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Howden - The Reviewed Financial Results For The Year Ended 31 December 2003
Release Date: 13/02/2004 17:15:01 Code(s): HWN
HOWDEN - THE REVIEWED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2003
HOWDEN AFRICA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1996/002982/06)
Share code: HWN ISIN: ZAE000010583
("the Company" or "the Group")
THE REVIEWED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2003
ABRIDGED CONSOLIDATED INCOME STATEMENT
2003 2002
R"000 R"000
TURNOVER 554 925 6,2% 522 598
Operating profit 34 124 42,9% 23 872
Net financial revenue 5 029 734
Foreign exchange (6 243) (7 196)
Exceptional item - loan written-off - (112)
Impairment of goodwill on acquisition
of subsidiary - (979)
Share of results of associate - (1 397)
Profit before taxation 32 910 120,5% 14 922
Taxation (11 138) (10 286)
Profit after taxation 21 772 4 636
Outside shareholders" interest (3 242) (2 393)
Net profit for year 18 530 2 243
Number of shares:
In issue (`000) 65 729 65 729
Weighted average (`000) 65 729 65 729
Earnings per share (cents) 28,19 3,41
Headline earnings per share (cents) 29,47 274,4% 7,87
Dividends per share (cents) 3,00 -
Reconciliation of headline earnings
Net profit for year 18 530 2 243
Amortisation of goodwill 290 248
Loss on sale of subsidiary 3 080 2 110
Profit on sale of property, plant
and equipment (3 453) (518)
Exceptional item - loan written-off - 112
Loss on conversion of subsidiary
to associate 925 -
Impairment of goodwill on acquisition
of subsidiary - 979
19 372 5 174
OTHER GROUP SALIENT FEATURES
2003 2002
R"000 R"000
Net asset value per share (cents) 181,78 153,99
Depreciation 6 370 6 557
Capital expenditure 5192 6 984
Capital commitments
Authorised and contracted 78 811
Authorised not contracted 287 -
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
2003 2002
R"000 R"000
Opening balance 101 215 95 669
Currency translation differences 1 710 2 393
Net profit 18 530 2 243
Dividends (1 972) -
Changes in subsidiary holdings - 910
Closing balance 119 483 101 215
ABRIDGED CONSOLIDATED BALANCE SHEET
2003 2002
R"000 R"000
ASSETS
Non - current assets 62 174 35 957
Property, plant and equipment 23 701 34 601
Intangible assets 581 871
Investment in associate company 33 865 -
Deferred tax 4 027 485
Current assets 190 833 209 353
Inventories 48 447 54 663
Receivables and prepayments 67 011 123 133
Cash and cash equivalents 75 375 31 557
Total assets 253 007 245 310
EQUITIES AND LIABILITIES
Capital and reserves 119 483 101 215
Outside shareholders" interest 5 289 6 556
Non - current liabilities - 3 164
Post retirement medical benefit obligations - 3 164
Current liabilities 128 235 134 375
Trade and other payables 115 157 126 825
Taxation 13 078 7 550
Total liabilities 128 235 137 539
Total equity and liabilities 253 007 245 310
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
2003 2002
R"000 R"000
Cash flows from operating activities
Cash generated by operations 34 803 24 825
Utilised to decrease working capital 8 851 13 632
Cash generated from operating activities 43 654 38 457
Financial revenue 5 029 734
Dividends paid (1 972) -
Taxation paid (11 626) (10 170)
35 085 29 021
Cash flows from investing activities 13 233 (5 879)
Cash flows from financing activities (4 500) 4 037
Net increase in cash and cash equivalents 43 818 27 179
SEGMENTAL ANALYSIS BY OPERATING DIVISION
2003 2002
R"000 R"000
Turnover
Fans and heat exchangers 232 024 213 694
Environmental control 190 044 194 106
Pumps 132 857 114 798
554 925 522 598
COMMENTS
A strong order book at the beginning of the year, and good order intake in the
first quarter, gave early indications that results for the full year would be
ahead of results reported for 2002. Although this did materialise it must be
viewed against a sharp decline in both the order book and order intake over the
balance of the year, post the first quarter. The strengthening of the Rand over
the year impacted negatively on the larger resource based sector of the economy
resulting in a rescheduling of capital expenditure programs in line with reduced
export earnings. Order intake, having peaked at a rolling average of R57 million
per month in March, fell steadily over the balance of the year to lows of R33
million in December 2003.
Operating results achieved over the second half of the year represent a healthy
improvement over both the second half of last year and the first half of 2003.
Reorganisation efforts associated with the offshore operations, together with
the sale of Hertz Technologies (Pty) Ltd in May 2003, have resulted in profit
improvements of R3,3 million being reported for the year, offset by a R3,1
million loss on sale of this subsidiary.
