Wrap Text
Audited preliminary results for the year ended 30 September 2018
Barloworld Limited
(Incorporated in the Republic of South Africa)
(Registration number 1918/000095/06)
(Income tax registration number 9000/051/71/5)
(JSE share code: BAW)
(JSE ISIN: ZAE000026639)
(Share code: BAWP)
(JSE ISIN: ZAE000026647)
(Namibian Stock Exchange share code: BWL)
(Barloworld or the company or the group)
Audited preliminary results for the year ended 30 September 2018
Salient features
- Proposed B-BBEE transaction - approved by the board
- Disposal of Equipment Iberia generates R2.5 billion in cash
- Logistics turnaround on track
- Record Equipment Russia performance
- Return on equity at 11.4%
(2017: 10.5%; 2016: 9.3%)
- Return on invested capital at 12.3%
(2017: 11.2%; 2016: 9.4%)
- Free cash of R3.6 billion generated
(2017: R3.4 billion; 2016: R4.3 billion)
- Headline earnings per share from continuing operations up by 18% to 1 151 cents
(2017: 16.0%; 2016: (5.0%))
- Total dividend per share of 462 cents up 18%
(2017: 390 cents; 2016: 345 cents)
Chairman and chief executive's report
Dominic Sewela, CE of Barloworld, said:
"The group produced a strong result in the reporting period, despite a difficult trading and economic
environment. The solid performance was particularly due to robust earnings growth in Equipment Russia,
the turnaround of the Logistics business and the strong associate income from the Bartrac JV in the Katanga
region of the DRC. Equipment southern Africa and Automotive performances were satisfactory in a challenging
economic cycle.
The group will continue to focus on driving our businesses to their full potential through the optimal
allocation of capital and the execution of our medium-term strategy; this sets a strong foundation for
the pursuit of value-enhancing acquisitive growth opportunities that fit our capabilities and the
optimisation of the group's capital structure."
19 November 2018
Overview
Momentum in the global economy has remained strong led by the United States (US) and other advanced
economies. Emerging market economies have come under pressure due to rising US interest rates, the
stronger US Dollar and the flow of capital out of these economies.
Growth in the Chinese economy has moderated and is likely to remain under pressure as a result of the
escalating trade dispute with the US.
The outlook for the South African economy has weakened with negative consumer and business confidence
impacting local demand and a technical recession in the last half of 2018. Benign recovery in the second
half of 2018 is expected to result in full year gross domestic product (GDP) growth of approximately 0.7%.
Uncertainty regarding government policy on the expropriation of land (without compensation) has negatively
impacted new investment in the country and represents a further risk to retaining South Africa's investment
grade sovereign credit rating.
The group generated headline earnings per ordinary share from continuing operations of 1 151 cents per
ordinary share which represented a 176 cents (18%) increase on last year. Total headline earnings per ordinary
share including discontinued Equipment Iberia operations of 1 192 cents represented a 309 cents per ordinary
share (35%) improvement on the 883 cents last year.
The group achieved a return on invested capital (ROIC) for the year of 12.3% (2017: 11.2%) and a return on
equity of 11.4% (2017: 10.5%). The improvement of these key metrics remain a key focus area for the group.
Operational review
Health and safety
As reported at the interim, despite ongoing focus on safety across the group, we tragically incurred two
work-related fatalities during the year, one in Equipment Russia and another in Automotive. We extend our
sincere condolences to the bereaved families to whom we have offered support. We continue to drive the
awareness of health and safety in the workplace.
Equipment and Handling
Equipment southern Africa
Revenue for the year of R19 775 million represented a R1 488 million (8.1%) increase on 2017 driven
primarily by higher equipment sales (up 21%) in South Africa, Mozambique and Zambia; and rental
revenues (up 25%).
Operating profit of R1 790 million was in line with the previous year while operating margin reduced to
9.1% (2017: 9.8%) due to changes in sales mix and foreign exchange.
The effective taxation rate for the division increased from 24% to 34% mainly as a result of local currency
weakness in Angola and Zambia.
Income from associates, which mainly relates to our Bartrac joint venture in the Katanga province of the DRC
increased from R97 million to R251 million (159%) underpinned by increased mining activity in the region on
the back of buoyant current copper and cobalt demand.
The division generated a ROIC of 12.7% slightly lower than the prior year.
The Angolan government has taken steps to reform its economy and restore economic stability. The scrapping
of the local currency peg to the US Dollar in January 2018 resulted in a 76% devaluation of the Kwanza to
September. Our investment in Angolan US Dollar linked bonds proved an effective hedge against this significant
currency devaluation. At September 2018, our investment in US Dollar linked bonds totalled $64.3 million
which was $2.0 million down on the prior year and now comprises bonds with longer dated maturities compared
to the prior year. Importantly, the trapped in-country Kwanza cash balance decreased by $20 million to
$9.9 million at September 2018 with the bulk remitted to repay the holding company in the United Kingdom (UK).
Equipment Russia
Revenue for the year of $606 million was a record high exceeding last year by $221 million (57%). Mining
machine revenue increased by 126% while aftermarket revenues were up by 11%. Mining revenue included the
delivery of the package deals to Polyus Gold, Norilsk Nickel and NordGold that were highlighted in the
September 2017 firm order book.
Operating profit for the year of $61.7 million was $18 million (41%) ahead of the prior year. The operating
margin of 10.2% was down on the 11.3% achieved last year due to the increase of large mining machines in the
sales mix.
The imposition of increased import tariffs on US sourced machines in early August did not significantly
impact the current year's performance.
The divisional ROIC for Russia of 20.4% (2017: 18.4%) was the highest return performance in the group.
Automotive and Logistics
Automotive
The division produced a satisfactory result in difficult trading conditions. Revenue for the year of
R29 809 million was R1 784 million (5.6%) down on the previous year. The division produced an operating
profit of R1 701 million which was R46 million (2.6%) lower than 2017 with the operating margin increasing
from 5.5% to 5.7% in the current year.
ROIC for the year of 12.4% was down on last year's 13.1% due to the lower operating result.
Car Rental
Revenue for the year of R6 528 million was R82 million (1.3%) up on last year mainly as a result of
increased rental days and rate per day but negatively impacted by lower used vehicle revenue.
For the year operating profit reduced by R26 million (4.6%) to R536 million due to lower used vehicle
profitability.
Avis Fleet
Revenue of R3 326 million was 6.8% below last year as a result of lower leasing revenues.
Operating profit of R641 million showed a R20 million (3.2%) improvement on last year mainly driven by
increased used vehicle contribution.
Motor Trading
Trading revenue of R19 955 million was R1 622 million (7.5%) below the prior year, impacted by the
dealership closures and disposals during the course of last year. Revenue was further negatively impacted
by the implementation of an agency model in Mercedes-Benz passenger vehicles during the course of the
current financial year.
Operating profit for the year of R524 million was R40 million (7.1%) below last year with the premium brands
showing reduced profitability.
Due to underperformance the Jaguar Land Rover N4 Witbank dealership was closed at the end of July 2018.
Logistics
Revenue for the year decreased by R247 million (4%) compared to prior year. This was mainly due to the
subdued economy and a rationalised customer portfolio in Supply Chain Management. Transport revenue was
6% up on prior year.
Operating profit of R262 million was significantly ahead (160%) of the R101 million generated last year
driven by the operational and cost benefits arising from the turnaround initiatives initiated in 2017.
This result was achieved despite a restructuring charge of R12.5 million and sub-optimal performance in
the KLL and SmartMatta operations.
The division generated a ROIC of 8.7% compared to 2.5% last year, within the set target range in the
turnaround process.
Changes in directorate and executive management
At the annual general meeting scheduled for 14 February 2019, Ms Bongiwe Mkhabela and Mr Isaac Shongwe will
retire as directors of the board and Mr Don Wilson will retire as a member of the board and finance director.
In line with a structured board nomination process the appointment of new non-executive directors of
Barloworld will be announced in due course.
