Wrap Text
Unaudited interim financial statements for the six months ended 30 June 2018
Howden Africa Holdings Limited (HAHL)
(Incorporated in the Republic of South Africa)
(Registration number 1996/002982/06)
JSE code: HWN ISIN: ZAE000010583
(“Howden”, “the Company” or “the Group”)
Unaudited interim financial statements for the six months ended
30 June 2018
Condensed consolidated statement of financial position
as at 30 June 2018
Restated Restated
30 June 30 June 31 December
2018 2017 2017
R’000 Note (Unaudited) (Unaudited) (Audited)
Assets
Non-current assets 172 070 175 532 178 403
Property, plant and equipment
and intangible assets 127 501 132 585 133 105
Pension fund plan surplus 17 522 16 463 17 071
Deferred tax assets 3 23 021 15 975 21 069
Trade, construction contracts
and other receivables 4 026 10 509 7 158
Current assets 1 959 172 1 862 541 1 952 121
Inventories 321 299 321 111 337 065
Trade, construction contracts
and other receivables 3 257 839 377 585 389 751
Loans receivable 17 075 16 050 25 625
Current income tax asset 18 562 22 663 23 259
Cash and cash equivalents 1 344 397 1 125 132 1 176 421
Total assets 2 131 242 2 038 073 2 130 524
Equity
Share capital and reserves
Share capital and reserves 3 1 623 588 1 381 734 1 533 160
Total equity 1 623 588 1 381 734 1 533 160
Liabilities
Non-current liabilities 63 701 95 920 78 463
Deferred tax liabilities 3 731 2 784 5 738
Provisions 13 105 8 695 12 956
Payables and construction
contracts 46 865 84 441 59 769
Current liabilities 443 953 560 419 518 901
Provisions 14 822 19 679 10 993
Current income tax
liabilities 3 407 — 562
Payables and construction
contracts 425 724 540 740 507 346
Total liabilities 507 654 656 339 597 364
Total equity and liabilities 2 131 242 2 038 073 2 130 524
Condensed consolidated statement of comprehensive income
for the period ended 30 June 2018
Restated
Restated 12 months
Six months Six months ended
ended ended December
30 June 2018 30 June 2017 Change 2017
R’000 Note (Unaudited) (Unaudited) % (Audited)
Revenue 3,4 652 317 844 608 (22.8) 1 728 661
Cost of sales 3 (479 191) (627 463) (23.6)(1 233 378)
Gross profit 173 126 217 145 (20.3) 495 283
Distribution
costs (31 248) (29 007) 7.7 (60 459)
Administrative
expenses (64 211) (57 796) 11.1 (127 177)
Other income 59 654 (91.0) 468
Operating
profit 77 726 130 996 (40.7) 308 115
Investment
income 41 418 35 738 15.9 77 494
Finance costs (43) (56) (23.2) (145)
Profit before
income tax 119 101 166 678 (28.5) 385 464
Income tax
expense (32 916) (46 902) (29.8) (111 000)
Profit for the
period 86 185 119 776 (28.0) 274 464
Other comprehensive
income for the
period:
Other comprehensive
income to be
reclassified to
profit or loss in
subsequent periods:
Cash flow hedge
gain/(loss) 4 243 1 254 238.4 (2 008)
Total
comprehensive
income for the
period 90 428 121 030 (25.3) 272 456
Earnings per
share — basic
and diluted
(cents) 3 131.12 182.23 (28.0) 417.57
Condensed consolidated statement of changes in equity
for the period ended 30 June 2018
12 months
Six months Six months ended
ended ended December
30 June 2018 30 June 2017 2017
R’000 Note (Unaudited) (Unaudited) (Audited)
Share capital and
reserves at
the beginning of
the period 1 533 160 1 254 912 1 254 912
Restatement 3 — 5 792 5 792
Restated share capital
and reserves at the
beginning of
the period 1 533 160 1 260 704 1 260 704
Total comprehensive
income for the period 90 428 121 030 272 456
Profit for the period —
restated 3 86 185 119 776 274 464
Other comprehensive
income/(loss) 4 243 1 254 (2 008)
Share capital and
reserves at the end of
the period — restated 1 623 588 1 381 734 1 533 160
Condensed consolidated statement of cash flows
for the period ended 30 June 2018
Six months Six months
ended ended
30 June 30 June
2018 2017
R’000 (Unaudited) (Unaudited)
Cash flow from operating activities
Cash generated from operations 151 219 236 480
Interest paid (43) (56)
Income tax paid (30 910) (51 729)
Net cash generated from operating activities 120 266 184 695
Cash flow from investing activities
Interest received 41 418 35 132
Purchases of property, plant and equipment and
intangible assets (2 258) (4 036)
BEE loan repayment 8 550 —
Net cash generated from investing activities 47 710 31 096
Net increase in cash and cash equivalents 167 976 215 791
Cash and cash equivalents at the beginning
