| Mon 3 Jul 2006, 8:03 | | Hudaco - Unaudited Interim Group Results |
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HDC
HDC
Hudaco - Unaudited Interim Group Results
HUDACO INDUSTRIES LIMITED
(Incorporated in the Republic of South Africa)
Registration Number 1985/004617/06
Share Code: HDC & ISIN: ZAE000003273
("Hudaco" or "the company")
Unaudited Interim Group Results for the six months ended 31 May 2006
* HEPS up 19% to 177 cents per share
* Interim dividend increased 19% to 50 cents per share
Results
Hudaco Industries is a South African group of companies engaged in the business
of importing and distributing branded industrial products. About half of group
sales are to the South African manufacturing and mining markets with the balance
evenly distributed between the construction, automotive aftermarket and security
industries.
This year the group is reporting for the first time in terms of International
Financial Reporting Standards (IFRS). The changes made to the accounting
policies resulting from the adoption of IFRS and the impact of those changes are
set out in a separate section of this announcement.
Demand from the mining sector was weak in the first half of 2006 as gold output
fell 10% offsett by small increases in output of platinum and coal. Demand from
the manufacturing sector was also weak mainly due to the strong Rand. On the
other hand sales of power tools, outboard motors and security equipment were
well up on 2005, benefiting from continued robust consumer spending on housing
and leisure products.
The firm Rand meant that the group was still dealing with the effects of price
deflation in the first half of 2006. With expenses rising by the local inflation
rate the Bearings and Power Transmission Products division, which had no volume
sales growth, was again faced with a profit squeeze. Fortunately, in the Powered
Products and Security divisions, volume sales growth was more than sufficient to
cover cost increases.
First half sales at R793 million are 14% up on last year. The operating margin
improved from 9.5% to 10.1% and operating profit is up 21% to R80 million.
Headline earnings per share increased 19% to 177 cents. The implementation of
IFRS had a minimal effect on headline earnings per share. An interim dividend of
50 cents per share has been declared, an increase of 19%.
The balance sheet is in good shape. Working capital (inventories, accounts
receivable and accounts payable) at R424 million is R60 million above 2005 year
end levels. This is to be expected as we are currently stocking up for the
second half of the year which is traditionally a busier trading period. Net cash
on hand (cash balances less interest bearing debt) at the half year is R134
million.
Black Economic Empowerment (BEE)
Hudaco is in the process of selecting and structuring a BEE shareholding.
Ideally an announcement in this regard will be made in this financial year.
Prospects
The group remains optimistic about the future. Government spending on
infrastructure should get underway in the next 12 months and higher commodity
prices will support an increase in mining investment once certainty is reached
on various regulatory issues. These positives will provide a welcome spin-off to
the manufacturing sector whilst the consumer side of the economy should remain
strong as employment levels continue to rise.
This scenario should have a positive effect on sales levels in the Bearings and
Transmission Products businesses which have struggled over the last few years.
Prospects for the Powered Products and Security Equipment businesses remain
sound.
Prospects for the remainder of 2006 are good whilst in the medium term we expect
Hudaco"s earnings to grow commensurately with the above outlook.
Dividend?
Notice is hereby given that interim dividend No. 38 of 50 cents per share has
been declared in respect of the six months ended 31 May 2006.
The last day to trade in order to participate in the dividend ("cum" the
dividend), will be Thursday, 3 August 2006. The shares will commence trading
"ex" the dividend from the commencement of business on Friday, 4 August 2006 and
the record date will be Friday, 11 August 2006. The dividend will be paid on
Monday, 14 August 2006. Share certificates may not be dematerialised between
Friday, 4 August 2006 and Friday, 11 August 2006, both days inclusive.
