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BAW BAWP
BAW
BAW / BAWP - Barloworld Limited - Audited Results for the year ended
30 September 2007
Barloworld Limited
(Registration number 1918/000095/06)
JSE codes: BAW and BAWP
ISIN codes: ZAE000026639 and ZAE000026647
HIGHLIGHTS
* Revenue from continuing operations up 23% to R43 238 million
* Trading profit up 33%
* Operating profit from continuing operations up 24% to
R2 741 million
* HEPS - from continuing operations up 13%
- from continuing operations (excluding STC on special dividend) up 21%
* Strategic actions completed ahead of schedule
* Significant shareholder value unlocked
- Special dividend of R1 billion (R5 per share) paid
- R19,3 billion distribution of PPC shares to shareholders
Clive Thomson, CEO of Barloworld, said:
"Barloworld embarked on an exciting new course during 2007. The group has been
repositioned as a distributor of leading international brands providing
integrated rental, fleet management, product support and logistics solutions.
We made good progress in executing the strategic actions announced at our AGM on
25 January 2007 to achieve that strategic positioning. PPC has been unbundled,
the coatings division is being separately listed on the JSE Limited in early
December and the scientific division and Freightliner truck business have been
sold. These actions have unlocked significant value for our shareholders.
The group delivered a strong trading performance during the year, driven by our
equipment division together with good performances from both automotive and
logistics.
We have made significant progress on the transformation front during the year
and our broad-based BEE transaction is on track for implementation in the first
half of 2008.
Barloworld is in a strong position to capitalise on favourable trading
conditions across most of our chosen business segments. The outlook for the
refocused group is positive and, based on the currently prevailing economic
climate, we expect continued growth in all of our operations in the year ahead".
Chairman and Chief Executive`s Report
Future direction of the group
Barloworld has been repositioned as a distributor of leading international
brands providing integrated rental, fleet management, product support and
logistics solutions.
The group will comprise businesses that fit this strategic profile, meet strict
performance criteria, and demonstrate good growth potential.
Following the completion of our announced strategic actions the restructured
Barloworld group will consist of the following core divisions:
* Equipment (earthmoving and power systems).
* Automotive (car rental, fleet services and motor trading).
* Handling (forklift truck distribution and fleet management).
* Logistics (logistics and supply chain management).
Strong trading performance
The trading performance is based on the results from continuing operations and
include, equipment, automotive, handling, logistics and the coatings division.
Revenue from continuing operations increased by 23% to R43,2 billion, impacted
by favourable trading conditions in most of the businesses.
Operating profit from continuing operations rose by 24% to R2 741 million driven
by strong growth in the southern African equipment business and a pleasing
result in Spain. The automotive division continues to perform well, with a
significant contribution from Avis Rent a Car Southern Africa. The turnaround of
motor retail Australia continued with the business more than doubling its
operating profit. In southern Africa new vehicle sales slowed in the last six
months of the year. We have seen continued improvements in our handling business
in the UK and Europe while the marked slowdown in the US economy impacted the US
handling business. The logistics division is beginning to make a meaningful
contribution to group profits with strong organic growth from the business in
Africa.
PPC and scientific have been disclosed as discontinued in the current year.
Coatings produced a good performance for the full year and will be disclosed as
discontinued in 2008 following its unbundling and listing.
A significant downsizing of the corporate office is substantially complete.
Redundancy costs amounting to R92 million have been provided against operating
profit. Estimated annualised savings from these initiatives amount to
approximately R100 million, certain of which have already been realised in 2007.
Headline earnings per share (HEPS) from continuing operations increased by 13%
to 811,7 cents per share. This was 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 21%.
In addition to the special distribution of 500 cents per share the board
declared a final dividend of 200 cents per share. The final dividend is not
directly comparable to the prior period due to the unbundling of PPC. The
ordinary dividends of 175 cents (interim) and 200 cents (final) declared in
respect of the current year`s earnings, plus the final dividend of 166 cents
declared by PPC (equivalent to 308 cents per Barloworld share) represent, in
total, an improvement of 14% over the dividends paid to shareholders last year.
Strategic actions to unlock shareholder value
Unbundling of PPC and Coatings
The unbundling of Pretoria Portland Cement Company Limited (PPC) was completed
in line with our stated timeline on 16 July 2007. This represented a
distribution to shareholders of shares in PPC with a market value of R19,3
billion.
