| Mon 31 Jan 2005, 11:08 | | Hudaco - Audited preliminary results for the year |
|
Hudaco - Audited preliminary results for the year ended 30 November 2004
HUDACO INDUSTRIES LIMITED
Reg no 1985/004617/06
Share code HDC
ISIN code ZAE000003273
AUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2004
- Headline earnings per share up 2%
- Dividend increased 5% to R1,28 per share
Results
Hudaco is a South African importer and distributor of industrial consumable
products. Its main customers operate within the southern African manufacturing,
mining, automotive and security industries.
Demand for Hudaco`s product range has been good in 2004. In most areas,
particularly in those related to consumer spending, it has been strong but
customers exposed to the impact of the strong Rand have recorded a static or
lower demand. The steady strengthening of the Rand over the past two and a half
years has had a significant impact on Hudaco`s financial results. The costs of
Hudaco`s imported product range fall as the Rand strengthens and these
reductions are passed on to customers. Although lower input costs can improve
our customers` competitiveness, the impact of the strengthening Rand (11% on a
trade weighted basis in 2004) on sales has far outweighed any positive growth in
demand.
Throughout this period Hudaco has maintained its policy of hedging all foreign
currency liabilities. In hindsight this has been expensive for the group, given
the strengthening Rand, but it has provided certainty on the cost of goods sold
and amounts owing to suppliers.
Sales from continuing operations declined 1% to R1,37 billion whilst operating
profit at R167 million was slightly higher than last year. Net interest received
of R6 million assisted the group to record a pleasing 3% increase in earnings
per share from continuing operations to 383 cents. Headline earnings per share
was slightly up on last year at 371 cents. The final dividend has been increased
to 93 cents, bringing total dividends this year to 128 cents per share, an
increase of 5%.
The Bearings and Transmission division, which accounts for half of Hudaco`s
total sales, produced a satisfactory result in a deflationery and competitive
environment with sales and operating profit declining 5% and 3% respectively.
The Powered Products division delivered a very pleasing and substantial increase
in operating profit on a sales increase of 8%. The Security Products division
recorded flat sales in Rand terms but a 18% lower operating profit as Rand costs
rose to support higher unit sales in South Africa. The costs of expanding the
offshore operation by opening a branch in London reduced the contribution from
the UK business.
During the year a decision was reluctantly taken to close Hudaco Friction, the
group`s only significant manufacturer, as intense pressure from cheaper imported
products pushed the business into a loss. In addition to the R5 million
operating loss included in headline earnings, this resulted in a once-off charge
for closure cost of R14 million after tax.
Net cash on hand (cash balances less interest bearing debt) at year-end amounted
to R200 million, up R96 million on 2003. Cash flow per share of
509 cents is 42% up on the previous year. The return on net operating assets
(RONA) in 2004 was 41%, higher than in 2003 and well above our pre-tax cost of
capital which is approximately 24%.
Prospects
Manufacturers and other Hudaco customers serving South African markets are
expected to do well once again in 2005 as low inflation and interest rates
continue to stimulate consumer spending. Southern African mining and
manufacturing exporting industries, however, are not expected to do as well in
2005. Hopefully the robust growth in consumer spending of the last two years
will be supplemented and ultimately sustained by the promised government
spending on maintaining and growing the country`s infrastructure.
If year-end exchange rates are sustained, prices of Hudaco`s product range will
continue to reduce as inventories are replaced, adding further pressure to the
sales line. With exchange rates playing such an important role in Hudaco`s
fortunes we are reluctant to form a view on the likely earnings per share in
2005. Nevertheless, Hudaco`s businesses are soundly placed and will benefit from
the current buoyant trading conditions, and another year of good cash flows and
high internal rates of return is expected in 2005.
The group is committed to using its strong balance sheet to expand by
acquisition and over the next few years up to R500 million is planned to be
spent on new businesses. Thus, in the longer term we believe Hudaco is well
placed to deliver attractive earnings growth which should be handsomely
supplemented by additional earnings from our acquisition programme.
Dividends
Notice is hereby given that final dividend number 35 of 93 cents per share has
been declared in respect of the year ended 30 November 2004.
