Industrial brand management company Barloworld on Wednesday reported headline earnings per share of 372 cents for the six months ended March 31, from 374 cents for the same period a year ago.
The headline earnings per share were affected by a number of non-operational factors. These were the increased secondary tax on companies charge on the higher PPC special dividend, the non-recurrence of the 2004 pension provision write-back and a higher weighted average number of shares in issue.
An interim dividend of 130 cents was declared — an increase of 13%.
Operating profits before goodwill amortisation grew by 25% to R1,545-billion from R1,235-billion before.
Barloworld CEO Tony Phillips said: “Once again, the ongoing benefits derived from our value based management approach have created value. The strength of our performance is illustrated in 7% top-line [revenue] growth, the rise in our operating margin to 8,2% from 7%, and cash flows from operations of R1,466-million for the half.”
He added: “We expect the excellent trading conditions in Southern Africa and high levels of activity in Spain to continue for the rest of the year.
“Our outlook for the full year remains as chairman Warren Clewlow stated in our annual report in December last year, where he predicted another year of solid progress and improved results, backed by strong cash flows.”
Philips said the Southern African businesses accounted for 83% of total operating profit.
The strong growth from this region was driven by healthy consumer spending, lower interest rates and the continuing recovery in infrastructural growth. The equipment business performed well on the back of a strong construction sector and a solid regional mining sector.
The strength of cement demand in South Africa resulted in a higher profit contribution from PPC, and the motor business benefited from continued high new vehicle sales and the inclusion of 100% of Avis. Coatings also improved its margins.
The Iberian equipment business continued its high activity levels, largely maintaining revenue and profits in local currency terms. Industrial distribution produced a good result in the United States handling operations, and the changed senior management at Truck Centre is starting to affect the business positively.
Handling United Kingdom was affected by lower sales and restructuring costs. The scientific division was negatively affected by provisions for site rationalisations, which will benefit results in the future.
Market conditions in Australia remained difficult for the coatings business, but the motor operations posted an improved performance.
“The balance sheet remains strong with total assets of R28,1-billion marginally up on the previous period. Interest-bearing debt of R8,487-billion, representing a debt-equity ratio of 70%, was up from 65%, but remains within targets. Interest cover has improved from 4,5 times for the full 2004 financial year to 5,5 times for the six months,” he added.
Phillips reiterated Barloworld’s commitment to a systematic, structured approach to black economic empowerment (BEE), which saw the company publish a formal BEE policy in its 2004 annual report. He reported that the company is on track to achieve the targeted minimum 65% in terms of the Department of Trade and Industry’s balanced scorecard by 2007.
Contemplating the outlook for the second half, Phillips said that once again the company is both sailing in favourable winds and making good use of them. Strong performances are expected from the Southern African and Iberian businesses.
Good order books for the Handling businesses in the UK and the US should see both these divisions show improved results, while the US Freightliner dealership business is responding well following management changes and a strong focus on cost reduction.
Phillips reminded stakeholders that currency volatility remains a key uncertainty and reinforced his long-standing position that high real interest rates are having a negative effect on the South African economy.
He added that, while he welcomed the recent decision by the South African Reserve Bank to lower interest rates, “we trust that a continued low inflationary environment will spur the governor to continue in this vein as lower real interest rates are a prerequisite for sustainable economic growth”. — I-Net Bridge