A decision was also taken to list the coatings division as Freeworld Coatings
Limited on the JSE Limited and unbundle its shares to Barloworld shareholders.
The shareholder general meeting to approve this transaction will be held on 23
November 2007 and, subject to the necessary approvals, the company will be
listed on 3 December 2007 and its shares distributed to shareholders on 10
December 2007.
PPC and coatings will have a successful future as independent listed companies
and we wish the respective companies, boards and management teams well for the
future.
Disposal of businesses
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 in the handling division. As stated at the half year, a decision was taken
to exit the Finaltair biomass energy joint venture
in Spain.
Within the handling division, we sold DitchWitch of Georgia in April 2007 and
Barloworld Vacuum Technology and the Freightliner Truck Center operations in
July 2007.
A substantial part of the coatings Australia assets were sold at net asset value
to PPG Industries in July 2007.
The decision to dispose of the scientific division is being implemented in line
with our stated timeframes. Melles Griot was sold in July 2007 for a
consideration around tangible net asset value. The laboratory business has been
sold for approximately ?75 million, subject to certain regulatory requirements
being met. The transaction is expected to be concluded before the end of
December 2007.
Where applicable, impairment provisions have been made to write down goodwill or
assets to their estimated recoverable amounts.
BEE and transformation
The process to finalise the details of the group`s broad-based black economic
empowerment (BEE) transaction is on track. Whilst the transaction will lead to
approximately 10% empowerment at holding company level, it is anticipated that
it will result in an effective 25% empowerment of our South African operations.
Participants in the transaction will include employees, current and future black
management, community-based corporate social investment (CSI) partners, black
non-executive directors, as well as a number of strategic equity and black
business partners. The transaction is expected to be implemented in the first
half of 2008.
We have made good progress on the transformation of our South African businesses
during the year. We have appointed black CEOs within equipment (Dominic Sewela),
motor retail (Litha Nkombisa) and logistics (Isaac Shongwe).
Isaac Shongwe, Dominic Sewela and Sibani Mngomezulu (Executive - Governance and
Corporate Affairs) were appointed to the group executive committee during the
year.
Board and other management changes
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 and confirmed
as Chairman on 6 June 2007.
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 independent non-executive directors effective 26 January 2007.
Warren Clewlow, Tony Phillips, John Gomersall, Mike Coward, Lester Day and Eddie
Theron retired from the board in the current year. We would like to thank them
for their valuable contributions to the company over many years.
In other executive management moves, John Blackbeard has taken over as CEO of
the handling division on 1 October 2007. Peter Bulterman has been appointed as
CEO of equipment southern Africa and to the board of our Siberian joint venture,
while Viktor Salzmann has taken over as the Managing director of equipment
Iberia.
Outlook
Within our equipment division in southern Africa, growth in the mining and
construction sectors is expected to result in a further increase in activity. 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
opportunities. In Angola, we expect increasing demand with a number of
significant infrastructure projects under way.
In Iberia, we are seeing solid 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.
In the automotive division we expect sustained growth in the car rental
business, however increased interest rates and the National Credit Act are
impacting the sales of passenger vehicles within motor retail. 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.
Our handling business in Europe is benefiting from the streamlining of its
operating structure. In the US, slowing economic conditions will carry through
to the business. Overall we expect to show good profit improvement next year as
a result of the restructuring undertaken.
Growth in the logistics division is expected to continue at a rapid pace in
southern Africa and various international expansion opportunities are being
explored.
The implementation of our BEE transaction in the first half of 2008 is an
exciting development which is expected to deliver significant benefits to the
group.
We are in a strong position to capitalise on favourable trading conditions
across most of our chosen business segments. The outlook for the refocused group
is very positive and, based on the currently prevailing economic climate, we
expect continued growth in all of our businesses in the year ahead.
DB Ntsebeza CB Thomson
Chairman Chief Executive Officer
Group financial review
Revenue from continuing operations increased by 23% to R43 238 million. Good
growth was delivered in the equipment division, particularly in Southern Africa
where demand was bolstered by mining and infrastructural projects.
