Barloworld shareholders in for a treat

Barloworld shareholders in for a treat
CAPE TOWN - Barloworld yesterday surprised shareholders with a R2.28 special dividend on top of the R4.62 a share the group dished up for the year to end September.

Chief executive Dominic Sewela said that the dividend was issued to allocate capital. Sewela said Barloworld would have preferred share buy-backs, but the group was unable to do this as it was trading under a cautionary announcement.

However, gearing would increase following the acquisition in Mongolia.

Normalised headline earnings a share, including Avis Fleet, which has been put up for sale, increased 1.4percent to 1167c in a tough environment and many once-off costs during the period. The increase was well below the 18 and the 16percent in 2018 and 2017 respectively.

Heavy equipment operations Equipment Southern Africa (sNA), Equipment Russia and the Bartrac JV performed well. The automotive division reported a strong performance. The logistics division's revenue and operating profit were down.

Strong free cash generation of R3.1billion included R2.5bn from the Iberian operation sale. Return on equity fell to 10.1percent from 11.4percent, but the group aimed to improve this by 300 to 400 basis points by 2022.

Sewela said that with a debt of only about R1bn and equity of some R20bn, an inefficient allocation of capital had come about, partly due the cash realised from the sale of the Iberian business sitting in the UK earning very low interest, but this cash would be repatriated. Due diligence for the acquisition of Wagner Asia in Mongolia was complete, and negotiations around the legal and commercial matters were being finalised. The strong balance sheet would also position Barloworld for further acquisitions, and put it in a strong position once trading conditions improve, he said,

Avis Fleet was put up for sale on September 30, 2019. The Khula Sizwe B-BBEE transaction was oversubscribed. A once-off R73m in charges arose from the transaction, and further International Financial Reporting Standards-related charges would arise over two years as the company assisted employees and management to acquire shares in Khula Sizwe.

Revenue of R56.8bn was down 5.4percent from the prior year, but it had followed a non-repeatable large mining equipment sale at Equipment Russia in 2018, said Sewela. Operating profit fell 13percent to R3.3bn.

“We are positive that despite the challenging macroeconomic environment as well as volatile geopolitical dynamics, Barloworld will continue to generate pleasing results,” said Sewela.

He said they were already seeing the benefits of the Lean-based Barloworld Business System being realised in sNA, through increased cash flows and reductions in invested capital. This was expected to continue as the system was rolled out to other divisions,” he said.

Logistics was expecting a much improved performance going forward following the closure of KLL and the disposal of the Middle East and SmartMatta businesses.

Barloworld shares declined 0.31percent on the JSE yesterday to close at R123.62.