To ensure a seamless transition, Ms Olufunke Ighodaro was appointed as an executive director of the board
and CFO designate of the company effective 1 October 2018. She will succeed Mr Wilson as finance director of
Barloworld at the annual general meeting in February 2019.
Ms Andiswa Ndoni was appointed company secretary effective 1 September 2018.
The board wishes to thank the departing executive and non-executive directors for their valuable service and
contribution to the board and Barloworld.
Funding
Group net debt decreased by R2 477 million to R3 276 million mainly as a result of the proceeds of
R2 469 million from the sale of Equipment Iberia. While total interest-bearing debt increased by R1 491 million
to R11 169 million due to working capital absorption, cash and cash equivalents improved by R3 968 million
to R7 893 million at year end.
Human capital, diversity and inclusion and sustainable development
A key initiative for the group to meet its strategic transformational objectives is the development and
growth of the diverse talent pool to drive executional ability.
We also continue to drive transformation and diversity within our supply chain in order to support the
broader objectives of the company. We have engaged our various principals to advance the localisation objectives;
the equity equivalent investment programme in partnership with the Department of Trade and Industry announced
by Caterpillar is ongoing.
During 2018 the group remained a constituent of the FTSE/JSE Responsible Investment Index, FTSE4Good Index
Series and the Dow Jones Sustainability Emerging Markets Index.
Corporate level strategy
Progress continues in all four areas of the group's strategy.
Fix - The disposal of Equipment Iberia was successfully concluded in July 2018 with the bulk of the proceeds
received. The turnaround within the Logistics business is progressing in line with expectations.
Optimise - Equipment southern Africa continues with its operational transformation project, while Motor
Retail has an ongoing review of its dealer network and cost structures. Options for the optimal deployment
of capital in the Leasing business are well advanced and we are exploring various funding options to enhance
return on capital of our rental assets.
Active shareholder model - The group has fully adopted managing for intrinsic value, which focuses on value
creation through the structured assessment of opportunities, a strong focus on resource allocation (capital,
talent and operating costs), and robust business performance management. The rollout of this programme is
complete. To further enhance its foundational capabilities the group is developing and rolling out process
optimisation which will be supported by process automation capabilities. The redevelopment of the Barlow
Park precinct will commence mid-2019.
Grow - The group continues to review various options as part of its stringent capital deployment
philosophies. Our balance sheet has capacity to fund growth or optimise capital structures should opportunities
not materialise.
Broad-based black economic empowerment (B-BBEE)
As a responsible corporate citizen Barloworld is aligned with the national development imperatives of
advancing inclusive economic transformation and growth. To that effect the Barloworld board approved a
B-BBEE transaction proposal that was announced in the terms announcement released on SENS on
19 November 2018.
Transaction highlights:
- Transformation through the creation of a long term sustainable B-BBEE transaction
- Creation of a broad-based foundation (the Foundation) to be issued with 3% of Barloworld's issued
ordinary shares
- Sale of a R2.8 billion property portfolio with value growth over time to a black controlled company
(PropCo)
- Broad-based participation of 14 000 employees
- Offer to black public to buy PropCo shares
- Sale of property portfolio aligned to strategic focus to maximise and unlock value of all assets
- B-BBEE ownership equivalent to 13.4%
- Limited dilution to shareholders
- Protect and grow the market leading positions of the South African operations
- Reliable, credible partner to public and private sector clients
The proposed transaction is subject to shareholder approval at the annual general meeting scheduled for
14 February 2019.
Outlook
Since June 2018, commodity prices which were negatively impacted by the US-China trade dispute have shown
some recovery based on improved demand from China. Commodity market fundamentals remain positive going into
the new financial year.
The Equipment SA firm order book as at the end of September 2018 of R2.4 billion includes approximately
R580 million relating to the Mota Engil deal which will be delivered in the first quarter of the new
financial year. While the bulk of the order book relates to mining and contract mining, 42% relates to
construction orders. Government's plan to establish an infrastructure fund as part of the economic stimulus
and recovery plan is further likely to stimulate local demand for construction equipment.
The new Mining Charter issued in late September 2018 has received a positive reaction from the market.
While a number of positive changes have been made compared to the June 2018 consultation draft, there remain
a number of key issues to be resolved. The finalisation of the Mining Charter remains a requirement for ensuring
the long-term sustainable growth and transformation of the South African mining industry.
In the Democratic Republic of the Congo (DRC), the general election for a new president is scheduled to take
place on 23 December 2018. This election has been delayed by just over two years and is vital for ensuring
peace and stability in the DRC.
Mining activity in the DRC remains at elevated levels on the back of strong global demand for copper and
cobalt. While the adoption of a new mining code in January 2018 could affect new mining investment in the DRC,
it has not impacted existing production and we are projecting another strong performance from our joint venture
in the Katanga province in the coming year.
Russian GDP growth is forecast to reduce from around 2% in 2018 to 1.0% in 2019 due to slowing consumer
demand and reduced investment. The outlook for the Russian economy is, however, highly dependent on the oil
price as well as the nature of new sanctions that are likely to be introduced later this year or in 2019.
The Equipment Russia firm order book at September 2018 has reduced to $44 million following the delivery of
various package deals in the current financial year. The outlook for 2019 remains positive but mining machine
sales are unlikely to meet the activity levels achieved in 2018. In addition, machines sourced from the United
States are subject to higher tariffs that will result in margin pressure in the Russian market. The installed
working machine population has increased significantly which bodes well for future aftermarket demand
especially in the mining segment.
South African consumers remain under pressure in a slowing economy. Higher fuel prices due to the weakening
Rand and rising global oil prices have eroded the consumer's disposable income. We therefore expect industry
vehicle sales in 2019 to be flat or slightly down on the current year with Rand depreciation adding further
pressure to the premium segment.
Motor Trading will continue to focus on dealership profitability and returns, and actively address any
underperformance at that level. The premium brands are expected to remain under pressure in the coming year.
Car Rental industry volumes have decreased by approximately 1% for the financial year with corporate and
local leisure segments under pressure. While we expect continued growth in inbound tourism, this segment
remains extremely competitive.
In mid-October, the City of Johannesburg announced the non-renewal of the Avis Fleet contract for
non-specialised vehicles. While securing contracts to increase the finance fleet is an immediate challenge
facing the business, good momentum has recently been gained in securing additional sizeable corporate contracts.
In Logistics the benefits of the turnaround initiatives surpassed the targets set for 2018 and we expect the
next phase of the project to play a significant part in delivering improved results in 2019. A decision has
been taken to dispose of the loss making KLL and the SmartMatta business units and consequently the assets
and liabilities of these businesses have been disclosed as held for sale at September 2018.
DB Ntsebeza
Chairman
DM Sewela
Chief Executive
Group financial review
In July 2018 the group announced the conclusion of the sale of its Equipment Iberia business. In compliance
with IFRS 5, and as presented at the year ended 30 September 2017, the results of the Equipment Iberia
operations and the profit on the sale of this operation have been reported separately as a discontinued
operation. The following commentary reflects current year trends from the group's continuing operations
unless specifically stated.
The financials have been prepared in accordance with International Financial Reporting Standards (IFRS) and
IAS 34 Interim Financial Reporting.
The accounting policies applied for the reporting period are consistent with those applied during the prior
comparative period.
The financial information has been audited by the company's auditors Deloitte & Touche, and a copy of
the audit opinion is available for inspection at the company's registered offices.
Financial performance from continued operations for the year ended 30 September 2018
Revenue for the year increased by 2.4% to R63.4 billion (2017: R62.0 billion) on the back of a record
performance in Equipment Russia together with solid growth in Equipment southern Africa. Despite geopolitical
challenges in the latter part of the year, Equipment Russia continued to benefit from strong mining activity
in the region, specifically the delivery of large orders contracted at the end of 2017, with revenue up by 57%
in US Dollar terms to $606 million (2017: $385 million). Equipment southern Africa revenues of R19.8 billion
were 8.1% above prior year (2017: R18.3) driven by mining machine sales in South Africa and Mozambique.
