| Fri 29 Jan 2010, 7:05 | | HDC - Hudaco Industries Limited - Audited Group Results |
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HDC
HDC
HDC - Hudaco Industries Limited - Audited Group Results
for the year ended 30 November 2009
Hudaco Industries Limited
("Hudaco"; "the company"; or "the group")
Incorporated in the Republic of South Africa
Registration number: 1985/004617/06
Share code: HDC
ISIN code: ZAE000003273
* Normalised headline earnings per share down 19% to R8,01
* Dividends reduced 12,5% to R3,50 per share
* Cash increased to R335 million
Hudaco is a South African group engaged in the business of importing and
distributing engineered consumable products. Its customers are mainly within the
southern African manufacturing, mining, construction, automotive aftermarket and
security industries.
Results
Total sales of R2,4 billion for the year are down 12% on 2008.
In October 2008, when it became clear that South Africa was going to follow the
world into recession, a number of precautionary operational measures were put in
place. These included a moratorium on acquisitions, a hiring freeze and a stock
reduction programme. The effect of these measures means that Hudaco has
weathered the worst of the recession and emerged in good shape.
Volume sales of bearings, power transmission products and diesel engines were
well down on last year`s levels, as mining and manufacturing customers acted to
cut production in response to reduced demand and lower commodity prices.
Infrastructure spending, particularly road and stadium building, continued but
the group`s exposure to this sector of the economy was not sufficient to
outweigh the decline in demand from mining and manufacturing. Interest rate
increases in 2007 and 2008 had already started to dampen consumer spending on
housing and building related activities and the recession only accelerated the
process. This resulted in sales of power tools and security equipment falling
sharply this year.
Sales in the Bearings and power transmission division were down 8%, whilst sales
in the Powered products division were down 17%. In the Security equipment
division they were down 22%. The Rand strengthened steadily throughout the first
half of 2009, resulting in prices decreasing across our product range,
particularly in the second half, when new cheaper stock started arriving. This
only added to the pressure on our sales line. There were signs towards year end
that sales had stabilised somewhat but there are no signs of an upturn yet.
The group gross profit margin at 39,3% was up 0,2% on last year, which we regard
as a fine achievement given the competition in the market place for scarce
turnover. Operating expenses were down 2% on 2008 but as a percentage of sales
they increased from 23,7% to 26,6%, understandable given the decline in sales.
Group operating profit fell by 28% or R120 million to R307 million with an
operating margin to sales of 12,7% (last year: 15,4%). Headline and basic
earnings per share are down 17% and 21% respectively on last year. Normalised
headline earnings per share (which excludes capital items) are 801 cents, down
19% on the 995 cents of last year.
The group`s dividend policy is to pay approximately 40% of normalised earnings
annually. In view of the strong cash generation this year, a final dividend of
235 cents per share brings total dividends declared in respect of the 2009
financial year to 350 cents, 42% of normalised earnings.
The balance sheet is healthy. Working capital (inventories, accounts receivable
and accounts payable) at R627 million has been managed down by R172 million or
22% from 2008 levels. The considerable decrease in inventories in 2009 of R183
million or 23% brings stockholding back into line with current trading levels.
The group has R335 million cash on hand at year end (last year: net R69
million).
Prospects
The recession is not yet over. Although some economic indicators are showing an
upturn, many others reflect only a slowdown in the rate of decline. In our
businesses, volume demand declined steadily throughout the year and there were
no indications that it had turned upwards by yearend. Our view is that it will
take until mid 2010 before the recession in South Africa is over and economic
growth resumes across a broad front.
It is difficult to tell how strong this growth will be. There will be restocking
throughout the economy which will give early impetus to growth and government
infrastructure investment will gather pace, particularly power station building.
Although commodity prices have turned upwards, some quite strongly, Rand
strength removes much of the benefit for our mining industry. Renewed investment
in mining projects and manufacturing capacity will be slow - it is natural to be
wary of another bubble in demand and prices. As a result, we expect the recovery
in the South African economy to also be slow until meaningful job creation gets
underway. Consequently, consumer spending, to which we are indirectly exposed,
could be weak for some time.
We are expecting trading in the first half of the year to continue to be
difficult. However, an expected resumption of economic growth in the second half
makes us optimistic that the group will post an earnings increase for the full
year.
