• Barloworld reported   a blockbuster set of results that ticked all the boxes as the group recovered   from the low point of the global downturn caused by the Covid -19 pandemic.   Barloworld has over the past few years undergone major restructuring which,   in addition, has been responsible for the turnaround in the company’s   fortunes.

  • The Caterpillar equipment operations surged due to the strong demand   for commodities in SA, Russia and Mongolia, contributing approximately 70% of   group operating profits in excess of R4 bn. This division has high margin   parts and services revenues, which was a major profit driver in the current   year.

  • A strong order book for equipment in the region of R4 bn for 2022 is   already secured, and should be a positive catalyst for the next financial   year. The turnaround in the car rental and leasing segment, previously   battered by the falloff in tourism, reflected an operating profit of R850m,   compared to a loss of R302m in the previous reporting period. This was also a   function of downscaling of the AVIS fleet. This division’s operating margins   jumped by 340%, with FCF up by 223%, on a rise in   revenue of only 3.5%. It benefited from the leverage of a lower cost base and   stronger pricing on the back of buoyant demand.

  • The Avis operations have been earmarked for disposal, with the sale   closing in 2022, and is part of the strategy of selling low margin capital   intensive businesses. It was the same strategy followed in the exiting of the   loss-making logistics division.

  • The grain, food and starch operations purchased from Tongaat made an   operating profit of R534m, and is part of the strategy to double the services   contribution to the group by 2026.

  • Group operating margins grew by 450bps, with FCF conversion of 92%   vs that of 69% in the previous year. EPS was 1391c compared to the previous   loss of 1236c, which enabled the group to pay a special dividend of R11.50   per share. This special dividend reflects the strengths of the balance sheet,   and the good capital allocation investment strategy (and good execution of   acquisitions).

  • The equipment division, with its geographic and commodity   diversification, are a sound long term theme, which should be positive for   Barloworld, as well as growing rand hedge income. Barloworld’s forward PE   rating of 12x, does not appear to be onerous given proactive management   results.