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RNS
Barloworld Limited  -  BWO   

Results for the year ended 30 September 2017

Released 07:00 20-Nov-2017

RNS Number : 8872W
Barloworld Limited
20 November 2017
 

BARLOWORLD LIMITED
Preliminary audited year-end results for the 12 months to 30 September 2017

 

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 and Logistics (car rental, motor retail, fleet services, used vehicles and disposal solutions, logistics management, supply chain optimisation and waste management). We offer flexible, value adding, innovative business solutions to our customers backed by leading global brands. 115 years of heritage built on solid relationships with our principals and customers. The brands we represent on behalf of our principals include Caterpillar, Avis, Budget, Audi, BMW, Ford, Jaguar, Land Rover, Mazda, Mercedes-Benz, Toyota, Volkswagen 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 diversity and inclusion. The company was founded in 1902 and currently has operations in over 20 countries around the world with 83% of over 18 000 employees in South Africa.

 

Corporate information

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")

 

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^, H Hickey, NP Mnxasana, M Lynch-Bell*, SS Mkhabela, SS Ntsaluba,

P Schmid, OI Shongwe

Executive: DM Sewela (Chief executive), DG Wilson

^Nigeria *UK

 

Group company secretary

Lerato Manaka

 

Enquiries

Barloworld Limited

ethiwe Motloung

Tel +27 11 445 1000

Email: invest@barloworld.com

Instinctif: Hartwell Tshuma Tel +27 11 447 3030

Email: hartwell.tshuma@instinctif.com

 

Sponsor

J.P. Morgan Equities South Africa (Pty) Ltd

 

 



 

Salient features

 

Revenue (from continuing operations) maintained at R62.0 billion

 

Operating profit (from continuing operations) maintained at R4.1 billion

 

Headline earnings per share (from continuing operations)  up 16% to 975 cents (2016: 841 cents)

 

Cash inflow before financing activities of R2.6 billion (2016: R3.5 billion)

 

Net debt to equity (from continuing operations) at 27.6% (2016: 40.7%)

 

Return on equity (from continuing operations) at 10.5% (2016: 9.3%)

 

Total dividend per share of 390 cents up 13% (2016: 345 cents)

 

 

Dominic Sewela, CE of Barloworld, said:

"Equipment southern Africa's operating performance has been resilient in the year following a rebound in mining and infrastructure demand. Increased activity has generated improved results in our joint venture in the Katanga province of the Democratic Republic of Congo (DRC). Strong mining and aftermarket in Equipment Russia drove the solid performance in that business. The discontinued Iberian Equipment operation is now held for sale.

 

The Automotive division produced pleasing results despite challenging market conditions with both revenue and operating profit exceeding 2016 levels. Trading in Logistics was up on last year due to the full year impact of acquisitions and new contracts secured in 2016, however, the operating performance was negatively impacted by the loss of a major customer and once-off costs.

 

The group is making good progress in implementing its strategy to fix and optimise existing businesses and has started to realise the benefits. As a result of strong positive cash generation and well managed debt levels, we are well placed to capitalise on acquisitive growth opportunities as they arise. The full benefit of initiatives progressed in the current year will continue to have a positive impact into 2018."

 

20 November 2017

 

 



 

Chairman and chief executive's report

 

Overview

The latest IMF World Economic Outlook forecasts the global economy to grow by 3.6% in 2017 with the advanced economies set to grow by 2.2% and the emerging economies by 4.6%.

 

The US economy is projecting GDP growth of 2.2% this year and 2.3% in 2018. Productivity growth in the US remains disappointing and represents a limiting factor to higher growth. The lack of inflation in the US economy could influence the pace of monetary tightening by the US Federal Reserve in the coming year.

 

The South African economy exited the technical recession in the second quarter of 2017 with the World Bank's outlook for full year growth now down to 0.6%. However, local business and consumer confidence levels remain under pressure in the wake of current political and economic uncertainty.

 

Against this backdrop, the group posted a pleasing 134 cents growth in headline earnings per share to 975 cents per share from continuing operations. This represents a 16% increase on the prior year of 841 cents per share. Moreover, the group generated a strong cash inflow before financing activities of R2.6 billion mainly driven by a R1.5 billion decrease in working capital and lower cash applied to investing activities. Net debt of R5.8 billion was R2.2 billion down on September 2016 net debt of R8.0 billion.

 

A total dividend for the year of 390 cents per share was declared in respect of the current year's earnings (2016: 345 cents).

 

OPERATIONAL REVIEW

Equipment

Equipment southern Africa

Revenue for the year of R18.3 billion was 1.4% down on the prior year (R18.5 billion) but in line with the guidance given to the market in November last year. The stronger rand compared to the prior year shaved R431 million off revenue for the year. Approximately 69% of total revenue was generated in South Africa with aftersales representing 57% of the total sales mix.

 

We have seen a rebound in mining unit sales following the low level in 2016. While mining unit sales have improved compared to last year, the growth has been driven by increased demand for smaller sized truck units by contract miners.

 

Operating profit of R1.8 billion is R200 million (13%) up on last year with the operating margin increasing from 8.5% to 9.8%.

 

Income from associates, which mainly relates to the Bartrac joint venture in the Katanga province of the DRC, increased from R14 million to R94 million with the recommencement of mining activities at the Glencore Katanga Mine during the current year and improved commodity prices.

 

In August, Equipment southern Africa celebrated its 90th anniversary as a Caterpillar dealer. This coincided with the official opening of the new Caterpillar/Barloworld parts facility at Kempton Park which will further improve parts availability to our customers.

 

Equipment Russia

Revenue for the year of US$385 million was US$56 million (17.1%) up on the prior year driven by strong growth in mining unit sales particularly into opencast gold mining projects. In addition we have experienced 16% growth in after sales revenue which in the current year represented 51% of total sales (2016: 51%).

 

The division generated operating profit of US$43.7 million which was 6.8% up on the prior year. The operating margin of 11.3% was down on the 12.4% achieved in 2016 mainly as a result of lower new machine margins.

 

Automotive and Logistics

Automotive

Automotive delivered a solid result in tough trading conditions.

 

Revenue for the year of R31.6 billion was marginally up on the prior year while operating profit of R1.7 billion was R93 million (5.6%) higher than last year.

 

The total operating margin showed a pleasing increase to 5.5% from 5.3% in 2016.

 

Car Rental

Revenue for the year of R6.4 billion was R479 million (8.0%) up on the prior year's R6.0 billion.

 

The car rental market grew by 3.6%. The business increased rental days and rate per day, however, margins were impacted by higher parts and vehicle prices and increased damage costs. Another strong used vehicle contribution supported the overall results.

 

Operating profit of R562 million was 4.9% up on the R536 million earned last year with an operating margin of 8.7% which was slightly down on the 9.0% achieved last year.

 

Fleet utilisation for the year improved by 1% to 76%.

