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Barloworld final results September 06

Published on 2006-11-21. Author : SpecialChem

Revenues increased by 13% to R42 693 million, with operating profit rising 21% to R4 133 million. Good growth was delivered in the southern African equipment division due to increasing infrastructure and mining expenditure while the cement business benefited from strong demand in the domestic building and construction industry. Operating results were also boosted by a reduction in UK pension liabilities discussed below. The weakening of the rand against the US dollar in the second half of the year contributed to positive mark-to-market adjustments in the fair value of derivative financial instruments. In addition hedges concluded to protect the company against negative currency movements during the term of the offer to acquire Wattyl in Australia were closed out at a profit of R54 million when Barloworld allowed the offer to lapse. Finance costs increased by R164 million to R605 million. This was mainly due to the acquisitions of Avis Denmark in November 2005 and the remaining 50% of Avis Fleet Services in April 2006. Interest cover remained strong at 5.8 times (6.0 times). Income from investments increased to R273 million (R198 million), due mainly to the refinancing by central treasury of the funding of Avis Fleet Services when the company became a wholly owned subsidiary. Taxation rose by 31% to R1 370 million in line with the higher profits. The effective taxation rate increased to 30.0% (29.0%). Income from associates and joint ventures increased by R19 million to R72 million. The improvement was largely attributable to higher profits contributed by the Siberian joint venture in the equipment division and the motor division empowerment joint ventures. Exceptional profits of R120 million (R7 million) included gains on disposal of properties, investments and subsidiaries of R143 million less impairments of goodwill and capital assets of R23 million. Following the decision taken earlier this year to dispose of the Steel Tube division, this business has been reflected as a discontinued operation. The net loss of R112 million comprises an impairment of R156 million reduced by the after tax profits earned during the year of R44 million. Net profit from continuing operations increased by 34% to R2 858 million (R2 139 million), while headline earnings per share increased by 32% from 888c to 1 171c.

Outlook

In southern Africa, the equipment division should benefit from increased infrastructure and mining investment. While cement demand growth is expected to continue, albeit at a slower rate, revenue growth in the cement division will be limited by capacity constraints. In the motor division the improved rental rates will positively impact the car rental result, and the higher interest rate environment and new fleet business will boost the fleet services contribution. Vehicle retail sales growth is expected to slow due to the increased interest rates in South Africa. The coatings division will benefit from the integration of the new acquisitions. The group's Iberian Caterpillar business continues to deliver consistently good results. The board expect continued growth in the US materials handling operations and a further improvement in the UK. By contrast the effect of the new emission standards in the US could impact Truck Center new unit sales during the early part of 2007. The positive trend in the scientific business is expected to continue. The overall outlook for 2007 is favourable and the group look forward to another year of good progress as the southern African capital investment cycle gains momentum with continued, albeit slower, growth in residential housing and vehicle retail sales. Barloworld have set a new medium-term goal of doubling the value of the company before the world cup of soccer comes to South Africa in 2010, and will continue to focus on enhancing returns and growing profits to achieve this objective.

Source: Barloworld


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