 |
 |
| Currently viewing: GROUP FINANCIAL REVIEW | Next: OPERATIONAL REVIEWS |
|
GROUP FINANCIAL REVIEW
Revenue from continuing operations increased by 8% to R21,7 billion. Revenue in 2007 included R1,7 billion attributable to Freightliner and certain other Handling businesses which were sold during the year.
Operating profit rose 30% driven by strong growth in Equipment Southern Africa.
Net finance costs increased by R78 million to R316 million, mainly due to higher interest rates.
Taxation, before STC, increased by 51% to R289 million and the effective tax rate, excluding STC, prior year taxation and taxation on exceptional items was 29% (1H’07: 35%).
The decrease was largely the result of the geographical split of income and the 1% reduction in the South African corporate tax rate this year.
STC of R44 million represents the charge arising from the final 2007 ordinary dividend paid in January 2008. The charge in 2007 included R125 million in respect of the special dividend of R5 per share paid in April 2007.
Headline earnings per share from continuing operations increased by 105% to 345 cents (1H'07: 169 cents). The growth in earnings is largely due to the improved operating performance and the absence of STC on the prior year special dividend. Operating profit in 2007 included a once-off charge of R60 million associated with the restructuring of the corporate offices.
In terms of accounting standards the results of the Cement, Coatings and Scientific divisions are included in discontinued operations until the dates of unbundling or disposal. The profit from discontinued operations of R384 million in the six months to March 2008 includes R52 million representing the earnings of Coatings and the Laboratory business up to their unbundling or disposal and R332 million relating to the profit on the disposal of the Laboratory business.
Operating cash flows before changes in working capital amounted to R2 585 million. These are not comparable to the prior period which includes cash flows from Cement, Coatings and Scientific divisions before their unbundling or disposal.
Working capital increased by R1 640 million due to higher levels of trading activity particularly in the Equipment division. Net cash applied to investing activities of R1 300 million includes additions to property, plant and equipment of R570 million, a further net investment in rental assets and car hire vehicles of R1 694 million and proceeds of R1 077 million from the disposal of the Laboratory business. A payment of R759 million was made to fund the actuarial deficit following the merger of our two UK pension funds.
Total assets employed in the group increased to R35 663 million (September 2007: R30 655 million) mainly due to the weaker rand (R2 431 million) and increased working capital.
Total interest-bearing borrowings of R11 494 million (September 2007: R9 066 million) represent a group debt to equity ratio of 84% (September 2007: 81%). The weaker rand has resulted in an increase in net interest-bearing borrowings at 31 March 2008 of R222 million. Debt of R308 million is included as a result of consolidating NMI/DSM.
Our group segmental gearing ratios are all within their target ranges as set out below:
| Total debt to equity (%) | Trading | Leasing | Car rental | Total group |
| Target range | 30 – 50 | 600 – 800 | 200 – 300 | |
| Ratio at 31 March 2008 | 46 | 642 | 208 | 84 |
| Ratio at 30 September 2007 | 38 | 646 | 216 | 81 |
The ratio of short to long term debt has risen to 56:44 (September 2007: 52:48), however, the proposed BEE transaction includes the inflow of long term funds into the group and these proceeds will be used to reduce short term borrowings.
DG Wilson
Finance Director