 

Avis Fleet

Revenue for the year decreased by R71 million (1.9%) to R3.6 billion while operating profit increased by 11% to R621 million. The current year produced a much improved used vehicle margin compared to the prior year which was impacted by the disposal of the defleeted vehicles from the government of Lesotho contract. Consequently operating margin for the year increased to 17.4% compared to 15.4% in the prior year.

 

Motor Trading

For the 2017 financial year, the total new vehicle market declined by 2.2%. The industry is forecast to grow by close to 1.5% for the 2017 calendar year.

 

Revenue for the year decreased by R242 million (1.1%) from R21.8 billion in 2016 to R21.6 billion in the current year impacted by the disposal of one and closure of four dealerships in the year. New vehicles sold decreased by 7.4% impacted by a weaker dealer market, down 4.0%. There was good contribution from aftermarket revenues.

 

Operating profit of R564 million for the year was R6 million up on the prior year assisted by the full year impact of the two Union Motors dealerships and Salvage Management and Disposal (SMD) acquisitions made in the prior year.

 

Margins contracted across certain franchises with the premium brands affected the most.

 

Logistics

Revenue for the year of R6.2 billion was R415 million (7.2%) ahead of last year driven by the acquisitions of KLL and Aspen in January 2016, as well as the full impact of additional contracts within Supply Chain Management and Transport won last year.

 

Year to date operating profit of R101 million was, however, R122 million (54.7%) below the prior year due to the low growth in the South African economy, difficult trading conditions, the negative impact of the loss of a major client, as well as the retention impairments in the close out of the Supply Chain Software disposal reported in 2016.

 

On 1 July we acquired the 21.2% minority interest in Barloworld Transport for a consideration of R141 million. This step has laid the foundation for further rationalisation of the overhead structure of the Logistics group.

 

STRATEGIC REVIEW

Work continues in respect of all four areas identified in the group strategy.

 

Fix - The board has taken the decision to continue with the disposal of Equipment Iberia. The turnaround within the Logistics business is ongoing and progress on the exit of the Middle East Logistics operations is advancing well with several offers being negotiated. All options remain under consideration as we continue to closely monitor the performance of the business against this plan.

 

Optimise - Equipment southern Africa has commenced the roll-out of the operational transformation project, while Motor Retail has completed the bulk of the work around the restructuring contemplated through various dealership closures and further cost rationalisations.

 

Grow - Steady progress is being made in assessing opportunities that offer synergies to the group.

 

Active shareholder model - The group has adopted an approach of 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 roll-out of this programme is continuing. Good progress has been made on the project for the redevelopment of the Barlow Park property with legal agreements expected to be signed before the end of the 2017 calendar year.

 

HUMAN CAPITAL, DIVERSITY AND SUSTAINABLE DEVELOPMENT

Despite our ongoing strong focus on safety across the group, we regrettably had three tragic work-related fatalities during the year in our Logistics operations in unrelated incidents. We extend our sincere condolences to the bereaved families to whom we offered support. We continue to drive awareness of health and safety in the workplace.

 

We continue to engage emerging and black-owned professional service providers to drive diversity in our supply chain and provide them with access to the broader market.

 

We have also engaged our various principals to advance the localisation of some of their products and services. The equity equivalent investment programme in partnership with the Department of Trade and Industry recently announced by Caterpillar will assist in increasing the local content in CAT equipment and assist Barloworld Equipment's competitiveness by improving their BBBEE rating.

 

Sustainability plays a key role in how Barloworld does business. As a result of the sustainability practices we have adopted over the years, we are a constituent of the Dow Jones Sustainability Emerging Markets Index, the FTSE/JSE Responsible Investment Top 30 Index and the FTSE4Good Emerging Index.

 

CHANGES IN DIRECTORATE AND EXECUTIVE MANAGEMENT

As reported during the course of the 2017 financial year, Messrs Steven Pfeiffer, Clive Thomson and Peter Bulterman retired as directors of the board at the annual general meeting held on 8 February 2017. Mr John Blackbeard retired from the board of Barloworld Limited at the end of April 2017 and Ms Babalwa Ngonyama resigned from the Barloworld Limited board with effect from 11 May 2017.

 

In line with a structured board nomination process for the appointment of non-executive directors of Barloworld Limited, Ms Hester Hickey and Messrs Peter Schmid and Michael Lynch-Bell were appointed independent non-executive directors with effect from 1 April 2017 and Ms Nomavuso Mnxasana was appointed with effect from 6 October 2017.

 

The board wishes to thank the non-executive and executive directors that have departed for their valuable service and contribution to the board and Barloworld.

 

FUNDING

Following the reduction in group net debt of R2.7 billion in 2016, net debt further decreased by R2.3 billion in the current year from R8.0 billion to R5.8 billion. This was mainly due to strong cash generation in Equipment southern Africa.

 

OUTLOOK

The South African economy is projected to grow by 1.1% in 2018. The markets, however, remain focused on the December 2017 ANC elective conference, the result of which could impact the sovereign rating, confidence levels as well as the value of the rand.

 

The outlook for mining in Equipment southern Africa remains positive with demand for commodities and related commodity pricing holding up. We are forecasting mining unit sales and mining after sales to show continued growth in 2018.

 

The Equipment firm order book of R1.5 billion is up on the R1.3 billion at September 2016 but down on the R1.9 billion at March with construction representing 50% of the book.

 

Equipment southern Africa has embarked on a number of cost saving measures driven by achieving process efficiencies that will address weaknesses in the current IT environment, together with procurement saving initiatives. The project will run into the 2020 financial year and will further improve the operating performance of the division.

 

The Russian economy is likely to show growth of just under 2% in 2017 with further growth improvement into 2018 expected. The firm order book at September of US$203 million is well up on the US$21 million at September 2016. The bulk of these orders (94%) relate to mining projects and include the machines for the Polyus Gold and NordGold projects. This together with a number of other potential mining projects under discussion should ensure strong growth in machine revenue in the coming year.

 

In Car Rental we expect to see further growth in the foreign in-bound segment while the corporate and local leisure markets will remain subdued.

Avis fleet will continue to benefit from retaining the existing customer portfolio and gain new business.

 

The South African motor industry is going through a period of transition with the exit of General Motors from South Africa and dealer footprint realignments. In response to these challenges, Motor Trading has closed one and disposed of another BMW dealership and closed three of the existing GM dealerships. These actions will reduce annualised revenue by close to R1.5 billion in 2018 with marginal impact at the operating level. We expect vehicle sales in 2018 to be in line with the current year and the premium market to remain challenging.

 

In early October, Logistics management embarked on a turnaround strategy aimed at improving performance through operational efficiency, and to simplify and optimise the operating an organisational model. This initiative entails multiple initiatives of cost reduction and procurement savings. Management are further focused on returning underperforming businesses to required performance targets.

 

Logistics have been successful in securing a number of new contracts in the current year which will underpin further growth in 2018.

