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Eqstra Holdings' dividend up 12%

Johannesburg – Mobile capital equipment distributor Eqstra Holdings [JSE:EQS] on Tuesday reported a rise in diluted headline earnings per share to 76 cents for the year ended June 2012 from 69.8c a year ago. Headline earnings per share from continuing operations increased 6.2% to 77.2c.

The group’s final dividend increased 12% to 28c per share.

Revenue increased 18% to R8.143bn‚ mainly due to a ramp-up of production volumes recorded by Contract Mining and Plant Rental's Benga project in Mozambique and increased unit and aftermarket sales in Industrial Equipment.

Profit before tax increased 35.6% to R488m‚ resulting in the profit before tax margin increasing to 6.0% from 5.2% previously.

Revenue-generating assets increased 15.2% to R8.884bn across all divisions. The Benga equipment fleet grew to its full complement and reached targeted production levels in the last quarter of the financial year. Foreign exchange movements accounted for 2.8% of the increase.

On 29 June 2012 the Eqstra Mining Services (Bucyrus) business unit was sold as a going concern for a purchase price based on R287m inventory and R137m for goodwill‚ resulting in a net cash inflow to the group of R424m.

The group has also given notice of termination of its distribution rights for New Holland Construction equipment‚ effective 31 August 2012. This exit is anticipated to have a minimal impact on the 2013 financial year. Discontinued operations will not materially alter group's future operating performance.

The group's performance is expected to improve in the coming year as corrective action to address contract management issues in Contract Mining and Plant Rental takes effect‚ it said.

In addition‚ the division will focus on the rationalisation of its existing asset base. This will take place through equipment sales‚ improved planning of the maintenance cycle and a reduction and smoothing of capital spend. Opportunities for achieving better leverage from existing assets have been identified.

All other divisions remain positioned for meaningful growth in profitability from secured long-term contracts‚ increased client penetration‚ additions to the group's range of products and value-added services‚ it added.

Global and local economic conditions are expected to remain subdued‚ however‚ the group is better structured for this challenging economic situation than it was in 2008 in several respects.

It has reduced its exposure to the cyclical construction and mining equipment market and resulting working capital drain through the sale of Eqstra Mining Services (Bucyrus) and the termination of the New Holland Construction distribution agreement and it has also diversified its commodity exposure from a previous concentration in platinum and diamonds.

It has also pursued a policy of matching equipment purchases to its contract mining requirements and the Fleet Management and Logistics and Industrial Equipment divisions have retained their resilience and defensive nature through depressed economic cycles.

“The depressed global macro environment and the European debt crisis will result in lower GDP growth in Southern Africa. Business confidence is expected to remain weak with private sector delays in capital expenditure.

Government infrastructure spending‚ if executed‚ will support leasing and industrial equipment sales growth‚” it concluded.

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