Barloworld Limited

Good morning. Thank you for joining us for Barloworld's Interim Results for its 6 months to the end of 31 March.

Today, we will take you through our group highlights led by our Group CEO, Mr. Dominic Sewela.

He will be followed by Ms. Nopasika Lila, to take us over the financial overview.

We will then go into our Industrial Equipment and Services Business, and they will have Equipment Southern Africa first from Mr. Emmy Leeka; and then we will have Mr.

Quinton McGeer for Equipment Eurasia. That will be followed by our Consumer Industries Ingrain where Chris Wierenga will take us through the highlights, followed by Car Rental and Leasing Business, Avis Budget Car Rental and Avis Fleet from Mr.

Ramasela Ganda. After that, we will have a strategy outlook session way after we will also take questions from Mr.

Dominic Sewela and his team. So without further ado, I'd like to call Mr.

Dominic Sewela onto the stage. Thanks.

Thank you, Nwabisa. Good morning, ladies and gentlemen.

I'm thankful to the opportunity to present Barloworld's interim results despite the many challenges through which these have been achieved. I'd like to start by emphasizing what remains at the center of our business, our people.

We continue to intentionally put the safety of all our employees at the forefront. This applies to physical, social, psychological in terms of mental wellness, and safety among others.

February took an unexpected turn, as the conflict between Russia and Ukraine began. The wellbeing of our employees is at our utmost importance in Russia as well.

We also remain committed to the communities in which we operate. April also brought some unforeseen events with floods that devastated [indiscernible], Eastern Cape and Mozambique region.

In our country, over 400 people have lost their lives. Mozambique death toll was reported to be over 50 people.

A number of our employees were impacted within the relevant branches. This didn't go unseen, as we'd -- as Barloworld ensured that we take various initiatives like providing water, a temporary accommodation to try and alleviate the pain that our employees suffered.

As a Group 235 employees, about 171 in South Africa, 64 in Mozambique were directly impacted. Support was given as I said via food parcels, temporary accommodation, drinking water, and so on.

We continue to set and measure ESG related targets. Therefore ensuring that we remain environmentally responsible corporate citizen.

These floods in these areas alone are a key indication of how climate change can affect us all. I must say something to note.

We have a wonderful achievement during the period that is securing our first ESG linked loan to the value of -- of about $1 billion, ensuring that ESG is at the heart of our business. As part of governance initiative, our Board continues to monitor the capacity of our Directors, regularly assessing where we need fresh skills and ensuring a limited risk, particularly when it relates to over boarding.

I think from a safety point of view, as you can see from the graph, if you look at the first half of '17, lost-time injuries were about 88 people. We've decided to reflect lost-time injury because it's about people as opposed to just talking about frequency rate.

We do publish with regard to rate, but you can see the decline because of the focus. Now we're sitting at about 22 people, but having had 22 people is hitting to many people in our organization.

And I think what we have done as leaders and managers is to put these in our scorecard and have visible felt leadership to ensure that we eliminate anything like near misses that could actually hit other people further, but it is encouraging to see that a trend towards zero harm is on the path. Just to give you total Group highlight, I don't want to spend too much time here because I want to make sure that I give Ramasela ample time to give you -- part of the business is done well over above others, but I think it's important to note, revenue is down at a group level.

But this is largely due to the fact that we sold Motor Retail, if you take that out, we'll be up 5%. Strong EBITDA, which is up 12%.

Incredible improvement on HEPS, 108 -- 109%. Even on a normalized basis, we are up 94% -- 95.4%.

Then when you look at the net debt position, its high. And this speaks to the fact when you look at the fleeting in Avis, also the big order book both in Equipment Eurasia as well as Southern Africa, it was important that we fleet [ph] up.

I think Chris will also speak up to -- speak around funding of maize, some fairly comfortable that in the second half we should see a conversion of bulk of those into audits. As I've said, we've had a beginning of a war in -- on the 24th of February, and that translated to us taking an impairment of $68 million, which is about $0.316 per share in terms of basic earnings per share.

I think when you look at continuing operation, you are all aware that Avis is going to be exited one way or the other, whether it be through unbundling or sale. We also have sold Logistics, the few remnants of it still left.

So on a continuing operation, its pleasing to see that revenue is up 13%. EBITDA 20% up, HEPS 78%, and as normalized HEPS about 61.5%.

And you can see the decrease being magnified largely because it's purely the continuing operations at 82.9 cents per share. I'm also pleased that the Board, notwithstanding the challenges that we have, this belief and we know that notwithstanding all the -- we had COVID, we had floods, we had unrest, we now have the war in Ukraine, but still we believe that the business is well placed to afford to pay a dividend about 155 cents.

I'm going to hand over to Nopasika to take you through the numbers. Thank you.

Thank you, Mr. Sewela.

