| Mon 14 May 2007, 8:06 | | BAW/BAWP - Barloworld - Reviewed interim results: |
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BAW BAWP
BAW
BAW/BAWP - Barloworld - Reviewed interim results: six months ended 31 March 2007
Barloworld Limited
(Registration number 1918/000095/06)
JSE codes: BAW and BAWP
ISIN codes: ZAE000026639 and ZAE000026647
Reviewed interim results for the six months ended 31 March 2007
Highlights
New strategic focus positions Barloworld for the future
* Revenues up 30% to R24 324 million
* Operating profit increases 25% to R2 157 million
* Headline earnings per share up 14% to 467 cents
* Headline earnings per share (excluding STC on special dividend) up 30%
* Proposed interim distribution up 17% to 175 cents per share
* Special dividend of R5 per share paid on 2 April 2007
* Announced strategic actions proceeding according to plan
Clive Thomson, CEO of Barloworld, said:
"We have embarked on a new course for Barloworld. With the group`s future focus
as a leading global distribution business, we are in a strong position to
capitalise on favourable trading conditions in each of our chosen business
segment. We have exciting growth opportunities within our Caterpillar equipment
businesses, face a growing market in our southern African Avis car rental
operations, and have a number of expansion possibilities within our Logistics
division. Our motor retail businesses are performing well and we look forward to
ongoing improvements from streamlining our Hyster materials handling division
following the impending disposal of the Freightliner operations. The outlook for
the refocused group is very positive and we expect continued growth in all these
businesses for the full year."
"A number of steps have been taken to unlock shareholder value including the
disposal of underperforming businesses. In this regard, we are pleased to report
good progress on the strategic actions announced at our annual general meeting
on 25 January 2007."
14 May 2007
Enquiries
Barloworld Limited:
Rowan Goeller Tel +27 11 445 1300, email rowang@barloworld.com
College Hill:
Nicholas Williams Tel +27 11 447 3030 email nickw@collegehillir.com
For background information visit www.barloworld.com
Chairman and Chief Executive`s report
Future direction of the group
At the annual general meeting held on 25 January 2007, it was announced that
Barloworld Limited will be repositioned and profiled as a focused distribution
company with an offering that includes integrated product support as well as
rental and logistics solutions. The group will comprise businesses that fit the
above strategic profile, meet strict performance criteria, and demonstrate good
growth potential.
The board conducted an assessment of the impact of unbundling the Motor division
and concluded that it is in the best long-term interests of shareholders and the
company for the division to remain as an integral part of the Barloworld group.
Following the implementation of the announced unbundlings and disposals referred
to below, the Barloworld group will comprise of the following core divisions:
- Equipment (earthmoving and power systems)
- Motor (car rental, fleet services and motor retail)
- Materials Handling (forklift truck distribution and fleet management)
- Logistics (logistics management and supply chain optimisation).
Progress on announced strategic actions
1. Unbundlings to unlock shareholder value
We announced on 27 March 2007 that Barloworld is at an advanced stage of
preparing for the Pretoria Portland Cement Company Limited (PPC) unbundling. The
PPC unbundling circular has been finalised and will be posted on Thursday, 17
May 2007. A general meeting of shareholders to consider the PPC unbundling will
be held on 8 June 2007. It is further anticipated that the PPC unbundling
transaction, which is conditional upon shareholder approval at the general
meeting, will be implemented on 16 July 2007, subject to all regulatory
requirements being satisfied.
An independent non-executive director, Mr Trevor Munday, has been appointed as
chairman of a board subcommittee to manage the Coatings division, unbundling.
This process is targeted to be concluded by the end of the calendar year.
2. Disposal of businesses
Within the Scientific division, the sale of Melles Griot has recently been
concluded for a consideration above tangible net asset value. The transaction
remains subject to certain conditions precedent and is expected to close by the
end of June 2007. Advisors have been appointed to assist in the disposal of the
laboratory business and numerous indicative bids have been received. The
targeted completion date remains the end of the calendar year.
Within the Industrial Distribution division, we have sold DitchWitch of Georgia
effective 27 April 2007. The process to sell the Freightliner operations has
commenced and we have made good progress in the disposal of the Vacuum
Technology business. In the Equipment division, a decision has also been taken
to exit the Finaltair biomass energy joint venture in Spain.
Where applicable, impairment provisions have been made to write down goodwill or
assets to their estimated recoverable amounts.
The sale of the Steel Tube division to a management and BEE consortium was
finalised in November 2006 as was the sale of the major part of our UK leasing
book.
3. BEE and transformation
The process to finalise the details of the group`s broad-based Black Economic
Empowerment (BEE) transaction is on track. Separate transactions are being
planned for PPC and the Coatings division and the Barloworld transaction will
therefore be implemented shortly after these companies have been unbundled.
Strong trading performance for half year
Revenue growth of 30% has been positively impacted by favourable trading
conditions in most of the businesses to be retained in the Barloworld group.
Operating profit from continuing operations is up 25% driven by strong growth in
the southern African equipment business and a pleasing result in Spain. The
Motor division also performed very well with significant contributions from Avis
Rent a Car South Africa and a strong turnaround in Motor Retail Australia. We
have seen continued improvements in our handling business in the UK and our
Logistics division is beginning to make a meaningful contribution to group
profits.
Growth in profits from divisions that will be unbundled - Cement and Coatings -
were also good. The Scientific division has performed ahead of the previous
period despite weak market conditions, due mainly to fixed cost savings. This
division has been disclosed as discontinued due to the impending sales of Melles
Griot and the laboratory business.
A significant downsizing of the corporate offices is under way. Redundancy costs
amounting to R60 million have been provided against operating profit at the half
year. Estimated annualised savings from these initiatives amount to
approximately R80 million.
Headline earnings per share (HEPS) increased by 14% to 467 cents per share. This
was negatively impacted by the R125 million secondary taxation on companies
(STC) charge provided on the R5 per share special dividend paid on 2 April 2007.
Adjusting for this STC charge, HEPS increased by 30%.
It is the intention of the board to declare an interim distribution of 175 cents
per share (17% up on the prior period) on 8 June 2007. Details of the last day
to trade and the payment date will be published on that date.
Directorate
Clive Thomson was appointed as Chief Executive Officer (CEO) of Barloworld
Limited effective from 18 December 2006.
