| Wed 12 May 2010, 12:05 | | HWN - Howden - Audited Financial Results For The Year Ended 31 December 2009 |
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HWN
HWN - Howden - Audited Financial Results For The Year Ended 31 December 2009
Howden Africa Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/002982/06)
Share code: HWN & ISIN: ZAE000010583
("the Company" or "the Group")
AUDITED FINANCIAL RESULTS for the year ended 31 December 2009
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2009
31 December 31 December
2009 2008
(Audited) Change (Restated)
R`000 % R`000
Revenue 976 332 20,0 813 625
Operating profit 129 480 35,9 95 273
Net finance income 5 222 3 322
Profit before income tax 134 702 36,6 98 595
Income tax expense (34 481) (38 186)
Profit for the year 100 221 65,9 60 409
Other comprehensive income
Currency translation differences - (924)
Pension fund plan surplus 20 112 3 842
Income tax relating to components (5 631) (1 076)
of other comprehensive income
Other comprehensive income for the 14 481 1 842
year, net of tax
Total comprehensive income for the 114 702 62 251
year attributable to equity holders
of the Company
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2009
31 December 31 December 1 January
2009 2008 2008
(Audited) (Restated) (Restated)
R`000 R`000 R`000
ASSETS
Non-current assets 202 109 174 459 125 904
Property, plant and equipment and 121 219 114 607 102 150
intangible assets
Pension fund plan surplus 25 334 6 484 -
Cash and cash equivalents 18 313 16 971 -
Other non-current assets 37 243 36 397 23 754
Current assets 481 896 418 593 266 867
Inventories 144 701 137 060 85 327
Trade and other receivables 235 780 229 165 161 638
Cash and cash equivalents 101 415 52 368 19 902
Total assets 684 005 593 052 392 771
EQUITY
Capital and reserves
Shareholders` funds 170 174 73 218 93 127
LIABILITIES
Non-current liabilities 156 944* 108 217 31 096
Current liabilities 356 887* 411 617 268 548
TOTAL LIABILITIES 513 831 519 834 299 644
TOTAL EQUITY AND LIABILITIES 684 005 593 052 392 771
*Current and non-current
liabilities were restated after
reviewing construction contract
advance receipts which relate to
non-current contracts. Bank
borrowings have been impacted
following the triggering of a
prepayment clause invoked by the
bank and this is reflected in the
restated current portion of
borrowings.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2009
Foreign
Pension currency
Share Retained fund plan translation
capital earnings surplus reserve Total
R`000 R`000 R`000 R`000 R`000
Balance at 1 January 657 93 969 - (1 499) 93 127
2008
Total comprehensive - 60 409 2 766 (924) 62 251
income for the year
attributable to
equity holders of the
Company
Dividends paid - (82 160) - - (82 160)
Balance at 31 657 72 218 2 766 (2 423) 73 218
December 2008
Balance at 1 January 657 72 218 2 766 (2 423) 73 218
2009
Total comprehensive - 100 221 14 481 - 114 702
income for the year
attributable to
equity holders of
the Company
Reclassification of - (2 423) - 2 423 -
currency translation
reserve
Dividends paid - (17 746) - - (17 746)
Balance at 31 657 152 270 17 247 - 170 174
December 2009
OTHER GROUP SALIENT FEATURES
for the year ended 31 December 2009
31 December 31 December
2009 2008
(Audited) Change (Restated)
R`000 % R`000
Net asset value per share (cents) 258,90 111,39
Depreciation 5 423 3 511
Amortisation 2 150 2 167
Capital expenditure 14 963 18 879
Capital commitments
- Authorised and contracted 570 2 842
Number of shares in issue (000`s) 65 729 65 729
Earnings per share (cents) 152,48 65,9 91,91
Headline earnings per share (cents) 152,50 64,5 92,72
Dividends per share
- dividend paid (cents) 15,00 15,00
- special dividend paid (cents) - 100,00
- interim dividend paid (cents) 12,00 10,00
Reconciliation of headline earnings
attributable to the equity holders of
the Company
Net profit attributable to equity 100 221 60 409
holders
Loss on disposal of property, plant 19 532
and equipment
Headline earnings attributable to 100 240 64,5 60 941
equity holders
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2009
31 December 31 December
2009 2008
(Audited) (Restated)
R`000 R`000
Cash flow from operating activities
Cash generated from operations 146 060 144 904
Interest paid (9 460) (9 988)
Income tax paid (68 943) (29 105)
Net cash generated from operating 67 657 105 811
activities
Cash flow from investing activities
Interest received 14 682 13 310
Purchases of property, plant and (14 963) (18 879)
equipment and intangible assets
Proceeds from disposal of property, 759 212
plant and equipment and intangible
assets
Net cash generated from/(used in) 478 (5 357)
investing activities
Cash flow from financing activities
Proceeds from borrowings - 31 143
Dividends paid (17 746) (82 160)
Net cash used in financing activities (17 746) (51 017)
Net increase in cash and cash 50 389 49 437
equivalents
Cash and cash equivalents at the 69 339 19 902
