UNAUDITED INTERIM FINANCIAL STATEMENTS. for the six months ended 30 June 2018

Transcription

1 UNAUDITED INTERIM FINANCIAL STATEMENTS for the six months ended

2 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at R 000 Note 31 December 2017 ASSETS Non-current assets Property, plant and equipment and intangible assets Pension fund plan surplus Deferred tax assets Trade, construction contracts and other receivables Current assets Inventories Trade, construction contracts and other receivables Loans receivable Current income tax asset Cash and cash equivalents TOTAL ASSETS EQUITY Share capital and reserves Share capital and reserves TOTAL EQUITY LIABILITIES Non-current liabilities Deferred tax liabilities Provisions Payables and construction contracts Current liabilities Provisions Current income tax liabilities Payables and construction contracts TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES Howden Unaudited interim financial statements for the six months ended

3 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the period ended R 000 Note Change % 12 months ended December 2017 Revenue 3, (22.8) Cost of sales 3 ( ) ( ) (23.6) ( ) Gross profit (20.3) Distribution costs (31 248) (29 007) 7.7 (60 459) Administrative expenses (64 211) (57 796) 11.1 ( ) Other income (91.0) 468 Operating profit (40.7) Investment income Finance costs (43) (56) (23.2) (145) Profit before income tax (28.5) Income tax expense (32 916) (46 902) (29.8) ( ) Profit for the period (28.0) Other comprehensive income for the period: Other comprehensive income to be reclassified to profit or loss in subsequent periods: Cash flow hedge gain/(loss) (2 008) Total comprehensive income for the period (25.3) Earnings per share basic and diluted (cents) (28.0) Howden Unaudited interim financial statements for the six months ended 3

4 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the period ended R 000 Note 12 months ended December 2017 Share capital and reserves at the beginning of the period Restatement share capital and reserves at the beginning of the period Total comprehensive income for the period Profit for the period restated Other comprehensive income/(loss) (2 008) Share capital and reserves at the end of the period restated CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS for the period ended R 000 Cash flow from operating activities Cash generated from operations Interest paid (43) (56) Income tax paid (30 910) (51 729) Net cash generated from operating activities Cash flow from investing activities Interest received Purchases of property, plant and equipment and intangible assets (2 258) (4 036) BEE loan repayment Net cash generated from investing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period Howden Unaudited interim financial statements for the six months ended

5 NOTES TO THE FINANCIAL STATEMENTS for the period ended 1. BASIS OF PREPARATION The condensed consolidated interim financial statements for the period ended 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 the 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. Howden Unaudited interim financial statements for the six months ended 5

6 NOTES TO THE FINANCIAL STATEMENTS CONTINUED for the period ended 3. CHANGES IN ACCOUNTING POLICIES CONTINUED Effect of adoption of IFRS 15 on financial statements previously reported: June 2017 December 2017 R 000 Gross Tax Net Gross Tax Net Statement of comprehensive income Revenue (3 368) 943 (2 425) (14 289) (10 288) Cost of sales (360) (1 749) Gross profit (2 083) 583 (1 500) (8 044) (5 792) Basic and diluted earnings per share (cents) (2.28) (8.81) Statement of financial position Deferred tax assets (1 669) Retained earnings (4 292) Trade, construction contracts and other receivables Statement of changes in equity Opening retained income Profit for the period (1 500) (5 792) REVENUE Revenue comprises revenue from contracts with customers. R months ended December 2017 Construction contracts Sale of goods Services Howden Unaudited interim financial statements for the six months ended

7 NOTES TO THE FINANCIAL STATEMENTS CONTINUED for the period ended 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. R 000 Change % 12 months ended December 2017 Orders received Fans and Heat Exchangers (35.8) Environmental Control (43.1) Fabrication Technology (16.1) (35.3) Revenue from contracts with customers Fans and Heat Exchangers (15.8) Environmental Control (64.1) Fabrication Technology (9.7) (22.8) Operating profit/(loss) Fans and Heat Exchangers (36.9) Environmental Control (3 344) 987 (438.8) Fabrication Technology (38.4) Central operations (6 210) (5 374) 15.6 (15 774) Total operating profit (40.7) 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 (level 2 instruments). These are included as other receivables and payables on the condensed consolidated statement of financial position. Howden Unaudited interim financial statements for the six months ended 7

8 NOTES TO THE FINANCIAL STATEMENTS CONTINUED for the period ended 7. OPERATING PROFIT INCLUDES R 000 Change % 31 December 2017 Depreciation and amortisation (12.9) Foreign exchange loss HEADLINE EARNINGS PER SHARE R 000 Change % 31 December 2017 Headline earnings per share (cents) (28.1) Number of shares in issue ( 000) Reconciliation of headline earnings Net profit attributable to equity holders (28.0) Loss on disposal of property, plant and equipment 85 (100.0) Write off of property, plant and equipment Headline earnings attributable to equity holders (28.1) CAPITAL COMMITMENTS Authorised and contracted OTHER SALIENT FEATURES Net asset value per share Capital expenditure (44.1) Howden Unaudited interim financial statements for the six months ended

9 NOTES TO THE FINANCIAL STATEMENTS CONTINUED for the period ended 11. RELATED PARTY TRANSACTIONS R months ended December 2017 TRANSACTIONS DURING THE PERIOD Sales to related parties Howden Australia Other Purchases from related parties ESAB Middle East Howden Process Compressors Limited Howden Denmark Howden Group Limited UK management fee and ERP licence fees Other R December 2017 BALANCES AT Amounts receivable from related parties Howden Australia Other Amounts payable to related parties ESAB Middle East Howden Group Limited UK * * 632 Howden Denmark Other * 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 reporting date that require disclosure or an adjustment to the financial results. Howden Unaudited interim financial statements for the six months ended 9

10 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 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 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 cents (June 2017: 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 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. For and on behalf of the board of directors IH Brander Chairman 31 July 2018 W Thomson Chief Executive Officer 10 Howden Unaudited interim financial statements for the six months ended

11 CORPORATE INFORMATION HOWDEN AFRICA HOLDINGS LIMITED (HAHL) Incorporated in the Republic of South Africa Registration number 1996/002982/06 JSE code: HWN ISIN: ZAE ( Howden, the Company or the Group ) REGISTERED OFFICE 1A Booysens Road Booysens South Africa 2019 (PO Box 2239, Johannesburg, 2000) T F 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) 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 PUBLICATION DATE 31 July 2018 COMPANY SECRETARY CR Masson sigil design bureau

12 HOWDEN AFRICA 1A Booysens Road, Booysens, 2091 PO Box 2239, Johannesburg, 2000 South Africa T F E enquiries@howden.co.za Howden Group Limited. All rights reserved Howden and the flying H logo are registered trade marks belonging to the Howden Group.