Barloworld Limited (BAW) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining Barloworld's 2022 annual results. With you today, speaking in front of you is Nwabisa Piki. I'm the Head of Investor Relations. Today, you will hear from our CEO, Mr. Dominic Sewela and his team. Dominic will open with an overview and do a closing as well. We'll then move to Nopasika Lila, who will take us through the financial performance, and she'll come back later on, actually to take you also through some pro forma slides that we've prepared for you. Nopasika will be followed by divisional heads, starting with Equipment Southern Africa, Mr. Emmy Leeka; followed by Quinton McGeer to take you through the Eurasia Division. Quinton will be followed by Chris to take us through Ingrains performance and thereafter, we will close and go into a Q&A session. Please post your questions online, and we shall get to that. Without any further ado, I'd like to introduce Mr. Dominic Sewela. Thank you.

Thank you, Nwabisa. Good morning, ladies and gentlemen. It is indeed a great pleasure to welcome you all at this significant moment. I think this year, we're celebrating 120 years of Barloworld's existence. Similarly, we're celebrating a relationship of 95 years with Caterpillar. And I think often times, when we talk our results every year, I give you numbers in terms of ESG. But I thought -- let me just talk about it very differently because I don't think too many of you understand how we approach ESG at Barloworld. Before I even rejoined Barloworld, Barloworld was leading in this area of ESG. But I guess the way we weave the story sometimes doesn't come across as one because, fundamentally, we're saying for the business to survive 120 years, how does it ensure that it survives another 120 years. First and foremost, it's going to operate in an environment where it respects its people and show that its people, when they come to work, they come to work in a safe environment. Therefore, it's one of the things that we look at. Another one is employee engagement because employees that are disengaged are very difficult to please the customers. But these very same employees are coming from communities that are distressed, that are challenged, therefore, we, as a company needs to think about what impact do we make in those communities where we operate in, and where our employees are coming from? But we also live in a planet that is only one planet that at least I know. There are other planets out there, but this planet is the one that we, as Barloworld operate in. And it is our responsibility as the executives and the Board to ensure that we are responsible in reducing the negative impact to the planet. You know that we've given you steps around water withdrawals, electricity consumptions and the emissions reductions. But more importantly, we thought it's important that as we continue taking the steps, we also engage other stakeholders like funders, to say we, as Barloworld, have embarked on these things. We would like you to start linking our funding to some of these, but it must be funding that makes sense for us. It must be cheaper because we've done the work and we intend to do the work. And I'm glad that we were able to negotiate a sustainable sustainability bond of over ZAR 1.1 billion and linking that bond where targets that spoke to solar energy because by the time we engage, we had already rolled out 1,300 megawatt hour of photovoltaic solar plants across our businesses. We said we commit that by 2024, we'll increase that by 55%. But also of importance, we say we link that funding to the safety of our employees, that we want to see the reduction in lost time injury where we're currently sitting at 0.34, which is very low, by the way. It's very low because our journey is to move to zero harm to our employees. I'm glad to say, this year, we've reduced that by 19%. But of importance, we said, when you look at South Africa and we look at countries like Siberia where we operate, women are a major component of our business. So in our drive to diversity and inclusion, we felt it is important that we represent women, not just in lower levels but in boards, in senior executives. And when we put up this bone on, we're already far ahead in terms of our targets. But we said we don't want to drop those standards. We want to maintain and increase them, gender-bond link -- that gender linked bond has got metrics that seeks us to ensure that we can only do better in terms of what we've done thus far. But we didn't end there, we said it's important to also increase the number of women that we do business with. Through Siyakhula since that bond, we've onboarded 28 women enterprises, bringing up the number of people in that Siyakhula business to 87 and creating 2,500 jobs. It makes a difference in the society that we live in, in a country like South Africa. But I don't want to make it sounds like governance is not important for us. Governance is very important. Most of you, as shareholders, do engage with our Chairman, Dr. Lulu Gwagwa, and some of the directors in governance road show. The objectives of those is to ensure there is an alignment in understanding the strategy from the perspective of a shareholder, making sure that shareholders can raise issues in the absence of management so that we are aligned in what it is we're doing to impact the shareholder as a key stakeholder. But what you see in front of here, I'm very proud to say the work that we do didn't go unnoticed. The SARA Rewards Award gave us an award to say we've came first in terms of our remuneration report. That speaks