TIDMBWO
RNS Number : 9095A
Barloworld Limited
04 June 2021
Barloworld Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1918/000095/06)
(Income tax registration number: 9000/051/71/5)
(JSE share code: BAW) (JSE ISIN: ZAE000026639)
(Share code: BAWP) (JSE ISIN: ZAE000026647)
(Namibian Stock Exchange share code: BWL)
(Bond issuer code: BIBAW)
(Barloworld or the Company or the Group)
Reviewed interim results for the six months ended 31 March
2021
GROUP SALIENT FEATURES
-- Group HEPS of 367 cents (1H20: 70 cents)
-- Strong balance sheet with a robust cash balance of R8.3bn maintained
-- Group revenue of R28.6bn up 6.5% (1H20 Group revenue:
R26.9bn) with revenue from continuing operations up 13% to R20.2
billion
-- Improvement of Group EBITDA to gross interest paid to 6.9 times (FY2020: 5.8 times)
-- Acquisition of Equipment Mongolia and Ingrain SA contributed
23.0% of total operating profit
-- Enhanced Group ROIC of 3.8% (FY2020: 1.0%)
-- Operating margin of 9.6% (1H20: 7.5%)
-- A special dividend of 200 cents per share declared, returning capital to shareholders
-- R1.2 billion cost savings as a result of austerity measures
-- Interim dividend reinstated for the six months ended 31 March 2021: 137 cents (1H20: Nil)
-- Basic earnings per share (BEPS) 371.4 cents (1H20: 729.7 cents loss per share)
-- Group normalised HEPS from continuing operations#* of 448 cents (1H20: 180 cents)
-- Group net debt (including Ingrain) increased to R4.9 bn
-- Operating profit increased 44.0% to R1.9 billion
# Excluding IFRS 16 impact (1H21: R46 million: 1H20: R50
million)
* Excluding B-BBEE charges (1H21: R40 million: 1H20: R93
million)
The Group's performance during the period has been bolstered by
executing on our strategy, the swift implementation of austerity
measures aimed at cash preservation, maintaining a focused balance
sheet management strategy and instilling focused working capital
management, resulting in cash generation exceeding our
expectations.
Group chief executive officer
Dominic Sewela
Group review
The decisive actions taken in 2020 are beginning to yield
positive results, as reflected in our strong set of results for the
first six months of the financial year ended 31 March 2021. The
revenue from continuing operations for the period was R20.2 billion
(1H20: R17.9 billion), up 13% from the prior period, which was
largely unaffected by COVID-19. Our recent acquisitions delivered
better than expected performance with Equipment Mongolia and
Ingrain contributing R3.4 billion in revenue (17% of total
revenue).
The operating profit from continuing operations increased by
44.0% to R1.9 billion, with Equipment Mongolia and Ingrain
contributing. R450 million (23.0% of total operating profit). The
Group achieved a R1.2 billion reduction in costs compared to the
prior period, owing to the swift implementation of austerity
measures aimed at cash preservation. The effect of the acquisitions
and cost containment resulted in a 210 basis points increase in the
operating margin to 9.6%.
We maintained a strong balance sheet and instilled intensive
working capital management, with free cash generation of R4 billion
(excluding the Ingrain acquisition of R5.3 billion) exceeding our
expectations. Our Group net borrowings of R4.9 billion have
increased by R2.3 billion as at 31 March 2021, from R2.6 billion at
30 September 2020. The increase was solely driven by the R5.3
billion Ingrain acquisition, which was partially paid down by cash
from existing operations.
The Group headline earnings per share (HEPS) was 367 cents, up
on the prior period HEPS of 70 cents. The Group normalised HEPS
from continuing operations, excluding the impact of IFRS16 and
B-BBEE charges, at 448 cents (1H20: 180 cents) was higher than the
prior period owing to exceptional performance in the Equipment
businesses and the contribution from our recent acquisitions. Basic
earnings per share (BEPS) of 371.4 cents (1H20: -729.7 cents loss
per share) up 1 101.1 cents per share.
An improved return on invested capital (ROIC) of 3.8% (1H20:
7.8%), compared to the 1.0% achieved in the 2020 financial year,
was generated from the improved results recorded. Attention should
be drawn to the fact that the calculation of ROIC for six months
necessitates the inclusion of our annualised performance, therefore
the last half of the 2020 financial year is included, which will be
eliminated in September 2021.
