| Wed 29 Jun 2011, 7:05 | | HDC - Hudaco Industries Limited - Unaudited interim group results for the six |
|
HDC
HDC
HDC - Hudaco Industries Limited - Unaudited interim group results for the six
months ended 31 May 2011
HUDACO INDUSTRIES LIMITED
Incorporated in the Republic of South Africa
Registration number 1985/004617/06
JSE Code: HDC
ISIN: ZAE000003273
UNAUDITED INTERIM GROUP RESULTS
FOR THE SIX MONTHS ENDED 31 MAY 2011
- Sales up 26%
- Operating profit up 24%
- Headline earnings per share up 11% to 377 cents per share
- Interim ordinary dividend increased 13% to 130 cents per share
Background
Hudaco is a South African group that imports and distributes branded engineering
consumables, power tools and security, automotive and professional mobile radio
communication products. Its customer base is mainly within the southern African
manufacturing, mining, construction, automotive aftermarket and security
industries. Adding value to the product sold by offering technical advice,
prompt availability and training is a key part of Hudaco`s business model.
The group has delivered satisfactory results in challenging circumstances.
Acquisitions
The effects of the group`s acquisition programme are reflected meaningfully for
the first time in these results.
FHS and Midrand Special Steels are included for the full six months, while
Global Communications is included from February and Pentagon Distribution from
March. None of these acquisitions was in the interim results for 2010.
Results
During the six months under review, markets served by Hudaco continued their
weak and patchy recovery from the global turmoil of 2008/9. Volume sales were
about the same as last year and this was coupled with a decrease in prices
resulting from continuing Rand strength. The contribution from acquisitions,
particularly FHS, which has been part of the group since September 2010, helped
the group to post stronger earnings than would have otherwise been the case. The
Japanese earthquake did affect some of our suppliers, but not materially, and
all were back to normal production within a few weeks. Hudaco`s large
stockholding also acts as a buffer against supply interruptions, so we do not
anticipate any meaningful stock shortages resulting from the disaster.
The gross profit margin at 39% is down 1% on last year, the change being mainly
attributable to the different mix of businesses this year. Operating expenses as
a percentage of sales at 28% is lower than the 29% for the same period last year
for much the same reason.
Sales for the six months are up 26% to R1,4 billion. Operating profit grew by
24% to R149 million with an operating margin to sales of 10,6% (last year
10,8%). Headline and basic earnings per share of 377 cents are up 11% on last
year. The interim dividend has been increased by 13% to 130 cents per share
(last year 115 cents per share).
The financial position is healthy. Working capital (inventories, receivables and
payables) increased as new businesses have been brought on board and activity
levels are within our normal parameters. In the past 12 months Hudaco has
acquired four businesses for a total cost of R565 million of which R262 million
has already been paid. R303 million is still to be paid over the next two to
three years and is dependent on earn-out performances. The group has R101
million net cash on hand at May 2011.
Engineering consumables segment
This segment is the biggest profit contributor to the group. The trading
environment was challenging in the period under review with increased profits in
some businesses being offset by weaker performances from others. Hudaco`s
acquisition activity over the past year has contributed meaningfully to this
segment`s sales base and it is pleasing to note that both FHS and Midrand
Special Steels are performing in line with, or ahead of expectations.
Volume sales were generally higher than the same period last year but the strong
Rand impacted sales and margins negatively in many businesses. Sales were R977
million, up 24% on last year, whilst operating profit increased 21% to R98
million.
Consumer related products segment
Trading conditions in this segment were muted during the period under review.
The power tool business managed to increase market share, but this was offset by
a weaker performance from our security business. Sales were up 29% to R432
million whilst operating profit increased 35% to R65 million. The two
acquisitions in this segment, Global Communications and Pentagon Distribution,
have performed in line with or ahead of expectations.
Prospects
A significant percentage of Hudaco`s sales are derived from the South and
southern African mining industry, and the manufacturing and service sectors
supporting that industry. Constrained by insufficient infrastructure,
particularly electricity and rail capacity, South African mining houses have
been unable to expand to take advantage of high commodity prices over the past
five or so years. It will still be some years before infrastructural capacity is
increased sufficiently, so we anticipate only muted growth from this sector
until then. We would urge Government to use this time to settle the debate
around nationalisation which, if not resolved, could also become a deterrent to
investment.
With the mining industry being a significant engine of growth for the South
African economy as a whole, for the reasons above, we anticipate that economic
growth is likely to continue to be weak over the next few years. If this is the
case, meaningful earnings growth must come from acquisitions and the successes
we have already enjoyed over the last year will add materially to earnings in
the medium term. Although our prospect list is shorter now than last year, we
are confident of further successes in the years to come.
Directorate
As reported on SENS, Mesdames D Naidoo and D Mokgatle joined the board as
independent non-executive directors with effect from 24 March 2011.