to the transparency of how we reward our employees for work done, the way we set targets, it's very transparent. Anybody can go and read those reports because sometimes we can write very complicated reports, but we've been able to do that. I think it was important that I start with this slide because when you now look at how we cascade our strategy to execute lowest-level employee, it is important to bespoke in that context. This year for me is a year of consolidating -- of consolidation. I've been in this job now for 5 years and probably about 8 months. But notwithstanding, it was very clear that we wanted to make sure that our strategy of fix optimize will grow, execute an delivers. And we also spoke about the cash generative nature of our business. And every year, we measure those, and I'll talk about it later on, but it's pleasing also to see the acquisition that people doubted, probably, didn't understand the rationale delivering significant results, 27.5% up on EBITDA, and Chris will talk more about it. But one of my biggest [ bad boy ] was this Logistics business. Because I did at some stage, believe that we can tender around, but I must say, I was humbled by how tough this business was. And sometimes, the reputation of the business is stronger than the reputation of the leader. And I had to exit that business. I'm glad that we've finally exited. The other one that you would have seen announced this morning was the unbundling of Avis. I know some of you asked the question, should we unbundled, should we sell it? But we said, no, let's rather fix it first and foremost because 2020 really hit this business. We brought new management team on to that company. That management team, through a very short space of time, they turned the business around. They have built a track record that no buyer could give me a price that will satisfy that I would be able to distribute value to the shareholders. And hence, we believe that, with their track record, they will be able to actually stand on their own and demonstrate to the market what they can deliver value directly to the shareholders. So all of these actions lead to numbers. And I don't want to spend too much numbers because numbers speak for themselves. But just to highlight, that [ ZAR 17.71 ] (sic) [ 1,771 cents ] HEPS growth, this is achieved, ladies and gentlemen, in an environment that we just came out of COVID not too long ago. We're currently experiencing a war in Ukraine. There are headwinds geopolitically and there are headwinds around inflation and some people talk about recession, but notwithstanding we delivered these results, and I'm really proud of the team that has helped me deliver those results. And to that extent, the Board has approved, not only just a final dividend of ZAR 295, but they felt, when they looked at the balance sheet, when they looked at the cash generative capability of what is core, they also declared an additional 550 cents a share. I'm going to hand over to Ms. Lila to take you through results for continuing operation. Thank you.

Thank you, Dominic, and welcome to all to the financial year-end presentation 2022. Indeed, it has been a phenomenal year, Dominic. The numbers speak for itself. And we have been consolidating this financial year from a strategy point of view, and we'll see a lot of focus into our core operations going forward. So the results that the business has delivered has been stellar results in an environment that is very, very challenging. So I'll start with the construct of the numbers so that it's easier to understand our financial statements. And so the first point to consider is that, similar to the interim numbers that we did present, we spoke about discontinued operations. So that remains. Also, what you'll see as an adjustment is our EBITDA and core operating profit now includes the adjustment of fair value as well as BEE charges. Ingrain, of course, we reported 11 months in 2021 and compared to a 2022 -- sorry, 12 months in 2022. So with that in mind, I will pivot straight into then the performance of continuing operation. So our continuing operation has performed phenomenal results. And we see there with that revenue, that performance of 15%, that is up 15% in the current year. Also, when you look at our EBITDA, it's up 9% in this current financial year. I move forward to operating profit, 13%, and headline earnings at 16%. Now those results speak for themselves from a highlight perspective. But just in terms of revenue from absolute numbers, so you get a sense of the percentages that I've spoken about. Revenue is at ZAR 39.4 billion for the year. And this is an increase from ZAR 34.1 billion in the previous financial year. Operating profit also at ZAR 3.7 billion. And our adjusted effective tax rate is at 25.5%. So when I cover the segmental numbers, I will not be specific because the specific heads will follow and talk more detail about their performance and also how they have achieved, managed to achieve those results in these difficult times. But having said that, though, from a revenue point of view, we saw resilience from trading activities from all operations of Barloworld. On the EBITDA side, again, ZAR 4.7 billion of EBITDA recognized. And here, I must emphasize again, this is continuing operation that we are talking about. Operating profit from core trading activities. Here, again, that ZAR 3.7 billion coming through, with a 13% improvement in the current financial year. During interim, we spoke about Russia. We spoke about it's impact from an impairment point of view. So we took a ZAR 1 billion at interim. So it