| Fri 7 Mar 2003, 17:34 | | HOWDEN AFRICA HOLDINGS LIMITED - FINANCIAL REPORT |
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HOWDEN AFRICA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1996/002982/06)
Share code: HWN ISIN: ZAE000010583
Audited financial Results for the year ended 31 December 2002
* the summarised audited results for the year ended 31 December 2002 are as
follows:
abridged consolidated income statement
2002 2001
R`000 R`000
TURNOVER 522 598 38,8% 376 466
Operating profit 23 872 242,9% 6 962
Net financial revenue/(cost) 734 (965)
Foreign exchange
(losses)/gains (7 196) 6 677
Exceptional item - loan written-down (112) (4 303)
Diminution in value of investment
in a subsidiary (152) -
Amortisation of goodwill on
acquisition (827) -
Share of results of associate (1 397) (3 225)
Profit before taxation 14 922 190,0% 5 146
Taxation (10 286) (9 520)
Profit/(Loss) after taxation 4 636 (4 374)
Outside shareholders` interest (2 393) (787)
Net profit/(loss) for the year 2 243 (5 161)
Number of shares
In issue (000`s) 65 729 65 729
Weighted average (000`s) 65 729 65 729
Earnings per share (cents) 3,41 (7,85)
Headline earnings per share (cents) 7,87 (2,13)
Dividends per share (cents) - -
Reconciliation of headline earnings
Net profit/(loss) for the period 2 243 (5 161)
Amortisation of goodwill 248 332
Loss/(Profit) on sale of subsidiary 2 110 (336)
Profit on sale of property, plant
and equipment (518) (538)
Exceptional item - loan
written-down 112 4 303
Diminution in value of investment
in a subsidiary 152 -
Amortisation of goodwill on
acquisition 827 -
5 174 (1 400)
other group salient features
2002 2001
R`000 R`000
Net asset value per share (cents) 153,99 145,55
Depreciation 6 557 5 244
Capital expenditure 6 984 4 590
Capital commitments
Authorised and contracted 811 556
Authorised not contracted - 626
abridged consolidated
statement of changes in equity
2002 2001
R`000 R`000
Opening balance 95 669 103 083
Currency translation differences 2 393 (1 349)
Net profit/(loss) 2 243 (5 161)
Changes in subsidiary holdings 910 (904)
Closing balance 101 215 95 669
abridged consolidated balance sheet
2002 2001
R`000 R`000
ASSETS
Non-current assets 35 957 43 840
Property, plant and equipment 34 601 33 841
Intangible assets 871 1 329
Investment in associate company - 4 521
Non-current loan - 4 149
Deferred tax 485 -
Current assets 209 353 161 484
Inventories 54 663 57 090
Receivables and pre-payments 123 105 99 900
Amounts owing by fellow subsidiaries 28 116
Cash and cash equivalents 31 557 4 378
Total assets 245 310 205 324
equity and liabilities
Capital and reserves 101 215 95 669
Outside shareholders` interest 6 556 4 227
Non-current liabilities 3 164 5 152
Post-retirement medical benefit obligations 3 164 3 164
Deferred tax - 1 988
Current liabilities 134 375 100 276
Trade and other payables 123 124 93 742
Taxation 7 550 5 050
Amounts owing to fellow subsidiaries 3 701 1 484
Total liabilities 137 539 105 428
Total equity and liabilities 245 310 205 324
abridged consolidated cash flow statement
2002 2001
R`000 R`000
Cash flow from operating activities
Cash generated by operations 24 825 18 009
Utilised to decrease/(increase)
working capital 13 632 (11 304)
Cash generated from operating activities 38 457 6 705
Financial revenue/(cost) 734 (965)
Dividends paid - (5 915)
Taxation paid (10 170) (5 321)
29 021 (5 496)
Cash utilised in investing activities (5 879) (14 433)
Cash effects of financing activities 4 037 (6 000)
Increase/(Decrease) in cash and
cash equivalents 27 179 (25 929)
segmental analysis by operating division
2002 2001
R`000 R`000
Turnover
Fans and heat exchangers 213 694 170 408
Environmental control 194 106 104 016
Pumps 114 798 102 042
522 598 376 466
Comments
Generally favourable market conditions have been experienced by Group companies
based in South Africa and a good degree of success was achieved against intense
competition. The growth rate being witnessed in gross domestic fixed investment
has impacted positively on operations, resulting in a good order book at year-
end. A disappointing exception to this has been the investment in Hertz
Technologies where results have not met expectations. It was stated last year
that operational bases were in a strong position to win a larger share of
available market. This has been borne out by circumstances, providing a stronger
platform moving into 2003.
A good share of business was obtained via the offshore business operations
with two large environmental control projects helping increase the ratio of
offshore business to total orders from 5% in 2001 to 13% this year.
Operating results achieved over the second half of the year, represent a healthy
improvement over both the second half of 2001 and the first half of 2002.
Operations based in South Africa are well placed in their respective markets but
further focus will be given to turning the position around in Hertz
Technologies.