Declaration of interim dividend no 49
Interim dividend number 49 of 130 cents per share is declared payable on Monday,
22 August 2011 to ordinary shareholders recorded in the register at the close of
business on Friday, 19 August 2011. The timetable for the payment of the
dividend is as follows:
Last day to trade cum dividend Friday, 12 August 2011
Trading ex dividend commences Monday, 15 August 2011
Record date Friday, 19 August 2011
Payment date Monday, 22 August 2011
Share certificates may not be dematerialised or rematerialised between Monday,
15 August 2011 and Friday, 19 August 2011, both days inclusive. The certificated
register will be closed for this period.
Results presentation
Hudaco will host presentations on the financial results in Johannesburg and Cape
Town on Wednesday, 29 June 2011 and Thursday, 30 June 2011 respectively. Anyone
wishing to attend should contact Robin Benson at 011 657 5007.
The slides which form part of the presentation will be available on the
company`s website on Friday, 1 July 2011.
For and on behalf of the board
RT Vice SJ Connelly
Independent non-executive chairman Chief executive
28 June 2011
Group statement of financial position
31 May 31 May 30 Nov
R million 2011 2010 2010*
ASSETS
Non-current assets 2 946 2 428 2 700
Property, plant and equipment 173 89 131
Investment in preference shares 2 181 2 181 2 181
Goodwill 513 117 331
Intangible assets 57 16 34
Deferred taxation 22 25 23
Current assets 1 317 1 286 1 348
Inventories 780 601 663
Trade and other receivables 436 321 423
Taxation 1
Cash and cash equivalents 101 363 262
TOTAL ASSETS 4 263 3 714 4 048
EQUITY AND LIABILITIES
Equity 1 354 1 223 1 314
Interest of shareholders of the group 1 336 1 194 1 287
Non-controlling interest 18 29 27
Non-current liabilities 2 383 2 181 2 280
Subordinated debenture 2 181 2 181 2 181
Amounts due to vendors of businesses 202 99
acquired
Current liabilities 526 310 454
Trade and other payables 430 297 420
Amounts due to vendors of businesses 91 5 28
acquired
Taxation 5 8 6
TOTAL EQUITY AND LIABILITIES 4 263 3 714 4 048
Group statement of comprehensive income
Six months Six months Year
ended ended ended
31 May % 31 May 30 Nov
R million 2011 change 2010 2010*
Turnover 1 406 26 1 116 2 458
- Ongoing operations 1 166 4 1 116 2 393
- Acquired in 2010 and 2011 240 65
Cost of sales 857 669 1 464
Gross profit 549 23 447 994
Operating expenses 400 327 694
Operating profit 149 24 120 300
- Ongoing operations 101 (16) 120 286
- Acquired in 2010 and 2011 48 14
Impairment of goodwill and 22
intangible assets
Profit before dividends 149 24 120 278
received, interest received and
finance costs
Dividends received on preference 100 99 201
shares
Interest received 3 9 17
Finance costs (123) (115) (235)
Profit before taxation 129 14 113 261
Taxation 9 7 24
PROFIT FOR THE PERIOD 120 13 106 237
Other comprehensive income
Movement on fair value of cash (1) 1
flow hedges
TOTAL COMPREHENSIVE INCOME FOR 119 11 107 237
THE PERIOD
Profit attributable to:
- shareholders of the group 119 107 234
- non-controlling shareholders 1 (1) 3
120 106 237
Total comprehensive income
attributable to:
- shareholders of the group 118 108 234
- non-controlling shareholders 1 (1) 3
119 107 237
Headline earnings per share 377 11 341 800
(cents)
Basic earnings per share (cents) 377 341 745
Diluted headline earnings per 371 336 784
share (cents)
Diluted basic earnings per share 371 336 730
(cents)
Reconciliation to headline
earnings
Profit attributable to 119 107 234
shareholders of the group
Adjusted for:
- Impairment of goodwill and 22
intangible assets
- Tax effect (2)
- Non-controlling interest (2)
Headline earnings 119 11 107 252
Dividends
-per share (cents) 130 13 115 350
- amount (Rm) 41 36 110
Shares in issue 31 634 31 532 31 540
- total (000) 34 142 34 040 34 048
- held by subsidiary company (2 508) (2 508) (2 508)
(000)
Weighted average shares in issue
- basic (000) 31 592 31 395 31 466
- diluted (000) 32 077 31 909 32 109
Group statement of cash flows
Six months Six months Year
ended ended ended
31 May 31 May 30 Nov
R million 2011 2010 2010*
Cash generated from trading 171 134 327
(Increase) decrease in working capital (79) 2 12
Cash generated from operations 92 136 339
Finance costs (116) (115) (234)
Taxation paid (20) (24) (49)
Net cash from operating activities (44) (3) 56
Net investment in new operations (87) (184)
Net investment in property, plant and (45) (6) (50)
equipment
Dividends and interest received 103 108 218
Net cash from investing activities (29) 102 (16)
Proceeds from issue of shares 2 8 7
Dividends paid (90) (79) (120)
Net cash from financing activities (88) (71) (113)
Net (decrease) increase in cash and (161) 28 (73)
cash equivalents
Group statement of changes in equity
Six months Six months Year
ended ended ended
31 May 31 May 30 Nov
R million 2011 2010 2010*
Equity at the beginning of the period 1 314 1 184 1 184
Comprehensive income for the period 119 107 237
Increase in equity compensation 3 3 5
reserve
Issue of shares 2 8 7
Dividends (84) (79) (119)
Equity at the end of the period 1 354 1 223 1 314
Supplementary information
The consolidated financial statements have been prepared in accordance with IAS
34: Interim Financial Reporting, International Financial Reporting Standards,
the JSE Listings Requirements and in the manner required by the Companies Act of
South Africa. The principal accounting policies set out in the group`s 2010
annual report have been consistently applied throughout the period ended 31 May
2011. Except for information at 30 November 2010, no information set out in this
announcement has been audited or reviewed by the company`s auditors.