is pleasing to mention that we have not taken or recognized any additional impairments in the latter half for the Russia business. So what remains in our Russia business at the moment from an asset point of view is the land and buildings as well as working capital in order to continue to run and manage the business as the team has done phenomenally well from the results that we are seeing today. Moving on to the tax adjustments. So our effective tax adjustment this year, it lands us at 25.5%, which is very much in line with what we presented last year. This is now if we take out the impairment as well as the withholding taxes that -- this is now withholding taxes from dividends, obviously, from our businesses, whether we talk about the Greater Africa and Eurasia. This is a very exciting story for me. So when I look at the performance of our investments in our JVs and associates, you may recall last year, we reported ZAR 36 million in terms of profit. But this year, we are reporting a magnificent ZAR 309 million, which is the performance coming from the investments. And this is really driven by the Bartrac. You'll see Bartrac last year had a loss. And this year, we're reporting ZAR 143 million. What a remarkable recovery for that business. Thank you very much to the team managing Barloworld -- I'm sorry, the Bartrac. On the NMI side, also great recovery, that is a 50% improvement in terms of our share of the NMI business. And once again, phenomenal, phenomenal performance from the joint ventures and our associate and keep it up teams. Now moving on to our HEPS. So here, we are seeing the sustainable earnings coming through when we report our operating -- sorry, continuing operating HEPS at 1,093 cents (sic) [ 1,096 cents ]. And this is also an improvement from that ZAR 945 that we had reported in the previous financial year. Now from a group perspective, now here, this is when we add our discontinued operations back. We include them. And we're talking here Avis. This is a Car Rental and leasing as well as Logistics, our group HEPS increases to 1,771 cents. Again, a great improvement from that 1,195 cents that we had reported in the previous period. On the financial statement -- sorry, balance sheet, we look here at how our assets have remained strong with that asset, ZAR 54.4 billion. And to note on the balance sheet is really the reclassification of our assets and liabilities. And here, this is now, again, as a result of the discontinued business that we had mentioned earlier. On the equity line, we have utilized funds to pay back money to our shareholders. And this year alone, we paid back to the tune of ZAR 4 billion back to the shareholders. And this has been in the form of both dividends as well as share buybacks. On the free cash flow side, we are reporting ZAR 3.7 billion free cash flow generated from the businesses. And this is obviously before taking into account our derisking of the U.K. pension fund. And we've heard -- and we have heard and received queries in terms of what does this then mean derisking of the pension fund. And for us, it means that we are currently protected from future volatility in the pension fund in the U.K., and congratulation to the team for actually closing on that deal as well. On the net group -- on the group net debt, so here, we closed off the year with a ZAR 4.6 billion of net debt. And yes, it is an increase from last year of ZAR 2.3 billion. But what this is doing, it's -- we are doing this or increasing because we would -- we want to be aligned with our own debt equity ratios that we are managing very, very closely. And at these levels, it is very, very low. But we are going to be increasing going forward. And also to mention on the slide is we closed the year with a cash of ZAR 9.5 billion. We are geared for growth and ready for future opportunities. We remain very comfortable on the covenant side, and with our group covenants from a net debt to EBITDA at 3 -- which is measured at 3x and we're sitting at 0.6x, very, very comfortable in terms of that covenant. On the debt, on the EBITDA gross interest, again, very comfortable on that measure. Here, the threshold is 3x, and we are reporting 7.5x, very, very good performance. On the metrics, we measure ROE and we measure ROIC and many others, but focusing on these 2 today. On the ROIC -- on the ROE, we're reporting a 17.7% which compared to our target of 15%. We've exceeded that target. On the ROIC side, 16.9%, again, we're exceeding our target of 13%. Now extracting from reports from investors. I understand that these are levels that Barloworld has not achieved in the last 20 years. So this is really a good performance coming from Barloworld. And team, let's continue achieving and delivering at those levels. As Dominic has said, the Board has declared a final dividend of ZAR 295. And this is, in total ZAR 460, if you take into account the ZAR 165 that we have declared during interim. Now this dividend that we are talking about and declared it is in line with our dividend policy of 2.5x to 3x. Also, with the cash that the Board has seen and also aligned with our capital allocation principles, the Board has seen it necessary and reasonable to declare an additional special dividend of 0.555 cents (sic) [ 550 cents ] per share. What a pleasing, pleasing performance for the business. And I think, having looked at numbers that look like this, it is pleasing and exciting to deliver on such results, well done team. And at this point, I'd like to hand over to Mr. Emmy Leeka, who will take us through the performance of Barloworld Equipment Southern Africa.