For and on behalf of the Board
PL Campbell (Chairman)
SJ Connelly (Chief executive)
30 June 2006
Income statement
Year
Six months ended ended
31 May % 31 May 30 Nov
R million 2006 change 2005* 2005**
Turnover 792,8 14 697,0 1529,8
Cost of sales 490,0 422,6 930,9
Gross profit 302,8 274,4 598,9
Operating expenses 222,4 208,0 417,7
Operating profit 80,4 21 66,4 181,2
Closure of discontinued operations 6,2
Capital items (3,4)
Profit before interest 80,4 66,4 184,0
Net interest received 2,5 1,8 3,6
Profit before taxation 82,9 68,2 187,6
Taxation 28,2 22,8 60,3
Profit after taxation 54,7 20 45,4 127,3
Attributable to shareholders
of the group 52,7 21 43,6 122,3
Attributable to minorities 2,0 1,8 5,0
54,7 45,4 127,3
Headline earnings per share (cents) 76,9 19 148,1 408,6
Basic earnings per share (cents) 176,9 148,1 413,3
Diluted earnings per share (cents) 172,0 146,0 401,8
Reconciliation to headline earnings
Profit attributable to shareholders 52,7 43,6 122,3
Add back:
- Closure of discontinued operation (4,8)
- Capital items 3,4
Headline earnings 52,7 21 43,6 120,9
Dividends ?? -? Per share (cents) 50,0 19 42,0 144,0
? ? -? Amount (Rm) 14,9 12,4 42,8
Shares in issue 29 891 29 610 29 756
? ? -? Total (000) 32 399 32 118 32 264
? ? -? Held by subsidiary
company (000) (2 508) (2 508) (2 508)
Weighted average shares in issue
? ? -? Basic (000) 29 783 29 473 29 592
? ? -? Diluted (000) 30 636 29 889 30 440
Cash flow statement
Year
Six months ended ended
31 May 31 May 30 Nov
R million 2006 2005* 2005**
Cash generated from trading 87,7 73,8 195,3
Applied to working capital (56,1) (45,9) (60,4)
Cash generated from operating activities 31,6 27,9 134,9
Net interest received 2,5 1,8 5,0
Taxation paid (32,7) (36,9) (62,9)
Cash flow from operations 1,4 (7,2) 77,0
Dividends paid (36,3) (27,4) (42,1)
NET CASH APPLIED (34,9) (34,6) 34,9
Investment in new operations - net (6,6) (17,9) (45,3)
Cash applied to capital items (1,6)
Investment in property, plant and
equipment - net (8,6) (3,6) (9,0)
NET CASH INVESTED (15,2) (21,5) (55,9)
Cash utilised (50,1) (56,1) (20,7)
Shareholder funding 1,7 1,9 3,3
DECREASE IN NET CASH (48,4) (54,2) (17,4)
Balance sheet
31 May 31 May 30 Nov
R million 2006 2005* 2005**
ASSETS
Non-current assets 129,7 144,0 128,8
Property, plant and equipment 65,7 70,6 63,6
Deferred taxation - net 4,7 1,0
Goodwill 64,0 68,7 64,2
Current assets 821,7 800,5 886,6
Inventories 407,3 362,5 375,0
Accounts receivable 280,4 242,4 279,2
Bank call deposits and balances 134,0 195,6 232,4
TOTAL ASSETS 951,4 944,5 1 015,4
EQUITY AND LIABILITIES
Equity 662,9 573,5 637,6
Shareholders" equity 643,0 546,0 613,8
Minority interest 19,9 27,5 23,8
Non-current liabilities 10,1 75,0 61,0
Interest bearing debt 50,0 50,0
Deferred taxation - net 0,2
Due to vendors - interest bearing 9,9 25,0 11,0
Current liabilities 278,4 296,0 316,8
Accounts payable 263,7 242,2 290,7
Due to vendors - interest bearing 7,0 46,1 12,7
Taxation 7,7 7,7 13,4
TOTAL EQUITY AND LIABILITIES 951,4 944,5 1 015,4
Statement of changes in equity
Year
Six months ended ended
31 May 31 May 30 Nov
R million 2006 2005* 2005**
Equity at beginning of period
as previously stated 595,8 506,5 506,5
Change in accounting policy -
IFRS (see note) 18,0 18,2 18,2
Equity at beginning of period, as restated 613,8 524,7 524,7
Attributable profit for the period 52,7 44,6 124,2
Increase in share based payments reserve 0,8 0,9 1,7
Deferred on hedging instruments 2,6 3,1 0,2
Gain on translation of foreign entities 1,8 (1,0) 1,1
Share issues 1,7 2,1 3,7
Dividends (30,4) (27,4) (39,9)
Equity at the end of the period 643,0 546,0 613,8
Supplementary information
These results were prepared applying accounting policies which conform with
International Financial Reporting Standards (IFRS) and are consistent with those
applied in the previous financial year, except for the changes noted under "IFRS
Adjustments".
31 May 31 May 30 Nov
2006 2005* 2005**
Average net operating assets (Rm) 530,5 461,9 463,4
Operating profit margin (%) 10,1 9,5 11,8
Average NOA turn (times - annualised) 3,0 3,0 3,3
Return on average NOA (% - annualised) 30,3 28,8 39,1
Interest covered by operating profit (times) n/a n/a n/a
Gearing - net (%) nil nil nil
Net asset value per share (cents) 2 151 1 844 2 063
Capital expenditure
-? Spent during the period (Rm) 9,2 7,0 11,4
-? Budgeted for second half of
the year (Rm) 7,0 6,2
Operating lease commitments -
property (Rm) 48,0 47,5 40,0
Net cash comprises (Rm) 134,0 145,6 182,4
-? Bank call deposits and balances 134,0 195,6 232,4
-? Interest bearing debt - non-current 0,0 (50,0) (50,0)
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 - restated
*Restated
IFRS adjustments
The group has adopted International Financial Reporting Standards (IFRS) for the
year ending 30 November 2006. The first results to be published under IFRS are
for this reporting period and the transitional arrangements allowed for in IFRS
1 have been applied with effect from
1 December 2004, the date of transition to IFRS. This means the balance sheets
at
31 May and 30 November 2005 and all other comparative information has been
restated, where applicable, to comply with the new accounting standards.