beginning of the year
Cash and cash equivalents at the end 119 728 69 339
of the year
SEGMENTAL ANALYSIS BY OPERATING DIVISION
for the year ended 31 December 2009
31 December 31 December
2009 2008
(Audited) Change (Restated)
R`000 % R`000
Revenue
Fans and Heat Exchangers 605 997 551 492
Environmental Control 370 335 262 133
976 332 20,0 813 625
Orders received
Fans and Heat Exchangers 751 114 849 264
Environmental Control 239 337 406 976
990 451 (21,2) 1 256 240
Operating profit
Fans and Heat Exchangers 103 220 81 002
Environmental Control 32 136 16 836
135 356 97 838
Central operations (5 876) (2 565)
Total operating profit 129 480 35,9 95 273
Inter-segmental sales
Fans and Heat Exchangers 45 375 59 339
Environmental Control 20 040 18 559
65 415 (16,0) 77 898
The effect of the restatements on prior year financial statements is as follows:
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2008
As previously
reported Restated
31 December 31 December
2008 Restatements 2008
Note R`000 R`000 R`000
Amounts due from 2 24 875 (24 875) -
customers for contract
work (non-current)
Amounts due from 2 41 089 18 326 59 415
customers for contract
work (current)
Inventories 2 44 816 92 244 137 060
Pension fund plan asset 1 - 6 484 6 484
Shareholders` funds 1 & 2 65 706 7 512 73 218
Deferred income tax 1 5 118 2 922 8 040
liabilities
Amounts due to 2 74 550 (48 139) 26 411
customers for contract
work (non-current)
Amounts due to 2 100 339 10 965 111 304
customers for contract
work (current)
Trade and other 2 165 961 102 027 267 988
payables (current)
Trade and other 2 - 16 892 16 892
payables (non-current)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2008
As previously
reported Restated
31 December 31 December
2008 Restatements 2008
Note R`000 R`000 R`000
Revenue 2 849 795 (36 170) 813 625
Operating profit 1 & 2 95 833 (560) 95 273
Income tax expense 1 & 2 (38 414) 228 (38 186)
Profit for the year 1 & 2 60 741 (332) 60 409
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 1 January 2008
As previously
reported Restated
1 January 1 January
2008 Restatements 2008
Note R`000 R`000 R`000
Amounts due from 2 74 860 (27 868) 46 992
customers for contract
work (current)
Inventories 2 32 197 53 130 85 327
Shareholders` funds 1 & 2 88 049 5 078 93 127
Deferred income tax 1 & 2 5 342 2 074 7 416
liabilities
Amounts due to 2 138 941 (52 530) 86 411
customers for contract
work (current)
Trade and other 2 99 498 70 640 170 138
payables (current)
IMPACT OF THE RESTATEMENTS
1. Defined benefit pension fund
31 December
2008
R`000
Statements of financial position
Increase in pension fund surplus 6 484
Increase in deferred tax liability (1 816)
Increase in pension fund plan surplus taken to equity (2 766)
Increase in retained earnings (1 902)
Statements of comprehensive income
Decrease in administrative expenses 2 642
Increase in income tax expense (740)
Increase in profit for the year 1 902
Increase in basic earnings per share - cents 2,89
Increase in headline earnings per share - cents 2,89
2. Contract accounting
31 December 1 January
2008 2008
R`000 R`000
Statements of financial position
Decrease in amounts due from customers for (24 875) -
contract work (non-currrent)
Increase/(decrease) in amounts due from 18 326 (27 868)
customers for contract work (currrent)
Increase in inventories 92 244 53 130
Increase in deferred tax liability (1 106) (2 074)
Decrease in amounts due to customers for 48 139 -
contract work (non-currrent)
(Increase)/decrease in amounts due to (10 965) 52 530
customers for contract work (currrent)
Increase in trade and other payables (current) (102 027) (70 640)
Increase in trade and other payables (non- (16 892) -
current)
Increase in retained earnings (2 844) (5 078)
Statements of comprehensive income
Decrease in revenue (36 170)
Decrease in cost of sales 32 968
Decrease in income tax expense 968
Decrease in profit for the year (2 234)
Decrease in basic earnings per share - cents (3,39)
Decrease in headline earnings per share - (3,39)
cents
CHANGE IN ACCOUNTING POLICIES
1. Pension and provident benefit
The Group early adopted AC 504 - IAS 19 (AC 116) The Limit on a Defined Benefit
Asset, Minimum Funding Requirements and their Interaction in the South African
Pension Fund Environment. The effective date for AC 504 is financial periods
starting on or after 1 April 2009, however the Group elected the early adoption
as this guidance was published before the Group`s year-end and seeks to clarify
an existing accounting pronouncement. The early adoption resulted in the Group
recognising its defined benefit surplus as an asset, retrospectively. AC 504
required the Group to assess whether it had an unconditional right to the
surplus. As the Rules of the Fund were amended in 2008 to apportion future
surpluses to the employer, the surplus in the pension fund should be recognised
in the statement of financial position.
