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HOWDEN AFRICA HOLDINGS LIMITED - CANCELLATION OF S375368 Unaudited Interim financial results for the six months ended 30 June 2016

Release Date: 26/08/2016 12:04
Code(s): HWN     PDF:  
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CANCELLATION OF S375368 Unaudited Interim financial results for the six months ended 30 June 2016

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

Unaudited interim financial results for the six months ended 30 June 2016

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 also a distributor of ESAB welding and cutting equipment and consumables (reported under our new
Fabrication Technology division). 

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).

HIGHLIGHTS
- Revenue of R702.8 million increased by 3.7%
- Earnings per share of 140.85 cents increased by 1.2%
- Operating profit of R102.4 million decreased by 7.1%


COMMENTARY
OVERVIEW
Howden Africa experienced challenging trading conditions due to a slow-down in expenditure for environmental and
mining capital equipment projects within the first six months of 2016 which resulted in the Group’s operating profits
declining 7.1% when compared to the corresponding period in 2015. 

RESULTS
Orders received of R673.9 million for the first half of 2016 is 19.0% behind the corresponding period in 2015. There
has been reduced order intake within the Environmental Control division with orders reducing to R42.8 million. The Fans
and Heat Exchangers division is 0.8% ahead of the corresponding period in 2015 due to improved aftermarket (spares and
service supply). The new Fabrication Technology division commenced trading in the first quarter and received orders of
R38.7 million.

Revenue was R702.8 million for the first half of 2016 and is 3.7% ahead of the equivalent period in 2015 of R677.5 million. 
The Fans and Heat Exchangers division increased revenue 11.5% to R588.2 million due to improved aftermarket. The
Environmental Control division revenue decreased 46.7% due to customers delaying decisions on environmental control
projects due to economic conditions. The new Fabrication Technology division had revenue of R34.7 million.

Operating profit of R102.4 million is a reduction of 7.1% over the R110.2 million to June 2015; the performance in the
Fans and Heat Exchangers division was robust with the reduction resulting from a decline within the Environmental
Control division. The Fabrication Technology division made a loss of R1.8 million in its first few months of trading. 
Central operation costs are in line with the prior year. 

Earnings per share of 140.85 cents is 1.2% up on the corresponding period last year due primarily to improved
investment income.

Cash generated from operations was R61.8 million - an improvement over the corresponding period (2015: R8.2 million). 

Net asset value per share has increased by 23.4% to 1 718.98 cents (June 2015: 1 392.98 cents) mainly due to the
increase in cash and cash equivalents to R764.2 million.

ACCOUNTING POLICIES
The condensed consolidated interim financial statements for the period ended 30 June 2016 are prepared in accordance
with the requirements of the JSE Limited Listings Requirements for interim reports and the requirements of the Companies
Act of South Africa. The Listings Requirements require interim 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.

OUTLOOK
Capital project spend within power generation, mining and general industry is expected to remain subdued. The Fans and
Heat Exchangers division will continue to focus its strategy on the supply of services and spares to key industries.
Market conditions within the Environmental Control division are expected to remain challenging. The Fabrication Technology
division is expected to grow.

EVENTS AFTER REPORTING DATE
Mrs C Koopman resigned on 29 July and Mr C Masson was appointed as Company Secretary.

DIVIDENDS
The directors have resolved not to declare a dividend (2015: nil).

DIRECTORATE
Mr W Thomson joined the board on 1 February 2016 and became CEO on 1 June 2016 with Mr T Bärwald resigning as a
director.

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 2016.

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            W Thomson
Chairman              Chief Executive Officer