Results Orders of R597,0 miliion were received (2001: R446,5 million)
representing a 33,7% improvement. This was achieved against a background of a
significantly strong recovery in the value of the Rand against major currencies,
instability in oil and resource prices internationally and the threat of war in
the Middle East.
Group turnover is reported at R522,6 million (2001: R376,5 million) which
represents an improvement of 38,8% over the previous year. A number of large
orders were completed during the year in both the mining and export sectors.
Exports as a percentage of total sales increased from 12,5% last year to 22,2%
in the year under review.
Operating profit of R23,9 million (2001:R7,0 million) is reported, after
making a provision against slow-moving stock of R2,5 million in the Engart group
of businesses. An amount of R2,1 million was written-off being associated with
the loss on sale of shares in Engart Australasia.
Despite the higher level of business achieved in the offshore companies,
operating results proved disappointing with a combined operating loss of R3,6
million (2001: R4,5 million). The recovery in the Rand over the year gives rise
to exchange losses totalling R7,2 million which compares to the exchange gain of
R6,7 million reported in 2001.
A taxation charge of R10,3 million has been accrued, equivalent to 68,9% of
profit before tax, it being deemed prudent not to raise any deferred tax assets
associated with companies carrying assessed losses until such time as they
return to a sustainable level of profit making.
The Group net cash position of R31,6 million compares with the R4,4 million
net cash as at December 2001.
Net profit for the period of R2,2 million compares with a loss of R5,2
million in 2001 after the charge for taxation and the apportionment of profits
attributable to outside shareholders.
Headline earnings per share of 7,87 cents compares with a headline loss 2,13
cents last year.
Review of operations
Fans and Heat Exchangers
The pattern of improved order intake has continued with a 41% increase over
2001. The standard fan business improved on its strong position in the local
market and enjoyed a relatively successful year in its efforts to expand export
territories. Business in the United Kingdom market remains difficult and
opportunities are being explored to operate more effectively in that market.
Good results were reported in the engineered fan and heat exchanger business
with a strong order book in place moving into the year 2003. A number of large
orders were received from the mining sector. A high level of work was carried
out in the power generation and industrial boiler markets with the installation
and modification of airheater element packs in particular playing a dominant
role.
The Engart businesses did not enjoy a good year. The Group`s interest in
Engart Australasia has been sold to the minority shareholder. In future,
business in the territory will be carried out through a network of distributors.
Progress in the American market has been slower than anticipated but a small,
yet solid, base is being established which should produce positive results over
the medium term. The disappointing level of orders obtained in export markets
has raised challenges for the Engart operation. Engart has sought to replace
volumes by moving into markets beyond traditional coal mining.
A strategic decision was taken mid year to refocus the operations of Hertz
Technologies to that of an original equipment manufacturer and refurbisher of
high voltage motors. This gave rise to rationalisation costs totalling R2,8
million. A number of prospects are being targeted in the redefined market
against strong competitive pressures.
Environmental Control
Business activity has been robust with both orders and invoicing improving by
38% and 87% respectively over 2001. The 3T`s business in Australia received its
first project order, which was commissioned during the year. There were record
orders received in the mine refrigeration and process gas divisions. The
environmental control division`s results continue to take on a more meaningful
role in terms of contribution to Group results. These results are expected to
continue in the foreseeable future given the strength shown in the local mining,
steel and petrochemical industries.
Pumps
Order intake and sales are respectively 14% and 12% up over the prior year.
Results in the pump business continue to show impressive improvement and the
company remains a key player in the local market.
The proposed merger negotiations with Orbit Pumps were terminated during the
year. Exports remained in line with the achievement in 2001 with much attention
being given to marketing beyond the confines of the SADC region. Efforts to
improve the ratio of exports to total sales will continue.
Outlook
The outlook for the resources, utilities and petrochemicals industries is that
growth is anticipated to continue in 2003. There is the expectation for a
decline in inflation and a reduction in interest rates, which should facilitate
spending and growth within the economy. The South African economy weathered the
past year well and there is a mood of anticipation for further progress to be
made. We are starting the year positively with an improved order position, 55%
above the prior year.
Board of directors
During the year Mr John Feek was appointed as non-executive director and
Chairman and Mr David Gawler and Dr Vincent Maphai, non-executive directors,
resigned from the board.
Dividend
In light of the modest earnings per share the board has adopted a conservative
view and resolved not to declare a dividend for the year ended 31 December 2002.
Basis of preparation
These annual financial statements have been audited by PricewaterhouseCoopers
Inc. and the audit report is available for inspection at the company`s
registered office. The accounts have been prepared in accordance with
Statements of Generally Accepted Accounting Practice in South Africa. There has
been no change in accounting policies since the annual report of 31 December
2001.
For and on behalf of the Board of Directors.
J S Feek
(Chairman)
7 March 2003
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 Limited
70 Marshall Street
Johannesburg
2001
Date: 07/03/2003 05:15:00 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
