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Hudaco Industries Limited - PRELIMINARY RESULTS ANNOUNCEMENT FOR THE YEAR
ENDED 30 NOVEMBER 2003
Hudaco Industries Limited
(Incorporated in the Republic of South Africa)
(Registration Number 1985/004617/06)
Share code HDC ISIN ZAE000003273
PRELIMINARY RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 30 NOVEMBER 2003
A network of specialised branches and independent distributors serves the
replacement part markets in southern Africa"s primary and secondary industries
and domestic and commercial security service providers.
* Headline EPS up 16% to R3,65 - R105 million
* Five year compound growth in HEPS - 18%
* Dividends increased 16% to R1,22 per share
* Stronger balance sheet
RESULTS
Hudaco"s business is predominately an importer and distributor of industrial
products and its main customer base is South Africa"s manufacturing, mining,
automotive and security industries.
The substantial strengthening of the Rand in 2003 impacted negatively on
mining customers and those manufacturing customers who are dependant on
exports or who are competing with imports. On the other hand, demand from
manufacturing and other customers serving the South African market was robust
as the impact of interest rate reductions spurred consumer spending. Against
this background the prices of our mainly imported product range have been
falling in response to the stronger Rand but since less than 40% of Hudaco"s
imports are Dollar based, decreases have not mirrored the extreme weakening of
that currency. Throughout this period Hudaco has maintained its policy of
covering forward all foreign currency liabilities. This has been expensive for
the group especially as the Rand strengthened, but it provided certainty on
the cost of goods sold and amounts owing to suppliers.
In 2003 Hudaco"s sales mix improved slightly with a higher proportion of value
added versus commodity sales which is reflected in the higher margin this
year. The Bearings and Power Transmission division posted a small improvement
in sales and operating profit resulting mainly from the acquisition of
Varispeed, a distributor of variable speed drives. The Powered Products
division produced particularly pleasing results whilst our Security Products
division, in particular its United Kingdom subsidiary in its first full year
of operation, posted a very satisfactory improvement on last year.
Sales of R1,48 billion for the year are the same as 2002 which broadly
reflects the weak demand and falling prices environment. The operating profit
margin rose from 9,8% to 11% resulting in a 15% increase in operating profit
to R163 million. Net financing costs reduced from R7,5 million last year to
R0,7 million due to lower interest rates and a stable working capital
requirement. Headline earnings increased 18% from R89 million in 2002 to R105
million.
Headline earnings per share rose 16% to 365 cents. The final dividend of 90
cents brings total dividends this year to 122 cents per share, an increase of
16%.
BALANCE SHEET AND CASH FLOW
The balance sheet is healthy. Working capital is at 2002 levels and each
element thereof, inventories, accounts receivable and accounts payable are in
line with current activity. Net cash on hand (cash balances less interest
bearing debt) at year-end is R104 million, up R50 million on 2002. Cash flow
per share at 358 cents is essentially the same as earnings per share and the
net cash on hand position gives the group considerable internal resources for
expansion. Net asset value per share is R15,79.
PROSPECTS
The South African mining and manufacturing exporting industries are expected
to continue to be under some pressure as the improving global demand for South
African exports is offset by lower Rand selling prices. Conversely,
manufacturers and other Hudaco customers serving South African markets are
expected to continue to do well in 2004 as lower inflation and interest rates
stimulate consumer spending in the local economy.
With exchange rates playing such an important role in Hudaco"s fortunes, it is
difficult to form a view on the likely financial results in 2004. Hudaco"s
businesses are soundly placed to benefit from any improvement in trading
conditions and a good financial performance is expected in 2004.
DIVIDEND
Notice is hereby given that final dividend No 33 of 90 cents per share has
been declared in respect of the year ended 30 November 2003.
The last day to trade in order to participate in the dividend ("cum" the
dividend), will be Friday 12 March 2004. The share will commence trading "ex"
the dividend from the commencement of business on Monday, 15 March 2004 and
the record date will be Friday 19 March 2004. The dividend will be paid on
Tuesday 23 March 2004. Share certificates may not be dematerialised or
rematerialised between Monday 15 March 2004 and Friday 19 March 2004, both
days inclusive.
AUDIT OPINION
Grant Thornton have signed an unqualified audit opinion on the financial
statements for the year. These have been approved by the board and abridged
for purposes of this report. Both the auditors" opinion and the financial
statements are available for inspection at the company"s registered office.