 

The group is making good progress in implementing its strategy to fix and optimise existing businesses and has started to realise the benefits. As a result of strong positive cash generation and well managed debt levels, we are well placed to capitalise on acquisitive growth opportunities as they arise. The full benefit of initiatives progressed in the year in review will continue to have a positive impact into 2018.

 

               

DB Ntsebeza         DM Sewela

Chairman                 Chief executive

 



 

Group financial review

 

Following the board's decision to sell the group's Equipment Iberia operations, the group has in terms of IFRS 5 reported the results of Equipment Iberia separately as a discontinued operation and assets and liabilities held for sale in the financial statements for the year ended 30 September 2017. The following commentary regarding current year trends is against restated comparatives to reflect the results from continuing operations unless specifically stated.

 

FINANCIAL PERFORMANCE FROM CONTINUING OPERATIONS FOR THE YEAR ENDED 30 SEPTEMBER 2017

Revenue for the year of R62.0 billion remained resilient and in line with the prior year (2016: R62.1 billion) on the back of an impressive performance in Equipment Russia while our Logistics business was boosted by the full year impact of contracts and acquisitions in the prior year. Equipment Russia benefited from strong mining unit and after sales demand, generating revenue growth of 17.1% in US dollar terms. Demand for mining equipment in southern Africa showed some improvement as commodity prices held up. Automotive revenues were marginally up by 0.5% notwithstanding the sale and closure of a number of BMW and General Motor dealerships in Motor Trading. With approximately 20% of the group's revenue generated outside of South Africa the stronger rand negatively impacted revenues by R1.1 billion.

 

Earnings before interest, taxation, depreciation and amortisation (EBITDA) of R6.7 billion improved by 3.2% while operating profit and the operating margin remained consistent with the prior year at R4.1 billion and 6.6% respectively. Key to this achievement amidst tough trading conditions was the high level of after sales in both Equipment southern Africa and Russia, and the continued profitability from the sale of used vehicles in Automotive.

 

Operating profit in Equipment southern Africa was up 13% on the prior year with Equipment Russia increasing by 6.8% in US dollar terms. Automotive produced another record result increasing operating profits by 5.6% to R1.8 billion. Avis Fleet produced a strong performance increasing their operating margin to 17.4% (2016: 15.4%). In Logistics, the loss of a key customer, restructuring and other costs associated with implementing a turnaround strategy have negatively impacted operating margins in this business with operating profit falling to R101 million (2016: R223 million).

 

The net negative fair value adjustments on financial instruments of R209 million (2016: R209 million) mainly represent the cost of forward points on foreign exchange contracts and translation gains and losses on foreign currency denominated monetary assets and liabilities in Equipment southern Africa. During the year, the strengthening of the rand resulted in exchange losses in respect of US dollar deposits held.

 

Finance costs of R1.3 billion are down by R2 million on prior year due to lower average borrowings despite higher short-term rates in South Africa.

 

Losses from non-operating and capital items of R155 million consist largely of impairments of goodwill, other intangibles and other assets of R158 million in Automotive and Logistics and losses on disposal of the Handling business of R46 million. Offsetting these losses were gains of R63 million recognised by Automotive on the sale of properties and a dealership.

 

The taxation charge decreased by R231 million and the effective tax rate (excluding prior year taxation and non-operating and capital items) reduced to 23.9% (2016: 27.0%) largely as a result of local currency fluctuations against the US dollar functional currency of the offshore operations. In this respect Barloworld's taxation charge was favourably impacted by movements in the Russian ruble, Angolan kwanza, and the Mozambican metical 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 and follows from improved copper and cobalt prices and the resumption of mining activities at the Katanga Mine.

 

The discontinued Equipment Iberia operations generated losses of €17.7 million (R269 million) in the year which were negatively impacted by restructuring costs of €9.1 million (R137 million) and an impairment of €5.1 million (R78 million) for the investment and goodwill in the associate Energyst. In addition the deferred tax asset in Spain was impaired by €3.4 million (R52 million) following the change in Spanish legislation regarding the annual recovery of such losses. The decision to sell this business is expected to release capital for allocation to new growth opportunities for the Group.

 

Overall, profit from continuing operations increased by R76 million (3.9%) to R2.0 billion (2016: R1.9 billion) and HEPS from continuing operations increased by 16% to 974.5 cents (2016: 840.9 cents). Total HEPS including discontinued operations increased by 5% from 838.1 cents to 883.4 cents, a pleasing result against challenging trading conditions and illustrative of our ability to deliver sustainable financial results.

 

CASH FLOWS

Generating free cash flow is a strategic imperative for the group. Despite a strong reduction in working capital in the current year of R1.5 billion (2016: R2.1 billion), cash generated from operations of R6.0 billion was down on the prior year (2016: R7.8 billion). These cash flows were impacted by increased net investment in leasing assets and vehicle rental fleet of R2.9 billion (2016: R1.5 billion).

 

Investing activities of R329 million (2016: R1.4 billion) were driven by additional investment in Angolan US dollar-linked government bonds of R201 million (US$15 million) using Kwanza cash on hand as protection against currency devaluation. The total investment in Angolan US dollar-linked government bonds at September was US$66 million (2016: US$51 million). The disposal of the Handling and Agriculture assets generated proceeds of R301 million.

 

Net cash flows before financing activities for the year to R2.6 billion were down from R3.5 billion in the prior year but were well up on our forecasts.

 

FINANCIAL POSITION

Total assets employed in the group increased by R302 million driven by investments in leasing assets and vehicle rental fleet together with the improved cash position of the group. This was offset by a decrease in inventories. Assets held for sale of R3.3 billion comprise Equipment Iberia and the Logistics Middle East business.

 

For the second consecutive year total debt dropped substantially, reducing by R1.3 billion to R 9.7 billion (2016: R11.0 billion). Coupled with the increase in cash at the year end, net debt of R5.8 billion was R2.3 billion down on prior year (2016: R8.0 billion).

 

The UK pension scheme deficit decreased from R2.8 billion (£161 million) to R2.2 billion (£123 million) due to an increase in the AA corporate bond yield and changes in demographic factors which impacted the estimated future pension liability. The recent interest rate increase by the Bank of England (the first in 10 years) represents a first step in the gradual increase of UK rates which should have a positive impact in the reduction of the scheme deficit going forward.

 

Return on equity from continuing operations increased to 10.5% from 9.3% last year while return on equity including discontinued operations increased from 9.2% to 9.5%.

 

DEBT

In April 2017 the R450 million BAW13 bond matured and was redeemed through available banking facilities. During May and June 2017 R1 582 million was raised through bond issuances of four three to five-year floating rate notes under our existing South African Domestic Medium Term Note programme. The issuance of these notes effectively refinanced and prefunded the settlement of notes (totalling R925 million) which matured late September and early October 2017. Overall debt maturity is well balanced in future years.

 

In South Africa, closing short-term debt includes commercial paper totalling R643 million (September 2016: R807 million). This market saw a change in investor appetite in the current year with a shift in liquidity from three-month paper to six-month paper resulting in higher spreads for this debt instrument. We aim to maintain our participation in this market but this is dependent on overall liquidity and relative pricing in the market.