Good morning, ladies and gentlemen, and welcome to the Barloworld interim results for the period ended 31 March 2022. As I've done in the past, before going into the numbers, it is important to set the scene so that one understands the financial statements better, and some of the key events that have taken place.

I'll start with Motor Retail. You will recall that on the 1st of June 2021, Motor Retail was equity accounted for the first time.

Avis Car Rental and Lease, that business has been discontinued. Therefore, the Board had approved the discontinuation from the 1st of February 2023.

And lastly, Ingrain was acquired on the 1st of November 2020. Therefore, the 2020 -- 2021 numbers only reflect 5 months of that business compared to the 12-month -- to the 6 months that we are reporting for the first quarter.

Very strong results have come through from the business. Solid performance in the first quarter, leading to that operating profit that we're reporting at $1.9 billion.

Now this translates to an increase of 26% when compared to the previous financial reporting period. Closing your eyes to the non-operating and capital items, you will observe that there is a $1 billion write-off there, that is really the impairment that we've have recorded resulting from the Russia business.

We all understands the uncertainties that are attained at the moment. So -- but I'll expand a little bit more on that at a later stage.

When we look at revenue per segment, we do notice that across all the Barloworld businesses, stellar performance has come through from the businesses. We report a total of 18.4% -- sorry, R18.4 billion.

Now this is the revenue in rand terms compared to the R16.1 billion that were reported in the previous year. It is important also to note that this is a 14% increase that we're reporting, phenomenal.

Operating profit per segment. Again, phenomenal number coming through there.

I did mention that 26% across the Group, but I'd like to focus on the divisions here, Equipment Eurasia as well as Ingrain. They have both reported in excess of 20%.

This is in terms of the operating margins, as you can see on your screens. Looking at Equipment Southern Africa, it came through at 8.7%.

Again, very good performance. When we do analyze and look at why the reasons behind such good operating profit, the large contribution is as a result of the cost containment measures that the business has been conscious of over the last 2 years, starting with COVID and all the other challenges.

I move now to the non-operating. I did mention that I'll spend a bit of time on this.

So we adopted the value in use approach when we calculated and measured impairment on Russia. And what did affect us is the movement or increase in the weighted average cost of capital, which increased from 8.3% in 2021 to 16.3%.

Now, that certainly did impact on our numbers. And, overall, the reduction in the net book value and -- of our non-current assets in Russia remains at $21.2 million.

We’ve had a shift in our effective tax rate, and this is largely influenced by what I've just spoken to. This is the impairment.

You will notice that 129.3%. But it's important to understand that because of the accounting adjustments, like impairment and others, these are nondeductible items for tax purposes, and that is why you see that number escalating at that 171%.

And also, in our numbers, it is important also to note that the reduction in effective tax rate has contributed or rather had an impact in our calculations, but more on the deferred tax component. I'll move on to the discontinued operations.

And now Dominic did mention that Ramasela has performed phenomenally well in Avis. So if you look at the numbers, that $903 million profit coming from discontinued operation, it is largely as a result of car rental 414, as well as leasing at 433.

When you analyze the financial statements, it is also important to note that with IFRS 15, which basically says that once we start discontinuing an operation, we stop depreciating. So from the 1st of February, we did stop the depreciation at Group level.

And the numbers aren't indicated in terms of what the depreciation is for the entity. Exciting story for our associates and joint ventures.

We're reporting a profit of $112 million compared to the loss that we did report in the previous financial year. I was pleasantly surprised by the performance of Bartrac.

We record last year that was struggling there, but remarkable recovery. They implemented a turnaround strategy towards the middle part of the year.

And we can see the benefits that's coming through there, but that reported $52 million profit. And this is only the portion of Barloworld representing 50% because we own 50% of Bartrac.

On our balance sheet, this -- it is very, very strong. We remain strong, but when we do look at the current assets as well as non-current assets, you will observe a reduction in those amounts.

And this is largely as a result of Avis Car Rental and Leasing. We have reclassified that because it is now held for sale, no longer part of operations.

So, on that asset classified for sale line item, you will see an increase compared to the previous financial period. And you can look at these numbers, similarly on the liability side because you strip out on the assets similarly on the liability side, so you will observe that reclassification there.

Also to note is on the cash side, there were movements, largely because of the timely de-risking of our U.K pension fund. We did pay £68 million, which translates to $1.3 billion in the current period, as well as a special dividend of $2.3 billion.

This was a good story last year, but the actual outflow of cash happened in January, this period. HEPS for the period improved.

Starting in September, we started at 250 cents, and move to 441 cents. And when normalized, this number moves to 465.

If we were going to have or still had Avis in our numbers, the Group number for HEPS would have been, in fact sits at 756 cents. We end the period with cash outflow of $1.9 billion.

Now this is driven largely by the working capital. The businesses with a good performance and growth did demand working capital injection.

Also with the U.K pension fund, which is something that I did mention earlier, as well as the pay down of our bond program. Here we've settled in excess of $1.6 billion.

