Press releases

Barloworld's delivers a robust set of results despite tough trading conditions

18 November 2019

Key highlights:

Pleasing performance from Equipment southern Africa, Equipment Russia and our Bartrac joint venture in challenging trading conditions across the mining and construction industries

Strong performance from Automotive amidst a tough macroeconomic environment

Logistics impacted by non-core businesses held for sale and KLL closure costs

Strong free cash generation R3.1 billion (2018: R3.6 billion –included R2.5 billion from the Iberian operation sale; 2017: 3.4 billion)

Group return on invested capital of 11.9% (2018: 12.3%, 2017: 11.2%)

Normalised headline earnings per share from continuing operations including Avis Fleet at 1 167 cents up 1.4% (2018: up 18%, 2017: up 16%)

Total dividend per share of 462 cents together with a special dividend of 228 cents per share (subject to Exchange Control approval)

Avis Fleet held for sale at 30 September 2019

Khula Sizwe BBBEE transaction oversubscribed and funding target met

JOHANNESBURG, 18 NOVEMBER 2019: Barloworld Group delivered resilient results in a sluggish economic climate.

Equipment southern Africa and Equipment Russia delivered solid results, while the automotive division registered a steady performance year-on-year despite persistent challenges across the industry.

Despite disappointing results, the logistics division, led by a strong management team, remains on course to optimise its restructuring process.

Due diligence for the acquisition of Wagner Asia in Mongolia is complete with final negotiation of legal and commercial matters being finalised.

“Normalised headline earnings per share were up 1.4% from the previous year, driven by pleasing performance from Equipment southern Africa and Equipment Russia”, Group CE Dominic Sewela says.

“The group generated R3.1 billion in free cash flows against R3.6 billion in the prior year. This is a notable improvement in the cash conversion of our operations particularly when considering that prior year investing cash flows included R2.5 billion from the sale of our Iberian operations”, said Sewela.
The group realised a return on invested capital of 11.9% (2018: 12.3%, 2017: 11.2%).

“Equipment southern Africa increased full year revenue by 3.3% to R20.4 billion driven mainly by the improved contribution of aftermarket sales. Equipment Russia demonstrated buoyancy with revenue of $433 million for the period. The reduction in revenue of 28.6% in USD terms when compared with 2018 was driven primarily by the inclusion of large package mining machine deals in the 2018 results not repeated in the current year. The imposition of increased duties for US-manufactured products in August 2018 impacted demand but had a lesser effect than originally estimated. A strong increase in aftermarket sales offset some of the reduction in new machine revenues and boosted profit”.

The Automotive division, he noted, improved its operating profit by 2.3% and yielded an operating margin of 6.0% against 5.7% in the prior year. The revenue decline of 4.8% was mainly a result of the change in revenue recognition from the principal to agency model in Mercedes-Benz (passenger) and the impact of the deconsolidation of NMI Durban South Motors (Pty) Ltd (NMI-DSM) for the month of September.

On a comparable basis, Sewela emphasised, “revenue was down 1.0% and operating profit improved by 1.3%. The division recorded a 13.2% return on invested capital (ROIC), up from 12.4% achieved in 2018, a return that was in line with the Group target of 13.0%”.

“The Logistics business achieved disappointing results on the back of weak exchange rates, civil unrest and unplanned port strikes over the last 3-6 months, lower trading activity and limited growth in represented industry verticals that made trading conditions difficult”.

The determined implementation of the turnaround strategy remains a key focus for the management team says Sewela.

“The implementation of Barloworld Business Systems is expected to contribute to improved efficiencies with positive benefits anticipated in 2020. The integration of Automotive and Logistics has provided the division with the opportunity to review the management structure, consolidate functions into shared services and extract value from combined strategic sourcing. We expect to realise savings in the next financial year.”

Looking forward, in terms of Equipment southern Africa, Sewela said, “It is unlikely that there will be significant improvement in the markets Barloworld serves in the near future. The company’s approach will continue to be one of austerity, until the operating environment improves. Prudent cost containment and invested capital reduction were other key focus areas in the short to medium term”, Sewela noted.

“The South African consumer is still under pressure with the industry outlook negatively impacted by the declining outlook for growth in the economy. It is anticipated that new vehicle sales will remain challenging in FY2020. However, we will continue to focus on improving the profitability and returns of dealerships to ensure resilience in the short to medium term.”

While industry rental days are expected to remain subdued in Car Rental, Sewela indicated that business plans were in place to drive top line revenue growth through yield management.

The Logistics division, Sewela indicated, is expecting stronger performance going forward following the closure of the loss-making KLL business. The divisional turnaround project continues to be a priority for management and is a key factor in ensuring ongoing improved profitability.