Thank you, Ms. Lila. Good morning, ladies and gentlemen. It really gives me pleasure to announce Equipment Southern Africa results for the year ending September 2022. Exceptional result indeed, with revenue up at 20% to ZAR 21.8 billion, mainly driven by a 34.4% growth in total machine sales. The operating profit from core trading activities before the impact of financial instruments was up at 21.7%, with the margin at 10.8%. Our joint venture in the Democratic Republic of Congo continued to deliver positive share of associates, a very strong cash conversion, with free cash at ZAR 1.9 billion. We have delivered a record return on invested capital of 22.8%. Now turning to new equipment sales by segment. The new equipment sales up at 46%, mainly driven by the mining customers and particularly the contract mining. With contribution prior year at 30%, and in this reporting period contributing at 43%. But again, when we look at which commodities drove that improved new machine sales? When we look at coal and platinum, although, overall, we've seen an improvement. However, we've seen significant improvement coming from copper, zinc, manganese and as well as iron ore. Our aftermarket, or product support remained resilient. Given the fact that we've seen a significant growth in machine sales, we managed to maintain the aftermarket contribution of 53% compared to prior year at 57%. And when we look at all the efforts that we've put in, in sustaining cost discipline, cost efficiencies that assisted us to maintain the op margin as we have promised of 10.8%. That is before the impact of financial instruments. But I've included at the bottom of the graph in blue that shows the impact in terms of fair value adjustment when we include the financial instruments, and we'll continue going forward reporting based on the financial instrument included as part of our operating profit. Now turning to the performance of Bartrac. As indicated by Ms. Lila. We've seen significant improvement in terms of activity, overall, revenue up 72% in U.S. dollar terms, mainly driven by increased copper and the execution of our diversification strategy. But I just wanted to take you back to 2015. When we had concentration risk in terms of customers, only 3 customers who contributed more than 85% of our top line, which is KCC, MUMI and Tenke Fungurume. That year 2015, share of our income was ZAR 265 million. And we know what happened with the Kamoto mine in the pit challenges that they had and had to stop production, and, hence, we had a decline -- significant decline in terms of profitability from Bartrac for the -- over the period of 2 years. And in 2017, we started seeing the contribution coming to the fore and then also at about ZAR 93 million. As you can see in 2018 to 2019, contribution in terms of the ramp-up went from ZAR 251 million to ZAR 268 million. I must say 2019 was a record contribution based on the rand number. However, we know what happened with COVID in 2020. Over and above, we had MUMI going on care and maintenance, and then that's when we started seeing the losses in 2020. And we embarked on the journey in terms of cost efficiencies, turnaround strategy in terms of diversification, that yielded the numbers that we are seeing as reported of ZAR 143 million. In the near term, the copper prices started to retract, and we are seeing going forward. But in the long term, we believe that they will bounce back and be sustainable based on the demand for copper. And hence, we have a positive outlook for 2023 with activity levels expected to steadily improve. Now turning to our divisional strategy. It's really pleasing to see that we are delivering on our promise from fixed, optimized, but now we're saying we need to grow and drive our growth agenda. We will continue, ladies and gentlemen, to focus on double-digit growth in terms of services, but also deliver a solution to cater for our various customers in growing the population. Focusing on improving the turnaround times and as well as enhancing technical skills and retaining our technical skills will help us to improve customer experience. We have made great strides in terms of e-commerce, particularly around our retail customers, by definition, customers that have 1 to 3 machines. And then we'll continue to focus in making sure that we improve the e-commerce penetration. We need to grow the market share, particularly in the regions that are delivering below average. And through the Barloworld Business Systems, we will continue to embed that culture of managing for daily improvement, cost efficiencies, process efficiencies to make sure that all our brand champions are problem solvers. Now turning to the outlook. We remain cautiously optimistic as indicated by the Group C regarding the headwinds. But if we look at the order book, sitting at ZAR 4.8 billion, and post balance sheet, I must say it was sitting more than ZAR 5 billion. We've gone through the restructuring. We've gone through optimization. We've been on this journey, and we are well positioned to achieve profitable growth. Our aftermarket opportunities remain very, very attractive. As we're going to expand our omnichannel coverage, in order to drive positive customer experience, we will continue to deliver in terms of our ESG commitments. As Dominic said, zero harm is possible and we have seen in the reporting period, we managed to reduce our lost time injuries by close to 40%. We are focusing in terms of the environmental side, looking at the rebuilds, linking it back to aftermarket, particularly around machine rebuilds, component rebuilds to make sure that we deliver when it comes to the secular economy. Ladies and gentlemen, I would like to thank you, and I'd like to pass on to Quinton. Thank you.