Our closing net debt for the period is at $7.3 billion. But if you look at all the movements that I’ve spoken about in terms of cash, it is a very good number to have as a business because it also drawing us close to our debt equity number as well.

Our strong balance sheet is clearly evident in the -- and is reflected in the Group covenants. The net debt to EBITDA is at 1x times, well in line with the requirement of 3x.

And when we look at our EBITDA, gross interest, that is sitting at 9.2x, maintained over the past reporting period as well. Now this is well above the 3x that is expected and required by our lenders.

As Dominic had mentioned earlier, it is really pleasing to announce that the Board has declared a dividend of 165 cents per share. And this is achieved -- achieving it's within the 2.8x, which when we look at our dividend policy of 2.5x to 3x, we remain well within that.

So as I conclude on the numbers, I want to rest on the financial metrics. Looking at the ROE, these are real record numbers for the business.

Barloworld has been striving to achieve a target of 15% on ROE and today we're reporting 16.9%, really great work from the team. Also on the ROIC side, the business has been striving to attain 13%, and now we're reporting a 14.1%, really phenomenal, phenomenal results delivered by the business.

And if I may say so myself, it is certainly steady results and well done to the teams. I now hand over to Emmy Leeka, who will take us through the Equipment Southern Africa.

Thank you, Nopasika. Good morning, ladies and gentlemen.

It gives me real pleasure to announce Equipment first half results. The Division delivered stellar result for the first half with revenue up 7.7% at R9.4 billion, supported mainly by strong machine sales at 31%, up with the Rental Business also up by 12.5%.

Looking at operating profit, as indicated by Nopasika earlier on, we were up 8.7%. We are seeing leverage coming through.

And as you can see the operating profit margin at 10.3% and mainly due to the cost efficiencies. EBITDA up at 12%, but also, we managed to reduce and optimize our invested capital by R200 million.

But as from September, we started increasing our working capital to fulfill the firm back orders in the second half of 2022 just to ensure that we can be able to deliver to our customers. However, that had a negative impact in terms of our cash flow at negative R263 million.

I will unpack the Bartrac performance later on. But ladies and gentlemen, our overall returns remain very strong, with a record ROIC of 18.1%.

Now turning to Equipment sales, as I've indicated, new Equipment sales were up by 31%, mainly driven by the mining sector, both contract mining and mining, up 47%. But also pleasing to see construction industries starting to take.

E&T remain flat. And what drove the mining sector, it was more commodities when we look at our commodity mix.

Normally we were averaging in terms of contribution from coal at about 40%. Now, we have seen contribution from coal down at about 16% and an uplift in terms of platinum and diamonds, but also with copper contribution significantly, at more than 30%.

The aftermarket contribution remains resilient at 56% compared to the prior period contributing at 59%. Beside the dilution in terms of the mix, we have seen an uplift in terms of the reported operating profit, as indicated by Nopasika in terms of the cost efficiencies that we have been driving across.

We will endeavor to continue to maintain our operating margin above the 10%. And then also ensuring that we focus on double-digit growth when it comes to the aftermarket, but also sustaining the cost discipline.

Now, a good story in terms of the turnaround strategy that has been implemented in -- for Bartrac in the Democratic Republic of Congo, it's starting to yield positive results with associate income at R52 million compared to prior reporting period at the loss of R104 million. We have completed the restructuring program, focusing on making sure that our coverage is good in territory, but also making sure that our diversification strategy in selling new machines to different customers.

We have recently managed to be able to support and sell more machines to new customers. The JV outlook is positive, driven by strong copper and cobalt prices on the back of the green economy.

Our strategy remains the same. Aligned to caterpillar to double services, looking at making sure that aftermarket double-digit growth, we are focusing on making sure that with our customers in terms of repair options, rebuilt, we have seen a momentum building up in terms of cut finance in territory with regards to the rebuild as well.

We have been launching new products, the GC [ph] product that will help us as well to be able to secure and maintain our leadership position. Cost containment is imperative.

While we invest growth and maintaining efficiencies, we want to maintain our invested capital turns above the 2.1. And again, quite pleasing to see as part of our focus in making sure that we realize full potential for our territories, returns in terms of most of the regions above the hurdle rate, and particularly an uplift that we've seen in terms of the contribution from the greater Africa where the revenue was up 35%.

As we continue to embed that culture of continuous improvement, inculcating [ph] a behavior on the ground in terms of halving the bad and doubling the good, we are starting to see the results in terms of efficiency gained. Finally, we remain cautiously optimistic for the remainder of the period.

However, as you can see, our order book is quite strong at R4.5 billion, driven by mining as well as contract mining, but also see the significant improvement in terms of recovery from construction industries. We remain committed to the unlocking of the value through Barloworld business system, while we are also focusing on our employee wellness, safety and sustainable development.

