| Fri 27 Jun 2008, 12:23 | | HDC - Hudaco Industries - Unaudited Interim Group Results For The Six Months |
|
HDC
HDC
HDC - Hudaco Industries - Unaudited Interim Group Results For The Six Months
Ended 31 May 2008
HUDACO INDUSTRIES LIMITED
(Incorporated in the Republic of South Africa)
Registration Number 1985/004617/06)
Share Code: HDC & ISIN: ZAE000003273
Unaudited Interim Group Results for the six months ended 31 May 2008
* Sales up 24% to R1,2 billion
* Operating Profit up 36% to R158 million
* Normalised headline earnings per share up 57% to 400 cents
* Dividends rebalanced - interim dividend increased 100% to 130 cents per share
Hudaco is a South African group engaged in the business of importing and
distributing industrial consumable products. Its customers are predominately in
the southern African manufacturing, mining, construction, automotive and
security industries.
Results
The group has delivered excellent first half results. Sales of R1,2 billion for
the half year are up 24% on 2007. Two acquisitions, Astore Africa a distributor
of specialised pipes and fittings, and Ambro Sales, a distributor of special
solid and hollow round steel which together cost R152 million contributed R75
million or 8% to this increase. The balance of 16% was achieved mainly in the
Bearings and Transmission and diesel engine businesses. Operating profit
increased 36% to R158 million.
The Bearings and Transmission division has become the main beneficiary of the
surge in spending on mining and infrastructure projects. Full advantage was
taken of the prevailing buoyant trading conditions and an outstanding first half
result was achieved. Total sales including the two acquisitions were up 34% to
R763 million. Operating profit increased 50% to R92 million.
Trading conditions in the Powered Products division were mixed with sales
increasing 16% and operating profit 29%. The diesel engine business had an
excellent first half, with continued strong demand for engines for underground
mining and power generation applications. On the other hand, volume sales of
industrial power tools were flat.
In the Security Equipment division sales increased 2% and operating profit
declined 13%. This disappointing result was due to the scaling down of the UK
business. The South African business increased sales and held profitability as
it completed a three-year nationwide branch rollout.
The complete restructure and refinancing of the group in August 2007 when new
BEE shareholders were introduced has resulted in significant changes to the
balance sheet and consequently to finance costs and the rate of taxation this
year. These changes were spelt out in detail in the 2007 annual report. Net
finance costs of R17,4 million compare with last year`s income of R6,4 million
whilst the tax charge has decreased from R41 million to R12 million.
Headline earnings per share of 366 cents are up 43% on last year. Normalised
headline earnings per share, which excludes a fair value adjustment ofR10
million which has been raised to recognise costs to be incurred in closing or
rationalising a number of branch outlets, are 400 cents, up 57% on last year.
The interim dividend has been increased by 100% to 130 cents (last year 65
cents). This follows a decision to both rebalance the interim and final
dividends and to change the group policy to now pay annual dividends equal to
approximately 40% (previously 33%) of normalised headline earnings.
The group balance sheet remains healthy. Working capital (inventories, accounts
receivable less accounts payable) at R727 million is R218 million or 43% above
2007 financial year end levels. Of this increase, R86 million or 17% is from
acquisitions which means the group is slightly overstocked but should be back in
line by year-end. Net cash declined R367 million since the end of the 2007
financial year is mainly due to R132 million spent on acquisitions andR165
million on dividends including the special dividend of R100 million paid in
December last year, resulting in R50 million short-term borrowing.
Prospects
Growth prospects in the medium term remain good. Infrastructural spending looks
set to continue and perhaps accelerate. High commodity prices and electricity
demand continues to support ongoing investment in mining projects. Thus,
economic growth driven by investment spending looks set to continue for the
foreseeable future. Prospects for making acquisitions at more reasonable prices
than the recent past also look brighter. Growth in the consumer side of the
economy is weak and could weaken further but Hudaco`s exposure to this segment
of the economy is relatively limited.
