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BARLOWORLD LIMITED - Preliminary results for the six months ended 31 March 2020
2020/06/30 07:28:00Download PDF Stock report
Preliminary results for the six months ended 31 March 2020
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')
Preliminary results for the six months ended 31 March 2020
SALIENT FEATURES
- Challenging trading conditions prior to COVID-19
- Revenue R25.2bn down 12.2%
- Operating margin 4.4% down from 5.5%
- Austerity measures implemented to manage COVID-19 impact, expected 2020 overhead cost containment
between R700 and R720 million before implementation costs
- Balance sheet a key strength for the Group in these times, with available committed funding
capacity of R8.1bn as at 31 March 2020
- The Group net debt-to-EBITDA* ratio 0.9 times (FY19: 0.2 times)
- Group EBITDA to gross interest cover* ratio of 5.5 times (1H'19: 5.7 times)
- Group return on invested capital* 9.2% (1H'19: 11.3%)
- Basic loss per share of 729.7 cents (1H'19: earnings per share of 438.1 cents)
- Headline earnings per share of 268.4 cents (1H'19: 476.0 cents)
- Group normalised headline earnings per share** of 354.0 cents (1H'19: 521.4 cents)
- Well positioned to withstand expected intensification of challenging trading conditions in the
second half
* Excluding IFRS 16 impact.
** Excluding B-BBEE charges and IFRS 16 impact.
' The first half of the financial year was characterised by a combination of a tough trading cycle
and the initial impact of the COVID-19 pandemic. While we have seen lower performance
compared to the prior period, we have acted quickly to identify areas of exposure and implement
austerity measures to minimise the impact on our business. We believe these actions together
with our resilient balance sheet will serve us well in ensuring the longevity of the business.
Our Fix, Optimise, Grow strategy and managing for value approach is firmly in place across the
Group and we will continue to adapt and transform to align with the expected volatile and
uncertain macroeconomic environment.'
DOMINIC SEWELA
GROUP CHIEF EXECUTIVE
GROUP OVERVIEW
The low business confidence and constrained consumer demand that was experienced in 2019 continued
during the first six months of trading. The onset of the COVID-19 global pandemic in our geographies
started impacting trading in March 2020 triggered by trade restrictions, subsequent lockdowns and
travel restrictions that resulted in negative knock-on effects in tourism, supply chains and
pressure on commodity prices. During this period, the Group produced a result that reflected the
difficult trading environment and the challenges faced by our businesses.
Revenue for the Group to 31 March 2020 was down 12.2% to R25.2 billion (1H'19: R28.7 billion) due to
reduced activity from the majority of the divisions, excluding Equipment Russia which delivered
revenue of USD253 million, up 10.5% on the back of strong machine and resilient aftermarket sales
in the region. Equipment southern Africa had a robust 2019, however revenue for this period of
R8.9 billion was down 11.1% due to lower machine sales, parts and service revenue. The Automotive
revenue of R10.4 billion was impacted by reduced trading in all business units. Adjusting the prior
period for the impact of the deconsolidation of NMI-DSM (R2.0 billion of revenue 1H'19), Automotive's
revenue was down 1.4% driven by a marginal decline in the Motor Trading business and a 4.1% decline
in Car Rental. Logistics generated revenue of R2.1 billion which was 27.8% down largely due to
previously included KLL and Middle East, the non-renewal of low margin contracts, reduced volumes
and the early impact of the COVID-19 pandemic on global freight movements.
During the period the Group adopted IFRS 16: Leases (IFRS 16) for the first time and applied the
modified retrospective approach, therefore comparatives were not restated. The impact of IFRS 16 on
the Group's operating profit was an uplift of R93 million.
Group operating profit was R1.1 billion (1H'19: R1.5 billion), 28.0% down on the prior period with
the operating margin declining from 5.5% to 4.4%. Equipment Russia's operating profit was up 9.2%
to USD24 million, while Equipment southern Africa's operating profit was 10.5% down to R722 million,
largely in line with the decline in revenue. Automotive's operating profit of R279 million was
significantly down due to market pressures on performance and strategic investment costs. Logistics
generated a loss of R30 million impacted by the factors driving the revenue decline and fleet
management costs.
Group normalised headline earnings per share (HEPS*) of 354.0 cents (1H'19: 521.4 cents), excluding
the impact of B-BBEE charges and IFRS 16, was lower than the prior period. Including these charges,
HEPS was down to 268.4 cents (1H'19: 476.0 cents).
A return on invested capital (ROIC) of 9.2% was generated compared to the 11.3% achieved in the
first half of 2019 due to a reduction in operating profit in 2020 whilst Invested capital remained
at similar levels to 2019.
OPERATING SEGMENTS RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2020 FOR CONTINUING OPERATIONS
REVENUE OPERATING PROFIT/(LOSS) INVESTED CAPITAL
Rm 31 MAR 2020 31 MAR 2019 31 MAR 2020 31 MAR 2019 31 MAR 2020 31 MAR 2019
Equipment
and Handling 12 745 13 292 1 092 1 120 16 541 15 529
Automotive and
Logistics 12 472 15 434 249 624 13 186 13 034
Corporate 1 (240) (197) (373) (739)
Khula Sizwe 12 (519)
Total Group 25 217 28 727 1 113 1 546 28 835 27 824
CASH PRESERVATION, COST CONTAINMENT AND COST-SAVING MEASURES
The cost saving and containment initiatives implemented during the period are aimed at preserving
cash in the immediate period while ensuring the medium to long term strength sustainability of the
organisation. The measures include amongst others a Group-wide 12-month remuneration sacrifice plan
and retirement fund payment holiday which was implemented on 1 May 2020, retrenchments, the deferment
of non-essential capex, a moratorium on external appointments, a reduction in operating costs as well
as additional counter-measures to contain invested capital. Once implemented these measures are
expected to contain 2020 overhead costs by approximately R400 million. The retrenchment process,
which includes early retirement, is expected to cost between R300 and R320 million when it is
concluded at the end of the current financial year, resulting in approximately 20% - 25% Group
headcount reduction with Automotive and Logistics, in particular Car Rental mostly affected.