Operating segment results for the six months ended 31 March 2021
for continuing operations
Revenue Operating profit/(loss)
Six months ended Six months ended
Reviewed Unreviewed Reviewed Unreviewed
Rm 31 Mar 2021 31 Mar 2020 31 Mar 2021 31 Mar 2020
---------------------------------- ------------- ------------ --------------- ---------------
Industrial equipment and services 13 846 12 745 1 452 1 092
---------------------------------- ------------- ------------ --------------- ---------------
Consumer industries 1 956 305
---------------------------------- ------------- ------------ --------------- ---------------
Car Rental and Leasing 4 014 4 829 378 464
---------------------------------- ------------- ------------ --------------- ---------------
Other segments* 393 326 (200) (213)
---------------------------------- ------------- ------------ --------------- ---------------
Total continuing operations 20 326 17 900 1 935 1 343
---------------------------------- ------------- ------------ --------------- ---------------
* Other segments includes Digital Disposal Solutions (including
SMD), Corporate, Khula Sizwe and Handling.
Discontinued operations
During the year under review the board approved the sale of the
Group's wholly owned Motor Retail business to NMI Durban South
Motors Proprietary Limited (NMI-DSM), in which Barloworld holds a
50% interest, effective 1 June 2021. All substantive conditions
have now been met, including the Competition Tribunal approval.
The board also approved a formal disposal process to exit the
Logistics business after receiving several expressions of interest.
The process is expected to close by the end of the current calendar
year.
Cash flow
Net cash generated from operating activities before dividends to
31 March 2021 of R3.7 billion (inflow) was R5.1 billion higher than
the prior year at R1.3 billion (outflow). Operating cash flows were
better than last year and the working capital levels significantly
improved due to the reduction in inventory balances and the
increase in payables. Cash utilised in the acquisition of the
Leasing and Rental Fleet was R1.3 billion (1H20: R1.1 billion), as
we ramped up the fleet to meet increasing demand.
Net cash utilised in investing activities of R5 billion includes
the Ingrain acquisition of R5.3 billion, partly offset by the
maturity of the investment in USD-linked Angolan bonds of R388
million (USD25.5 million).
Free cash flow generated of R4.0 billion before the acquisition
of Ingrain for the period was an exceptional effort in tough
trading conditions when compared to the prior year's outflow of
R1.4 billion.
Financial position, gearing and liquidity
Group total assets amounting to R52.4 billion (FY2020: R47.9
billion) were impacted by the acquisition of Ingrain carrying a
total asset base of R6 billion, together with increased cash
levels, but partially offset by a reduction in working capital in
the rest of the businesses. A robust cash balance of R8.3 billion
was maintained with the net debt position, including the Ingrain
acquisition increasing to R4.9 billion. Assets held for sale of
R5.8 billion (1H20: R218 million) include Motor Retail and
Logistics.
The Group maintains committed facilities for both the local and
offshore operations, which remained substantial at R22.7 billion
and non-committed facilities amounted to R2.2 billion.
Our South African short-term debt includes committed overnight
short-term facilities, revolving credit fund facilities and a R3
billion bridging finance on the Ingrain acquisition, which expires
in May 2021. Subsequently, we concluded syndication at favourable
rates. We expect to maintain our participation in this market to
the extent that we are able to achieve funding rates that are
competitive with existing short-term funding lines and
requirements, as well as available liquidity within this
market.
Liquidity volumes have eased up within the debt capital markets
post the outbreak of the COVID-19 pandemic when compared to the
2020 financial year. With the easing of lockdown restrictions in
recent months, a number of investors found themselves with
available cash to invest, which has allowed spreads to narrow and
slightly favourable rates on bond issuances.
The Group's financial position remains well within our
covenants.
March
Debt covenants 2021
---------------------------------- ---------
EBITDA: Interest cover > 3.0 times 6.9 times
---------------------------------- ---------
Net Debt: EBITDA < 3.0 times 0.9 times
---------------------------------- ---------
Resumption of dividend
Our focus on the integration and value extraction from the
acquisitions, which will precede programmatic "bolt-on" mergers and
acquisitions focused on Industrial Equipment and Services and
Consumer industries, and the release of capital likely from the
disposals under way, has provided the board with the comfort
necessary to take the decision at its May 2021 board meeting to
resume the payment of dividends. In light of this decision, the
Group will pay a total of 337 cents per share in dividends to
shareholders, made up of an ordinary dividend of 137 cents per
share and a special dividend of 200 cents per share.
Dividend declaration
Notice is hereby given that interim dividend number 183 and a
special dividend have been declared (collectively "the dividends")
in respect of the six months ended 31 March 2021 subject to the
applicable dividends tax levied in terms of the Income Tax Act, 58
of 1962 (as amended) as follows:
Dividend Gross amount Withholding tax Net amount
----------- ------------- --------------- ------------
Ordinary 137 cents 20% 109.60 cents
----------- ------------- --------------- ------------
Special 200 cents 20% 160.00 cents
----------- ------------- --------------- ------------
Payment of the special dividend is subject to exchange control
approval by the South African Reserve Bank. A further announcement
will be released once such approval has been obtained.
