Business Maverick


Barloworld says unbundling of car rental division a ‘bittersweet moment’

Barloworld says unbundling of car rental division a ‘bittersweet moment’
Barloworld group CEO, Dominic Sewela. (Photo: Supplied)

Barloworld’s results have been severely dented by Russia’s war in Ukraine and continued Covid lockdowns in China.

Barloworld shares climbed sharply on Monday after it released its annual results for the year ended 30 September, and announced separately that it plans to unbundle its car hire and leasing business, which will be listed under Zeda, its wholly owned subsidiary, on the main board of the JSE on 13 December.

The industrial processing, distribution and services company’s shares were up more than 4% in late afternoon trade, from 10,526 on Friday’s closing. 

Zeda trades under the Avis and Budget car brands in South Africa and 10 other sub-Saharan African countries. 

Subject to JSE approval, the unbundling will entail listing 100% of Zeda’s ordinary shares on the main board.

CEO Dominic Sewela said in a statement that the unbundling was a bittersweet moment for Barloworld. 

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

“This decision was taken in the interest of maintaining value for our shareholders. As two separate companies, each business will be able to operate in a more focused and efficient manner — actively pursuing our growth ambitions in different sectors and verticals,” he added.

Visit Daily Maverick’s home page for more news, analysis and investigations

“To date, Barloworld has divested of a number of businesses identified as non-core to its strategic ambition. The unbundling is in line with this strategy. The board believes that the decision to separate the business and operations of Barloworld and Zeda through the unbundling will enable Zeda to execute on its own strategy and allow it to operate in a more focused and efficient manner, unshackled by the umbrella of Barloworld’s capital allocation framework.”

Zeda will now have a dedicated executive management team directly accountable to its dedicated board of directors. 

For Zeda, this unbundling means positioning as a distinct sub-Saharan African integrated mobility solutions provider, which would be able to pursue its own growth strategy and benefit from improved management focus and flexibility.

Barloworld, meanwhile, will be able to complete its non-core divestiture programme; streamline its activities to focus on its industrial equipment, services and consumer industries pillars; deleverage its balance sheet and allocate resources more in keeping with its strategy.

Both Barloworld and Zeda will remain South African-domiciled companies, with their primary listings on the JSE.

Founded in 1902, Barloworld has operations in 16 countries, including Russia, Mongolia and the UK.

Zeda, meanwhile, was established in Bloemfontein in 1967 as Zeda Car Rental and Tours. A Sanlam subsidiary acquired a majority shareholding in the company soon after, before going into a joint venture with Avis. 

Zeda now operates in South Africa and 10 other countries across sub-Saharan Africa under the Avis and Budget brands, which include rentals, fleet services leasing (from motorcycles to heavy commercial vehicles), value-added products and services, and maintenance. 


Barloworld’s results have been severely dented by Russia’s war in Ukraine and continued Covid lockdowns in China. 

The group’s profit after tax has plunged 59% to R891-million, and profit for the year was down 45% to R1.2-billion.

Group revenue was up 19.9% to R49.2-billion, though, mainly driven by 34.4% growth in total machine sales. 

Group headline earnings per share (Heps), a measure of a company’s earnings based purely on operational and capital investment activities, jumped 48.2% to 1,771c. Heps from continuing operations was up 16%.

Group operating profit from core trading activities was up 32% to R5.6-billion, from R4.2-billion.

An ordinary dividend of 295 cents per share and a special dividend of 550 cents per share will be paid on 9 January 2023.

As part of its diversified offering, Barloworld is heavily exposed to the mining, construction, oil and gas sectors in Russia, through distribution rights for Caterpillar and other original equipment manufacturer equipment in the country. The Russian business has a R1-billion impairment.

In May 2022, after delivering a strong set of interim results, Sewela told Business Maverick, “Our Russian business shot the lights out over the last six months, but we have no certainty that this will continue — we are seeing orders being cancelled, revenue is slowing down and in the next financial year we could make a loss. So we can’t justify holding the value of the investment at this level.”

Now, Eurasia revenue was “flat”, Barloworld said, affected by sanctions despite robust mining activity across all commodities. 

Still, Russia is contributing most (83%) of total Eurasia revenue.

Operating profit was marginally down, negatively affected by Mongolia’s continued border closures, while Russia increased by 8%.

Revenue from Russian operations increased from R8.3-billion in 2021 to R8.9-billion, while Mongolia declined from R2.4-billion to R1.8-billion.

Positive cash flow generated in the region was $92-million. Russia generated an exceptional return on invested capital of 39% (without impairment 31.4% vs 21.4% prior year). 

Sanctions have severely curtailed Barlow’s operations in Russia. As at September, the firm’s order book plunged to $16-million, from $197-million the previous year, while Mongolia stood at $10-million (down from $27-million. BM/DM


Comments - Please in order to comment.

Please peer review 3 community comments before your comment can be posted


This article is free to read.

Sign up for free or sign in to continue reading.

Unlike our competitors, we don’t force you to pay to read the news but we do need your email address to make your experience better.

Nearly there! Create a password to finish signing up with us:

Please enter your password or get a sign in link if you’ve forgotten

Open Sesame! Thanks for signing up.

We would like our readers to start paying for Daily Maverick...

…but we are not going to force you to. Over 10 million users come to us each month for the news. We have not put it behind a paywall because the truth should not be a luxury.

Instead we ask our readers who can afford to contribute, even a small amount each month, to do so.

If you appreciate it and want to see us keep going then please consider contributing whatever you can.

Support Daily Maverick→
Payment options

Daily Maverick Elections Toolbox

Feeling powerless in politics?

Equip yourself with the tools you need for an informed decision this election. Get the Elections Toolbox with shareable party manifesto guide.