Graham Dunford
JSE-listed Hudaco on Friday reported a 7% increase in sales to R5.9-billion for the financial year ended November 30, 2017, while operating profit rose 6% to R676-million.
CEO Graham Dunford told Engineering News Online on Friday that comparable earnings a share were up by 7% to 1 251c, while headline earnings a share rose by 3% to 1 256c, owing to a positive fair value adjustment on the vendor liability in the previous year.
“Looking at the problems we’ve had in the past, we are very happy with that result. Ongoing operations were slightly down from last year and our basket of currencies strengthened by 10%, owing to an uptick in the rand, which means we paid less for our products. We also reduced our pricing to our customers,” he said.
He added that the company had seen an uptick in demand from some of the industries that it serves, such as the mining and engineering sectors, “so we are very happy with that”.
Dunford pointed out that the company’s return on equity was very respectable at 19%, well above its cost of capital.
Ongoing operations' operating profit was down 1%.
“The results give a good indication of how difficult trading conditions were. Ongoing operations in the consumer-related products segment were down 4%, with the bulk of this decline coming from the projects side of both the communications and
security businesses,” he said.
Dunford noted, however, that, engineering consumables' operating profit from ongoing operations was up 4.5%, even with the mining and manufacturing sectors firmly in recession for part of the year.
“It is only through the deployment of cash generated by the existing businesses in the acquisition of successful new businesses with better growth potential that we were able to increase profits.”
The financial position remains healthy, with consistently strong cash generation, he noted.
The group had R860-million in net bank borrowings at year-end, representing gearing of 36%, down from R905-million in 2016, notwithstanding R210-million spent on acquisitions.
Interest payments were covered eight times by operating profits against the company’s internal benchmark of at least five times.
“The final dividend has been increased by 25c, giving a total dividend for 2017 of 560c, up almost 7% year-on-year,” he stated.
OUTLOOK
Hudaco’s growth prospects for this year will depend on how the economy performs and that, in turn, depends largely on government policy and its implementation, Dunford said.
“The year has started off in a much more positive vein with consumer and business confidence increasing after the election of Cyril Ramaphosa as president of the ANC. There is a great deal of optimism that he will deliver good governance, eradicate much of the corruption, put in place policies that support economic growth and assign responsibility to competent people,” he noted.
“If that perception becomes a reality, then the optimism is likely to translate into investment in those sectors of the economy that are traditional Hudaco markets.
“That will enable those of our businesses that have been in austerity mode for the past few years to thrive again,” he stated.