Wrap Text
Reviewed Condensed Annual Financial Results For The Year Ended 31 December 2015
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 2015
HIGHLIGHTS FOR DECEMBER 2015 WHEN COMPARED TO THE CORRESPONDING PERIOD IN 2014 ARE:
- Revenue declined 6.6% to R1 483.3 million
- Operating profit declined 19.8% to R262.0 million
- Cash and cash equivalents increased 16.3% to R730.2 million
- The Environmental Control division’s revenue increased 25.6% to R366.0 million
Commentary
OVERVIEW
Overall the 2015 performance included a solid operating profit performance (R262.0 million) and the Company’s
continued focus on working capital means that it ends the year with a strong balance sheet and is well positioned to take
up any opportunities that present themselves during 2016.
RESULTS AND REVIEW OF OPERATIONS
Orders
Orders received during 2015 have decreased to R1 417.7 million, a decrease of 10.7% compared to the corresponding
period (2014: R1 587.7 million). The closing order book for 2015 has reduced to R800.0 million (2014: R882.7 million).
The aftermarket order book has increased by 21.6% despite the reduced order intake in 2015 as a result of securing some
additional aftermarket in the latter part of 2015. New build order book has reduced by 29.9% as customers are deferring
any non-essential and expansionary capital expenditure.
Environmental Control division order intake was R311.2 million compared to R166.3 million in 2014. The business
received some large orders in the first half of 2015 which resulted in this improvement. The division continues to have
a large opportunity list but the award of orders from customers in the second half of 2015 has been slow.
Fans and Heat Exchangers division orders received during 2015 have decreased by 22.2% to R1 106.5 million compared to
the corresponding period (2014: R1 421.4 million). There has been reduced order intake experienced in all key market
segments in South Africa as customers engage in cost-minimisation strategies and defer all non- essential expenditure.
Revenue of R1 483.3 million for 2015 is 6.6% behind the equivalent period in 2014 of R1 588.0 million.
The Environmental Control division delivered an improved performance with revenue rising 25.6% to R366.0 million
(2014: R291.3 million) as it successfully executed its opening order book and new orders awarded in the first half of 2015.
The Fans and Heat Exchangers division saw a decline in revenue of 13.8% to R1 117.3 million (2014: R1 296.7 million).
The decline is a result of the challenging market conditions being faced in South Africa across our key market segments
as customers seek to minimise or delay expenditure until conditions improve.
Operating profit of R262.0 million is a 19.8% decline from the R326.8 million reported in 2014.
The Environmental Control division’s operating profit was 68.0% higher at R51.4 million when compared to the
corresponding period, as a result of increased revenue.
The Fans and Heat Exchangers division’s operating profit reduced by 32.7% to R213.6 million (2014: R317.7 million).
Operating profit margins in this division decreased from 24.5% to 19.1% on the back of reduced revenue volumes and
increased pricing pressure from key customers.
Central operations had a reduction in costs of 85.9% largely due to the recognition of a gain on curtailment of
R19.8 million for the Company’s defined benefit scheme. During 2015, the remaining members of the defined benefit scheme
were offered the opportunity to join the defined contribution pension fund (DC plan) for future service and to transfer
their accrued benefits from the fund in the DC plan. As a result of this change, the latest accounting valuation as at
31 December 2015 has resulted in a gain.
Earnings per share has reduced by 19.9% to 327.94 cents (2014: 409.54) as a result of the decrease in revenue
partially mitigated by improved net finance income.
Howden’s continuing focus on sustainable working capital management has resulted in a satisfactory cash flow
performance in 2015. Cash generated from operations for the year was R156.8 million and cash and cash equivalents are
R730.2 million (2014: R627.7 million).
ACCOUNTING POLICIES
The condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Limited
Listings Requirements for provisional reports and the requirements of the Companies Act of South Africa. The Listings
Requirements require provisional reports to be prepared in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards
Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting
policies applied in the preparation of the condensed consolidated financial statements are in terms of IFRS and are
consistent with those applied in the previous consolidated annual financial statements.
