Barloworld interim results March 2019
Revenue for the first six months was down by 1.6% to R30.4 billion (1H'18: R30.9 billion) despite strong revenue growth in Equipment southern Africa which grew by 15.7% to R10.0 billion (1H'18: R8.7 billion). This was driven by increased mining, construction and service activity in South Africa, together with increased machine and after-market sales in Mozambique and Zambia. Following the record sales in FY18, Equipment Russia revenues reduced by 22.7% to USD229 million (1H'18: USD297 million). Revenues in Rand terms from our Equipment businesses were positively impacted by the weaker Rand exchange rate, which increased total revenue by R628 million. Year-on-year Automotive revenues were down by 7.7% to R14.2 billion (1H'18: R15.4 billion) and were affected by the change in dealership revenue model for Mercedes-Benz. Logistics revenues were 3.3% down on the prior period at R2.9 billion (1H'18: R3.0 billion) resulting from contract losses and the closure of KLL.
Operating profit was down 4.0% to R1 876 million (1H'18: R1 954 million). The performance of the group was impacted by a once-off charge of R88 million (?4.7 million) which was required to equalise the GMP requirements of the UK defined benefit pension scheme, together with R24 million of costs related to the implementation of our "Khula Sizwe" B-BBEE transaction. Equipment southern Africa's operating profit was well up at R806 million (1H'18: R734 million) and Equipment Russia was marginally higher in Rand terms but down in US Dollars to USD22.3 million (1H'18: USD24.6 million). In a difficult trading environment, Automotive operating profit was slightly improved at R885 million (1H'18: R883 million) and the operating margin improved to 6.2%. In Logistics, operating profit was impacted by KLL losses and closure costs amounting to R66 million (1H'18 losses of R24 million). The group's operating profit margin of 6.2% was down on the 6.3% achieved at March 2018, impacted by stronger machine sales mix contributions in Equipment southern Africa.
The group performed well in challenging economic and trading conditions. The headline earnings per share (HEPS) from continuing operations for the six months ended 31 March 2019 of 476.0 cents, was up 4.1% over the 457.1 cents generated for the six months ended 31 March 2018.
Dividend number 181
Notice is hereby given that interim dividend number 181 of 165 cents (gross) per ordinary share in respect of the six months ended March 2019 has been declared subject to the applicable dividends tax levied in terms of the Income Tax Act (Act No. 58 of 1962) (as amended) (the Income Tax Act).
The Equipment southern African firm order book at the end of March 2019 of R2.4 billion was in line with September 2018 driven by strong demand from contract miners. The outlook for mining activity in Russia remains positive. The order book at March 2019 of USD83.4 million improved on the September 2018 book of USD44 million. The bulk of the deliveries being to mining applications. The pipeline for major projects in Russia remains strong. The South African consumer remains under pressure with the industry outlook negatively impacted by the declining prospects for growth in the economy. It is anticipated that new vehicle sales will remain challenging in the second half, with the premium segment growth expected to be negative for the full period while volume brands provide resilience over the period. Management continues to focus on improving the profitability and returns of each dealership to ensure resilience in the short to medium term.
Industry rental days are expected to remain subdued in Car Rental. The business plans to drive top line revenue growth through yield management. The Avis Fleet business is forecast to show some finance fleet growth in the corporate segment in the coming months as we fleet up for the recent contract gains. The timing of the de-fleeting of the City of Johannesburg contract vehicles remains uncertain which could impact the profitability in the second half. The business is awaiting the outcome of a tender currently in the adjudication process which could impact the medium-term performance of the business. Logistics is expecting a stronger second half performance following the closure of the loss making KLL business. The divisional turnaround project continues to be a priority for management and remains a key factor in ensuring ongoing improved returns.