Declaration of final dividend no 46
Ordinary dividend number 46 of 235 cents per share is declared payable on Monday
15 March 2010 to ordinary shareholders recorded in the register at the close of
business on Friday 12 March 2010. The timetable for the payment of the dividend
is as follows:
Last day to trade cum dividend Friday 5 March 2010
Trading ex dividend commences Monday 8 March 2010
Record date Friday 12 March 2010
Payment date Monday 15 March 2010
Share certificates may not be dematerialised or rematerialised between Monday 8
March 2010 and Friday 12 March 2010, both days inclusive. The certificated
register will be closed for this period.
Results presentation and annual general meeting
Hudaco will host presentations on the financial results in Johannesburg and Cape
Town on Friday 29 January and Monday 1 February 2010 respectively. Anyone
wishing to attend should contact Robin Benson at 011 345 8214.
The slides, which form part of the presentation, will be available on the
company`s website on Tuesday 2 February 2010.
The company`s 25th annual general meeting will be held in the boardroom, Hudaco
Park, 190 Barbara Road, Elandsfontein, Gauteng at 11:00 on Friday 26 March 2010.
Further details on the company`s annual general meeting will be included in the
annual report that will be published on www.hudaco.co.za during the first week
of February 2010 and will be posted to shareholders on or about 15 February
2010.
Approval of financial statements
The financial statements have been approved by the board and abridged for
purposes of this report. Grant Thornton has signed an unqualified audit opinion
on the annual financial statements. Both the financial statements and the
auditor`s opinion are available for inspection at the company`s registered
office.
For and on behalf of the board
RT Vice
Independent non-executive chairman
SJ Connelly
Chief executive
28 January 2010
Income statement
30 Nov % 30 Nov
R million 2009 change 2008
Turnover 2 420 -12 2 766
Cost of sales 1 469 1 684
Gross profit 951 1 082
Operating expenses 644 655
Operating profit 307 -28 427
Capital items (7) (2)
Profit before dividends received,
interestreceived and finance costs 300 425
Dividends received on preference shares 202 200
Interest received 5 12
Finance costs (235) (252)
Profit before taxation 272 385
Taxation 24 55
Profit after taxation 248 -25 330
Attributable to shareholders of the group 243 307
Attributable to minorities 5 23
248 330
Normalised headline earnings per share 801 -19 995
(cents)
Headline earnings per share (cents) 801 964
Basic earnings per share (cents) 784 995
Diluted normalised headline earnings
per share (cents) 785 970
Diluted headline earnings per share (cents) 785 940
Diluted basic earnings per share (cents) 769 970
Reconciliation to normalised headline
earnings
Profit attributable to shareholders of the
group adjusted to eliminate the effect of
the following items in attributable 243 307
earnings:
- Surplus on disposal of property, plant
and equipment (1)
- Foreign currency translation reserve (9)
realised
- Impairment of goodwill and intangible 9
assets
- Surplus on sale of business (1)
- Tax effect (1)
- Minority interest (1)
Headline earnings 249 297
Adjusted to eliminate the effect of the
following items in headline earnings:
- Impairment of assets in operation
discontinued in 2008 10
Normalised headline earnings 249 -19 307
Dividends
- Per share (cents) 350 -13 400
- Amount (Rm) 109 124
Shares in issue 31 240 30 923
- Total (000) 33 748 33 431
- Held by subsidiary company (000) (2 508) (2 508)
Weighted average shares in issue
- Basic (000) 31 023 30 836
- Diluted (000) 31 644 31 632
Cash flow statement
30 Nov 30 Nov
R million 2009 2008
Cash generated from trading 333 450
Decrease (increase) in working capital 166 (235)
Cash generated from operations 499 215
Finance costs (235) (249)
Taxation paid (63) (56)
Net cash from operating activities 201 (90)
Investment in new operations - net (7) (140)
Investment in property, plant and equipment - net (17) (20)
Discontinuation of businesses 7
Dividends and interest received 203 212
Net cash from investing activities 186 52
Proceeds from issue of share capital 8 4
Dividends paid (129) (214)
Net cash from financing activities (121) (210)
Net increase (decrease) in cash and cash equivalents 266 (248)
Statement of changes in equity
30 Nov 30 Nov
R million 2009 2008
Equity at the beginning of the year 1 055 835
Profit for the year 248 330
Increase in equity compensation reserve 3 6
Movement on fair value of cash flow hedges (1) (2)
Gain on translation of foreign entities 2
Foreign currency translation reserve realised (8)
Shares issued 8 4
Dividends (129) (112)
Equity at the end of the year 1 184 1 055
Balance sheet
30 Nov 30 Nov
R million 2009 2008
ASSETS
Non-current assets 2 418 2 429
Property, plant and equipment 91 92
Investments 2 181 2 181
Goodwill 117 131
Intangible assets 18 25
Deferred taxation 11
Current assets 1 288 1 422
Inventories 597 780
Accounts receivable 356 507
Bank deposits and balances 335 135
TOTAL ASSETS 3 706 3 851
EQUITY AND LIABILITIES
Equity 1 184 1 055
Shareholders` equity 1 150 1 015
Minority interest 34 40
Non-current liabilities 2 186 2 204
Subordinated debenture 2 181 2 181
Deferred taxation 5
Due to vendors - interest bearing 5 18
Current liabilities 336 592
Accounts payable 326 488
Amounts due to bankers 66
Due to vendors - interest bearing 5
Taxation 10 33
TOTAL EQUITY AND LIABILITIES 3 706 3 851
Supplementary information
These results were prepared applying accounting policies which conform
with International Financial Reporting Standards and are consistent with
those applied in the previous financial year. These results also comply
with the requirements of IAS 34 on interim reporting.