Normalised earnings per share for the full year will not grow at the same pace
as the 57% of the first half mainly because the initial earning enhancement
feature of the group`s BEE transaction was largely already in last year`s second
half results. Nevertheless earnings for the full 2008 financial year are
expected to be well ahead of last year.
Dividend
Notice is hereby given that interim dividend No. 43 of 130 cents per share has
been declared in respect of the six months ended 31 May 2008.
The last day to trade in order to participate in the dividend ("cum" the
dividend), will be Friday, 8 August 2008. The shares will commence trading "ex"
the dividend from the commencement of business on Monday, 11 August 2008 and the
record date will be Friday, 15 August 2008. The dividend will be paid on Monday,
18 August 2008. Share certificates may not be dematerialised between Monday, 11
August 2008 and Friday, 15 August 2008 both days inclusive.
For and on behalf of the Board
RT Vice (Chairman) SJ Connelly (Chief executive)
26 June 2008
Income statement
Year Year
Six months ended Ended Ended
31 May 31 May 30 Nov 30 Nov
R million 2008 2007 2007*
Turnover 1 230,0 24 992,6 2 226,9
- continuing operations 1 155,4 16 992,6 2 226,9
- operations acquired in 2008 74,6
Cost of sales 761,5 628,4 1 382,6
Gross profit 468,5 364,2 844,3
Operating expenses 311,0 248,8 526,3
Operating profit 157,5 36 115,4 318,0
- continuing operations 150,1 30 115,4 318,0
- operations acquired in 2008 7,4
Impairment of assets in businesses
for sale 10,0
Cost to introduce BEE shareholders 43,9
Profit before dividends received,
interest received and finance 147,5 115,4 274,1
costs
Dividends received on preference
shares 100,2 66,6
Interest received 6,4 15,4
Finance costs (117,6) (80,7)
Profit before taxation 130,1 121,8 275,4
Taxation 12,3 40,9 86,5
Profit for the period 117,8 46 80,9 188,9
attributable to shareholders of
the group 112,9 47 76,7 182,8
Attributable to minorities
(see supplementary information) 4,9 4,2 6,1
117,8 80,9 188,9
Normalisedheadline earnings per
share (cents) 400 57 255 750
Headline earnings per share 366 43 255 604
(cents)
Basic earnings per share (cents) 367 44 255 606
Diluted normalised headline
earnings per share (cents) 390 249 726
Diluted headline earnings per
share (cents) 357 249 585
Diluted basic earnings per share
(cents) 358 249 586
Reconciliation to normalized
headline earnings
Profit attributable to
shareholders of the group 112,9 76,7 182,8
Adjusted to eliminate the effect
of the following items in
attributable earnings:
-?Surplus on disposal of plant and
equipment after taxation (0,3) (0,4)
Headline earnings 112,6 47 76,7 182,4
Adjusted to eliminate the effect
of the following items in headline
earnings:
Impairment of assets in businesses
for sale 10,0
Other 1,0
Cost to introduce BEE shareholders 43,9
Debt raising fees 3,3
STC on special dividend 4,6
Taxation effect of adjustment (0,3) (1,0)
Minority effect of adjustments (0,1) (6,9)
Normalised headline earnings 123,2 61 76,7 226,3
Normal dividends
- Per share (cents) 130 31 65 260
- Amount (Rm) 40,1 19,7 79,6
Special dividend
- Per share (cents) 330
- Amount (Rm) 101,5
Share in issue 30 853 30 250 30 754
- Total (000) 33 361 32 758 33 262
- Held by subsidiary company (000) (2 508) (2 508) (2 508)
Weighted average shares in issue
- Basic (000) 30 774 30 047 30 178
- Diluted (000) 31 580 30 834 31 182
Cash flow statement
Year
Six months ended ended
31 May 31 May 30 Nov
R million 2008 2007 2007*
Cash generated from trading 159,1 123,6 344,6
Applied working capital (160.9) (68,3) (71,2)