Automotive revenues at R29.8 billion (2017: R31.6 billion) were down by 5.6% against the prior year.
Automotive trading revenues were impacted by the 2017 closure and disposal of three General Motors and
two BMW dealerships, together with the changes in revenue recognition in line with the agency model for
Mercedes-Benz new passenger vehicle sales during the year. Logistics' successful turnaround continued with
transport revenues growing by 9.1%, however total Logistics revenue of R5.9 billion (2017: R6.2 billion) was
4% behind prior year following the loss of key contracts in the prior year.
While the Rand weakened towards the end of the second half of the financial year, a strengthening in the
Rand during the first half of the year resulted in a net year to date reduction in revenue of R356 million
(0.7%) with the bulk of the reduction impacting Equipment southern Africa and Russia.
Earnings before interest, taxation, depreciation and amortisation (EBITDA) of R7.0 billion improved by 4.2%
while operating profit improved by 7.9% to R4.4 billion (2017: R4.1 billion). Group operating margin increased
to 6.9% (2017: 6.6%). Margins in Equipment Russia and Equipment southern Africa were negatively impacted by
stronger mining machine sales mix contributions which in time will contribute positively to aftermarket
activity. Russia generated record operating profits of $61.7 million (2017: $43.4 million). Equipment southern
Africa maintained operating profit at R1.8 billion (2017: R1.8 billion) which was assisted by the release of parts
inventory provisions following certification of our rebuild facility. Automotive operating margin improved
despite closures and disposals in the prior year while operating profit declined by 2.7%. A highlight of this
year's operating profit growth was the turnaround of Logistics which contributed operating profit of R262 million
against last year's R101 million, an increase of 160%.
Net operating profit after tax (NOPAT), a key element of our ROIC metric for determining economic profit (EP),
increased by R126 million to R3.3 billion (2017: R3.2 billion).
The net negative fair value adjustments on financial instruments of R133 million (2017: R209 million)
largely consist of the cost of forward points on foreign exchange contracts, translation gains and losses on
foreign currency denominated monetary assets and liabilities in Equipment southern Africa. The weakening of
the Rand, particularly towards the end of the financial year, resulted in exchange gains in respect of US Dollar
held deposits.
Net finance costs of R1 035 billion are down by R186 million (15%) on prior year due to lower average
borrowings and lower funding rates in South Africa.
Losses from non-operating and capital items of R248 million consist largely of impairments of goodwill,
intangibles and other assets of R234 million in Logistics following the decision to dispose of the KLL and
SmartMatta businesses and the impairment of an investment held by our Automotive investment (R24 million).
The taxation charge increased by R385 million and the effective tax rate (excluding prior year taxation and
non-operating and capital items) increased to 28.5% (2017: 23.9%) largely as a result of local currency
weakness against the US Dollar in certain offshore operations. In particular, the group's tax charge was
negatively impacted by the weakening Angolan Kwanza, Zambian Kwatcha and Russian Ruble against the US Dollar.
The increase in income from associates and joint ventures in the year is mainly attributable to the
profitability of the Equipment joint venture in the Katanga province of the DRC. Income of R235 million was
well up on the R93 million achieved last year.
The discontinued Equipment Iberia operations generated a net gain on sale of R1.6 billion, representing the
premium to net asset value of the sale of proceeds and a R1.5 billion gain in respect of the recycling of
exchange reserves accumulated since the acquisition in 1992.
Overall, profit from continuing operations increased by R247 million (12.2%) to R2.3 billion and headline
earnings per share (HEPS) from continuing operations increased by 18% to 1 151 cents (2017: 975 cents).
Total HEPS including discontinued operations increased by 35% from 883 cents to 1 192 cents.
Cash flows
Generating cash flow is a key returns measure for management and the group achieved net cash flows before
financing activities of R2.6 billion, which was in line with the prior year. This was after dividend payments
of R953 million for the year.
Cash generated from operations of R3.8 billion was down on the prior year (2017: R6.0 billion) but strong in
light of market conditions weighing on our operations.
The group invested R2.1 billion into working capital in the current year compared to the R1.5 billion
reduction last year. The increase was largely as a result of increased inventories and receivables in our
Equipment businesses. Investments in our rental and leasing fleets were contained to R2.2 billion
(2017: R2.9 billion) with car rental well down on the prior year.
Cash inflows from investing activities of R1.9 billion (2017: R329 million outflow) included the proceeds
from the sale of Equipment Iberia of R2.5 billion (EUR163 million).
Our ongoing strategy to hedge our exposure in Angola by investing in Angolan US Dollar linked government
bonds protected us against the Kwanza devaluation of more than 76% that has occurred since January 2018
following that currency's unpegging from the US Dollar. Due to improved US Dollar currency allocations in
Angola in the latter part of the year we have marginally reduced our investment in Angolan US Dollar linked
government bonds at September 2018 to US Dollar 64 million (2017: US Dollar 66 million) and we have reduced
our Kwanza cash on hand by US Dollar 20 million.
Financial position
Total assets employed in the group increased by R2.9 billion (6.3%) driven by increased inventories and
receivables in our Equipment businesses, together with an increase of R4 billion in cash on hand at year
end. Assets held for sale of R497 million include the Logistics Middle East business, the KLL and SmartMatta
Logistics assets and the Barlow Park office park.
Total debt increased by R1.5 billion to R11.2 billion (2017: R9.7 billion) while net debt of R3.3 billion
was R2.5 billion down on prior year (2017: R5.8 billion) as a result of the increase in cash on hand.
The UK pension scheme deficit decreased from R2.2 billion (£123 million) to R1.8 billion (£95 million)
mainly due to an increase in the AA corporate bond yield which reduced the estimated future pension liability.
As part of the 2017 triennial recovery plan agreement with the trustees and the UK Pensions Regulator, the group
has agreed a payment plan for the next eight years to address the actuarial deficit at the 2017 valuation date.
Returns
Return on equity from continuing operations increased to 11.4% from 10.5% last year. Return on invested
capital increased to 12.3% from 11.2% driven by increased NOPAT and a reduction in our overall invested
capital to R26.0 billion (2017: R26.6 billion). The primary driver of the reduction in invested capital
was in the Logistics business where management have reduced the invested capital by R510 million.
Debt
In October 2017 bonds totalling R425 million (BAW3 and BAW8) matured and were repaid using available banking
facilities. In February 2018, BAW29, a five-year, R400 million bond was issued in anticipation of bonds
maturing in the latter part of the calendar year. BAW11 and BAW17, totalling R1.2 billion, mature in October
and December 2018 respectively with BAW11 repaid just after year end using existing facilities. The refinance
of BAW17 will be addressed with a new R700 million three-year bond to be issued in December 2018. Overall the
group debt maturity profile is well balanced in future years.
Closing South African short-term debt includes commercial paper totalling R700 million (2017: R643 million).
Subject to funding rates, we expect to maintain our participation in this market.
At 30 September 2018 the group had unutilised borrowing facilities of R10.6 billion (2017: R10.7 billion)
of which R8.1 billion (2017: R8.0 billion) was committed. The group's ratio of long-term to short-term debt
declined to 54%:46% (2017: 79%: 21%). The increased short-term debt ratio is attributable to maturing bonds
of R1.2 billion as (highlighted above). The group has sufficient long-term committed facilities to cover
short-term debt.
In March 2018 Moody's raised Barloworld's Global Scale outlook from negative to stable following the change
of outlook on the Baa3 sovereign rating of South Africa and on 2 May 2018 Moody's affirmed our long-term and
short-term issuer Global Scale Rating of Baa3 and P-3 and long-term and short-term issuer National Scale
Rating of Aa1.za and P-1.
Net debt to EBITDA of 0.5 times is well down on the prior year of 0.9 times and supports our capacity for
future transactions. Net debt to equity has also reduced to 14.7% from 27.6% in the prior year with 176%
of our year-end net debt in the leasing and Car Rental business segments and the Trading segment in a net
cash position.
