Wrap Text
Unaudited interim results for the six months ended 31 May 2016
Hudaco Industries Limited
Incorporated in the Republic of South Africa
Registration number: 1985/004617/06
JSE share code: HDC
ISIN code: ZAE000003273
Unaudited interim results for the six months ended 31 May 2016
Turnover down 1,6% to R2,5 billion
Operating profit down 15,8% to R246 million
Basic and headline earnings per share down 13,9% to 472 cps
Comparable earnings per share down 19,7% to 440 cps
Net cash generated from operating activities R172 million
Interim dividend down 5,6% to 170 cps
Commentary
Hudaco Industries is a South African group specialising in the importation
and distribution of high-quality branded automotive, industrial and electrical
consumable products, mainly in the southern African region. Hudaco businesses
serve markets that fall into two primary categories:
* The automotive aftermarket, power tool, security and communication equipment
businesses supply products into markets with a bias towards consumer spending.
* The mechanical and electrical power transmission, diesel engine, hydraulics
and pneumatics, steel, thermoplastic fittings and bearings businesses supply
engineering consumables mainly to mining and manufacturing customers.
Value added includes product specification, technical advice, application and
installation training and troubleshooting, combined with ready availability
at a fair price.
Results
The group has delivered satisfactory first half results under exceedingly difficult
economic circumstances. The group’s deft positioning over the past few years to
reduce dependence on the mining and manufacturing sectors has proved successful
with welcome increases in revenues and earnings over time from sectors of the
economy that have better prospects.
Group sales at R2,5 billion for the half year have reduced marginally from
2015 but that is after acquisitions added R122 million. Operating profit
declined 15,8% to R246 million with an operating margin still at a very
respectable 9,8%. Operating expenses were very well controlled, increasing
only 4% even with the acquisitions. Basic and headline earnings per share
declined 13,9% to 472 cents whilst comparable earnings per share (CEPS)
declined 19,7% to 440 cents. 2015’s first half results were boosted by
approximately R50 million profits (R36 million after tax) from two sources
that have not been repeated this period – sales of alternative energy
products due to load shedding and a large contract for communication equipment.
Had it not been for these last year, CEPS would have been down only 3% and
it is notable that 2016 half-year CEPS are 6% above those of 2014. The impact
on the full year results will not be as significant as it has been on
the half year results.
The interim dividend has been reduced 5,6% to 170 cents per share.
The financial position is in good shape. Bank borrowings normally peak at
the half year as we stock up for what is usually a busier second half
and with the depreciation of the Rand, our inventory is costing us considerably
more than last year. Notwithstanding this, and the fact that we paid dividends
of R115 million and R135 million for acquisitions, net borrowings increased only
R137 million in the half year to R1 153 million. Operating activities generated
net cash of R172 million for the six months. Borrowings are still well within
our self-imposed conservative guidelines and our available banking facilities
and, unless we make further acquisitions, our usual strong second half cash
generation should reduce them by year end.
Consumer-related products
This segment’s contribution to group sales has benefited from acquisition activity
over the past few years and in this half it accounted for 49% of group sales and 62%
of operating profit. There are now nine businesses in this segment and they diversify
our opportunities and market segment mix. The automotive aftermarket is the biggest
market sector and continues to perform well. Our security businesses have also had
a good start to the year, securing some quality project business. Our battery and
communication businesses were well down on last year as a result of load shedding
largely coming to an end and no repeat major communication equipment contract.
Power tool sales felt the impact of the pressure of the economy and volumes
declined in the first half.
Segment sales declined 3,7% to R1 238 million, of which R38 million was from
acquisitions. Operating profit declined 17,5% to R160 million at an operating
margin of 13%.
Engineering consumables
There are 20 businesses which make up this segment and the South African mining
and manufacturing markets account for half of its revenue. Trading conditions were
extremely tough with the drought, anaemic economy and weak commodity prices resulting
in sharply lower demand. This tough environment created aggressive pricing pressure
which reduced the return on sales. However, there were good performances from
businesses supplying diesel engines, thermoplastic fittings, belting and
electrical drives. Our filtration and hydraulics businesses, although well
down on prior year, produced a very acceptable return on sales. Segment
sales did very well to remain flat at R1 271 million, albeit supported
by a small acquisition. Operating profit declined 18,3% to R98 million at
an operating margin of 8%.