The last day to trade in order to participate in the dividend (`cum` the
dividend), will be Friday, 11 March 2005. The share will commence trading `ex`
the dividend from the commencement of business on Monday, 14 March 2005 and the
record date will be Friday, 18 March 2005. The dividend will be paid on Tuesday,
22 March 2005. Share certificates may not be dematerialised or rematerialised
between Monday, 14 March 2005 and Friday, 18 March 2005, 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.
By order of the board
PL Campbell Chairman
SJ Connelly Chief executive
27 January 2005
Income statement
For the year ended 30 November 2004
30 Nov % 30 Nov
R million 2004 change 2003
Turnover 1 448,4 (2) 1 476,9
- Continuing operations 1 369,1 (1) 1 379,6
- Operation discontinued in 2004 79,3 97,3
Cost of sales 896,5 931,0
Gross profit 551,9 1 545,9
Operating expenses 376,1 369,1
EBITDA 175,8 176,8
Depreciation less recoupments 13,7 13,6
Operating profit 162,1 (1) 163,2
- Continuing operations 167,0 3 162,7
- Operation discontinued in 2004 (4,9) 0,5
Cost of closure of discontinued operation 18,6
Capital items 5,5 5,1
Profit before interest 138,0 158,1
Net finance revenue (costs) 6,1 (0,7)
Profit before taxation 144,1 157,4
Taxation 50,4 51,7
Profit after taxation 93,7 105,7
Attributable to outside shareholders 5,0 5,7
Profit attributable to shareholders 88,7 100,0
Headline earnings per share (cents) 370,6 2 365,0
Continuing operations 382,8 3 370,5
Operation discontinued in 2004 (12,2) (5,5)
Basic earnings per share (cents) 302,8 347,3
Diluted earnings per share (cents) 298,6 340,1
Reconciliation to headline earnings
Profit attributable to shareholders 88,7 100,0
Add back capital items 5,5 5,1
Add back closure costs 18,6
Tax effect of closure costs (4,2)
Headline earnings 108,6 3 105,1
Dividends
- Per share (cents) 128 5 122
- Amount (Rm) 37,7 35,3
Shares in issue 29 438 29 003
- Total (000) 31 946 31 511
- Held by subsidiary (2 508) (2 508)
Weighted average shares in issue
- Basic (000) 29 289 28 776
- Diluted (000) 29 702 29 388
Balance sheet
At 30 November 2004
30 Nov 30 Nov
R million 2004 2003
Assets
Non-current assets 104,6 115,2
Property, plant and equipment 42,9 44,2
Deferred taxation 16,0 15,4
Goodwill 45,7 55,6
Current assets 779,4 712,5
Inventories 284,6 319,8
Accounts receivable 245,0 238,5
Bank deposits and balances 249,8 154,2
Total assets 884,0 827,7
Equity and liabilities
Equity 536,8 481,4
Shareholders` equity 510,9 457,9
Outside shareholders` interest 25,9 23,5
Non-current liabilities 62,4 70,7
Interest-bearing debt 50,0 50,2
Amounts due to vendors 12,4 20,5
Current liabilities 284,8 275,6
Accounts payable 259,5 238,4
Taxation 25,3 37,2
Total equity and liabilities 884,0 827,7
Cash flow statement
For the year ended 30 November 2004
30 Nov 30 Nov
R million 2004 2003
Cash generated from trading 175,8 176,8
Cash released from working capital 37,9 (11,1)
Cash generated from operating activities 213,7 165,7
Net interest received 5,8 (0,7)
Taxation paid (62,9) (56,7)
Cash flow from operations 156,6 108,3
Dividends (39,3) (33,7)
Cash retained from operations 117,3 74,6
Net investment in new operations etc (10,7) (17,0)
Net investment in fixed assets (13,9) (12,4)
Cash invested (24,6) (29,4)
Cash retained 92,7 45,2
Shareholder funding 3,1 2,4
Increase in net cash 95,8 47,6
Statement of changes in equity
For the year ended 30 November 2004
30 Nov 30 Nov
R million 2004 2003
Equity at beginning of period 457,9 391,2
Attributable profit for the period 88,7 100,0
Deferred on hedging instruments (0,1) (1,1)
Shares issued 3,0 2,5
Loss on translation of foreign entities (1,9) (3,6)
Dividends (36,7) (31,1)
Equity at the end of the period 510,9 457,9
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 previous financial year.
