Jacques Magliolo
Barlows’ latest financial results highlight the benefits of a major conglomerate unbundling its assets and turning a lumbering giant into a lean and streamlined organisation.
Last week the group released its interim results and showed profitability unsurpassed in the last decade. With improvements coming from almost all its operations, the refocused Barlows has managed to increase earnings per share (eps) by 54 percent to 112,5 cents for its half year to end-March 31 1995. The company declared an interim dividend payment of 26 cents a share, which is an increase of 44 percent.
Chairman Warren Clewlow says the group’s strong performance was due to “an improved and more normal trading environment in South Africa”. He adds: “We responded quickly to the change in the market through the efficiency of our new streamlined organisation.”
Other financial statistics are as impressive. Turnover was up 19 percent to R7,3-billion and profit margins improved to 5,4 percent (1994: 4,4 percent) through a combination of higher production volumes, improved operating efficiencies and better control of group
A lower interest bill and higher income from investments pushed pre-tax profit up by 50 percent to R431,2-million. In moving towards compliance with International Accounting Standards, Barlows includes in its income statement an amount of R32,1-million for “exceptional items”. These were previously classified as extraordinary items and include profits arising from the sale of investments, reduced as a result of prudent
Divisional analysis shows that there was good all round growth, except for Barlows Consumer Electric Products, which was affected by strong competition from imported products and by low consumer demand. Subsidiary Pretoria Portland Cement benefited from increased volumes, a higher contribution from investment income and a drop in the average tax rate, achieving a 44 percent growth in earnings.
In the international division, J Bibby increased its earnings contribution by 153 percent. This was due mainly to a turnaround in its recapitalised Capital Equipment division, which increased sales by 31 percent and converted losses into profit.
Cynics suggest that, because of the unbundling, these results are not comparable and are, in fact, meaningless. To get a truer picture of how the company has faired in the past six months, analysts suggest investors look at the group’s balance sheet. Barlow’s financial stature is not as strong as analysts would like to see it. Its gearing level — total liabilities to total shareholders’ funds — stands at 120 percent and levels of working capital, required to fund operations, remain high at R387-million. Despite the unbundling, Barlow’s cash-on-hand rose by a mere 11 percent to R909-million.
While fund managers suggest that Barlows’ share has now, at 3 850 cents, reached a ceiling, Barlows’ management disagree and expect continued growth in