TIDMBWO
RNS Number : 6859K
Barloworld Limited
23 April 2020
Barloworld Limited
(Incorporated in the Republic of South Africa)
(Registration number 1918/000095/06)
(Income Tax Registration number 9000/051/71/5)
(Share code: BAW)
(JSE ISIN: ZAE000026639)
(Share code: BAWP)
(JSE ISIN: ZAE000026647)
(Bond issuer code: BIBAW)
(Namibian Stock Exchange share code: BWL)
("Barloworld" or the "Group" or the "Company")
VOLUNTARY BUSINESS UPDATE
Shareholders are referred to the pre-closing operational update
released on 30 March 2020, which included the Group's initial
perspective on the unfolding COVID-19 pandemic, the impact on
businesses and a number of immediate austerity measures taken in
response.
In light of the rapidly evolving environment, the board and
management of Barloworld are of the view that it is appropriate to
institute regular updates containing relevant information regarding
the impact of COVID-19 on the Group and the appropriate austerity
measures taken in response.
Shareholders are advised that the financial information
contained in this announcement has not been audited, reviewed or
reported upon by Barloworld's external auditors.
Operational update
The Government imposed lockdowns across the globe continue to
negatively impact the environment in which our businesses operate.
The latest consensus macroeconomic forecasts indicate that most
economies, including South Africa and the rest of Africa, are
likely to enter recession in the first half of 2020, with a
recovery only commencing in 2021.
The operating environment is therefore expected to remain weak
and volatile in the near term with significantly lower activity
levels in the Automotive division. Activity levels in the Equipment
southern Africa and Logistics divisions are currently low, but are
improving as customer activity levels improve as they adjust to
operating under a lockdown environment. In Russia, trading remains
strong and the current impacts of COVID-19 have been very
limited.
The Group has a strong balance sheet and stable mature business
platforms to weather the storm and will be well positioned in the
future recovery. In the short term, we are actively focused on both
cost reduction and containment, as well as driving operational
efficiencies for the remainder of the financial year to September
2020.
The lockdown restrictions in various territories are causing
delays in the internal consolidation and review processes of our
financials. As a result, the release of the Group's interim results
for the six months to 31 March 2020 has been postponed from 18 May
2020 to 30 June 2020. This remains in line with Section 3.15 of the
JSE Limited (JSE) Listings Requirements which requires results to
be released within three months following the end of the reporting
period. Furthermore, in line with section 3.18(a) of the JSE
Listings Requirements, the board has approved the release of
unaudited interim results, with limited assurance.
Cost-saving initiatives
The Group's internally imposed austerity measures are expected
to yield significant cost savings by the end of the 2020 financial
year as well as lowering the overall cost base going forward. The
following additional initiatives, amongst others, have also been
adopted:
-- A non-executive directors' fee reduction of 25% for a period of three months with effect from
1 May 2020;
-- A suspension of the retirement fund contributions to the respective funds for a period of
up to 12 months in line with applicable fund rules and country specific legislation. This
plan affects all employees who are members of the respective funds, excluding those who are
close to retirement age (60+) and will be effected from 01 May 2020.
-- A 12-month remuneration sacrifice plan effected for employees at executive, senior, middle
and junior/supervisory levels using a sliding scale that will see executives taking the highest
total guaranteed pay (basic salary plus benefits) reduction with effect from 01 May 2020.
The total average remuneration sacrifice is shown in the table below:
Total average remuneration sacrifice, including suspended retirement fund
contributions %
Group Executives 25%
------------------------------------------------------------------------------------
Senior management 21%
------------------------------------------------------------------------------------
Middle management 18%
------------------------------------------------------------------------------------
Junior management /supervisors 14%
------------------------------------------------------------------------------------
-- A further targeted reduction of head office costs across all areas; and
-- A reduction of costs across all business units in southern Africa to deal with the slowdown
and prepare the business for the recovery.
Shareholders are advised that the board and management are
prepared to take further active measures to reduce costs as the
situation demands. The full extent of all the cost savings will be
communicated as part of the 2020 interim results.
Gearing and liquidity
The Group's gearing levels remain low and well within our
covenants. At 31 March 2020, the Group maintained a robust cash
balance in excess of R4 billion. The Group's net debt position
(excluding IFRS 16) increased to over R4 billion in line with
operational cycles. The Group's headroom on committed facilities
for both the local and off-shore operations remains substantial at
over R8 billion. In addition, we have non-committed facilities of
over R2 billion.
