Barloworld makes it rain


Barloworld makes it rain


Published Date: 2021-11-23 | Source: INCE|Community | Author: The Finance Ghost

Barloworld makes it rain

Barloworld has released its results for the year ended September 2021. A 6% bump in the share price tells you most of what you need to know about the performance.

I've written on Barloworld several times before. In my view, the most impressive thing about the group is the way it navigated the pandemic and came through it with a stronger balance sheet than before. When management teams know how to allocate and manage capital, everything else often falls into place.

Return on Invested Capital (ROIC) could still do with further improvement. 11.3% isn't bad but I'm not sure this is sufficient for the operational risk in the industries in which Barloworld operates.

With a group net debt position of R2.3 billion and interest cover (EBITDA divided by interest paid) of 9.2x, Barloworld is in great shape financially to grow from here. Net debt : EBITDA is only 0.3x vs. a covenant of 3x.

Group revenue increased 8.4% and revenue from continuing operations jumped 22.5%. Operating margin nearly doubled from 5.8% to 10.3%. Equipment Mongolia and Ingrain (acquired from Tongaat) contributed 19.2% of operating profit, demonstrating the contribution of acquisitions to the Barloworld story.

The result looks good across the underlying operations. Equipment Southern Africa posted operating margin 10.7%, Equipment Eurasia margin was 11% (in USD), Ingrain was 12.2% and the car rental business posted a huge swing in fortunes as a loss of R142 million last year seems like a distant memory against a current operating profit of R348 million. Avis Fleet also joined the good news party, growing revenue by 13%.

The joint venture in the DRC (Bartrac) worsened significantly, with a loss of R112 million vs. a loss of R41 million in the prior period. The NMI-DSM (car dealerships) business helped offset the pain, with profit literally doubling from R52 million to R104 million.

A final dividend of 300 cents per share has been declared, taking the total to 437 cents for the year. In addition, there's a special dividend of 1,150 cents per share. In easier numbers, the Barloworld price of R143.54 is now pregnant with a total dividend of R14.50.

Normalised headline earnings per share (HEPS) from continuing operations was 1,323 cents. The dividend will be out the system by early January, so if the ex-dividend price is rounded off to R130 per share then Barloworld is trading on a Price / Earnings multiple of under 10x.


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