of the period 1 176 421 909 341
Cash and cash equivalents at the end of the
period 1 344 397 1 125 132
Notes to the financial statements
for the period ended 30 June 2018
1. Basis of preparation
The condensed consolidated interim financial statements for the period ended
30 June 2018 are prepared in accordance with the requirements of the JSE
Limited Listings Requirements for condensed interim report and the
requirements of the Companies Act of South Africa. The Listings Requirements
require condensed interim report to be prepared in accordance with the
framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS) and the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by Financial Reporting Standards Council and to also,
as a minimum, contain the information required by IAS 34 Interim Financial
Reporting. The report has been so prepared.
2. Accounting policies
The accounting policies applied in the preparation of the condensed
consolidated interim financial statements are in terms of IFRS and are
consistent with those applied in the previous consolidated annual financial
statements with the exception of the adoption of IFRS 15 - Contracts with
customers.
IFRS 15 - Contracts with customers - Revenue is recognised when the entity
satisfies a performance obligation by transferring a promised good or service
(i.e. an asset) to a customer, based on the consideration specified in a
contract and excludes amounts collected on behalf of third parties. An asset
is transferred when (or as) the customer obtains control of that asset. For
each performance obligation, an entity shall determine at contract inception
whether it satisfies the performance obligation over time or satisfies the
performance obligation at a point in time. If the entity does not satisfy a
performance obligation over time, the performance obligation is satisfied at
a point in time.
IFRS 15 Contracts with customers was adopted on 1 January 2018 and the effects
of the standard have been disclosed in note 3 (Changes in accounting policies).
There were no other new revised standards adopted that have a material impact
on the consolidated financial statements.
IFRS 16 update: the standard is not yet effective and the Group has not early
adopted. The Group is in the process of quantifying the effect of the standard
and is expected to have a material impact on the consolidated financial
statements.
The Group financial results were prepared under the supervision of the Chief
Financial Officer, Mrs M Vigouroux CA(SA).
3. Changes in accounting policies
The accounting treatment of services in multiple-arrangement contracts relating
to services revenue category entered into in previous periods has been
impacted by IFRS 15. The Group has elected to apply the full retrospective
method in transition to IFRS 15, with the following expedients:
* For completed contracts with a variable consideration, the Company has used
the transaction price at date contract was completed; and
* For all contracts prior to 1 January 2018, the Company has not disclosed the
amount of the transaction price allocated to the remaining performance
obligations and an explanation of when the entity expects to recognise
that amount as revenue.
The Company has not reviewed contracts that begin and are completed within
the same financial year.
Effect of adoption of IFRS 15 on financial statements previously reported:
June 2017
R’000 Gross Tax Net
Statement of comprehensive income
Revenue (3 368) 943 (2 425)
Cost of sales 1 285 (360) 925
Gross profit (2 083) 583 (1 500)
Basic and diluted earnings per share (cents) (2.28)
Statement of financial position
Deferred tax assets (1 669)
Retained earnings (4 292)
Trade, construction contracts and other
receivables 5 961
—
Statement of changes in equity
Opening retained income 5 792
Profit for the period (1 500)
4 292
December 2017
R’000 Gross Tax Net
Revenue (14 289) 4 001 (10 288)
Cost of sales 6 245 (1 749) 4 496
Gross profit (8 044) 2 252 (5 792)
Basic earnings per share (cents) (8.81)
Diluted earnings per share (cents) (8.81)
Statement of financial position
Deferred tax assets —
Retained earnings —
Trade, construction contracts and other
receivables —
—
Statement of changes in equity
Opening retained income 5 792
Profit for the period (5 792)
—
4. Revenue
Revenue comprises revenue from contracts with customers.