Dividends
Barloworld's dividend policy is to pay dividends within an annual HEPS cover range of 2.5 to 3.0 times.
On the back of the results of the year, dividends totalling 462 cents per ordinary share have been declared,
representing cover of 2.5 times.
2019 outlook
The execution of our strategy to fix, optimise and grow the business has yielded improved returns for our
shareholders and we remain committed to delivering on this strategy. Notwithstanding Logistics' commendable
results for 2018, pressure remains on the turnaround of that business with the aim of driving returns closer
to the group hurdle rates.
The low gearing levels in the group mainly as a result of high cash on hand will be addressed going forward
by both acquisitions and optimisation of the existing capital structure to improve group returns.
DG Wilson
Finance director
Operational reviews
Equipment and Handling
Revenue Operating profit/(loss) Net operating assets
Year ended Year ended Year ended
30 September 30 September 30 September
2018 2017 2018 2017 2018 2017
Rm Rm Rm Rm Rm Rm
Equipment 27 572 23 428 2 594 2 367 14 596 15 091
- Southern Africa 19 775 18 287 1 790 1 785 11 637 10 106
- Europe 2 441
- Russia 7 797 5 141 804 582 2 959 2 544
Handling 114 765 (20) (5) 306 443
27 686 24 193 2 574 2 362 14 902 15 534
Share of associate income 241 97
Equipment southern Africa's revenue increased by 8.1% to R19.8 billion compared to last year, primarily
due to higher new equipment and rental revenues. Machine revenue was up 21%, driven by growth in mining
sales and market share growth in the construction sector. Reduced demand in public works and investment in
infrastructure continued to constrain the construction sector while the mining sector contracted slightly
during the year. Rental revenue increased by 25% supported by rising contract mining activities and growth
in emerging contractors. The Energy and Transportation segment posted weak results in a constrained diesel
genset market.
Operating profit remained flat at R1.8 billion with reduced operating margin of 9.1% (2017: 9.7%), largely
due to changes in the sales mix and the impact of foreign exchange. Aftermarket was down 2%, due to the ramp
down of the De Beers Voorspoed mine in preparation for closure, a reduction in Maintenance and Repair Contract
and Service revenues, which declined by 8.6% in South Africa, Mozambique and Botswana. Approximately 79% of
operating profits were generated in South Africa (2017: 70%).
The effective tax rate increased to 34% in 2018 (2017: 24%) as a result of IAS 12.41 adjustments relating to
currency devaluations in our Angola and Zambia operations. The impact was offset by the growth in income from
associates. Bartrac, our joint venture in the Katanga province of the DRC, generated pleasing earnings of
R251 million, a significant increase of 159%, compared to R97 million in 2017, reflecting higher commodity
prices and production ramp-up of the Glencore Katanga operations. The cash outflow before financing activities
and before dividends of R99 million was mainly as a result of working capital outflows. ROIC for the division
ended at 12.7% slightly lower than the prior year performance.
In Russia revenue for the year of R7.8 billion showed a R2.7 billion (52%) increase over the prior year
driven by improved new equipment demand in the mining and infrastructure segments, headlined by the Polyus
mining truck deal. The aftermarket business has also demonstrated resilience and growth.
Operating profit of R804 million was R222 million up on last year (38%). Operating margin decreased from
11.3% to 10.3% primarily due to the increase of new equipment sales in the revenue mix. Russia produced
record returns and generated positive cash flows in 2018.
The Handling loss of R20 million mainly relates to losses incurred following the decision to close the
agriculture operations in Mozambique. BHBW our Agriculture and Handling associates in South Africa and
Zambia generated associate losses of R6 million for the year.
Automotive and Logistics
Revenue Operating profit/(loss) Net operating assets
Year ended Year ended Year ended
30 September 30 September 30 September
2018 2017 2018 2017 2018 2017
Rm Rm Rm Rm Rm Rm
Automotive 29 809 31 593 1 701 1 747 8 758 8 675
- Car Rental 6 528 6 446 536 562 2 854 2 750
- Avis Fleet 3 326 3 570 641 621 3 778 3 687
- Motor Trading 19 955 21 577 524 564 2 126 2 238
Logistics 5 924 6 171 262 101 1 538 2 082
- Southern Africa 5 807 6 011 255 102 1 445 1 970
- Europe and Middle East 117 160 7 (1) 93 112
35 733 37 764 1 963 1 848 10 296 10 757
Share of associate loss (6) (4)
The Automotive division delivered a satisfactory result in a difficult trading environment. Operating profit
declined by 2.6% off a revenue reduction of 5.6%. Revenue was impacted by dealer network restructuring in BMW
and General Motors during the 2017 financial year as well as the change of revenue recognition in line with
the new agency model implemented by Mercedes-Benz (Passenger) in the Motor Trading business. On a comparable
basis revenue increased by 0.3% compared to prior year. The division increased operating margin to 5.7%
(2017: 5.5%) and achieved a ROIC of 12.4% (2017: 13.1%). The division also generated R690 million in free
cash flow.
Car Rental produced a respectable result with operating profit declining by 4.6% to R536 million. The car
rental industry rental days declined by 0.7%. The used vehicle market for one-year old vehicles came under
pressure as margins declined due to lower new vehicle inflation, impacting the overall results negatively.
The business managed to offset this impact through growth in rental days, increased rates per day and
containing fleet costs and vehicle damage expenses below inflation. Fleet utilisation was maintained at 76%.
Avis Fleet delivered a solid result generating operating profit of R641 million, up 3.2%, and increased
operating margin to 19.3% (2017: 17.4%). The result was supported by strong used-vehicle profit contribution
from three to five-year old de-fleeted vehicles. Revenue declined by 6.8% due to lower leasing revenue in
some of the key contracts. The business continues to focus on improving returns in other African territories.
Motor Trading delivered a reasonable result in a tough trading environment. Operating profit declined by
7.1% to R524 million against a revenue decline of 7.5%, impacted by the dealer network restructuring and
revenue recognition in line with the new agency model implemented by Mercedes-Benz (Passenger). On a
comparable basis, revenue increased by 1.2% on the prior year with the operating margin maintained at
2.6%. The new vehicle dealer market increased by 0.5% on the prior year but the premium brands declined
by double digits for the fourth consecutive year, negatively impacting the results. On the upside, the
results were positively impacted by a good performance from the volume brands as well as positive
contribution from aftermarket revenues. The business has benefited from the cost alignment and
restructuring decisions taken in the past two years and to further optimise the portfolio the business
disposed of one non-core business and closed an underperforming dealership in the year. ROIC was above
the group target of 13% with positive free cash flow generated.
Logistics produced significant improvements in business performance, driven by focused transformational
turnaround plans despite the tough economic environment. While total revenue of R5.9 billion declined by
4.0% from 2017, operating profit of R262 million was 160% up on prior year. Lower trading in Supply Chain
Management was partly offset by improved activity in Transport mainly due to improved trading in mining and
FMCG. Overall, the significant improvement in profitability was driven by implementation of the turnaround
strategy embarked on in 2017. The reduction in net operating assets was mainly driven by refinancing of
Transport assets and working capital reduction in Supply Chain Management.
The KLL and SmartMatta business units have significantly underperformed and as a result have been impaired
to fair value and disclosed as held for sale at September 2018. The disposal of the Middle East business
is progressing well.
Corporate
Net operating
Revenue Operating profit/(loss) assets/(liabilities)
Year ended Year ended Year ended
30 September 30 September 30 September
2018 2017 2018 2017 2018 2017
Rm Rm Rm Rm Rm Rm
Southern Africa 1 2 (74) (56) 580 553
UK (59) (72) (1 739) (2 262)
1 2 (133) (128) (1 159) (1 709)
Corporate primarily comprises the operations of the group headquarters and treasury in Johannesburg, the
treasury in Maidenhead (United Kingdom) and Barloworld Insurance Limited (BIL), the captive insurance company.
Southern Africa incurred higher operating losses compared to last year mainly due to increased corporate
activities while the UK costs were favourably impacted by improved BIL profitability.