Dumisa Ntsebeza was appointed interim Chairman on 25 January 2007 following
Warren Clewlow reaching the mandatory retirement age. The search committee that
was tasked to appoint a permanent Chairman is making good progress, and an
announcement in this regard will be made shortly.
Isaac Shongwe was appointed as an executive director and CEO of Barloworld
Logistics Africa, while Hixonia Nyasulu, Gordon Hamilton, and Trevor Munday were
appointed as non-executive directors effective 26 January 2007.
Warren Clewlow, Tony Phillips, Mike Coward and Lester Day retired from the
board. We would like to thank them for their valuable contribution to the
company over many years.
In other executive management moves, John Blackbeard will take over as CEO of
the Industrial Distribution division on 1 October 2007 when Brandon Diamond
returns to South Africa following the completion of his term.
Outlook
In southern Africa, growth in the construction and mining sectors is expected to
result in a further increase in activity in the Equipment division. We have
entered into a joint venture in the mineral-rich Katanga province of the
Democratic Republic of Congo, which will provide us with further growth
potential in the southern African region. In the Motor division, increased
interest rates are impacting the sales of passenger vehicles, although sales of
commercial vehicles are continuing strongly. We expect sustained growth in the
car rental business. In the fleet services business, we are delivering vehicles
into new fleet contracts and are in a good position to further grow our fleet
under management. Growth in the Logistics division is expected to continue at a
rapid pace.
In Iberia, we are seeing good demand for equipment in Spain and expect
conditions to remain stable for the short to medium term. Conditions in
Portugal, however, are expected to remain weak in the short term.
Our handling business in Europe is benefiting from the streamlining of the
operating structure. In the US, the materials handling business is expected to
continue performing well, although slowing economic conditions are evident
through lower deliveries and a reduced customer order book.
In Australia, we expect further benefit from the investments in our motor retail
facilities and the strategic repositioning of our represented brands.
In businesses that will be unbundled, cement sales continue to grow strongly
while the coatings business in southern Africa is benefiting from strong demand
and the contribution from recently acquired businesses. These companies will
have a good future, independent of Barloworld.
As a result of the implementation of many of the strategic actions announced,
including the PPC unbundling, business disposals and corporate restructuring, as
well as some once-off favourable profit impacts in the second half of last year,
the results for the full year will not be directly comparable with the prior
year. However, we expect the underlying operating performance to show good
progress on 2006.
DB Ntsebeza CB Thomson
Chairman Chief Executive Officer
Group financial review
Strong growth in all our major businesses resulted in revenue from continuing
operations increasing by 30% to R24 324 million.
Operating profit rose by 25% to R2 157 million, driven by the strong revenue
growth. Included in operating profit are redundancy and restructuring charges of
R60 million associated with the re-organisation of the corporate offices.
Operating profit margin fell slightly from 9,3% to 8,9%.
Headline earnings per share of 467 cents (1H `06: 408 cents) is 14% higher than
last year but was adversely impacted by the additional secondary tax on
companies (STC) of 62 cents per share relating to the special dividend of R5 per
share paid on 2 April 2007.
The charge for fair value adjustments on financial instruments reduced to R12
million (1H `06: R69 million) mainly due to the decisions in June 2006 to
implement hedge accounting for Caterpillar machine purchases and in November
2006 for Caterpillar spare parts in the southern African equipment business. The
effect of these decisions is that a net amount of R6 million before tax is now
deferred in equity.
Net finance costs increased by R80 million to R241 million mainly due to higher
borrowings resulting from the increased trading activity and higher interest
rates. The increase in the second half of last year was R76 million.
The exceptional loss of R190 million includes the pre-tax impairments of the
investment in Finaltair and goodwill relating to the Freightliner dealerships in
the USA.
The taxation charge (before STC) of R521 million rose by 20%. The effective tax
rate excluding STC, prior year taxation and taxation on exceptional items
increased to 31,0% (1H`06: 29,0%).
The substantial increase in the STC charge to R276 million (1H`06: R116 million)
is mainly due to STC of R125 million provided on the special dividend of R1
billion paid on 2 April 2007.
In terms of accounting standards the results of the Cement and Coatings
divisions are included in continuing operations until the date of unbundling.
Once the unbundlings have been implemented, the results will be reported as
discontinued operations for the period up to the unbundling date and for the
full comparative reporting period.
The profit from discontinued operations of R28 million (1H `06: R90 million
loss) comprises the results of the Steel Tube division (two months up to date of
disposal) and the Scientific division (six months).
The Steel Tube division was sold with effect from 30 November 2006. The
Scientific division has been accounted for as a discontinued operation following
the decision earlier this year to dispose of its businesses.
Cash generated from operations decreased by R85 million to R1 828 million mainly
due to an increase of R1 441 million in net working capital due to higher levels
of activity. This is, in part, a timing issue with strong deliveries anticipated
in the second half of the financial year. Net cash generated from investing
activities of R296 million includes additions to property, plant and equipment
and intangibles of R772 million; a further net investment of R778 million in
rental assets and hire vehicles; and proceeds of R1 973 million from the
disposal of subsidiaries, investments, plant and equipment and the sale of the
UK handling leasing assets.
The group`s balance sheet remains strong with total assets employed in the
business declining by 5% in the past six months to R33 711 million. The
reduction is mainly due to the disposal of the UK leasing book and the Steel
Tube division.
Assets classified as held for sale of R3 336 million comprise mainly the
Scientific division (R1 745 million) and Freightliner, DitchWitch and Vacuum
Technologies within the Industrial Distribution division (R982 million).
Total interest-bearing borrowings of R9 728 million (September 2006: R9 884
million) represent a group debt to equity ratio of 76% (September 2006: 73%),
while the debt to equity ratio for the Trading businesses is 42% (September
2006: 32%).
Capital commitments of R3 002 million include the approved expansion within our
Cement division estimated at R1 656 million.
DG Wilson
Finance Director
Operational reviews
In the case of the leasing businesses, the operating profit is net of interest
paid. Income from associates, which includes our share of earnings from joint
ventures, is shown at the profit after taxation level.