In June 2017, Moody's affirmed the Barloworld long-term and short-term issuer Global Scale Ratings of Baa3 and P-3, raised the long-term National Scale Rating to Aa1.za from Aa3.za and affirmed the short-term National Scale Rating P-1.za. The outlook on the ratings of Barloworld changed from stable to negative following the change of outlook on the Baa3 sovereign rating of South Africa.

 

At September, R7.6 billion (79%) of our total debt of R9.7 billion was long term, which was slightly up on the 76% last year while R2 billion (21%) is short-term debt.

 

At year end we had total unutilised facilities of R10.7 billion (2016: R9.6 billion) of which R8 billion was committed (2016: R7.2 billion).

Net debt to EBITDA of 0.8 times is a strong improvement on the prior year of 1.2 times and supports our capacity for future transactions. Net debt to equity has also reduced to 27.6% from 40.7% in the prior year with 94% of our year-end net debt in the leasing and car rental business segments.

 









 

Total debt to equity (%)



Trading

Leasing

Car

Rental

Group

debt

Group

net debt

Target range



30 - 50

600 - 800

200 - 300



Ratio at 30 September 2017



 21

 560

 203

 46

 28

Ratio at 30 September 2016



 29

 720

 216

 56

 41

 

DIVIDENDS

Barloworld's dividend policy is to pay dividends within an annual headline earnings per share (HEPS) cover range of 2.5 - 3.0 times. On the back of the results of the year dividends totalling 390 cents per share have been declared, representing cover of 2.5 times.

 

2018 OUTLOOK

We remain committed to optimising the returns of our existing businesses with specific focus on the turnaround of Logistics and gaining cost efficiencies across the group. With the recovery of global mining, we expect to see higher returns across our Equipment businesses in the year ahead. The local automotive industry is facing a number of challenges yet we remain positive that our integrated model can withstand these pressures. Generating free cash flows remains an imperative together with ensuring that the group's assets generate a return on invested capital above our stated target weighted average cost of capital target of 13%. We continue to explore options to rationalise the group's asset base and unlock capital to take advantage of future high growth opportunities.

 

 

DG Wilson

Finance director

 



 

Operational reviews

 

 

EQUIPMENT












Revenue

 

Operating
profit/(loss)

Net operating assets

 




Year ended 30 September

Year ended 30 September

Year ended 30 September




2017

Rm

Restated*

2016

Rm

2017

Rm

Restated*

2016

Rm

2017

Rm

2016

Rm

Equipment



 23 428

 23 384

 2 367

 2 191

 15 091

 15 642

- Southern Africa



 18 287

 18 547

 1 785

 1 585

 10 106

 10 546

- Europe






 7

 2 441

 2 694

- Russia



 5 141

 4 837

 582

 599

 2 544

 2 402










Handling



 765

 1 505

(5)

 25

 443

 910




 24 193

 24 889

 2 362

 2 216

 15 534

 16 552

Share of associate income





 97

 6



* Restated to classify Equipment Iberia as discontinued operation. Refer to note 6.

 

BWE southern Africa produced a pleasing result for the 2017 financial year. Revenue of R18.3 billion was R260 million down on last year in rand terms, however, operating profits increased by 13% to R1.8 billion, with significant improvement in operating margins.

 

A recovery in commodity prices saw improvement in trading activities in South Africa, driven largely by mining activities in Middelburg and the Northern Cape regions. Operating profit improved in Angola, while performance from the remaining African operations remained in line with the previous year. Revenue in Construction and Contract mining activities grew by 5% with our rental and used business growing significantly at 28.5%, in response to improved market conditions. The aftermarket business remained strong, contributing 57% of total revenue.

 

Attributable profit contribution from our joint venture in the Katanga province of the DRC increased to R97 million from R13 million in 2016 on the back of improved copper and cobalt prices.

 

In addition, our drive to improve efficiency in our operations, delivered a step change in cost containment and improved performance. Return on equity increased from 9.1% to 15.2% with strong net cash generation of R1 363 million mainly as a result of working capital reduction. Our inventory optimisation programme delivered an improvement in inventory turns from previous 2.5 to 3.2 times.

 

Although the global economic outlook is improving, policy and political uncertainty continues to restrict growth in southern African economies. BWE will continue to drive operational efficiencies through operational transformation and a new operating model.

 

In Russia, revenue for the year of R5 141 million showed a R304 million (6.3%) increase over the prior year driven by improved mining machine demand into the opencast gold mining segment and a rebound of the coal mining segment. The aftermarket business has also demonstrated strong growth.

 

While operating profit of R582 million was R17 million down on last year in rand terms due to the strengthening of the rand during the year, it was up 6.8% in US dollar terms. Operating margin decreased from 12.4% to 11.3% primarily due to lower margins on new machine deliveries. Russia produced excellent returns and again generated positive cash flows in 2017.

 



 

AUTOMOTIVE AND LOGISTICS




Revenue

 

Operating

profit/(loss)

Net operating assets

 




Year ended 30 September

Year ended 30 September

Year ended 30 September




2017

Rm

2016

Rm

2017

Rm

2016

Rm

2017

Rm

2016

Rm

Automotive



 31 593

 31 427

 1 747

 1 654

 8 675

 8 686

- Car Rental



 6 446

 5 967

 562

 536

 2 750

 2 534

- Avis Fleet



 3 570

 3 641

 621

 560

 3 687

 3 786

- Motor Trading



 21 577

 21 819

 564

 558

 2 238

 2 366

Logistics



 6 171

 5 756

 101

 223

 2 082

 2 472

- Southern Africa



 6 011

 5 527

 102

 226

 1 970

 2 348

-
Europe and Middle East



 160

 229

(1)

(3)

112

 124




 37 764

 37 183

 1 848

 1 877

 10 757

 11 158

Share of associate loss





(4)

(4)



 

The Automotive division delivered another record result with operating profit up 5.6% on prior year off a revenue growth of 0.5%. Revenue was impacted by dealer network restructuring with the sale of one BMW dealership and closure of one BMW and three GM dealerships. On a comparable basis, excluding the closure and disposal of dealerships, revenue increased by 2.3% on prior year. This year's result was impacted by a weaker new vehicle market, depressed consumer confidence, price increases and dealer network restructuring in the Motor Trading business. On the upside, the business benefited from cost alignment initiatives and strong used vehicle profit contribution. The business increased operating margin to 5.5% (2016: 5.3%). The division continues to deliver a ROE and ROIC above the group hurdle rates and generated positive cash flow.

 

Car Rental delivered a pleasing result increasing revenue by 8.0% to R6.4 billion and generated an operating profit of R562 million, up 4.9% on prior year. Operating margin declined from 9.0% to 8.7%, impacted by higher vehicle damage expenses and increased vehicle and parts prices. Lower than planned rate per day increases were achieved due to highly competitive pricing in the market. The result is underpinned by increased rental days and strong used vehicle contribution. Optimal fleet utilisation remains a key focus with the business achieving a 76% utilisation rate.