Prospects
South Africa, right now, is a difficult place to do business. We expect that
trading conditions in the second half of 2016 will be much the same. Consumer
spending will probably remain under pressure as the economy continues to
struggle and three of the sectors we serve: mining, manufacturing and
agriculture, are likely to stay depressed until such time as commodity
prices increase and the drought is broken.
Notwithstanding the substantial shift in Hudaco’s exposure away from mining
and manufacturing over the past few years, these remain important sectors for
the group and their fortunes still have a significant impact on Hudaco’s
trading results. Businesses heavily exposed to these markets are bound to
battle to get organic growth and will have to manage the relationship
between sales, gross margin and expenses even more carefully until
conditions improve.
Consumer-related markets, which now account for the majority of our profit
are performing well and increased emphasis will continue to be placed on
growing this segment. The acquisition of Miro in May 2016 is another
positive step in this direction.
Hudaco’s business model, which is principally the sale of replacement
parts with a high value added component; and its financial characteristics
– high margin and strong cash flows with a limited requirement for investment
in fixed assets; allow us to continue to deliver acceptable results in this
difficult economic environment. We expect that the results for the
full year to November 2016 will be closer to last year’s results than those
of the first half.
Declaration of interim dividend number 59
Interim dividend number 59 of 170 cents per share (gross) is declared payable
on Monday, 15 August 2016 to ordinary shareholders recorded in the register
at the close of business on Friday, 12 August 2016.
The timetable for the payment of the dividend is as follows:
Last day to trade cum dividend Monday, 8 August 2016
Trading ex dividend commences Wednesday, 10 August 2016
Record date Friday, 12 August 2016
Payment date Monday, 15 August 2016
Share certificates may not be dematerialised or rematerialised between
Wednesday, 10 August 2016 and Friday, 12 August 2016, both days inclusive.
The certificated register will be closed for this period.
In terms of the Listings Requirements of the JSE Limited regarding
Dividends Tax, the following additional information is disclosed:
* the dividend has been declared out of income reserves;
* the dividend withholding tax rate is 15%;
* the net local dividend amount is 144,5 cents per share for shareholders
liable to pay Dividends Tax and 170 cents per share for shareholders
exempt from Dividends Tax;
* Hudaco Industries Limited has 34 153 531 shares in issue (which includes
2 507 828 treasury shares); and
* Hudaco Industries Limited’s income tax reference number is 9400/159/71/2.
Results presentation
Hudaco will host presentations on the financial results in Johannesburg
and Cape Town on Friday, 1 July 2016 and Monday, 4 July 2016, respectively.
Anyone wishing to attend should contact Janine Yon at 011 657 5007.
The slides which form part of the presentation will be available on the
company’s website from Tuesday, 5 July 2016.
For and on behalf of the board
RT Vice GR Dunford
Independent non-executive chairman Chief executive
30 June 2016
Nedbank Corporate and Investment Banking
Sponsor
These results are available on the internet: www.hudaco.co.za
Group statement of financial position
31 May 31 May 30 Nov*
2016 2015 2015
R million
Assets
Non-current assets 1 611 1 341 1 367
Property, plant and equipment 262 264 261
Investment in joint venture 5 2 7
Goodwill 1 240 996 1 001
Intangible assets 75 79 69
Deferred taxation 29 29
Current assets 2 562 2 240 2 407
Inventories 1 612 1 356 1 369
Trade and other receivables 858 834 990
Taxation 38 3 9
Bank deposits and balances 54 47 39
Total assets 4 173 3 581 3 774
Equity and liabilities
Equity 1 941 1 774 1 895
Equity holders of the parent 1 890 1 731 1 844
Non-controlling interest 51 43 51
