MARC HASENFUSS: Best to temper short-term dividend expectations
Howden directors need to come up with more convincing arguments about how the growing cash pile will be deployed to extract value for shareholders
At the end of June, the cash pile of industrial services business Howden Africa had breached the R1.3bn mark. That’s equivalent to more than R20 a share — startling for a company with a market cap of less than R2.5bn. The firm has mostly trundled along nicely since the most recent dividend was paid — in the second half of 2013 — which has frustrated shareholders accustomed to a generous payout policy. The just-released interim results, however, show that Howden is feeling considerable strain in its main markets. The core division for fans and heat exchanges reported a 37% plunge in operating profits to R84m and the environmental control division slid R3.3m into the red. Overall revenue was down 23% and operating profit plunged 40%. The large cash holding — which generated more than R40m in interest — provided a cushion, limiting the fall in bottom line to just 25%. Cash generated from operations declined to R151m from R236m in the corresponding period. Under the circumstances, I sus...
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