Dividend declaration
Dividend number 180
Notice is hereby given that total dividend number 180 of 317 cents (gross) per ordinary share in respect of
the 12 months ended 30 September 2018 has been declared subject to the applicable dividends tax levied in terms
of the Income Tax Act (Act No. 58 of 1962)(as amended) (the Income Tax Act).
In accordance with paragraphs 11.17(a)(i) to (ix) and 11.17(c) of the JSE Listings Requirements the following
additional information is disclosed:
- The dividend has been declared out of income reserves;
- Local dividends tax rate is 20% (twenty per centum);
- Barloworld has 212 692 583 ordinary shares in issue;
- The gross local dividend amount is 317 cents per ordinary share;
- The net dividend amount is 254 cents per ordinary share.
In compliance with the requirements of Strate and the JSE Limited, the following dates are applicable:
Dividend declared Monday, 19 November 2018
Last day to trade cum dividend Tuesday, 08 January 2019
Ordinary shares trade ex-dividend Wednesday, 09 January 2019
Record date Friday, 11 January 2019
Payment date Monday, 14 January 2019
Share certificates may not be dematerialised or rematerialised between Wednesday, 09 January 2019 and
Friday 11 January 2019, both days inclusive.
On behalf of the board
Andiswa Ndoni
Group company secretary
Summarised consolidated income statement
for the year ended 30 September
Audited
2018 2017 %
Note Rm Rm change
CONTINUING OPERATIONS
Revenue 63 420 61 959 2
Operating profit before items listed below (EBITDA) 6 978 6 694
Depreciation (2 433) (2 468)
Amortisation of intangible assets (141) (144)
Operating profit 4 404 4 082 8
Fair value adjustments on financial instruments (133) (209)
Finance costs (1 182) (1 329)
Income from investments 147 109
Profit before non-operating and capital items 3 236 2 653 22
Non-operating and capital items 3 (248) (155)
Profit before taxation 2 988 2 498
Taxation (950) (565)
Profit after taxation 2 038 1 933 5
Income from associates and joint ventures 235 93
Profit for the year from continuing operations 2 273 2 026 12
DISCONTINUED OPERATIONS
Profit/(loss) from discontinued operation 6 1 647 (269)
Profit for the year 3 920 1 757
Net profit attributable to:
Owners of Barloworld Limited 3 846 1 643 134
Non-controlling interest in subsidiaries 74 114
3 920 1 757
Earnings per share from group (cents)
- basic 1 823.8 779.6
- diluted 1 812.9 774.7
Earnings per share from continuing operations (cents)
- basic 1 042.8 907.2
- diluted 1 036.5 901.5
Earnings/(loss) per share from discontinued operation (cents)
- basic 781.0 (127.6)
- diluted 776.4 (126.8)
Summarised consolidated statement of other comprehensive income
for the year ended 30 September
Audited
2018 2017
Rm Rm
Profit for the year 3 920 1 757
Items that may be reclassified subsequently to profit or loss: (874) 75
Exchange gains on translation of foreign operations 645 8
Translation reserves realised on disposal of foreign subsidiaries (1 502)
(Loss)/gain on cash flow hedges (23) 89
Deferred taxation on cash flow hedges 6 (22)
Items that will not be reclassified to profit or loss: 345 535
Actuarial gains on post-retirement benefit obligations 415 678
Taxation effect of net actuarial losses (70) (143)
Other comprehensive (loss)/income for the year, net of taxation (529) 610
Total other comprehensive income for the year 3 391 2 367
Total other comprehensive income attributable to:
Owners of Barloworld Limited 3 317 2 253
Non-controlling interest in subsidiaries 74 114
3 391 2 367
Summarised consolidated statement of financial position
at 30 September
Audited
2018 2017
Note Rm Rm
ASSETS
Non-current assets 19 231 18 613
Property, plant and equipment 12 657 12 659
Goodwill 1 873 1 932
Intangible assets 1 528 1 602
Investment in associates and joint ventures 1 343 1 093
Finance lease receivables 211 240
Long-term financial assets 909 404
Deferred taxation assets 710 683
Current assets 29 531 24 368
Vehicle rental fleet 3 058 3 222
Inventories 9 592 8 457
Trade and other receivables 8 883 8 676
Taxation 105 88
Cash and cash equivalents 7 893 3 925
Assets classified as held for sale 6 497 3 343
Total assets 49 259 46 324
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 441 441
Other reserves 4 194 5 144
Retained income 17 598 14 690
Interest of shareholders of Barloworld Limited 22 233 20 275
Non-controlling interest 517 602
Interest of all shareholders 22 750 20 877
Non-current liabilities 8 917 10 852
Interest-bearing 5 995 7 623
Deferred taxation liabilities 632 538
Provisions 47 19
Other non-current liabilities 2 243 2 672
Current liabilities 17 466 13 798
Trade and other payables 11 122 10 697
Provisions 1 100 929
Taxation 70 117
Amounts due to bankers and short-term loans 5 174 2 055
Liabilities directly associated with assets classified as held for sale 6 126 797
Total equity and liabilities 49 259 46 324
Summarised consolidated statement of changes in equity
at 30 September
Audited
Attribu-
table to
Share Barloworld Interest
capital Limited Non- of all
and Other Retained share- controlling share-
premium reserves income holders interest holders
Rm Rm Rm Rm Rm Rm
Balance at
1 October 2016 441 5 134 13 367 18 942 737 19 679
Total comprehensive
income for the year 75 2 178 2 253 114 2 367
Transactions with owners,
recorded directly in equity
Other reserve movements (154) 32 (122) (122)
Other changes in minority
shareholders' interest and
minority loans 89 (132) (43) (201) (244)
Dividends (755) (755) (48) (803)
Balance at
30 September 2017 441 5 144 14 690 20 275 602 20 877
Total comprehensive (loss)
/income for the year (874) 4 191 3 317 74 3 391
Transactions with owners,
recorded directly in equity
Other reserve movements (41) 55 14 (3) 11
Other changes in minority
shareholders' interest and
minority loans (183) (183) (75) (258)
Disposal of subsidiary (35) (283) (318) (318)
Dividends (872) (872) (81) (953)
Balance at
30 September 2018 441 4 194 17 598 22 233 517 22 750
Summarised consolidated statement of cash flows
for the year ended 30 September
Audited
2018 2017
Note Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Operating cash flows before movements in working capital 8 111 7 307
Movement in working capital (2 065) 1 539
Cash generated from operations before investment
in leasing and rental fleets 6 046 8 846
Fleet leasing and equipment rental fleet (1 593) (1 661)
Additions (3 305) (3 550)
Proceeds on disposal 1 713 1 889
Vehicles rental fleet (631) (1 220)
Additions (3 921) (4 373)
Proceeds on disposal 3 290 3 153
Cash generated from operations 3 822 5 965
Finance costs (1 184) (1 338)
Realised fair value adjustments on financial instruments (140) (270)
Dividends received from investments, associates
and joint ventures 113 13
Interest received 147 108
Taxation paid (1 058) (744)
Cash inflow from operations 1 700 3 734
Dividends paid (including non-controlling interest) (953) (803)
Cash retained from operating activities 747 2 931
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of subsidiaries, investments and intangibles 4 (86) (393)
Proceeds on disposal of subsidiaries, investments and intangibles 5 2 342 379
Movements in investments in leasing receivables (53) (134)
Acquisition of other property, plant and equipment (618) (774)
Replacement capital expenditure (244) (315)
Expansion capital expenditure (374) (458)
Proceeds on disposal of property, plant and equipment 306 593
Net cash generated/(used) in investing activities 1 891 (329)
Net cash inflow before financing activities 2 638 2 602
CASH FLOWS FROM FINANCING ACTIVITIES
Shares repurchased for equity-settled share-based payment (43) (154)
Purchase of non-controlling interest (257) (201)
Non-controlling interest loan and equity movements 4
Proceeds from long-term borrowings 2 956 4 260
Repayment of long-term borrowings (3 322) (5 005)
Movement in short-term interest-bearing liabilities 1 746 (546)
Net cash from/(used in) financing activities 1 080 (1 642)
Net increase in cash and cash equivalents 3 718 960
Cash and cash equivalents at beginning of year 3 925 3 028
Cash and cash equivalents held for sale at the beginning of year 102
Effect of foreign exchange rate movement on cash balance 167 39
Effect of cash balances classified as held for sale (19) (102)
Cash and cash equivalents at end of year 7 893 3 925
Cash balances not available for use due to reserving restrictions 178 444
Summarised notes to the consolidated financial statements
for the year ended 30 September
1. BASIS OF PREPARATION
The summarised consolidated financial statements are prepared in accordance with the requirements
of the JSE Limited Listings Requirements (Listings Requirements) for preliminary reports, and the
requirements of the Companies Act applicable to the summarised financial statements. The Listings
Requirements require preliminary reports to be prepared in accordance with the framework concepts
and the measurement and recognition requirements of International Financial Reporting Standards
(IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Pronouncements as issued by the Financial Reporting Standards Council, and to also, as
a minimum, contain the information required by IAS 34: Interim Financial Reporting. The accounting
policies applied in the preparation of the summarised consolidated financial statements are derived
in terms of International Financial Reporting Standards and are consistent with those accounting
policies applied in the preparation of the previous consolidated financial statements, with the
exception of a change in estimate relating to the determination of the net realisable value (NRV)
of rebuild components. In the current year the Equipment southern Africa Rebuild Centre was
certified by Caterpillar. In order to receive certification the Rebuild Centre had to demonstrate
excellence in quality, efficiency, capacity, image, administration and continuous improvements.