Cash (applied) to operating
activities (1,8) 55,3 263,4
Preference dividends and interest
received 100,2 82,0
Net interest (paid) received (117,6) 6,4 (80,1)
Taxation paid (43,2) (52,7) (81,1)
Cash (applied) to operations (62,4) 9,0 184,2
Dividends paid (164,6) (42,0) (67,3)
NET CASH APPLED (227,0) (33,0) 116,9
Investment in new operations - net (131,8) (8,0) (35,4)
Investment in plant and equipment
- net (10,6) (8,6) (17,0)
Investment in preference shares - (2 181,0)
net
NET CASH INVESTED (142,2) (16,6) (2 233,4)
Cash utilised (369,4) (49,6) (2 116,5)
Issue of shares 2,4 4,7 14,4
Issue of subordinated debenture 2 181,0
DECREASE IN NET CASH (367,0) (44,9) 78,9
Balance sheet
31 May 31 May 30 Nov
R million 2008 2007 2007*
ASSETS
Non-current assets 2 432,1 127,6 2 332,8
Property, plant and equipment 85,6 69,5 73,7
Investment in preference shares 2 181,0 2 181,0
Deferred taxation - net 0,9 1,5
Goodwill and other tangible assets 165,5 57,2 76,6
Current assets 1 149,1 1 029,2 1 260,1
Inventories 745,4 517,3 544,1
Accounts receivable 403,7 318,4 398,7
Bank deposits and balances 193,5 317,3
TOTAL ASSETS 3 581,2 1 156,8 3 592,9
EQUITY AND LIABILITIES
Equity 893,3 797,2 835,4
Shareholders` equity 863,1 771,8 806,8
Minority interest 30,2 25,4 28,6
Non-current liabilities 2 204,3 2 181,0
Subordinated debenture 2 181,0 2 181,0
Deferred taxation - net 5,3
Due to vendors - interest bearing 18,0
Current liabilities 483,6 359,6 576,5
Accounts payable 421,7 340,7 434,4
Shareholders for special dividend 101,5
Due to vendors - interest bearing 12,0 6,6 10,5
Bank overdraft and call funds 49,7
Taxation 0,2 12,3 30,1
TOTAL EQUITY AND LIABILITIES 3 581,2 1 156,8 3 592,9
Statement of changes in equity
Year
Six months ended ended
31 May 31 May 30 Nov
R million 2008 2007 2007*
Equity at beginning of the period 835,4 749,9 749,9
Attributable profit for the period 117,8 80,9 188,9
Increase in equity compensation
reserve 2,4 2,2 4,7
Movement on fair value of cash
flow hedges (2,0) 1,3 0,2
Gain on translation of foreign
entities 0,6 0,5 2,5
Arising on the introduction of BEE
shareholders 43,9
Minority interest acquired (0,3) (0,3)
Shares issued 2,4 4,7 14,4
Dividends (63,3) (42,0) (168,8)
- to shareholders of the group (60,0) (42,0) (163,5)
- to minorities (3,3) (5,3)
Equity at the end of the period 893,3 797,2 835,4
Supplementary information
These results were prepared in terms of IAS34, applying
accounting policies that conform with International Financial
Reporting Standards (IFRS) and are consistent with those
applied in the previous financial year.
31 May 31 May 30 Nov
2008 2007 2007*
Average net operating assets (Rm) 837,5 584,7 612,2
Operating profit margin (%) 12,8 11,6 14,3
Average NOA turn
(times - annualised) 2,9 3,4 3,6
Return on average NOA
(% - annualised) 37,6 39,5 51,9
Net asset value per share (cents) 2 797 2 551 2 623
Profit after tax attributable to
minorities (Rm) 4,9 4,2 6,1
- Share of normalized earnings 4,9 4,2 13,0
- Share of cost to introduce BEE
shareholders (6,9)
Capital expenditure
- Spent during the period (Rm) 12,3 20,6
- Budgeted for second half of the
year (Rm) 28,5
Operating profit has been
determined after taking into
account the following charges:
- Depreciation 6,2 6,0 12,1
- Amortisation of intangible
assets acquired in acquisitions 2,4
Commitments and contingencies
- Operating lease on property (Rm) 100,1 75,9
- Break fee on debenture (Rm) 35,7 49,6
- A contingent liability still exits in respect of the ongoing dispute on
whether an employer contribution holiday in one of the group`s defined
contribution retirement funds, was authorised by its rules.
