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HDC
HDC
HDC - Hudaco Industries Limited - Audited preliminary report for the year ended
30 November 2011
HUDACO INDUSTRIES LIMITED
Incorporated in the Republic of South Africa
Registration number 1985/004617/06
JSE Code: HDC ISIN: ZAE000003273
AUDITED PRELIMINARY REPORT for the year ended 30 November 2011
Operating profit UP 42% to R426 million
Headline earnings per share UP 28% to R10,24
Dividends UP 26% to R4,40 per share
Results
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.
Sales of R3,2 billion for the year are up 29% on 2010, whilst operating profit
is up 42% to R426 million.
Hudaco has delivered a good set of results this year. Demand for our product
offering was reasonable throughout the year, but picked up noticeably in the
second half of 2011. The renewed focus on acquisitions also made a material
contribution to profits this year. All acquisitions made over the past two years
are performing to or ahead of plan. Rand weakness from September 2011 had little
impact on the 2011 results, but if it persists, it could have a significant
positive impact on next year`s earnings.
The Engineering Consumables segment continues to be the core driver of profits
for the Hudaco group, delivering 63% of operating profit this year - up 33% on
last year on sales of R2,2 billion. Demand from the two key markets for this
segment, South African-based mining and manufacturing was hindered by
infrastructure constraints and managed only moderate growth in 2011. However,
demand from mining customers in neighbouring countries was noticeably higher.
The Consumer-related Products segment also performed well, increasing operating
profit by 39% from sales of R1 billion. This segment experienced strong demand
for power tools and professional digital radio communication equipment.
The group gross margin of 40% is much the same as last year, but expenses
declined to 27% of sales from 28%. The net result was that the operating profit
margin increased to 13,4% from 12,2% last year.
Headline earnings per share of 1024 cents are up 28% on last year. The group`s
dividend policy is to pay about 40% of headline earnings annually. The final
dividend of 310 cents per share brings total dividends declared in respect of
the 2011 financial year to 440 cents, which is a little higher than 40% of
earnings and up 26% on last year.
The financial position is healthy. Working capital (inventories, receivables and
payables) increased as new businesses were brought on board, but activity levels
are within our normal parameters. In the past year Hudaco has acquired three
businesses at a cost of R251 million, of which R108 million has already been
paid. R143 million is still to be paid over the next three years and is
dependent on earn-out performances. The group has R169 million (last year: R262
million) cash on hand at year end.
Prospects
Trading conditions for the group have improved over the past year. Rand
weakness, such as occurred in the last quarter of 2011, has traditionally led to
increased activity by mines and local manufacturers and this bodes well for
Hudaco`s Engineering Consumables segment`s prospects in 2012. Demand from mining
customers in neighbouring countries is expected to remain strong. Demand for
power tools and digital communication equipment, products in our Consumer-
related Products segment, is expected to continue to be strong, but the outlook
for the security products business remains weak. The strong financial position
also gives plenty of ammunition for Hudaco to continue to pursue its successful
acquisition strategy.
Notwithstanding the economic uncertainties created by the financial crises in
Europe and the USA, the board is confident that the group is well positioned to
continue to grow earnings in the years ahead.
Directorship
As reported on SENS, Mr Graham Gardiner retired with effect from 31 July 2011
and Mrs Nene Molefi resigned with effect from 27 October 2011.
Declaration of final dividend No. 50
Ordinary dividend number 50 of 310 cents per share is declared payable on
Monday, 12 March 2012 to ordinary shareholders recorded in the register at the
close of business on Friday, 9 March 2012. The timetable for the payment of the
dividend is as follows:
Last day to trade cum dividend Friday, 2 March 2012
Trading ex dividend commences Monday, 5 March 2012
Record date Friday, 9 March 2012
Payment date Monday, 12 March 2012
Share certificates may not be dematerialised or rematerialised between Monday, 5
March 2012 and Friday, 9 March 2012, 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, 27 January and Monday, 30 January 2012 respectively. Anyone
wishing to attend should contact Robin Benson at 011 657 5007.