Thank you, Emmy. Good morning, ladies and gentlemen. I'm pleased to announce a set of strong results for the Eurasia division, despite a very difficult trading environment in which we operated during 2022. In rand terms, the division reflected no growth on the revenue line. The division also become under pressure in the second half from a cost perspective with a very, very strong ruble. And that impacted our operating profit and operating margin marginally down. The fact the margins were still good, and this was driven largely by a good aftermarket performance and margin realization in both countries. The division continues to generate strong cash flows on the back of a good trading result as well as working capital management. If we turn our attention to the ROIC, Russia generated an excellent ROIC of 39% versus 21.4% in the previous year. If we were to reverse the impairment that were booked at the half year, the Russian business would still have generated an ROIC of 31%. Mongolia had a very difficult year, driven by sporadic border closures due to the COVID lockdowns in China and generated an 8.9% ROIC for the financial year. From a prime product perspective, it's pleasing to see that all the segments made a significant contribution to the top line, with mining still dominating at 60% of the total prime product sales. Aftermarket in Russia, reflected a real growth of 9% in dollar terms, with a record result generated in 2022. Despite the negative growth in Mongolia, the division still reflected an overall growth of 3.8% in this segment, contributing to the overall profitability of the division. If we look at this slide, it's -- it reflects a well-balanced portfolio, reflecting a diversified mining customer base. And we still have access to most of our mining customers. I would also like to just maybe mention that most of the commodities produced in Russia and Mongolia are now being exported to China and India as an offtake. In terms of the outlook, I think it's clear to see the impact of the sanctions with our firm order book down from $224 million to $26 million at the end of the 2022 financial year. Our target for Russia in 2023 was to -- will be to get at least to a breakeven, and we will be focusing on also the recovery of our Mongolian business. And it's pleasing to see that the October numbers already indicated a strong recovery, with $5 million (sic) [ $6 million ] worth of firm orders signed. In terms of the focus, specific focus areas, obviously, our employees will be first and foremost. So we talked a lot about safety. But another very important one will be compliance, specifically with what's happening in the Eurasia division. We will also align and structure our business according to the opportunities that is available to us as and when the year unfolds. We will focus on cost containment. We will focus on cash preservation and working capital and then obviously the Mongolian recovery, specifically also linking it to the Oyu Tolgoi big copper mine that is ready to start with the underground phase. And with that, I would like to hand over to Chris. Thank you very much, ladies and gentlemen.

Good morning, ladies and gentlemen. It's really good to be standing here and presenting the first full 12-month results for Ingrain in the Barloworld stable. We've had a very good year this year, and I think the benefit -- the business has benefited from some tailwinds and we've also been able to take advantage of those tailwinds in delivering a very good set of results. These results show comparatives for 11 months in the prior year. But if I have a look at the revenue growth, EBITDA growth and operating profit growth for -- on a 12 months, 12-month period, you would still see strong double-digit growth in all of those sectors. But just focusing on what we -- on the highlights for this business, revenue is up 34%, really supported by good underlying volumes and also higher starch and glucose prices that's come through as a strong driver on the EBITDA line. But pleasingly, operating profit is up by more than 31% in the period under review. We've also benefited from very, very strong cash generation. And if you look at the ratio of cash -- free cash to EBITDA at around 65% is a very, very good result, and that's after including ZAR 170 million of cash CapEx during this 12-month period. Going forward, around this, we'll continue to focus on net investments in capital, the skills we need to drive the growth and also trying to optimize that sales mix as we go forward. If we look at the segmental breakdown of revenue into our key segments, we've had a very good growth in overall revenue. Domestic market have -- we've grown participation. And I'm also pleased to announce that we've grown export volumes as well. We've seen the domestic sales really impacted by a strong recovery across the major sectors, and I'll unpack that on the next slide. And then we've also benefited from very, very strong demand in the pet food and animal feed sector, where our products remain highly desirable in -- within certain customer groups. Our exports has been a story of success this year. We've been able to grant more and that has allowed us to capitalize on those export opportunities that have availed themselves during the last 12-month period. If we just have a quick look at the domestic sales, you'll see good growth across the segment. I'm particularly pleased about the strong recovery we've seen in the confectionery sector. And we've had a targeted strategy to go after the import replacement program of glucose in this sector, and we've seen good volume recovery come through in this -- in an 11-month and 12-month scenario, but also if I look at this from a 12 on 12, we've seen strong double-digit growth in the sector as well. We've also benefited this year from a recovery in the paper sector after the major disruptions our customers saw last year as a result of the floods and unrest in that province. I think just looking at the overall market, export sales volumes are up by 26.5%. It's a very good result. We've seen good strong demand and, obviously, the ability to fill some long-standing backorders in the system. We've also seen an uptick in demand in Southern Africa as well. Looking at operating performance in the business, and this is the success story of Barloworld Business Systems for me. We've seen strong grind across the mills. I just want to draw to your attention that, yes, we're looking at 12 months, 12 months because we're looking at production volumes out of the plants. We had some challenges at Belville. We