30 Nov 30 Nov
2009 2008
Average net operating assets (Rm) 1 015 923
Operating profit margin (%) 12,7 15,4
Average NOA turn (times) 2,4 3,0
Return on average NOA (%) 30,2 46,2
Net asset value per share (cents) 3 681 3 282
Capital items (7) (2)
Impairment of goodwill and intangible assets (8)
Impairment of assets of operation discontinued (10)
Foreign currency translation reserve realised 8
Surplus on disposal of operating assets 3
Cost to relocate remainder of business (2)
Operating profit has been determined after
taking into account the following charges:
- Depreciation 18 15
- Amortisation of intangible assets 4 3
- Loss (profit) on foreign cash 10 (12)
Capital expenditure
- Spent during the period (Rm) 20 25
- Budgeted for 2010 (Rm) 93
- Already contacted for (Rm) 22
Commitments and contingencies
- Operating leases on property (Rm) 103 99
- Break fee on debenture (Rm) 21
- A contingent liability exists in respect of a
dispute with the Registrar of Pension Funds 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) 335 69
- Bank deposits and balances 335 135
- Amounts due to bankers (66)
Segment analysis
Turnover
30 Nov % 30 Nov
R million 2009 change 2008
Bearings and power transmission products 1 593 -8 1 727
Powered products 559 -17 673
Security equipment 269 -27 367
- Ongoing operations 269 -22 343
- Operation discontinued in 2008 24
Internal/head office (1) (1)
Total group 2 420 -12 2 766
Segment analysis (continued)
Operating profit
30 Nov % 30 Nov
R million 2009 change 2008
Bearings and power transmission products 201 -20 251
Powered products 102 -30 145
Security equipment 41 -16 49
- Ongoing operations 41 -25 55
- Operation discontinued in 2008 (6)
Internal/head office (37) (18)
Total group 307 -28 427
Segment analysis (continued)
Average net operating
assets
30 Nov % 30 Nov
R million 2009 change 2008
Bearings and power transmission products 768 10 696
Powered products 159 15 138
Security equipment 70 -12 80
- Ongoing operations 70 67
- Operation discontinued in 2008 13
Internal/head office 18 9
Total group 1 015 10 923
Bearings and power transmission products
Bearings International
Distributor of bearings, seals and transmission products.
Abes Technoseal
Distributor of oil and hydraulic seals, clutch kits and automotive ignition
leads.
Ambro Sales
Distributor of special solid and hollow round steel.
Astore Africa
Distributor of specialised thermoplastic pipes and fittings.
Belting Supply Services
Distributor of conveyer belting, industrial hose, fluid sealing and process
control products.
Bosworth
Manufacturer of conveyor drive pulleys, forgings and rollings.
Ernest Lowe
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, stern drives, outboard motors, survey equipment,
nuclear gauges and rivets.
Security equipment
Elvey equipment
The distribution of intruder detection, access control, related CCTV equipment
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) CV Amoils (Financial director)
GE Gardiner (Alt GR Dunford) JB Gibbon# YKN Molefi# CWN Molope# SG Morris#
# Independent non-executive
Group secretary
R Wolmarans
Sponsor
Nedbank Capital
These results are available on the Internet
www.hudaco.co.za
"Value-added distribution - our core competency"
Date: 29/01/2010 07:05:02 Produced by the JSE SENS Department.
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