30 Nov 30 Nov
2004 2003
Average net operating assets (NOA) (Rm) 391,2 423,5
Operating profit margin (%) 11,2 11,0
Average NOA turn (times) 3,7 3,5
Return on average NOA (%) 41,4 38,5
Interest covered by operating profit (times) n/a n/a
Gearing - net (%) nil nil
Net asset value per share (cents) 1 736 1 579
Capital expenditure (Rm)
- Spent during the year 18,3 15,5
- Budgeted for 2005 14,1
Operating lease commitments
- Property (Rm) 33,9 33,8
Net cash comprises (Rm) 199,8 104,0
- Bank call deposits and balances 249,8 154,2
- Interest-bearing debt - non-current (50,0) (50,2)
Capital items (Rm) 5,5 5,1
Amortisation of goodwill 5,8 5,1
Surplus on sale of property (0,3)
There is a contingent liability in respect of an unresolved dispute with the
Financial Services Board on whether the rules of one of the group`s defined
contribution retirement funds authorised an employer contribution holiday of
approximately R2,5 million per annum from 1992 to 2001.
Segment analysis
Turnover 30 Nov % 30 Nov
R million 2004 change 2003*
Bearings and Transmission Products 790,5 (5) 828,2
Powered Products 350,2 8 324,7
Security Equipment 229,7 (1) 232,7
Discontinued operations 79,3 97,3
Internal/Head office (1,3) (6,0)
Total Group 1 448,4 (2) 1 476,9
Operating profit 30 Nov % 30 Nov
R million 2004 change 2003*
Bearings and Transmission Products 94,9 (3) 97,5
Powered Products 59,9 25 48,1
Security Equipment 17,8 (18) 21,7
Discontinued operations (4,9) 0,5
Internal/Head office (5,6) (4,6)
Total Group 162,1 (1) 163,2
Average net operating assets 30 Nov % 30 Nov
R million 2004 change 2003*
Bearings and Transmission Products 233,6 (1) 235,6
Powered Products 63,0 (9) 69,1
Security Equipment 78,4 (11) 88,5
Discontinued operations 41,9 43,9
Internal/Head office 25,7 (13,6)
Total Group 391,2 (8) 423,5
*Comparative figures have been reclassified following the closure of Hudaco
Friction.
Transfer secretaries
Computershare Investor Services 2004 (Pty) 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
Secretary
RGL Arnestad
Bearings and transmission products
Abes Technoseal
Importer and distributor of world-class oil seals, hydraulic, pneumatic and
rotary shaft seals.
Angus-Hawken
Manufacturer of rotary shaft and pneumatic seals in NBR, Viton and Silicone
compounds.
Bauer Geared Motors
Distributors of geared motors, frequency inverters and electric motors.
Bearings International
Distributors of leading international brands of anti-friction bearings and
chain to the manufacturing, mining and agricultural markets.
Belting Supply Services
Specialist suppliers of conveyor belting, power transmission products and
industrial hoses.
BEP Bestobell South Africa
Distributors of fluid measurement and control products including valves,
gaskets, insulation and instrumentation.
Bosworth
Market leaders in design and manufacture of conveyor pulleys, forge, heat
treatment and plate-rolling.
Ernest Lowe ELCO
Quality automation solutions using world-class pneumatic and hydraulic products.
Mather & Platt
Distributors of Viking, Lowara and Mather + Platt pumps and spares.
PHC Clutch
Distributes the Valeo brand of light and medium-duty clutches.
Valard Bearings - specialising in repair and manufacture of white-metal
bearings.
Varispeed
Specialist supplier of products that control, monitor and regulate the speed of
standard AC motors.
Powered products
Deutz Dieselpower
Marketing and servicing of Deutz diesel engines and spares.
Rutherford
Sole distributor of Makita industrial power tools, Mercury and Mariner outboard
engines and accessories and survey and GPS equipment.
Security equipment
Elvey Security Technologies
Distributor of intruder detection, closed-circuit television, access control and
fibre-optic equipment.
Hudaco Industries Limited
Reg no 1985/004617/06
Share code HDC
ISIN code ZAE000003273
These results are available on the Internet at www.hudaco.co.za
A network of specialised branches and independent distributors throughout
southern Africa serves the industrial replacement part markets and supplies
original equipment to the security industry.
Date: 31/01/2005 10:00:44 AM
Produced by the JSE SENS Department
