Buoyant Barloworld rewards shareholders with special dividend

Barloworld shares soared as much as 10% on Monday, the most since late September, after the diversified industrial group rewarded shareholders with a payout equivalent to a 10th of its market value. This was after earnings recovered strongly from the Covid-19-induced setback.

CEO Dominic Sewela has overseen efforts that successfully turned around the company’s car rental business, which was previously battered by the fall off in tourism numbers as lockdown restrictions curbed travel by corporates and individuals. 

With declining air travel, management repositioned its car rental business towards off-airport activities that attracted demand and longer length rentals. The size of its Avis fleet was also reduced. As a result, the car rental and leasing segment realised an operating profit of R850m in the year to end-September compared with R302m a year before.

In the preceding financial year, Barloworld cut costs, which included retrenchments.

Barloworld’s equipment businesses in Southern Africa and Eurasia also contributed to the recovery in financial results, as did its starch business. The equipment businesses benefited from a surge in demand for commodities such as coal, which is used in the generation of electricity. The demand came from China in particular, which was gripped by coal shortages during the review period.

“Barloworld’s equipment businesses in SA and Eurasia, which made up nearly 70% of group operating profit, have strong order books heading into the new financial year,” said Shaun Murison, senior market analyst at IG SA.

“Equipment SA has already secured R3.22bn in sales, while Equipment Eurasia has secured $55m. The group’s Ingrain and car rental-leasing business looks set to benefit from increasing levels of economic activity.”

Barloworld declared a special dividend of R11.50 per share, topping up an ordinary dividend of R3 per share in the year to end-September, after none was declared a year ago as the company erred on the side of caution while the pandemic played out. The two dividends total R2.9bn.

The share pared gains by the JSE’s close, ending the day 7.47% higher at R144.97, giving the company a market valuation of R28.9bn.

Group headline earnings per share were R11.95 vs a headline loss of R2.86 a year ago.

“Our results have benefited from the acquisitive growth provided by Equipment Mongolia and Ingrain, the exceptional performance from the southern African and Russian equipment businesses, and the impressive turnaround of the car rental business,” Sewela said.

A year ago it acquired the starch business from Tongaat Hulett, which it rebranded Ingrain. Earlier in 2020 it also acquired the Mongolian business, which sells and distributes mining and construction equipment, among other services.

Update: November 22 2021
The article has been updated with new information and the closing share price.

mahlangua@businesslive.co.za