Non-current liabilities 1 119 805 831
Amounts due to bankers 900 792 800
Amounts due to vendors of businesses acquired 197 17
Deferred taxation 22 13 14
Current liabilities 1 113 1 002 1 048
Trade and other payables 760 761 764
Bank overdraft 307 220 255
Amounts due to vendors of businesses acquired 34 21 22
Taxation 12 7
Total equity and liabilities 4 173 3 581 3 774
Group statement of comprehensive income
Six Six
months months Year*
ended ended ended
31 May % 31 May 30 Nov
R million 2016 change 2015 2015
Turnover 2 507 (1,6) 2 549 5 230
– Ongoing operations 2 385 (6,4) 2 549 5 216
– Operations acquired after
December 2014 122 14
Cost of sales 1 605 1 625 3 313
Gross profit 902 924 1 917
Operating expenses 656 632 1 312
Operating profit 246 (15,8) 292 605
– Ongoing operations 229 (21,6) 292 604
– Operations acquired after
December 2014 17 1
Adjustment to fair value of amounts
due to vendors of businesses acquired 12 (2)
Profit before interest 258 (11,6) 292 603
Finance costs 48 39 76
Profit before taxation 210 (17,0) 253 527
Taxation 57 71 141
Profit after taxation 153 (15,9) 182 386
Income from joint venture 1 1 3
Profit for the period 154 (15,8) 183 389
Other comprehensive income (1) 1 4
Movement on fair value of cash
flow hedges (3) 1 4
Exchange gain on translation of
foreign operations 2
Total comprehensive income for the
period 153 184 393
Profit attributable to:
– Equity holders of the parent 149 (13,9) 173 369
– Non-controlling shareholders 5 10 20
154 (15,8) 183 389
Total comprehensive income
attributable to:
– Equity holders of the parent 148 (14,9) 174 372
– Non-controlling shareholders 5 10 21
153 (16,8) 184 393
Earnings per share (cents)
– Basic 472 (13,9) 548 1 164
– Headline 472 (13,9) 548 1 163
– Comparable 440 (19,7) 548 1 169
Diluted earnings per share (cents)
– Basic 471 (12,3) 537 1 163
– Headline 471 (12,3) 537 1 161
– Comparable 439 (18,2) 537 1 167
Calculation of headline earnings
Profit attributable to equity
holders of the parent 149 (13,9) 173 369
Adjusted for:
Profit on disposal of property,
plant and equipment (1)
Headline earnings 149 (13,9) 173 368
Calculation of comparable earnings
Headline earnings 149 (13,9) 173 368
Adjusted for:
Adjustment to fair value of amounts
due to vendors of businesses acquired (12) 2
Non-controlling interest 2
Comparable earnings 139 (19,7) 173 370
Dividends
– Per share (cents) 170 (5,6) 180 525
– Amount (Rm) 54 57 166
Shares in issue (000) 31 646 31 646 31 646
– Total (000) 34 154 34 154 34 154
– Held by subsidiary (000) (2 508) (2 508) (2 508)
Weighted average shares in issue
– Total (000) 31 646 31 646 31 646
– Diluted (000) 31 708 32 267 31 696
Group statement of cash flows
Six Six
months months Year*
ended ended ended
31 May 31 May 30 Nov
R million 2016 2015 2015
Cash generated from trading 287 331 653
Increase in working capital (29) (3) (157)
Cash generated from operations 258 328 496
Fair value adjustment of cash flow hedges (3) 4
Taxation paid excluding tax settlement (83) (73) (186)
Net cash from operations before tax settlement 172 255 314
Settlement of tax dispute (192) (192)
Net cash from operating activities 172 63 122
Net investment in new operations (135) (466) (463)
Net investment in property, plant and equipment (16) (13) (31)
Net cash from investing activities (151) (479) (494)
Increase in non-current amounts due to bankers 100 595 603
Finance costs paid (44) (38) (73)
Dividends paid (115) (98) (158)
Net cash from financing activities (59) 459 372
(Increase) decrease in net bank overdraft (38) 43 0
Foreign exchange translation gain 1
Net bank overdraft at beginning of the period (216) (216) (216)
Net bank overdraft at end of the period (253) (173) (216)
Group statement of changes in equity
Share
capital Non-
and distributable
R million premium reserves
Balance at 1 December 2015 55 75
Comprehensive income for the period
Movement in equity compensation reserve 8
Dividends
Balance at 31 May 2016 55 83
Less: Shares held by subsidiary company
Net balance at 31 May 2016 55 83
Balance at 1 December 2014 55 66
