Barloworld Limited (BAW) Earnings Call Transcript & Summary

Thank you for joining us for the presentation of Barloworld's interim results for the period ended March 31, 2021. My name is Nkombisa, and thank you for joining us today. Just to take you through our program. We'll start with group highlights from our group CEO, Mr. Dominic Sewela. We'll follow that with a financial overview from our FD Nopasika Lila; then the divisional CEs for industrial equipment and services; and for consumer industries, will take us through their performance, together with Car Rental and Leasing and our Motor Retail and logistics business which are discontinued during this period. We'll then end off with a strategy update and outlook, and thereafter, take you through to a Q&A session. I would now like to hand over to our group CEO, Mr. Dominic Sewela. Dominic, over to you.

Thank you, Nkombisa. Good morning, ladies and gentlemen. I hope you're safe wherever you are. Just as we pivot in Barloworld to a more simpler business, let's focus more on 2 verticals. One of the key thing for us is that ESG underpins our strategic actions. And our approach is really ensuring that our people are safe. However, they are in our operations but also when we deal with communities, we lessen negative impact to those communities. And we also reduce our environmental footprint. And all that is governed by a very independent and active board supported by subcommittees of origin risk as well as social and ethics subcommittee. I'm pleased to say that our LTFIR has been reduced by 30% over this reporting period. One of the key issues for us is that safety is a metric that we put on the executive scorecard for short-term incentives. And in the event there's a fatality is that, that executive or that group will actually score 0. That would apply to me on a proportionate basis because all the divisions sit -- would site on my scorecard. Regrettably, we have had a fatality in our discontinued operation of logistics where [Alfred Kakani ] was involved in a federal accident. A sincere condolence is to the family, friends and colleagues of Alfred. I must say the investments that we've made over time in terms of our environmental footprint has paid dividends. You can actually see that in terms of carbon emissions, Scope 1 and 2, we've seen a reduction of about 40% or improvement of 40% in carbon emission. In terms of water, withdrawal, we've seen about 18% improvement. Energy efficiency, we've seen about 41%, which is actually a good result. These are all continuing operations. And with the acquisition of Ingrain, we will include in next year. What we're currently doing is a packing that and making sure that we can have -- we set targets that are realistic and that we can be able to ensure that, that business also adheres to these initiatives. So when we just talk about our financial highlights, I think it's pleasing to see in terms of continuing operation, an increase of about 13% in terms of revenue. All the actions that we took last year are bearing fruit. We are seeing a savings of about ZAR 1.2 billion for the entire group. And we've also seen the efforts by operations to preserve cash, yielding an 18% growth in our EBITDA to ZAR 3.1 billion. When you look at HEPS, it is a very significant 265% increase compared to last year to ZAR 4.05 per share. And what's also pleasing is to see the conversion, a ratio of EBITDA to free cash of about 121% for the Group. When you look at -- for continuing operation right up. For the Group, I think it's about 114%. With all the initiatives that the business have actually taken in terms of ensuring good management around the balance sheet, our working capital management. We've seen a solid net debt position of about ZAR 4.9 billion compared to ZAR 2.6 billion, taking into account that we have paid ZAR 5.3 billion for starch. And I'm also pleased to say that Motor Retail, all the substantive conditions have been met earlier than anticipated. We've just had that tribunal gave us a green light last week Friday, and this transaction will close on the first of June as anticipated. With all this, the Board has made a decision that they would pay a special dividend of ZAR 2 per share and an interim dividend of ZAR 1.37 per share. In terms of our policy, the interim dividend is more on the lower side because our dividend policy is 2.5 to 3x cover. This is more around 3x. And I think we could have afforded to pay more, but we felt that we needed to be prudent given the fact that we are still dealing with the third wave, and the Board will then take due consideration in September once we've finalized the year. Thank you very much. I'm going to hand over to Nopasika.