had a dryer go down, and that was replaced in September. We were running at reduced capacity for probably 9 or 10 months this year. That was replaced in September, and we should see Belville settle on a 4-shift system going forward and increasing volumes down in the Western Cape. But the real success story here for me is Kliprivier mill. We've increased grind at Kliprivier about 31,000 tonnes, which is an equivalent of 1 month's grind. And this is not on the back of expansionary CapEx that has been put in. It is purely aligning operating efficiencies in the mill and making sure that BBS delivers on what we're looking for, so 1 month, no CapEx, and we've only invested in maintenance spend on this particular plant. I think it's a great result that has been achieved. All right. Looking at our focus areas in this business. Safety remains a critical focus for us. We haven't done well this year. And in line with the group's overall commitment to safety, we've got some work to do in this particular space. We will continue managing cash and price commodity exposure. Our investment in plant and infrastructure and driving efficiencies will unlock results for us. The focus on customer and improving supply chain efficiencies has also taken quite a lot of time and investment this year. We've opened up a new DC on the first of November in Johannesburg that should improve our product availability and on-time and full delivery to smaller customers who take packed product -- take packed product from us. Our investment in people will continue. And as we drive our culture change in this business, you should see and positive improvements come through as people become part and parcel of the Barloworld family, and we entrench our values and systems across the business further. And last but not least, I'd like to speak about sustainable development. We've made some good strides this year on energy efficiency in the business, but we've got a lot of work to do in terms of water and water recycling and energy efficiency across this business to really go out and address some of the longer-term structural headwinds that we will face from an energy security and water security in this business. Just looking at the outlook for the business. The macro environment still looks like we should see strong commodity prices, which will support our margins. Energy security concerns we've addressed, and we'll address those through a CapEx program going forward as well as we invest in -- these are solar plants and battery backup systems to remove some of the challenges we face in core manufacturing. From a market growth perspective, the domestic market still looks attractive to us, and we also continue to see a strong growth in the export markets. We'll continue to make the investments we need in our business to grow the core, and that will be supported with the operational excellence program, and that we expect to see BBS unlock additional yield through our businesses into 2023. And we'll also debottleneck our plants, which should give us additional ground capacity into 2024, really supporting the next 18 to 24 months growth in this business. From an input cost point of view, we are seeing some headwinds there. Utility costs are higher than inflation. But on the flip side to that, we've secured sufficient maize supply for 2023, those prices are locked in, contract is secured. And with the good rains we're having, we're expecting to get good yields this year coming through, which should secure maize availability for us in this growing season. And that means that we'll have our maize supplies covered right up until the middle of 2024. So currently, the runway looks quite positive for us from that perspective. And then lastly, turning to growth. We think we're well positioned in this business for organic growth opportunities that present. The markets are attractive, and we're trying to take every opportunity we can and focusing on margin enhancement and growing the top line. And then we also believe in line with the group's growth ambitions that Ingrain provides a very, very strong platform for growing into the food and ingredients sector going forward. So with that, I'd like to thank everyone and then hand over to Nopasika.

Thank you, Chris, and thank you to the heads of divisions for those presentations. Now you may have heard from Dominic earlier as well as seen from the investors -- sorry, from our SENS announcement earlier that we have and are unbundling Avis Rental Car and fleet. So what we have done and what we feel is very, very important is to demonstrate how Barloworld would have looked like had we unbundled at the 30th of September, 2022, because that is what the business is going to be going forward. So the only adjustment that we are going to be making or you will be seeing is really that ZAR 355 million of interest. Now how that arises is because Barloworld has a centralized treasury. So we have some of these finance costs sitting in the group's accounts. So that is the amount or item that you will see being adjusted. So if we adjust that amount, we would have reported a profit for the period of ZAR 1.5 billion as opposed to the ZAR 1.2 billion that we are reporting before the performance. On the balance sheet side, Avis has been an asset-heavy business. So Barloworld pivoting to being an asset-light business, we notice and see that our net debt will reduce to ZAR 1.3 billion from what I had reported earlier of ZAR 1.6 billion. So our group debt itself is going to reduce tremendously. So what does this mean? It really means that Barloworld is ready for its growth in terms of strategy because we have sufficient capacity from an asset point of view to optimize. And also from a gearing point of view, if you note that 9%, we're sitting very, very low if we are to take out Avis therefore, that is the headroom that we have for growth. On the covenants, again, we remain very, very comfortable with covenants. In 2021, as reflected in the numbers, we had a cash position or would have set at a cash position had we not had Avis into account. Moving into the current year, as I've indicated, we are sitting at ZAR 1.3 billion from a net debt point of view. So when you look at our net debt to EBITDA, again, we're sitting at 0.3x, which is way above our threshold of 3x, and also EBITDA gross interest at 7.8x, which is well above our threshold of 3x. So great business, position for growth. And also, if I should mention, it is demonstrating that Barloworld world is a cash-flash business. At this point, I'd like to hand back to the group CEO.