The slides that form part of the presentation will be available on the company`s
website from Tuesday, 31 January 2012.
The company`s 27th annual general meeting will be held in the boardroom, at
Hudaco`s corporate offices situated at Building 9, Greenstone Hill Office Park,
Emerald Boulevard, Greenstone Hill, Edenvale at 11:00 on Thursday, 22 March
2012. Further details on the company`s annual general meeting will be included
in the integrated report that will be published on www.hudaco.co.za during the
second week of February 2012 and will be posted to shareholders on or about 20
February 2012.
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 SJ Connelly
Independent non-executive chairman Chief executive
26 January 2012
Group statement of financial position
30 Nov 30 Nov
R million 2011 2010
ASSETS
Non-current assets 2 939 2 700
Property, plant and equipment 182 131
Investment in preference shares 2 181 2 181
Goodwill 516 331
Intangible assets 49 34
Deferred taxation 11 23
Current assets 1 598 1 348
Inventories 813 663
Trade and other receivables 616 423
Cash and cash equivalents 169 262
TOTAL ASSETS 4 537 4 048
EQUITY AND LIABILITIES
Equity 1 525 1 314
Interest of shareholders of the group 1 494 1 287
Non-controlling interest 31 27
Non-current liabilities 2 306 2 280
Subordinated debenture 2 181 2 181
Finance leases 2
Amounts due to vendors of businesses acquired 123 99
Current liabilities 706 454
Trade and other payables 586 420
Finance leases 1
Amounts due to vendors of businesses acquired 111 28
Taxation 8 6
TOTAL EQUITY AND LIABILITIES 4 537 4 048
Group statement of comprehensive income
Year Year
ended ended
30 Nov % 30 Nov
R million 2011 change 2010
Turnover 3 182 29 2 458
- Ongoing operations 2 601 9 2 393
- Acquired in 2010 and 2011 581 65
Cost of sales 1 910 1 464
Gross profit 1 272 28 994
Operating expenses 846 694
Operating profit 426 42 300
- Ongoing operations 320 12 286
- Acquired in 2010 and 2011 106 14
Impairment of goodwill and 22
intangible assets
Profit before dividends received, 426 278
interest received and finance costs
Dividends received on preference 201 201
shares
Interest received 4 17
Finance costs (247) (235)
Profit before taxation 384 261
Taxation 46 24
PROFIT FOR THE YEAR 338 237
Other comprehensive income
Movement on fair value of cash flow (1)
hedges
TOTAL COMPREHENSIVE INCOME FOR THE 337 42 237
YEAR
Profit attributable to:
Shareholders of the group 325 234
Non-controlling shareholders 13 3
338 237
Total comprehensive income
attributable to:
Shareholders of the group 324 234
Non-controlling shareholders 13 3
337 237
Headline earnings per share (cents) 1 024 28 800
Basic earnings per share (cents) 1 026 38 745
Diluted headline earnings per share 1 010 784
(cents)
Diluted basic earnings per share 1 012 730
(cents)
Reconciliation to headline earnings
Profit attributable to shareholders 325 234
of the group
Adjusted for:
- Impairment of goodwill and 22
intangible assets
- Tax effect (2)
- Non-controlling interest (2)
- Profit on disposal of property, (1)
plant and equipment
Headline earnings 324 29 252
Dividends
- Per share (cents) 440 26 350
- Amount (Rm) 139 110
Shares in issue 31 646 31 540
- Total (000) 34 154 34 048
- Held by subsidiary (000) (2 508) (2 508)
Weighted average shares in issue
- Basic (000) 31 617 31 466
- Diluted (000) 32 058 32 109
Group statement of cash flows
Year Year
ended ended
30 Nov 30 Nov
R million 2011 2010
Cash generated from trading 458 327
(Increase) decrease in working capital (129) 12
Cash generated from operations 329 339
Taxation paid (46) (49)
Net cash from operating activities 283 290
Net investment in new operations (164) (184)
Net investment in property, plant and equipment (64) (50)
Dividends and interest received 205 218
Net cash from investing activities (23) (16)
Proceeds from issue of shares 2 7
Increase in finance leases 3
Finance costs (234) (234)
Dividends paid (124) (120)
Net cash from financing activities (353) (347)
Net decrease in cash and cash equivalents (93) (73)
Group statement of changes in equity
Year Year
ended ended
30 Nov 30 Nov
R million 2011 2010
Equity at beginning of the year 1 314 1 184
Comprehensive income for the year 337 237
(Decrease) increase in equity compensation (3) 5
reserve
Issue of shares 2 7
Dividends (125) (119)
Equity at end of the year 1 525 1 314
Supplementary information
The consolidated financial statements have been prepared in accordance with IAS
34: Interim Financial Reporting, International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB), the AC
500 Standards as issued by the Accounting Practices Board, the requirements of
the South African Companies Act and the JSE Listings Requirements. IFRS 9 and
IAS 24 have been adopted for the first time during the current year. The
principal accounting policies set out in the group`s 2010 annual report have
been consistently applied throughout the current year. These results have been
compiled under the supervision of the financial director, CV Amoils CA(SA).
