ownership transaction.
Earnings per share of 139.15 cents is 19.9% down on the corresponding period last year reflecting reduced operating
profit mitigated partially by improved investment income.
Cash generated from operations was R8.2 million and cash and cash equivalents were R604.6 million, a 26.6% improvement
over the corresponding period in 2014.
Net asset value per share has increased by 36.1% to 1 392.98 cents from the corresponding period in 2014 mainly due to
the increase in cash and cash equivalents.
Accounting policies
The condensed consolidated interim financial statements for the period ended 30 June 2015 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 and methods of computation applied are consistent with those used in the most recent annual financial
statements.
Review of operations
Fans and Heat Exchangers
The Fans and Heat Exchangers division experienced challenging trading conditions in the six months to June 2015,
decreasing both revenue and operating profit compared to the corresponding period in 2014. Revenue was down by 14.3% to
R527.5 million and operating profit by 35.1% to R97.7 million compared to the corresponding period in 2014.
Orders received during the first half of 2015 have decreased to R587.6 million, a decrease of 12.1% compared to the
corresponding period in 2014. There has been reduced order intake experienced for both new build and aftermarket (spares
and service) across all our market segments.
Environmental Control
Revenue increased to R150.0 million, a 9.6% increase on the first half of 2014. The division, as a result of the
increased revenue, improved its operating profit by 38.2% to R23.0 million. Operating profit margins have improved from 12.2%
to 15.3% due to improved project execution. Order intake was R243.9 million compared to R114.6 million in the first
half of 2014.
Outlook
Capital project spend within power generation, mining and general industry is expected to remain subdued. The Fans and
Heat Exchangers division continues to focus on the supply of services and spares to key industries. Although the order
intake in the Environmental Control division is ahead of the corresponding period in 2014, the division is experiencing
challenging market conditions.
Events after reporting date
There are no known material events under this category.
Dividends
The directors have resolved not to declare a dividend (2014: nil).
Directorate
There have been no directorate changes for the six months ended 30 June 2015.
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 2015.
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
1 September 2015
Condensed consolidated statement of comprehensive income
for the period ended 30 June 2015
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2015 2014 2014
(Unaudited) (Unaudited) Change (Audited)
R’000 R’000 % R’000
Revenue 677 469 752 104 (9.9) 1 588 022
Cost of sales (485 562) (501 312) (1 086 529)
Gross profit 191 907 250 792 (23.5) 501 493
Operating profit 110 211 159 181 (30.8) 326 847
Investment income 17 152 8 978 23 961
Finance costs (617) (3 002) (23)
Profit before income tax 126 746 165 157 350 785
Income tax expense (35 283) (50 919) (81 596)
Profit for the period 91 463 114 238 (19.9) 269 189
Other comprehensive income
Other comprehensive income to be reclassified
to profit or loss in subsequent periods:
Currency forward contracts:
Reclassification during the
period to profit or loss 514 - 500
Net income/(loss) during the
period of contracts not yet matured 1 576 - (1 557)
Tax impact of cash flow hedges (585) - 296
Net other comprehensive income/(loss)
to be reclassified to profit or loss
in subsequent periods 1 505 - (761)
Other comprehensive income not to be
reclassified to profit or loss in
subsequent periods:
Pension fund plan income/(loss) 1 225 (2 490) (9 388)
Tax impact of pension fund plan (343) 697 2 629
Net other comprehensive income/ (loss)
not to be reclassified to profit
or loss in subsequent periods 882 (1 793) (6 759)
Other comprehensive income/(loss)
for the period, net of tax 2 387 (1 793) (7 520)
Total comprehensive income for the period 93 850 112 445 (16.5) 261 669
Cents Cents Cents
Earnings per share
- basic and diluted 139.15 173.80 (19.9) 409.54
Headline earnings per share 139.29 173.84 (19.9) 410.22
Condensed consolidated statement of financial position
as at 30 June 2015
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2015 2014 2014
(Unaudited) (Unaudited) (Audited)
R’000 R’000 R’000
ASSETS
Non-current assets 191 854 209 203 201 818
Property, plant and equipment and intangible assets 146 890 148 391 152 389
Pension fund plan surplus - 3 575 -
Other non-current assets 44 964 57 237 49 429
Current assets 1 288 626 1 087 712 1 227 645
Inventories 223 225 297 145 225 405
Trade and other receivables 460 851 303 620 374 552
Cash and cash equivalents 604 550 486 947 627 688
