Wrap Text
Summarised Audited Financial Statements
Howden Africa Holdings Limited (HAHL)
(Incorporated in the Republic of South Africa)
(Registration number 1996/002982/06)
JSE code: HWN
ISIN: ZAE000010583
("Howden", "the Company" or "the Group")
Summarised audited financial statements for the year ended 31 December 2016
Vision and highlights
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, iron and steel, cement and
water treatment.
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).
Our vision is to be Africa's leading application engineer, providing lifetime solutions in air and gas-handling.
Highlight for 2016 when compared to the corresponding period in 2015 is:
Revenue of R1 604.5 million
increased by 8.2%
COMMENTARY
OVERVIEW
Howden Africa experienced both orders and sales growth in 2016 despite the adverse market conditions.
RESULTS
Orders received during 2016 have increased to R1 572.7 million an increase of 10.9% compared to the corresponding period
(2015: R1 417.7 million). The closing order book for 2016 remains strong at R770.4 million (2015: R800 million). The
aftermarket order book has increased by 4.8% resulting from additional export and retrofit orders received in the 2016
period. New build order book has reduced 13.5% as customers are deferring any non-essential and expansionary capital
expenditure.
Environmental Control division order intake was R239.9 million compared to R311.2 million in 2015. The business received
some larger orders in the latter part of 2016. The division continues to have a large opportunity list, but due to the
economic conditions within sub-Saharan Africa, the award of orders from customers has been slow.
Fans and Heat Exchangers division orders received during 2016 have increased by 11.9% to R1 238.3 million compared to
the corresponding period (2015: R1 106.5 million). The increase has been driven by aftermarket and retrofit activity,
with new build activity being subdued as customers continue to defer non-essential expenditure.
The new Fabrication Technology division order intake for 2016 is R94.4 million with R87 million of this converted into
revenue in the period.
Revenue of R1 604.5 million for 2016 is 8.2% ahead of the equivalent period in 2015 of R1 483.3 million.
The Fans and Heat Exchangers division recorded revenue growth of 19.8% to R1 338.8 million (2015: R1 117.3 million).
This revenue growth has been driven by an improvement in both aftermarket and retrofit revenue. The Environmental Control
division saw a decline in revenue of 51.2% due to economic conditions delaying customers' decisions on environmental
control projects. The new Fabrication Technology division was also a contributing factor to the growth in revenue with
revenue for the period of R87 million.
Operating profit of R247.6 million is a 5.5% decline from the R262.0 million reported in 2015.
The Environmental Control division moved from a operating profit of R51.4 million in the previous year to operating
loss of R12.7 million, this decline resulted from challenging market conditions adding pressure to project margins
and a one-off project warranty of R26.4 million.
The Fans and Heat Exchangers division's operating profit improved by 32.9% to R283.9 million (2015: R213.6 million)
driven by increased revenue volumes and product mix.
Central operations had an increase in costs to R24.8 million largely due to the recognition of a gain on curtailment
of R19.8 million in the prior year for the defined benefit scheme.
The Group's earnings per share was 332.31 cents, compares with 327.94 cents in the corresponding period in 2015. This
is made up of a 5.5% decline in operating profit and has been mitigated by improved net finance income of R55.5 million
(2015: R40.5 million).
Cash generated from operations for the year was R216.2 million and cash and cash equivalents are R909.3 million. Howden's
continuing focus on sustainable working capital management has resulted in a satisfactory cash flow performance in 2016.
Net asset value per share has increased by 20.8% to 1 909.22 cents (2015: 1 581.00 cents) mainly due to the increase
in cash and cash equivalents to R909.3 million.
ACCOUNTING POLICIES
The condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Limited
Listings Requirements for condensed reports and the requirements of the Companies Act of South Africa. The Listings
Requirements require condensed 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 2016, 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 within South
Africa. We continue to focus our strategy on the supply of services and spares to key industries and to pursue capital
project opportunities within sub-Saharan Africa. The expectation is to grow the local market share of The Fabrication
Technology division.
EVENTS AFTER REPORTING DATE
None were identified.
DIVIDENDS
The directors have resolved not to declare a dividend.
DIRECTORATE
W Thomson joined the board on 1 February 2016 as COO and became CEO effective 1 June 2016 replacing Mr Bärwald whose
contract expired on 31 May 2016. Mrs M Vigouroux joined the board on 8 December 2016 assuming the role of CFO with
Mr K Johnson resigning as a director and CFO.