Restated Restated
Six months Six months 12 months
ended ended ended
30 June 30 June December
2018 2017 2017
R’000 (Unaudited) (Unaudited) (Audited)
Construction contracts 62 517 148 646 406 292
Sale of goods 316 842 395 939 796 825
Services 272 958 300 023 525 544
652 317 844 608 1 728 661
5. Segmental analysis by operating division
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker (CODM). The CODM,
who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Howden Africa executive
committee.
Restated Restated
Six months Six months 12 months
ended ended ended
30 June 30 June December
2018 2017 Change 2017
R’000 (Unaudited) (Unaudited) % (Audited)
Orders received
Fans and Heat Exchangers 457 898 713 267 (35.8) 1 415 200
Environmental Control 55 385 97 326 (43.1) 192 100
Fabrication Technology 48 267 57 545 (16.1) 112 400
561 550 868 138 (35.3) 1 719 700
Restated Restated
Six months Six months 12 months
ended ended ended
30 June 30 June December
2018 2017 Change 2017
R’000 (Unaudited) (Unaudited) % (Audited)
Revenue from contracts
with customers
Fans and Heat Exchangers 552 787 656 768 (15.8) 1 311 628
Environmental Control 46 247 128 847 (64.1) 310 890
Fabrication Technology 53 283 58 993 (9.7) 106 143
652 317 844 608 (22.8) 1 728 661
Operating profit/(loss)
Fans and Heat Exchangers 83 884 132 979 (36.9) 267 610
Environmental Control (3 344) 987 (438.8) 51 930
Fabrication Technology 3 396 2 404 41.3 4 349
83 936 136 370 (38.4) 323 889
Central operations (6 210) (5 374) 15.6 (15 774)
Total operating profit 77 726 130 996 (40.7) 308 115
6. Financial instruments
The Group has not disclosed the fair values of financial instruments measured
at amortised cost as their carrying amounts closely approximate their fair
values. Financial instruments measured at fair value comprise forward exchange
contracts and are determined using forward exchange rates as at 30 June 2018
(level 2 instruments). These are included as other receivables and payables
on the condensed consolidated statement of financial position.
7. Operating profit includes
30 June 30 June Change 31 December
R’000 2018 2017 % 2017
Depreciation and amortisation 7 029 8 074 (12.9) 15 915
Foreign exchange loss 6 702 2 618 156.0 6 742
8. Headline earnings per share
Restated Restated
30 June 30 June 31 December
2018 2017 Change 2017
R’000 (Unaudited) (Unaudited) % (Audited)
Headline earnings per share
(cents) 131.13 182.36 (28.1) 417.77
Number of shares in issue
(’000) 65 729 65 729 0.0 65 729
Reconciliation of headline
earnings
Net profit attributable to
equity holders 86 185 119 776 (28.0) 274 464
Loss on disposal of property,
plant and equipment — 85 (100.0) —
Write off of property, plant
and equipment 2 — — 131
Headline earnings attributable
to equity holders 86 187 119 861 (28.1) 274 595
9. Capital commitments
Restated Restated
30 June 30 June 31 December
2018 2017 Change 2017
R’000 (Unaudited) (Unaudited) % (Audited)
Authorised and contracted 4 848 851 469.7 38
10. Other salient features
Restated Restated
30 June 30 June 31 December
2018 2017 Change 2017
R’000 (Unaudited) (Unaudited) % (Audited)
Net asset value per share 2 470.12 2 102.17 17.5 2 332.55
Capital expenditure 2 258 4 036 (44.1) 12 443
11. Related party transactions
Six months Six months 12 months
ended ended ended
30 June 30 June December
2018 2017 2017
R’000 (Unaudited) (Unaudited) (Audited)
Transactions during the
period
Sales to related parties
Howden Australia 18 351 52 563 101 898
Other 2 557 168 954
20 908 52 731 102 852
Purchases from related parties
ESAB Middle East 44 520 34 707 65 236
Howden Process Compressors
Limited 1 322 2 872 6 934
Howden Denmark — 3 405 8 075
Howden Group Limited UK —
management fee and ERP licence
fees 13 199 11 590 24 153
Other 3 293 5 290 14 794
62 334 57 864 119 192
30 June 30 June 31 December
2018 2017 2017
R’000 (Unaudited) (Unaudited) (Audited)
Balances at
Amounts receivable from related
parties
Howden Australia 3 583 30 38 676
Other 2 662 750 782
6 245 780 39 458
Amounts payable to related parties
ESAB Middle East 67 503 49 934 45 819
Howden Group Limited UK 13 199* 11 931* 632
Howden Denmark — 3 521 7 935
Other 8 939 7 333 8 969
89 641 72 719 63 355
* Amount is an accrual that is due and payable in December subject to exchange
rate movement denominated in Great British Pound (GBP).