This certification, together with operational efficiencies, has resulted in increased margins being
earned on rebuilt components which management believes are sustainable into the foreseeable future.
This has resulted in a change in determining the scale applied to estimating the NRV of rebuilt
components and in the determination of inventory turns. This change in methodology to estimate the
NRV provision recognised against rebuilt components is considered a change in estimate in accordance
with IAS 8 Accounting policies, changes estimates and errors. This change has been accounted for
prospectively in the current year. Applying the previous methodology, the NRV provision against
rebuild components would have increased by R75 million in the year (income statement charge of
R75 million). The revised estimate resulted in a reduction in the NRV provision against rebuilt
components of R205 million. Therefore the net impact recognised in the income statement as income
for the year was R130 million. Equipment Iberia was sold in the year and the results of this
operation have been classified as a discontinued operation. This announcement is a summary of
the complete set of financial statements available for inspection at our registered office.
An unmodified audit opinion was issued on the complete set of the consolidated financial statements.
This preliminary report and the complete set of the consolidated financial statements were prepared
under the supervision of RL Pole CA(SA) (Group general manager: finance).
Audited
2018 2017
Rm Rm
2. RECONCILIATION OF NET PROFIT TO HEADLINE EARNINGS
Profit attributable to Barloworld shareholders 3 846 1 643
Adjusted for the following:
Loss on disposal of subsidiaries and investments (IFRS 10) (98) 25
Profit on disposal of plant, property, equipment and
intangibles assets excluding rental assets (IAS 16 and IAS 38) (10) (43)
Impairment of goodwill (IFRS 3) 70 73
Impairment of plant and equipment (IAS 16) and
intangibles (IAS 38) and other assets 155 98
Impairment of investments in associates and joint
ventures (IAS 36) 24
Realisation of translation reserves on disposal
of foreign subsidiaries (IAS 21) (1 502)
Taxation effects of remeasurements (18) (5)
Associate and non-controlling interest in remeasurements 47 71
Net remeasurements excluded from headline earnings (1 332) 219
Headline earnings 2 514 1 862
Headline earnings from continuing operations 2 427 2 053
Headline earnings/(loss) from discontinued operation 87 (191)
Weighted average number of ordinary shares in
issue during the year (000)
- basic 210 875 210 780
- diluted 212 147 212 095
Headline earnings per share (cents)
- basic 1 192.1 883.4
- diluted 1 185.0 877.9
Headline earnings per share from continuing operations (cents)
- basic 1 150.9 974.5
- diluted 1 144.0 968.0
Headline earnings/(loss) per share from discontinued operation (cents)
- basic 41.2 (91.1)
- diluted 41.0 (90.1)
Audited
2018 2017
Rm Rm
3. NON-OPERATING AND CAPITAL ITEMS
Loss on acquisitions and disposal of investments and subsidiaries (25)
Impairment of investments (24) (73)
Impairment of goodwill (70)
Profit on disposal of property, plant, equipment, intangibles
and other assets 1 41
Impairment of property, plant and equipment, intangibles and other assets (155) (98)
Gross non-operating and capital items from continuing operations (248) (155)
Taxation benefit on non-operating and capital items 20 5
Non-operating and capital items included in associate
income from continuing operations 7
Net non-operating and capital items from continuing operations (228) (143)
Net non-operating and capital items from discontinued operations 9
Taxation charge on non-operating and capital items from
discontinued operations (2)
Non-operating and capital items included in associate
income from discontinued operations (47) (78)
Net non-operating and capital items loss (268) (221)
As per our group accounting policy the definition of non-operating and capital items does not include
profit or loss on property, plant and equipment, intangibles and investments. These items are adjusted
for in the headline earnings calculation.
Audited
2018 2017
Rm Rm
4. ACQUISITION OF SUBSIDIARIES, INVESTMENTS AND INTANGIBLES
Investment and intangible assets acquired (86) (393)
Cash amounts paid to acquire subsidiaries, investments and intangibles (86) (393)
5. PROCEEDS ON DISPOSAL OF SUBSIDIARIES, INVESTMENTS AND INTANGIBLES
Inventories disposed 969 551
Receivables disposed 1 196 26
Payables, taxation and deferred taxation balances disposed and settled (785) (60)
Borrowings net of cash 162
Property, plant and equipment, non-current assets, goodwill and intangibles 1 048 151
Net assets disposed 2 590 668
Outstanding receivable from buyer (170)
Less: Non-cash translation reserves realised on disposal of
foreign subsidiaries (1 502)
Profit/(loss) on disposal 1 586 (9)
Investment in joint venture (301)
Net cash proceeds on disposal of subsidiaries 2 504 358
Bank balances and cash in subsidiaries disposed (162)
Proceeds on disposal of investments and intangibles 21
Cash proceeds on disposal of subsidiaries, investments and intangibles 2 342 379
The net cash proceeds on disposal of subsidiaries arises from the sale of the Equipment Iberia business
for R2.5 billion (EUR163 million) during June 2018.
Audited
2018 2017
Rm Rm
6. DISCONTINUED OPERATION AND ASSETS CLASSIFIED AS HELD FOR SALE
Due to its significance, Equipment Iberia business segment was
classified as a discontinued operation as 30 September 2017.
The sale of this business segment was concluded during June 2018.
Revenue 3 337 4 076
Operating profit before items listed below (EBITDA) 215 58
Depreciation (72) (121)
Amortisation of intangible assets (7) (14)
Operating profit/(loss)^ 136 (77)
Finance costs (2) (9)
Income from investments 1
Profit/(loss) before non-operating and capital items 134 (85)
Non-operating and capital items 9
Profit/(loss) before taxation 143 (85)
Taxation (29) (51)
Profit/(loss) after taxation 114 (136)
Loss from associates# (67) (133)
Profit/(loss) from discontinued operations 47 (269)
Net profit on disposal of discontinued operations* 1 600
Profit/(loss) discontinued operations per income statement 1 647 (269)
^ Operating loss at 30 September 2017 included restructuring costs at R137 million (EUR9.1 million).
# Loss from associates includes an impairment of investment of R47 million (2017: R78 million).
* Net profit on disposal of Equipment Iberia includes R1.5 billion that relates to recycle of the foreign
currency translation reserves since acquisition.