 

Avis Fleet delivered a strong result increasing operating profit by 11% to R621 million against a 1.9% revenue decline on prior year. Higher used vehicle volumes in the prior year driven by the disposal of the defleeted government of Lesotho vehicles, contributed to the decline in revenue. Operating margin increased from 15.4% in prior year to 17.4% supported by improved used vehicle profits and major contracts performing well. African countries are still impacted by challenging macro-economic environments. Turnaround strategies have been implemented to address underperforming businesses.

 

Motor Trading delivered a credible result in a tough trading environment and a declining new vehicle dealer market which was down by 4.0%. Revenue declined by 1.1% but operating profit increased by 1.1%, maintaining an operating margin of 2.6%. Revenue was impacted by the dealer network restructuring, and on a comparable basis revenue increased by 1.3% on prior year. Returns and margins were further impacted by double digit declines in the premium segment due to increasing vehicle pricing. Improved aftersales performance and cost alignment initiatives favourably, impacted the overall returns. The business continues to benefit from acquisitions made in the previous financial year.

 

In Logistics while revenue was up by 7.2%, operating profit was down 54.7% on last year. The results were negatively impacted by the loss of an anchor client as well as lack of desired integration efficiencies coupled with high network cost and increased cost of doing business within the KLL acquisition. An asset refinancing transaction was concluded within the Transport business resulting in an overall reduction in net operating assets.

 

The Freight Management and Services segment continues to show a pleasing operating profit performance within southern Africa. The Middle East business continues to face challenging trading conditions as a result of both market conditions and loss of major clients, therefore disposal options within this region are being reviewed. Barloworld Logistics Africa concluded a minority buyout during the period under review and now owns 100% of Barloworld Transport providing for better integration efficiencies into the new financial year.

 

CORPORATE












Revenue

 

Operating

profit/(loss)

Net operating assets/ (liabilities)




Year ended 30 September

Year ended 30 September

Year ended 30 September




2017

Rm

2016

Rm

2017

Rm

2016

Rm

2017

Rm

2016

Rm

Southern Africa



 2

 2

(56)

 48

 553

 578

Europe





(72)

(54)

(2 262)

(2 908)




 2

 2

(128)

(6)

(1 709)

(2 330)

Share of associate loss






 1



 

Corporate Office primarily comprises the operations of the group headquarters and treasury in Johannesburg, the treasury in Maidenhead (United Kingdom) and the captive insurance company.

 

Southern Africa has incurred higher operating losses compared to the previous comparative period largely as a result of once-off charges relating to group strategic projects and higher employment costs as a result of the group leadership transition. In Europe, claim losses incurred in BIL, our captive insurance company, led to increased operating costs.

 

In line with the strategic direction which includes a more activist role of the centre, the group has introduced Strategy and M&A, Talent Management and Project Management capabilities to the corporate office with focus on driving the value-maximising allocation of both human and financial capital.

 

DIVIDEND DECLARATION

Dividend number 177

Notice is hereby given that final dividend number 178 of 265 cents (gross) per ordinary share in respect of the 12 months ended 30 September 2017 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 (x) 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 265 cents per ordinary share;

• The net dividend amount is 212 cents per share.

 

In compliance with the requirements of Strate and the JSE Limited, the following dates are applicable:

• Last day to trade cum dividend                            Tuesday, 9 January 2018

• Shares trade ex-dividend                                     Wednesday, 10 January 2018

• Record date                                                          Friday, 12 January 2018

• Payment date                                                       Monday, 15 January 2018

 

Share certificates may not be dematerialised or rematerialised between Wednesday, 10 January 2018 and Friday, 12 January 2018, both days inclusive.

 

On behalf of the board

 

 

LP Manaka

Group company secretary

 

Directors

Non-executive: DB Ntsebeza (Chairman), NP Dongwana, FNO Edozien^, H Hickey, NP Mnxasana, M Lynch-Bell*, SS Mkhabela, SS Ntsaluba, P Schmid, OI Shongwe

Executive: DM Sewela (Chief executive), DG Wilson

^Nigerian *UK

 



 

Summarised consolidated income statement

for the year ended 30 September

 





Audited



Note



 2017

Rm

Restated*

2016

Rm

%

change

CONTINUING OPERATIONS







Revenue




 61 959

 62 074

(0)

Operating profit before items listed below (EBITDA)




 6 694

 6 486


Depreciation




(2 468)

(2 294)


Amortisation of intangible assets




(144)

(105)


Operating profit




 4 082

 4 087

(0)

Fair value adjustments on financial instruments




(209)

(209)


Finance costs




(1 329)

(1 331)


Income from investments




 109

 111


Profit before non-operating and capital items




 2 653

 2 658

(0)

Non-operating and capital items

 3



(155)

 85


Profit before taxation




 2 498

 2 743


Taxation




(565)

(796)


Profit after taxation




 1 933

 1 947

(1)

Income from associates and joint ventures




 93

 3


Profit for the year from continuing operations




 2 026

 1 950

 4

DISCONTINUED OPERATION







(Loss)/profit from discontinued operation

 6



(269)

 29


Profit for the year




 1 757

 1 979


Net profit attributable to:







Owners of Barloworld Limited




 1 643

 1 883

(13)

Non-controlling interest in subsidiaries




 114

 96






 1 757

 1 979


Earnings per share from group (cents)







- basic




779.6

890.5


- diluted




774.7

888.2


Earnings per share from continuing operations (cents)







- basic




907.2

876.8


- diluted




901.5

874.5


(Loss)/earning per share from discontinued operation (cents)







- basic




(127.6)

13.7


- diluted




(126.8)

13.7


* Restated to classify Equipment Iberia as discontinued operation. Refer to note 6.

 

 

 

 



 

Summarised consolidated statement of comprehensive income

for the year ended 30 September

 

 




Audited




 2017

Rm

 2016

Rm

Profit for the year



 1 757

 1 979

Items that may be reclassified subsequently to profit or loss:



 75

(550)

Exchange gains/(loss) on translation of foreign operations



 8

(377)

Translation reserves realised on disposal of foreign joint venture and subsidiaries




(83)

Gain/(loss) on cash flow hedges



 89

(121)

Deferred taxation on cash flow hedges



(22)

 31

Items that will not be reclassified to profit or loss:



 535

(1 134)

Actuarial gains/(losses) on post-retirement benefit obligations



 678

(1 343)

Taxation effect of net actuarial (losses)/gains



(143)

 209






Other comprehensive income/(loss) for the year, net of taxation



 610

(1 684)

Total comprehensive income for the year



 2 367

 295

Total comprehensive income attributable to:





Owners of Barloworld Limited



 2 253

 199

Non-controlling interest in subsidiaries



 114

 96




 2 367

 295

 

 



 

Summarised consolidated statement of financial position

at 30 September

 





