BAW
BAW
BAW - Barloworld Limited - Strategic Actions and Future Direction
Barloworld Limited
(Incorporated in the Republic of South Africa)
(Registration number 1918/000095/06)
(JSE Share code: BAW)
(NSX Share code: BWL)
(ISIN: ZAE000026639)
("Barloworld" or "the Company")
Strategic Actions and Future Direction
1. Introduction and Background
As set out in the Chairman`s Review in the recent Barloworld Annual Report,
during the course of 2006 the board commissioned an independent and
comprehensive review of both the future strategic direction and the
composition of the group.
Following deliberations by the board as well as extensive shareholder
engagement, it was announced on the 18th December 2006 that Barloworld
would undertake certain actions to unlock shareholder value. These included
the unbundling of Pretoria Portland Cement Limited ("PPC") and addressing
areas of under performance in the group.
The board undertook that Barloworld shareholders would be updated on these
initiatives at the annual general meeting (AGM) of the company which is
being held today. This statement has accordingly been released on SENS to
ensure all shareholders have simultaneous access to the information being
presented at the meeting.
2. Trading update
In the equipment division, demand for capital equipment in southern Africa
has maintained its strong growth, with the equipment order book now
exceeding R3.0 billion from the R2.4 billion reported at the end of
September 2006. Activity levels for our Caterpillar equipment business in
Spain remain high, with strong sales into public works fleets, and the
order book in Iberia has grown to R2.4 billion from the R2.2 billion
reported at the end of September 2006. Our Siberian joint venture
continued to experience growth in activity levels.
Cement demand continues to grow strongly with regional demand for the
quarter to December 2006 increasing by 8.3% over the comparable period last
year. Expansion plans are on track and proceeding according to schedule.
In South Africa, our motor retail operations continue to perform in line
with growth in the market, with results well ahead of last year. In the
Avis car rental business the benefit of continued strong growth in rental
days and higher rates has resulted in pleasing growth in profitability. The
fleet service business continues to take a leading position in the
industry. Our Scandinavian car rental business has experienced good growth
in rental activity over the quarter. In Australia, the motor retail
business is well ahead of the prior year.
The southern African coatings business is experiencing good growth, boosted
by the acquisitions made during 2006. The Australian coatings business has
shown a small recovery as improved trading activities and cost reduction
initiatives take effect.
The industrial distribution division completed the sale of the UK leasing
business during November 2006. In the US the Truck Center business
continues to show improved results despite lower activity in the freight
industry while the handling business is trading in line with the prior
year. In the UK our handling business is showing a strong recovery at the
operating level after last year`s restructuring exercise.
In the scientific division, activity levels are similar to last year but
benefits from fixed cost reductions are resulting in improved operating
margins.
The logistics business continues to grow steadily and for the past quarter
has performed above our expectations.
An acceleration of activity in the southern Africa capital investment cycle
has resulted in strongly growing demand for our products in the region. We
expect these conditions to continue and this will have a beneficial impact
on the operational performance of all of our southern African divisions.
Further improvements are expected in the international businesses and
overall we expect a strong first half to March 2007.
Due to the implementation of many of the strategic actions announced,
including the PPC unbundling, our BEE transaction and asset disposals, the
results for the full year will not be directly comparable with the prior
year. However, we expect the underlying operating performance to show good
progress on 2006.
3. Progress on strategic actions and future direction
Mr Clive Thomson, the company`s chief executive officer, made the following
statement:
"PPC unbundling
Barloworld has appointed advisors to assist with the unbundling of PPC.
The terms and conditions of the unbundling and the date of the general
meeting of Barloworld shareholders to be held to consider all matters
pertaining to the unbundling will be announced before the end of the first
calendar quarter 2007.
Plans in respect of the PPC BEE transaction are well underway and the
transaction will be implemented after the PPC unbundling.
The PPC board has announced that Mr Martin Shaw, one of the independent non-
executive directors on the PPC board, has been appointed Chairman for an
interim period until a new black chairman is appointed. The future
permanent Chairman of PPC may be one of the participants in their BEE
transaction.
Areas of Underperformance
As previously announced, action on underperforming assets is being
addressed mainly through disposals. Within the scientific division,
several offers have been received for Melles Griot and it is expected that
the restricted tender process and sale will be concluded shortly. The
board has now resolved to dispose of the laboratory business and this
process is targeted to be completed in 2007.
Within the coatings division, the sale of the Bristol stores network in
Australia is progressing according to plan.
Cash Distribution
The 18th December 2006 announcement stated that R1 billion of cash,
emanating mainly from recent disposals of the UK and US leasing books and
the steel tube division, would be returned to shareholders. The board has
decided to do this by way of a declaration of a special dividend.
