JOHANNESBURG (miningweekly.com) – JSE-listed Eqstra’s profits plunged into the red during the first half of the 2016 financial year, as an exit plan and overall progress made on the company’s 2020 strategy – and resultant impairments on discontinued operations – weighed on the interim financial results.
The integrated leasing and capital equipment group posted a R1.1-billion loss for the six months to December 31, compared with a R152-million profit in the six months to December 2014.
This was mostly as a result of the group’s discontinued operations, including the Benga operations in Mozambique and the related impairment of assets to a fair value less costs of sale; the closure of the construction equipment business unit within the industrial equipment division; and the closure of the commodities unit in the fleet management and logistics division.
The closures formed part of Eqstra's strategy to exit noncore operations.
Eqstra’s headline earnings per share (HEPS) from continuing operations increased by 18.1% to 22.2c for the six months, from the 18.8c apiece recorded in the prior corresponding period.
During the six months under review, R736-million in impairments on mining assets in the contract mining and plant rental divisions had led to a loss per share (LPS) of 112.5c from continuing operations, compared with the achieved earnings per share (EPS) of 18.9c in the first half of the 2015 financial year.
The discontinued operations posted a headline LPS of 26.1c, down from the HEPS of 18.1c in the first half of the prior financial year, while the EPS from discontinued operations fell from 18.1c in the six months to December 2014 to a LPS of 174.9c in the interim period under review.
Operating profit from continuing operations increased 7.1% to R436-million during the six months to December.
Revenue for the period under review rose marginally to R4.1-billion despite a decrease in revenue-generating assets to R8-billion as a result of a combination of the divisions curtailing growth, asset impairments and classifying R1.2-billion as assets held for sale – a move central to Eqstra’s intent to focus on core competencies and services.
During the period under review, Eqstra increased the market share of its industrial equipment division, which continued to perform well in its core forklift businesses, delivering operating profit of R154-million and a 4.3% rise in revenue to R1.44-billion.
The fleet management and logistics division improved operating margin from 14% in the prior corresponding period to 19.2% during the six months under review, while continuing operating profit improved from R192-million to R202-million. However, revenue contracted 6.9% to R1.05-billion.
Meanwhile, the company’s contract mining and plant rental unit continued to drive efficiencies, improving operating profit by 46.2% to R76-million during the six months to December, with revenue up 4.8% to R1.65-billion.
“The period under review was a pivotal one for Eqstra as management moved ahead with implementation of several key initiatives . . . [that] are expected to accelerate the transition of Eqstra to a services-oriented group,” CEO Jannie Serfontein said.
The group, which on Tuesday appointed Hulamin’s David Austin as CFO effective May 1, would continue implementing its 2020 strategy and focus on liquidity and working capital management.
The 2020 strategy was based on a balanced capital structure; evolving differentiated services business model; and operating efficiencies and margin improvement.
The industrial equipment division would remain focused on its core business, delivering solid performance in the forklift businesses in South Africa and the UK and ensuring a healthy order book.
The fleet management and logistics unit would ensure that earnings remained robust and drive value-added products, while the contract mining and plant rental division would continue disposing of impaired mining assets, limit contract mining exposure to 30% of group revenue and seek opportunities with existing assets.