Audited


Note



 2017

Rm

2016

Rm

ASSETS






Non-current assets




 18 613

 20 179

Property, plant and equipment




 12 659

 13 806

Goodwill




 1 932

 2 015

Intangible assets




 1 602

 1 713

Investment in associates and joint ventures




 1 093

 923

Finance lease receivables




 240

 147

Long-term financial assets




 404

 448

Deferred taxation assets




 683

 1 127

Current assets




 24 368

 25 015

Vehicle rental fleet




 3 222

 2 789

Inventories




 8 457

 10 317

Trade and other receivables




 8 676

 8 826

Taxation




 88

 55

Cash and cash equivalents




 3 925

 3 028

Assets classified as held for sale

6



 3 343

 828

Total assets




 46 324

 46 022

EQUITY AND LIABILITIES






Capital and reserves






Share capital and premium




 441

 441

Other reserves




 5 144

 5 134

Retained income




 14 690

 13 367

Interest of shareholders of Barloworld Limited




 20 275

 18 942

Non-controlling interest




 602

 737

Interest of all shareholders




 20 877

 19 679

Non-current liabilities




 10 852

 12 446

Interest-bearing




 7 623

 8 379

Deferred taxation liabilities




 538

 703

Provisions




 19

 111

Other non-current liabilities




 2 672

 3 253

Current liabilities




 13 798

 13 830

Trade and other payables




 10 697

 10 054

Provisions




 929

 931

Taxation




 117

 180

Amounts due to bankers and short-term loans




 2 055

 2 665

Liabilities directly associated with assets classified as held for sale

6



 797

 67

Total equity and liabilities




 46 324

 46 022

 

 



 

Summarised consolidated statement of changes in equity

at 30 September

 

 Audited



Share

capital

and

premium

Rm

Other

reserves

Rm

Retained

income

Rm

Attribu-

table to

Barloworld

Limited

share-

holders

Rm

Non-

controlling

interest

Rm

Interest

of all

share-

holders

Rm

Balance at 1 October 2015



 282

 5 793

 13 351

 19 426

 616

 20 042

Total comprehensive income for the year




(550)

 749

 199

 96

 295

Transactions with owners, recorded directly in equity









Other reserve movements




(109)


(109)


(109)

Acquisition of subsidiary







 96

 96

Other changes in minority shareholders interest and minority loans







(55)

(55)

Dividends





(733)

(733)

(16)

(749)

Share buy-back during the year



(127)



(127)


(127)

Share issue during the year



 286



 286


 286

Balance at 30 September 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

 



 

Summarised consolidated statement of cash flows

for the year ended 30 September

 





Audited


Note



 2017

Rm

2016

Rm

CASH FLOWS FROM OPERATING ACTIVITIES






Operating cash flows before movements in working capital




 7 307

 7 161

Movement in working capital




 1 539

 2 119

Cash generated from operations before investment in leasing and rental fleets




 8 846

 9 280

Fleet leasing and equipment rental fleet




(1 661)

(506)

Additions




(3 550)

(2 580)

Proceeds on disposal




 1 889

 2 074

Vehicles rental fleet




(1 220)

(947)

Additions




(4 373)

(3 798)

Proceeds on disposal




 3 153

 2 851







Cash generated from operations




 5 965

 7 827

Finance costs




(1 338)

(1 346)

Realised fair value adjustments on financial instruments




(270)

(105)

Dividends received from investments, associates and joint ventures




 13

 31

Interest received




 108

 113

Taxation paid




(744)

(805)

Cash inflow from operations




 3 734

 5 715

Dividends paid (including non-controlling interest)




(803)

(772)

Cash retained from operating activities




 2 931

 4 943

CASH FLOWS FROM INVESTING ACTIVITIES






Acquisition of subsidiaries, investments and intangibles

4



(393)

(1 057)

Proceeds on disposal of subsidiaries, investments and intangibles

5



 379

 258

Movements in investments in leasing receivables




(134)

 9

Acquisition of other property, plant and equipment




(774)

(980)

Replacement capital expenditure




(315)

(459)

Expansion capital expenditure




(458)

(521)

Proceeds on disposal of property, plant and equipment




 593

 334

Net cash used in investing activities




(329)

(1 436)

Net cash inflow before financing activities




 2 602

 3 507

 



 

Summarised consolidated statement of cash flows continued

for the year ended 30 September

 





Audited





 2017

Rm

2016

Rm

CASH FLOWS FROM FINANCING ACTIVITIES






Shares repurchased for equity-settled share-based payment




(154)

(95)

Share buy-back





(162)

Share issue





 286

Purchase of non-controlling interest




(201)

(142)

Non-controlling interest loan and equity movements




4

 24

Proceeds from long-term borrowings




 4 260

 2 500

Repayment of long-term borrowings




(5 005)

(3 311)

Movement in short-term interest-bearing liabilities




(546)

(1 853)

Net cash from financing activities




(1 642)

(2 753)

Net increase in cash and cash equivalents




 960

 754

Cash and cash equivalents at beginning of year




 3 028

 2 372

Effect of foreign exchange rate movement on cash balance




 39

(112)

Effect of cash balances classified as held for sale




(102)

 14

Cash and cash equivalents at end of year




 3 925

 3 028

Cash balances not available for use due to reserving restrictions




 444

 580

 

 



 

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. Note that in the current year, Equipment Iberia has been classified as a discontinued operation and assets and liabilities held for sale. As such, comparatives have been restated where required by IFRS 5 Non-current assets held for sale and discontinued operations as detailed in note 11. 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 (Group general manager: finance) CA(SA).





Audited





 2017

Rm

Restated

2016*

Rm

2.

Reconciliation of net profit to headline earnings






Net profit attributable to Barloworld shareholders



 1 643

 1 883


Adjusted for the following:






Loss/(profit) on disposal of subsidiaries and investments (IFRS 10)



 25

 (168)


Profit on disposal of plant, property, equipment and intangibles excluding rental assets (IAS 16 and IAS 38)



(43)

 (11)


Impairment of goodwill (IFRS 3)



 73

 15


Impairment of investments in associates and joint ventures (IAS 36)




 37


Impairment of plant and equipment (IAS 16), intangibles (IAS 38) and other assets



 98

 6


Taxation effects of remeasurements



(5)

 10


Associate and non-controlling interest in remeasurements



 71



Net remeasurements excluded from headline earnings



 219

 (111)


Headline earnings



 1 862

 1 772


Headline earnings from continuing operations



 2 053

 1 778


Headline loss from discontinued operation



(191)

(6)


* Restated to classify Equipment Iberia as discontinued operation. Refer to note 6.








Weighted average number of ordinary shares in issue during the year (000)






- basic



 210 780

 211 425


- diluted



 212 095

 211 973


Headline earnings per share (cents)






- basic



 883.4

 838.1


- diluted



 877.9

 836.0


Headline earnings per share from continuing operations (cents)






- basic



 974.5

 840.9


- diluted



 968.0

 838.8


Headline loss per share from discontinued operation (cents)






- basic



(91.1)

(2.8)


- diluted



(90.1)

(2.8)

 

 

 





Audited





 2017

Rm

2016

Rm

3.