25 August 2016


Condensed consolidated statement of comprehensive income
for the period ended 30 June 2016
                                                              Six months       Six months                Twelve months     
                                                                   ended            ended                        ended    
                                                                 30 June          30 June                  31 December     
                                                                    2016             2015                         2015    
                                                              (Unaudited)      (Unaudited)     Change         (Audited)   
                                                                   R’000            R’000           %            R’000    
Revenue                                                          702 823          677 469         3.7        1 483 276    
Cost of sales                                                   (511 284)        (485 562)        5.3       (1 071 717)   
Gross profit                                                     191 539          191 907        (0.2)         411 559    
Distribution costs                                               (24 088)         (19 246)                     (37 583)   
Administrative expenses                                          (65 769)         (64 017)                    (117 460)   
Other income                                                         737            1 567                        5 481    
Operating profit                                                 102 419          110 211        (7.1)         261 997    
Investment income                                                 25 861           17 152                       40 510    
Finance costs                                                        (61)            (617)                         (27)   
Net finance income                                                25 800           16 535        56.0           40 483    
Profit before income tax                                         128 219          126 746                      302 480    
Income tax expense                                               (35 639)         (35 283)                     (86 927)   
Profit for the period                                             92 580           91 463         1.2          215 553    
Other comprehensive income for the period:                                                                                
Cash flow hedge (loss)/gain                                       (1 921)           1 505                        1 009    
Pension fund plan gain                                                 -              882                          901    
Other comprehensive (loss)/income for the period, net of tax      (1 921)           2 387                        1 910    
Total comprehensive income for the period                         90 659           93 850        (3.4)         217 463    
Earnings per share                                                                                                        
- basic and diluted (cents)                                       140.85           139.15         1.2           327.94 


Condensed consolidated statement of financial position
as at 30 June 2016   
                                                             Six months         Six months        Twelve months     
                                                                  ended              ended                ended     
                                                                30 June            30 June          31 December     
                                                                   2016               2015                 2015    
                                                             (Unaudited)        (Unaudited)            (Audited)   
                                                                  R’000              R’000                R’000    
ASSETS                                                                                                             
Non-current assets                                              196 635            191 854              196 763    
Property, plant and equipment and intangible assets             137 179            146 890              142 290    
Pension fund plan surplus                                        19 675                  -               17 712    
Deferred tax assets                                              25 200             28 564               24 452    
Trade and other receivables and construction contracts           11 581             16 400               12 309    
Current assets                                                1 510 254          1 288 625            1 387 607    
Inventories                                                     357 838            223 225              235 163    
Trade and other receivables and construction contracts          335 704            427 509              384 800    
Loans issued                                                      7 500                  -                7 500    
Current income tax asset                                         45 028             33 342               29 954    
Cash and cash equivalents                                       764 184            604 550              730 190    
TOTAL ASSETS                                                  1 706 889          1 480 480            1 584 370    
EQUITY                                                                                                             
Share capital and reserves                                                                                         
Share capital and reserves                                    1 129 866            915 594            1 039 207    
Total equity                                                  1 129 866            915 594            1 039 207    
LIABILITIES                                                                                                        
Non-current liabilities                                          96 887            152 257              108 933    
Pension fund plan deficit                                             -              5 815                    -    
Deferred tax liabilities                                          9 272              1 034                9 272    
Other payables and construction contracts                        75 434            121 194               87 626    
Provisions                                                       12 181             24 214               12 035    
Current liabilities                                             480 136            412 629              436 230    
Trade and other payables and construction contracts             457 692            403 191              417 564    
Current income tax liabilities                                        -                277                    -    
Provisions                                                       22 444              9 161               18 666    
Total liabilities                                               577 023            564 886              545 163    
TOTAL EQUITY AND LIABILITIES                                  1 706 889          1 480 480            1 584 370    


Condensed consolidated statement of changes in equity
for the period ended 30 June 2016
                                                              Six months        Six months        Twelve months     
                                                                   ended             ended                ended     
                                                                 30 June           30 June          31 December     
                                                                    2016              2015                 2015    
                                                              (Unaudited)       (Unaudited)            (Audited)   
                                                                   R’000             R’000                R’000    
Share capital and reserves at the beginning of the period      1 039 207           821 744              821 744    
Total comprehensive income for the period                         90 659            93 850              217 463    
Profit for the period                                             92 580            91 463              215 553    
Cash flow hedge                                                   (1 921)            1 505                1 009    
Pension fund plan loss                                                 -               882                  901    
Share capital and reserves at the end of the period            1 129 866           915 594            1 039 207    