Net operating assets comprise total assets less non-interest-bearing
liabilities. Cash is excluded as well as current and deferred taxation assets
and liabilities. In the case of the leasing businesses, net assets are reduced
by interest-bearing liabilities.
Comparative numbers have been restated as per note 19.
Equipment
Operating profit Net
including fair operating
Revenue value adjustments assets
6 months Year 6 months Year
ended ended ended ended
31 Mar 30 Sept 31 Mar 30 Sept 31 Mar 30 Sept
R million 2007 2006 2006 2007 2006 2006 2007 2006
- Europe 3 511 2 509 5 415 293 218 474 3 258 3 368
- Southern 4 084 2 815 6 212 337 189 645 2 599 2 304
Africa
7 595 5 324 11 627 630 407 1 119 5 857 5 672
Share of associate income
after taxation 6 10 27
The business in this division arises mainly from our enduring partnership of 80
years with Caterpillar Inc. as their dealer in 16 countries.
Activity levels in Iberia were well up on the prior period, as construction
demand in Spain remained at a high level and our public works machine sales were
strong. We have not yet seen any impact from the reported cooling down in the
Spanish residential market. Conditions in Portugal, however, continue to be
weak. Overall operation margins fell slightly due to a higher mix of new
equipment sales relative to product support revenues.
The southern African business continues to see accelerated demand for capital
equipment. The construction industry is starting work on major public works and
we have seen rising demand from this sector. The mining industry is investing in
new capacity with significant new orders placed for Caterpillar equipment.
During the period under review we have entered into a joint venture in the
mineral-rich Katanga province of the Democratic Republic of Congo, which will
provide us with further growth potential in the southern African region.
Associate income includes the results from the Siberian joint venture business
as well as Energyst and Finaltair. Activity levels in Siberia in the mining and
resource sectors remain high, and we are continuing to grow both our earthmoving
and power systems businesses.
All territories recorded high levels of order intake which is a positive sign
for equipment deliveries over the next 12 months. At March 2007 there are firm
customer orders of R6,5 billion (September 2006: R4,8 billion). The order book
placed on Caterpillar is US$978 million (September 2006: US$906 million).
Longer lead times and availability of certain product lines remains a challenge,
but we are working closely with Caterpillar to meet our customers` requirements.
Industrial Distribution
Operating profit/(loss) Net
including fair operating
Revenue value adjustments assets
6 months Year 6 months Year
ended ended ended ended
31 Mar 30 Sept 31 Mar 30 Sept 31 Mar 30 Sept
R million 2007 2006 2006 2007 2006 2006 2007 2006
- Europe 1 307 852 1 995 31 (2) 23 845 670
- North
Africa 2 627 1 929 4 697 49 30 115 1 317 1 180
Trading 3 934 2 781 6 692 80 28 138 2 162 1 850
- Europe 78 145 257 - 12 33 121 309
- North
America 3 49 96 (5) (8) (25) (27) (17)
Leasing* 81 194 353 (5) 4 8 94 292
4 015 2 975 7 045 75 32 146 2 256 2 142
*Net operating assets after deducting interest-bearing borrowings
In Europe, restructuring benefits have positively affected profitability and the
business is well on its way to recovery. The order book has shown healthy growth
in the UK.
While the US handling business continues to perform well, trading conditions in
the US are slowing which is evident in a reduced order book. The Truck Center
benefited from the pre-buying generated by the new emission regulations that
came into force at the beginning of 2007 although as expected orders have now
dropped off sharply. Lower overall freight activity in the US is evident as
well.
The leasing business continues to be wound down after the sale of the US book
last year and the majority of the UK lease book during the period under review.
The UK Ministry of Defence (MOD) leasing and fleet management contract will
continue.
The sale of the Freightliner and Vacuum Technology businesses are proceeding
well and the DitchWitch business was sold at the end of April 2007. These
businesses constitute R695 million of the trading businesses net operating
assets.
Motor
Operating profit/(loss) Net
including fair operating
Revenue value adjustments assets
6 months Year 6 months Year
ended ended ended ended
31 Mar 30 Sept 31 Mar 30 Sept 31 Mar 30 Sept
R million 2007 2006 2006 2007 2006 2006 2007 2006
- Southern
Africa 664 546 1 108 197 134 256 2 715 2 400
- Europe 577 322 805 5 (7) 69 2 260 2 536
Car rental 1 241 868 1 913 202 127 325 4 975 4 936
- Southern
Africa 4 916 4 501 9 307 91 87 223 1 185 1 020
-
Australia 1 134 759 1 719 23 4 23 721 666
Trading 6 050 5 260 11 026 114 91 246 1 906 1 686
Leasing
Southern
Africa* 364 320 631 34 33 65 319 276
7 655 6 448 13 570 350 251 636 7 200 6 898
Share of
associate
income
after
taxation 4 12 27
*Net operating assets after deducting interest-bearing borrowings
Our integrated motor vehicle usage solutions strategy has driven our overall
operating margin to 4,6% (1H`06: 3,9%). Avis Rent a Car Southern Africa
delivered a good performance as a result of our focus on yield management and
improving efficiencies, together with strong growth in car rental demand. The
Scandinavian car rental business posted a small profit, in line with the
seasonal earnings pattern where substantially all of the profits are earned
during the European summer. This business is expected to benefit from our
ongoing profitability initiatives and the increased business activity in the
next six months.
The southern African motor retail operations performed well, despite higher
interest rates impacting passenger vehicle sales. Commercial vehicle sales
remain strong. The Subaru import and distribution business was negatively
impacted by the weaker Rand compared to the prior period. The Australian result
benefited from the investments in our dealer facilities and the strategic
repositioning of our represented brands.
As a consequence of new contracts secured, our fleet services operation
experienced strong growth in vehicles under management, which will positively
benefit profitability into the future.
Associate income includes our DaimlerChrysler and Phavisworld BEE joint ventures
but now excludes Auric Auto, which was disposed of during the period.
Cement
Operating profit Net
including fair operating
Revenue value adjustments assets*
6 months Year 6 months Year
ended ended ended ended
31 Mar 30 Sept 31 Mar 30 Sept 31 Mar 30 Sept
R million 2007 2006 2006 2007 2006 2006 2007 2006
Southern
Africa 2 588 2 183 4 863 983 855 1 905 2 933 2 565
Share of
associate
income
after
taxation 4
*Net operating assets include goodwill arising on PPC shares purchased by
Barloworld
The South African domestic cement market grew by over 12% compared with the same
period last year. Increased investment in public-sector infrastructure is
materialising rapidly and is likely to offset any slowdown in the rate of growth
in the residential building sector following the continued rise in interest
rates.
