Barloworld unveils a R3.5bn BEE deal
The distribution company’s board has approved a deal that will lift the Barloworld’s black economic empowerment ownership to 48%
Listed distribution group Barloworld has sold a 14% stake in its local property portfolio to a newly established majority black-owned Propco in a R3.5bn deal that will enhance the group’s procurement opportunities, it said on Monday.
When finalised, the deal — which the company’s board has approved — will enhance Barloworld’s empowerment credential as it will lift the group’s broad-based black economic empowerment (B-BBEE) ownership to 48%.
“All Barloworld South African business units require an improvement of their black ownership to remain relevant and competitive,” the SA distributor of Caterpillar’s construction machinery said.
Propco comprises of a management trust, an employee trust and the black public individual shareholders.
Barloworld CEO Dominic Sewela said elements of the transaction included the participation of 14,000 employees “black and white” and an offer to the black public.
As part of the deal, Barloworld would issue 6.6-million Barloworld ordinary shares of R0.05 each, which will constitute 3% of the group’s entire issued share capital, to the Barloworld Empowerment Foundation.
Barloworld, which reported an 18% increase in revenue for the year ended September 30, said the sale of the property assets, which are worth about R2.8bn, would be funded through debt (R2.2bn) and equity (R544m).
Speaking after the release of the financial results, Sewela said the group delivered strong results in a difficult trading environment. The low consumer confidence hit Barloworld’s automotive business.
“The automotive business is exposed to the consumer. When the consumer confidence is low, consumers are unlikely to buy new cars. So we feel the heat especially in the luxury vehicle segment. On the other hand, the logistics business feels the pressure from the subdued economy,” he said.
Barloworld’s core divisions are equipment and automotive and logistics.
Barloworld revenue increased by 2% to R63.4bn, while operating profit was up 8% to R4.4bn. The company increased headline earnings per share by 18% to 1,151c. The Equipment Southern Africa business increased revenue by 8.1% to R19.8bn, largely due to higher equipment sales and rental revenues.
Barloworld said the government’s plans to establish an infrastructure fund as part of the economic stimulus and recovery plan were likely to stimulate local demand for construction equipment.
As at September 30, Equipment Southern Africa’s firm order book was R2.4bn, with 42% of the order book relating to construction orders.
Equipment Russia’s revenue for the year was 57% up to $606m, while operating profit increased by 41% to $61.7m.
“The operating profit outlook in Russia remains positive, helped by growth with product support and services, however growth is likely to show a decline off the high base,” Ron Klipin of Kratos Wealth said in a note.
Automotive business revenue was down 5.6% to R29.8bn, while car rental business revenue increased by R82m (1.3%) to R6.5bn. Revenue for the Avis Fleet was down 6.8% due to lower leasing revenues.
In October, the City of Johannesburg announced its decision not to renew Avis Fleet contract for non-specialised vehicles.
“I cannot say we were not disappointed with the decision. There was no process to make sure that we could bid for the tender openly and fairly,” Sewela said. He declined to disclose the value of the City of Johannesburg tender.
On Monday, Barloworld shares were down 0.81% to R114.96.