TIDMBWO
RNS Number : 2217O
Barloworld Limited
28 May 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 voluntary business updates
released on 30 March and 23 April 2020. These releases provided the
perspectives of the board and management of Barloworld on the
unfolding COVID-19 pandemic, an update on the impact on the Group's
businesses and the 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.
Our operating context
The COVID-19 pandemic is inflicting increasing human and
business costs worldwide, and the protection measures implemented
by governments in all countries are severely impacting economic
activity. The reported high number of job losses and the enormous
pressures on businesses will weigh heavily on post-crisis activity
levels. GDP growth for many countries is generally not expected to
return to pre-virus levels in the near term (at least 18 months)
with consumer spending focused on essentials and, where possible,
prioritising savings over discretionary spend. Following the recent
dramatic decline in the oil price and other commodities, near-term
prospects for commodity exporting countries have deteriorated even
further. Sub-Saharan Africa is impacted severely and recovery is
likely to take longer than global averages. Accordingly, trading in
most of the countries in which the Group operates is expected to
remain very challenging in the short to medium term.
Operational update
The Barloworld Crisis Committee is monitoring and assessing the
COVID-19 situation closely and has implemented controls across all
businesses to prevent and minimise potential infections and
transmissions of the virus. Contingency plans are in place in the
unfortunate event that senior leaders and/or executives are
affected by the virus. Currently, only seven employees have tested
positive for the virus, five are in the process of recovering while
two have recovered.
In April, the Automotive and Logistics businesses were
significantly impacted by the stringent lockdown regulations in
South Africa which limited non-essential trading, affecting key
areas of the value chain. Whilst all businesses within the division
are still operational, volumes are being negatively impacted in all
instances, however, cash flows remain in line with forecasts.
A significant percentage of the Avis Budget Rent-a-Car ("RAC")
business is driven by the on-airport market segment, with the
off-airport segment being mainly the replacement business. The
closing of borders and subsequent lockdowns impacted operational
activities, with fleet utilisation declining from over 75% before
the pandemic to below 30%. However, activity is now improving on
the back of easing lockdown restrictions. Rentals in local and
replacement segments have also increased, and this trend is
expected to continue improving with the continued easing of
lockdown restrictions. Regulatory restrictions on used car sales
impacted performance negatively.
In Motor Trading, operational activities were limited to Motor
Retail that supported essential services through a select number of
sites. Activity in aftersales was limited and the new vehicle
market declined by over 90% compared to pre-lockdown levels due to
regulations prohibiting the sale of new vehicles. SMD continued
with online auction sales in April resulting in sales activity in
excess of 40% of normal volumes. Vehicle volumes are expected to
remain under significant pressure, with some improvements expected
when the lockdown regulations are relaxed.
The Avis Fleet business continues to operate, however activity
is being negatively impacted by some customers that are
experiencing challenges resulting from the current environment.
In Logistics, approximately 55% of the transport fleet has been
operational during the lockdown period supporting essential
services; 60% of warehouse personnel were active supporting the
food and health sectors and 50% of the business that supports the
waste industry was operational. The freight forwarding operations
were hardest hit with average volumes reduced to nearly 35%.
However, on the back of the recent relaxation of lockdown
restrictions, transport volumes increased to over 80%, active
warehouse personnel went up to about 70%, with freight forwarding
and waste increasing to over 60% activity levels.
Activity levels in Equipment southern Africa continued to
recover with April ranging between 35% and 45% compared to
pre-lockdown levels. Encouragingly, equipment sales were boosted by
a steady demand of mining equipment in both South Africa and the
rest of Africa. Aftermarket sales were stronger than expected
driven mainly by coal mining activities in South Africa and
Mozambique. Activity levels are expected to continue improving as
countries ease lockdown restrictions, with sales to the
construction sector continuing to be subdued.
In Russia, trading remains resilient and the impact of COVID-19
on this mining focused territory has been limited, supported by
strong sales in the gold mining segment and resilient aftermarket
performance. The coal segment has slowed down significantly driven
by continued decline in the price of both thermal and coking coal.
