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SIMON BROWN: I’m chatting with Dominic Sewela, he is group CEO at now delisted Barloworld. Dominic, appreciate the time today. The delisting from the JSE (Johannesburg Stock Exchange) and from A2X effective late January. This process started in December 2024.
A long journey, this does seem to be the process these days where the delistings, maybe mergers and acquisitions, this was a different story. There are a lot of legalities and loopholes, and it does take a long time to finalise.
DOMINIC SEWELA: Yes, certainly. I guess the nature of regulatory transaction like this one does take a while because you’ve got various parties, and obviously shareholders have a consideration. I guess for me, leading that LBO (leveraged buyout) didn’t make it easier, to be honest with you.
I think, in fairness, you end up going through that very process because shareholders have got to make sure that is there no conflict of interest? If there is, how is it managed? From a value point of view, are we getting the right value from a value unlock. So yeah, those processes take a while.
SIMON BROWN: Yeah, I take your point. I suppose it is very much in fairness to shareholders. I suppose that’s part of the process. In terms of day-to-day operations, I’m imagining very little has changed at Barloworld day-to-day. But there must be some benefits that you’re expecting from being unlisted.
DOMINIC SEWELA: I guess first and foremost, one of the biggest benefits from being unlisted is the cost of listing because the cost of listing isn’t cheap, number one. Number two is the ability to spend time with customers, solving customer problems because you’d understand that if you’re listed, you spend a lot of time with analysts, as well as asset managers trying to explain the business, and they’re trying to put numbers in their model.
It can be very time-consuming, and sometimes it takes you away from what matters because I think Barloworld is a far smaller business than it was when I took over because of unbundling and then selling some of the businesses. So what’s core to us now is a business that’s cyclical, that requires attention to detail, and that makes it easy for me to support the team, given by my past experience in this business.
SIMON BROWN: I take your point there. It’s patient capital in a sense, which is perhaps especially important in a cyclical business such as what Barloworld exists in.
DOMINIC SEWELA: Certainly, and I think at times when you are listed and obviously you’ve got a bunch of shareholders who rightfully have got certain return expectations and performance of their asset, and therefore us on the other side.
The reason why Barloworld has been around now, it has been going for 124 years, is precisely that long-term view that the founders of this business had. They had a different leeway back in the days where you could diversify, whereas at the moment, if you’re too diversified, you get penalised, in the market that is.
But part of the reason is that, when you have a cyclical business, you’ve got to be able to support it through a trough but some of the support is supporting your own customers, and you’ve got to be with them through that tough so that when the market turns, they’re able to give you their orders. So yeah, those are some of the pros of when you are private and when you can decide, do I take a dividend this year or not? I’m not going to be hard pressed to take a dividend now.
SIMON BROWN: I take your point in that it’s patient capital, but it’s also a patient Barloworld, in a sense, working with your customers so that they survive and remain customers. You mentioned about being a smaller business, a more focused business, is the current size and scope of Barloworld fit for purpose where it sits right now, in your view?
DOMINIC SEWELA: I think if you look at Southern Africa, clearly, there’s a huge opportunity when you’re very focused. We are fortunate that Southern Africa is endowed with various minerals and commodities, but those commodities are not always in sync from a value point of view. You’ve got copper currently at a high price. On the other hand, you’ve got coal at a lower price.
So when you have these conglomerates of companies that you could run, they give you the ability to smooth out and absorb your cost without all the time having to retrench people, because let’s be honest, if you retrench people in South Africa, the likelihood of them getting a job is slim.
So that long-term focus is very important because eventually commodity turns, then you wish they could all be up at the same time and then never go down. But it’s the nature of commodities. So that for us, the advantage of being focused on the equipment space is very important as opposed to dabbling in motorcars and rent a car and all that.
That’s really the focus that I’m talking about. When you look at the number of dealerships that we have with Caterpillar and the contiguous geography, it makes a lot of sense that this becomes our core business.
SIMON BROWN: Yeah, I get your point. Yes, commodities come and go. They all have their day in the sun. It’s being patient. You mentioned staffing. One of the things as a listed company is, certainly for senior staffing, it’s easy to do share options and that sort of thing. I’m imagining in the unlisted space, it still works. It might work differently. There isn’t a reference price on the JSE, but you’re still able to incentivise staff quite easily.
DOMINIC SEWELA: Yeah, certainly we do. In my experience, the bottom line with most employees, because what they really care about is that, even though they reference the share price, it’s what they’re able to cash the share (for) and take the money in their pocket. So to the extent that we are able to incentivise them to still get money in their pocket, then they can decide how they allocate it in their own families.
I think we’re able to do that. Hence, from that point of view, we’re able to retain the quality management that we’ve had. Fortunately, I’ve worked with a lot of people prior to this and then those are people who will continue to run the business because I’m not getting younger. So I can help people who I can work with and grow the business.
Who knows, the future people may decide otherwise, to say, okay, let’s go back to the market. Probably not in my lifetime.
SIMON BROWN: I take your point, things will change. Last question, and I’ve often wondered this, and I ask this of CEOs, often of listed companies, but they’re still listed. When you were listed, would you check the share price? If the share was down 5%, did you take it personally or do you really just say, I’m going to stick to my knitting, and the price will look after itself?
DOMINIC SEWELA: I think in the beginning, I must be honest, Simon, I did check. Every time I released my results and the share price went down, I was like, what did I do wrong? But with experience, you focus on the intrinsic. You focus on what you control and let the market play because people, whether they speculate, whether they’re long-term investors or whatever, they’ll do whatever they want. So the supply and demand of your share price, it will be what it will be.
Our incentive is not so much what the share price is doing, but how do you grow the intrinsic value of the business. That way you stop thinking about the share price every now and then.
SIMON BROWN: The share price, as you say, it’s out there. It’ll do things. There’s not much you can do about it. We’ll leave it there. Dominic Sewela, group CEO, Barloworld, appreciate the time.
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