Thank you, Dominic. And a good welcome to everyone to the interim results for Barloworld for the 31st of March 2021. It has been a very interesting time for Barloworld. So if one has to understand and analyze the financial statements, it's important to take the following into consideration. First, Avis fleet was in the prior year included in our discontinued operations, but it is now in our continued operations. So we've really had to restate the financial statements. I'm talking about the income statement as well as the balance sheet for the 2020 financial year. Looking at logistics and -- looking at Logistics -- I beg your pardon there. Looking at Logistics and Motor Retail, in this current period, it's recognized as discontinued operation, whereas in the previous year, it was continuing operation. So likewise, we've had to restate the income statement for comparative purposes. Also to note in this first quarter is the first-time integration of Equipment Mongolia as well as Ingrain. And to note is the fact that Ingrain was acquired on the first of November 2020. Therefore, we've only incorporated 5 months of trading. We've had a very resilient operational performance across the businesses with a good start to the year. And we've seen this through the delivery of group revenue. This includes discontinued operation at ZAR 28.6 billion. For continuing operation, the revenue is up 13%, at ZAR 20.9 billion. An exceptional performance has come through on the operating profit, up 44% for the group at ZAR 1.9 billion, and this has been positively impacted by the acquisition of Mongolia as well as Ingrain previously mentioned. Also, very important is the benefits that we're starting to realize from the sterility measures that we implemented in the previous financial period. On the segmental revenue side, across all segments, revenue remains in line with prior financial periods and also then the levels, therefore, are very much alike. Included in the ZAR 20.2 billion, is the acquisitive growth of ZAR 3.4 billion. And this ZAR 2 billion is from Ingrain and ZAR 1.4 billion from Eurasia. And you will notice that our Mongolia interest is included in the Eurasian numbers. Again, a very remarkable operating profit number of ZAR 1.3 billion from continued operations. We saw from Equipment Southern Africa, up 24%; Eurasia, up 51%; with Mongolia, obviously, contributing ZAR 145 million to the operating profit. Contribution from Ingrain as mentioned, for the 5 months, is ZAR 305 million on the operating profit line. Car Rental generated ZAR 114 million operating profit. And these margins were impacted by the high damage costs that they've experienced in the first 6 months. Leasing 2% lower than prior year, also again, very much in line with the previous period, great performance considering the challenges within this business. Included in other segments, we have our corporate office. We have Khula Sizwe. We have Handling as well as the DDS, which is our Digital and Disposal Solutions. So when we look at these losses that we're reflecting under other segments, it is very mixed. And this is really also because of the inclusion of the acquisition costs for Ingrain, and this is a one-off cost. Net finance costs have been well-managed in the first 6 months, improving 20% on a like-to-like basis. And this is attributable to the low interest rates as well as the reduced debt levels in the divisions. The cost of funding for Ingrain is ZAR 89 million for the first 6 months. And this has increased the total net finance costs to previous year or prior year levels at ZAR 434 million. Improved earnings from operations with notable HEPS at ZAR 4.05 for the period, and this is an improvement from last year at ZAR 1.11. And when we combine the contribution of both Mongolia and Ingrain to that number, we see that they contribute ZAR 2.29. Overall, from a group perspective, our HEPS, including discontinued operations, was ZAR 3.67. Barloworld remains to have a very strong balance sheet with good working capital management. And as can be seen in the balance sheet, we have converted -- or the cash conversion throughout the group has been approximately 114%. The integration of Ingrain increased our asset base or assets by ZAR 6 billion. You will also notice in the balance sheet that we've reclassified Motor Retail as well as logistics. And you'll see there both from an asset and a liability side, the reclassification to held-for-sale. I must say, when I look at the cash conversion, the exceptional effort that's been put by the divisions in terms of performance throughout the tough conditions, the yielding of free cash flow of ZAR 4 billion before Ingrain was simply remarkable. When we also do consider the fact that we've increased our debt by ZAR 5.3 billion for the acquisition of Ingrain, the net debt is well-managed at ZAR 4.9 billion. This is an increase of ZAR 2.3 billion from the prior year number that we reported in September at ZAR 2.6 billion. We remain well within our covenant levels with the net debt EBITDA at 0.9x as well -- and the EBITDA gross interest at 6.9x. Looking at our returns. We remain well against our target and the net gearing at ZAR 3.6% is within our target. The ROIC as a measure is an annual number. Therefore, a half year number may not always reflect the return on investment. The 3.8% for the 6 months is affected by taking into account the 6 months from last year to arrive at the rolling 12 months number to calculate the ROIC. I'm pleased to announce that the Board has approved and declared a dividend of ZAR 1.37 for ordinary and also a special dividend of ZAR 2 per share. Now this is on the back of the good performance of the business and the cash conversion and the cash that the business has in our balance sheet. So we've been able to declare ordinary dividends there. The intention, however, to fund the special dividend is through the proceeds that we are going to be receiving from the sale of Motor Retail. In conclusion, we've had no material significant changes post the 31st of March 2021. On the Motor Retail side, as Dom has indicated, all the substantive conditions have been met, including the competition tribunal approval that we've received. Logistics, we remain focused to achieve and conclude the deal by the end of the financial -- by the end of the calendar year, which is at 31st of December 2021. Thank you. I'll now hand over to Emmy Leeka.