BEE Transaction
The Barloworld BEE transaction, which will empower the group`s South
African operations, is planned to follow shortly after the conclusion of
the PPC unbundling and timelines have been set with our advisors to achieve
this. Participants will include employees, current and future black
managers, black non executive directors, an education trust set up
principally for the benefit of the families of Barloworld`s black
employees, and a consortium including broad-based groups led by Ayavuna
Women Investments (Proprietary) Limited.
Future Direction
During 2007 Barloworld will be repositioned and profiled as a focussed
distribution company, with an offering that includes integrated product
support, rental and logistics solutions.
The group will comprise businesses that fit this strategic profile as well
as meet strict performance criteria. Growth options for the restructured
group will be pursued.
On this basis the board has taken the following decisions in relation to
the future composition of the group.
The Caterpillar equipment business remains core to the group with excellent
growth opportunities in southern Africa, Iberia and Russia.
The logistics business is also showing good regional and international
growth potential and will be retained within the group.
While the motor division meets the group`s future strategic profile, the
benefits of a separate listing and unbundling of this division will be
independently assessed in the context of the value creation potential for
shareholders. A further announcement in this regard will be made, at the
latest, with the release of the group`s half year results in May 2007.
The industrial distribution division will be significantly downsized by
disposing of the DitchWitch and vacuum technology business units in the
immediate short term, and the more complex disposal of the Freightliner
operations in a manner and time to maximise shareholder value. The
materials handling operations will be critically re-evaluated and a
decision taken on their future by the end of the financial year.
The coatings division, which would be the company`s only remaining
manufacturing business after the unbundling of PPC and disposal of the
scientific businesses, will no longer fit the future strategic profile. The
board will consider alternative ways to realise shareholder value through
the divestiture of this business. These include a potential listing and
unbundling to Barloworld shareholders, or other mechanism. A decision
regarding the best alternative to maximise value will be made in due course
and implemented as a priority."
4. Chairmanship and board composition
Mr Warren Clewlow, the company`s chairman, made the following statement:
"I have indicated to the board and announced in the 2006 annual report that
I will be retiring as chairman of the group. I believe I have discharged
my duty in contributing to the setting of Barloworld on a new and exciting
course which will enhance shareholder value even further. I also leave
behind a dedicated and highly motivated team capable of carrying out all
the plans.
I therefore believe that it is appropriate for me to stand down as chairman
and a director at the conclusion of today`s AGM.
The board has accordingly appointed Mr Dumisa Ntsebeza as chairman for an
interim period until a permanent appointment can be made.
A committee of the board to deal with my successor has been formed and they
will be consulting shareholders and other interested parties on this. This
committee will consist of members of the nomination committee comprising Mr
Mike Levett as chairman and Messrs Dumisa Ntsebeza, Steven Pfeiffer, Eddie
Theron and Robert Tomkinson. Board members Ms Sibongile Mkhabela and Mr
Selby Baqwa have also been appointed to this committee.
The board further intends to review the composition of the boards of
directors of its principal operating divisions including the appointment of
independent non-executive directors. The chairmanship of these boards will
likewise be considered by the committee.
Ms Hixonia Nyasulu, who through Ayavuna Women`s Investments (Pty) Limited
will be an investor in the Barloworld BEE transaction, will be appointed to
the board. She will be playing an important role in the transformation
plans we have for the group.
Consistent with the group`s commitment to transformation, I am pleased to
announce today that Mr Isaac Shongwe, currently a senior executive in the
logistics business, will be appointed as CEO of Barloworld Logistics Africa
and will join the Barloworld board as an executive director. In the latter
capacity he will also have responsibility for empowerment, transformation
and social investment within the group.
Mr Trevor Munday, until recently deputy CEO of Sasol Limited, will be
joining the board and will, in addition to his board responsibilities, play
a positive role with his substantial industrial experience in the
deliberations and future concerning the motor and coatings divisions.
Mr Gordon Hamilton, a past senior partner of Deloittes in the UK, will also
join the board and will assume the chairmanship of the audit committee when
the present incumbent, Mr Robert Tomkinson, steps down at the end of this
year.
In addition to myself, directors who have retired from the board are Mr
Tony Phillips, Mr Lester Day and Mr Mike Coward.
These gentlemen have had a long and outstanding service within the group in
many important capacities and we salute, acknowledge and thank them for
their loyal and dedicated service."
Enquiries:
Nicholas Williams
College Hill
Tel: 011 447 3030 / 083 607 0761
Johannesburg
25 January 2007
Sponsor: JPMorgan
Date: 25/01/2007 12:11:15 Produced by the JSE SENS Department. |