Operating profit from continuing operations rose by 24% to R2 741 million and
the operating margin was maintained at 6,3% (2006: 6,3%). The margin, and
operating profit, benefited in 2006 from a R149 million gain arising from the
reduction in UK pension obligations.
Included in favourable fair value adjustments on financial instruments of R287
million (2006: R233 million) is a gain of R312 million arising from the marking
to market of PPC shares. The shares are held as a hedge against the company`s
liability to share option holders arising from the unbundling of PPC in July
2007. Prior year fair value adjustments include R141 million gains in equipment
southern Africa which mainly arose prior to the implementation of hedge
accounting and a foreign currency gain of R54 million.
Finance costs increased by R274 million to R816 million. This was mainly due to
higher interest rates and increased working capital required to support the
growth in revenue.
Income from investments increased to R272 million (2006: R202 million) largely
as a result of the financing of growth in the Avis Fleet Services business by
the central treasury.
Exceptional charges of R160 million includes the impairments of the Finaltair
investment (R140 million), goodwill in Avis Scandinavia
(R101 million) and Truck Center (R59 million), less the release of R197 million
from the foreign currency translation reserve following the disposal of offshore
assets and businesses in the handling division.
Taxation rose by 4% to R658 million (2006: R633 million). Secondary Taxation on
Companies (STC) increased to R151 million (2006: R27 million) mainly due to the
charge of R125 million on the special R5 per share dividend paid in April 2007.
The effective taxation rate (excluding exceptional items, STC and prior year
taxation) was 29,0% (2006: 28,7%).
Income from associates and joint ventures declined to R68 million (2006: R72
million) due to slightly lower earnings in the automotive joint ventures.
Headline earnings per share (HEPS) from continuing operations increased by 13%
to 812 cents (2006: 720 cents).
HEPS from discontinued operations for the current financial year amounted to 370
cents(2006: 451 cents).
The consolidated cash flow statement for 2007 includes the cash flows of all
divisions and businesses while they were subsidiaries of the Barloworld group.
Net cash inflows before financing activities amounted to R379 million (2006:
R698 million).
Total assets declined by 14% to R30 655 million. The decline arose mainly due to
the unbundling of the cement division and the disposals of the UK lease assets,
steel tube division, Melles Griot, Freightliner dealerships and most of
coatings` Australian assets.
The currency effect on translation of offshore net assets resulted in a decrease
of R229 million following the appreciation of the rand at
30 September 2007 when compared with 30 September 2006.
The vehicle rental fleet increased to R3 902 million
(2006: R3 441 million).
Assets classified as held for sale of R1 447 million (2006: R2 840 million)
comprise the laboratories business (R972 million) and vehicles and equipment
rental fleets (R475 million).
Total interest-bearing borrowings of R9 066 million reduced by
R1 460 million in the year. The reduction was mainly attributable to the
unbundling of PPC (R194 million) and the disposals referred to above.
Borrowings in the three segments utilised in the group for gearing purposes, are
all within the defined target ranges as follows:
Total debt to equity (%) Trading Leasing Car Total
rental group
Target range 30 - 50 600 - 800 200 - 300
Ratio at 30 September 2007 38 646 216 81
The total debt to equity ratio for the group of 81% compares to 73% last year.
The maturity profile of the group`s borrowings is weighted in favour of the
short-term component (52%). The group is planning to implement a BEE transaction
early in 2008 and it is expected that this will result in the replacement of
existing short term debt with longer term borrowings.
Cash and cash equivalents totalled R1 201 million
(2006: R2 134 million). Reserving requirements in the company`s captive
insurance operations restrict the use of cash balances of R235 million (2006:
R405 million).
Dividends totalling 375 cents per share were declared in respect of this year`s
earnings (2006: 600 cents).
The company paid a special 500 cents per share dividend on 2 April 2007.
The year ahead
The group`s balance sheet remains strong and further reduction in debt will
result from the expected disposal of the laboratories business and the repayment
of intercompany debt on the unbundling of coatings. The group has committed ?55
million (R773 million) to address the funding deficit in the UK defined benefit
pension funds.
The focus in 2008 will be on concluding the unbundling of coatings, the disposal
of laboratories, implementing the proposed BEE transaction and increasing the
long term component of our debt. In terms of International Financial Reporting
Standards the BEE transaction will lead to a once-off, non cash, charge to the
income statement.