Thank you, Nopasika. As we wrap up, I guess it's important to look at the group in review. When we started out, we said our set objective instead of doubling intrinsic value. And this would be realized by us fixing the business are optimizing it and grow it both organically and inorganically. You can actually see when you look at this group in 2016, we had a revenue of about ZAR 66 billion, and now we're down to 26% if you look at the component of those. I think one of the things I remember saying to my Remco chair at the time was that my intention it is not just to run a big business with higher revenue and a lot of people because you know as a CEO, you get paid quite well when you have a lot of people reporting under you and you have high revenue, but whether you make money or not it was another story. And we sold [ Spain ] during that period. And what we also did, we also exited, like what Nopasika was talking about, Logistics and Avis. You can actually see that the group is down 41%. So when you look at it is like why are you shrinking the base? The issue is, for you to be able to move forward, you've got to establish a strong, solid foundation from which you can grow from. So when you look at the core business, in spite of the down -- the growth -- I mean, the decline in revenue, you look at combination of acquisitive growth as well as organic growth, delivering 58%. But I think what is more important is the next slide. If you look at the quality of earnings of this business is improving from about [ 6.5 ] in operating profit to around [ 10 ]. Even if you take out in the latter part, IFRS 16, the effect is minimal. And you can actually see that the core of what's left behind of Barloworld, you've had Quinton, you had Emmy, you've had Chris, we are talking about businesses that have got operating margin in the double digits. Therefore, that is a platform upon which we will be -- we would like to grow this business. And when you look at what we've done in terms of capital allocation because one of the key issue, if you are an executive and running a business that's generating returns below cost of funds, in fairness, you are saying, you're not worthy of keeping shareholders' money, you're best returning that money to shareholders. And during that time frame when we are still fixing this business to try and ensure that we can -- and our right to grow, we have returned money to shareholders. During 2017 and 2022 we returned ZAR 11.2 billion. That's a lot of money. If you look at how that was retrained is ZAR 8.6 billion of that was in ordinary and special dividends. And we also returned another ZAR 2.6 billion through share buyback because we believe that we shouldn't be keeping shareholders' money when we're generating the returns that you saw. Now when you now look at what Nopasika spoke about, and I chose to represent this slide this way so that you can get a feel, and I'm going to take you through a series so that you can actually see that we understand what it is we're doing in terms of the journey that we're embarking on. Because sometimes the accounting effects that are always sometimes to say to my EFD, I don't understand is, IFRS 5, IFRS 16, but I'm just is a commercial guy, but now let's just take you through those numbers. If you look through the journey, right up until 2021, we were below our cost of fund, whether you looked at it in terms of ROIC, whether you looked at it in terms of ROE. In 2022, with all the headwinds that we have, you can see the benefit. But obviously, this is a combination of effects. When you buy back shares, when you return money to shareholders, you're reducing your equity, but you are actually taking actions that are accretive in nature as opposed to be going to buying huge businesses and paying a premium. You can begin to see the effects of it in those numbers of 17.7 and 16.9. But if you now say, okay, let's just exclude Avis and Logistics out of this number, as Ms. Lila was trying to do in the performance side. In 2018, if we didn't have Avis as part of our group, would have generated a return of 15.6. So when people are asking me, why do you want to sell or why do you want to unbundle this business? I have figured it out. That great as a business it is, we, as Barloworld, we're not the right parent for that business. Obviously, we all know what happened to 2020. And you can actually see the differential between the 2 numbers. I mean if you restate for IFRS 15, you compare 15.8 and 15 in terms of ROIC. And if you look at it further, you say, let's exclude Russia. And the reason why I'm saying exclude Russia, because I saw in the beginning of the year, when the word broke out, some shareholders ran to the mountain. They dropped the share price from a value point of view. We said if you looked at the value of this business, it was still far more valued than what the market was pricing it at. And when you look at those, you're saying that ROIC would be about 12.9. That's assuming Russia is worth zero in our books. And you know it's not worth zero even after unbundling it. But a 12.9 return is decent, taking into account that we've had Ingrain for 2 years. And I'm looking at Chris, as I say here, and Chris, I said you have 3 years to make sure that, not only do you wash your face on this business, but you actually generate a return above your cost of funds. And I'm sure