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HDC
HDC
HDC - Hudaco - Unaudited Interim Group Results
Hudaco Industries Limited
for the six months ended 31 May 2009
("Hudaco"; "the company"; or "the group")
Incorporated in the Republic of South Africa
Registration number: 1985/004617/06
Share code: HDC
ISIN code: ZAE000003273
Unaudited Interim Group Results
Half year sales down 4%
Normalised headline earnings per share down 14% to 343 cents
Interim dividend reduced 12% to 115 cents per share
Cash from operating activities R162 million
Hudaco is a South African group engaged in the business of importing and
distributing branded industrial consumable products. Its customers are
predominately in the southern African manufacturing, mining, construction,
automotive and security industries.
Results
The group has delivered reasonable first half results under the prevailing
economic circumstances. Sales of R1.176 billion for the half year are down 4% on
2008 whilst operating profit decreased 16% to R132 million.
The scale and speed of the downturn this first half was more severe than
expected with the group experiencing average volume sales declines of about 25%.
Most of this decline was offset in the first quarter by year on year price
increases, but the stronger Rand began to negate this offsetting effect in the
second quarter. April, with the many public holidays, was a particularly poor
month for sales.
All businesses in the group have been affected to a greater or lesser degree by
the decline in demand. The Bearings and Transmission division, previously the
main beneficiary of the surge in spending on mining and infrastructure projects,
increased sales by 1% to R770 million but operating profit declined 10% to R83
million. Bearings International and Bosworth held up better than expected but
all other business experienced sharp falls in demand.
Trading conditions in the Powered Products division were also difficult, with
sales decreasing 7% to R272 million and operating profit 20% to R47 million.
Volume sales of power tools were down 30% and demand from the mining industry
for diesel engine parts and service also declined sharply, particularly in the
second quarter.
The Security Equipment division was hit harder than our other businesses - sales
declined 12% to R134 million. However, action taken late last year to cut the
expense base held the decline in operating profit to 14%.
Normalised headline earnings per share this half of 343 cents are down 14% on
last year. In acknowledgement of the current difficult trading conditions, the
interim dividend has been reduced by 12% to 115 cents (last year - 130 cents).
The group balance sheet is strong with R60 million net cash on hand,
notwithstanding an overstocked position. Although orders on suppliers were
scaled back in October last year, the extent of the fall in demand was not
foreseen and measures taken were insufficient to keep stockholding balanced to
sales. As a result stock levels at the half year are too high by about R80
million. Due to long lead times from suppliers, most of the reduction required
to bring stockholding back into line will only be achieved in the second half of
the year.
The group`s balance sheet positions it well to take advantage of acquisition
opportunities in the months ahead.
Prospects
Demand for Hudaco`s fairly diversified range of products appears to have
stabilised (albeit at lower levels than last year) since February this year. The
month of April, as already mentioned however, was a notable exception. The
possibility of a further downturn in demand is still real although its
likelihood recedes as time passes.
Volume sales could recover somewhat in the second half as spending on South
Africa`s infrastructure continues and there is a limit to how much our customers
can continue to strip non-operational equipment for spare parts. The strong Rand
may however act as an offsetting force. It is highly unlikely that sales will
recover sufficiently to enable the group to match last year`s earnings
performance.
In the medium term we remain confident that once the current economic crisis has
passed, demand fundamentals will support a resumption in economic growth. The
timing of such recovery is an open question.
Directorate
Peter Campbell, an independent non-executive director, retired on 26 March 2009.
As already reported in March 2009, the company`s group financial director, Peter
Poole will retire on 6 July 2009. Clifford Amoils, who will succeed him as group
financial director will join the group on 1 July 2009.
The board records its thanks to both for their considerable and lasting
contribution they made to Hudaco during their many years service. We wish them
well in their retirement.