DG Wilson
Finance Director
Pro forma results for restructured Barloworld
The following pro forma represents the results of the Barloworld group for 2007
and 2006 excluding the results of cement, steel tube, coatings, scientific, the
UK lease book, and the Freightliner, DitchWitch, Vacuum Technology and Finaltair
businesses. All these divisions and businesses have either been unbundled or
sold this year or are in the process of being unbundled or sold.
This analysis is prepared to assist readers to better understand the current
year`s operating performance of the core businesses that will comprise the
"future" Barloworld group.
Year ended 30 September
Unaudited
R million 2007 2006 % change
Revenue 38 378 30 312 27
Trading profit 2 446 1 710 43
Pension fund gain 149
Corporate office redundancies and
closure costs (92)
Operating profit 2 354 1 859 27
Fair value adjustments on financial
instruments 295 224
2 649 2 083
Net finance costs (522) (322)
Profit before exceptional items 2 127 1 761 21
Exceptional items (115) 117
2 012 1 878
Taxation (657) (529) 24
Secondary Tax on Companies (149) (26)
Profit after taxation 1 206 1 323
Income from associates and joint
ventures 53 53
Net profit 1 259 1 376
Headline earnings 1 388 1 220 14
Headline earnings per share (cents) 685 589 16
Headline earnings per share
excluding STC on
special dividend (cents) 747 589 27
Revenue increased by 27% to R38 378 million mainly due to strong growth in the
equipment division. Growth of 44% in the division`s revenue was driven by the
southern African region where demand was bolstered by mining and infrastructural
projects.
Trading profit rose by 43% to R2 446 million. Profit grew strongly in the
equipment division on the back of higher revenue and in logistics which has
grown rapidly since its formation in 2002.
The corporate office redundancies and closure costs of R92 million in 2007
relate to the downsizing of the South African and UK corporate offices and the
closure of the Botswana and Namibia corporate offices.
Operating profit increased by 27% to R2 354 million (2006: R1 859 million).
Favourable fair value adjustments on financial instruments of R295 million
(2006: R224 million) relate mainly to the marking to market of PPC shares. In
2006, gains of R141 million related to foreign currency transactions in the
southern African equipment business. Most of these gains were incurred prior to
the adoption of hedge accounting which had the effect of reducing earnings
volatility arising from foreign currency fluctuations.
Finance costs net of investment income increased by R200 million to R522 million
mainly due to higher interest rates and increased working capital requirements.
It is anticipated that the coatings division will be unbundled with
approximately R900 million of debt which will favourably impact the future group
finance costs. No benefit has been reflected in the year end 2007 pro forma
figures.
Exceptional items of R115 million (loss) include R101 million relating to the
impairment of goodwill in Avis Scandinavia.
Taxation increased by 24% to R657 million. STC increased to R149 million (2006:
R26 million) due to R125 million being incurred on the special dividend paid in
April 2007.
Headline earnings increased by 14% to R1 388 million (2006: R1 220 million) and
HEPS increased by 16% to 685 cents.
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.
Comparatives have been re-classified as per note 9.
Equipment
Operating
Revenue profit Net operating
Year ended Year ended assets
30 Sept 30 Sept 30 Sept
R million 2007 2006 2007 2006 2007 2006
- Southern 9 333 6 212 972 504 2 740 2 304
Africa
- Europe 7 422 5 415 612 474 3 738 3 368
16 755 11 627 1 584 978 6 478 5 672
Share of
associate income 36 27
This division offers customers new, used and rental Caterpillar equipment
solutions and support in 11 southern African countries as well as Spain,
Portugal and Siberia.
In southern Africa, record commodity prices continue to fuel expansion of mines
and development of new mining projects, boosting results for the mining business
in terms of both new machine sales and product support.
Our joint venture in the DRC`s Katanga province received its first major
equipment orders from two new mining ventures. The Katanga operation dovetails
well with the growing opportunity in the adjoining Zambian copper belt.
Accelerated infrastructural spend, particularly in South Africa and Angola, has
increased demand for Caterpillar construction machines and the allied Metso
crushing and screening product. Activity in the used equipment joint venture
increased, with machines sourced from the rental fleet providing an attractive
alternative to competing brands.