Audited
2018 2017
Rm Rm
6. DISCONTINUED OPERATION AND ASSETS CLASSIFIED AS
HELD FOR SALE CONTINUED
The cash flows from the discontinued operation are as follows:
Cash flows from operating activities 129 381
Cash flows from investing activities (31) (65)
Cash flows from financing activities (6) (326)
The major classes of assets and liabilities classified
as held for sale are as follows:
Property, plant and equipment 253 1 131
Investments 97
Long-term financial assets 9
Deferred tax assets 18 166
Intangible assets 2 42
Inventories 37 823
Trade and other receivables*** 168 973
Cash balances 19 102
Assets classified as held for sale 497 3 343
Interest-bearing long-term loans (33)
Trade and other payables - short and long term** (125) (637)
Deferred tax liability (2)
Provisions (125)
Bank overdraft (1)
Total liabilities associated with assets classified
as held for sale (126) (797)
Net assets classified as held for sale 371 2 546
Per business segment:
Equipment Iberia 2 424
Logistics Middle East 278 122
Corporate division 93
Total group 371 2 546
*** Include financial assets of R63 million (2017: R798 million).
** Include financial liabilities measured at amortised cost of R83 million (2017: R369 million)
Following a detailed strategic review of the various operations within the Logistics business, management
has taken the firm decision to sell the KLL and SmartMatta businesses. In the prior year, the Logistics
Middle East operations were classified as held for sale and positive steps have been made to dispose of
this business in the year. Based on progress in the year and developments subsequent to year end,
management is confident that this sale will take place in 2019, failing which a reassessment of this
classification will be made. These assets do not constitute a major line of business and have therefore
not been classified as discontinued operations.
The net assets held for sale within the Corporate division relate to the Barlow Park property owned by
Barloworld Limited which is in the process of being sold into a consortium of investors with the aim of
redeveloping the site into a multi-use precinct.
Audited
2018 2017
Rm Rm
7. FINANCIAL INSTRUMENTS
Carrying value of financial instruments by class:
Financial assets:
Trade receivables
- Industry 6 124 5 429
- Government 902 438
- Consumers 543 403
Other loans and receivables and cash balances 9 120 5 732
Finance lease receivables 459 499
Derivatives (including items designated as effective hedging instruments)
- Forward exchange contracts 1 42
Other financial assets at fair value 278 49
Total carrying value of financial assets 17 427 12 592
Financial liabilities:
Trade payables
- Principals 2 925 3 336
- Other suppliers 3 734 5 234
Other non-interest-bearing payables 490 435
Derivatives (including items designated as effective hedging instruments)
- Forward exchange contracts 35
- Other derivatives 9 5
Interest-bearing debt measured at amortised cost 13 920 9 134
Total carrying value of financial liabilities 21 113 18 144
Fair value measurements recognised in the statement of financial position
Level 1 measurements are derived from quoted prices in active markets. Level 2 fair value measurements
are those derived from inputs other than quoted prices included within Level 1 that are observable
either directly or indirectly. Level 3 fair value measurements are those derived from valuation
techniques that include inputs that are not based on observable market data (unobservable inputs).
2018
Level 1 Level 2 Level 3 Total
Financial assets at fair value
through profit or loss
Financial assets designated at fair
value through profit or loss 55 55
Available-for-sale financial assets
Shares 5 5
Derivative assets designated as effective
hedging instruments 1 1
Total 1 60 61
Financial liabilities at fair value
through profit or loss
Financial liabilities designated at fair
value through profit or loss 9 9
Derivatives 35 35
Total 44 44
2017
Level 1 Level 2 Level 3 Total
Financial assets at fair value
through profit or loss
Financial assets designated at fair
value through profit or loss 49 49
Available-for-sale financial assets
Shares 5 5
Derivative assets designated as
effective hedging instruments 42 42
Total 42 54 96
Financial liabilities at fair value
through profit or loss
Financial liabilities designated at
fair value through profit or loss 5 5
Total 5 5
Audited
2018 2017
Rm Rm
8. DIVIDENDS
Ordinary shares
Final dividend No 178 paid on 15 January 2018: 265 cents per share
(2017: No 176 - 230 cents per share) 564 489
Interim dividend No 179 paid on 11 June 2018: 145 cents per share
(2017: No 177 - 125 cents per share) 308 266
Paid to Barloworld Limited shareholders 872 755
Paid to non-controlling interest 81 48
953 803
Dividends per share (cents) 462 390
- interim (declared May) 145 125
- final (declared November) 317 265
9. CONTINGENT LIABILITIES
Performance guarantees given to customers, other guarantees and claims
From continuing operations 872 578
From discontinued operations 207
Total group 872 785
Buy-back and repurchase commitments not reflected on the
statement of financial position
From continuing operations 94 102
From discontinued operations 24
Total group 94 126
During 2018 the Barloworld Equipment division entered into a 25% Risk Share Agreement with Caterpillar
Financial in South Africa and Portugal. The Risk Share Agreement only relates to certain agreed upon
customer risk profiles and relates to exposure at default less any recoveries. As at 30 September 2018
the maximum exposure of this guarantee was estimated to be R278 million.
In October 2017, the Barloworld Equipment South Africa (BWE SA) business received notification from the
Competition Commission that it is investigating a complaint against the Contractors Plant Hire Association
of which Barloworld Equipment was a member. The matter is ongoing but no action has been taken by the
Competition Authorities.
The company and its subsidiaries are continuously subject to various tax and customs audits in the
territories in which they operate. While in most cases the companies are able to successfully defend
the tax positions taken, the outcomes of some of the audits are being disputed. Where, based on our own
judgement and the advice of external legal counsel, we believe there is a probable likelihood of the group
being found liable, adequate provisions have been recognised in the financial statements. The Namibian
Directorate Customs and Excise performed an audit on the import and export records of Barloworld's rental
business in-country. Resulting from this audit, the company received notice of the Directorate Customs and
Excise's intention to impose a penalty relating to the immediate availability of certain original customs
documentation. This matter is ongoing.
At the date of this report, management were unable to conclude on the possible outcome of certain tax and
customs matters, nor could management reliably measure the potential financial impact at this stage.
Audited
2018 2017
Rm Rm
10. COMMITMENTS
Capital expenditure commitments to be incurred:
Contracted - Property, plant and equipment 340 566
Contracted - Vehicle rental fleet 1 131 1 259
Approved but not yet contracted 216 168
Total continuing operations 1 687 1 993
Discontinued operations 24
Total group 1 687 2 017
Share of joint ventures' capital expenditure commitments to be incurred:
Approved but not yet contracted 135
135
Commitments will be spent substantially in the next financial year. Capital expenditure will be financed
with funds generated by the business, existing cash resources and borrowing facilities available to
the group.
11. RELATED PARTY TRANSACTIONS
There has been no significant change in related party relationships since the previous year.
Other than in the normal course of business, there have been no significant transactions during the
year with associate companies, joint ventures and other related parties.
12. AUDIT OPINION
Independent auditor's report on summarised financial statements
To the Shareholders of Barloworld Limited
Opinion
The summarised consolidated financial statements of Barloworld Limited, which comprise
the summarised consolidated statement of financial position as at 30 September 2018,
the summarised consolidated income statement, the summarised consolidated statements of
comprehensive income, changes in equity and cash flows for the year then ended, and related
notes, are derived from the audited consolidated financial statements of Barloworld Limited
for the year ended 30 September 2018.
In our opinion, the accompanying summarised consolidated financial statements are consistent,
in all material respects, with the audited consolidated financial statements of Barloworld
Limited, in accordance with the requirements of the JSE Limited Listings Requirements for
preliminary reports, set out in note 1 to the summarised consolidated financial statements,
and the requirements of the Companies Act of South Africa as applicable to summarised financial
statements.
Summarised consolidated financial statements
The summarised consolidated financial statements do not contain all the disclosures required
by the International Financial Reporting Standards and the requirements of the Companies Act
of South Africa as applicable to annual financial statements. Reading the summarised
consolidated financial statements and the auditor's report thereon, therefore, is not a
substitute for reading the audited consolidated financial statements of Barloworld Limited
and the auditor's report thereon.