Comprehensive income for the period
Movement in equity compensation reserve 6
Dividends
Balance at 31 May 2015 55 72
Less: Shares held by subsidiary company
Net balance at 31 May 2015 55 72
Balance at 1 December 2014 55 66
Comprehensive income for the year 4
Movement in equity compensation reserve 5
Dividends
Balance at 30 November 2015 55 75
Less: Shares held by subsidiary company
Net balance at 30 November 2015* 55 75
Equity
holders
Retained of the
R million income parent
Balance at 1 December 2015 1 733 1 863
Comprehensive income for the period 148 148
Movement in equity compensation reserve 8
Dividends (110) (110)
Balance at 31 May 2016 1 771 1 909
Less: Shares held by subsidiary company (19) (19)
Net balance at 31 May 2016 1 752 1 890
Balance at 1 December 2014 1 547 1 668
Comprehensive income for the period 174 174
Movement in equity compensation reserve 6
Dividends (98) (98)
Balance at 31 May 2015 1 623 1 750
Less: Shares held by subsidiary company (19) (19)
Net balance at 31 May 2015 1 604 1 731
Balance at 1 December 2014 1 547 1 668
Comprehensive income for the year 368 372
Movement in equity compensation reserve (27) (22)
Dividends (155) (155)
Balance at 30 November 2015 1 733 1 863
Less: Shares held by subsidiary company (19) (19)
Net balance at 30 November 2015* 1 714 1 844
Non-
controlling
R million interest Equity
Balance at 1 December 2015 51 1 914
Comprehensive income for the period 5 153
Movement in equity compensation reserve 8
Dividends (5) (115)
Balance at 31 May 2016 51 1 960
Less: Shares held by subsidiary company (19)
Net balance at 31 May 2016 51 1 941
Balance at 1 December 2014 33 1 701
Comprehensive income for the period 10 184
Movement in equity compensation reserve 6
Dividends (98)
Balance at 31 May 2015 43 1 793
Less: Shares held by subsidiary company (19)
Net balance at 31 May 2015 43 1 774
Balance at 1 December 2014 33 1 701
Comprehensive income for the year 21 393
Movement in equity compensation reserve (22)
Dividends (3) (158)
Balance at 30 November 2015 51 1 914
Less: Shares held by subsidiary company (19)
Net balance at 30 November 2015* 51 1 895
Supplementary information
The consolidated financial statements have been prepared in accordance with
IAS 34: Interim Financial Reporting, International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board
(IASB), SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee, the requirements of the South African Companies Act
and the JSE Listings Requirements. The same accounting policies,
presentation and measurement principles have been followed in the
preparation of the abridged report for the period ended 31 May 2016
as were applied in the preparation of the group’s annual financial
statements for the year ended 30 November 2015. These results have been
compiled under the supervision of the financial director, CV Amoils,
CA (SA). The directors of Hudaco take full responsibility for the
preparation of the abridged report and ensuring that the financial
information has been correctly extracted from the underlying
financial statements.
31 May 31 May 30 Nov*
2016 2015 2015
Average net operating assets (NOA) (Rm) 3 032 2 615 2 708
Operating profit margin (%) 9,8 11,5 11,6
Average NOA turn (times) 1,7 1,9 1,9
Return on average NOA (%) 16,2 22,3 22,4
Average net tangible operating assets (NTOA)
(Rm) 1 900 1 577 1 650
PBITA margin (%) 10,3 12,0 12,1
Average NTOA turn (times) 2,6 3,2 3,2
Return on average NTOA (%) 27,1 38,9 38,5
Net asset value per share (cents) 5 972 5 472 5 827
Return on average equity (%) 16,1 21,2 21,8
Comparable return on average equity (%) 14,8 21,2 21,9
Operating profit has been determined
after taking into account the
following charges (Rm)
– Depreciation 21 19 40
– Amortisation 12 15 29
Capital expenditure (Rm)
– Incurred during the period 19 15 37
– Authorised but not yet contracted for 32 27 58
Commitments
– Operating lease commitments on
properties (Rm) 224 232 245
– Commitment to purchase business:
Brewtech Engineering for a maximum
consideration of R70 million payable
over a period of three years.