The Iberian business reported increased level of activity, driven by growth in
public works construction and some market share gains. Indicators show that
infrastructure spending by government remains strong in Spain. Construction
activity is slow in Portugal with infrastructure investment dampened by
government spending constraints.
New marketing strategies have been introduced in both the machine sales and
after sales segments in Iberia and these are expected to continue to yield
benefits.
The Siberian joint venture, Vostochnaya Technica, posted pleasing results based
on continued growth and diversification in mining, coupled with a number of
significant power generation orders. The after sales business also performed
well.
The formal Common Goals agreement between Barloworld Equipment and Caterpillar
is ensuring alignment on key strategies. The issues of lead times and machine
availability due to global demand remain a challenge.
In order to sustain the equipment business through the current growth phase, we
will continue to make considerable investments in people, skills and facilities.
The equipment division entered the new financial year with a healthy order book
amounting to R5,4 billion (2006: R4,8 billion).
Automotive
Operating
Revenue profit Net operating
Year ended Year ended assets
30 Sept 30 Sept 30 Sept
R million 2007 2006 2007 2006 2007 2006
- Southern Africa 1 209 1 108 325 250 2 820 2 400
- Europe 1 134 805 81 69 2 427 2 536
Car rental 2 343 1 913 406 319 5 247 4 936
- Southern Africa 9 948 9 307 184 210 1 363 1 020
- Australia 2 448 1 719 48 23 743 666
Trading 12 396 11 026 232 233 2 106 1 686
Leasing Southern
Africa* 701 631 76 63 346 276
15 440 13 570 714 615 7 699 6 898
Share of
associate income 17 27
* Net operating assets after deducting interest-bearing borrowings.
Our integrated motor vehicle usage solutions strategy continued to yield
benefits, with an improved 4,6% (2006: 4,5%) operating margin for the division.
Avis Rent a Car Southern Africa increased profitability by 30% through firmer
rates, higher rental days and improved utilisation, as well as benefits being
derived from a number of focused strategic initiatives. Our Scandinavian car
rental business, which includes both Avis and Budget brands, reported an
improved operating profit, driven by a strong performance in Norway and our
ongoing operational and profitability initiatives. The Swedish operation has
been successfully turned around after last year`s change in the vehicle pricing
strategy of a major supplier. A significant number of assets have been removed
from the balance sheet across the region by converting corporate rental stations
into licensees, the benefits of which will be realised going forward.
In southern Africa, the record growth in new vehicle sales over the past three
years has slowed in the last six months. Rising interest rates and the
introduction of the National Credit Act have been the major factors causing the
slowdown. In spite of this, our dealership network, including associate
operations held up well. Notwithstanding an increase in Subaru units sold, the
depreciation of the rand against the yen placed severe pressure on margins which
negatively affected our importation and distribution business and hence
significantly impacted our southern African trading result. Our Australian
operation more than doubled its operating profit following the strategic
repositioning of our represented brands, against a background of an 8% growth in
Australian industry sales.
Our fleet services business reported a 20% increase in profitability due to
interest rate margin improvement and a number of new contracts secured, both of
which will continue to positively benefit profitability into the future.
NMI-DSM, our DaimlerChrysler empowerment joint venture, delivered positive
results for the year. However, the start-up costs in Phakisaworld Fleet
Solutions, our fleet services empowerment joint venture, and our exit from Auric
Auto early in the year negatively impacted the associate result when compared to
the prior year.
Handling
Operating
Revenue profit Net operating
Year ended Year ended assets
30 Sept 30 Sept 30 Sept
R million 2007 2006 2007 2006 2007 2006
- Europe 2 690 1 995 55 23 688 670
- North America 4 330 4 697 72 115 579 1 180
Trading 7 020 6 692 127 138 1 266 1 850
Leasing* 164 353 6 8 107 292
7 184 7 045 133 146 1 373 2 142
* Net operating assets after deducting interest-bearing borrowings.
At the January 2007 Barloworld annual general meeting it was announced that we
would substantially restructure the group in order to bring about a more focused
business entity. It was decided to focus activities within the division on its
core materials handling business, Hyster forklifts and related product. All
other businesses have been exited. This included the US and UK leasing
businesses, the Freightliner operation, DitchWitch and the Vacuum Technology
business in the UK. Consequently the reported results above are not comparable
and have been restated below to reflect the core handling operations only and
show a 14% operating profit growth off a much reduced revenue level.