The Group is actively reviewing all current facilities on an
ongoing basis and we remain confident of our liquidity position.
Even after taking into account the acquisitions being progressed,
we retain significant headroom within our covenants, with Net Debt
to EBITDA expected to still remain below 2.0 times.
We had working capital absorption at the end of the interim
period caused by a delay in accounts receivable and inventory
build-up on the back of the lockdowns in the various regions we
operate in. We continue to monitor the working capital levels
closely with certain countermeasures already implemented to manage
the expected build-up in the second half of the 2020 financial
year, as a result of an anticipated slow-down in demand and
activity.
Avis Fleet
We previously disclosed our intention to sell 50% of the equity
in Avis Fleet. Given the current market environment, a decision has
been taken to place this initiative on hold. This position will be
re-assessed at the appropriate time and in the context of the
Group's strategy and optimal portfolio mix. Avis Fleet will
continue to be shown as part of discontinued operations in the
interim results for the period to 31 March 2020 and will revert to
being reported as part of continuing operations going forward.
Update on acquisitions
The Group continues to progress the recently announced
acquisitions while exercising caution on the need to ensure our
ability to weather the immediate effects of COVID-19. We continue
to believe that these acquisitions will strengthen the resilience
of the business in the longer term. Further updates on the
acquisitions will be provided in due course.
Next update
The next voluntary business update will be issued towards the
end of May 2020.
Please refer all investor relations queries to:
Zanele Salman - Head of Investor Relations
bawir@barloworld.com
+27 11 445 1000
Sandton
23 April 2020
Sponsor
Nedbank Corporate and Investment Banking, a division of Nedbank
Limited
About Barloworld
Barloworld is a distributor of leading global brands with
corporate offices in Johannesburg (South Africa) and Maidenhead
(United Kingdom), providing integrated rental, fleet management,
product support and logistics solutions. Established in 1902 in
South Africa, we are one of the country's oldest companies.
Inspiring leadership, a reputation for ethical conduct, innovation
and a commitment to giving back have ensured Barloworld's longevity
over the past 117 years. The core divisions of the Group comprise
Equipment (earthmoving equipment and power systems), Automotive
(car rental, motor retail, fleet services, used vehicles and
disposal solutions) and Logistics (logistics management and supply
chain optimisation). The brands we represent on behalf of our
principals include Avis, Audi, BMW, Budget, Caterpillar, Ford,
Mazda, Mercedes-Benz, Toyota, Volkswagen and others.
Forward-looking statements
Certain statements in this document are not reported financial
results or historical information, but forward-looking statements.
These statements are predictions of or indicate future events,
trends, future prospects, objectives, earnings, savings or plans.
Examples of such forward-looking statements include, but are not
limited to, statements regarding volume growth, increases in market
share, exchange rate fluctuations, shareholder return and cost
reductions. Forward-looking statements are sometimes, but not
always, identified by their use of a date in the future or such
words as "believe", "continue", "anticipate", "ongoing", "expect",
"will", "could", "may", "intend", "plan", "could", "may", and
"endeavour". By their nature, forward-looking statements are
inherently predictive, speculative and involve inherent risks and
uncertainties, because they relate to events and depend on
circumstances that may or may not occur in the future.
If one or more of these risks materialise, or should underlying
assumptions prove incorrect, our actual results may differ
materially from those anticipated. There are a number of factors
that could cause actual results and developments to differ
materially from those expressed or implied by these forward-looking
statements. These factors include, but are not limited to: changes
in economic or political conditions and changes to the associated
legal, regulatory and tax environments; lower than expected
performance of existing or new products and the impact thereof on
the Group's future revenue, cost structure and capital expenditure;
the Group's ability to expand its portfolio; skills shortage;
changes in foreign exchange rates and a lack of market liquidity
which holds up the repatriation of earnings; increased competition,
slower than expected customer growth and reduced customer
retention; acquisitions and divestments of Group businesses and
assets and the pursuit of new, unexpected strategic opportunities;
the impact of legal or other proceedings against the Group;
uncontrollable increases to legacy defined benefit liabilities and
higher than expected costs or capital expenditures. When relying on
forward-looking statements to make investment decisions, you should
carefully consider these factors and other uncertainties and
events. Forward-looking statements apply only as of the date on
which they are made, and we do not undertake any obligation to
update or revise any of them, whether as a result of new
information, future events or otherwise.
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
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