• Revenue increases to R3.6bn from R2.4bn
• EBIT improves to R354.4m from R257.1m
• Profit before tax grows to R182.7m from R175.2m
• Balance sheet strengthened, and debt maturity profile extended
• Group well positioned for future growth

Diversified JSE-listed industrial group enX today announced pleasing interim results for the six months ended 28 February 2018.

Steven Joffe, CEO commented:

“During the period, we bedded down our management structure and focused on deepening existing OEM relationships, expanding of our UK footprint and strengthening our funding profile.

“The inclusion of contributions from the EIE as well as Eqstra Fleet Management and Logistic (EFML) for the full six-month period further bolstered our performance.

“We reduced net debt and re-entered the debt capital markets to strengthen our balance sheet and position us for future growth.

“We now have optionality to invest in our existing businesses or opportunistically as new prospects arise.” 

Revenue for the period increased to R3.6 billion (2017: R2.4 billion) with the inclusion of EIE and EFML for six months as compared to their four months inclusion for the prior corresponding period. Revenues for Petrochemicals increased to R778.4 million (2017: R695.7 million) following good growth in the Chemicals business.

The Group’s EBIT improved to R354.4 million (2017: R257.1 million) and PBT improved to R182.7 million (2017: R175.2 million). Consistent with prior disclosures, management has elected to disclose adjusted EBIT which provides a more meaningful reflection of sustainable earnings. Adjusted EBIT increased to R377.9 million (2017: R306.7 million). The restructure and unbundling of eXtract, culminating in an in specie dividend having been made to shareholders in October 2017, resulted in the Group’s NAV and NTAV dropping to 1 459.7 cents (2017: 1 820.6 cents) and 993.7 cents (2017: 1 367.8 cents) respectively.

If eXtract was excluded from the 2017 comparative number the NAV would have been at 1 323.7, a period on period increase of 10.3% and the TNAV would have been at 870.9, a period on period increase of 14.1%.

The effective tax rate for the period was 22.9% (2017: 33.33%). The lower charge is primarily due to the lower effective tax rate in the UK and Botswana and the impact of the deemed interest income. Joffe advised that in the future “we anticipate the tax rate to normalise”.

During the six months under review, EIE (a distribution, rental and value added services business for industrial and materials handling equipment in South Africa, other African countries, the United Kingdom and Ireland) and EFML provider of a full spectrum of services including leasing, fleet management, outsourcing solutions, maintenance, warranty management and vehicle tracking solutions for passenger and commercial vehicles) performed satisfactorily.  

Post the period-end, the Group entered into a R315.5 million 3.5 year note specific liquidity facility and raised R260 million in the debt capital markets through an auction conducted on 17 April 2018. Together with the cash held at 28 February 2018 and the funds received from the bonds raised, enX was able to redeem R565.5 million of maturing debt during April 2018. The Group’s debt funding position has been strengthened with a more prudent maturity profile and sufficient liquidity to address capital repayments to the end of August 2019. 

Under enX’s ownership, operations have steadied: Capital constraints experienced by the EFML business in the past have largely been released, freeing up the business to refocus on maintaining and growing its leasing book.  In line with the strategic intent to expand the enX footprint in the UK, two forklift businesses were acquired. Both businesses complement current operations and will be seamlessly integrated as additional branches.

The recapitalisation and unbundling of eXtract Group Limited (“eXtract”) was finalised in October 2017 and R175 million of the R250 million remaining debt has been received from eXtract. A further R25 million was received post February, with the remaining R50 million expected in the next few months. Joffe stressed “that this is well ahead of our original anticipated timing”.

The Lubricants business, having finalised the re-commissioning of a manufacturing plant in Boksburg to carry the highest global quality standards, concluded a five-year agreement with ExxonMobil for the blending of lubricants. The benefits of this partnership will become evident in the next year. In addition to this, a three-year extension was signed with ExxonMobil to continue marketing and distributing their oil lubricants.

Power commenced the year with a healthy order book, but difficult trading conditions resulted in a substantial slow-down in new order intake during the period.  Joffe said that a restructuring was implemented to cater for the lower sales volumes and is hoping for a commensurate turnaround in the business.

Earnings

Headline earnings increased by 20.9% to R138.0 million (2017: R114.1 million). This translates into headline earnings per share (“HEPS”) of 77.4 cents (2017: 73.6 cents). Adjusted headline earnings increased by 33.9% to R156.0 million (2017: R116.5 million) and translated into adjusted HEPS of 87.5 cents (2017: 75.1 cents). The weighted average number of shares (net of treasury shares) in issue during the current reporting period was 178 332 559 as compared to the previous reporting period’s weighting of 155 154 559, following the shares issued for the acquisition of EIE and EFML and the capital raise in November 2016.

Capex

Capital expenditure increased to R823.2 million (2017: R492.8 million). The increase was due to the longer trading period and was employed primarily to maintain and grow leasing fleets.

Funding

The Group’s net interest-bearing debt (including deferred vendor consideration and cash) decreased to R4 345.5 million (August 2017: R4 572.3 million). As announced on SENS on 7 December 2017, the Group raised a term loan of R200 million the proceeds of which, together with the loan repayments received from eXtract, are included in our cash balances at 28 February 2018. These cash balances were utilised in April 2018 to settle maturing bonds.

Cash flow

Cash flows from the Group were positive over the period. The key drivers being cash flow from operating activities after capital expenditure on leasing assets of approximately a billion Rand and the R175 million cash received from eXtract. The cash paid for the ‘Business combinations’ was settled out of existing cash resources and funding facilities available to the Group.

Mpho Makwana, the Chairman of the group commented that he was delighted assuming the position of independent Chairman of the board with Steven Joffe assuming the role of CEO.  Makwana continued that the prospects for the group were positive and the members of the board and management look forward to continue to deliver on the expectations of enX stakeholders.