In addition the Group changed its accounting policy in accordance with the
allowed alternative in IAS 19 Employee Benefits to recognise actuarial gains and
losses on the Group`s defined benefit pension fund. As a result of this change
in accounting policy, any adjustments to the surplus or deficit by applying the
limit to the asset in accordance with IAS 19 Employee Benefits will also be
recognised in other comprehensive income. This new policy results in more
relevant information on the Group`s performance by removing the volatility from
changes in actuarial assumptions and reserves.
2. CONTRACT ACCOUNTING
IFRIC 15 - Agreements for the Construction of Real Estate, which became
effective during the current year, clarifies how to determine whether an
agreement is within the scope of IAS 11 - Construction Contracts or IAS 18 -
Revenue and when revenue from construction should be recognised. The Group has
reviewed all of its contract classifications and determined that some contracts
previously classified as construction contracts under IAS 11 have now been
classified as sale of goods and services under IAS 18.
COMMENTARY
It is pleasing to report an excellent set of results for the year ended 31
December 2009. Earnings per share attributable to equity holders of the Company
increased to 152,48 cents per share (2008: 91,91 cents per share), an increase
of 65,9%.
OVERVIEW
Although the economy experienced negative growth over the first two quarters of
2009 there appear to be signs of a bottoming out from the recession with
moderate growth forecast in 2010. Under these circumstances it is pleasing to
report that the Company has been able to hold the order book at levels close to
those that were reported at the beginning of 2009.
In 2009 revenue of R976,3 million is reported compared to R813,6 million in
2008, an increase of 20,0%, and operating profit has increased by 35,9% to
R129,5 million (2008: R95,3 million). Improved project margins in both
divisions, and strong increases in revenue achieved in the Environmental Control
division, have contributed to profit margins above those reported last year.
Of considerable importance to the Group was the extent of our inclusion in
Eskom`s new build programme. This has resulted in sustainability of business
given that work on Eskom`s return to service programme has started to decline.
Another important issue for the Group has been the execution of the contract for
the supply and erection of a dedusting system at ArcelorMittal. Progress to date
on this project gives encouragement that the Environmental Control division has
delivered a project which could lead to further opportunities nationally and
internationally in due course.
RESULTS
Profit before tax of R134,7 million (2008: R98,6 million) is reported, higher
revenue volumes and margins being achieved in both operating divisions. Net
financial income of R5,2 million compares to R3,3 million reported last year, a
favourable outcome reflecting strong operating cash flow generation by Group
companies.
A tax charge of R34,5 million (2008: R38,2 million) has been accrued, equivalent
to 25,6% (2008: 38,7%) of profit before tax. The higher charge in 2008 included
an STC amount of R6,6 million paid in respect of the special dividend of R65,7
million. The charge for 2009 has also benefited from an amount of R5 million
allowed by the authorities for the write-off of intellectual property acquired
when the Company listed in 1996.
The comparisons below refer to the corresponding year to December 2008:
- Order intake amounted to R990 million compared to R1 256 million in the
corresponding period.
- Operating profit of R129,5 million compared to R95,3 million.
- Earnings per share of 152,48 cents compared to 91,91 cents.
- At 31 December 2009 the Group`s cash less borrowings resulted in a net cash
position of R68,6 million compared to R17,6 million last year.
ACCOUNTING POLICIES
The condensed annual financial statements for the year ended 31 December 2009
have been prepared in accordance with International Financial Reporting
Standards (IFRS), IAS 34 Interim Financial Reporting, JSE Listings Requirements
and the Companies Act of South Africa. The accounting policies are consistent
with those applied in the prior year annual financial statements, except for the
changes in accounting policies as noted in the restatement section above.
REVIEW OF OPERATIONS
FANS AND HEAT EXCHANGERS
Order intake for fans and heat exchangers totaled R751 million, which represents
76% of the total order intake, compared to R849 million the previous year.
The standard fan business produced a solid performance in a very competitive
market, achieving profit margins in line with expectations. It is pleasing to
report that the business also achieved success in obtaining certification
against the OHSAS 18001 occupational health and safety management standard, and
the international environmental standard ISO 14001. Tender activity has remained
high through the year and certain capital projects, previously postponed, have
been released for updated pricing and should offer opportunity through 2010.