Operating profit
Revenue
Year ended Year ended
30 Sept 30 Sept
Handling businesses 2007 2006 2007 2006
- Europe 2 628 1 937 51 21
- North America 1 879 1 810 71 83
Trading 4 507 3 747 122 104
Leasing 164 353 6 8
4 671 4 100 128 112
The total UK market showed good growth of 8% despite the manufacturing sector
declining significantly in line with the strong currency position. Our progress
was impacted by the process change required in new equipment contract financing
as a result of the sale of the leasing business. The operating profit of the
European businesses includes redundancy costs of Euro 600 000 depressing its
strong trading performance. The total European open order book remains strong at
a value of ?44,3 million reflecting 1 834 units against 1 461 units last year.
There was a marked slowdown in the US economy during the year and this carried
through to our business. In 2007, the south eastern US industry declined by 20%,
while our sales decreased by 10% to 3 502 units. Despite the reduced market we
finished the year strongly and the order book grew by 239 trucks over last year
to 1 078 units at a value of $39 million.
Logistics
Revenue* Operating profit Net operating
Year ended Year ended assets
30 Sept 30 Sept 30 Sept
R million 2007 2006 2007 2006 2007 2006
Southern Africa 1 088 683 76 37 400 433
Europe 371 280 19 28 67 50
1 459 963 95 65 467 483
*Excludes intergroup revenue of R747 million (2006: R666 million).
Since its formation during 2002, Barloworld Logistics has grown into one of the
leading logistics and supply chain management businesses in southern Africa with
complementary operations in Iberia, the UK, USA and UAE, a staff complement of 1
700 and approximately R5 billion annual logistics activity under management.
What was particularly pleasing this year was the coming of age of Barloworld
Logistics Africa who continued to lead the local industry through strong organic
growth and BEE transformation. Our business in Iberia had to digest the loss of
a major client whilst at the same time implementing new systems and procedures
to bring them more in line with the southern African logistics business model.
Reported revenue up 52% excludes approximately R747 million (2006: R666 million)
of intra-company revenue. We have experienced strong organic growth through our
blue-chip client base inside and outside the Barloworld group. Our ability to
achieve such growth while keeping the net asset base constant highlights the
asset efficiency of our logistics business model as well as tight working
capital management.
We expect the logistics industry to continue as one of the world`s most dynamic
and exciting industries for the foreseeable future. During next year this should
translate into continued, strong organic growth in Africa, especially southern
Africa. At the same time we will be exploring a number of international growth
opportunities for the division.
Coatings
Revenue Operating profit Net operating
Year ended Year ended assets
30 Sept 30 Sept 30 Sept
R million 2007 2006 2007 2006 2007 2006
Southern Africa 2 347 2 024 383 331 817 752
Share of
associate income 15 18
The division will be unbundled from Barloworld, subject to attaining the
required approval, before the end of 2007.
The year was characterised by further strong performances from the African-based
operations. We reported last year that the investment in the Australian
operations would be reduced. In line with this, the division sold a substantial
part of the Australian investment which resulted in a significantly lower asset
intensive presence in Australia, but leaving the division potential to take up
future opportunities in the Asia Pacific region. Operating profit, including our
Australian operations up to the date of sale to PPG Industries, was up 26%.
We were also pleased to implement our first BEE transaction in the automotive
business with our partners Izingwe Holdings taking a stake in the Prostart
refinish operations.
Cement
Revenue Operating profit Net operating
Year ended Year ended assets*
30 Sept 30 Sept 30 Sept
R million 2007 2006 2007 2006 2007 2006
Southern Africa 4 016 4 863 1 527 1 903 0 2 565
Share of
associate income 5 0
* Net operating assets include goodwill arising on PPC shares purchased by
Barloworld.
PPC was unbundled from Barloworld on 16 July 2007 and resulted in a distribution
to Barloworld shareholders of PPC shares with a market value of R19,3 billion.
The group provided another solid performance on the back of continued growth in
cement volumes. Operating profit for the nine months to end June was 12% higher
than last year. Buoyant market conditions necessitated the import of cement, to
meet customer demand. The imported cement was produced abroad to PPC
specifications and sold at negligible margin. We focused on maximising our
efficiencies, though this was not without its challenges due to increased
energy, logistics and maintenance costs.
