Having sold the bulk of its noncore assets in a big restructuring over the past year, Barloworld is now poised to exploit the massive increase in infrastructure and mining construction activity sweeping across Africa.
Barloworld was set to invest R250m in various countries on the continent in the next two years to optimise on robust growth, CE Clive Thomson said at the presentation of Barloworld’s results for the year to September.
The group is looking at building new facilities in Angola, the Democratic Republic of Congo and Bots- wana, and expanding facilities in the copper belt of Zambia as activity explodes in these regions.
Much of Barloworld’s year was taken up with the strategic restructuring, the biggest event of which was the unbundling of its stake in profit churner Pretoria Portland Cement (PPC).
It also sold its steel tube business, UK leasing book, and a number of other noncore assets.
When the firm first announced the strategic review, the motivation was to unlock shareholder value. It did: while shares traded at R129,60 at end-September – just 10c higher than exactly a year before -- distributions to shareholders translated into a 79% return.
This included R88,69 in PPC shares distributed, dividends for the year of 875c (including a 500c special dividend) and a PPC final and special dividend of 421c.
Barloworld is still set to wrap up the sale of its laboratory division (expected to fetch AGBP75m) and will separately list Barloworld Coatings in the first week of next month.
Restructuring also entails continuing streamlining of the group’s corporate office at a R92m cost, which will realise annualised savings of R100m.
The restructuring activity makes a comparative review of the two years’ results difficult. Net profit for the year slumped almost 7% to R2,6bn on revenue growth of 23% to R43,2bn. Headline earnings from continuing operations rose 13% to 812c per share, or 21% if the secondary tax on companies attracted by the special dividend declared in the interim period is stripped out.
More pertinent, however, are figures from continuing operations, an indicator of things to come.
The equipment unit had a stellar year. Also operating in Siberia, Spain and Portugal, it lifted its operating profit 62% to R1,6bn. The unit now contributes 40% to total profit.
The logistics business also had robust growth, raising operating profit 45%, albeit off a low base, to R95m. Thomson said the group was exploring offshore opportunities to grow this business.
The automotive segment had a more modest year, with operating profit growing 16% to R714m as interest rate hikes started to bite.
Thomson said the group was in a strong position to capitalise on favourable trading conditions. The outlook was positive with growth expected in all operations this year.