TOTAL ASSETS 1 480 480 1 296 915 1 429 463
EQUITY
Share capital and reserves
Share capital and reserves 915 594 672 520 821 744
Total equity 915 594 672 520 821 744
LIABILITIES
Non-current liabilities 152 257 87 808 118 409
Other non-current liabilities 146 442 87 808 113 534
Pension fund plan deficit 5 815 - 4 875
Current liabilities 412 629 536 587 489 310
Other current liabilities 412 629 527 278 489 310
Bank overdraft - 9 309 -
Total liabilities 564 886 624 395 607 719
TOTAL EQUITY AND LIABILITIES 1 480 480 1 296 915 1 429 463
Condensed consolidated statement of changes in equity
for the period ended 30 June 2015
Pension
fund plan Cash flow
Share Retained surplus/ hedge
capital earnings (deficit) reserve Total
R’000 R’000 R’000 R’000 R’000
Balance at 1 January 2014 657 557 299 2 119 - 560 075
Total comprehensive income - 114 238 (1 793) - 112 445
Profit and loss - 114 238 - - 114 238
Other comprehensive loss for the period - - (1 793) - (1 793)
Balance at 30 June 2014 (unaudited) 657 671 537 326 - 672 520
Balance at 1 July 2014 657 671 537 326 - 672 520
Total comprehensive income - 154 951 (4 966) (761) 149 224
Profit and loss - 154 951 - - 154 951
Other comprehensive loss for the period - - (4 966) (761) (5 727)
Balance at 31 December 2014 (audited) 657 826 488 (4 640) (761) 821 744
Balance at 1 January 2015 657 826 488 (4 640) (761) 821 744
Total comprehensive income - 91 645 882 1 505 94 032
Profit and loss - 91 645 - - 91 645
Other comprehensive loss for the period - - 882 1 505 2 387
Balance at 30 June 2015 (unaudited) 657 918 133 (3 758) 744 915 776
Condensed consolidated statement of cash flows
for the period ended 30 June 2015
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2015 2014 2014
(Unaudited) (Unaudited) (Audited)
R’000 R’000 R’000
Cash flow from operating activities
Cash generated from operations 8 220 214 055 404 774
Interest paid (617) (3 002) (23)
Income tax paid (45 542) (77 447) (131 877)
Net cash (used in)/generated from operating activities (37 939) 133 606 272 874
Cash flow from investing activities
Interest received 17 334 8 978 23 961
Purchases of property, plant and equipment (2 537) (8 028) (19 156)
Government grant received - - 7 448
Purchases of intangible assets (72) - (633)
Proceeds from disposal of property, plant and equipment 76 11 123
Net cash generated from investing activities 14 801 961 11 743
Net (decrease)/increase in cash and cash equivalents (23 138) 134 567 284 617
Cash and cash equivalents at the beginning
of the period 627 688 343 071 343 071
Cash and cash equivalents at the end of the period 604 550 477 638 627 688
Other Group salient features
for the period ended 30 June 2015
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2015 2014 2014
(Unaudited) (Unaudited) Change (Audited)
R’000 R’000 % R’000
Net asset value per share (cents) 1 392.98 1 023.17 36.1 1 250.33
Depreciation 6 952 6 027 15.3 12 296
Amortisation 999 938 6.5 1 900
Capital expenditure 2 609 8 028 (67.5) 19 156
Capital commitments
- Authorised and contracted 512 6 041 (91.5) 899
Number of shares in issue (000’s) 65 729 65 729 65 729
Earnings per share (cents) 139.15 173.80 (19.9) 409.54
Headline earnings per share (cents) 139.29 173.84 (19.9) 410.22
Reconciliation of headline earnings
Profit for the period 91 463 114 237 269 189
Loss on disposal of property, plant and equipment 88 25 173
Impairment of property, plant and equipment - - 272
Headline earnings 91 551 114 262 (19.9) 269 634
Segmental analysis by operating division
for the period ended 30 June 2015
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2015 2014 2014
(Unaudited) (Unaudited) Change (Audited)
R’000 R’000 % R’000
Revenue
Fans and Heat Exchangers 527 488 615 228 (14.3) 1 296 686
Environmental Control 149 981 136 876 9.6 291 336
677 469 752 104 (9.9) 1 588 022
Inter-segmental sales
Fans and Heat Exchangers 6 087 7 028 (13.4) 17 506
Environmental Control 14 764 7 630 93.5 22 558
20 851 14 658 42.2 40 064
Orders received
Fans and Heat Exchangers 587 595 668 454 (12.1) 1 421 400
Environmental Control 243 895 114 553 112.9 166 300
831 490 783 007 6.2 1 587 700
Operating profit
Fans and Heat Exchangers 97 740 150 696 (35.1) 317 663
Environmental Control 22 987 16 638 38.2 30 580
120 727 167 334 (27.9) 348 243
Central operations (10 516) (8 153) 29.0 (21 396)
Total operating profit 110 211 159 181 (30.8) 326 847
Directors
IH Brander (Chairman)#**, T Bärwald (Chief Executive Officer)†, J Brown#**, M Malebye (Lead Independent Director)**,
K Johnson (Chief Financial Officer)#, H Mathe**, M Patel** (#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 Proprietary Limited
70 Marshall Street, Johannesburg, 2001
02 September 2015
Sponsor
PricewaterhouseCoopers Corporate Finance Proprietary Limited
www.howden.co.za
Date: 02/09/2015 03:13:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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