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Release Date: 27/08/2004 17:15:01
HOWDEN AFRICA HOLDINGS LIMITED - RESULTS FOR THE SIX MONTHS ENDED 30 J
HOWDEN AFRICA HOLDINGS LIMITED - RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2004 HOWDEN AFRICA HOLDINGS LIMITED (Incorporated in the Republic of South Africa) (Registration number 1996/002982/06) Share code: HWN ISIN: ZAE000010583 SUMMARISED UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2004 abridged consolidated income statement Actual Actual 6 months ended 6 months ended 30 June 30 June 2004 2003 (Unaudited) (Unaudited) R`000 R`000 Turnover 217 643 281 284 Operating profit 14 894 14 646 Net financial revenue 2 379 2 739 Foreign exchange losses (1 070) (2 920) Share of results of associate 697 - Profit before taxation 16 900 14 465 Taxation (9 191) (5 308) Profit after taxation 7 709 9 157 Minority interest (2 397) (2 146) Net profit for the period 5 312 7 011 Number of shares in issue (`000) 65 729 65 729 Earnings per share (cents) 8,08 10,67 Headline earnings per share (cents) 8,30 15,49 Dividends per share (cents) 52,00 - Reconciliation of headline earnings Net profit for the period 5 312 7 011 Amortisation of goodwill 145 147 Loss on sale of subsidiary - 3 080 Profit on sale of property, plant and equipment - (57) Loss on conversion of subsidiary to associate - - Headline earnings 5 457 10 181 Actual 12 months ended 31 December Actual 2003 change (Audited) % R`000 Turnover (22,6) 554 925 Operating profit 1,7 34 124 Net financial revenue 5 029 Foreign exchange losses (6 243) Share of results of associate - Profit before taxation 16,8 32 910 Taxation (73,2) (11 138) Profit after taxation (15,8) 21 772 Minority interest (3 242) Net profit for the period 18 530 Number of shares in issue (`000) 65 729 Earnings per share (cents) 28,19 Headline earnings per share (cents) 29,47 Dividends per share (cents) 3,00 Reconciliation of headline earnings Net profit for the period 18 530 Amortisation of goodwill 290 Loss on sale of subsidiary 3 080 Profit on sale of property, plant and equipment (3 453) Loss on conversion of subsidiary to associate 925 Headline earnings 19 372 other group salient features Actual Actual Actual 6 months 6 months 12 months ended 30 June ended 30 June ended 31 December 2004 2003 2003 (Unaudited) (Unaudited) (Audited) R`000 R`000 R`000 Net asset value per share (cents) 137,46 166,11 181,78 Depreciation 2 344 3 446 6 370 Capital expenditure 870 2 735 5 192 Capital commitments Authorised and contracted - 896 78 Authorised not contracted - 80 287 abridged consolidated statement of changes in equity Opening balance 119 483 101 215 101 215 Currency translation differences (265) 959 1 710 Net profit 5 312 7 011 18 530 Dividend paid (34 179) (1 972) Subsidiary costs written off - - - Closing balance 90 351 109 185 119 483 abridged consolidated balance sheet Actual Actual Actual 6 months 6 months 12 months ended 30 June ended 30 June ended 31 December 2004 2003 2003 (Unaudited) (Unaudited) (Audited) R`000 R`000 R`000 ASSETS Non-current assets 61 436 34 274 62 174 Property, plant and equipment 22 218 33 063 23 701 Intangible assets 436 724 581 Investment in associate 34 755 - 33 865 Non-current loans - - - Deferred tax 4 027 487 4 027 Current assets 156 481 248 112 190 833 Inventories 35 876 65 263 48 447 Receivables and pre-payments 73 747 134 490 67 011 Cash and cash equivalents 46 858 48 359 75 375 Total assets 217 917 282 386 253 007 EQUITIES AND LIABILITIES Capital and reserves 90 351 109 185 119 483 Minority interest 5 054 4 188 5 289 Non-current liabilities - 3 164 - Post retirement medical benefit obligations - 3 164 - Current liabilities 122 512 165 849 128 235 Trade and other payables 117 933 161 079 115 157 Taxation 4 579 4 770 13 078 Total liabilities 122 512 169 013 128 235 Total equity and liabilities 217 917 282 386 253 007 abridged consolidated cash flow statement Actual Actual Actual 6 months 6 months 12 months ended 30 June ended 30 June ended 31 December 2004 2003 2003 (Unaudited) (Unaudited) (Audited) R`000 R`000 R`000 Cash flow from operating activities Cash generated by operations 16 865 18 195 34 803 Utilised to decrease/(increase) working capital 8 611 (37 470) 8 851 Cash generated from/(utilised in) operating activities 25 476 (19 275) 43 654 Financial revenue 2 379 2 739 5 029 Dividends paid (34 179) - (1 972) Taxation paid (17 480) (8 072) (11 626) (23 804) (24 608) 35 085 Cash flow from investing activities (4 183) (5 061) 13 233 Cash flow from financing activities (530) (4 500) (4 500) Net increase/(decrease) in cash and cash equivalents (28 517) (34 169) 43 818 segmental analysis by operating division Actual Actual Actual 6 months 6 months 12 months ended 30 June ended 30 June ended 31 December 2004 2003 2003 R`000 R`000 R`000 Turnover Fans and heat exchangers 120 330 116 817 232 024 Environment control 97 313 98 230 190 044 Pumps - 66 237 132 857 217 643 281 284 554 925 It should be noted that Howden Pumps was part of a merger with Orbit Pumps and it is now shown as an associate. OVERVIEW The conversion of project quotations into orders continues to be both difficult and elusive. The level of orders booked in the half year were R250,3 million against R295,4 million in 2003, a 15,3% decline. The market sectors which have shown order consistency are energy and petrochemicals with resources, manufacturing and general industry impacted by the weight of the robust Rand. RESULTS In the six months ended 30 June 2004 turnover of R217,6 million was 22,6% lower than the corresponding period in 2003. The major factor in this reduction is the exclusion from turnover of the Howden Pumps merged business. Our investment in the Pump business is now reflected as an associate. The 2004 turnover reflects a 1,8% improvement over the adjusted 2003 figure. The group sales performance continues to closely track inflation which is consistent with last year. This situation is repeated with operating profits of R14,9 million, against R14,6 million in the same period last year, a 1,7% improvement. Net financial