Hudaco optimistic about a better second half


Hudaco optimistic about a better second half

Published Date: 2020-06-26 | Source: Stephen Gunnion | Author: Stephen Gunnion

Hudaco optimistic about a better second half

The group says just as it was recovering from severe load shedding in December, trading conditions were overwhelmed by Covid-19.

Hudaco says Covid-19 had an overwhelming effect on trading conditions and its financial results for the six months to end-May. So much so that it's easy to lose sight of the significant impact of December's load shedding - which at one point reached stage 6.

The electricity disruptions caused a lot of its customers to close for the Christmas break a week earlier than normal, with many opening a week later than usual in January. Hudaco had a good month in February as trading got back on track, while March was encouraging until the announcement of the full lockdown.

The group specialises in the importation and distribution of high-quality branded automotive, industrial and electrical consumable products. Brands include Bearings International, Bauer, Partquip, Deltic Energy Solutions and Elvey Security Technologies, amongst others.

While a few of its consumer-related businesses were classified as essential services, and many of its engineering consumables businesses were also able to operate to a limited extent, the majority of its customers weren't classified as essential services. That meant that it operated at a significantly lower level than usual during the five weeks of level 5 lockdown. After a disastrous April, it said May proved better than expected, although still down from last year.

Due to the likelihood of increased business failures, the group increased its expected credit loss ratio on its receivables to R68 million at the end of May from R53 million in November. It also wrote down the value of its inventory and impaired goodwill by R345 million.

Turnover fell 17% to R2.64 billion and operating profit declined by 74% to R79 million for the six months. Due to the impairments, it reported a loss per share of 738c, down from earnings of 533c, while headline earnings per share fell 63% to 195c. It hasn't declared an interim dividend as it preserves cash due to the impact of the lockdown on its operations.

Despite the turmoil, it said its financial position remained sound and it was slightly cash positive over the critical two-month period of April and May. Bank borrowings of R1.17 billion were up R158 million from November.

Its shares closed 0.6% down at R70.78. The results were released at the close of trade.

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