Operating margins decreased slightly due to the importation and sale of almost
200 000 tons of bagged Surebuild cement at little or no margin, significant
increases in diesel and coal energy costs, the higher cost of operating older
less efficient plants and the inability to fully optimise distribution logistics
and factory sourcing at periods of very high demand.
The 1,25 million ton Batsweledi (Dwaalboom new kiln) project is progressing
according to plan and within budget. Orders for the Hercules Pretoria cement
mill upgrade and expansion project have been placed, and the project is expected
to be commissioned in the middle of calendar year 2009.
Lime volumes and margins improved following the recovery in the world steel
markets leading to higher profitability compared to the prior period.
PPC will be unbundled from Barloworld on 16 July 2007.
Coatings
Operating profit/(loss) Net
including fair operating
Revenue value adjustments assets
6 months Year 6 months Year
ended ended ended ended
31 Mar 30 Sept 31 Mar 30 Sept 31 Mar 30 Sept
R million 2007 2006 2006 2007 2006 2006 2007 2006
Southern
Africa 1 158 959 2 019 188 152 338 859 742
Australia and
Asia 577 466 952 (10) (17) (55) 292 296
1 735 1 425 2 971 178 135 283 1 151 1 038
Share of
associate
income after
taxation
6 9 18
The coatings business in southern Africa experienced good growth. The
integration of the recent acquisitions has been successful and these are
contributing well to the result. In Australia, improved average selling prices
and the reduced cost base resulted in an improved performance.
A 15% empowerment transaction with Izingwe in respect of Prostart Investments,
part of the automotive refinish business, was concluded at the end of the
period.
The division will be unbundling from Barloworld with the targeted completion
before the end of the calender year 2007.
Scientific
Operating profit Net
including fair operating
Revenue value adjustments assets
6 months Year 6 months Year
ended ended ended ended
31 Mar 30 Sept 31 Mar 30 Sept 31 Mar 30 Sept
R million 2007 2006 2006 2007 2006 2006 2007 2006
Scientific
Group 934 748 1 602 74 37 80 1 185 1 259
Continued benefits from the cost reduction initiatives resulted in further
improvement in profitability in this division.
The sale of Melles Griot has been concluded for a consideration above tangible
net asset value. The process to dispose of the laboratory business is
progressing well. Numerous initial bids have been received and completion of the
sale is expected before the end of the calendar year.
Logistics
Operating profit Net
including fair operating
Revenue value adjustments assets
6 months Year 6 months Year
ended ended ended ended
31 Mar 30 Sept 31 Mar 30 Sept 31 Mar 30 Sept
R million 2007 2006 2006 2007 2006 2006 2007 2006
Southern
Africa 520 149 683 24 7 20 525 433
Europe 181 124 280 12 11 27 47 48
701 273 963 36 18 47 572 481
The logistics businesses in South Africa and Spain have been consolidated under
a single executive management team and growth prospects remain good.
The logistics business in Africa has shown strong organic growth during the
period under review. A significant entry was made into the FMCG logistics market
with the conclusion of a long-term contract with a large FMCG
distributor/manufacturer. The results further reflect the benefit of the BEE
transaction concluded eighteen months ago with significant contributions to
revenue and operating profit from South African parastatals.
In Europe, the Iberian logistics business continues to perform well. We have
been investing in expanding the logistics offering in the region.
Corporate and other
Operating (loss)/profit Net
including fair operating
Revenue value adjustments assets
6 months Year 6 months Year /(liabilities)
ended ended ended ended
31 Mar 30 Sept 31 Mar 30 Sept 31 Mar 30 Sept
R million 2007 2006 2006 2007 2006 2006 2007 2006
Southern
Africa 35 35 52 (71) (28) 21 (580) 491
Europe - - - (36) (10) 131 (624) (667)
35 35 52 (107) (38) 152 (1 204) (176)
The operating loss for the period includes costs of R60 million relating to the
downsizing of the corporate offices. The expected annualised saving resulting
from these initiatives amounts to approximately R80 million.
The full year result for 2006 includes once-off favourable benefits of R149
million relating to the pension fund curtailment in the UK and a net gain of R36
million in SA on the Wattyl hedge net of transaction costs.
Net operating liabilities at 31 March 2007 include the provision of R1 015
million for the special dividend paid on 2 April 2007 and the UK pension fund
deficit amounting to R710 million.
Distribution declaration for the six months ended 31 March 2007: Dividend number
157.
It is the intention of the board to declare an interim distribution of 175 cents
per share in respect of the six months ended 31 March 2007 on 8 June 2007.
Details of the last day to trade and the payment date will be published on that
date.
On behalf of the board
S Mngomezulu
Secretary
Directors
Independent: DB Ntsebeza (Chairman), SAM Baqwa, AGK Hamilton*, MJ Levett, S
Mkhabela, TS Munday, TH Nyasulu, G Rodriguez de Castro de los Rios***, EP
Theron, RC Tomkinson*, SB Pfeiffer**
Executive: CB Thomson (Chief Executive), PJ Blackbeard, BP Diamond, JE
Gomersall*, AJ Lamprecht, M Laubscher, OI Shongwe, PM Surgey, DG Wilson
*British **American ***Spanish
Condensed consolidated income statement
Six months ended Year ended
31 Mar 31 Mar % 30 Sept
2007 2006 Change 2006**
Reviewed Reviewed Audited
R million Notes Restated
Continuing operations
Revenue 24 324 18 663 30 41 091
Operating profit 3 2 157 1 729 25 4 053
Fair value adjustments on
financial instruments 4 (12) (69) 235
Finance costs 5 (401) (242) (596)
Income from investments 160 81 270
Profit before exceptional 1 904 1 499 27 3 962
items
Exceptional items 6 (190) 16 116
Profit before taxation 1 714 1 515 4 078
Taxation 7 (521) (435) (1 186)
Secondary taxation on
companies 7 (276) (116) (159)
Profit after taxation 917 964 2 733
Income from associates and
joint ventures 20 31 72
Net profit from continuing
operations 937 995 2 805
Discontinued operations
Profit/(loss) from
discontinued operations 11 28 (90) (59)
Net profit for the period 965 905 2 746
Attributable to:
Minority shareholders 179 160 389
Barloworld Limited
shareholders 786 745 2 357
965 905 2 746
Earnings per share* (cents)
- basic 389,7 355,8 1 138,9
- diluted 384,4 348,6 1 117,1
Earnings per share from
continuing operations*
(cents)
- basic 375,8 398,8 1 167,4
- diluted 370,7 390,7 1 145,1
Earnings per share from
discontinued operations*
(cents)
- basic 13,9 (43,0) (28,5)
- diluted 13,7 (42,1) (28,0)
* Refer note 2 for details of headline earnings per share calculation
** Reclassified for the treatment of the Scientific segment as a discontinued
operation - refer note 19.