Pressures on the country's budget caused by COVID-19 restrictive
measures and the oil price decline have adversely affected the
construction segment. The macro situation in Russia remains fluid
while quarantine measures differ regionally and thus far the impact
on our operations has been minimal and business continues to
operate at high activity levels.
The Group has a strong balance sheet and stable mature business
platforms to weather the storm. The board and management are
focused on cash preservation, lowering operating costs in line with
reduced activity levels and ensuring the business is well
positioned for the recovery.
Additional Cost-saving measures
The austerity measures and cost saving initiatives already
implemented by the Group are expected to yield significant cost
savings during this financial year and lower the overall cost base
going forward. However, most of our businesses have been severely
affected by restrictions on trade as well as various lockdowns and
the prospects of a quick recovery are low, with some of the changes
expected to be structural and trading activity expected to be lower
for longer. In an effort to adjust to the requirements of trading
in a significantly changed environment while positioning the
business for a recovery, management and the board have decided to
institute group-wide retrenchments, in addition to the 12 month
remuneration sacrifice plan implemented on 1 May 2020. Retrenchment
processes are expected to be completed by the end of the current
financial year with significant staff complement reductions at
Automotive and Logistics, Equipment southern Africa and the
Corporate Centre.
As previously indicated, the board and management are committed
to the implementation of prudent measures aimed at reducing and
containing costs in an effort to preserve cash in the immediate
period while ensuring the medium to long term strength of the
organisation. The full extent of all the cost savings will be
communicated in due course.
Caring for our employees
The health and wellness of our employees is of paramount
importance to management and the board. Over and above ensuring
that we adhere to all workplace regulations announced by the
Governments of the countries we operate in, we have implemented
additional measures to assist employees navigate this uncertain,
changing and stressful period. These include, among others:
o First responder's training workshop for COVID-19;
o Workplace Wellness live (online) daily workout sessions;
o Workplace Wellness material related to lifestyle, finance, nutrition, anxiety and stress;
o Medical advice through the COVID-19 welfare support hotline that is active 24/7 and is manned
by over 20 medical professionals who are able to provide advice, support and assistance on
all COVID-19 related queries; and
o A wellness portal that has various COVID-19 related reading materials.
In terms of the retrenchments, support in addition to elements
required by labour regulations, include:
o Individual psychological support;
o Managerial and executive support;
o Emotional impact pre-recorded content;
o Career change / transition support that includes strengths-based assessment and feedback sessions;
and
o 3 months post-retrenchment support that includes:
-- Continued employee access to all wellness services, and
-- Face-to-face counselling limited to high risk cases.
Gearing and liquidity
The Group's gearing levels remain low and well within our
covenants. At 30 April 2020, the Group maintained a robust cash
balance in excess of R5 billion with the net debt position
(excluding IFRS 16) increasing to over R4 billion in line with
operational cycles. The headroom on committed facilities for both
the local and off-shore operations remains substantial at over R7
billion. In addition, we have non-committed facilities of over R3
billion.
The Group is actively reviewing and monitoring all facilities on
an ongoing basis and remain confident of our good liquidity
position. In May we issued notes under our DMTN program to the
value of R950 million used to refinance notes that matured in May
2020. We continue to engage with the investors in our DMTN program
and our banking partners to refinance upcoming maturities and we
remain confident that we will retain the existing facility
levels.
Tongaat Hulett Starch (THS) acquisition
Shareholders are referred to the SENS announcement issued on 12
May 2020 that the Board is exercising its rights in terms of the
Sale and Purchase Agreement (SPA) and believes that the impact of
the COVID-19 pandemic and the resultant expectation of a
significant downturn in the South African economy is reasonably
likely to result in a deterioration of the forecast 12 month EBITDA
(from 1 April 2020 to 31 March 2021) of Tongaat Hulett Starch to an
extent that constitutes a Material Adverse Change (MAC) as per the
SPA. An update will be provided once the independent assessment
process of the MAC is concluded.
Next update
The Group expects to release its interim results for the six
months ended 31 March 2020 on 30 June 2020.
Please refer all investor relations queries to:
Zanele Salman - Head of Investor Relations
bawir@barloworld.com
+27 11 445 1000
Sandton
28 May 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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