But on services growth, talking about what we are doing in terms of delivering some of the initiatives that we have with Caterpillar on the aftermarket, particularly on rebuilds, different offerings to our customers, but also shifting most of our customers from traditional way of doing business in terms of e-commerce. The retail customers to what we call parts.care.com, it will help us to transact easily with most of our customers.

But again, we are committed to making sure that we deliver positive cash by the end of the reporting period and sustaining the current performance with regards to the returns. In conclusion, ladies and gentlemen, our order book is strong.

And then we commit to deliver amidst the uncertainties as indicated by Dominic earlier on. Now I would like to hand over to Quinton McGeer, to take us through equipment Eurasia.

Thank you, Emmy. Good morning, ladies and gentleman.

I'm very pleased to share a record set of results from the Eurasia team for the first half of the 2022 financial year. Our Russian business delivered record results for the first 6 months both on the revenue as well as on the operating profit line.

Our Mongolia business were constrained due to the constant border closures, stifling growth on the top line. From a division perspective, we see improvement in all the key metrics.

Our revenue were up 12%, operating profit up 20.2%. And what is very pleasing to see is that despite the growth in the top line, the division still generated a good cash flow and link with that also a very strong right performance of 23.9%.

This slide reflects -- sorry, our focus -- we delivered another record set of machines to the market dominated by mining, which contributed 70% to the revenue from the segment. Our aftermarket division contributed 46% towards the overall revenue contribution, very much in line with the contribution in 2021.

Very pleasing to note is the fact that the aftermarket grew by 16% year-on-year over 2021. Our commodity mix presents a very well balanced commodity mix with all kind of commodities contributing towards the revenue growth and gold leading the pack, and also a very strong coal contribution in 2022.

If we look at this slide, the division is experiencing significant headwinds since the start of the war between Russia and Ukraine on the 24th of February. China's zero covered policy has also resulted in constant border closures impacting our customers and that also then spot into our business.

At the trading update at the end of February, we reported a record firm order book of $314 million, driven by a buoyant mining industry. After strong deliveries in March, the book closed at $269 million.

But the impact of the sanction post March, meant that we had to cancel $150 million worth of firm orders. Profitability will be under pressure in the short to medium terms, hence, the impairment that we booked for the Russian business at the half year.

Our focus will shift in the short to medium-term to reflect the new reality in which we operate in. We will focus on supporting our employees, both from a safety perspective and a mental perspective.

We will engage with our employees to support them within the ambit of the law. Compliance has become a new reality, and a key focus of our daily work.

And then obviously, cost containment, working capital management as well as cash perseverance to navigate through these troubled waters will be key for us as a division. For our Mongolian business, we are hopeful that China will ease the COVID restrictions that will allow the economy to stimulate our region.

And for us to take full advantage of the current mining boom. And with that, I want to say thank you, and hand over to Chris Wierenga.

Thank you, Quinton. Good morning, ladies and gentlemen.

I’m very pleased to be standing here today to talk to you about the results for Ingrain, which is platform business that we've acquired as part of our future Consumer Industries vertical. First off, the bet, I want to announce that we're looking at 5 months results in the comparatives and 6 months for this year.

And so you'll see some strong uplift in revenue EBITDA over that period as well as the operating profit. The business has seen some good momentum in these 6 months.

Revenue has come through as a result of increased volumes. We've had favorable commodity prices in the agricultural sector for us, and we've seen a return to bigger volumes in the alcoholic beverages sector.

This has allowed EBITDA to rise during the period, and we've also seen good operating profit come through albeit at a slightly lower margin than what we'd seen previously. We have seen some absorption of working capital in the period, but we remain cash positive despite further investments in the catch CapEx and also investing in much needed critical skills in the business.

We should see that working capital position unwind as we progress into the second half of this year. If we look at the revenue mix in the business, it's been pretty stable, but we've seen good growth across the two reporting periods.

We've seen very strong demand in the domestic market and exports are holding their own. And there's good demand for the product with higher international starch and glucose prices coming through.

And our agri products continue to be well received within the animal feed and the pet food sectors amongst others. I think if we turn our attention to the key driver for this business, which is the domestic sales volumes.

As I’ve mentioned the higher growth in alcoholic beverages, the strong growth in the coffee creamer and confectionery segments also supporting the business. But generally our products are seen in multiple sectors and we've seen very, very good growth across all of those.

Operationally, we're seeing good uplift in operating performances through the Formals. And this has largely been due to the rollout of the Barloworld Business Systems.

We've seen record grind at Kliprivier mill and that's where we started our BBS journey in June or July last year. Germiston is performing well ahead of expectations, and Meyerton despite its operating challenges over the 6 months appears to be well on track to delivering good operating performance in the second half.

Barloworld continues to perform well, and we're expecting to put on a 24/7 4th shift into that operation, and that will also up and unlock some further inherent capacity in that business. If we then just look at our focus areas for the division, safety remains critical.