Condensed consolidated balance sheet
31 Mar 31 Mar 30 Sept
2007 2006 2006
Reviewed Reviewed Audited
R million Notes Restated
ASSETS
Non-current assets 13 755 14 076 14 289
Property, plant and equipment 8 242 7 969 8 299
Goodwill 2 522 2 573 3 005
Intangible assets 305 252 323
Investment in associates and joint
ventures 9 875 552 749
Finance lease receivables 623 1 349 566
Long-term financial assets 10 615 613 597
Deferred taxation assets 573 768 750
Current assets 19 956 15 700 21 365
Vehicle rental fleet 3 504 2 764 3 441
Inventories 5 368 4 658 5 907
Trade and other receivables 6 661 6 000 7 026
Taxation 31 37 17
Cash and cash equivalents 1 056 1 386 2 134
Assets classified as held for sale 11 3 336 855 2 840
Total assets 33 711 29 776 35 654
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 441 1 461 327
Other reserves 3 117 1 178 3 461
Retained income 8 711 8 657 9 881
Interest of shareholders of
Barloworld Limited 12 269 11 296 13 669
Minority interest 581 567 691
Interest of all shareholders 8 12 850 11 863 14 360
Non-current liabilities 7 410 7 689 7 920
Interest-bearing 4 989 5 453 5 475
Deferred taxation liabilities 746 937 870
Provisions 472 400 468
Other non-interest-bearing 1 203 899 1 107
Current liabilities 13 451 10 224 13 374
Trade and other payables 5 965 4 855 6 663
Provisions 655 531 536
Taxation 512 311 705
Amounts due to bankers and short-
term loans 4 739 4 309 4 409
Shareholders for dividend 1 015 - -
Liabilities directly associated with
assets classified as held for sale 11 565 218 1 061
Total equity and liabilities 33 711 29 776 35 654
Condensed consolidated cash flow statement
Six months ended Year ended
31 Mar 31 Mar 30 Sept
2007 2006 2006
Reviewed Reviewed Audited
R million Notes Restated
Cash flow from operating activities
Operating cash flows before
movements
in working capital 3 269 2 739 6 077
Increase in working capital (1 441) (826) (10)
Cash generated from operations 1 828 1 913 6 067
Realised fair value adjustments on
financial instruments (22) (27) 136
Finance costs and investment income (234) (141) (265)
Taxation paid (1 006) (651) (1 007)
Cash flow from operations 566 1 094 4 931
Dividends paid (including minority
shareholders) (1 197) (933) (1 295)
Net cash from operating activities (631) 161 3 636
Net cash generated from/(applied to
investment activities 296 (1 654) (2 938)
Acquisition of subsidiaries and
investments 12 (113) (262) (814)
Acquisition of property, plant and
equipment and intangibles (772) (824) (1 217)
Net investment in rental assets 13 (511) (459) (832)
Net investment in car hire vehicles 13 (267) (340) (1 260)
(Increase)/reduction in instalment
sale and leasing receivables (14) 168 (16)
Proceeds on disposal of
subsidiaries,
investments and property, plant and
equipment and sale of leasing assets 1 973 63 1 201
Net cash (outflow)/inflow before
financing activities (335) (1 493) 698
Net cash from financing activities (654) 1 530 (224)
Ordinary shares issued 114 64 90
Buy-back of shares in company - - (1 160)
(Decrease)/Increase in interest-
bearing liabilities (768) 1 466 846
Net (decrease)/increase in cash
and cash equivalents (989) 37 474
Cash and cash equivalents at
beginning of period 2 134 1 399 1 399
Effect of foreign exchange rate
movements (11) (45) 242
Effect of cash included in assets
classified as held for sale (78) (5) 19
Cash and cash equivalents at end of
period 1 056 1 386 2 134
Condensed consolidated statement of recognised income and expense
Six months ended Year ended
31 Mar 31 Mar 30 Sept
2007 2006 2006
Reviewed Reviewed Audited
R million Restated
Exchange (losses)/gains on translation
of foreign operations (228) (326) 1 832
(Loss)/gain on cash flow hedges (160) - 139
Taxation on cash flow hedges 45 - (18)
Gain on revaluation of available for
sale investments - - 18
Deferred tax on revaluation of available
for sale investments - - (8)
Other reserve movements 1 (1) (71)
Net actuarial losses on post-retirement
benefit obligations (3) - (55)
Net (loss)/income recognised directly in
equity (345) (327) 1 837
Profit for the period 965 905 2 746
Total recognised income and expense for
the year 620 578 4 583
Attributable to:
Minority shareholders 176 160 381
Barloworld Limited shareholders 444 418 4 202
620 578 4 583
Group salient features
Six months ended Year ended
31 Mar 31 Mar 30 Sept
2007 2006 2006
Reviewed Reviewed Audited
Restated
Number of ordinary shares in issue,
net of buyback (000) 203 345 210 206 200 716
Net asset value per share including
investments at market value (cents) 6 194 5 520 6 973
Total liabilities to total shareholders`
funds (%) 156,5 143,1 142,2
Total borrowings to total shareholders`
funds (%)
- Trading segment* 42,4 36,6 31,7
- Total group 75,9 82,3 73,3
Interest cover (times)
- Trading segment* 7,6 10,6 10,2
- Total group 5,3 5,5 5,7
*Trading segment includes manufacturing and dealership businesses, but excludes
leasing and car rental
Notes to the condensed consolidated financial statements
1. BASIS OF PREPARATION
The condensed interim consolidated financial statements have been prepared in
accordance with International Accounting Standard (IAS) 34 Interim Financial
Reporting. The accounting policies and methods of computation used are
consistent with those used for the group`s 2006 annual financial statements
(which were prepared in accordance with International Financial Reporting
Standards) except for the adoption of IFRIC Interpretation 4 Determining Whether
an Arrangement Contains a Lease, the impact of which was not significant.
