Roy Cokayne
SHARES in listed leasing and capital equipment company Eqstra rocketed up by 20 percent yesterday after it released its latest interim results.
Eqstra shares climbed as much as 19.63 percent to R3.90 earlier, before closing up 17.79 percent at R3.84.
The planned termination of loss-making contracts, closure of non-core loss-making business units and cost reductions had a positive impact on Eqstra’s financial performance in the six months to December.
The contract mining and plant rental division, which has been a drain on the group, largely because of the slowdown in mining and infrastructural activity, made meaningful progress towards improving operations by terminating loss-making contracts and cost savings.
Despite the revenue of this division declining by 12.4 percent to R2 billion from R2.28bn, profit before taxation increased to R6 million from zero in the previous corresponding period.
Walter Hill, Eqstra’s chief executive, said the contract mining and plant rental division focused in the past six months on right-sizing the business following the termination of loss-making contracts, with the overhead structure reduced.
Hill said the benefits of this action would become visible in the second half of the financial year, adding that the turnaround in the reporting period (was) masked by retrenchment costs and the cost of underutilised assets. Management was actively looking for opportunities to redeploy underutilised assets, he said.
Eqstra’s other two divisions, the fleet management and logistics and industrial equipment divisions, both reported a marginal improvement in performance in the reporting period compared with the previous corresponding period.
The revenue of the industrial equipment fell marginally to R1.49bn from R1.5bn as profit before tax improved by 4 percent to R77m from R74m.
Hill said this improvement was achieved despite the industrywide industrial action in July, which resulted in workshops being closed and deliveries of equipment being hampered.
He said the continued slowdown in the local economy negatively impacted heavy equipment sales but ports equipment performed well.
The revenue of the fleet management and logistics division dropped 3.5 percent to R1.3bn from R1.35bn, with profit before tax rising by 2 percent to R98m from R96m.
Hill said this division benefited from the closure of underperforming business units.
Total group revenue fell by 4.5 percent to R4.7bn from R4.9bn. But operating profit rose 9.1 percent to R503m.