We are a manufacturing organization and site safety and behavioral based safety is important in the business. As a leadership team, we're spending a lot of time going out and observing our safety practices and enhancing those and upping the awareness across the business.

We're managing cash and our commodity price exposure very carefully in the business. It is being impacted in the current environment that we should see that translate into good contributions in the second half.

As a team, we are also focused on the catch up investments in CapEx. On our Barloworld Business System journey, we are driving the efficiency improvements.

We are focusing heavily on our customer experience in this business, and customer excellence is becoming a central mantra for this business. Our employees remain probably our biggest asset in this business, and changing the culture moving towards a value centered approach in the business and thinking long-term is critical to our future success.

And we're seeing a much higher employee engagement in this business post the acquisition. As we look forward, a lot of the work that we need to do in this business revolves around sustainable development.

We're at -- we are a large contributor to the Group's greenhouse gas emissions and energy consumption. And as we think about being a responsible manufacturer, these items need to be addressed and will be a critical focus in terms of our longer term sustainability objectives for this business.

We are then also considering the optimal product portfolio that we have and making sure that we maximize margins and values and value from the various products that we produce. And there are further efficiencies in the supply chain that we believe we can unlock through better planning, and better execution.

As we look forward, it's certainly not an easy macro environment for us. But the team is well -- is confident and the business is well-positioned to deal with the rising commodity prices that we're seeing.

And we have secured access to raw material locally and are confident that we'll have sufficient stocks available. We are seeing an impact on unit -- on imported raws [ph] that are used in the manufacturing process.

We have secured and made sure that we've got dual source of supply for those and have enacted various contingency measures to make sure that we've -- we can support the business over the next 18, 24, 36 months. From an operational excellence perspective, BBS is expected to further deliver on results into the second half as that is gaining a lot of momentum and the cultural changes are coming through nicely.

From a growth perspective, we do believe that we need to make investments into the organic growth in this business, make sure that we deploy capital efficiently and effectively to deliver on the top line growth. The market sectors that we serve are certainly looking quite bullish from where we're sitting.

Our customers are indicating expansionary CapEx being spent in their production facilities, which will impact offtake of materials from us. And we're also positioning this business for the acquisitive growth of that Consumer Industries vertical and also making the necessary investments in skills and capacity to grow this vertical in line with the Group strategy.

So with that, I thank you all and we'd like to welcome Ramasela to the stage.

Good morning. Sorry about that.

Thank you, Chris. Good morning, and thank you for joining us this morning.

I will be taking you through our journey as a mobility solution provider. I'll start in March 2020, which is a period predominantly pre-COVID-19 to March 2022.

Short-term rental. As you may recall, our journey started with a strategy of right sizing the business, which included the right fleet size, restructuring of the footprint, organizational structure and integration of the rental and leasing operation.

At the beginning of this financial year, there was Omicron virus, fleet shortage due to supply chain constraints and obviously, travel restriction. Despite these challenges, we have taken opportunity of an increase in the inbound corporate and private and public travel through a very agile operating model and our systems.

One will ask what did the strategy on right sizing yield? Allow me to take you through.

In March 2020, we deliver revenue of R3.2 billion from used car and rental operation with an average fleet of 38,000. Fast forward to March 2022, we generated revenue of R2.6 billion from a fleet of 23.5000.

That is an average revenue per vehicle of 111. That is 12% higher than 2021 and 33% higher than pre-COVID level.

Year-on-year, revenue marginally improved by 30 basis points. However, that is based on a fleet size that is 10.5% lower.

We have delivered a record EBITDA of R731 million with an EBITDA margin of 27.9%. That is dominated by the turnaround in the rental operation.

We continue to apply strict fleet management dealing with out of service vehicle, heavy more vehicle in the street than in the workshop. And that is evident by a utilization sitting at 81%.

That is 4% up compared to prior year. We've [indiscernible] on the damage costs and that has yielded benefit by implementing safety measure such as Avis safe drive.

Our strategy continues to yield positive results with operating profits at 255% compared to prior year. That is more than 100% compared to pre-COVID levels.

As you've heard from our colleagues, we from Avis, also have benefited from BBS by deploying the operational excellence methodology that has contributed to the quality of our earnings with operating margins of 15.5%. Let me take you through the market segments.

We provide mobility to a wide spectrum of industries, an individual requirement that serves as a natural hedge as the underlying drivers changes. In line with our business strategy, the segment mix has been diversified to introduce segments that has different risk profile.

As you may recall, I did indicate last year about the introduction of a subscription model, which clearly has different risk profile. Subscription model, which provide customer with mobility, where you are at a convenient location and whenever you needed for a minimum of 1 month.

That is where Avis car where you are comes in. As I also indicated that based on the demand and supply and as you know this fleet supply shortage, we manage the business to balance the segment mix that optimize the return.

And the major contributor, as you can see, is on insurance, which is the replacement business as well as the subscription. That gives you a relatively longer length of rental, and that is about average 23 days in a month.