Acquisition of businesses
On 1 December 2015 the group acquired 100% of the business of HERS, on
1 January 2016 100% of the business of All-Trade Distributors and on
1 May 2016 100% of the business of Miro Distribution each for a consideration
based on future profits and which are subject to a combined maximum of
R460 million.
Plant and equipment of R6 million, inventories of R66 million, trade and other
receivables of R47 million, trade and other payables of R27 million, cash of
R3 million, taxation of R12 million, intangible assets of R18 million and
goodwill of R211 million were recognised at dates of acquisition. These
values approximate the fair values as provisionally determined under IFRS 3.
Had these acquisitions been made at the beginning of the year, additional
turnover of R125 million and profit after interest and tax of R6 million
would have been included in the group results and the turnover and profit
after interest and tax for the group would have been R2 632 million and
R159 million, respectively.
Events after reporting date
On 1 June 2016 the group acquired 100% of the business of Brewtech
Engineering for a consideration based on future profits and which
is subject to a maximum of R70 million.
Plant and equipment of R2 million, inventories of R8 million, trade and
other receivables of R16 million, trade and other payables of R7 million,
cash of R2 million, taxation of R1 million, intangible assets of R3 million
and goodwill of R26 million will be recognised at date of acquisition. These
values approximate the fair values as provisionally determined under IFRS 3.
Had this acquisition been made at the beginning of the year, turnover of
R20 million and profit after interest and tax of R1 million would have been
included in the group results and the turnover and profit after interest
and tax for the group would have been R2 527 million and R154 million,
respectively.
Segment information
Turnover
Six Six
months months Year*
ended ended ended
31 May % 31 May 30 Nov
R million 2016 change 2015 2015
Consumer-related products 1 238 (3,7) 1 285 2 603
– Ongoing operations 1 200 (6,6) 1 285 2 603
– Operations acquired after December 2014 38
Engineering consumables 1 271 0,5 1 265 2 635
– Ongoing operations 1 187 (6,2) 1 265 2 621
– Operations acquired after December 2014 84 14
Total operating segments 2 509 (1,6) 2 550 5 238
Head office, shared services and
eliminations (2) (1) (8)
Total group 2 507 (1,6) 2 549 5 230
* Audited
Operating profit
Six Six
months months Year*
ended ended ended
31 May % 31 May 30 Nov
R million 2016 change 2015 2015
Consumer-related products 160 (17,5) 194 380
– Ongoing operations 156 (19,6) 194 380
– Operations acquired after December 2014 4
Engineering consumables 98 (18,3) 120 260
– Ongoing operations 85 (29,2) 120 259
– Operations acquired after December 2014 13 1
Total operating segments 258 (17,8) 314 640
Head office, shared services and
eliminations (12) (22) (35)
Total group 246 (15,8) 292 605
* Audited
Average net operating assets
Six Six
months months Year*
ended ended ended
31 May % 31 May 30 Nov
R million 2016 change 2015 2015
Consumer-related products 1 270 16,8 1 087 1 072
– Ongoing operations 1 219 12,1 1 087 1 072
– Operations acquired after December 2014 51
Engineering consumables 1 759 8,2 1 625 1 658
– Ongoing operations 1 681 3,4 1 625 1 652
– Operations acquired after December 2014 78 6
Total operating segments 3 029 11,7 2 712 2 730
Head office, shared services and
eliminations 3 (97) (22)
Total group 3 032 15,9 2 615 2 708
* Audited
Company information
Transfer secretaries
Computershare Investor Services Proprietary Limited
PO Box 61051
Marshalltown, 2107
Registered office
1st Floor, Building 9
Greenstone Hill Office Park
Emerald Boulevard, Greenstone Hill, Edenvale
Tel +27 11 657 5000
Email: info@hudaco.co.za
Directors
RT Vice (Chairman)*
GR Dunford (Chief executive)
CV Amoils (Financial director) SJ Connelly*
N Mandindi* SG Morris*
D Naidoo*
* Non-executive
Group secretary
R Wolmarans
Sponsor
Nedbank Corporate and Investment Banking
Date: 01/07/2016 08:00:00 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 