Non-operating and capital items






(Loss)/profit on acquisitions and disposal of investments and subsidiaries



(25)

 85


Impairment of goodwill



(73)

(15)


Reversal of impairment of investments




 9


Profit on disposal of property and other assets



 41

 11


Impairment of property, plant and equipment, intangibles and other assets



(98)

(6)


Gross non-operating and capital items



(155)

 85


Taxation charge on non-operating and capital items



 5

(10)


Non-operating and capital items included in associate income from continuing operations



 7



Net non-operating and capital items from continuing operations



(143)

 75


Net non-operating and capital items from discontinued operations




 35


Non-operating and capital items included in associate income from discontinued operations



(78)



Non-operating and capital items from discontinuing operations



(78)

 35


Net non-operating and capital items (loss)/profit



(221)

 110

4.

Acquisition of subsidiaries, investments and intangibles






Inventories acquired




(154)


Receivables acquired




(183)


Payables, taxation and deferred taxation acquired




 457


Borrowings net of cash




(34)


Property, plant and equipment, non-current assets, goodwill and non-controlling interest




(239)


Total net assets acquired




(153)


Goodwill arising on acquisitions




(290)


Intangibles arising on acquisition in terms of IFRS 3 Business Combinations




(196)


Total purchase consideration




(639)


Deemed disposal of associate at fair value on obtaining control




 21


Net cash cost of subsidiaries acquired




(618)


Bank balances and cash in subsidiaries acquired




 142


Investment and intangible assets acquired



(393)

(581)


Cash amounts paid to acquire subsidiaries, investments and intangibles



(393)

(1 057)


* R200 million (US$15 million) of investments acquired relates to dollar linked Angolan government bonds. These Kwanza denominated bonds are pegged to the United States Dollar.

5.

Proceeds on disposal of subsidiaries, investments and intangibles






Inventories disposed



 551

39


Receivables disposed



 26

 22


Payables, taxation and deferred taxation balances disposed and settled



 (60)

(46)


Borrowings net of cash




 9


Property, plant and equipment, non-current assets, goodwill and intangibles



 151

 146


Net assets disposed



 668

 170


Receivable from subsidiary disposed




(22)


Less: Non-cash translation reserves realised on disposal of foreign subsidiaries




 1


Investment in joint venture



(301)



(Loss)/profit on disposal



(9)

 117


Net cash proceeds on disposal of subsidiaries



 358

 266


Bank balances and cash in subsidiaries disposed




(9)


Proceeds on disposal of investments and intangibles



 21

 1


Cash proceeds on disposal of subsidiaries, investments and intangibles



 379

 258


The net cash proceeds on disposal of subsidiaries mainly arises from the sale of the assets of the Agriculture SA and Handling SA business into a joint venture company with BayWa AG.











Audited





 2017

Rm

2016

Rm

6.

Discontinued operation and assets classified as held for sale




Following the decision to dispose of the Equipment Iberia business, this segment is classified as a discontinued operation. Management believes the sale of this business will take place in the next financial year.






Results from discontinued operation are as follows:






Revenue



 4 076

 4 473


Operating profit before items listed below (EBITDA)^



 58

 188


Depreciation



(121)

(132)


Amortisation of intangible assets



(14)

(8)


Operating (loss)/profit



(77)

 48


Finance costs



(9)

(15)


Income from investments



 1

 2


(Loss)/profit before non-operating and capital items



(85)

 35


Non-operating and capital items




 35


(Loss)/profit before taxation



(85)

 70


Taxation



(51)

(13)


Net (loss)/profit of after taxation



(136)

 57


Loss from associates#



(133)

(28)


(Loss)/profit from discontinued operations per income statement



(269)

 29


The cash flows from the discontinued operation are as follows:






Cash flows from operating activities



 381

(26)


Cash flows from investing activities



(65)

(81)


Cash flows from financing activities



(326)

 156


The major classes of assets and liabilities classified as held for sale are as follows:






Property, plant and equipment



 1 131

 152


Investments



 97



Long-term financial assets



 9



Deferred tax assets



 166



Intangible assets



 42

 2


Inventories



 823

 650


Trade and other receivables*



 973

 24


Cash balances



 102



Assets classified as held for sale



 3 343

 828


Interest-bearing long-term loans



(33)



Trade and other payables - short and long-term**



(637)

(67)


Deferred tax liability



(2)



Provisions



(125)



Total liabilities associated with assets classified as held for sale



(797)

(67)


Net assets classified as held for sale



 2 546

 761


Per business segment:






Equipment Iberia



 2 424

 746


Logistics Middle East



 122

 15


Total group



 2 546

 761


^Operating loss in 2017 includes restructuring costs of R137 million (€9.1 million).

#Loss from associates includes an impairment of investment and goodwill of R78 million (€5.1 million).

* Include financial assets of R798 million.

** Include financial liabilities measured at amortised cost of R369 million.











Audited





2017

Rm

2016

Rm

7.

Financial instruments






Carrying value of financial instruments by class:






Financial assets:






Trade receivables






- Industry



5 429

5 654


- Government



438

423


- Consumers



403

540


Other loans and receivables and cash balances



5 732

4 900


Finance lease receivables



499

379


Derivatives (including items designated as effective hedging instruments)






- Forward exchange contracts



42

2


Other financial assets at fair value



49

33


Other financial assets at fair value



12 592

11 930


Financial liabilities:






Trade payables






- Principals



3 336

2 603


- Other suppliers



5 234

5 686


Other non interest-bearing payables



435

369


Derivatives (including items designated as effective hedging instruments)






- Forward exchange contracts




46


- Other derivatives



5



Interest-bearing debt measured at amortised cost



9 134

10 085


Total carrying value of financial liabilities



18 144

18 789

 



 

 

7.

Financial instruments continued








Fair value measurements recognised in the statement of financial position

 


Level 1 measurements are derived from quoted prices in active markets. Level 2 and level 3 measurements are determined using discounted cash flows.

 





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

 





2016

 





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





 28

 28

 


Available-for-sale financial assets







 


Shares





 5

 5

 


Derivative assets designated as effective hedging instruments




 2


 2

 


Total




 2

 33

 35

 


Financial liabilities at fair value through profit or loss







 


Financial liabilities designated at fair value through profit or loss




 2


 2

 


Derivatives




 91


 91

 


Total




 93


 93

 

 



 

 





Audited





 2017

Rm

2016

Rm

8.

Dividends






Ordinary shares






Final dividend No 176 paid on 16 January 2017: 230 cents per share (2016: no 174 - 230 cents per share)



 266

 488


Interim dividend No 177 paid on 12 June 2017: 125 cents per share (2016: No 175 - 115 cents per share)



 489

 245





755

733


Paid to non-controlling interest



 48

 16





 803

 749


Dividends per share (cents)



 390

 345


- interim (declared May)



 125

 115


- final (declared November)



265

 230







9.

