Barloworld dealership sale completed

JSE-listed Barloworld has finalised the sale of its motor retail business, comprising 38 motor franchise dealerships in South Africa and Botswana.

stock image vehicles parked - Ryan Searle

The group said the completion of the sale of the business is an important milestone in the pivoting of Barloworld’s portfolio towards defensive, relatively asset-light and cash-generative industrial sectors, based on a business-to-business operating model.

It said last week all conditions precedent to the disposal have been fulfilled or waived, including the approval of the Competition Tribunal. The disposal is effective from June 1 2021.

The sale of the motor retail business follows Barloworld announcing in January 2021 that it planned to sell these dealerships to its equal joint venture partner, NMI Durban South Motors, as a going concern for an estimated R1 billion.

The dealerships that form part of the transaction represent leading global brands such as Audi, BMW, Ford, Toyota, Lexus, Isuzu, Mazda, Volkswagen and Mercedes-Benz.

Barloworld last month reported that revenue from its motor retail business declined by 2.9% to R6.7 billion in the six months to end-March 2021 from R6.9 billion in the previous corresponding period.

The group attributed the lower revenue mainly to a decline across all major revenue drivers, adding that the new vehicle dealer market contracted by 3.8% and represented brands by 6.0% in the six months to end-March 2021 compared to the prior period.

Despite lower activity levels, the motor retail business improved operating profit levels significantly to R148 million from R54 million in the prior period.

Barloworld attributed this to a reduced cost base, an improvement in the operating margin to 2.2% from 0.9%, a significant reduction in provision for expected credit losses and the re-evaluation of the net realisable value of used vehicle stock as a result of the market recovering post the Covid-19 pandemic.

Barloworld Group CEO Dominic Sewela last month confirmed that in line with the group’s strategy, the group plans to also exit the Avis Rent A Car and Avis Leasing business in the medium term.

“Over the next 18 to 24 months, once we are more certain about the impact of Covid-19, we will look at various options of how best we unlock value to shareholders in terms of this business,” he said.

The car leasing business was previously classified as a discontinued operation while car rental remained a continuing operation but Barloworld subsequently reclassified the car leasing business again as a continuing operation. Sewela believes this was a very good decision.

“By combining car rental and leasing you have got a better offering, particularly in this period of Covid-19.

“Our view is that at a point in time, whatever decision we take, it will be a combined. We won’t split car rental and leasing,” he said.

Sewela added that Barloworld anticipates disposing of its logistics division by the end of this year as it progresses with its strategy to reposition the company as an industrial processing, distribution and services group.

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