Consultations are ongoing and are progressing as expected. The board and management remain committed
to the implementation of prudent measures aimed at reducing and containing costs to preserve cash in
the immediate period while ensuring the medium to long term strength of the organisation.
FINANCIAL POSITION, GEARING AND LIQUIDITY
The Group's balance sheet at 31 March 2020 remained strong. A robust cash balance of R4.6 billion
was maintained with the net debt position increasing to R5.1 billion in line with operational
cycles. The headroom on committed facilities remained substantial at R8.1 billion and non-committed
facilities amounted to R2.9 billion. These facilities exclude the R5.3 billion of committed funding
for the Tongaat Hulett Starch acquisition. The Group is actively reviewing and monitoring all
facilities on an ongoing basis and remain confident of the good liquidity position. In May 2020
bonds that matured under the Group's Domestic Medium Term Note (DMTN) programme to the value of
R950 million were issued and used to refinance notes that matured in the same month. Engagements
with investors on the DMTN programme continue as well as engagements with the Group's banking
partners to refinance upcoming maturities and we remain confident that we will retain the existing
facility levels.
At the end of 31 March 2020, the Group's gearing levels remained low and our financial position was
well within our covenants.
DEBT COVENANTS MAR 2020
EBITDA: Gross interest cover more than 3.5 times 5.5 times
Net Debt: EBITDA less than 3.0 times 0.9 times
DIVIDEND
At present, Barloworld has comfortably met its solvency and liquidity obligations and given the
current market conditions we take the important precautionary measure not to declare a dividend
payment for the six months ended 31 March 2020. Furthermore it is also unlikely that a dividend will
be declared at year end. The board will however continue to monitor the market conditions and will
make the decision on the declaration of a final dividend at the appropriate time.
LOOKING FORWARD
A strong balance sheet and stable mature business platforms are key strengths that will help the
Group navigate the challenges arising from the ongoing COVID-19 pandemic and the associated
macroeconomic fallout. Business confidence in the regions where we operate has dropped significantly
and the Group expects the average consumer to remain under pressure, while the trading environment
will be impacted by the lower outlook for recovery and growth. The board and management are focused
on cash preservation, lowering operating costs in line with reduced activity levels and ensuring the
business is well positioned for the recovery. The Group will also continue on its strategic path to
improve efficiencies and performance by adapting and transforming to align with the changing trading
environment in line with our stated goals. The assessment of the long-term fundamentals of our
businesses is a focus area in our ongoing portfolio review.
Automotive and Logistics division's performance is expected to be significantly below 2019 in the
short term with difficult trading conditions expected to intensify in the second half of 2020. The
various measures and initiatives proactively put in place by management should minimise the impact,
including the review of the dealership portfolio, rationalisation of the Car Rental branch network
as well as the consolidation of leased properties and activities on owned properties. Focus on
reducing costs and invested capital will continue including the review of underperforming businesses
and value added services.
Trading in the Equipment businesses will be affected by a variety of factors including lower average
commodity prices, the rate of capital investment in mining and construction, the impact of COVID-19
infections in the sectors in which they operate as well as the level of lockdowns and trade
restrictions in their countries of operation. The divisions will continue to focus on managing levers
under their control. In Equipment southern Africa this includes prudent cost containment and invested
capital reduction in the short to medium term and until the operating environment improves. The
environment in Russia is expected to continue on its current trajectory with the mining sector and
commodity outlook expected to remain stable and cash preservation continuing to be a key focus area
in line with the Group.
The board and management are committed to ensuring that all of the Group's re-opened operations are
managed responsibly and in compliance with risk mitigating regulations.
SHORT FORM ANNOUNCEMENT 30 JUNE 2020
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 2020 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.
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/2020/jse/isse/BAWE/ie2020.pdf
The full announcement is available for inspection, at no charge, at the registered office of
Barloworld Limited (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 information. This
information has been prepared for illustrative purposes only, it is the responsibility of the board
of directors of Barloworld and has not been reviewed or reported on by the Company's external
auditors.
REGISTERED OFFICE AND BUSINESS ADDRESS
Barloworld Limited
61 Katherine Street
PO Box 782248
Sandton, 2146, South Africa
T +27 11 445 1000
E invest@barloworld.com
DIRECTORS
Non-executive
NP Dongwana (Chairman), FNO Edozien*, HH Hickey, MD Lynch-Bell**, NP Mnxasana, NV Mokhesi,
H Molotsi, SS Ntsaluba, P Schmid
Executive
DM Sewela (Group Chief Executive), N Lila (Group Finance Director)
Group company secretary
Andiswa Ndoni
Head: Investor Relations
Zanele Salman
* Nigeria
** UK
ENQUIRIES
Barloworld Limited
T +27 11 445 1000
E invest@barloworld.com
Please refer all investor relations queries to:
Barloworld Investor Relations
T +27 11 445 1000
E bawir@barloworld.com
SPONSOR
Nedbank Corporate and Investent Banking a division of Nedbank Limited
FURTHER INFORMATION
For the full financial results visit www.barloworld.com
Date: 30-06-2020 07:28:00
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