The successful conclusion of negotiations with Orbit Pump, resulting in the
merger with Howden Pumps, proved to be one of the highlights of the year. An
ordinary resolution approving the merger was unanimously passed by shareholders
representing 89,4% of the issued share capital of the Company at a general
meeting held on 12 December 2003. The value of this merger is shown as an
investment in associate company at R33,9 million. Plans to move the Germiston
based business of Orbit Pump to the existing Sebenza site of Howden Pumps are in
place, the intention being for the move to be completed by end May 2004.
RESULTS
The excellent level of orders booked in 2002 was not repeated during 2003. This
concern was expressed in the interim report and any hope for an improvement
towards the year-end did not materialise. Orders booked in the period were R495
million, which is a decline of 17% against last year. However Group turnover of
R554,9 million represents an improvement of 6,2% compared to the year 2002. A
number of large orders were completed during the year in the key petrochemical,
power and mining markets.
Exports as a percentage of total sales reduced from 22,2% last year to 10,1% in
the year under review, due mainly to a reduction in large offshore contract
work.
Operating profit of R34,1 million (2002:R23.9 million) is reported, after
writing-off an amount of R3,1 million (2002: R2,1 million) for loss on sale of
discontinued business and R0,9 million (2002: Nil) on conversion of subsidiary
to an associate. The sale of the properties based in Sebenza and Montague
Gardens yielded a profit of R3,4 million.
The low level of business achieved in the offshore companies, in turn,
contributing chiefly to the lower aforementioned export earnings, resulted in a
combined operating loss of R3,1 million (2002:R3,6 million). Further efforts
will be directed towards reducing our offshore exposure in the 2004 year. The
continued recovery in the Rand over the year gives rise to exchange losses of
R6,2 million, which compares to the exchange loss of R7,2 million reported in
2002.
A taxation charge of R11,1 million (2002: R10,3 million) has been accrued which,
at 33,8% of profit before tax, represents an improvement on the 68,9% reported
last year. Earnings in the pump company for the year substantially reduced
available assessed losses, which, in turn, assisted in bringing the overall
effective tax rate to more reasonable levels.
The comparisons below refer to the corresponding twelve-month period to 31
December 2002:
* Order intake amounted to R495 million compared to R597 million in the
corresponding period.
* Turnover was R555 million compared to R523 million.
* Operating profit of R34,1 million compared to R23,9 million.
* Headline earnings per share of 29,5 cents compared to 7,9 cents.
* At 31 December 2003 the Group had a net positive cash position of R75,4
million compared to R31,6 million.
Outlook
The strong Rand exchange rate has impacted negatively on the mining and
manufacturing sectors of the economy, both of which are extremely important to
the Group. To this extent our future order book should be considered vulnerable.
With the significant reduction in the domestic inflation rate, coupled with
reduced interest rates, it would seem reasonable that projected investment
returns will track downwards over time. The impact for the Group will be that
margins on future projects will come under pressure as enquiries convert to
orders.
A unpredictable trading environment indicates that a difficult year lies ahead.
Board of directors
Mr Colin Ferreira resigned as an executive director on 12 June 2003.
Mr Arthur Mashiatshidi was appointed as an independent non-executive director on
31 July 2003.
Final Dividend and Special Dividend
An interim dividend of 3 cents per share was paid out on 13 October 2003 (2002:
nil). Given the improvement in earnings and the stronger cash position the
directors have authorised a final dividend of 5 cents per share to be declared
payable to shareholders. The Board has considered the net cash position as
reported and the current cash position and has resolved to declare a special
dividend of 47 cents per share. This represents a return of cash to
shareholders, which is considered appropriate. For both the final dividend of 5
cents per share and the special dividend of 47 cents per share the last date to
trade cum dividend is Friday, 27 February 2004. Shares start trading ex dividend
on Monday, 1 March 2004. The record date is Friday 5 March 2004. Payment will be
Monday 8, March 2004. No share certificates are to be dematerialised or
rematerialised between Monday, 1 March 2004 and Friday, 5 March 2004 both days
inclusive.
Review
The results announcement has been reviewed by the Company"s external auditors,
PricewaterhouseCoopers Inc. A copy of their unqualified review opinion is
available at the Company"s registered office.
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 2002.
For and on behalf of the Board of Directors.
J S Feek
(Executive Chairman, Acting)
13 February 2004
Directors: J S Feek (Executive Chairman, Acting),
S Meyer (Chief Operating Officer, Acting),
RJ Cleland #**, A B Mashiatshidi**, Dr R Mokate**
(# British ** Non-executive)
Company Secretary: M J M Lake
Registered Office: 1a Booysens Road
Booysens, 2091
Postal Address: P O Box 2239
Johannesburg, 2000
Transfer Secretaries: Computershare Limited
70 Marshall Street
Johannesburg 2001
Sponsor: PricewaterhouseCoopers
Corporate Finance (Pty) Limited