Comparative numbers have been restated as per note 19.
Six months ended Year ended
31 Mar 31 Mar % 30 Sept
2007 2006 change 2006
Reviewed Reviewed Audited
R million Restated
2. RECONCILIATION OF NET PROFIT
TO HEADLINE EARNINGS
Net profit attributable to
Barloworld shareholders 786 745 2 357
Profit on disposal of
properties, investments
and subsidiaries (3) (20) (140)
Impairment of assets 125 5 4
Impairment of goodwill 106 - 23
(Profit)/loss on sale of plant
and equipment excluding rental
assets (4) 1 4
Taxation on exceptional items (70) - 19
Interest of outside
shareholders
in exceptional items 1 - -
Impairment loss on disposal of
Steel tube after taxation - 123 156
Headline earnings 941 854 2 423
Headline earnings from
continuing operations 874 821 2 326
Headline earnings from
discontinued operations 67 33 97
Weighted average number
of ordinary shares in issue
during the period (000)
- basic 201 686 209 371 206 959
- diluted 204 490 213 732 210 998
Headline earnings per share
(cents)
- basic 466,5 407,9 14 1 170,8
- diluted 460,2 399,5 15 1 148,4
Headline earnings per share
from
continuing operations (cents)
- basic 433,3 392,1 1 123,9
- diluted 427,4 384,1 1 102,4
Headline earnings per share
from
discontinued operations (cents)
- basic 33,2 15,8 46,9
- diluted 32,8 15,4 46,0
3. OPERATING PROFIT
Included in operating profit
are:
Cost of sales (including
allocation of depreciation) 17 630 13 826 30 226
Depreciation 1 015 982 1 930
Profit on sale of rental assets 32 26 110
Profit/(loss) on sale of other
plant and equipment 4 (1) (2)
4. FAIR VALUE ADJUSTMENTS ON
FINANCIAL INSTRUMENTS
(Losses)/gains arising from:
Forward exchange contracts and
other financial instruments (11) (72) 238
Translation of foreign currency
monetary items (1) 3 (3)
(12) (69) 235
5.FINANCE COSTS
Total finance cost (454) (334) (835)
Leasing interest classified
as cost of sales 53 92 239
(401) (242) (596)
R million
Six months ended Year ended
31 Mar 2007 31 Mar 2006 30 Sept2006
Reviewed Reviewed Audited
Restated
6. EXCEPTIONAL ITEMS
Profit on disposal of properties,
investments and subsidiaries 5 16 139
Impairment of assets including
share of associates` impairment
losses (195) - (23)
Gross exceptional (losses)/profits (190) 16 116
Taxation on exceptional items 70 - (20)
Interest of minority shareholders (1) - -
Net exceptional (losses)/profits
- continuing operations (121) 16 96
- discontinued operations (net of
taxation) (38) - (2)
Net exceptional (losses)/profits (159) 16 94
7. TAXATION
Taxation per income statement 521 435 1 186
Prior year taxation (2) (2) 20
Taxation on exceptional items 70 - (20)
Taxation on profit before STC,
prior year taxation and
exceptional items 589 433 1 186
STC on normal dividends paid (151) (116) (159)
STC on special dividends (125) - -
Secondary taxation on companies (276) (116) (159)
Profit before exceptional items 1 904 1 499 3 962
Dividends received (3) (5) (16)
Profit before exceptional items
and dividends received 1 901 1 494 3 946
Effective taxation rate
excluding exceptional items, prior
year taxation and dividends
received (%)
- excluding STC (%) 31,0 29,0 30,1
- including STC (%) 45,5 36,7 34,1
8.INTEREST OF ALL SHAREHOLDERS
Balance at the beginning of the year 14 360 12 130 12 130
Net (loss)/income recognised
directly in equity (345) (327) 1 837
Net profit for the period 965 905 2 746
Reclassifications and other
reserve movements (31) 24 46
Purchase of minority shareholding
in subsidiary - - (34)
Buy-back of shares - - (1 160)
Dividends on ordinary shares (2 213) (933) (1 295)
Shares issued in current year 114 64 90
Interest of shareholders at
the end of the period 12 850 11 863 14 360
Six months ended Year ended
31 Mar 2007 31 Mar 2006 30 Sept 2006
Market Book Market Book Market Book
value/ value value/ value value/ value
Direc- Direc- Direc-
tors` tors` tors`
valu- valu- valu-
ation ation ation
Reviewed Reviewed Audited
R million Restated
9. INVESTMENT IN
ASSOCIATES AND
JOINT VENTURES
Joint ventures 497 252 351 172 440 198
Unlisted associates 294 214 298 169 306 217
791 466 649 341 746 415
Loans and advances 409 211 334
875 552 749
10.LONG-TERM
FINANCIAL ASSETS
Listed investments 10 10 8 8 10 10
Unlisted investments 35 35 36 36 37 37
Investment in
Portland Holdings
Limited 260 260 295 295 291 291
305 305 339 339 338 338
Other long-term
financial assets 310 274 259
615 613 597
Six months ended Year ended
31 Mar 31 Mar 30 Sept
2007 2006 2006
Reviewed Reviewed Audited
R million Restated
11. DISCONTINUED OPERATIONS AND ASSETS
CLASSIFIED AS HELD FOR SALE
The Scientific segment has been
classified as a disposal group held
for sale.
The disposal of Steel Tube was
concluded on 1 December 2006.