DIRECTORS' RESPONSIBILITY
The directors take full responsibility for the preparation of this report. The financial information has been
correctly extracted from the audited information, but is not itself audited.
AUDIT REPORT
This summarised report is extracted from the underlying audited information, but is not in itself audited. The audited
annual financial statements for the year ended 31 December 2016 from which the summarised report has been extracted
were audited by Ernst & Young Inc., who expressed an unmodified opinion thereon.
A copy of the auditor's report on the audited annual financial statements is available for inspection at the Company's
registered office, 1A Booysens Road, Booysens, 2091, during normal business hours together with the annual financial
statements identified in the auditor's report.
A full copy of these financial statements is available on Howden's website www.howden.co.za
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting (AGM) of shareholders of the Company will be held at HAHL's
registered office, on Thursday, 1 June 2017 at 1A Booysens Road, Booysens, Johannesburg, South Africa at 13:30 to consider
and, if deemed fit, to pass with or without modification all of the ordinary and special resolutions as set out in the
notice of AGM contained in the integrated report.
The record date for the purposes of determining the shareholders of the Company entitled to receive the AGM notice is
Friday, 24 March 2017.
The record date for purposes of determining which shareholders of the Company are entitled to attend, participate in,
and to vote at the AGM is Friday, 26 May 2017.
Accordingly, the last date to trade in the Company's shares on JSE Limited in order to be eligible to attend,
participate in and vote at the AGM is Tuesday, 23 May 2017.
PREPARATION OF CONDENSED ANNUAL FINANCIAL STATEMENTS
The Group financial results were prepared under the supervision of the Chief Financial Officer, Mrs M Vigouroux
CA(SA).
For and on behalf of the board of directors
IH Brander W Thomson
Chairman Chief Executive Officer
31 March 2017
Condensed consolidated statement of comprehensive income
for the year ended 31 December 2016
2016 2015 Change
R'000 R'000 %
Revenue 1 604 535 1 483 276 8.2
Cost of sales (1 176 761) (1 071 717) 9.8
Gross profit 427 774 411 559 3.9
Distribution costs (58 546) (37 583) 55.8
Administrative expenses (123 827) (117 460) 5.4
Other income/(expense) 2 210 5 481 (59.7)
Operating profit 247 611 261 997 (5.5)
Investment income 55 566 40 510 37.2
Finance costs (72) (27) 166.7
Profit before income tax 303 105 302 480 0.2
Income tax expense (84 684) (86 927) (2.6)
Profit for the year 218 421 215 553 1.3
Other comprehensive income for the year
Cash flow hedge (loss)/profit (1 418) 1 009
Pension fund plan (loss)/profit (1 298) 901
Other comprehensive (loss)/income for the year, net tax (2 716) 1 910
Total comprehensive income for the year 215 705 217 463 (0.8)
Earnings per share - basic and diluted (cents) 332.31 327.94 1.3
Condensed consolidated statement of financial position
as at 31 December 2016
2016 2015
R'000 R'000
ASSETS
Non-current assets 185 931 196 763
Property, plant and equipment and intangible assets 136 708 142 290
Pension fund plan surplus 17 485 17 712
Deferred tax assets 18 132 24 452
Trade, construction contracts and other receivables 13 606 12 309
Current assets 1 675 109 1 387 607
Inventories 332 166 235 163
Trade, construction contracts and other receivables 386 010 384 800
Loans receivable 16 050 7 500
Current income tax asset 31 542 29 954
Cash and cash equivalents 909 341 730 190
TOTAL ASSETS 1 861 040 1 584 370
EQUITY
Share capital and reserves
Share capital and reserves 1 254 912 1 039 207
Total equity 1 254 912 1 039 207
LIABILITIES
Non-current liabilities 102 066 108 933
Deferred tax liabilities 3 069 9 272
Payables and construction contracts 87 355 87 626
Provisions 11 642 12 035
Current liabilities 504 062 436 230
Payables and construction contracts 472 639 417 564
Current income tax liabilities 13 123 -
Provisions 18 300 18 666