It is important to note that with a gradual increase in the demand for inbound, cooperate and public sector, the mix, as we see it today, will change to cater for the growth of the recovering segment, because it is important for us that we continue to yield better returns. Let me take you to the leasing operation.

Our fleet management solution is about partnering with private sector and public sector to assist with productivity and service delivery. Yes, revenue from the leasing operation is 6.7% down, that’s compared to prior year.

That is driven by natural attrition of major public sector, the city of Johannesburg B1 and the South African post office. We continue to actively participate in public sector by responding to request for proposal.

It is important to note that despite the deadline, the average revenue per vehicle increased by 14% compared to prior year, which is testament to the work that we've been doing in driving our value added product like Intelligent Fuel Management System, Telematics, including focusing on the service and maintenance plan, which do not require capital outlay. We continue to capture growth in the last mile delivery, as all of us know about the growth in the e-commerce Industry.

And we are providing appropriate commercial vehicle solution in that as well. Corporate confidence seems to be on the rise.

If we compare it with the last year, we are receiving requests for new renewal and even higher value credit facility for replacement and the growth. We employ and deploy appropriate skill to manage the fleet throughout its lifecycle.

That combined with a strong current oil market has yielded superior return on EBITDA of 52.5% and a 15.3% increase in our operating profit year-on-year. Let me take you through the segment.

As I've indicated, the proportion of public sector is impacted by the natural attrition of those major contract. But it is important to note that our corporate sector is very diversified.

We servicing industry from mining, health care, construction, consumer industry, just to mention a few. Greater Africa region, as you can see with the movement, we have delivered a solid performance with the financed fleet contribution compared to prior period.

This is a very important slide. As I say, this is a period of record results.

We have delivered an exceptional return on invested capital of 14.1% on the car rental, which is higher than the Group hurdle rate, and a very strong return on equity of 29.1%. As if the record results are not enough, we now have delivered a very solid return on invested capital on a leasing business of 12.9%, 0.1% shy of the Group hurdle rate.

An exceptional return on equity of 56.3, which is underpinned by us understanding the nature of our business as a financing operation, which commensurate with an optimal capital structure. Where is our focus going forward?

As indicated in the Group's strategy, to people in the automotive business, the carve-out work has progressed significantly. To respond to two possible paths of either sale, or unbundle and separate listing.

While the carve-out work is progressing well, and I'm very, very pleased with the work that the team is doing, and the support we are getting from the Group, we remain deliberate about our growth strategy and operational efficiency, while having a keen focus on customer experience and employee engagement. As our future [indiscernible] we forge ahead as a trusted mobility solution provider connecting humanity.

Thank you. And I'll hand over back to the Group CEO.

Tough act to follow, Ramasela. I'm just about to do an auction bid or buy.

Ladies and gentlemen, I think what you've been seeing, it's a convergence of a strategy that we started 5 years ago. When we look at the history of the Group interacting with some of the analysts and some of the fund managers, one of the key issues I was hit by is that Barloworld, it is not a good returning business.

And we were a bit of a conglomerate, we're sitting with revenue about -- almost R63 billion. But when you look at the quality of earnings, it was challenge -- it was challenged at the time.

We're not quite cash generative, as we are now focused. One of the key issues we lined up was the concept of fix, optimize and grow.

We said if we can't fix the business within a certain time frame, we'll sell it. I think we all remember when we sold Spain, because we felt from a timing point of view it couldn't be done.

One mistake that I accept and any manager leader does accept, sometimes you say I should have sold Logistics quick enough. I tried to fix it, it was a hard business to fix.

But I'm glad to say, that has been disposed. We basically -- in the last rolls of selling, the supply chain.

But automotive, which is Motor Retail has been sold. And when you look at Car Rental and Leasing, [indiscernible] Ramasela is talking about where we stand in terms of are we selling the business or in unbundling it?

I think truth of the matter for me is where is the value that I can get for this business to give to my shareholders. If somebody gives me a good price, not trying to steal this business away from me, I'll look at it.

But I guess the best thing is probably to unbundle this business and list it, so that shareholders can be able to exercise the right of when they're able to realize value. And I think when you listen to Ramasela, the work that they're doing, basically says we don't it doesn't matter.

It's a management that's very focused on running the business and doing what's right for the business. At the end of the day, the Group will decide what happens thereafter.

I think what you see there for the first time is having Eurasia in optimize. And the reason why it's been optimized, remember, over the last 4 or 5 years, Eurasia has -- I mean, particularly Russia, has been achieving phenomenal returns and results, and still doing it even to this interim.

But the reality of what's ahead of us, says we need to focus on optimizing this business. And cash preservation becomes very important, cost containment becomes key, being efficient, but also making sure the wellbeing of our employees so that we retain our staff.

We've invested a lot in that business. So we want to be able to retain the best quality of our staff, but also looking and taking care of our customers.

