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Hudaco Industries Limited - Unaudited Interim Group Results for the six months
ended 31 May 2005
Hudaco Industries Limited
Reg no 1985/004617/06
Incorporated in the Republic of South Africa
Share code HDC ISIN ZAE000003273
Hudaco
Unaudited Interim Group Results for the six months ended 31 May 2005
* Acquisition strategy starts to pay off
* Headline EPS up 20% to 151 cents
* Interim dividend increased 20% to 42 cents per share
Bearings and transmission products
ABES Technoseal
Distributor of oil and hydraulic seals.
Angus-Hawken
Manufacturer of oil seals.
Bauer
Distributor of geared motors, frequency inverters and electric motors.
Bearings International
Distributor of bearings, seals and transmission products.
Belting Supply Services
Distributor of power transmission and conveyor belting products and industrial
hose.
BEP Bestobell South Africa
Distributor of fluid measurement and control products including valves, gaskets,
insulation and instrumentation.
Bosworth
Manufacturer of conveyor drive pulleys.
Ernest Lowe ELCO
Manufacturer and distributor of hydraulic and pneumatic equipment.
Mather and Platt
Distributor of centrifugal, gear, chemical and submersible pumps.
PHC Clutch
Distributor of Valeo clutch kits.
Powermite
Distributor of electrical cabling, plugs and other related products.
Valard Bearings
Repairs and manufactures white-metal bearings.
Varispeed
Distributor of controllers, monitors and regulators of the speed of standard AC
motors.
Deutz Diesel Power
Distributor of Deutz diesel engines and provider of after-market services.
Rutherford
Distributor of power tools, outboard motors, survey equipment and rivets.
Elvey
Distributor of intruder detection, closed circuit television, access control and
fibre-optic equipment.
Results
Hudaco imports and distributes a wide range of branded industrial products
including bearings and power transmission equipment, diesel engines, power tools
and security equipment. Almost half of Hudaco`s sales are to South Africa`s
mining and manufacturing industries. The balance of sales is mainly to a mixture
of the local construction, security, and automotive parts aftermarket.
These results reflect the impact of the following corporate activities:
*acquisition of the Powermite group (distributors of specialised electrical
cabling and related products, effective 1 December 2004)
* acquisition of Ekurhuleni Bearings and Seals (a FAG franchisee, effective 1
February 2005)
* closure of Hudaco Friction in 2004
* sale of Vivian Regina, a small glass fibre tissue plant, in December 2004.
Demand from mining and manufacturing customers was weak in the early part of the
year but picked up noticeably in April and May after the Rand weakened. Other
markets served benefited from improved demand throughout the period although
selling prices were lower than last year in all businesses.
Group sales at R705 million were up 4% of which continuing operations
contributed an increase of 1,8% despite lower selling prices. The operating
profit margin improved to 9.6% from 8.4% last year mainly as a result of the
elimination of the Hudaco Friction operating loss. Headline earnings per share
benefited from the aforementioned corporate activities and rose a satisfactory
20% to 151 cps.
The interim dividend has been increased 20% to 42 cps.
Inventories have increased by R78 million from November 2004 due to the
acquisitions, normal seasonal demand patterns and the recent weakening of the
Rand. Stockholding is higher than planned, mostly in Bearings International,
and should be back in line by year-end. Net cash on hand at May 2005 was R146
million of which R46 million was paid to the vendors of the Powermite business
in June 2005.
Prospects
If the recent Rand weakness is sustained, demand from mining and manufacturing
customers could improve further in the remainder of the year. Together with the
ongoing robust demand in the other areas of our business this should result in a
satisfactory increase in headline earnings per share in 2005.
The acquisition programme remains a priority. Although asking prices have
hardened, opportunities can still be found and a number are currently being
evaluated.
Dividends
Notice is hereby given that interim dividend number 36 of 42 cents per share has
been declared in respect of the six months ended 31 May 2005 (`the dividend`).
The last day to trade in order to participate in the dividend (`cum` the
dividend), will be Thursday, 4 August 2005. The share will commence trading `ex`
the dividend from the commencement of business on Friday, 5 August 2005 and the
record date will be Friday, 12 August 2005. The dividend will be paid on Monday,
15 August 2005. Share certificates may not be dematerialised between Friday, 5
August 2005 and Friday, 12 August 2005, both days inclusive.
