| Mon 30 Jan 2006, 8:00 | | Hudaco - Audited Preliminary Results for the year |
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HDC
HDC
Hudaco - Audited Preliminary Results for the year ended 30 November 2005
Hudaco Industries Limited
(Incorporated in the Republic of South Africa)
Registration Number 1985/004617/06)
Share Code: HDC & ISIN: ZAE000003273
- Turnover up 7% to R1,55 billion
- Headline EPS up 12% to 415 cents
- Dividend increased 13% to R1,44 per share
Results
Hudaco is a South African group engaged in the business of importing and
distributing industrial consumable products. Its customers are mainly within the
southern African manufacturing, mining, automotive aftermarket and security
industries.
Sales of power tools, outboard motors and security equipment were well up on
2004, benefiting from continued robust consumer spending on housing and leisure
products. Demand from mining companies was weak. Gold output this year fell 15%
to about 300 tons and plans to expand mining of coal, platinum and iron ore, to
take advantage of the higher prices for these commodities, only started falling
into place towards the year-end. Sales to manufacturers were generally weak with
a dearth of project business from mining houses and construction companies.
On average the Rand was slightly stronger than 2004 and was not as volatile as
the previous four years. This put an end to the significant price deflation
Hudaco has experienced since the second half of 2002, but the firmer Rand made
it difficult to increase selling prices. With expenses rising by inflation, the
group was faced with a profit squeeze which particularly affected the Bearings
and Power Transmission division which had no volume sales growth.
Hudaco"s financial results this year are nevertheless satisfactory given the mix
of markets served. Total sales at R1,55 billion are 7% up on last year. Sales in
continuing businesses are up a pleasing 5%. Acquisitions added R118 million or
8% to sales offsetting the R91 million in sales lost from businesses
discontinued in 2004. Operating profit is up 13% to R183 million with most of
this increase coming from the acquisition of the Powermite group and Ekurhuleni
Bearings and Seals. Net interest received was R4 million (last year R6 million)
and the tax rate before capital items declined 1% after the rate cut. Headline
earnings per share increased 12% to 415 cents. A final dividend of 102 cents per
share has been declared bringing total dividends this year to 144 cents per
share, an increase of 13%.
The balance sheet is healthy. Working capital (inventories, accounts receivable
and accounts payable) at R364 million is R95 million above 2004 levels of which
R47 million is from acquisitions. The balance of the increase is from normal
business demands although, due to lower sales than expected, stock levels are
about R25 million higher than ideal. Net cash on hand (cash balances less
interest bearing debt) at year-end is R182 million, slightly down on last year
notwithstanding cash outlays of R59 million on acquisitions.
Prospects?
Over the next few years the South African economy could be entering a
particularly prosperous period. It appears that spending on infrastructure is
about to get underway and if high Rand commodity prices are sustained and
certainty is reached on various regulatory issues, an upsurge in mining
investment will take place. This would spin off to manufacturers supporting that
industry whilst the consumer side of the economy should remain strong as
employment levels pick up.
Providing the Rand exchange rate does not strengthen significantly, this could
be a very realistic scenario and one could expect sales levels in our Bearings
and Power Transmission businesses to improve steadily in 2006 and accelerate
rapidly from 2007, whilst sales levels in our Powered Products and Security
Equipment businesses should remain strong. Hudaco"s earnings could be expected
to grow commensurate with this outlook, modestly in 2006 but more rapidly
thereafter.
Dividend?
Notice is hereby given that final dividend No. 37 of 102 cents per share has
been declared in respect of the year ended 30 November 2005.
The last day to trade in order to participate in the dividend ("cum" the
dividend), will be Friday, 10 March 2006. The share will commence trading "ex"
the dividend from the commencement of business on Monday, 13 March 2006 and the
record date will be Friday, 17 March 2006.