he will get there. So this, for me, is a story, ladies and gentleman, that says, when you look at the actions that we have taken over the years because fixing a business the size of Barloworld, with the history that Barloworld has, takes a while. I'm not saying one swallow make a summer. I'm quite aware that it's going to take us a while to ensure that we continue to retain and grow at those levels, failing which we will continue to allocate capital in the best way we know how. If the share price continues to be trading below intrinsic value, we're going to continue to buy shares. And if it doesn't, if we don't get the volume necessary, we will give dividends back to the shareholders. But by the same token, when business opportunities that fits our profile within the [ constraints ] of the current metrics, we will look at acquiring those businesses as well to ensure that we allocate capital in a way that will be accretive. So I just want to close by an interaction I once had in Cape Town in 2016, as I was ascending to the role of CEO, I was still CEO designate. And I remember a gentleman called Craig Butters. I used to go to Prudential with Clive and Don every year. But Craig consistently, without fail, they had a boardroom called the Benjamin Graham boardroom. For those of you who know who Benjamin Graham is. And Craig would bring this piece of paper and put -- give 1 to me, 1 to Clive, 1 to Don and say, "Tell me guys, what am I missing? What's happening to your return on equity." But I must say, Craig, wherever you are, I did get you. And we will sit as when we said we've got to do something in addressing our returns. But it's not enough to address returns. It's important that you generate cash because it's true cash that you could fund growth, it's through cash that you can pay down debt. So ladies and gentlemen, we will open up for questions. We did a survey, and I know that some of you feel that we sometimes don't give you enough time. And it's best to answer some of the questions in this forum. And I know some of you would be meeting one-on-one with the management team, but let's open it up to questions. Nwabisa?

Thank you, Dominic. Our first question comes from Shaun Bruyns. He wants to know about Bartrac. In this financial year, did Bartrac post -- or how many months in the financial year did Bartrac post positive results? And what is the outlook for the JV in 2023?

Emmy, you're taking that one? Mic is all you need.

All right. Thank you. Thank you for the question. At interim, we reported a contribution from Bartrac of about ZAR 51 million, and for the second half, then we reported a contribution of ZAR 92 million, which is a ramp-up. So throughout the period, Bartrac showed a steadily improvement in terms of the contribution for the reporting period. Now to the second question, with regards to, yes, the outlook for 2023. As we indicated, should everything remain the same, we're saying in terms of activity improvement between 10% to, say, 20%, given some of the headwinds, we know that there will be elections in the DRC. But however, in terms of positioning ourselves, going out and making sure that we focus on, again, additional customers that will help us to realize that activity improvement.

Thank you. [ Imtiaz ] would like to know, Chris, how is Ingrain managing with load shedding, especially when we move to Stage 4 and higher?

Thank you. From a load shedding point of view, our Germiston and Kliprivier mills do not get load shed at all. They are part of the large user group in the country. And then at Meyerton we are also not subject to load shedding in discussions with the local municipality. At Belville in Cape Town, we do deal with the municipality on load curtailment. So we're not subject to outright load shedding. And there's a sort of a 3-day schedule where we look at historic, or the last 3 days average usage and that will then determine the factor going forward. So currently, load shedding is not a major impact on our operations. The bigger issue that we do have are spikes, where we do have some interruptions in production. But I think the team has learned to work within those schedules and to work around those. And then going forward, we will be addressing this through the -- through a capital program in 2023 to look at alternative energy sources for the business where possible.

Thanks, Chris. Let's stay with you. Marc Ter-Mors wants to know how did the maize price differential, the global versus the local impact your margin? And what maybe is the outlook given that the local crops will likely be lower?

Thank you for the question, Marc. We've already secured maize for 2023. So that maize was purchased last year between October and March of this year. So those volumes have been locked in, and those prices have been effectively hedged. I think from the international higher prices that affects local prices at the export parity level, and you're seeing local maize prices rise in sympathy with global prices. But currently, because there's an excess in the local market, we're trading closer to export parity. So we're benefiting from that differential between export and import parity pricing largely. There are a lot of our customers, though, that do price on a cost-plus basis. And so we are, in a certain extent, shielded against that volatility across about half of our domestic customer base.