TIDMBWO
RNS Number : 5302Z
Barloworld Limited
20 May 2019
Media Release:
20 May 2019
Strong operational performance across divisions supports
Barloworld's solid interim results
Strategy implementation well on track
Highlights:
-- "Khula Sizwe" B-BBEE transaction approved by shareholders and
gaining traction
-- Equipment southern Africa generates strong results
-- Automotive division generates good operating performance in a
weak local market
-- Equipment Russia remains resilient
-- Strategy implementation well on track
-- Group return on invested capital of 11.3% (H1'18: 11.0%)
-- Normalised headline earnings per share at 521.4 cents up
14.1% (H1'18: 457.1 cents)*
-- Interim dividend per share of 165 cents up 13.8% (H1'18: 145
cents)
Commenting on the results, Barloworld CEO Dominic Sewela
said:
"I am pleased with the progress that we are making on our stated
strategy. Despite the challenging trading conditions, the Group
delivered strong results driven by the underlying divisional
performance, in particular from Equipment southern Africa and Motor
retail. The Group is currently involved in negotiations and due
diligence to acquire a contiguous Equipment territory.
During the first half of the year the Group launched its B-BBEE
scheme which we believe will enable Barloworld to play a role in
changing the transformation landscape through enabling employees
and the black public to participate in a first-class property
backed B-BBEE scheme, Khula Sizwe"
Performance Highlights
Revenue (R'm) Operating Operating margin ROIC (%)
profit/loss (%)
(R'm)
Six months Six months Six months Six months
ended ended ended ended
---------------------- ---------------------- ---------------------- ----------------------
31 Mar 31 Mar 31 Mar 31 Mar 31 Mar 31 Mar 31 Mar 31 Mar
19 18 19 18 19 18 19 18
Reviewed Reviewed Reviewed Reviewed Reviewed Reviewed Reviewed Reviewed
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
EQUIPMENT* 13 270 12 436 1 120 1 044
-------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Equipment
Southern
Africa 10 033 8 670 806 734 8% 8.5% 12.6% 12.4%
-------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Equipment
Russia 3 237 3 766 314 310 9.7% 8.2% 19.8% 19.4%
-------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
AUTOMOTIVE
& LOGISTICS
-------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Automotive 14 188 15 372 885 883 6.2% 5.7% 11.2% 11.6%
-------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Logistics 2 889 2 989 68 99 4.9% 4.5% 6.4% 3.3%
-------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
GROUP 30 400 30 900 187 195 6.2% 6.3% 11.3% 11.0%
-------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
*Excludes handling
Operational Performance
The performance of Barloworld's divisions has been largely
driven by a combination of the underlying economic and geopolitical
headwinds and good execution of our strategy. Whilst the South
African economy remains constrained by low business and consumer
confidence, the mining and equipment performance in Southern Africa
saw strong performance driven by positive market sentiments due to
favourable commodity fundamentals and a strong preference towards
contract mining. In Russia, the business continues to generate
robust results and the impact of increased tariffs on US
manufactured products was less than initially anticipated.
Equipment
-- Equipment southern Africa delivered a strong performance for
the period, driven by good demand for mining equipment and machine
deliveries for large surface and underground mining to Mozambique,
Zambia and South Africa. Similarly, the new products introduced as
well as more competitive financing given the challenging
environment saw growth in construction equipment sales. Looking
forward, the division has a firm order book and is well positioned
to take advantage of the robust demand from the regions.
-- Equipment Russia continues to benefit from robust mining
activity and stabilising commodity prices, particularly in the gold
sector. Revenue for the period was lower than the comparative
period as large package mining machine deals in 2018 were not
repeated. The imposition of increased duties for US manufactured
products had a lesser effect than previously thought. The decline
in revenue was somewhat offset by a strong increase in after-market
sales, which boosted profits. The outlook for mining activity in
Russia remains positive, with a strong pipeline for major projects
in the region.
Automotive & Logistics
-- The Automotive division generated a good operating
performance in a weak local market with the operating profit
slightly up on the prior period at R885 million and the operating
margin improving from 5.7% to 6.2%. Revenue, however, was down by
7.7% to R14.2 billion (H1'18: R15.4 billion) due mainly to the
change in revenue recognition for Mercedes-Benz passenger vehicle
sales in the prior period.
o The Car Rental business delivered reasonable results. Despite
the car rental industry seeing a 2% decline in rental days over the
period, the business increased its daily rate and managed vehicle
fleet costs. The business is aligning its cost base to the current
trading environment to improve performance and counter the impact
of external factors.
o Avis Fleet delivered a good result. Whilst, revenue was down
4.8% the operating profit was up by 6.8% to R329 million and the
operating margin increased to 20.0% compared to 17.9% in 2018.
Total fleet under management grew by 2.7% on the prior period. The
business is exiting its loss-making operation in Tanzania.
o Motor Trading was impacted by consumer confidence, resulting
in 9.7% lower revenue. Due to cost containment efforts the business
was still able to improve its operating profit, resulting in a 3%
margin compared to 2.7%. New vehicle sales are expected to remain
constrained in the second half of the year. Management will
continue to focus on improving the profitability and returns of
each dealership to ensure resilience in the short to medium
term.
-- The Logistics business continues to make strides on its
turnaround. Revenue for the period was mainly impacted by reduced
revenues in the Supply Chain Management business following a
decision to close the KLL business. Logistics is expecting a
stronger second half performance and the disposal of SmartMatta and
Middle East, remains a priority and is expected to be finalised at
the end of the second half.
Dominic Sewela concludes: "Capital allocation and driving
returns remain at the forefront of management's agenda, and we
continue to strive towards achieving our ROIC hurdle rates. We have
made steady progress on reviewing potential growth areas for the
group with active searches in both the local and targeted
international markets."
The Barloworld "Khula Sizwe" broad-based black economic
empowerment transaction has been lauded as a pioneering scheme that
presents a unique opportunity for black people to participate in a
truly inclusive and broad-based black empowerment scheme. To date,
interest in the scheme has gained traction. The scheme is expected
to be fully implemented by October 2019.
Ends
Issued for and on behalf of Barloworld by Brunswick South
Africa
_________________
About Barloworld
Barloworld is a distributor of leading international brands
providing integrated rental, fleet management, product support and
logistics solutions. The core divisions of the group comprise
Equipment and Power (earthmoving equipment and power systems),
Automotive and Logistics (car rental, motor retail, fleet services,
used vehicles and disposal solutions, logistics management and
supply chain optimisation). We offer flexible, value adding,
innovative business solutions to our customers backed by leading
global brands. The brands we represent on behalf of our principals
include Caterpillar, Avis, Budget, Audi, BMW, Ford, General Motors,
Jaguar Land Rover, Mazda, Mercedes-Benz, Toyota, Volkswagen,
Hyster, Massey Ferguson and others.
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END
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