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Howden Africa - Summarised Audited Results For The Six Months Ended 30
June 2002
HOWDEN AFRICA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1996/002982/06)
JSE Share code: HWN ISIN: ZAE000010583
("Howden Africa" or "the Group")
The summarised audited results for the six months ended 30 June 2002 are
as follows:
Abridged Consolidated Income Statement
Actual Actual Actual
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2002 2001 Actual 2001
(Unaudited) (Unaudited) % (Audited)
R`000 R`000 change R`000
Turnover 235 710 172 315 36,8 376 466
Operating profit 8 799 3 102 183,7 6 962
Net financial (cost)/revenue (224) 90 (965)
Foreign exchange (losses)/gains (2 053) - 6 677
Exceptional item - loan
written-down - - (4 303)
Amortisation of goodwill on
acquisition of subsidiary (1 821) - -
Share of results of associate (1 397) (326) (3 225)
Profit before taxation 3 304 2 866 15,3 5 146
Taxation (1 587) (1 660) (9 520)
Profit/(Loss) after taxation 1 717 1 206 42,4 (4 374)
Minority interest (1 255) 39 (787)
Net profit/(loss) for the period 462 1 245 (5 161)
Number of shares:
In issue (000`s) 65 729 65 729 65 729
Weighted average (000`s) 65 729 65 729 65 729
Earnings per share: (cents) 0,70 1,89 (62,9) (7,85)
Headline earnings
per share: (cents) 3,18 2,15 48,3 (2,13)
Dividends per share: (cents) - - -
Reconciliation of Headline earnings
Net profit/(loss)
for the period 462 1 245 (5 161)
Amortisation of goodwill 166 166 332
Profit on sale of subsidiary - - (336)
Profit on sale of property,
plant and equipment (357) - (538)
Exceptional
item - loan written-down - - 4 303
Amortisation of goodwill
on acquisition
of subsidiary 1 821 - -
Headline earnings 2 092 1 411 (1 400)
Abridged Consolidated Cash Flow Statement
Actual Actual Actual
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2002 2001 2001
(Unaudited) (Unaudited) (Audited)
R`000 R`000 R`000
Cash flow from operating activities
Cash generated by operations 7 380 5 928 18 009
Utilised to decrease/(increase)
working capital 7 036 (17 937) (11 304)
Cash generated from/(utilised in)
operating activities 14 416 (12 009) 6 705
Financial (cost)/revenue (224) 90 (965)
Dividends paid - (11 915) (5 915)
Taxation paid (8 164) (3 627) (5 321)
6 028 (27 461) (5 496)
Cash utilised in investing activities (1 045) (6 040) (14 433)
Cash effects of financing activities - - (6 000)
Increase/(Decrease) in cash
and cash equivalents 4 983 (33 501) (25 929)
Abridged Consolidated Balance Sheet
Actual Actual Actual
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2002 2001 2001
(Unaudited) (Unaudited) (Audited)
R`000 R`000 R`000
ASSETS
Non-current assets 39 712 45 414 43 840
Property, plant and equipment 34 400 33 043 33 841
Intangible assets 1 163 1 495 1 329
Investment in associate - 2 424 4 521
Non-current loans 4 149 8 452 4 149
Current assets 178 577 142 817 161 484
Inventories 65 381 57 704 57 090
Receivables and pre-payments 103 769 84 961 99 900
Amounts owing by fellow subsidiaries 66 152 116
Cash and cash equivalents 9 361 - 4 378
Total assets 218 289 188 231 205 324
EQUITIES AND LIABILITIES
Capital and reserves 97 136 103 701 95 669
Minority interest 5 482 3 401 4 227
Non-current liabilities 5 152 4 831 5 152
Post-retirement medical
benefit obligations 3 164 3 164 3 164
Deferred tax 1 988 1 667 1 988
Current liabilities 110 519 76 298 100 276
Trade and other payables 109 687 73 697 93 742
Taxation (1 565) (944) 5 050
Amounts owing to fellow subsidiaries 2 397 351 1 484
Borrowings - 3 194 -
Total liabilities 115 671 81 129 105 428
Total equity and liabilities 218 289 188 231 205 324
Other Group Salient Features
Actual Actual Actual
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2002 2001 2001
(Unaudited) (Unaudited) (Audited)
R`000 R`000 R`000
Net asset value per share (cents) 147,78 157,77 145,55
Depreciation 3 260 2 660 5 244
Capital expenditure 3 198 1 688 4 590
Capital commitments
Authorised and contracted - 861 556
Authorised not contracted - 450 626
Segmental Analysis by Operating Division
Turnover
Fans and heat exchangers 93 178 77 927 160 641
Environmental control 58 524 37 560 93 738
Pumps 53 461 47 916 102 042
Hertz 4 102 0 0
Overseas operations 26 445 8 912 20 045
235 710 172 315 376 466
Abridged Consolidated
Statement of Changes in Equity
Actual Actual Actual
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2002 2001 2001
(Unaudited) (Unaudited) (Audited)
R`000 R`000 R`000
Opening balance 95 669 103 083 103 083
Currency translation differences 1 005 (15) (1 349)
Net (loss)/profit 462 1 245 (5 161)
Subsidiary costs written-off - (612) (904)
Closing balance 97 136 103 701 95 669
Comments
The first half of the financial year gathered momentum in respect of
enquiries and quotations for most of the businesses within the Group.
This has been translated into an improved order book with actual
bookings reflecting an increase over the prior year period. There are,
however, individual areas of disappointment that have the focus and
attention of management for improvement going forward.
Results
Sales increased to R235,7 million compared to R172,3 million for the
same period last year. After adjusting for new businesses this
represents a 25% improvement. Similarly operating profit improved to
R8,8 million compared to R3,1 million for the same period last year.