Because one thing I'm sure of, is as however bad a war is it does end and when it ends, you need to make sure that as an organization, you are there to be able to continue to do business, and you have very good relationship with your customers as well as your employees. I think, Emmy, well done on that 18.1 ROIC, but it's something that you need to push ahead further.

And I think you've had other than Chris, the focus in the areas of deploying BBS coming very well. And I'm pleased to say that the strategy is being in place.

And I think at the end of the day, you can say all we want, numbers don't lie. They speak and you see me, interim [indiscernible] me putting up the slide.

And I'm reminded of my former colleague and boss, Peter Bulterman, he used to say, Dom, you never get what you don't measure. Don't expect what you don't inspect, and true to form.

Part of the reason that we put up this is not only to you, the investors, it's also to ourselves, that each and every business should be measured. You can see, I mean, where we've been.

I mean, we can talk about 2020 as COVID. But I'm really, really proud and happy to see that we didn't change work.

A lot of people will say to me, Dominic, this work is it's -- can't we change? No, we kept it.

At the end of the day, what we needed to achieve is make sure that this business are able to deliver above our cost of funds. And I'm glad to say this has been done.

And when you look at this particular slide, I never used to talk ROE a lot. Say for when I interact with portfolio managers to say, an ROE for me was a corporate issue that we needed to fix from a corporate point of view, in terms of capital structure.

Also look at saying, how do we allocate capital? You've often heard me say that, for me, it didn’t make sense.

But if I generate a return way below 15%, I then keep the money, and then think I'm going to deploy it in buying another business, which is not generating much. Our philosophy was to say, whilst we do not generate the right return, it makes a lot of sense when the market presents an opportunity to buy back shares.

And to that effect, we've done so. To an extent, we can find an opportunity buy back shares.

We distribute the capital back to the shareholders. And I think, at this level, I think we are now beginning to and are right to say, if we continue to perform at this level of returns, we should be able to say, we can retain some of the money and allocate it, better than -- we think our shareholders could.

And I think this is basically that slide, basically Barloworld post unbundling of Avis is likely -- is not likely, it's going to be basically a two vertical structure. We've created a platform.

BBS is working, you heard everybody talk about BBS. And if we are going to acquire businesses, we'll be using the same discipline that we're not going to be willy-nilly acquiring companies.

If we don't find anything exciting, we're not going to try and be smart, we'll return the money to the shareholders or we buy back shares. And I'll pause here.

Nwabisa [ph] are there any questions?

Thank you very much. I'll try and group the questions by sort of the areas that they cover.

So I'll start on the finance side. There's a question from Steph Erasmus, asking us to please elaborate on the U.K pension fund situation, if a special dividend would be coming from that?

Yes, I guess, remember, the pension fund is a liability that we have to the former employees of Barloworld that had a defined benefit in that fund. And that fund -- it -- either had a deficit from time-to-time, depending on how the asset were invested.

We took a decision, to say we need to minimize the volatility by engaging in a strategy where we engage the trustees to say, probably if we extinguish the liability of that fund, we'll have flexibility to bring the cash back. And thank goodness, we pay £68 million in January, and we're able to convince the trustees to rather invest in assets that are not as volatile.

Had we not done that now, I tell you, the deficit would have been huge. And so now that we've done that, you are correct, we've agreed with the trustees that it gives us flexibility to bring our capital back.

So, we are also looking at basically a -- what's the other word, not buy it [indiscernible] what's the word? Buy in.

Buy in.

So, currently we have a process where we are looking at various insurance company to look at buying in. Basically buying the liability from us.

The process is on the go. I can't say much about it, because it's too early.

And I think I should be able to give you that position. But once that is done, it certainly give us some flexibility in terms of how we move cash in and out, whether we are able to low debt in the U.K.

But I think it's important that I indicate though, that even though we're sitting with cash in the U.K. currently and being prudent, given the situation in Russia, we will be able to allocate capital liquidity of 165 cents a share.

But I think any manager when it's uncertain -- this time of uncertainty, you need to be prudent.

Thank you. And then several questions along the lines for rental and leasing.

Given the strong results and prospects for Car Rental and Leasing, will the Group consider keeping this business rather than listing them separately?

Is it from an employee [multiple speakers]?

That’s from Imtiaz Suleiman [ph].

Imtiaz, it -- you sound like most of the employees of Avis asking me that question. No, Imtiaz, we are not because I think we are playing a long game.

The strategy here was around saying, we wouldn't have sold this business in 2020, remember, there was a time where we were going to sell 50% of leasing, but we brought it back in. And we said let's bring it in, let's make sure that we next put the strategy and play to grow this business.

I think now it is well placed for it to be sold, because whilst this business has got certain good attributes under the leadership of Ramasela. But I think for Barloworld strategy, long-term it might not work.

Once you start splitting this business, its ability to consume cash when your fleet is high. And my fundamental philosophy is to work on cash conversion of nothing less than 50%.