Declaration of interim dividend no 45
Interim dividend number 45 of 115 cents per share for the six months ended 31
May 2009 is declared payable on Monday 17 August 2009 to ordinary shareholders
recorded in the register at the close of business on Friday 14 August 2009. The
timetable for the payment of the dividend is as follows:
Last day to trade cum dividend Thursday 6 August 2009
Trading ex dividend commences Friday 7 August 2009
Record date Friday 14 August 2009
Payment date Monday 17 August 2009
Share certificates may not be dematerialised or rematerialised between Friday 7
August 2009 and Friday 14 August 2009, both days inclusive. The certificated
register will be closed for this period.
For and on behalf of the Board
RT Vice Chairman
SJ Connelly Chief executive
25 June 2009
Income statement
Six months Year ended
ended
31 May % 31 May 30 Nov
R million 2009 chang 2008 2008*
e
Turnover 1 176 -4 1 230 2 766
Cost of sales 726 761 1 684
Gross profit 450 469 1 082
Operating expenses 318 311 655
Operating profit 132 -16 158 427
Surplus (loss) on sale of 1 (10) (2)
business
Profit before dividends
received, interest
received and finance costs 133 148 425
Dividends received on
preference shares 100 100 200
Interest received 1 4 12
Finance costs (120) (122) (252)
Profit before taxation 114 130 385
Taxation 6 12 55
Profit after taxation 108 -8 118 330
Attributable to
shareholders of the group 107 -5 113 307
Attributable to minorities 1 5 23
108 118 330
Normalised headline
earnings per share (cents) 343 -14 400 995
Headline earnings per
share (cents) 346 -6 366 964
Basic earnings per share
(cents) 346 -6 367 995
Diluted normalised
headline earnings per
share (cents) 333 390 970
Diluted headline earnings
per share (cents) 338 357 940
Diluted earnings per share
(cents) 336 358 970
Reconciliation to
normalised headline
earnings
Profit attributable to 107 113 307
shareholders of the group
Adjusted to eliminate the
effect of the
followingitems in
attributable earnings:
- Surplus on disposal of
property, plant and (1)
equipment after taxation
- Foreign currency
translation reserve
realised (9)
Headline earnings 107 -5 113 297
Adjusted to eliminate the
effect of the
followingitems in headline
earnings:
- (Surplus) loss on sale
of business (1) 10 10
- Other 1
- Taxation and minority
effect of adjustments (1)
Normalised headline
earnings 106 -14 123 307
Dividends
- Per share (cents) 115 -12 130 400
-?Amount (Rm) 36 40 124
Shares in issue 30 966 30 853 30 923
-?Total (000) 33 474 33 361 33 431
-?Held by subsidiary
company (000) (2 508) (2 508) (2 508)
Weighted average shares in
issue
-?Basic (000) 30 935 30 774 30 836
-?Diluted (000) 31 734 31 580 31 632
Cash flow statement
Six months Year ended
ended
31 May 31 May 30 Nov
R million 2009 2008 2008*
Cash generated from
trading 143 159 450
Generated by working
capital 19 (161) (235)
Cash generated from
operating activities 162 (2) 215
Preference dividends and
interest received 100 100 212
Finance costs (119) (118) (249)
Taxation paid (44) (43) (56)
Cash flow from operations 99 (63) 122
Special dividend paid (102) (102)
Dividends paid (97) (62) (112)
NET CASH GENERATED 2 (227) (92)
Investment in new
operations - net (4) (132) (140)
Investment in property,
plant and equipment - net (8) (10) (20)
NET CASH INVESTED (12) (142) (160)
Cash utilised (10) (369) (252)
Issue of shares 1 2 4
DECREASE IN NET CASH (9) (367) (248)
Balance sheet
31 May 31 May 30 Nov
R million 2009 2008 2008*
ASSETS
Non-current assets 2 430 2 432 2 429
Property, plant and
equipment 93 86 92
Investments in preference 2 181 2 181 2 181
shares
Goodwill 131 140 131
Intangible assets 25 25 25
Current assets 1 207 1 149 1 422
Inventories 758 745 780
Accounts receivable 340 404 507
Taxation 5
Bank deposits and balances 104 135
TOTAL ASSETS 3 637 3 581 3 851
EQUITY AND LIABILITIES
Equity 1 078 893 1 055
Shareholders` equity 1 042 863 1 015
Minority interest 36 30 40
Non-current liabilities 2 186 2 204 2 204
Subordinated debenture 2 181 2 181 2 181
Deferred taxation 5 5 5
Due to vendors - interest
bearing 18 18
Current liabilities 373 484 592
Accounts payable 310 422 488
Amounts due to bankers 44 50 66
Due to vendors - interest
bearing 19 12 5
Taxation 33
TOTAL EQUITY AND
LIABILITIES 3 637 3 581 3 851
Statement of changes in equity
Six months Year ended
ended
31 May 31 May 30 Nov
R million 2009 2008 2008*
Equity at the beginning of
the period 1 055 835 835
Attributable profit for
the period 108 118 330
Increase in equity
compensation reserve 4 2 6
Movement on fair value of
cash flow hedges (1) (2) (2)
Gain on translation of
foreign entities 1 2
Foreign currency
translation reserve
realised (8)
Shares issued 1 2 4
Dividends (89) (63) (112)
Equity at the end of the
period 1 078 893 1 055
Supplementary information
These results were prepared in terms of IAS34, applying
accounting policies which conform with International
Financial Reporting Standards (IFRS) and are consistent
with those applied in the previous financial year.