These results include the costs associated with the continued
development of markets outside South Africa amounting to R4,3 million,
(2001: R2,5 million) and the losses incurred in the electric motor
subsidiary, Hertz of R2,5 million since April 2002 and the costs of R0,4
million in relation to the Pump Company merger proposal, which has
recently been terminated.
Exceptional and other significant items are commented on as follows.
Exchange losses amounting to R2,1 million (2001: Nil) have been recorded
on foreign currency denominated inter-company loans as a consequence of
the relative strengthening of the Rand during the half year to date.
Your Board considers it prudent to provide for the amortisation of
goodwill on acquisition of the subsidiary Hertz and has set aside an
amount of R1,8 million for this purpose. In addition, Hertz`s losses to
March 2002 were R1,4 million and have been accounted for in the results
of associate.
The Group is reviewing the basis on which Engart products are sold and
marketed into both Australia and America. Consideration will be given to
the option that provides the most reliable presence in each of these
markets going forward and either activity will fall under Engart
International, as a trading division, or a distributor will be
identified. In these instances the companies will become dormant.
Alternatively, the companies may be sold with a supply and technical
support agreement to cover the territory. This process should be
resolved during the balance of calender 2002.
The group net cash position of R9,4 million compares with the R4,4
million net cash as at December 2001. Improvements in the net working
capital position have contributed positively to this.
Net profit attributable to shareholders of R0,5 million compares to
R1,2 million in the same period last year. Headline earnings per share
of 3,18 cents compare with 2,15 cents reported last year.
During January the Environmental control division established a new
company in Australia, namely 3T`s Australia Pty Ltd with a 10% minority
share holding. The activities of this company cover gas cleaning and
combustion engineering. During March the Group exercised it`s option to
acquire a further 25,02% of the equity of Hertz Technologies (Pty) Ltd
resulting in a 75% holding. Since half-year management has concluded an
agreement with the minority shareholders in Hertz. The cost of
finalising this transaction amounted to R0,15 million. These piecemeal
acquisitions have been treated as occurring during the interim period
resulting in Hertz being consolidated as a wholly-owned subsidiary.
REVIEW OF OPERATIONS
Fans and Heat Exchangers
The pattern of improved order intake has repeated itself this half-
year with a 32% increase in orders received. This has equated to
improved sales of some 20%. Market share has been maintained across all
sectors and the out-sourced services have also reflected solid growth.
The standard fan sales have improved although margins remain
competitive. It is reasonable to assume that recent events, both local
and international, will cause a slow down in the value of orders placed
during the second half of the calendar year.
Environmental control
Business activity has been robust with both orders and invoicing
improving. This combined with the existing contractual work being
undertaken at Eskom has reflected in a 56% increase in sales with a
commensurate improvement to operating profit. Indications for the second
half of the year remain positive. The 3T`s business in Australia has
received its first project order and commissioning is scheduled for the
second half of the year.
Pumps
Order intake and sales are respectively 15% and 12% up over the prior
year. Management has applied themselves to internal reforms with the
resultant improvement in an operating profit as against a loss in the
prior year. There is still the challenge to drive the results to
acceptable returns and the team remains focused on this objective. The
balance of the calendar year looks similar to the first half and`
indications are encouraging.
Hertz
This acquisition was made to gain access to flame-proof motor
technology for future development in the mining and petro-chemical
industries.
The entry into this business has proved both problematical and
difficult. There is a great deal of effort and attention that has to be
devoted to both operations and procedures. A new management team is
currently addressing these issues. Sales have fallen short of forecasts,
margins have not been satisfactory and pressure to reduce overheads is
an imperative. The company is, however, operating with a low market
share and the potential is evident. The success is now dependent on
management effort and energy. A break-even is projected over the balance
of the year.
Overseas operations
Order activity has been 24% higher than the prior year. However,
invoiced sales have disappointingly lagged the orders. Gross margins
have been insufficient to cover operating overheads and operating losses
have been incurred in four of the five companies, the exception being
3T`s Australia. The Group will need to keep assessing options open to
the offshore trading activities.
Outlook
Considerable effort is required to maintain the momentum of the order
book and sales for the balance of the calendar year. It remains to be
seen whether the recent international events and domestic issues will
impact negatively on the industries serviced by the Group. Management
remains committed to improving returns within the individual operating
companies.
Dividend
No change to the stated dividend policy has occurred. In the light of
the current results no interim dividend is being proposed.
Basis of preparation
These financial statements have been prepared in accordance with
Generally Accepted Accounting Practice in South Africa. There has been
no change in accounting policies since the annual report of 31 December
2001.
Directorate
Mr John Feek was appointed non-executive director to the Board during
April 2002. Following the conclusion of the Annual General Meeting on 27
June 2002, Mr David Gawler stood down as a Director and Mr Feek was
appointed Chairman in his place.
Dr T V Maphai resigned from the Board on 21 August 2002.
For and on behalf of the Board of Directors.
J S Feek
(Chairman)
3 September 2002
DIRECTORS: J S Feek (Chairman)**, C J Ferreira (Managing Director),
R J Cleland#**, S Meyer, Dr R Mokate**,
(# British ** Non-executive)
COMPANY SECRETARY: M J M Lake
REGISTERED OFFICE: 1a Booysens Road, Booysens, 2091
POSTAL ADDRESS: PO Box 2239, Johannesburg, 2000
TRANSFER SECRETARIES: Computershare Investor Services Limited,
11 Diagonal Street, Johannesburg, 2001
HOWDEN AFRICA HOLDINGS LIMITED
(Registration number 1996/002982/06
JSE Share code: HWN ISIN: ZAE000010583
Date: 04/09/2002 07:01:00 AM Produced by the JSE SENS Department
