Barloworld Group’s 2019 revenues totalled *ZAR56.8bn (2018: ZAR60.1bn), down 5.4% from the prior year. Operating profit for the group was down 13% to ZAR3,272m (2018: ZAR3,762m), with the operating margin declining from 6.3% to 5.8%. The company generated ZAR3.1 bn in free cash flows against ZAR3.6bn in the prior year.
Company’s CEO Sewela said: “This is a notable improvement particularly when considering that prior year investing cash flows included ZAR2.5bn from the sale of the company’s Iberian operations.”
Overall, Equipment southern Africa delivered solid results. The division increased full year revenue by 3.3% to ZAR20.4bn driven mainly by the improved contribution of aftermarket sales.
Equipment Russia totalled revenue of $433m for the period. The reduction in revenue of 28.6% year-on-year was driven primarily by the inclusion of large package mining machine deals in the 2018 results. The imposition of increased duties for US-manufactured products in August 2018 impacted demand but had a lesser effect than originally estimated.
Overall, the group recorded strong performance from Automotive amidst a tough macroeconomic environment. The division recorded revenues decline by 4.8% mainly as a result of the change in revenue recognition from the principal to agency model in Mercedes-Benz (passenger) and the impact of the deconsolidation of NMI Durban South Motors Ltd for the month of September. The division, however, improved its operating profit by 2.3% and yielded an operating margin of 6.0% against 5.7% in the prior year.
The company confirmed that, despite disappointing results, the logistics division, led by a strong management team, remains on course to optimise its restructuring process. The Logistics business achieved disappointing results on the back of weak exchange rates, civil unrest and unplanned port strikes over the last 3-6 months, lower trading activity and limited growth in represented industry verticals that made trading conditions difficult.
Looking forward, Sewela said: “The determined implementation of the turnaround strategy remains a key focus for the management team. The implementation of Barloworld Business Systems is expected to contribute to improved efficiencies with positive benefits anticipated in 2020. The integration of Automotive and Logistics has provided the division with the opportunity to review the management structure, consolidate functions into shared services and extract value from combined strategic sourcing. We expect to realise savings in the next financial year.”
As far as Equipment southern Africa is concerned, Sewela added: “It is unlikely that there will be significant improvement in the markets Barloworld serves soon. The company’s approach will continue to be one of with prudent cost containment and invested capital reduction. The South African consumer is still under pressure with the industry outlook negatively impacted by the declining outlook for growth in the economy. It is anticipated that new vehicle sales will remain challenging in FY2020.”
The Logistics division, Sewela said, is expecting stronger performance going forward following the closure of the loss-making KLL business. The divisional turnaround project continues to be a priority for management and is a key factor in ensuring ongoing improved profitability.
Avis Fleet was held for sale at 30 September 2019, while due diligence for the acquisition of Wagner Asia in Mongolia is complete with final negotiations being finalised.
Source: Barloworld Group
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