In accordance with paragraphs 11.17(a)(i) to (ix) and 11.17(c)
of the JSE Listings Requirements, the following additional
information is disclosed:
-- The dividends have been declared out of income reserves
-- Local dividends tax rate is 20% (twenty per centum)
-- Barloworld has 201 025 646 ordinary shares in issue.
In compliance with the requirements of Strate and the JSE
Limited, the following dates are applicable to the dividends:
DIVIDENDS DECLARED
Monday, 24 May 2021
FINALISATION DATE Monday, 14 June 2021
Last day to trade cum dividends
Tuesday, 22 June 2021
ORDINARY SHARES TRADE EX-DIVIDENDS
Wednesday, 23 June 2021
RECORD DATE
Friday, 25 June 2021
PAYMENT DATE
Monday, 28 June 2021
Outlook
Our strategy, based on a clear ambition and outcome to double
the Group's intrinsic value every four years, means that we need to
be forward looking in how we approach our business. With this in
mind, we are actively pivoting our portfolio towards defensive,
relatively asset-light and cash-generative industrial sectors,
based on a business-to-business operating model.
To achieve this, we have positioned the Group as an industrial
processing, distribution and services company with two primary
areas of focus: Industrial Equipment and Services and Consumer
Industries (food and ingredient solutions). However, as we
strengthen our position in these areas, our strategic focus will
remain on fixing and optimising our existing business portfolio to
extract maximum potential and further acquisitive growth once we
have completed our remaining portfolio changes.
Our outlook for 2021 remains positive as key markets recover,
commodity prices improve, our customers increase capital
expenditure, and government stimulus spending supports
infrastructure projects.
Mining activity is expected to steadily improve on the back of
buoyant commodity prices albeit with lower production, while
construction activity is expected to remain at the same levels in
the short term. We expect COVID-19-related restrictions to continue
impacting on our operations in the near term, with sporadic
lockdowns expected to be implemented to support efforts to curb the
spread of the virus. Sales volumes in the consumer segment are
expected to benefit from a reduction in economic restrictions that
impacted the prior period. The good outlook for maize in South
Africa for the current season is expected to continue to support
margins going forward as local maize prices remain competitive.
The used car market is expected to be strong on the back of the
shortage of new cars and anticipated higher prices. We also foresee
that providing quality services, and not just price, will continue
to be a driving force in the Car Rental and Leasing business. While
we await the resumption of new normal travel patterns, we will
maintain our reduced fixed cost base to ensure an agile
organisation in Car Rental and Avis Fleet. Our commitment to our
customers will continue while we grow our market share and sustain
a lower cost to serve.
Over the short to medium term, we will focus on aspects within
our control by executing on the completion of our corporate actions
through the disposal of Logistics and the integration of our recent
acquisitions.
We will continue our vigilant approach towards ensuring the
safety of all our employees by complying with legislation, as well
as implementing best practices in a safe working environment.
Uncertainty about the macroeconomic environment remains, and it
is therefore still too early to provide any guidance. However, we
will continue to provide regular updates to assist shareholders in
assessing the Group's performance and financial position.
24 May 2021
Short form announcement
This short form announcement is the responsibility of the board
of directors of Barloworld and is a summarised version of the full
announcement in respect of the interim financial results for the
period ended 31 March 2021 of Barloworld and its subsidiaries
(collectively the Group), and as such it does not contain full or
complete details pertaining to the Group's results. Any investment
decisions should be made based on the full announcement, which has
been reviewed by Barloworld's auditors.
The full announcement can be found on the Group's website:
https://www.barloworld.com/investors/interim-results-presentations/
and on the JSE's website at:
https://senspdf.jse.co.za/documents/2021/jse/isse/BAWE/ie2021.pdf
The full announcement is available for inspection, at no charge,
at the registered office of Barloworld (61 Katherine Street,
Sandton, Johannesburg, 2146) from 09:00 to 16:00 on business days.
Copies of the full announcement can be requested from the
registered office by contacting the Company secretary on +27 11 445
1000.
* Certain information presented in this announcement is regarded
as pro forma financial information. This information has been
prepared for illustrative purposes only, is the responsibility of
the board of directors of Barloworld and has not been reviewed or
reported on by the company's external auditors.
Corporate information
Directors
Non-executive
NP Dongwana (Chairman), FNO Edozien*, HH Hickey, MD
Lynch-Bell**, NP Mnxasana, NV Mokhesi, H Molotsi, P Schmid
Executive
DM Sewela (Group chief executive), N Lila (Group finance
director)
* Nigeria ** UK
Group company secretary
Andiswa Ndoni
Enquiries:
Group investor relations
Nwabisa Piki
Tel: +27 11 445 1819
E-mail: nwabisap@barloworld.com
Sponsor
Nedbank Corporate and Investment Banking, a division of Nedbank
Limited
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END
IR EAFKLEAFFEFA
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