The accounting standards and amendments issued to accounting standards and interpretations which are relevant to the
Group, but not yet effective at 31 December 2015, 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
Capital project spend within power generation, mining and general industry is expected to remain subdued. The Company
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
A distribution agreement was entered into in February 2016 between Howden Donkin (Pty) Limited and ESAB for the
distribution of ESAB’s products in South Africa.
DIVIDENDS
The directors have resolved not to declare a dividend.
DIRECTORATE
There were no changes to the board in 2015.
W Thomson joined the board on 1 February 2016 as Chief Operating Officer and alternative director to T Bärwald, who
will be leaving Howden Africa to take up another role within Howden Global at the end of May 2016. Mr Thomson will take
over the role of CEO upon Mr Bärwald’s departure.
DIRECTORS’ RESPONSIBILITY
The directors take full responsibility for the preparation of the provisional report. The financial information has
been correctly extracted from the underlying annual financial statements.
REVIEWED FINANCIAL RESULTS
These condensed consolidated financial statements for the year ended 31 December 2015, that comprises the condensed
consolidated statement of financial position and the consolidated statements of comprehensive income, changes in equity
and cash flows, have been reviewed by Ernst & Young Inc., who expressed an unmodified review conclusion. This summarised
report is extracted from audited information, but is not itself audited.
A copy of the auditor’s review report is available for inspection at the Company’s registered office, 1A Booysens
Road, Booysens, 2091, during normal business hours together with the financial statements identified in the auditor’s
report.
PREPARATION OF THE CONDENSED ANNUAL FINANCIAL RESULTS
The Group financial results were prepared by Mr Kulani Mlambo (CA)SA 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
30 March 2016
Condensed consolidated statement of comprehensive income for the year ended 31 December 2015
2015 2014
(Reviewed) Change (Reviewed)
R’000 % R’000
Revenue 1 483 276 (6.6) 1 588 022
Cost of sales (1 071 717) (1 086 529)
Gross profit 411 559 (17.9) 501 493
Distribution costs (37 583) 1.1 (37 191)
Administrative expenses (117 460) (16.9) (141 395)
Other income 5 481 39.1 3 940
Operating profit 261 997 (19.8) 326 847
Investment income 40 510 69.1 23 961
Finance costs (27) (23)
Profit before income tax 302 480 (13.8) 350 785
Income tax expense (86 927) (81 596)
Profit for the year 215 553 (19.9) 269 189
Other comprehensive income
Cash flow hedging gain/(loss) 1 009 (761)
Pension fund plan gain/(loss) 901 (6 759)
Other comprehensive income/(loss) for the year, net of tax 1 910 (7 520)
Total comprehensive income for the year 217 463 (16.9) 261 669
Earnings per share - basic and diluted (cents) 327.94 (19.9) 409.54
Condensed consolidated statement of financial position as at 31 December 2015
2015 2014
(Reviewed) (Reviewed)
R’000 R’000
ASSETS
Non-current assets 196 763 201 818
Property, plant and equipment and intangible assets 142 290 152 389
Pension fund plan surplus 17 712 -
Deferred tax assets 24 452 28 745
Trade and other receivables and construction contracts 12 309 20 684
Current assets 1 387 607 1 227 645
Inventories 235 163 225 405
Trade and other receivables and construction contracts 384 800 350 336
Loan issued 7 500 -
Current income tax asset 29 954 24 216
Cash and cash equivalents 730 190 627 688
TOTAL ASSETS 1 584 370 1 429 463
EQUITY
Share capital and reserves
Share capital and reserves 1 039 207 821 744
Total equity 1 039 207 821 744
LIABILITIES
Non-current liabilities 108 933 118 409
Deferred tax liabilities 9 272 1 417
Other payables and construction contracts 87 626 87 903
Provisions 12 035 24 214
Pension fund plan deficit - 4 875