revenue has reduced against the prior period as a function of lower interest rates and the return of cash to shareholders through the payout of the special dividend of 47 cents per share. Foreign Exchange losses declined in line with our reduced offshore exposure. Profit before tax in the period amounted to R16,9 million against R14,5 million for the same period last year, a 16,8% improvement. Against this profit, taxation has arisen as follows:- Normal Company Tax R5 051 (29,9%) Net STC on final dividend R 279 R5 330 (2003 R5 308) STC on special dividend R3 861 - Charge in the period R9 191 (2003 R5 308) Profit after taxation for the period amounts to R7,7 million against R9,2 million last year, a 15,8% decline. The impact of STC in respect of the special dividend is evident and required the publication of the earlier cautionary. ACTIONS REGARDING GROUP STRUCTURE *The Pumps merger to create the Pump Brands Group with an operating subsidiary Denorco has been accomplished during the past six months. Management of both entities has followed a difficult and arduous timetable and Howden Africa records its appreciation. The future holds good prospects for the merged entity. *Negotiations have continued for the sale of Engart Inc. (USA) and were finalised during July 2004. *During the period discussions were held with our BEE minority partners in an underlying subsidiary. Agreement was reached whereby their interest was converted into equity in Howden Africa Holdings. Effectively the Howden Group interest reduced by 1 343 333 shares, 2,04%. *In preparation for the above transaction Computershare were engaged to undertake an audit review of our shareholder profile to establish the empowerment holdings within our share register. The analysis revealed that a total of 85 historically disadvantaged shareholders held 11,12%. To this figure can be added the above transaction for a present empowerment percentage of 13,16%. REVIEW OF OPERATIONS Fans and heat exchangers Order intake for fans and heat exchangers totalled R136,6 million compared to R131,4 million in the corresponding period last year. Tough conditions persist in customer markets traditionally reliant on export earnings, the strong Rand exchange rate resulting in a number of projects being postponed or even cancelled. This has reduced the number of large value tenders on offer but focus on the aftermarket associated with our installed base has neutralised the lack of new equipment business. Second quarter achievements in the standard fan business have been encouraging and should hold through to year end. Unless prospects improve for new equipment business, orders receivable over the balance of the year will be at a lower level than achieved in the first half. Environmental control The environmental control business received orders totalling R113,6 million compared to R95,8 million last year. This achievement included an order worth R57 million received by Bateman Howden for the supply of fabric filters to Hendrina Power Station. The division started the year with an order book 35% down on the same time last year. Prospects in the industrial gas cleaning business unit, in particular, have been lean and the low level of the order book gives concern. Conversion of available tenders is proving difficult but competitive bids have been placed on a selective basis and may yet result in business improving over the latter part of the year. Business in the second half of the year, excluding the aforementioned fabric filter order, is expected to be similar to that achieved in the first half. Pumps As reported above, the results of the Pumps business are no longer consolidated as a subsidiary but as an associate company. Focus on merging the pumps businesses and exceptional rains over the end of the summer season, contributed to results in the first half of the year being lower than reported last year. The position is expected to improve over the second half of the year with good export orders on hand. Outlook The Group remains on track to achieve results in line with 2003. Focus over the second half of the year will be on improving the order book carried forward to 2005. The strong Rand continues to affect the export revenue streams of our major customers which in turn has a negative impact on their capital expenditure or refurbishment programmes. Should the local currency continue to display its current strength through the balance of the year, tough market conditions will persist with business levels remaining passive. DIVIDEND Earnings per share for the period are 8,08 cents. The special dividend of 47 cents paid on 8 March 2004 attracted STC amounting to R3,8 million and based on an adjusted earnings per share of 13,86 cents your directors have resolved to declare an interim dividend of 4 cents per share, 3.5 times covered against the adjusted earnings. The last date to trade cum dividend is Thursday, 16 September 2004. Shares start trading ex dividend on Friday, 17 September 2004. The record date is Thursday, 23 September 2004. Payment will be Monday, 27 September 2004. No share certificates are to be dematerialised or rematerialised between Friday, 17 September 2004 and Thursday, 23 September 2004, both days inclusive. DIRECTORATE There has been no change to the composition of the Board since the annual report as at 31 December 2003. BASIS OF PREPARATION These financial statements have been prepared in accordance with South African Statements of Generally Accepted Accounting Practice. There has been no change in accounting policies since the annual report of 31 December 2003. The results for the six months ended 30 June 2004 have not been reviewed or audited. For and on behalf of the Board. J S Feek (Chairman) 27 August 2004 Directors: J S Feek (Chairman), Dr R Mokate**, S Meyer, R J Cleland # **, A B Mashiatshidi ** (# 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 2004, (Pty) Limited 70 Marshall Street, Johannesburg, 2001 Sponsor: PricewaterhouseCoopers Corporate Finance (Pty) Limited
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