Thank you, Nopasika. Good morning, ladies and gentlemen. It gives me real pleasure to present Equipment Southern Africa interim results. Revenue was down 1.8%, mainly driven by a decline in machine sales, but also activity in the rest of Africa and particularly in Angola, Mozambique and Zambia. This is indeed detectable topline amidst the pandemic. The EBITDA was up 15.7%, with operating profit indicated by Nopasika earlier on, up at 24%. It is pleasing as well to see the operating margin at 10.2% compared to prior year at 8.1%. This was mainly supported by our cost reduction effort at 22.1%, but also the improved sales mix. Our efforts to optimize the invested capital has significantly reduced our invested capital by ZAR 4 billion to a tune of ZAR 8.2 billion. The division continued to generate strong cash of ZAR 1 billion with a free cash to EBITDA of over 85%. Our efforts in reducing costs help us to succumb the impact of COVID-19, and this has positioned us well in the years to come. Turning to new equipment sales by segment, our overall equipment sales were down 14%, mainly driven by the new machine sales to the mining sector. And particularly for the mining houses, we were down 25%. But also, we've seen an increase in terms of machine sales to the contract mining, growing by 14% -- 12%, sorry; and then as well as the construction side growing by 6%. And as you can see on the right-hand side of the graph, the contribution from 24% to 30%, supported strongly by our deliveries in terms of the government, RT57. Of note is that during the reporting period, we were able to increase our market share in a declining industry unit sales. Now when we look at the sales mix, the aftermarket remained resilient with the improved contribution to 59%. That also supported our operating margin of 10.2%. This notable achievement is the highest that the division was able to achieve in the last 10 years. We will endeavor to maintain and sustain this performance by: one, focusing on double-digit growth in the aftermarket, and particularly the parts side, but also ensuring that we sustain our cost discipline. The return on invested capital was down from 8.6% to 6.5%. But as it was explained in terms of how we account for the rolling 12 ROIC. If you consider the 6 months and annualize that, our ROIC is sitting at about 11.7%. But notably, so we have seen a significant turnaround for Botswana, and we still need to really ensure that we improve in terms of NOPAT for Mozambique, Zambia and Angola. Turning to the Democratic Republic of Congo. In the copper belt, our share of losses increased from minus ZAR 38 million to ZAR 104 million. As indicated previously, in terms of activity and then also impacted by the write-off of operating capital items, the change in our rental fleet amortization method, but also the restructuring costs. In terms of our program in ensuring we have -- we see the turnaround. We are executing that currently, and we foresee the full impact of our turnaround plans by 2022. We are progressing very well in terms of fixing our business and particularly aligned to the Caterpillar strategy of doubling services by 2026, but also ensuring that we continuously, as a division, we grow our population. It is important as well that we sustain our performance, and we will be using our -- continue to use our business system, improving our returns, reducing our cost to serve, but also ensuring that we can serve our customers better. We remain cautiously optimistic. The outlook it's mixed with positive signs. And particularly when we look at the mining sector, supported by strong commodity prices, unfortunately, our view in terms of the construction industry remains muted in the midterm. When we look at the next coming 6 months, our turnaround plans, our focus in making sure that we can deliver in terms of our promise, looking at a strong cash generation, improving our returns. And as we continue to focus relentlessly in terms of executing our aftermarket, we will do so in leveraging the omnichannels, improving our digital platforms in ensuring that we can be able to serve both our employees as well as our customers better. It is pleasing to see that our order book has improved from ZAR 2.39 billion in prior to ZAR 2.54 billion. Post balance sheet reporting as of April, our order book was sitting at ZAR 2.73 billion. Ladies and gentlemen, I thank you. I would now like to cross over to Quinton McGeer, who will take us through Siberia and Mongolia.

