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News24.com | Barloword rallies after results, says Avis will list on JSE as 'Zeda'




Barloworld verskaf motors aan die Avis-groep.Foto: Argief

Barloworld verskaf motors aan die Avis-groep.Foto: Argief

  • Barloworld intends to list its car rental and leasing business on the 13 December under the name Zeda
  • The business includes the Avis and Budget brands, and comes amid a push by the group to streamline its focus.
  • The vehicle division is faring well, and operating profits more than doubled in Barloworlds year to end-September
  • For more financial stories, go to the News24 Business front page.

Industrial group Barloworld expects its car rental and leasing business Avis Budget to be listed under the name Zeda with effect from 13 December.

Subject to approval from the bourse, Barloworld shareholders will receive one Zeda share for each Barloworld share held.

The unbundling represents a completion of Barloworld’s non-core asset sales programme. The firm has been looking to pare back its focus and stream-lined business its strategy and capital allocation, and will be focused on two main areas, industrial equipment and services, such as earth moving equipment, and consumer industries, which includes food, beverages and pharmaceuticals.

Zeda trades under the market leading Avis and Budget brands in South Africa and 10 other sub-Saharan African countries and was established in Bloemfontein in 1967. Apart from rental and leasing services, the business also sells cars through 14 Avis Car sales dealerships.

The business unit was Barloworld’s second largest employer, accounting for 21% of its workforce, and contributed about 12% of group revenue, or just under R6 billion, in Barloworld’s year to end-September.

The business’s strategy of diversifying its offering and increasing efforts to drive subscription products continues to pay off, Barloworld said on Monday, and benefited in 2022 due to sustained demand for subscription offerings, a solid base of insurance business (replacement), and the recovery in domestic and corporate travel. Operating profit surged 150% to R871 million to end-September, surpassing pre-pandemic levels.

“This is a bittersweet moment for Barloworld,” CEO Dominic Sewela said in a statement.

“While we conclude our restructuring and portfolio shift to defensive, relatively asset light and cash generative industrial sectors, based on a business-to-business operating model, we are also letting go of an incredibly strong business whose adaptability has taken it from strength to strength.

“This decision was taken in the interest of maintaining value for our shareholders,” said Sewela.

“As two separate companies each business will be able to operate in a more focused and efficient manner – actively pursuing our growth ambitions in different sectors and verticals.”

Shares leap 

Barloworld’s shares jumped 6.57% to R113 in morning trade on Monday, although they have still lost more than a quarter so far in 2022. Click here for details on Barloworld’s shares and other info.

The firm also released its results for the year to end-September, cutting its final dividend, though its total dividend still rose about 5.3% to 460c. The group also declared a 550c special dividend, having paid R11.50 in the prior year.

The group reported total group revenue growth of 9.5% to R49.2 billion, amid improved trading activity across most of its businesses. The firm said its equipment SA business had “exceptional results” despite supply-chain challenges, growing its total revenue just under a fifth to R21.8 billion. Revenue did benefit from an easing of the global supply chain backlog, the firm said, as well as strong demand for commodities.

Revenue in the firm’s equipment Eurasia business, however, was steady year-on-year, partly amid Covid-19 restrictions in Mongolia which affected trading, while it said that its Russian business had performed well, but due to sanctions was experiencing difficulties in sourcing products. While the business complies with international sanctions, Barloworld said it continues to deliver orders for products available in inventory to customers not affected by sanctions. Barloworld also reported it had written down that business by R1 billion due to the war in Ukraine, including fully writing down R217 million in goodwill, which covers intangible values such as brand recognition and customer relationships.

Barloworld still had R419 million in cash in Russia, which is about a fifth of revenue, while the remainder of properties as well as other fixed assets were not fully impaired, but retained at their fair values.

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