A sharp drop in commodity prices during the second half of 2008 raised concerns
that the platinum mining and industrial metals processing markets would be
difficult in 2009. The business unit focused on this market therefore
concentrated its efforts on the coal and gold mining markets where conditions
appeared more favourable. These efforts, coupled with a drive to increase
aftermarket business, resulted in improved profitability being reported in the
year. Good progress was also achieved in the production of cooling tower fans
connected to Eskom`s new build programme. Assuming no unforeseen postponements
to the aforesaid programme, and success in converting select new build
opportunities, performance levels in this business should at least be
maintained.
Negotiations for a five year National Draught Plant Framework Agreement with
Eskom were successfully concluded during the year. The agreement covers the
supply of general spares and maintenance on air heaters and draught plant fans
installed at Eskom`s coal fired power stations, and replaces individual
contracts previously in place at the respective stations. This will allow a more
focused effort on skills development and training to support Eskom`s drive to
improve efficiencies and plant availability.
The return to service (RTS) and capacity increase projects within Eskom provided
continuous support for the aftermarket business within the power generation
industry. The RTS programme is nearing completion but it is planned to replace
this business with increased aftermarket activity and the new build programme
connected to Medupi and Kusile power stations.
Strong order book levels have been maintained through the year, and although
there is evidence of some margin slippage due to product mix, existing prospects
support the view that another good year of earnings should be forthcoming in the
fans and heat exchangers division in 2010.
ENVIRONMENTAL CONTROL
The environmental control division recorded orders of R239 million, representing
24% of the total order intake, compared to R407 million in the previous year.
The domestic economy experienced negative growth over the first two quarters of
2009 and this raised challenges for the Environmental Control division which
started the year with a strong order book but witnessed a decline through the
year.
The division made good progress in executing the order received from
ArcelorMittal for the supply and erection of a meltshop dedusting system, the
first of its kind to be installed in South Africa. The gas cleaning market,
however, proved to be difficult through the year with many industrial plants
having scaled back production, thereby postponing the need for addressing issues
of an environmental nature. Environmental legislation will continue to call for
an increase in cleaning standards and the Group remains optimistic that the dust
extraction and gas treatment technologies in our possession will play an active
part in meeting future requirements.
As the division is run as a project management business, resources fluctuate
according to order book levels and available prospects. Difficult trading
conditions have been experienced but the business remains optimistic about
emerging opportunities. Orders have recently been converted connected to deep
level mine cooling and work continues in developing further prospects in this
market.
The division has increased its base of earnings substantially over the last two
years. Although challenges exist in building its order book and identifying
future opportunities, a number of prospects are developing which could
materially alter the position for the better over the coming year. The division
has, however, realistically budgeted for a tough year taking into account the
nature of prospects being targeted and the length of time needed to convert
them.
OUTLOOK
The Group has reported material improvements in results over the last three
years, with record earnings reported for 2009. Initiatives taken over the recent
past, and the successful completion of certain large value contracts, have
contributed to this improvement. This raises challenges in maintaining a higher
base of earnings given market uncertainties being experienced worldwide. Firming
commodity prices, and a moderate recovery in industrial production, would give
support to the Group remaining cautiously optimistic looking ahead.
DIVIDENDS
The Directors declared a final dividend of 20 cents per share payable to
shareholders for the year ended 31 December 2009. The last date to trade cum
dividend was Friday, 16 April 2010. Shares started trading ex dividend on
Monday, 19 April 2010. The record date was Friday, 23 April 2010. Payment was
made on Monday, 26 April 2010. No share certificates were dematerialised or
rematerialised between Monday, 19 April 2010 and Friday, 23 April 2010, both
days inclusive.
DIRECTORATE
There were no changes in directorate during the year.
AUDITED RESULTS
PricewaterhouseCoopers Inc., the Group`s independent auditors, have audited the
condensed consolidated financial statements for the year ended 31 December 2009,
that comprise the condensed consolidated statement of financial position as at
31 December 2009, condensed consolidated statement of comprehensive income,
condensed consolidated statement of changes in equity, and condensed
consolidated statement of cashflows for the year then ended and have expressed
an unqualified opinion on these audited condensed consolidated financial
statements. The review report is available for inspection at the Company`s
registered office.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of shareholders of the
Company will be held at the registered office,
1a Booysens Road, Booysens, Johannesburg at 12:00 on Thursday, 3 June 2010, to
transact the business as stated in the notice of the annual general meeting
forming part of the annual report, which was posted today.
For and on behalf of the Board of Directors
RJ Cleland T Barwald
Chairman Chief Executive Officer
12 May 2010
Directors:
RJ Cleland (Chairman)#**, T Barwald (Chief Executive Officer)+
S Meyer, AB Mashiatshidi**, J Brown#**, M Malebye**
(#British +German **Non-executive)
Company secretary:
M Luthuli
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: 12/05/2010 12:05:02 Produced by the JSE SENS Department.
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