Thank you, Emmy. And good morning, ladies and gentlemen. I'm pleased to announce the 2021 Half Year Financial Results for the Eurasia division. A very strong start to the year, and I will unpack various highlights during the presentation. What makes this result even more pleasing is that despite the difficult trading conditions caused by COVID, in particular, on the Mongolian business, that impacted the results negatively. The division still delivered record performances in many areas. Revenue was up by 33% to ZAR 5.1 billion driven by the acquisition in Mongolia. An active mining segment, especially in the gold, coal and nickel segment, Russia generated 73% of the total revenue. EBITDA increased by 53% to ZAR 698 million on the back of the Mongolian acquisition, but also a record result in profit terms from our Russian business. Russia generated 70% of the operating profit. In terms of margins, both countries generated solid results with the Russian business generated an 11.4% operating margin and our Mongolian business, a solid 10.4% on the operating level. Both businesses again generated solid cash flows through good trading results as well as a working -- good working capital management. A very pleasing ROIC return with the division generating 14.3%, well ahead of the group hurdle rate of 13%. Russia, in particular, generated 18.3% ROIC compared to the 15% in the prior year comparative period. Next slide, please. In analyzing our prime product sales, one can see that this is dominated by mining with 82% of the revenue generated by this segment. From a Mongolian segment, it's 97%, so significantly more coming from mining. Our aftermarket contribution as a percentage of total revenue was very similar to 2020 with the Russian aftermarket contributing 43.6% to the overall revenue and in Mongolia, 46% of the total revenue. Our aftermarket continues to support the overall profitability of the division with good margin realization in both countries. We saw some very encouraging signs in March for our coal recovery, which bodes well for the second half of our financial year. Next slide, please. A diversified commodity portfolio, led by gold. Russia is the leading producer in most of the world's major commodities with an abundance of opportunities. Our portfolio includes blue-chip mining houses as well as junior miners. For Russia, one can see that our gold customer -- ourselves to our gold customers continues to lead. The revenue generation with 49% generated from gold compared to 43% in the prior year -- same prior comparative period. For the first 6 months in Mongolia, sales to our coal customers was driving the revenue, with 46% of total revenue coming from our coal customers. 76% of this coal is coking coal, and this has all been exported to China for use in the steel mills. Gold also plays a very important part in Mongolia, as illustrated by the slide. Next slide, please. So many opportunities on this slide, and I'm just going to highlight a few. In Russia, we do have some very big greenfield opportunities still to materialize in the coming few years. Like Sukhoi Log, the biggest gold deposit, owned by Polyus in Eastern Siberia as well as KAZ Minerals in the Russian Far East, a big copper deposit. However, interestingly is the comeback of the coal customers in Russia, specifically in the Kuzbass basin with some very nice opportunities that were secured over the last month or so to be delivered in the second half and first half of the next financial year. The situation in Mongolia is very similar to Russia with some big greenfield opportunities in both the coal as well as the copper segment. And then on top of that, we've also got underground development at the copper mine still to be concluded. Next slide, please. Our strategy has not changed, and we remain closely aligned with Caterpillar in driving growth and value for all our stakeholders. I just want to highlight 3 key points for us from a Eurasia perspective. One is the importance to continue winning the greenfield opportunities. Secondly is to develop and continue to develop and improve our digital footprint as well as to develop and improve our rebuilt capabilities that will help and assist our services growth -- doubling our services growth revenue. Next slide, please. Our outlook for the remainder of 2021 is it will be very important to complete the integration process for the Mongolian business and to capitalize on the mining opportunities presented to us as well as optimizing best practice in this region. However, I just want to draw give your attention to one very big highlight, and that is the exceptional strong firm order book in both the Russian and Mongolian businesses as at the 31st of March 2021. And the fact that we have managed to secure a further ZAR 42 million after the half year close supports a very positive outlook for the remainder of the financial year. And we are optimistic that the second half, we will continue to generate solid results and returns. And with that, I would like to ask Garth and hand over to Garth. Thank you very much.