For and on behalf of the Board
PL Campbell (Chairman) SJ Connelly (Chief Executive)
INCOME STATEMENT
Rmillion 30 Nov 2003 % change 30 Nov 2002
Turnover 1 476,9 2 1 451,3
- Continuing operations 1 450,4 1 451,3
- Acquisitions in 2003 26,5
Cost of sales 931,0 958,2
Gross profit 545,9 11 493,1
Operating expenses 369,1 338,5
EBITDA 176,8 154,6
Depreciation less 13,6 12,5
recoupments
Operating profit 163,2 15 142,1
- Continuing operations 155,5 9 142,1
- Acquisitions in 2003 7,7
Capital items written off 5,1 5,2
Profit before interest 158,1 136,9
Net finance costs 0,7 7,5
Profit before taxation 157,4 129,4
Taxation 51,7 43,8
Profit after taxation 105,7 85,6
Share of associate company
profits 2,0
Attributable to outside
shareholders (5,7) (3,6)
Profit attributable to
shareholders 100,0 84,0
Headline earnings per
share (cents) 365,0 16 315,7
Basic earnings per share 347,3 297,1
(cents)
Diluted earnings per share
(cents) 340,1 291,3
Reconciliation to headline
earnings
Profit attributable to
shareholders 100,0 84,0
Add back capital items
written off 5,1 5,2
Headline earnings 105,1 18 89,2
Distributions to
shareholders
- Per share (cents) 122,0 16 105,0
- Amount (Rm) 35,3 29,9
Shares in issue 29 003 28 490
- Total (000) 31 511 30 998
- Held by subsidiary (2 508) (2 508)
Weighted average shares in
issue
- Basic (000) 28 776 28 264
- Diluted (000) 29 388 28 835
BALANCE SHEET
Rmillion 30 Nov 2003 30 Nov 2002
ASSETS
Non-current assets 115,2 108,9
Property, plant and 44,2 45,0
equipment
Deferred taxation 15,4 17,0
Goodwill 55,6 46,9
Current assets 712,5 672,9
Inventories 319,8 315,0
Accounts receivable 238,5 250,9
Bank deposits and balances 154,2 107,0
TOTAL ASSETS 827,7 781,8
EQUITY AND LIABILITIES
Equity 481,4 416,4
Shareholders" equity 457,9 396,0
Outside shareholders" 23,5 20,4
interest
Non-current liabilities 70,7 69,8
Interest-bearing debt 50,2 50,6
Amounts due to vendors 20,5 19,2
Current liabilities 275,6 295,6
Accounts payable 238,4 249,9
Taxation 37,2 45,7
TOTAL EQUITY AND 827,7 781,8
LIABILITIES
CASH FLOW STATEMENT
Rmillion 30 Nov 2003 30 Nov 2002
Cash generated from 176,8 160,3
trading
Cash applied to working (11,1) (55,7)
capital
Cash generated from
operating activities 165,7 104,6
Net finance costs (0,7) (7,5)
Taxation paid (56,7) (41,6)
Cash flow from operations 108,3 55,5
Cash dividends and capital
repayments (33,7) (44,6)
Cash retained from 74,6 10,9
operations
Net investment in new (17,0) (2,6)
operations
Net investment in fixed (12,4) (17,5)
assets
Cash invested (29,4) (20,1)
CASH RETAINED 45,2 (9,2)
Shareholder funding 2,4 1,8
INCREASE IN NET CASH 47,6 (7,4)
STATEMENT OF CHANGES IN EQUITY
Rmillion 30 Nov 2003 30 Nov 2002
Equity at beginning of 396,0 332,6
period
Application of AC133 at 1
December 2002 (4,8)
Deferred on hedging (1,1)
instruments
Attributable profit for
the period 100,0 84,0
Share issues 2,5 2,0
Loss on translations of
foreign entities (3,6) 0,6
Dividends and capital (31,1) (23,2)
repayments
Equity at the end of the 457,9 396,0
period
SUPPLEMENTARY INFORMATION
These results were prepared applying accounting policies which conform with
South African Statements of Generally Accepted Accounting Practice and are
consistent with those applied in the most recent annual financial statements,
except for changes resulting from the mandatory application of the following
new accounting statement:
AC 133, "Financial Instruments: Recognition and measurement" which requires
financial instruments to be recorded at fair value. The resultant marked-to-
market gain or loss is taken to income except for gains or losses on
designated cash flow hedging instruments which are deferred in equity. The
application of this statement resulted in a write-off against opening retained
income of R4,8 million in respect of the cost of forward cover relating to
inventory which was deferred at 30 November 2002. The application of AC 133
has had no material effect on the earnings for the year.
30 Nov 2003 30 Nov 2002
Average net operating
assets (NOA) (Rm) 423,5 376,1
Operating profit margin 11,0 9,8
(%)
Average NOA turn (times) 3,5 3,9
Return on average NOA (%) 38,5 37,8
Interest covered by
operating profit (times) >15 >15
Gearing - net (%) Nil Nil
Net asset value per share
(cents) 1 579 1 390
Capital expenditure (Rm)
- Spent during the year 15,5 19,0
- Budgetted for 2004 22,4 17,5
Net cash comprises (Rm) 104,0 56,4
- Bank call deposit and 154,2 107,0
balances
- Interest-bearing debt -
non-current (50,2) (50,6)
Operating lease
commitments
- Property (Rm) 26,0 35,4
Capital items written off 5,1 5,2
(Rm)
Amortisation of goodwill 5,1 4,6
Other 0,6
SEGMENTAL ANALYSIS
Turnover Operating profit Average net operating
assets
30 % 30 30 % 30 30 Nov % 30 Nov
Rmillion Nov change Nov Nov change Nov 2003 change 2002
2003 2002 2003 2002
Bearings &
Transmission
Products 771,3 6 728,1 89,8 9 82,1 218,8 14 192,2
Powered
Products 324,7 1 303,0 48,1 36 35,4 69,1 13 61,2
Security
Equipment 232,7 (16) 276,7 21,7 63 13,3 88,5 5 84,4
Automotive
Parts 154,2 4 148,4 8,2 (20) 10,3 60,7 6 57,4
Internal/Head
Office (6,0) (4,9) (4,6) 1,0 (13,6) (19,1)
Total Group 1 2 1 163,2 15 142,1 423,5 12 376,1
476,9 451,3
Transfer secretaries
Computershare Limited
PO Box 61051 Marshalltown 2107
Registered office
Hudaco Park 190 Barbara Road Elandsfontein 1406
Tel +27 11 345 8200 Fax +27 11 392 2740 E-mail info@hudaco.co.za
Directors
PL Campbell# (Chairman) SJ Connelly (Chief Executive) GE Gardiner
JB Gibbon# MS Jolly PG Joubert# YKN Molefi# PM Poole
#Non-executive
23 January 2004
Secretary
RGL Arnestad
Sponsor
Nedbank Corporate
Date: 23/01/2004 11:00:09 AM Produced by the JSE SENS Department
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