| Mon 3 Mar 2008, 16:59 | | HWN - Howden Africa Holdings - The reviewed financ |
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HWN
HWN
HWN - Howden Africa Holdings - The reviewed financial results for the year
ended 31 December 2007 and dividend declaration
Howden Africa Holdings Limited
Share code: HWN
ISIN: ZAE000010583
(Incorporated in the Republic of South Africa)
(Registration number 1996/002982/06)
("the Company" or "the Group")
The reviewed financial results for the year ended 31 December 2007
are as follows
ABRIDGED CONSOLIDATED INCOME STATEMENT
Year ended % Year ended
31 December change 31 December
2007 2006
(Reviewed) (Audited)
R`000 R`000
Revenue 686 367 34,3 510 942
Operating profit 88 979 70,6 52 154
Net finance costs (1 776) (1 483)
Foreign exchange (losses)/profit (132) 2 196
Share of results of associate 1 153 3 056
Loss on disposal of associate (1 028) -
Profit before income tax 87 196 55,9 55 923
Income tax expense (24 753) (35 349)
Profit for the year 62 443 203,5 20 574
Attributable to:
Equity holders of the Company 61 684 272,9 16 542
Minority interest 759 (81,2) 4 032
62 443 203,5 20 574
Number of shares in issue (000`s) 65 729 65 729
Earnings per share: (cents) 93,85 272,9 25,17
Headline earnings per share: 95,42 278,0 25,25
(cents)
Dividends per share: (cents) - 247,00
Reconciliation of Headline
earnings attributable to the
equity holders of the Company
Profit for the year attributable 61 684 16 542
to equity holders
Loss on disposal of property, 8 52
plant and equipment
Loss on disposal of associate 1 028 -
Headline earnings attributable to 62 720 278,0 16 594
equity holders
ABRIDGED CONSOLIDATED BALANCE SHEET
Year ended Year ended
31 December 31 December
2007 2006
(Reviewed) (Audited)
R`000 R`000
ASSETS
Non-current assets 131 974 138 133
Property, plant and equipment 43 217 35 181
Intangible assets 58 933 36 972
Investment in associate - 32 593
Deferred income tax assets 27 114 29 634
Trade and other receivables 2 710 3 753
Current assets 241 605 202 711
Inventories 32 197 32 431
Trade and other receivables 189 367 127 626
Derivative financial instruments 139 299
Cash and cash equivalents 19 902 42 355
Total assets 373 579 340 844
EQUITY
Capital and reserves attributable 88 049 26 166
to equity holders of the Company
Minority interest in equity - 8 850
Total equity 88 049 35 016
LIABILITIES
Non-current liabilities
Borrowings 20 000 81 647
Deferred income tax liabilities 7 526 11 908
Provisions for other liabilities 3 680 2 117
and charges
31 206 95 672
Current liabilities 254 324 210 156
Trade and other payables 238 439 193 142
Current income tax liabilities 8 968 876
Borrowings 616 9 628
Derivative financial instruments 102 25
Provisions for other liabilities 6 199 6 485
and charges
Total liabilities 285 530 305 828
Total equity and liabilities 373 579 340 844
OTHER GROUP SALIENT FEATURES
Year ended % Year ended
31 December change 31 December
2007 2006
(Reviewed) (Audited)
R`000 R`000
Net asset value per share (cents) 133,96 236,5 39,81
Depreciation 3 312 2 540
Amortisation 1 881 1 834
Capital expenditure 11 311 5 120
Capital commitments
Authorised and contracted 4 685 286
Authorised not contracted - 4 787
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
31 December 31 December
2007 2006
(Reviewed) (Audited)
R`000 R`000
Cash flow from operating
activities
Cash generated from operations 80 226 68 967
Interest paid (11 228) (8 021)
Income tax paid (18 523) (41 262)
50 475 19 684
Cash flow from investing
activities
Movement on loans to associate - 2 174
company
Acquisition of minority interest (26 320) -
of subsidiary
Interest received 7 558 9 048
Proceeds on disposal of associate 32 718 -
company
Exchange differences on conversion 199 (2 448)
of foreign subsidiaries
Replacement of property, plant and (11 311) (5 120)
equipment
Proceeds on disposal of property, - 77
plant and equipment
Net cash inflows from investing 2 844 3 731
activities
Cash flow used in financing
activities
Dividends paid to minorities (7 006) (5 000)
Dividends paid - (162 351)
Loan finance - 100 000
Repayment of loan finance (68 710) (11 291)
Net cash used in financing (75 716) (78 642)
activities
Net decrease in cash and cash (22 397) (55 227)
equivalent
Cash and cash equivalents at 42 299 97 526
beginning of year
Cash and cash equivalents at end 19 902 42 299
of year
SEGMENTAL ANALYSIS BY OPERATING DIVISION
Year ended Year ended
31 December 31 December
2007 2006
(Reviewed) (Audited)
R`000 R`000
Revenue
FANS AND HEAT EXCHANGERS 458 031 344 934
ENVIRONMENTAL CONTROL 228 336 166 008
686 367 510 942
Orders received
FANS AND HEAT EXCHANGERS 556 785 407 582
ENVIRONMENTAL CONTROL 216 915 130 555
773 700 538 137
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable
to equity
holders
of the Minority
Company interest Total
Balance at 1 January 2006 174 015 10 226 184 241
Currency translation differences (2 448) - (2 448)
Profit for the year 16 542 4 032 20 574
Minority interest acquired 408 (408) -
Dividends paid and return of share (162 351) (5 000) (167 351)
premium
Balance at 31 December 2006 26 166 8 850 35 016
Balance at 1 January 2007 26 166 8 850 35 016
Currency translation differences 199 - 199
Profit for the year 61 684 759 62 443
Acquistion of subsidiary from (2 603) (2 603)
minority
Dividends paid - (7 006) (7 006)
Balance at 30 December 2007 88 049 - 88 049
COMMENTARY
OVERVIEW
It is pleasing to report an excellent set of results for the year ended 31
December 2007, a healthy increase in sales and operating profits reflecting a
strong performance by all the businesses throughout the Group.
