TIDMBWO
RNS Number : 4972R
Barloworld Limited
30 June 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")
Unaudited 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 MONTHSED 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
DIVID
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
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR EAKKEDEFEEEA
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