Hudaco Facing Challenges, Mixed Analyst Views

Hudaco, which imports and distributes industrial products – mainly for the engineering, security and mining sectors – has produced results for the 6 months to May, announcing a 14% rise in turnover, but just a 2% increase in headline earnings a share.

Analysts were told at a presentation that the company is deeply concerned about the volatile rand. It is impacted by the woes of the mining industry, as half of its business is directly or indirectly affected by mining.

The company is in a long-running battle with the taxman, which will prove costly if SARS wins – to the tune of as much as 1.6 billion rand. It currently makes provisional payments of R20 million a quarter. It is also changing its BEE financing arrangements.

Expert comment:

Ian Cruickshanks, Independent analyst:

One can’t expect a fiery performance as this company is GDP-dependent. It is dependent on the global mining and resources cycle. Current ratios and potential tax liability render this a doubtful participant in current portfolios.

Mark Ingham, from Ingham Analytics:

A solid interim result in demanding circumstances, and in line with my forecast. The business model continues to prove its worth and resilience through business cycles. Hudaco is cautious about acquiring, but without exception acquisitions have been well integrated and have proved to be earnings accretive. I expect continued selective corporate action. The management team is motivated and focussed. Management succession is well planned and also assists investor confidence in continuity. Hudaco group financials are sound. The stock offers good value and the outstanding tax issue with respect to the BEE financing arrangements do not detract from that.

Tweets of the Day:

Bruce @BruceB555 : Dear SARS, please don’t just take 40% of my salary this month. Go and start a business and earn your own f….ing money. Thank you.

Beemerang (@ThisBikerBoy): My grade school teacher said I’d go far. My parole officer says I went too far.

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