Good morning, everybody, and thanks, Quinton. It's certainly a pleasure to be here this morning presenting our first set of results as part of Barloworld. We are very pleased with the resilient performance that Ingrain has posted during these challenging times, and I'd like to take this opportunity to pay tribute to all the employees and partners of Ingrain who have made -- helped make this possible. Before we cover the financial results, I'd just like to remind everybody that the period covered in the slides and in the information booklets that you've received, is for a 5-month period with the acquisition of Ingrain by Barloworld being effective from November 1, 2020. The period itself has seen strong revenue growth of 16%, driven by growth in sales, volumes in both the domestic and export markets, an improvement in sales mix and high international prices. This growth in revenue, combined with more competitive local maize prices and ongoing improvements in operational and efficiency, operational efficiencies and cost control has seen operating profit increased by 35% to ZAR 306 million. Ingrain continues to be a strong cash generator on the back of the improved operating results and a decrease in working capital requirements. And this has translated into a cash flow for the period of some ZAR 424 million. As mentioned previously, we've seen good revenue growth on the back of increased sales volumes in both the domestic market, which grew by 3.5%, and the export markets, which grew by 4.8%. The graphs here depict the mix of our sales across the various markets. And as you can see in the domestic and export markets, we've been relatively consistent in terms of the sales mix. In the co-product area, we've seen an increase in the proportion of revenue derived from co-products on the back of higher international commodity prices. Co-products are produced during the manufacture of starch and are sold into the animal feeds, edible oil and protein markets, largely in the South African domestic market. If we now turn to domestic sales, we certainly continue to see the benefit of our diversified customer mix with growth in the coffee creamer, prepared foods, canning and paper converting sectors, offsetting declines in the Confectionery & Papermaking sectors. The alcoholic beverage sector has shown its resilience during the period with quick rebounds from the various lockdowns and has still managed to demonstrate some growth over the prior year period. We remain very pleased with the progress that we continue to make in the areas of our powdered glucose and modified starch with growth of 8.4% and 16.8%, respectively. When we look ahead to the remainder of the year, despite the macroeconomic outlook, which remains uncertain due to the possible impacts of COVID, we still believe that we will see volume growth. And this is largely as a result of the following factors. We expect to see a benefit of reduced levels of economic restriction compared to the prior year. Certainly, in April and May last year, we saw significant impacts on volumes with the hard lockdowns that were imposed in that period. We expect to see further growth in part of glucose. And in the prior year, the April figures were impacted by some production constraints. In the modified starch area of the business, we only commissioned capacity improvements in the latter part of 2020. And so we expect to see the full benefit of these capital investments realizing themselves in the second part of the year. Turning to maize. And just to remind everybody that when South Africa has excess maize crops, it's beneficial to the business as it certainly helps improve and support margins. If we look at the prior year and the forecast for the current year, we can see crops of 15.3 million and 16 million forecast. And certainly, these are in excess of the 11.5 million tons that the domestic market requires. Current international markets remain incredibly volatile, with increased global demand, particularly from China, and also concerns around planting delays and weather concerns in key markets such as the United States and other key producing countries having an impact on prices. And we're seeing prices trading at levels that we have not seen since 2013. These high international prices are certainly resulting in an increase in international starch and glucose prices and increases and -- encouraging increases in planting intentions in various markets, of which South Africa has been no exception. The forecast large maize crop of 16 million tons for the current year is expected to provide support to margins in the business going forward. Turning to our strategy and our focus areas for the remainder of the -- all ongoing focus areas. Ingrain is continuing to look at various initiatives to accelerate its market development opportunities. This will be supported by ongoing operational excellence programs and efforts to optimize capacity within the asset base. These processes are being supported by the implementation of the Barloworld business system and resourcing and implementation of this program is currently underway. As mentioned, work is continuing on our various sales mix improvements and our import replacement program with a particular focus on powdered glucose and modified starches. Opportunities to expand our regional market presence continue to be reviewed, particularly as new trade regimes are being developed. From an outlook perspective, despite the uncertainties that remain in the markets as a result of COVID, we expect to see volume growth in the remainder of the year as markets recover from the lockdowns of the previous year, and we execute our various growth initiatives. The current high international commodity prices, combined with the forecast large maize crop are expected to support margins going forward, and we expect to see growth in earnings in relation to the prior year. Thank you. I'll now hand over to Ramasela, who will cover Car Rental and Leasing. Thank you.