Acquisitions
The group acquired 100% of the businesses of Astore Africa Group and Ambro Sales
on 1 February 2008 and 1 March 2008 respectively, for an aggregate purchase
consideration of R152 million. Property plant and equipment of R7 million,
working capital (inventories, accounts receivable and trade accounts payable) of
R60 million, goodwill and other intangible assets (brand name and customer
relations) of R92 million, and deferred tax liabilities of R7 million were
recognized at date of acquisition. These values approximate the fair value as
determined under IFRS 3.
The initial accounting for the acquisition of Ambro Sales has been determined
provisionally as the valuation of intangible assets has not yet been completed.
The acquisitions had no impact on the reported attributable earnings of the
group for the period and if both these acquisitions had been effective on 1
December 2007 the turnover and attributable earnings of the group would have
been approximately R1 264 million and R111 million respectively.
Segment analysis
Turnover
31 May % 31 May 30 Nov
R million 2008 Change 2007 2007*
Bearings and Power
Transmission products 763,0 34 569,7 1 272,5
Powered products 291,4 16 250,7 589,1
Security equipment 176,0 2 172,6 365,4
Internal/head office (0,4) (0,2) (0,1)
Total group 1 230,0 24 992,6 2 226,9
Operating profit
31 May % 31 May 30 Nov
R million 2008 Change 2007 2007*
Bearings and Power
Transmission products 91,6 50 61,2 173,3
Powered products 58,6 29 45,5 124,0
Security equipment 16,4 (13) 18,9 44,0
Internal/head office (9,1) (10,2) (23,3)
Total group 157,5 36 115,4 318,0
Average net operating assets
31 May 31 May 30 Nov
R million 2008 2007 2007*
Bearings and Power 620,6 425,9 445,9
Transmission products
Powered products 123,6 95,7 100,3
Security equipment 84,1 79,0 79,6
Internal/head office 9,2 (15,9) (13,6)
Total group 837,5 584,7 612,2
* Audited
Bearings and Power Transmission products
ABES Technoseal - Distributor of oil and hydraulic seals, clutch kits and
automotive ignition leads.
AmbroSales - Distributor of special solid and hollow round steel.
Astore Africa - Distributor of specialised pipes and fittings.
Bearings International - Distributor of bearings, seals and transmission
products.
Belting Supply Services - Distributor of power transmission and conveyor belting
products and industrial hose.
Bosworth - Manufacturer of conveyor drive pulleys, forgings and rollings.
Ernest Lowe ELCO - Manufacturer and distributor of hydraulic and pneumatic
equipment.
Bauer - Distributor of geared motors, frequency inverters and electric motors.
Powermite - Distributor of electrical cabling, plugs, sockets, electric feeder
systems and crane materials.
Varispeed - Distributor of controllers, monitors and regulators of the speed of
standard AC motors.
Powered products
Deutz Dieselpower - Distributor of Deutz diesel engines and provider of
aftermarket services.
Rutherford - Distributor of power tools, outboard motors, survey equipment and
rivets.
Security equipment
Elvey Security Technologies - Distributor of intruder detection,
closed-circuit television, access control and fibre-optic equipment.
Transfer secretaries
Computershare Investor Services (Pty) Ltd PO Box 61051 Marshalltown 2107
Registered office
Hudaco Park 190 Barbara Road Elandsfontein 1406 Tel +27 11 345 8200 Fax +27
11 392 2740 E-mail info@hudaco.co.za
Directors
RT Vice# (Chairman) SJ Connelly (Chief executive) PL Campbell#
GE Gardiner JB Gibbon# YKN Molefi* PM Poole
# Independent non-executive
* Non-executive
Group secretary
MMM Nkumanda
Hudaco Industries Limited Reg no 1985/004617/06
Share code HDC & ISIN ZAE000003273
These results are available on the Internet at www.hudaco.co.za
value-added distribution - our core competency
Date: 27/06/2008 12:23:11 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.