Results from discontinued
operation are as follows:
Revenue 1 282 1 544 3 377
Operating profit 112 49 175
Fair value adjustments on
financial instruments - 3 (6)
Finance costs (12) (7) (34)
Income from investments 1 0 6
Profit before exceptional items 101 45 141
Exceptional items (2) (1) (3)
Profit before taxation 99 44 138
Taxation (32) (13) (45)
Profit after taxation 67 31 93
Income from associates and joint
ventures - 2 4
Net profit of discontinued operation
before impairment loss 67 33 97
Impairment loss on write-down to fair
value less costs to sell (39) (163) (185)
Taxation on impairment loss - 40 29
Impairment loss after taxation (39) (123) (156)
Profit/(loss) from discontinued
operation per income statement 28 (90) (59)
The cash flows from the discontinued
operation are as follows:
Cash flows from operating activities 51 51 255
Cash flows from investing activities (28) (18) (153)
Cash flows from financing activities 20 (49) (113)
The major classes of assets and
liabilities comprising the disposal
group classified as held for sale
are as follows:
Property, plant and equipment
and intangibles 1 110 229 567
Investment in associates - 9 5
Inventories 1 122 273 353
Trade and other current receivables 842 293 328
Deferred tax assets 66 - -
Cash and cash equivalents 4 5 27
Finance lease receivables - - 1 467
Assets of disposal group held for sale
before impairment loss 3 144 809 2 747
Impairment loss on write-down to
fair value less costs to sell (36) (123) (156)
Assets of disposal group held for sale
after impairment loss 3 108 686 2 591
Vehicles and equipment removed
from rental fleets to be sold 228 169 249
Assets classified as held for sale 3 336 855 2 840
Interest-bearing liabilities (31) - (642)
Trade and other payables (534) (218) (419)
Total liabilities associated with
assets classified as held for sale (565) (218) (1 061)
Net assets classified as held for sale 2 771 637 1 779
Per business segment:
Continuing operations
Equipment 28 20 23
Industrial distribution 982 18 1 159
Motor 172 131 187
Cement - - 20
Corporate and other 279 - 22
Total continuing operations 1 461 169 1 411
Discontinued operations
Scientific 1 180 - -
Steel Tube* 130 468 368
Total group 2 771 637 1 779
* The current balance represents property not yet transferred at balance sheet
date.
12. ACQUISITION OF SUBSIDIARIES
INVESTMENTS AND INTANGIBLES
Inventories acquired - 52 57
Receivables acquired - 164 226
Payables, taxation and deferred
taxation acquired - (184) (230)
Borrowings net of cash - (379) (512)
Property, plant and equipment,
non-current assets, goodwill
and minority shareholders - 490 744
Net assets acquired - 143 285
Goodwill arising on acquisitions - 119 238
Net cash cost of subsidiaries acquired - 262 523
Investments and intangible acquired 113 - 291
Cash amounts paid to acquire
subsidiaries and investments 113 262 814
13. NET INVESTMENT IN RENTAL ASSETS
AND CAR HIRE VEHICLES
Rental assets 511 459 832
Additions 994 719 1 821
Proceeds on disposals (483) (260) (989)
Car hire vehicles 267 340 1 260
Additions 1 720 1 174 3 663
Proceeds on disposals (1 453) (834) (2 403)
14. COMMITMENTS
Capital commitments to be incurred 3 002 2 364 3 105
Contracted 1 404 1 521 2 106
Approved but not yet contracted 1 598 843 999
Operating lease commitments 1 868 1 579 2 509
15. CONTINGENT LIABILITIES
Guarantees, claims and other
contingent liabilities 671 503 622
Buyback and repurchase commitments* 1 158 958 1 250
Share of buyback and repurchase
commitments of joint ventures - 16 -
* The related assets are estimated to have a value at least equal to the
repurchase commitments.
16. PORTLAND HOLDINGS LIMITED (PORTHOLD)
The results of Porthold, a wholly owned Zimbabwean subsidiary have in terms of
the exclusions contained in the revised IAS 27 Consolidated and Separate
Financial Statements, not been consolidated into the group results as at 31
March 2007.
Significant constraints impacting on the normal operation of Porthold, has
resulted in the board concluding that management does not have the ability to
exercise effective control over the business. As a result, the results of
Porthold have continued to be excluded from the group results in the current
period. Severe restrictions are placed on our ability to access foreign
currency and remit funds and as a result the investment continues to be
accounted for on a fair value investment basis with dividends only being
recognised to the extent they are received.
17. 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 has been no significant
transactions during the six months with associate companies, joint ventures and
other related parties.
18. SUBSEQUENT EVENTS
A sale agreement for the disposal of the Melles Griot business has been
concluded subsequent to 31 March 2007. The business will be sold for a premium
over tangible net asset value. Completion of the deal is subject to certain
suspensive conditions.
The sale of the DitchWitch of Georgia business has been concluded and paid for
subsequent to 31 March 2007. The sale price includes a premium over tangible net
asset value.
These transactions are not expected to have a significant impact on current year
earnings or net asset value.
19. COMPARATIVE INFORMATION
Comparative information has been restated for the treatment of the Scientific
segment as a discontinued operation, for the effects of the change in accounting
policy in terms of IAS 19 Employee Benefits and the requirements of the South
African Institute of Chartered Accountants Circular 9/2006. Transaction giving
rise to adjustment to Revenue/Purchases.