Thank you, Garth. Good morning, everyone. Last year at this time, it was 54 days as a helm of Avis budget rent-a-car, a business and an industry that really epitomized the epicenter of COVID-19 within the Barloworld Group. This morning, I'm pleased to be leading an integrated mobility provider, offering Car Rental, Leasing and Commercial Fleet. Let me take you through the March 2021 results. A period of restricted lot down compared to March 2020, pre-COVID, pre-lock down. Starting with Car Rental. This business is predominantly an airport-based business, with 60% of the bill days coming from the airport. The closure of the airport and restricted travel, almost caused calamity to this business. Our recovery journey has been nothing but incredible, with revenue traded at 83% of the March 2020 level despite international travel, severely subdued domestic tourism, no public, no corporate travel. As management, we swiftly reacted by repositioning the business of the airport, expanding on a mobility subscription offering, that coupled with our expertise on the used car sale really contributed significantly to our result. Our fleet utilization was up 1.6 basis points, which gave us an average of 77%. And what is really, really encouraging is that in a period of 6 months, we turn around a loss-making position of over ZAR 300 million to a profit of ZAR 100 million. That despite international travel. We continue to generate strong cash in our used car business, supported by a buoyant used car market cost. What is important to note is that in this market condition, Barloworld invested back ZAR 2 billion in our business, we acquired over 13,000 new vehicles. Moving on to the Leasing business. Leasing remained resilient in the face of the pandemic, as well as continuously challenging market conditions. The actions that we took last year, of cost containment, restructuring of the used car really yielded positive results, with our op margin up from 16.2% to 18.8%. We continue to generate solid cash in the business. But key to note because it is known that profit sector activity has been low, but in this case, we protected our private sector space by replacing 100% of all our leased during the period through new customers and retaining most of our customers. And we are sitting with a decent order book. Let me take you through outlook. COVID-19 will still remain patent part of all our lives, especially as in the mobility and tourism business. We are, however, very much encouraged by the rollout of the Phase II vaccination program. We remain optimistic that we may see some business and iconic activity. New cars. New cars is still a challenge with the supply of fleet. That means for us, our used car market will still remain buoyant for the foreseeable future. As an integrated mobility provider, we continuously reposition ourselves in the digital space to be able to provide and cater for the changing mobility requirement. As we provide from a multiple -- from the motorbike to a 6x4 truck, a 1-day renter to a 7-day lease. I'd like to take this opportunity to hand over to Kamo. Thank you, Kamo. Thank you.