For and on behalf of the Board
PL Campbell (Chairman)
SJ Connelly (Chief executive)
29 June 2005
Income statement
Year
Six months ended ended
31 May % 31 May 30 Nov
R million 2005 change 2004 2004*
Turnover 705,2 4 678,4 1 448,4
- Continuing operations 651,0 2 639,6 1 357,3
- Operations acquired in 2005 54,2
- Operations discontinued in 2004 38,8 91,1
Cost of sales 409,7 428,8 896,5
Gross profit 295,5 249,6 551,9
Operating expenses 221,7 185,6 376,1
EBITDA 73,8 15 64,0 175,8
Depreciation less recoupments 6,4 7,2 13,7
Operating profit 67,4 19 56,8 162,1
- Continuing operations 59,8 3 61,8 166,3
- Operations acquired in 2005 7,6
- Operations discontinued in 2004 (5,0) (4,2)
Costs of closure of
discontinued operations 18,6
Capital items 2,9 5,5
Profit before interest 67,4 53,9 138,0
Net interest received 1,8 2,5 6,1
Profit before taxation 69,2 56,4 144,1
Taxation 22,8 20,8 50,4
Profit after taxation 46,4 30 35,6 93,7
Attributable to outside
shareholders 1,8 1,6 5,0
Profit attributable to
shareholders 44,6 31 34,0 88,7
Headline earnings per share (cents)151,3 20 126,5 370,6
- Continuing operations 138,9 0 139,5 381,4
- Operations acquired in 2005 12,4
- Operations discontinued in 2004 (13,0) (10,8)
Basic earnings per share (cents) 151,3 116,5 302,8
Diluted earnings per share (cents) 149,2 114,1 298,6
Reconciliation to headline earnings
Profit attributable to shareholders 44,6 34,0 88,7
Add back
- Costs of closure of
discontinued operations 18,6
- Tax effect of costs of closure (4,2)
- Amortisation of goodwill 2,9 5,5
Headline earnings 44,6 21 36,9 108,6
Dividends
- per share (cents) 42,0 20 35,0 128
- amount (Rm) 12,4 10,3 37,7
Shares in issue 29 610 29 372 29 438
- Total (000) 32 118 31 880 31 946
- Held by subsidiary company (000)(2 508) (2 508) (2 508)
Weighted average shares in issue
- Basic (000) 29 473 29 185 29 289
- Diluted (000) 29 889 29 806 29 702
Cash flow statement
Year
Six months ended ended
31 May 31 May 30 Nov
R million 2005 2004 2004*
Cash generated from trading 73,8 64,0 175,8
Applied to working capital (45,9) 1,6 37,9
Cash generated from
operating activities 27,9 65,6 213,7
Net interest received 1,8 2,5 5,8
Taxation paid (36,9) (40,1) (62,9)
Cash applied to operations (7,2) 28,0 156,6
Dividends paid (27,4) (26,4) (39,3)
Net cash applied (34,6) 1,6 117,3
Investment in new operations - net (17,9) (4,4) (10,7)
Investment in property, plant
and equipment - net (3,6) (7,8) (13,9)
Net cash invested (21,5) (12,2) (24,6)
CASH UTILISED (56,1) (10,6) 92,7
Shareholder funding 1,9 2,6 3,1
DECREASE IN NET CASH (54,2) (8,0) 95.8
Balance sheet 31 May 31 May 30 Nov
R million 2005 2004 2004*
ASSETS
Non-current assets 129,5 109,6 104,6
Property, plant and equipment 45,1 44,8 42,9
Deferred taxation - net 12,5 12,1 16,0
Goodwill 71,9 52,7 45,7
Current assets 800,5 674,4 779,4
Inventories 362,5 314,4 284,6
Accounts receivable 242,4 214,0 245,0
Bank call deposits and balances 195,6 146,0 249,8
TOTAL ASSETS 930,0 784,0 884,0
EQUITY AND LIABILITIES
Equity 559,8 493,6 536,8
Shareholders` equity 532,3 468,5 510,9
Outside shareholders` interest 27,5 25,1 25,9
Non-current liabilities 75,0 66,1 62,4
Interest bearing debt 50,0 50,0 50,0
Due to vendors - interest bearing 25,0 16,1 12,4
Current liabilities 295,2 224,3 284,8
Accounts payable 241,4 209,7 259,5
Due to vendors - interest bearing 46,1
Taxation 7,7 14,6 25,3
TOTAL EQUITY AND LIABILITIES 930,0 784,0 884,0
Statement of changes in equity
Year
Six months ended ended
31 May 31 May 30 Nov
R million 2005 2004 2004*
Equity at beginning of period 510,9 457,9 457,9
Attributable profit for the period 44,6 34,0 88,7
Deferred gain on hedging
instruments 3,1 0,3 (0,1)
Loss on translation of
foreign entities (1,0) 0,1 (1,9)
Share issues 2,1 2,6 3,0
Dividends (27,4) (26,4) (36,7)
Equity at the end of the period 532,3 468,5 510,9
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 most recent annual financial statements.