The dividend will be paid on Monday, 20 March 2006. Share certificates may not
be dematerialised between Monday, 13 March 2006 and Friday, 17 March 2006, 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)
26 January 2006
Income statement
for the year ended 30 Nov % 30 Nov
R million 2005 change 2004
Turnover 1 549,2 7 1 448,4
? ? - Continuing operations 1 431,6 5 1 357,3
? ?- Operations acquired in 2005 117,6
? ?- Operations discontinued in 2004 91,1
Cost of sales 930,9 896,5
Gross profit 618,3 12 551,9
Operating expenses 422,9 376,1
EBITDA 195,4 11 175,8
Depreciation less recoupments 12,2 13,7
Operating profit 183,2 13 162,1
? ?- Continuing operations 161,9 (3) 166,4
? ?- Operations acquired in 2005 21,3
? ?- Operations discontinued in 2004 (4,3)
Closure of discontinued operations 6,2 (18,6)
Capital items (3,4) (5,5)
Profit before interest 186,0 138,0
Net finance revenue 3,6 6,1
Profit before taxation 189,6 144,1
Taxation 60,4 50,4
Profit after taxation 129,2 38 93,7
Attributable to minorities 5,0 5,0
Profit attributable to shareholders 124,2 40 88,7
Headline earnings per share (cents) 415,0 12 370,6
-?Continuing operations 374,8 (2) 381,4
-?Operations acquired in 2005 40,2
-?Operations discontinued in 2004 (10,8)
Basic earnings per share (cents) 419,7 302,8
Diluted earnings per share (cents) 408,0 298,6
Reconciliation to headline earnings
Profit attributable to shareholders 124,2 88,7
Adjusted for:
Closure of discontinued operation (4,8) 14,4
Capital items 3,4 5,5
? ?Impact of acquisitions and disposals (11,9) 3,1
Headline earnings from continuing
operations 110,9 (1) 111,7
Profit after taxation of operations
acquired in 2005 11,9
Loss after taxation in operations
discontinued in 2004 (3,1)
Headline earnings 122,8 13 108,6
Dividends
?? -? Per share (cents) 144 13 128
? ? -? Amount (Rm) 42,8 37,7
Shares in issue 29 756 29 438
? ? -? Total (000) 32 264 31 946
? ? -? Held by subsidiary company (000) (2 508) (2 508)
Weighted average shares in issue
? ? -? Basic (000) 29 592 29 289
?? -? Diluted (000) 30 440 29 702
Cash flow statement
for the year ended 30 Nov 30 Nov
R million 2005 2004
Cash generated from trading 195,6 175,8
Cash applied to working capital (60,4) 37,8
Cash generated from operating activities 135,2 213,6
Net finance revenue 5,0 5,9
Taxation paid (62,9) (62,9)
Cash flow from operations 77,3 156,6
Dividends (42,1) (39,3)
NET CASH RETAINED FROM OPERATIONS 35,2 117,3
Investment in new operations, etc (71,2) (10,6)
Proceeds from operations discontinued 25,9
Cash applied to capital items (1,6)
Investment in plant and equipment (9,0) (14,0)
NET CASH INVESTED (55,9) (24,6)
Cash applied (30,7) 92,7
Shareholder funding 3,3 3,1
DECREASE IN NET CASH (17,4) 95,8
Balance sheet
30 Nov 30 Nov
R million 2005 2004
ASSETS
Non-current assets 110,8 102,0
Property, plant and equipment 38,2 42,9
Deferred taxation - net 8,4 16,5
Goodwill 64,2 42,6
Current assets 886,6 779,4
Inventories 375,0 284,6
Accounts receivable 279,2 245,0
Bank deposits and balances 232,4 249,8
TOTAL ASSETS 997,4 881,4
EQUITY AND LIABILITIES
Equity 619,6 532,4
Shareholders" equity 595,8 506,5
Minority interest 23,8 25,9
Non-current liabilities 61,0 62,4
Interest bearing debt 50,0 50,0
Due to vendors - interest bearing 11,0 12,4
Current liabilities 316,8 286,6
Accounts payable 290,7 261,3
Due to vendors - interest bearing 12,7
Taxation 13,4 25,3
TOTAL EQUITY AND LIABILITIES 997,4 881,4
Statement of changes in equity
for the year ended 30 Nov 30 Nov
R million 2005 2004
Equity at beginning of period 506,5 457,8
Prior year adjustment (4,4)
Attributable profit for the period 124,2 88,7
Deferred on hedging instruments 0,2 (0,1)
Shares issued 3,7 3,2
Translation of foreign entities 1,1 (2,0)
Dividends (39,9) (36,7)
Equity at the end of the period 595,8 506,5
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, except for the
following:
- Rent paid on operating leases of fixed property is now expensed
on a straight line basis where it was previously expensed on a basis that
represented the cash flow of such payments.