12. Events after reporting date
There were no events identified after the reporting date that require disclosure
or an adjustment to the financial results.
Commentary
Overview
Howden Africa experienced a challenging first half year, stemming from financial
constraints of customers, subdued economic outlook and general industry
uncertainty, however we continue to look for all opportunity to support our
customers.
Results
Orders received of R561.5 million for the first half of 2018 is 35.3% behind the
corresponding period in 2017. There has been deterioration of order intake in
all three segments during the period, with the delays in environmental control
projects, a reduction in activities within the Power market and general decline
within the South African industry.
Revenue was R652.3 million for the first half of 2018 a decline of 22.8% behind
the equivalent period in 2017 of R844.6 million. The Fans and Heat Exchangers
division revenue has declined by 15.8% to R552.8 million with the large portion
of the decline attributable to outage activity in the power market compared to
activity levels for the same period in the prior year. This division also had no
large mining projects being executed in the period. The decline of 64.1% in The
Environmental Control division is driven by a lower opening order book with no
significant order intake in the period. With subdued economic outlook and industry
uncertainty the fabrication sector has seen a decline in demand of products with
a decline in revenue of 9.7% to R53.3 million to that of the corresponding period.
Operating profit of R77.7 million is a decrease of 40.7% over the R131.0 million
to June 2017; all three divisions have reported significant decline in operating
profit percentage with reduced revenue volumes and pricing pressure from key
customers.
Earnings per share of 131.12 cents has declined by 28.0% to the corresponding period
as operating profit declined.
Cash generated from operations declined to R151.2 million from the corresponding
period (2017: R236.4 million) driven by the decline in operating profit and working
capital movements in project funding.
Net asset value per share has increased by 17.5% to 2 470.12 cents (June 2017:
2 102.17 cents) mainly due to the increase in cash and cash equivalents and working
capital movements relating to activity levels.
Outlook
Capital project spend within power generation, mining and general industry is
expected to remain subdued. The business will continue to seek opportunities beyond
our borders.
Directorate
Mr Alastair Irvine joined the board effective 30 May 2018 replacing Mr James Brown
who resigned from the board effective 30 May 2018.
Dividends
The directors have resolved not to declare a dividend (2017: nil).
Unaudited interim financial results
The Company’s auditor Ernst & Young Incorporated, have not reviewed or audited the
interim financial results for the six months ended 30 June 2018.
For and on behalf of the board of directors
IH Brander W Thomson
Chairman Chief Executive Officer
31 July 2018
Corporate information
Registered office
1A Booysens Road
Booysens
South Africa 2019
(PO Box 2239, Johannesburg, 2000)
T +27 11 240 4000
F +27 11 493 0545
Directors
IH Brander (Chairman)#* W Thomson (Chief Executive Officer)# A Irvine#*
M Malebye* M Vigouroux (Chief Financial Officer) H Mathe* S Badat*
(#British; *Non-executive)
Company secretary
CR Masson
Transfer secretaries
Link Market Services South Africa (Proprietary) Limited
13th Floor, 19 Ameshoff Street
Braamfontein, Johannesburg
(PO Box 4844, Marshalltown 2000)
Sponsor
PricewaterhouseCoopers Corporate Finance
(Proprietary) Limited
4 Lisbon Lane
Waterfall City
Jukskei View
2090
Website www.howden.co.za
Publication date
31 July 2018
Date: 31/07/2018 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