So I don't think long-term it would work. So I think it is right for it to stand on its own so that an investor who sees value in a financial services type of business that is highly geared to generate high return on equity can invest in that.

I'm looking for an investor in Barloworld, who identify with some of the things that we got lined. Thank you.

Thank you. I'll read the two questions on Russia together, because I think they are also pretty common.

What is the expected effect on Group ROE from a Russian exclusion? And that's Daniel Isaacs.

And then Mark [indiscernible] wants to know, what is the Group WACC with the adjustment to higher cost of capital in Russia?

I don't understand that last second one. Do you understand it, Nopasika?

Or is it because you -- when you're talking about the impairment, the Group WACC. But let me answer the first one in terms of the ROE.

I think when you look at the uncertainty, we likely over the next few months at an operating level to still deliver at the back of the inventory that's still on available. But it's not going to be a lot.

So I don't think we're going to shoot the light out like we did in the second half. But you've taken impairment in that particular environment, so when you look at the overall impact, I haven't actually finalized modeling the impact, but it is going to impact the ROE somewhat in terms of where we are, September.

Nopasika, you want to respond to that one on WACC?

Yes. If I understand correctly, it's -- what is a Group WACC with adjustments post Russia.

So, currently the Group WACC is around 13.7. And we do anticipate that to remain around there, so around 14.1.

That's what -- that's the number we're looking at.

Thank you, Nopasika. Can I go on to Ingrain?

At one point -- at what point do higher maize prices hurt operating margins? Are you able to keep passing input costs on to customers?

Okay, Chris.

Yes, thank you for the question. So, high maize prices do translate into price increases for customers.

We actually benchmark our pricing for -- on the import parity of starch and glucose. So we do try and hedge out the effects of rising and falling maize prices.

But essentially, rising maize prices does lead to expand, let's call it, expanded margins for the business.

Thank you. Over to Equipment Southern Africa.

Laurion [ph] Capital is looking for helping them to understand why Equipment sales in South Africa have been slower than the rest of Africa? What is the South Africa specific constraints?

And then further, if we could just explain the performance between contract mining and direct mining equipment sales? Contract mining, they say is outperforming.

Yes, thank you. If I look at the deliveries, particularly for Southern Africa, we do have a very strong order book for South Africa.

Unfortunately, most of the machines that were supposed to be delivered, will be delivered in the second half. And if you look at what we have delivered in terms of some of the Greenfields projects, the project that we spoke about in Botswana, the T3, the copper project, we have delivered and we will continue to finalize some of the deliveries in the other greater Africa.

But it has been our drive to make sure that we can be in a position where we see growth in the rest of Africa. Now turning to the question regarding contract mining, as we know that we have seen an uplift in terms of the [indiscernible] to contract mining, which is particularly quite cyclical.

Given the fact that most of the mining houses whenever they want to have saving in terms of machines, they will direct machines to contract mining. But as I've indicated, in terms of the order book, larger equipment requirements for the second half that we'll be delivering, it's coming more so from the mining houses directly as opposed only from the contract mining.

So there's also capturing opportunities in terms of making sure that with the commodity prices behind in terms of machine deliveries, it's easier to get contract miners to mobilize and actually deliver as opposed to larger equipment sizes that take time in terms of the lead times to be delivered. But the thing has changed already.

Thank you.

Thank you, Emmy. And then I'm just also trying to group through a lot of questions on Russia still.

There's one phone from [indiscernible] asking if the Group is not worried about post war sanctions on the Russian commodity sector?

I think, Quinton, was opine to explain issues around compliance, because it's not for the first time that they've been sanctions in Russia. And maybe, Quinton, just indulge -- I know you've done it, in terms of the rigor with which you comply, not just only to one regulatory regime, it could be the U.S sanctions, E.U., U.K and counter sanctions by the way from Russia itself.

Maybe just want to …

Yes, I think, I mean, the sanctions in itself is very complex. And so there's a lot of work that's been done on a daily basis as I’ve alluded to.

I think we've already screened 8,000 customers, persons, individuals. But I think from a sanction perspective, what makes it also complicated and why it's difficult to answer the question is because it's constantly evolving, it's constantly changing.

So I think in the 2 or 3 months since the war started, we've already had six rounds. And every round there's a new set of sanctions or restrictions that we need to take into account.

So it's very difficult to answer 100%. But it's also fair to say that Europe is still buying gas on a daily basis from the Russians.

So we will have to monitor and see how the situation evolves, and then adapt our strategy accordingly.

Thanks, Quinton.

Thank you very much. I think I'll stop there.

There are a few questions from people that I know we're going to be meeting one-on-one on the line, and I think we would address those. They are not very different from the questions that I've asked.

So thank you very much. Over to you see, CEO.

Thank you very much, everybody and we hope you keep safe wherever you are. And those that are going to be on the one on ones, we hopefully could see some of you there, and thanks for your support.

Cheers.