Current liabilities 436 230 489 310
Trade and other payables and construction contracts 417 564 478 581
Current income tax liabilities - 277
Provisions 18 666 10 452
Total liabilities 545 163 607 719
TOTAL EQUITY AND LIABILITIES 1 584 370 1 429 463
Condensed consolidated statement of changes in equity for the year ended 31 December 2015
2015 2014
(Reviewed) (Reviewed)
R’000 R’000
Share capital and reserves at the beginning of the year 821 744 560 075
Total comprehensive income for the year 217 463 261 669
Profit for the year 215 553 269 189
Other comprehensive income 1 910 (7 520)
Dividends - -
Share capital and reserves at the end of the year 1 039 207 821 744
Condensed consolidated statement of cash flows for the year ended 31 December 2015
2015 2014
(Reviewed) (Reviewed)
R’000 R’000
Cash flow from operating activities
Cash generated from operations 156 760 404 774
Interest paid (27) (23)
Income tax paid (81 536) (131 877)
Net cash generated from operating activities 75 197 272 874
Cash flow from investing activities
Interest received 37 521 23 961
Purchases of property, plant and equipment (7 192) (19 156)
Loans issued (7 500) -
Purchases of intangible assets (17) (633)
Government grant received 4 209 7 448
Proceeds from disposal of property, plant and equipment 284 123
Net cash generated from investing activities 27 305 11 743
Cash flow from financing activities
Dividends paid - -
Net cash used in financing activities - -
Net increase in cash and cash equivalents 102 502 284 617
Cash and cash equivalents at the beginning of the year 627 688 343 071
Cash and cash equivalents at the end of the year 730 190 627 688
Other Group salient features for the year ended 31 December 2015
2015 2014
(Reviewed) Change (Reviewed)
R’000 % R’000
Net asset value per share (cents) 1 581.0 26.5 1 250.2
Depreciation 14 035 12 296
Amortisation 1 886 1 900
Capital expenditure 7 209 19 789
Capital commitments
- authorised and contracted 598 899
Operating profit to revenue (%) 17.66 20.58
Number of shares in issue (’000) 65 729 65 729
Earnings per share - basic and diluted (cents) 327.94 (19.9) 409.54
Headline earnings per share - basic and diluted (cents) 329.62 (19.6) 410.22
Dividends per share
- dividend paid (cents) - -
- interim dividend paid (cents) - -
Reconciliation of headline earnings
Profit for the year 215 553 269 189
Loss on disposal of property, plant and equipment 59 173
Write off of property, plant and equipment 1 044 272
Headline earnings 216 656 (19.6) 269 634
Segmental analysis by operating division for the year ended 31 December 2015
2015 2014
(Reviewed) Change (Reviewed)
R’000 % R’000
Revenue
Fans and Heat Exchangers 1 117 302 (13.8) 1 296 686
Environmental Control 365 974 25.6 291 336
1 483 276 (6.6) 1 588 022
Intersegmental revenue
Fans and Heat Exchangers 18 242 4.2 17 506
Environmental Control 22 249 (1.4) 22 558
40 491 1.1 40 064
Orders received
Fans and Heat Exchangers 1 106 500 (22.2) 1 421 400
Environmental Control 311 200 87.1 166 300
1 417 700 (10.7) 1 587 700
Operating profit
Fans and Heat Exchangers 213 642 (32.7) 317 663
Environmental Control 51 377 68.0 30 580
265 019 348 243
Central operations (3 022) (85.9) (21 396)
Total operating profit 261 997 (19.8) 326 847
Investment income 40 510 69.1 23 961
Finance costs (27) (23)
Profit before tax 302 480 (13.8) 350 785
Assets
Fans and Heat Exchangers 719 670 (36.4) 1 131 941
Environmental Control 172 626 (2.4) 176 801
Central operations 692 074 473.3 120 721
1 584 370 10.8 1 429 463
Liabilities
Fans and Heat Exchangers 461 896 4.4 442 415
Environmental Control 61 337 (24.6) 81 352
Central operations 21 930 (73.9) 83 952
545 163 (10.3) 607 719
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
Carmen Koopman
Company Secretary
+27 11 240 4000
carmen.koopman@howden.co.za
Publication date
30 March 2016
www.howden.co.za
Date: 30/03/2016 04:45:00 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.
Sharenet Sites 