RESULTS
Sales of R686,4 million are reported compared to R510,9 million in 2006, an
increase of 34%, and operating profit has increased by 71% to R89,0 million
(2006: R52,2 million). The improved profitability has been generated from higher
sales volumes and good control over operating costs.
Strong growth in Gross Domestic Fixed Investment, driven by public and private
sector initiatives, continues to generate demand for products and services
provided by Group operations. Developments in the mining and power markets in
particular have led to increased business activity, making a big contribution to
the 34% increase in Group sales. As reported last year, a key area for the Group
is in supporting Eskom in its drive to build additional electricity generating
capacity over the next few years and in this regard the Group has been active on
all three of the power stations being returned to service.
Profit before tax of R87,2 million (2006: R55,9 million) is reported, higher
sales volumes and an improvement in results in the environmental control
division largely accounting for the difference. Net finance costs of R1,8
million compares to R1,5 million reported last year, a favourable outcome given
the high gearing reported at the beginning of the year.
A taxation charge of R24,8 million (2006: R35,3 million) has been accrued,
equivalent to 28,4% of profit before tax. This compares to the 63,2% charge last
year, which included STC of R12,2 million paid in respect of the special
dividend of R97,4 million. The previous ruling by the Revenue authorities to
disallow the deduction of certain intellectual property expenses has been
reversed, resulting in a normalisation of this year`s tax charge.
The comparisons below refer to the corresponding twelve-month period to December
2006:
* Order intake amounted to R774 million compared to R538 million in the
corresponding period
* Operating profit of R89,0 million compared to R52,2 million
* Earnings per share of 93,9 cents compared to 25,2 cents
* At 31 December 2007 the Group had a net positive cash position of R19,9
million compared to R42,3 million
* Net borrowings of R0,7 million compare with R48,9 million last year.
On 18 May 2007, the Company completed the disposal of its 42% shareholding in
Pump Brands (Pty) Limited, for a consideration of R32,7 million. The board
regarded the business as non-core.
On 6 July 2007 the Group acquired the outstanding 50,01% shareholding in Bateman
Howden South Africa (Pty) Limited for R26,3 million, resulting in the company
becoming a wholly owned subsidiary. Goodwill of R23,7 million was recognised on
this transaction. The acquisition has led to a consolidation of the Group`s
environmental control businesses, resulting in one business unit with the
necessary critical mass to focus on the high end of the gas cleaning market.
REVIEW OF OPERATIONS
FANS AND HEAT EXCHANGERS
Order intake for fans and heat exchangers totalled R557 million, which
represents 72% of the total order intake, compared to R408 million the previous
year.
The standard fan business enjoyed another year of improved results supported by
growth in the transportation and axial fan markets. A good share of prime
projects bid into the building services market was recorded together with an
improvement in sales volumes into established export markets. The industrial
sector proved to be a little disappointing but the business remains well placed
to improve market share in 2008. The business continues to convert a large
proportion of targeted bids into orders and this should result in further
improvements in operating results over the coming year.
The fan business focused on the mining market has reported strong growth in
earnings as the mines continue to roll out capital expansion programs on the
back of strong Rand based commodity prices. This led to a good intake of new
equipment orders to support normal aftermarket business associated with this
market. Actions associated with Eskom`s demand side management initiative
continue to attract attention and this business unit in particular can make a
meaningful contribution in assisting the larger mines to reduce energy costs
associated with their mine ventilation processes. A strong closing order book is
in place and given a normalisation of operations in the mining markets another
solid performance should be forthcoming from this business through the year.
