- Barloworld, an industrial group which supplies earth moving equipment to the mining and construction sectors, released a stellar set of results in a challenging and volatile operating environment.
- It also announced the unbundling of the Avis and Budget car hire and rental divisions, as this no longer fits in with its business model. Barlo will focus its energies on the core operations of industrial equipment, and food services.
- The unbundling should complete the groups’ restructuring which has been an ongoing exercise for the past five years. The objective was to achieve a focused capital light business model which involved sales of non-core assets such the loss-making logistics division.
- The Avis business, which operates in ten Sub- Saharan countries, will list under the name of Zeda, and should be a bonus for Barloworld shareholders who will receive one Zeda share for every one Barlow share held.
- Barloworld managed revenue growth of 15.4% to R53.8bn in the the period in respect of core operations. Revenue of the equipment SA division was up by 20%, with a strong increase in new equipment sales from the buoyant mining industry, and an order book of R4.8bn.
- However, the Eurasia division in Russia was under pressure due to an embargo on new equipment from Caterpillar in the US, whilst the Mongolian operation was hampered by a border closure with China due to Covid lockdowns.
- The Ingrain food businesses had a robust year with revenue increasing by 34%, with strong demand from the confectionary industry, exports and pet foods.
- Group operating profits rose by 32% to a healthy R5.6bn, whilst HEPS were up by 16% to R11.00 per share (HEPS including Avis were R17.71).
- Group net debt of R2.3bn vs that of R4.6bn in the comparative reporting period in 2021, was a function of powerful cash generation, with cash on the balance sheet of R9.5bn at year-end.
- This resulted in a final dividend of R2.95, and an additional special dividend of R5.50, putting the share on an attractive dividend yield of around 7.8%.
- Good capital allocation, a focus on higher margin business operations, and its asset light cash generative operations make Barloworld an attractive long-term investment for patient investors.
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