Condensed consolidated statement of cash flows
for the period ended 30 June 2016 
                                                              Six months        Six months        Twelve months     
                                                                   ended             ended                ended     
                                                                 30 June           30 June          31 December     
                                                                    2016              2015                 2015    
                                                              (Unaudited)       (Unaudited)            (Audited)   
                                                                   R’000             R’000                R’000    
Cash flow from operating activities                                                                                
Cash generated from operations                                    61 755             8 220              156 760    
Interest paid                                                        (61)             (617)                 (27)   
Income tax paid                                                  (50 713)          (45 542)             (81 536)   
Net cash generated from/(utilised in) operating activities        10 981           (37 939)              75 197    
Cash flow from investing activities                                                                                
Interest received                                                 25 861            17 334               37 521    
Loans issued                                                           -                 -               (7 500)   
Purchases of property, plant and equipment                        (2 814)           (2 537)              (7 192)   
Government grant received                                              -                 -                4 209    
Purchases of intangible assets                                       (48)              (72)                 (17)   
Proceeds from disposal of property, plant and equipment               14                76                  284    
Net cash generated from investing activities                      23 013            14 801               27 305    
Net increase/(decrease) in cash and cash equivalents              33 994           (23 138)             102 502    
Cash and cash equivalents at the beginning of the period         730 190           627 688              627 688    
Cash and cash equivalents at the end of the period               764 184           604 550              730 190    


Other Group salient features 
for the period ended 30 June 2016
                                                             Six months       Six months                 Twelve months     
                                                                  ended            ended                         ended     
                                                                30 June          30 June                   31 December     
                                                                   2016             2015                          2015    
                                                             (Unaudited)      (Unaudited)     Change          (Audited)   
                                                                  R’000            R’000           %             R’000    
Net asset value per share (cents)                              1 718.98         1 392.98        23.4          1 581.00    
Depreciation                                                      6 962            6 952           -            14 035    
Amortisation                                                      1 009              999         1.0             1 886    
Capital expenditure                                               2 862            2 609         9.7             7 209    
Capital commitments                                                                                                       
- Authorised and contracted                                         335              512       (34.6)              598    
Operating profit to revenue (%)                                   14.57            16.27       (10.4)            17.66    
Number of shares in issue (000’s)                                65 729           65 729                        65 729    
Earnings per share - basic and diluted (cents)                   140.85           139.15         1.2            327.94    
Headline earnings per share (cents)                              140.83           139.29         1.1            329.62    
Reconciliation of headline earnings                                                                                       
Profit for the period                                            92 580           91 463                       215 553    
(Profit)/loss on disposal of property, plant and equipment          (12)              88                            59    
Impairment of property, plant and equipment                           -                -                         1 044    
Headline earnings                                                92 568           91 551         1.1           216 656    


Segmental analysis by operating division
for the period ended 30 June 2016 

                               Six months       Six months                    Twelve months     
                                    ended            ended                            ended     
                                  30 June          30 June                      31 December     
                                     2016             2015                             2015    
                               (Unaudited)      (Unaudited)      Change            (Audited)   
                                    R’000            R’000            %               R’000    
Orders received                                                                                
Fans and Heat Exchangers          592 339          587 595          0.8           1 106 500    
Environmental Control              42 804          243 895        (82.4)            311 200    
Fabrication Technology             38 719                -            -                   -    
                                  673 862          831 490        (19.0)          1 417 700    
Revenue                                                                                        
Fans and Heat Exchangers          588 213          527 488         11.5           1 117 302    
Environmental Control              79 952          149 981        (46.7)            365 974    
Fabrication Technology             34 658                -            -                   -    
                                  702 823          677 469          3.7           1 483 276    
Inter-segmental sales                                                                          
Fans and Heat Exchangers           11 412            6 087         87.5              18 242    
Environmental Control              16 276           14 764         10.2              22 249    
Fabrication Technology                560                -            -                   -    
                                   28 248           20 851         35.5              40 491    
Operating profit/(loss)                                                                        
Fans and Heat Exchangers          118 403           97 740         21.1             213 642    
Environmental Control              (3 941)          22 987       (117.1)             51 377    
Fabrication Technology             (1 781)               -            -                   -    
                                  112 681          120 727         (6.7)            265 019    
Central operations                (10 262)         (10 516)        (2.4)             (3 022)    
Total operating profit            102 419          110 211         (7.1)            261 997    
                                                                                               
Investment income                  25 861           17 152         50.8              40 510    
Finance costs                         (61)            (617)       (90.1)                (27)    
Profit before tax                 128 219          126 746          1.2             302 480    


Corporate information
  
Directors
IH Brander (Chairman)#**, W Thomson (Chief Executive Officer)#, J Brown#**, M Malebye**, 
K Johnson# (Chief Financial Officer), H Mathe**, M Patel**
(#British **Non-executive)

Company secretary
C Masson

Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg, 2001

Sponsor 
PricewaterhouseCoopers Corporate Finance Proprietary Limited

www.howden.co.za


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