31 May 31 May 30 Nov
2009 2008 2008*
Average net operating
assets (Rm) 1 058 838 923
Operating profit margin(%) 11,2 12,8 15,4
Average NOA turn (times -
annualised) 2,2 2,9 3,0
Return on average NOA (% -
annualised) 25,0 37,6 46,2
Net asset value per share
(cents) 3 365 2 797 3 282
Operating profit has been
determined after taking
into account the following
charges:
- Depreciation 8 6 15
- Amortisation of
intangible assets 1 2 3
Capital expenditure
-?Spent during the period
(Rm) 10 12 25
-?Budgeted for second half
of the year (Rm) 21 29
Commitments and
contingencies
-?Operating lease
commitments - property(Rm) 104 100 99
- A contingent liability
still exists in respect of
an ongoing dispute on
whether an employer
contribution holiday in
one of the group`s defined
contribution retirement
funds, was authorised by
its rules.
Net cash comprises (Rm) 60 (50) 69
-?Bank deposits and
balances 104 135
-?Amounts due to bankers (44) (50) (66)
Segment analysis
Turnover
31 May % 31 May 30 Nov
R million 2009 chang 2008 2008*
e
Bearings and Power
Transmission Products 770 1 763 1 727
Powered Products 272 -7 291 673
Security Equipment 134 -24 176 367
-?Ongoing operations 134 -12 152 343
-?Operations discontinued
in 2008 24 24
Internal/head office (1)
Total Group 1 176 -4 1 230 2 766
Operating profit
31 May % 31 May 30 Nov
R million 2009 chang 2008 2008*
e
Bearings and Power
Transmission Products 83 -10 92 251
Powered Products 47 -20 59 145
Security Equipment 19 19 16 49
-?Ongoing operations 19 -14 22 55
-?Operations discontinued
in 2008 (6) (6)
Internal/head office (17) (9) (18)
Total Group 132 -16 158 427
Average net operating assets
31 May 31 May 30 Nov
R million 2009 2008 2008*
Bearings and Power
Transmission Products 806 621 696
Powered Products 165 124 138
Security Equipment 79 84 80
-?Ongoing operations 79 71 67
-?Operations discontinued
in 2008 13 13
Internal/head office 8 9 9
Total Group 1 058 838 923
*Audited
Registered office: 190 Barbara Road, Elandsfontein, 1406
Transfer Secretaries: Computershare Investor Services (Pty) Limited, Ground
Floor, 70 Marshall Street, Johannesburg
Sponsors: Nedbank Capital
Directors: RT Vice# (Chairman); SJ Connelly (Chief executive); GE Gardiner (Alt
GR Dunford); JB Gibbon#; YKN Molefi#; CWN Molope#; SG Morris#; PM Poole
# Independent non-executive
Group Secretary: R Wolmarans
Date: 26/06/2009 12:00:03 Produced by the JSE SENS Department.
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