Total liabilities 606 128 545 163
TOTAL EQUITY AND LIABILITIES 1 861 040 1 584 370
Condensed consolidated statement of changes in equity
for the year ended 31 December 2016
2016 2015
R'000 R'000
Share capital and reserves at the beginning of the year 1 039 207 821 744
Total comprehensive income for the year 215 705 217 463
Profit for the year 218 421 215 553
Other comprehensive (loss)/income (2 716) 1 910
Share capital and reserves at the end of the year 1 254 912 1 039 207
Condensed consolidated statement of cash flows
for the year ended 31 December 2016
2016 2015
R'000 R'000
Cash flow from operating activities
Cash generated from operations 216 297 156 760
Interest paid (72) (27)
Income tax paid (71 975) (81 536)
Net cash generated in operating activities 144 250 75 197
Cash flow from investing activities
Interest received 53 990 37 521
Loans issued (8 550) (7 500)
Purchases of property, plant and equipment (10 275) (7 192)
Government grant received - 4 209
Purchases of intangible assets (375) (17)
Proceeds from disposal of property, plant and equipment 111 284
Net cash generated from investing activities 34 901 27 305
Net increase in cash and cash equivalents 179 151 102 502
Cash and cash equivalents at the beginning of the year 730 190 627 688
Cash and cash equivalents at the end of the year 909 341 730 190
Other Group salient features
for the year ended 31 December 2016
2016 2015 Change
R'000 R'000 %
Net asset value per share (cents) 1 909.22 1 581.00 20.8
Depreciation 14 111 14 035 0.5
Amortisation 1 975 1 886 4.7
Capital expenditure 10 650 7 209 47.7
Capital commitments
- Authorised and contracted 774 598 29.4
Operating profit to revenue (%) 15.4 17.7 (2.3)
Number of shares in issue ('000) 65 729 65 729 -
Earnings per share - basic and diluted (cents) 332.31 327.94 1.3
Headline earnings per share (cents) 332.36 329.62 0.8
Reconciliation of headline earnings
Profit for the period 218 421 215 553
Loss on disposal of property, plant and equipment - 59
Write off of property, plant and equipment and
intangible assets 35 1 044
Headline earnings 218 456 216 656 0.8
Segmental analysis by operating division
for the year ended 31 December 2016
2016 2015 Change
R'000 R'000 %
Orders received
Fans and Heat Exchangers 1 238 338 1 106 500 11.9
Environmental Control 239 949 311 200 (22.9)
Fabrication Technology 94 430 - -
1 572 717 1 417 700 10.9
Revenue
Fans and Heat Exchangers 1 338 783 1 117 302 19.8
Environmental Control 178 610 365 974 (51.2)
Fabrication Technology 87 142 - -
1 604 535 1 483 276 8.2
Intersegmental sales
Fans and Heat Exchangers 26 115 18 242 43.2
Environmental Control 29 690 22 249 33.4
Fabrication Technology 2 783 - -
58 588 40 491 44.7
Operating profit/(loss)
Fans and Heat Exchangers 283 942 213 642 32.9
Environmental Control (12 744) 51 377 (124.8)
Fabrication Technology 1 257 - -
272 455 265 019 2.8
Central operations (24 844) (3 022) 722.1
Total operating profit 247 611 261 997 (5.5)
Investment income 55 566 40 510 37.2
Finance costs (72) (27) 166.7
Profit before tax 303 105 302 480 0.2
Assets
Fans and Heat Exchangers 848 304 719 670 17.9
Environmental Control 166 437 172 626 (3.6)
Fabrication Technology 113 892 - -
Central operations 732 407 692 074 5.8
1 861 040 1 584 370 17.5
Liabilities
Fans and Heat Exchangers 462 761 461 896 0.2
Environmental Control 54 908 61 337 (10.5)
Fabrication Technology 63 301 - -
Central operations 25 158 21 930 14.7
606 128 545 163 11.2
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
Directors
IH Brander (Chairman)#**
W Thomson (Chief Executive Officer)#
J Brown#**, M Malebye**
M Vigouroux (Chief Financial Officer)
H Mathe**, M Patel**
(#British **Non-executive)
Company secretary
CR Masson
Transfer secretaries
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue
Rosebank, Johannesburg, 2196
(PO Box 61051, Marshalltown 2107)
Sponsor
PricewaterhouseCoopers Corporate
Finance Proprietary Limited
2 Eglin Road
Sunninghill
2157
Website
www.howden.co.za
Publication date
31 March 2017
www.howden.co.za
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