Contingent liabilities






Performance guarantees given to customers, other guarantees and claims






From continuing operations



 578

 1 017


From discontinued operation



 207



Total group



 785

 1 017


Buy-back and repurchase commitments not reflected on the statement of financial position






From continuing operations



 102

 98


From discontinued operation



 24



Total group



 126

 98


On 13 October 2017, the Barloworld Equipment South Africa business (BWE SA) received notification from the Competition Commission that it intended referring BWE SA and the members of the Contractors Plant Hire Association to the Competition Tribunal in respect of a contravention of section 4(1)(b)(i) of the South African Competition Act. Based on preliminary internal investigations, BWE SA's view is that these allegations are unfounded. At the date of this report management are not in a position to conclude on the possible outcome of this matter, nor can management reliably measure the potential financial impact at this stage.





10.

Commitments






Capital expenditure commitments to be incurred:






Contracted - Property, plant and equipment



 566

 392


Contracted - Vehicle rental fleet



 1 259

 1 196


Approved but not yet contracted



 168

 643


Total continuing operations



 1 993

 2 231


Discontinued operation



 24



Total group



 2 017

 2 231


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.

Changes in comparatives







Equipment Iberia has been classified as a discontinued operation in the current year. Per IFRS 5: Non-current assets held for sale and discontinued operations, the income statement comparatives for this business have been reclassified to discontinued operation.

 





2016

 





Previously

stated

Rm

Discontinued

operation

Rm

Restated

Rm

 


CONSOLIDATED INCOME STATEMENT






 


Revenue



 66 547

(4 473)

 62 074

 


Operating profit before items listed below (EBITDA)



 6 674

(188)

 6 486

 


Depreciation



(2 426)

 132

(2 294)

 


Amortisation of intangible assets



(113)

 8

(105)

 


Operating profit



 4 135

(48)

 4 087

 


Fair value adjustments on financial instruments



(209)


(209)

 


Finance costs



(1 346)

 15

(1 331)

 


Income from investments



 113

(2)

 111

 


Profit before exceptional items



 2 693

(35)

 2 658

 


Non-operating and capital items



 120

(35)

 85

 


Profit before taxation



 2 813

(70)

 2 743

 


Taxation



(809)

 13

(796)

 


Profit after taxation



 2 004

(57)

 1 947

 


Income from associates and joint ventures



(25)

 28

 3

 


Net profit from continuing operations



 1 979

(29)

 1 950

 


Discontinued operation






 


Profit from discontinued operation




29

29

 


Net profit for the period



 1 979


 1 979

 


Attributable to:






 


Owners of Barloworld Limited



 1 883


 1 883

 


Non-controlling interest in subsidiaries



 96


 96

 





 1 979


 1 979

 


Earnings per share (cents)






 


- basic



890.5


890.5

 


- diluted



888.2


888.2

 


Earnings per share from continuing operations (cents)






 


- basic



890.5

(13.7)

876.8

 


- diluted



888.2

(13.7)

874.5

 


Earnings per share from discontinued operation (cents)






 


- basic




13.7

13.7

 


- diluted




13.7

13.7

 

 



 

 

12.

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 other significant transactions during the year with associate companies, joint ventures and other related parties.

13.

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 2017, 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 2017.                                       


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 17 November 2017. 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.                                  


Deloitte & Touche

Registered auditors


Per: Bongisipho Nyembe

Partner


17 November 2017


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, *MJ Jarvis Chief Operating Officer, *AF Mackie Audit & Assurance, *N Sing Risk Advisory, *NB Kader Tax, TP Pillay Consulting, S Gwala BPaaS, *K Black Clients & Industries, *JK Mazzocco Talent & Transformation, MG Dicks Risk Independence & Legal, *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


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.                     

14.

Events after the reporting period


To the knowledge of the directors, no material events have occurred between the statement of financial position date and the date of approval of these financial statements that would affect the ability of the users of the financial statements to make proper evaluations and decisions.

 



 


 

15.

Operating segments (audited)











Revenue

Operating profit/(loss)

Fair value adjustments on financial instruments

Operating profit/(loss) including fair value adjustments

Net operating assets/ (liabilities)





Year ended 30 September

Year ended 30 September

Year ended 30 September

Year ended 30 September

Year ended 30 September





2017

Rm

Restated*

2016

Rm

2017

Rm

Restated*

2016

Rm

2017

Rm

2016

Rm

2017

Rm

2016

Rm

2017

Rm

2016

Rm


Equipment



24 193

24 889

2 362

2 216

(184)

(201)

2 178

2 015

15 534

16 552


Automotive and Logistics



37 764

37 183

1 848

1 877

(6)

(7)

1 842

1 870

10 757

11 158


Corporate



 2

 2

(128)

(6)

(19)

(1)

(147)

(7)

(1 709)

(2 330)


Total group



61 959

62 074

4 082

4 087

(209)

(209)

3 873

3 878

24 582

25 380

         * Restated to classify Equipment Iberia as discontinued operation. Refer to note 6.

 

 

 

 



 


 

Salient features

for the year ended 30 September

 




Audited




 2017

2016

Financial





Group headline earnings per share (cents)



883

 838

Continuing headline earnings per share (cents)



975

 841

Dividend per share (cents)



390

 345

Continuing operating margin (%)



6.6

6.6

Continuing net asset turn (times)



 2.2

 2.0

Continuing EBITDA/interest paid (times)



 5.0

 4.9

Continuing net debt/equity (%)



 27.6

 40.7

Group return on net operating assets (RONOA) (%)



 18.4

 15.9

Continuing return on net operating assets (RONOA) (%)



 16.4

15.5

Group return on ordinary shareholders' funds (%)



 9.5

 9.2

Continuing return on ordinary shareholders' funds (%)



 10.5

 9.3

Net asset value per share including investments at fair value (cents)



 9 533

 8 997

Number of ordinary shares in issue, including BBBEE shares (000)



 212 693

 212 693

Non-financial*#





Non-renewable energy consumption (GJ)



3 087 269

3 037 034

Greenhouse gas emissions (tCO2e)∆



 270 707

 266 769

Water withdrawals (municipal sources) (ML)



674

755

Number of employees



18 085

19 547

Lost-time injury frequency rate (LTIFR)†



0.75

0.75

Work-related fatalities



3

1

Corporate social investment (R million)



18

17

DTI^ BBBEE rating (level)+



3

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)



2017

2016

2017

2016

United States dollar



 13.50

 13.75

 13.39

 14.75

Euro



 15.96

 15.45

 14.83

 16.32

British sterling



 18.12

 17.86

 17.03

 20.99

Exchange rates used:

Balance sheet - closing rate (rand)

Income statement and cash flow statement - average rate (rand)

 


This information is provided by RNS
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Results for the year ended 30 September 2017 - RNS