30 Nov 30 Nov
2011 2010
Average net operating assets (NOA) (Rm) 1 469 948
Operating profit margin (%) 13,4 12,2
Average NOA turn (times) 2,2 2,6
Return on average NOA (%) 29,0 31,6
Average net tangible operating assets (NTOA) (Rm) 951 758
PBITA margin (%) 13,8 12,4
Average NTOA turn (times) 3,3 3,2
Return on average NTOA (%) 46,1 40,1
Net asset value per share 4 721 4 080
Return on average equity (%) 23,8 18,9
Operating profit has been determined after taking
into account the following charges (Rm):
- Depreciation 24 18
- Amortisation 13 4
Capital expenditure (Rm)
- Incurred during the year 69 52
- Authorised but not contracted for 38 31
Commitments and contingencies (Rm)
- Operating lease commitments on properties 123 116
Acquisition of new businesses
The group acquired 100% of the businesses of
Midrand Special Steels, Global Communications and
Pentagon for a total consideration based on
future profits and which is estimated to be R251
million. The results since acquisition date
included in consolidated results for the year are
as follows:
- Turnover (Rm) 322
- Profit after tax (Rm) 29
If the acquisitions had been concluded at the
beginning of the financial year, consolidated
results for the group would havebeen as follows:
- Turnover (Rm) 3 224
- Profit after tax (Rm) 344
Segment information
Turnover
Year Year
ended ended
30 Nov % 30 Nov
R million 2011 change 2010
Engineering consumables 2 187 25 1 750
- Ongoing operations 1 852 10 1 685
- Acquired in 2010 and 2011 335 65
Consumer-related products 1 006 41 716
- Ongoing operations 760 6 716
- Acquired in 2010 and 2011 246
Total operating segments 3 193 29 2 466
Head office, shared services and (11) (8)
eliminations
Total group 3 182 29 2 458
Operating profit
Year Year
ended ended
30 Nov % 30 Nov
R million 2011 change 2010
Engineering consumables 274 33 206
- Ongoing operations 210 9 192
- Acquired in 2010 and 2011 64 14
Consumer-related products 163 39 117
- Ongoing operations 121 3 117
- Acquired in 2010 and 2011 42
Total operating segments 437 35 323
Head office, shared services and (11) (23)
eliminations
Total group 426 42 300
Average net operating assets
Year Year
ended ended
30 Nov % 30 Nov
R million 2011 change 2010
Engineering consumables 1 093 50 728
- Ongoing operations 773 17 660
- Acquired in 2010 and 2011 320 68
Consumer-related products 366 101 182
- Ongoing operations 201 10 182
- Acquired in 2010 and 2011 165
Total operating segments 1 459 60 910
Head office, shared services and 10 38
eliminations
Total group 1 469 55 948
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
DD Mokgatle*
D Naidoo*
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: 26/01/2012 15:35:02 Produced by the JSE SENS Department.
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