Thank you very much, Ramasela, and good morning, ladies and gentlemen. It is my honor to present the Motor Retail and Logistics business unit results for the period under review, ending 31st of March. I think it's important to note the key progress that has been made in terms of the restructure of the Motor Retail business, over the period, that resulted in a respectable ZAR 100 million reduction in terms of the base cost line of the business. And we've seen some very significant progress around selling gross margin improvement across the various key performance areas of the business, resulting in an improved operating margin of about 2.2% compared to 0.9% in the prior year. Of course, we ended the year with a positive free cash flow against the prior period where you had ZAR 925 million, significantly, obviously, driven around by the proceeds of Khula Sizwe properties. And the ZAR 119 million, as you see it, obviously, is purely operating in our cash flows on an ongoing basis. And this, obviously, again, is underpinned by the key performance indicators in the business that are showing a very resilient and positive, I think, improvement on an ongoing basis. So I see a business that is well positioned as it integrates with the NMI DSM business as we take it forward into the next 6 months. Logistics, on the other hand, has been a business that has been negatively impacted by and large by the effects of COVID-19 and the resultant lockdowns. As well as, obviously, some of the deliberate management actions around the turnaround of the business. And this business in the last 6 months has been put through at least 2 sets of restructures, just to make sure that we align and respond directly to the prevailing market conditions resulting in the reduction of employee cost of about ZAR 77 million as well as taking, of course, ZAR 34 million once-off costs related to the disposal of the business. I think the business is well set up with a new management team led by Lubabalo and his team, it redefines and repositions itself for its new future outside of Barloworld. And I'm strongly confident that Lubabalo and the team will do exceptionally well as they move forward. I thank you, and I would like to hand over to Dominic Sewela.

Thank you, Kamo. I must say this is the last presentation that Kamo makes in this forum. And thank you for enough years of loyalty and commitment, and particularly over the last 18 months, as you led, the auto and logistics division in through a very difficult period. I'm glad that you're leaving when the results are beginning to yield in Avis. You've spoken about Logistics. And I wish you well as a co-chief executive of NMI DSM going forward with the approval of the Motor Retail disposal. I think I'd just like to highlight 2 areas in terms of the strategic update, the disposal of the Logistics division as Nopasika has highlighted. It's well underway. Our view is that it will be concluded by the end of the calendar year. One other thing I'd like to highlight on the strategic update is around governance. Most of you would know that Neo Mokhesi has been appointed as the Lead independent Director. It's the first time that Barloworld has that Lead Independent Director. And also the appointment of a new Chairman is underway, and the announcements will be made in due course. Just coming back to my favorite slide. I think Nopasika did speak about the rolling 12 in terms of how we calculate, particularly NOPAT, and they're using the sort of the rolling 12 invested capital. But I just want to draw your attention to the invested capital table because I think that's what you will see that the management of these divisions have done exceptionally well under the circumstances. I think Ramasela, when she was up here, she said when all happens, we had just been in the role for 54 days, but what she negated to say is that in that 54 days, you were battling with COVID for the 2 weeks of that, and but notwithstanding, I think being able to take out ZAR 1.5 billion of invested capital within that time frame is actually great. And when you look at leasing, similarly, ZAR 700 million. So overall, in that division, the loan was ZAR 2.2 billion of invested capital taken out. So if you then annualize these numbers, if you look at the 6 months, and you said, if the conditions were to stay the same to the next 6 months, so you should be ending at about ZAR 6.4 billion, Ramasela in terms of Car Rental and about ZAR 12.5 billion in terms of Leasing. I think, similarly, when you look at the equipment side in Africa, Emmy has highlighted the issues in terms of the rest of Africa, but I guess, to take out ZAR 4.1 billion Emmy, that was also normal mean feed in terms of your team to achieve that. And my sense is that you should be in the region of about 11% and 12% ROIC by the end of September. A good story here is Equipment Eurasia, at 14.1% and taking into account that we just bought Mongolia and to achieve 14.1% for the period, it shows how stable that business is but if you look at VT alone, they achieved about 18%. So hence, Mongolia dragged that down. But I think, overall, with the second half, you should be seeing at about 16.2% return. I think Ingrain is very interesting because it is the 5-month trading period, as Scott has indicated, we've had a 5-week strike in the business, and we've had alcohol ban. And -- but notwithstanding, you're sitting at about 11.7% and my view is that those numbers include November and December, which tend to be your peak, Garth. And I think -- so if you were to annualize that, you have to take that into account, probably, I say that would probably 10%, a bit down to about 10% by the end of the year on set at 11.9% that we've indicated there because I think there was an anomaly in terms of that annualization. But I think of importance is what I spoke about in the beginning, that we are actually pivoting this business to a more simplified business. And I think when you look at Car Rental and Leasing, my view is that over the next 18 to 24 months, once we are more certain about the impact of COVID, we would look at various options of how best we unlock value to shareholders in terms of this business. And going forward, the business for Barloworld basically should be a too simplified. It is rising more focus as an industrial processing, distribution and services business, underpinned by Ingrain on the consumer industries and Equipment Southern Africa and Equipment Eurasia as the divisions of Barloworld. I think we are pretty tight for time. I would like to take some questions. If we are not able to answer the questions within the time frame set, we'll probably send those to you noise, and then we can respond online.