31 May 31 May 30 Nov
2005 2004 2004*
Average net operating assets (Rm) 443,7 402,9 391,2
Operating profit margin (%) 9,6 8,4 11,2
Average NOA turn
(times - annualised) 3,2 3,4 3,7
Return on average NOA
(% - annualised) 30,4 28,2 41,4
Interest covered by operating
profit (times) n/a n/a n/a
Gearing - net (%) nil nil nil
Net asset value per share (cents) 1 798 1 595 1 736
Capital expenditure
- Spent during the period (Rm) 7,0 9,0 18,3
- Budgeted for second half
of the year (Rm) 6,2 10,6
Operating lease commitments
- property (Rm) 47,5 29,1 33,9
Net cash comprises (Rm) 145,6 96,0 199,8
- Bank call deposits and
balances 195,6 146,0 249,8
- Interest bearing debt -
non-current (50,0) (50,0) (50,0)
Capital items (Rm) 0,0 2,9 5,5
- Amortisation of goodwill 2,9 5,8
- Other - net 0,0 (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 correctly authorised an employer contribution
holiday of approximately R2,5 million per annum from 1992 to 2001.
*Audited
Segment analysis**
Turnover
31 May % 31 May 30 Nov
R million 2005 change 2004 2004*
Bearings and Transmission Products 425,1 16 367,7 778,7
- Continuing operations 370,9 1 367,7 778,7
- Operations acquired in 2005 54,2
Powered Products 158,2 (2) 161,2 350,2
Security Equipment 122,8 10 111,4 229,7
Internal/head office (0,9) (0,7) (1,3)
Operations discontinued in 2004** 38,8 91,1
Total Group 705,2 4 678,4 1 448,4
Operating profit
31 May % 31 May 30 Nov
R million 2005 change 2004 2004*
Bearings and Transmission Products 33,5 (7) 36,2 93,6
- Continuing operations 25,9 (28) 36,2 93,6
- Operations acquired in 2005 7,6
Powered Products 26,1 18 22,1 59,9
Security Equipment 10,8 52 7,1 17,5
Internal/head office (3,0) (3,6) (4,7)
Operations discontinued in 2004** (5,0) (4,2)
Total Group 67,4 19 56,8 162,1
Average net operating assets
31 May % 31 May 30 Nov
R million 2005 change 2004 2004*
Bearings and Transmission Products 320,8 235,6 232,4
- Continuing operations 258,8 235,6 232,4
- Operations acquired in 2005 62,0
Powered Products 54,8 67,8 63,0
Security Equipment 71,9 79,1 78,4
Internal/head office (16,3) (31,0) (25,7)
Operations discontinued in 2004** 12,5 51,4 43,1
Total Group 443,7 402,9 391,2
** Comparative figures have been restated following the closure of Hudaco
Friction and sale of Vivian Regina.
Transfer secretaries
Computershare Investor Services 2004 (Pty) Ltd
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# PG Joubert# YKN Molefi# PMPoole
#Independent non-executive
Secretary
RGL Arnestad
Value-added distribution
Hudaco Industries Limited Reg no 1985/004617/06
Incorporated in the Republic of South Africa
Share code HDC ISIN ZAE000003273
These results are available on the Internet at www.hudaco.co.za
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