Barloworld's strong performance underpinned by strategy execution and better-than-expected trading activity
Conservative management of balance sheet has enabled agility in responding to macro-economic challenges
Key financial highlights:
- Revenue from continuing operations of R45.0 billion, up 14.3%
- Group operating profit from core trading activities improved 18.6% to R4.3 billion
- Group operating profit margin of 9.6% (FY22: 9.3%)
- Group EBITDA margin of 12.2%, in line with prior year
- Group HEPS from continuing operations increased 60 cents to 1 156 cents
- Improved group ROIC at 17.7% above the hurdle rate of 14% (FY22: 16.9%)
- Final ordinary dividend of 300 cents per share (cps) declared
Johannesburg - Commenting on the group's full year results, Barloworld CEO, Dominic Sewela said: "Barloworld has again delivered a pleasing set of results. Our geographic focus on the emerging markets has enabled us to weather the tough macroeconomic backdrop characterised by geopolitical tensions and unstable commodity prices. Overall, we have seen strong trading across our operations as the businesses remained agile to external risks.
He adds: "The performance is supported by our efforts to optimise the balance sheet to ensure continuous value creation for our stakeholders. We have reduced our net debt to R668 million from previous levels of R4.6 billion due to R2.7 billion free cash inflow and the unbundling of the Avis car rental and leasing business. I am confident in our liquidity position and positive that the consistent execution on our strategy will ensure sustainability going forward."
Barloworld's robust performance reflects the Group's steadfast focus on executing on its defined strategy. Overall, the businesses within the Barloworld stable have delivered stellar performance for the period although margins in Ingrain were somewhat impacted by the unforeseen maintenance cost pressures and efficiency challenges.
Equipment southern Africa
Equipment southern Africa delivered record returns despite macroeconomic challenges. The business achieved double-digit topline growth, driven by robust machine sales growth and aftermarket-sales revenue. Favourable mining production and fleet replacements by customers, resulted in revenue growth of 34.9% to R29.5 billion, while operating profit grew by 19.1% to R2.5 billion. EBITDA positively rose by 15.6% to R3.2 billion, representing an EBITDA margin of 11%. Our share of earnings from our Bartrac joint venture grew by 56% to R223 million.
Equipment Eurasia had a strong year, supported by an excellent performance in Mongolia and offset by the performance of Equipment Russia. Whilst revenue was 23.2% lower at R8.2 billion, strong trading margins were delivered (Mongolia's revenue increased by 59.2% offset by 40% reduction in Russia's revenue). The division recorded R1.4 billion in operating profit from core trading activities, an increase of 21.2% from the prior period. ROIC return achieved at a divisional level was 33.2% for the period.
Mining activity in Mongolia remains strong, with improved prime product sales and aftermarket revenue. Despite the impact of the conflict in Ukraine, the business in Russia performed ahead of expectations.
Notwithstanding continued pressure on South African consumers and the subsequent decline in disposable income impacting on local demand, Ingrain remains a solid contributor to the group with a contribution of 15% to total group revenue. Ingrain's revenue increased by 11% to R6.6 billion, supported by growth in exported starch volumes and favourable exchange rates. Operating profit from core trading activities for the period was R591 million, while operating margins decreased from 11.9% in the prior period to 9.1% in the current period due to lower contribution margins and increased overheads following higher plant maintenance costs due to unplanned plant breakdowns. EBITDA for the year declined 12% to R858 million for the period.
Progress on strategy
In the past financial year Barloworld has continued to deliver on its strategy, extracting value to shareholders. The group remains focused on delivering on its strategic levers. Barloworld aims to focus on its growth agenda to improve its core verticals of Industrial Equipment and Services and Consumer Industries to create a sustainable future.
Barloworld will continue to focus on delivering against its strategy and solidifying core asset-light and cash generative businesses in our two key areas of Industrial Equipment and Services and Consumer Industries. With recognition that the external environment remains uncertain, the group will maintain its focus on strict capital allocation and investment guardrails whilst looking towards organic and inorganic growth for a sustainable future.
Mr Sewela added: "The results speak volumes about Barloworld's commitment to staying true to its long-term vision. We are a business focused on creating a sustainable future and continue to prioritise creating and delivering value for all our stakeholders. Despite several headwinds, as a group, we recognise the importance of having a firm grip on what we can control."
"Looking ahead, we anticipate that external factors impacting the industry will linger for the foreseeable future and we have proved the agility of our business to navigate these risks. On the back of softening commodity prices and slowdown in machine sales, Equipment southern Africa will be well positioned through increased aftermarket opportunities in line with the increased installed population. Equipment Eurasia will continue to benefit from increased activity in the region while we continue to service our clients on the ground in our VT business. Ingrain will benefit from our ongoing investment in preventative maintenance to support production; and opportunities to grow volumes in the domestic market from imported product." Sewela concluded.