Thank you. I shall start reading the questions. Okay?

Okay.

A question from [Peter Krombach ] from EON Group. Given the increase in short-term debt, does Barloworld plan to reduce these short-term borrowings or convert into larger -- into longer-term date, sorry.

I guess most of the short-term debt, Nopasika, maybe you want to comment on that.

Thanks. Dominic. Just by way of reminder, included in the short-term debt as of the 31st of March 2021 was the bridging finance to fund Ingrain of ZAR 5.3 million. So that's why that short-term was quite high. So we've subsequently been able to refinance that entire amount. But we've only refinance about ZAR 4 billion. And the reason being, we had excess cash, so we didn't need to fund -- finance the entire amount. And we used about ZAR 1 billion for bonds and the ZAR 3 billion normal bank facilities. And I must say it was at very, very favorable rates as well.

James Twyman, would like to know what is our exposure in Mongolia? What is it by commodity? And how big the exposure is to top 1 or 2 customers?

Quinton, did you hear that question?

Yes, Dominic. I think if I respond like this. In Mongolia, there's 3 major commodities: coal, gold and copper. If we look at the first half trading results, it was sort of dominated by coal with 46% and 31%, I think, gold; and less -- to a lesser extent, copper. If you look at the second half, in terms of the firm orders, the picture is reversed, where we've signed more, I think, 62% of what we're going to deliver over the next 6 months is relating to the gold segment. So I think it's very diversified, and I think it's -- I can't do very much to be dependent on cycles and in terms of also the production schedules within the mine. So I think that's the 3 major commodities. I think copper at this point may be a little bit understated. Taking into account, there's election coming up in June. And then also the agreement that still need to be resolved between Rio Tinto and the Mongolian government. I think in terms of customers, we've got 2 world-class mining houses, one mining house and one contract miner operating in Mongolia being Rio Tinto and [ Ts ], one of the biggest contract miners in the world. And then a lot of junior miners. So our exposure, obviously, is more towards the big mining companies like Rio and [ Ts ], and then we've got quite a lot of smaller junior miners where they are operating in developing the smaller deposits, et cetera. I think very similar as if we look at the Russian Mining segment, a few years ago, we operated for a lot of junior mines.

[Munira Cava ] would like to know, please, can you give us more detail on Bartrac operations in the DRC? What are the challenges? What is the time line for this business to return to breakeven? And what do you see a sustainable operating profit for this division given it hit a peak operating profit of ZAR 270 million in 2019?

Thank you. I just wanted to start by explaining the impact in terms of the impairment numbers and particularly the restructuring costs, which were the once off. We reported previously about ZAR 59 million by January, in terms of the impairments as well as the restructuring costs. The total, to date, we're sitting at about ZAR 72 million. But if you take a 50%, it's about ZAR 36 million in terms of the impact on our numbers. And then the balance, which is basically the ZAR 68 million was more activity based. And then if you look at it in terms of the plans that we have in place to make sure that we can turn around the business, we are looking at making sure that we can be able to see us in terms of profitability into 2022. But again, it was promising, though, if you look at MUMI and can maintenance, whereby there's been talks of getting it back into operations, in 2022. So we are hopeful in terms of our diversification strategy as well, focusing on the other Chinese customers in the territory to make sure that we come back to profitability. So the numbers that we've seen previously of about ZAR 270 million in terms of the Bartrac contribution. It will take us some time as we're looking at the region, but supported by the strong both cobalt as well as the copper prices, and we hope in the next coming foreseeable future, we'll be able to see a turnaround there. Thank you.