The aggregate effect of the above changes on the financial statements for the
period ended 31 March 2006:
Reclassi-
fication of
Previously discontinued Other
R million stated operation restatements Restated
Income statement
Revenue 19 462 (748) (51) 18 663
Operating profit 1 748 (37) 18 1 729
Fair value
adjustments on
financial (69) - - (69)
instruments
Finance costs (245) 3 - (242)
Income from
investments 81 - - 81
Profit before
exceptional items 1 515 (34) 18 1 499
Exceptional items 20 (4) - 16
Profit before
taxation 1 535 (38) 18 1 515
Taxation (558) 12 (5) (551)
Profit after 977 (26) 13 964
taxation
Income from
associates
and joint ventures 31 - - 31
Net profit from
continuing
operations 1 008 (26) 13 995
Loss from
discontinued
operation (116) 26 - (90)
Net profit for the
period 892 - 13 905
Attributable to:
Minority 160 - - 160
shareholders
Barloworld Limited
shareholders 732 - 13 745
892 - 13 905
Earnings per share
(cents)
- basic 349,6 - 6,2 355,8
Earnings per share
(cents)
- diluted 342,5 - 6,1 348,6
Balance sheet
Long-term financial
assets 781 - (168) 613
Deferred taxation
assets 527 - 241 768
Inventories 4 686 - (28) 4 658
Trade and other
receivables 6 045 - (45) 6 000
Assets classified as
held for sale 857 - (2) 855
Other reserves 1 239 - (61) 1 178
Retained income 9 182 - (525) 8 657
Interest of all
shareholders 12 449 - (586) 11 863
Other non-interest-
bearing liabilities 268 - 631 899
Trade and other
payables 4 900 - (45) 4 855
Liabilities directly
associated with
assets classified as
held for sale 220 - (2) 218
The aggregate effect of the above changes on the annual financial statements for
the year ended 30 September 2006:
Reclassi-
fication of Re-
Previously discontinued Other classi-
R million stated operation restatements fied
Income statement
Revenue 42 693 (1 602) - 41 091
Operating profit 4 133 (80) - 4 053
Fair value
adjustments on
financial 235 - - 235
instruments
Finance costs (605) 9 - (596)
Income from
investments 273 (3) - 270
Profit before
exceptional items 4 036 (74) - 3 962
Exceptional items 120 (4) - 116
Profit before
taxation 4 156 (78) - 4 078
Taxation (1 370) 25 - (1 345)
Profit after 2 786 (53) - 2 733
taxation
Income from
associates
and joint ventures 72 - - 72
Reclassi-
fication of
Previously discontinued Other
R million stated operation restatements Restated
Net profit from
continuing 2 858 (53) - 2 805
operations
Loss from
discontinued (59)
operation (112) 53 -
Net profit 2 746 - - 2 746
Attributable to:
Minority 389 - - 389
shareholders
Barloworld Limited
shareholders 2 357 - - 2 357
2 746 - - 2 746
Earnings per share
(cents)
- basic 1 138,9 - - 1 138,9
Earnings per share
(cents)
- diluted 1 117,1 - - 1 117,1
The restatement has not affected the balance sheet as at 30 September 2006.
The restatements have not impacted on cash flows.
20. AUDITOR`S REVIEW
Deloitte & Touche has reviewed these interim results. The unmodified review
opinion is available for inspection at the company`s registered office.
Segmental summary
Revenue Operating profit/(loss)
Six months Year Six months Year
ended ended ended ended
31 Mar 31 Mar 30 Sept 31 Mar 31 Mar 30 Sept
2007 2006 2006 2007 2006 2006
Reviewed Reviewed Audited Reviewed Reviewed Audited
Restated Restated
Equipment 7 595 5 324 11 627 628 445 978
Industrial
Distribution 4 015 2 975 7 045 75 32 146
Motor 7 655 6 448 13 570 352 261 615
Cement 2 588 2 183 4 863 987 856 1 903
Coatings 1 735 1 425 2 971 183 139 274
Logistics 701 273 963 36 18 47
Corporate
and other 35 35 52 (104) (22) 90
Total
continuing
operations 24 324 18 663 41 091 2 157 1 729 4 053
Discontinued
operations -
Scientific 934 748 1 602 74 37 80
- Steel tube 348 796 1 775 38 12 95
25 606 20 207 44 468 2 269 1 778 4 228
Operating profit/(loss)
Fair value adjustments including fair
on financial instruments value adjustments
Six months Year Six months Year
ended ended ended ended
31 Mar 31 Mar 30 Sept 31 Mar 31 Mar 30 Sept
2007 2006 2006 2007 2006 2006
Reviewed Reviewed Audited Reviewed Reviewed Audited
Restated Restated
Equipment 2 (38) 141 630 407 1 119
Industrial
Distribution - - - 75 32 146
Motor (2) (10) 21 350 251 636
Cement (4) (1) 2 983 855 1 905
Coatings (5) (4) 9 178 135 283
Logistics 0 0 0 36 18 47
Corporate
and other (3) (16) 62 (107) (38) 152
Total
continuing
operations (12) (69) 235 2 145 1 660 4 288
Discontinued
operations -
Scientific - - - 74 37 80
- Steel tube - 3 (6) 38 15 89
(12) (66) 229 2 257 1 712 4 457
Net operating
assets/(liabilaities
31 Mar 30 Sept
2007 2006
Reviewed Audited
Equipment 5 857 5 672
Industrial
Distribution 2 256 2 142
Motor 7 200 6 898
Cement 2 933 2 565
Coatings 1 151 1 038
Logistics 572 481
Corporate
and other (1 204) (176)
Total
continuing
operations 18 765 18 620
Discontinued
operations -
Scientific 1 185 1 259
- Steel tube 130 368
20 080 20 247
Registered office and business address
Barloworld Limited
180 Katherine Street
PO Box 782248
Sandton
2146, South Africa
Ph: +27 11 445 1000
E mail: invest@barloworld.com
United Kingdom registrar
Lloyds TSB Registrars
The Causeway, Worthing
West Sussex, BN99 6DA, England
Ph: +44 190 350 2541
Transfer secretaries
Ultra Registrars (Pty) Limited
Physical address:
5th Floor,
11 Diagonal Street
Johannesburg
2000, South Africa
Postal address:
P O Box 4844
Johannesburg
2000, South Africa
Ph: +27 11 834 2266
E mail: info@ultrareg.co.za
About Barloworld
Barloworld is repositioning itself as a focused distribution company with an
offering that includes integrated product support as well as, rental and
logistics solutions. The core divisions of the group comprise Equipment
(earthmoving and power systems), Motor (motor retail, car rental and fleet
services), Materials Handling (forklift truck distribution and fleet management)
and Logistics (logistics management and supply chain optimisation).
We offer flexible, value adding, integrated business solutions to our customers
backed by leading global brands. The brands we represent on behalf of our
principals include Caterpillar, Hyster, Avis, Mercedes, Chrysler, BMW, General
Motors, Ford, Toyota, Volkswagen, Audi, Nissan, Renault, Volvo and others.
Barloworld has a proven track record of effectively managing 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 play a leading role in
empowerment and transformation.
The company was founded in 1902 and currently has operations in 31 countries
around the world with approximately half of our 25 000 people in South Africa.
14 May 2007
Sponsor: J.P.Morgan Equities Limited
Date: 14/05/2007 08:06:27 Produced by the JSE SENS Department.
