Hudaco Industries, which imports and distributes branded automotive, industrial and electronic consumer products, reported an 8.1% increase in headline earnings per share to 926 cents in the six months to May 31.
The interim dividend was raised 8.3% to 325 cents. Revenue increased 12.4% to R4.25 billion, and operating profit was up 2.8% to R465 million.
Operating profit was “a respectable number” considering the difficult trading conditions, which were impacted by load shedding and include the December, January and April holidays.
“Bank borrowings at R1.09bn are up R234m in May 2022, primarily because of the increased cost of inventory from rand weakness and because we have made a more significant investment in inventories in our growth sector businesses,” the group said.
Trading generated cash of R581m, of which R335m was reinvested to stock up for the busier second half. This resulted in cash generated from operations of R246m.
Borrowings were comfortably within group guidelines and banking facilities. “Potential acquisitions aside, our usual strong second-half cash generation should reduce borrowings by year-end,” the group said.
In February, Hudaco indicated it expected even better results from the security and communications, Cadac and alternative energy businesses in 2023.
“We are happy to report that those businesses had an excellent first half, and we expect the same from them in the second half. Our inventory levels have remained elevated for the reasons set out. Fortunately, we have seen the supply chain return to some level of normality.”
In consumer related products, with disposable income of consumers under pressure, there were reduced volumes in automotive products and power tools. Segment sales increased 13.2% to R2.2bn, while operating profit fell 2.8% to R294m.
In engineering consumables, comprising 18 businesses, trading conditions continued the positive trend of 2022, with increased turnover from the mining and manufacturing sectors. Engineering consumables accounted for 47% of group sales and 41% of operating profit.
Sales grew 11.8% to R2bn and operating profit increased 4.3% to R204m.
On May 30, Hudaco entered into an agreement to acquire Brigit Fire, Brigit Systems and Portagas, based on a multiple of the average annual taxed profit of Brigit for the two years following the date of the deal, with an initial payment of R143m and a maximum of R315m.
Brigit offer fire detection, fire containment protection and fire suppression systems. The fire security offering of Brigit was expected to enhance the range of products and services that Hudaco already offers to the security sector through its Elvey Security Technologies and Pentagon businesses.
BUSINESS REPORT