- Goodwill arising on the acquisition of foreign entities is now translated at
closing rates of exchange where it was previously translated at the rate of
exchange that ruled at the time of the acquisition.
The resulting restatement of opening reserves is reflected in the Statement of
Changes in Equity. These changes had no effect on the reported income in 2004 or
2005.
30 Nov 30 Nov
2005 2004
Average net operating assets (Rm) 445,2 391,2
Operating profit margin (%) 11,8 11,2
Average NOA turn (times) 3,5 3,7
Return on average NOA (%) 41,1 41,4
Gearing - net (%) nil nil
Net asset value per share (cents) 2 002 1 720
Capital expenditure
- Spent during the year (Rm) 11,4 18,3
- Budgeted for 2006 (Rm) 12,8
Operating lease commitments - property (Rm) 40,0 32,1
Net cash comprises (Rm) 182,4 199,8
- Bank call deposits and balances 232,4 249,8
- Interest bearing debt - non-current (50,0) (50,0)
Capital items (Rm) 3,4 5,5
- Amortisation of goodwill 5,8
- Impairment of goodwill and properties 2,5
- Fees paid on unsuccessful acquisition 1,6
- Profit on disposal of businesses and properties (0,7) (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
Bearings and Transmission Products 911,4 17 778,7
- Continuing operations 93,8 2 778,7
- Operations acquired in 2005 117,6
Powered Products 375,7 7 350,2
Security Equipment 262,8 14 229,7
Internal/head office 0,7) (1,3)
Operations discontinued in 2004* 91,1
Total Group 1 549,2 7 1 448,4
Operating profit
30 Nov % 30 Nov
Bearings and Transmission Products 92,0 (2) 93,6
- Continuing operations 70,7 (24) 93,6
- Operations acquired in 2005 21,3
Powered Products 72,1 20 59,9
Security Equipment 23,7 35 17,5
Internal/head office (4,6) (4,6)
Operations discontinued in 2004* (4,3)
Total Group 183,2 13 162,1
Average net operating assets
30 Nov % 30 Nov
Bearings and Transmission Products 335,2 44 232,4
- Continuing operations 273,2 18 232,4
- Operations acquired in 2005 62,0
Powered Products 55,8 (11) 63,0
Security Equipment 71,9 (8) 78,4
Internal/head office (17,7) (25,7)
Operations discontinued in 2004* 43,1
Total Group 445,2 14 391,2
*Comparative figures have been reclassified 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# PM Poole
# Independent non-executive
Secretary
RGL Arnestad
Hudaco Industries Limited Reg no 1985/004617/06
Share code HDC ISIN ZAE000003273
These results are available on the Internet at www.hudaco.co.za
Bearings and Power Transmission products
Abes Technoseal
Distributor of oil and hydraulic seals.
Bearings International
Distributor of bearings, seals and transmission products.
Belting Supply Services
Distributor of power transmission and conveyor belting products and industrial
hose.
Bosworth
Manufacturer of conveyor drive pulleys.
Earnest Lowe ELCO
Manufacturer and distributor of hydraulic and pneumatic equipment.
PHC Clutch
Distributor of Valeo clutch kits.
Powermite
Distributor of electrical cabling, plugs and other related products.
Varispeed
Distributor of controllers, monitors and regulators of the speed of standard AC
motors.
Powered products
Deutz Dieselpower
Distributor of Deutz diesel engines and provider of after-market services.
Rutherford
Distributor of power tools, outboard motors, survey equipment and rivets.
Security equipment
Elvey Security Technologies
Distributor of intruder detection, closed circuit television, access control and
fibre-optic equipment.
Date: 30/01/2006 08:00:10 AM Produced by the JSE SENS Department