The return to service project in Eskom covering the Camden, Komati and Grootvlei
power stations has led to consistently high levels of business activity in
Howden Power throughout the year. Manning levels have increased accordingly and
the business continues to provide every assistance in supporting Eskom`s
capacity expansion programme. Maintenance and upgrade programmes at the active
power stations continue to receive attention and the business looks forward to
participating constructively in the utility`s new build program moving forward.
Work associated with the RTS programme peaked through year and this would need
to be replaced with new build activities in order to maintain earnings in this
business.
Strong order book levels and existing prospects support the view that another
good year of earnings should be forthcoming in the fan and airheater division.
ENVIRONMENTAL CONTROL
The environmental control division recorded orders of R217 million, representing
28% of the total order intake, compared to R130 million in the previous year.
The division`s drive to expand its range of available gas cleaning technologies
resulted in an SO3 flue gas conditioning plant order being received for R58
million. This technology, together with existing technologies and further
efforts to add to the portfolio, has resulted in the business positioning itself
strongly at the high end of the market. A focus on dust extraction technologies
has broadened to cover gas treatment as well, offering a wider base of customers
to expand business.
The fabric filter retrofit programme at Camden Power Station was largely seen
through to completion during the year, increasing the installed base of this
technology to five power stations, both Eskom and municipal. We are extremely
proud of these installations and the improvements they have brought to the
immediate environments in which they operate. The successful completion of the
Camden contract has led to further negotiations to retrofit the remaining two
boilers at the power station in order to improve stack emissions.
Work continues to be carried out in supporting depth extension initiatives at
various gold mines given the strong Rand gold price. Mine cooling processes tend
to be energy intensive and every effort is being made to improve existing
processes to reduce power consumption. The business is confident that efforts in
this regard should prove successful over the coming year.
The consolidation of businesses in this division has been successfully worked
through and available prospects suggest that the division is well placed to
continue growing market share.
ACCOUNTING POLICIES
The financial results for the year ended 31 December 2007 have been prepared in
accordance with International Financial Reporting Standards (IFRS) and IAS 34:
Interim Financial Reporting. The accounting policies are consistent with those
applied in the prior years financial statements, other than IFRS 7 - "Financial
Instruments Disclosure" which is applicable, for the first time, for the
financial year ended 31 December 2007.
OUTLOOK
A strong closing order book and select number of environmental control projects
gives encouragement for the year ahead. The Company remains close to
developments associated with Eskom`s new build programme and the extent to which
these efforts lead to positive outcomes would largely influence the Group`s
ability to grow earnings in the longer term.
DIRECTORATE
Ms. Morongwe Malebye was appointed as an independent non-executive director on 7
November 2007. We welcome her to the Board and look forward to her contributions
over the coming years. There were no other changes to the board during the year.
DIVIDEND
Given the improvement in earnings and the resultant cash position the directors
have considered the reintroduction of regular dividend payments.
Notice is hereby given that the board has declared a dividend of 15 cents per
share payable to shareholders for the year ended 31 December 2007. The last date
to trade cum dividend is Friday, 28 March 2008. Shares start trading ex dividend
on Monday, 31 March 2008. The record date is Friday, 4 April 2008. Payment will
be Monday, 7 April 2008. No share certificates are to be dematerialised or
rematerialised between Monday, 31 March 2008 and Friday, 4 April 2008 both days
inclusive.
Reviewed Results - Auditor`s Opinion
PricewaterhouseCoopers Inc., the Group`s independent auditors, have reviewed the
abridged financial statements that comprise the abridged consolidated balance
sheet at 31 December 2007, abridged consolidated income statement, abridged
consolidated statement of changes in equity and abridged consolidated cashflow
statement for the year then ended, and have expressed an unmodified opinion on
these reviewed abridged financial statements. The review report is available for
inspection at the Company`s registered office.
For and on behalf of the Board of Directors.
RJ Cleland
(Non-Executive Chairman)
3 March 2008
Directors: RJ Cleland (Non-Executive Chairman)#**
S Meyer (Chief Operating Officer)
J Brown#**, AB Mashiatshidi**, M Malebye**
(# British ** Non-executive)
Company secretary: MJM Lake
Registered office: 1a Booysens Road, Booysens, 2091
Postal address: PO Box 2239, Johannesburg, 2000
Transfer secretaries: Computershare Investor Services (Pty) Limited, 70 Marshall
Street, Johannesburg, 2001
Sponsor: PricewaterhouseCoopers Corporate Finance (Pty) Limited
Date: 03/03/2008 16:59:12 Produced by the JSE SENS Department.
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