The audited consolidated financial statements and our report thereon
We expressed an unmodified audit opinion on the audited consolidated financial statements in
our report dated 16 November 2018. That report also includes the communication of key audit
matters as reported in the auditor's report of the audited financial statements.
Directors' responsibility for the summarised consolidated financial statements
The directors are responsible for the preparation of the summarised consolidated financial
statements in accordance with the requirements of the JSE Limited Listings Requirements for
preliminary reports, set out in note 1 to the summarised consolidated financial statements,
and the requirements of the Companies Act of South Africa as applicable to summarised financial
statements, and for such internal control as the directors determine is necessary to enable the
preparation of the summarised consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
The Listings Requirements require preliminary reports to be prepared in accordance with
the framework concepts and the measurement and recognition requirements of International
Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by
the Accounting Practices Committee and Financial Pronouncements as issued by the Financial
Reporting Standards Council, and to also, as a minimum, contain the information required
by IAS 34, Interim Financial Reporting.
Auditor's responsibility
Our responsibility is to express an opinion on whether the summarised consolidated financial
statements are consistent, in all material respects, with the consolidated audited financial
statements based on our procedures, which were conducted in accordance with International
Standard on Auditing (ISA) 810 (Revised), Engagements to Report on Summarised Financial
Statements.
The auditor's report does not necessarily report on all of the information contained in this
announcement/financial results. Shareholders are therefore advised that in order to obtain a
full understanding of the nature of the auditor's engagement they should obtain a copy of the
auditor's report together with the accompanying financial information from the issuer's
registered office.
We have not audited future financial performance and expectations by management included
in the accompanying summarised consolidated financial statements and accordingly do not
express any opinion thereon.
Deloitte & Touche
Registered Auditors
Per: Bongisipho Nyembe
Partner
16 November 2018
Building 1 and 2
Deloitte Place
The Woodlands
Woodlands Drive
Woodmead Sandton
National Executive: *LL Bam Chief Executive Officer *TMM Jordan Deputy Chief Executive
Officer; Clients & Industries *MJ Jarvis Chief Operating Officer *AF Mackie Audit &
Assurance *N Sing Risk Advisory DP Ndlovu Tax & Legal TP Pillay Consulting *JK Mazzocco
Talent & Transformation MG Dicks Risk Independence & Legal *KL Hodson Corporate
Finance *TJ Brown Chairman of the Board *Partner and Registered Auditor
A full list of partners and directors is available on request
B-BBEE rating: Level 1 contribution in terms of the DTI Generic Scorecard as per the
amended Codes of Good Practice
Associate of Deloitte Africa, a Member of Deloitte Touche Tohmatsu Limited
13. EVENTS AFTER THE REPORTING PERIOD
On 15 November 2018 the board approved a proposed B-BBEE transaction to be known as
"Khula Sizwe". This proposed transaction seeks to have participation from our employees,
management and the general public in South Africa. The proposed transaction is subject to
the approval by shareholders and will be voted on at the annual general meeting scheduled
for February 2019.
14. OPERATING SEGMENTS (AUDITED)
Operating
Fair value profit/(loss)
adjustments including Net operating
Operating on financial fair value assets/
Revenue profit/(loss) instruments adjustments (liabilities)
Year ended Year ended Year ended Year ended Year ended
30 September 30 September 30 September 30 September 30 September
2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Equipment
and Handling 27 686 24 193 2 574 2 362 (84) (184) 2 490 2 178 14 902 15 534
Automotive
and Logistics 35 733 37 764 1 963 1 848 (19) (6) 1 944 1 842 10 296 10 757
Corporate 1 2 (133) (128) (30) (19) (163) (147) (1 159) (1 709)
Total group 63 420 61 959 4 404 4 082 (133) (209) 4 271 3 873 24 039 24 582
Salient features
for the year ended 30 September
Audited
2018 2017
Financial
Group headline earnings per share (cents) 1 192 883
Continuing headline earnings per share (cents) 1 151 975
Return on invested capital (ROIC) (%) 12.3 11.2
Free cash flow 3 591 3 405
Economic profit (48) (476)
Dividend per share (cents) 462 390
Continuing operating margin (%) 6.9 6.6
Continuing net asset turn (times) 2.1 2.2
Continuing EBITDA/interest paid (times) 5.9 5.0
Continuing net debt/equity (%) 14.4 27.6
Continuing return on net operating assets (RONOA) (%) 20.9 16.4
Continuing return on ordinary shareholders' funds (%) 11.4 10.5
Net asset value per share including investments at fair value (cents) 10 453 9 533
Number of ordinary shares in issue (000) 212 693 212 693
Non-financial*#
Non-renewable energy consumption (GJ) 2 947 696 3 087 269
Greenhouse gas emissions (tCO2e)## 257 650 270 707
Water withdrawals (municipal sources) (ML) 588 674
Number of employees 17 417 18 085
Lost-time injury frequency rate (LTIFR)** 0.69 0.75
Number of work-related fatalities 2 3
Corporate social investment (R million) 16 18
dti^ B-BBEE rating (level)+ 4 3
* Continuing operations.
# Deloitte & Touche have issued an unmodified limited assurance report on the non-financial salient
features included above, in accordance with International Standard 3000 (Revised) on Assurance Engagements
Other Than Audits or Reviews of Historical Financial Information.
## Scope 1 and 2.
** Lost-time injuries multiplied by 200 000 divided by total hours worked.
^ Department of Trade and Industry (South Africa).
+ Audited and verified by Empowerdex.
Closing rate Average rate
Exchange rates (Rand) 2018 2017 2018 2017
United States Dollar 14.15 13.75 13.01 14.75
Euro 16.44 15.45 15.48 16.32
British Sterling 18.45 17.86 17.53 20.99
Exchange rates used:
Balance sheet - closing rate (Rand)
Income statement and cash flow statement - average rate (Rand)
About Barloworld
Barloworld is a distributor of leading international brands providing integrated rental, fleet management,
product support and logistics solutions. The core divisions of the group comprise Equipment (earthmoving
equipment and power systems), Automotive (car rental, motor retail, fleet services, used vehicles and
disposal solutions) and Logistics (logistics management and supply chain optimisation). We offer flexible,
value adding, innovative business solutions to our customers backed by leading global brands. The brands
we represent on behalf of our principals include Caterpillar, Avis, Budget, Mercedes-Benz, Toyota,
Volkswagen, Audi, BMW, Ford, Mazda, and others.
Barloworld has a proven track record of long-term relationships with global principals and customers.
We have an ability to develop and grow businesses in multiple geographies including challenging
territories with high growth prospects. One of our core competencies is an ability to leverage
systems and best practices across our chosen business segments. As an organisation we are committed
to sustainable development and playing a leading role in empowerment and transformation. The company
was founded in 1902 and currently has operations in over 16 countries around the world with 79% of
just over 17 400 employees in South Africa.
Corporate information
Registered office and business address
Barloworld Limited, 180 Katherine Street
PO Box 782248, Sandton, 2146, South Africa
Tel +27 11 445 1000
Email: invest@barloworld.com
Directors
Non-executive: DB Ntsebeza (Chairman),
NP Dongwana, FNO Edozien^, HH Hickey,
NP Mnxasana, MD Lynch-Bell*, SS Mkhabela,
SS Ntsaluba, P Schmid, I Shongwe
Executive: DM Sewela (Chief executive),
DG Wilson, O Ighodaro^
^Nigeria *UK
Group company secretary
Andiswa Ndoni
Enquiries
Barloworld Limited: Lethiwe Hlatshwayo
Tel +27 11 445 1000
Email: invest@barloworld.com
Brunswick: Iris Sibanda: Tel +27 11 502 7421
Email: isibanda@brunswick.co.za
Sponsor
Nedbank Corporate and Investment Banking, a division of Nedbank Limited
Date: 19/11/2018 07:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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