31 May 31 May 30 Nov
2011 2010 2010*
Average net operating assets (NOA) (Rm) 1 377 872 948
Operating profit margin (%) 10,6 10,8 12,2
Average NOA turn (times) 2,0 2,5 2,6
Return on average NOA (%) 21,7 27,5 31,6
Net asset value per share (cents) 4 223 3 787 4 080
Operating profit has been determined after
taking into account the following charges
(Rm):
- Depreciation 13 8 18
- Amortisation 6 2 4
Capital expenditure (Rm)
- Incurred during the period 49 6 52
- Authorised but not contracted for 35 18 31
- Already contracted for 64 28
Commitments and contingencies (Rm)
- Operating lease commitments on properties 136 109 116
Acquisition of new businesses
The group acquired 100% of Midrand Special
Steels (1 Dec 2010), Global Communications
(1 Feb 2011) and Pentagon Distribution (1
Mar 2011) for considerations based on
future profits over 2-3 years and the fair
value of which are estimated to total R246
million. The purchase considerations are
subject to a maximum of R264 million.
Property, plant and equipment of R10
million, inventories of R39 million,
receivables of R60 million, payables of R63
million, goodwill of R182 million,
intangible assets of R29 million and
deferred tax liabilities of R11 million
were recognised at date of acquisition.
These values approximate the fair values as
determined under IFRS 3.
The results since acquisition date included
for the period are as follows:
- Turnover (Rm) 123
- Profit after tax (Rm) 10
If the acquisitions had been concluded at
the beginning of the period the
consolidated results for the group would
have been as follows:
- Turnover (Rm) 1 448
- Profit after tax (Rm) 124
Segment information
Turnover
Six months Six months Year
ended ended ended
31 May % 31 May 30 Nov
R million 2011 change 2010 2010*
Engineering consumables 977 24 785 1 750
- Ongoing operations 829 6 785 1 685
- Acquired in 2010 and 2011 148 65
Consumer related products 432 29 335 716
- Ongoing operations 340 1 335 716
- Acquired in 2011 92
Total operating segments 1 409 26 1 120 2 466
Head office, shared services (3) (4) (8)
and eliminations
Total group 1 406 26 1 116 2 458
Operating profit
Six months Six months Year
ended ended ended
31 May % 31 May 30 Nov
R million 2011 change 2010 2010*
Engineering consumables 98 21 81 206
- Ongoing operations 67 (17) 81 192
- Acquired in 2010 and 2011 31 14
Consumer related products 65 35 48 117
- Ongoing operations 48 48 117
- Acquired in 2011 17
Total operating segments 163 26 129 323
Head office, shared services (14) (9) (23)
and eliminations
Total group 149 24 120 300
Average net operating assets
Six months Six months Year
ended ended ended
31 May % 31 May 30 Nov
R million 2011 change 2010 2010*
Engineering consumables 996 53 653 728
- Ongoing operations 677 4 653 660
- Acquired in 2010 and 2011 319 68
Consumer related products 298 55 192 182
- Ongoing operations 184 (4) 192 182
- Acquired in 2011 114
Total operating segments 1 294 53 845 910
Head office, shared services 83 27 38
and eliminations
Total group 1 377 58 872 948
* Audited
HUDACO INDUSTRIES LIMITED
Incorporated in the Republic of South Africa
Registration number 1985/004617/06
JSE Code: HDC
ISIN: ZAE000003273
Transfer secretaries:
Computershare Investor Services (Pty) Limited
PO Box 61051, Marshalltown 2107
Registered office:
Building 9, Greenstone Hill Office Park
Emerald Boulevard, Greenstone Hill, Edenvale
Tel +27 11 657 5000
E-mail info@hudaco.co.za
Directors:
RT Vice (Chairman)*
SJ Connelly (Chief executive)
CV Amoils (Financial director)
GR Dunford
GE Gardiner
DD Mokgatle*
YKN Molefi*
SG Morris*
D Naidoo*
* 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: 29/06/2011 07:05:01 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.
