Roy Cokayne
LABOUR unrest, the general slowdown in mining and infrastructure, and the impairment of an investment dented the earnings of listed leasing and capital equipment company Eqstra in the year to June.
The revenue of the group’s contract mining and plant rental division improved but Eqstra chief executive Walter Hill said its performance was disappointing, largely because of three weeks of industry-wide industrial action during August and September last year, abnormally high rainfall in February and March this year, closure costs and the general slowdown in mining and infrastructure activity in South Africa.
Hill said the group’s profit after taxation was also hurt by the impairment of its R63 million investment in Protech Khuthele, the listed civil engineering group, following the company’s voluntary liquidation order.
Protech, in a trading update published in March, highlighted problems that included payment disputes and cost overruns with a mining infrastructure project in the Democratic Republic of Congo, where it was a 33 percent joint venture partner with Group Five Construction and Societe Africaine de Construction Au Congo.
Business rescue applications were filed with the Companies and Intellectual Property Commission on June 3 for all seven of Protech’s subsidiary companies.
But business rescue practitioner Gavin Gainsford concluded in July there were no reasonable prospects of rescuing Protech’s three major subsidiary companies and indicated that they would be liquidated.
Eqstra yesterday reported a 26.3 percent decrease in headline earnings a share to 76.7c in the year to June from R1.04 in the previous year.
Hall said this was largely attributable to the disappointing operating performance by the group’s contract mining and plant rental business.
Eqstra’s earnings a share decreased further by 39.4 percent to 60.6c from R1 because of the impairment of its investment in Protech.
Eqstra’s revenue increased by 9.8 percent to R9.98 billion from R9.09bn. Hill attributed this to the investment in revenue-generating assets, increased used vehicle remarketing and increased sales activity in the UK.
Operating profit declined by almost 10 percent to R938m from R1.04bn. Cash generated from operations before working capital movements rose by 3 percent to R2.97bn from R2.87bn. Cash and cash equivalents at year-end fell by 67 percent to R93m from R300m.
Despite the group’s published dividend policy, its board decided not to declare a dividend to position the group for future growth in fleet management and logistics and industrial equipment. It said it would return to its stated dividend policy “in the near term”.
Hill said the industrial equipment division anticipated that the South African forklift market would remain challenging, with the UK market expected to increase marginally.
“We aim to further balance our product portfolio and grow into sub-Sahara Africa and the UK with a much stronger basket of products in place. A healthy order book for long-term leasing and cash sales is in place to support annuity revenue growth.”
Hill said earnings from leasing activities by the fleet management and logistics division were set to remain defensive and higher interest rates would have a positive impact on earnings. Hill added that the contract mining and plant rental division expeced global commodity prices to remain under pressure.
Eqstra shares fell 1.9 percent to close at R6.21.