The following IFRS standards have impacted on group accounting policies and
reported performance and financial position:
Business combinations - The group has elected not to apply IFRS 3 to business
combinations prior to March 2004. The group adopted IFRS 3 - business
combinations from 1 April 2004 and therefore no adjustments were required.
Share-based payments - The group has now applied IFRS 2 to account for share-
based payments in respect of options granted in terms of the share incentive
scheme after
7 November 2002. This means that the expense of the options granted is
recognised in the income statement over the vesting period, with a corresponding
credit to equity.
Cumulative translation differences - The group has elected to apply IAS 21
retrospectively for cumulative translation differences of all foreign
operations. The cumulative translation differences at 1 December 2004 have been
set to zero in terms of IFRS 1 - by transfer of the balance to retained
earnings, and IAS 21 has been applied from that date.
Property, plant and equipment - The group has re-assessed the useful lives and
residual values of its property, plant and equipment in accordance with IAS 16
and adjusted depreciation accumulated to 30 November 2005 where appropriate.
Revenue recognition - The group has re-assessed the definition of revenue in
terms of IAS 18 and settlement discounts that are closely related to revenue are
now deducted from turnover. Turnover, gross profit and operating expenses have
been reduced by R19,4 million (1,25%) for the year ended 30 November 2005 and by
R8,2 million for the six months ended
31 May 2005.
Reconciliation of profit attributable
to shareholders 31 May 30 Nov
2005 2005
As previously reported under SA GAAP 44,6 124,2
Adjustments for IFRS: (1,0) (1,9)
IFRS 2 - share-based payments (0,9) (1,7)
IAS 16 - depreciation of property, plant and equipment (0,1) (0,2)
Deferred taxation effect of IFRS adjustments (0,0) (0,0)
Profit attributable to shareholders under IFRS 43,6 122,3
Reconciliation of reserves 31 May 2006 30 Nov 2005
Other+ Retained Other+ Retained
reserves income reserves income
As previously reported
under SA GAAP (7,3) 520,7 (8,2) 587,9
Adjustments for IFRS: 9,7 8,4 10,6 7,4
IFRS 2 - share-based payments 2,5 (2,5) 3,4 (3,4)
IAS 16 - net depreciation of
property, plant and equipment 25,5 25,4
IAS 21 - translation reserve on
foreign operations 7,2 (7,2) 7,2 (7,2)
Deferred taxation effect of
IFRS adjustments (7,4) (7,4)
As reported under IFRS 2,4 529,1 2,4 595,3
+
Other reserves are the foreign exchange translation reserve and the share based
payments reserve
Segment analysis
Turnover
31 May % 31 May 30 Nov
R million 2006 change 2005* 2005**
Bearings and Transmission
Products 458,3 8 425,1 911,4
Powered Products 202,4 28 158,2 375,7
Security Equipment 141,8 15 122,8 262,8
Internal/head office (0,1) (0,9) (0,7)
Operations discontinued
in 2004
Total Group 802,4 14 705,2 1 549,2
Segment analysis
Operating profit
31 May % 31 May 30 Nov
R million 2006 change 2005* 2005**
Bearings and Transmission
Products 34,6 4 33,2 91,4
Powered Products 36,9 42 25,9 71,7
Security Equipment 15,5 45 10,7 23,5
Internal/head office (6,6) (3,4) (5,4)
Operations discontinued in 2004
Total Group 80,4 21 66,4 181,2
Segment analysis
Average net operating assets
31 May 31 May 30 Nov
R million 2006 2005* 2005**
Bearings and Transmission Products 389,9 335,0 349,4
Powered 78,2 58,8 59,8
Security Equipment 75,3 73,3 73,3
Internal/head office (12,9) (17,7) (19,1)
Operations discontinued in 2004 12,5
Total Group 530,5 461,9 463,4
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) GEGardiner
JB Gibbon# YKN Molefi# PMPoole # Independent non-executive
Secretary
RGL Arnestad
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.
Ernest Lowe ELCO - Manufacturer and distributor of hydraulic and pneumatic
equipment.
HBC - Distributor of 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.
value-added distribution
Date: 03/07/2006 08:03:40 AM Produced by the JSE SENS Department