The Batsweledi (Dwaalboom) capacity expansion project is progressing within
budget and on time. Plant commissioning is expected in April 2008 bringing 1,25
million tons per year additional capacity.
Higher plant maintenance activity at our major customers impacted local sales
volume of lime. Notwithstanding this decline there was a significant increase in
operating profit largely due to the impact of renegotiated long-term supply
agreements.
Scientific
Revenue Operating profit Net operating
Year ended Year ended assets
30 Sept 30 Sept 30 Sept
R million 2007 2006 2007 2006 2007 2006
Europe 1 191 1 027 104 62 683 834
North America 388 429 (4) 10 71 316
Asia 121 146 4 8 8 109
1 700 1 602 104 80 762 1 259
The Melles Griot business was sold to CVI Laser during the year with completion
of the sale taking place in July 2007.
Melles Griot started the year strongly with recoveries in Japan and Europe.
While the sales run rate was lower than the previous year, the operating profit
run rate for the 10 months of the financial year to July 2007 was 11% higher.
Nova Capital Management has signed an agreement to purchase the laboratory
business for approximately ?75 million and the transaction is expected to be
complete by the end of December 2007.
The laboratory group continued to show good improvement in operating profit
despite revenue being flat. This has been achieved through better control of the
cost base and growth in the higher margin scientific equipment businesses.
Demand grew in Spain, France, Germany and the US but trading conditions in the
UK and Italy remained difficult.
Corporate and other
Revenue Operating profit Net operating
Year ended Year ended assets
30 Sept 30 Sept 30 Sept
R million 2007 2006 2007 2006 2007 2006
Southern Africa 53 52 (111) (57) 633 491
Europe 0 0 (57) 129 (807) (669)
53 52 (168) 72 (174) (178)
In southern Africa, results were adversely affected by redundancy and related
costs of
R81 million associated with the downsizing of the South African corporate office
and the closure of the Botswana and Namibia corporate offices.
In Europe, the downsizing and relocation of the London office to Maidenhead
incurred costs of R11 million (?0,8 million). In 2006 a pre-tax gain of R149
million (?10,5 million) arose due to a reduction in the defined benefit pension
liabilities in the United Kingdom.
Net operating assets increased in southern Africa mainly due to the PPC shares
held to cover the company`s liability to share option holders. The PPC shares
are carried at market value.
As a result of the redundancy initiatives, annualised cost savings of
approximately R100 million is expected to be achieved.
DIVIDEND DECLARATION
for the year ended 30 September 2007
Dividend number 158
Notice is hereby given that the following dividend has been declared in respect
of the year ended 30 September 2007: Number 158 (final dividend) of 200 cents
per ordinary share (2006: final dividend of 450 cents per ordinary share).
In compliance with the requirements of the JSE Limited, the following dates are
applicable.
Date declared Monday, 19 November 2007
Last day to trade cum dividend Friday, 4 January 2008
First trading day ex dividend Monday, 7 January 2008
Record date Friday, 11 January 2008
Payment date Monday, 14 January 2008
Share certificates may not be dematerialised or rematerialised between Monday, 7
January 2008 and Friday, 11 January 2008, both days inclusive.
On behalf of the board
S Mngomezulu
Secretary
CONSOLIDATED INCOME STATEMENT
for the year ended 30 September
Audited %
R million Notes 2007 2006* change
Continuing operations
Revenue 43 238 35 281 23
Trading profit 2 741 2 058 33
Pension fund gain 149
Operating profit 2 741 2 207 24
Fair value adjustments on financial
instruments 287 233
Finance costs (816) (542)
Income from investments 272 202
Profit before exceptional items 2 484 2 100 18
Exceptional items 3 (160) 116
Profit before taxation 2 324 2 216
Taxation (658) (633)
Secondary taxation on companies (151) (27)
Profit after taxation 1 515 1 556
Income from associates and joint
ventures 68 72
Net profit from continuing 1 583 1 628
operations
Discontinued operations
Profit from discontinued operations 4 976 1 118
Net profit 2 559 2 746
Attributable to:
Minority shareholders 289 389
Barloworld Limited shareholders 2 270 2 357
2 559 2 746
Earnings per share (cents)
- basic 1 120,0 1 138,9
- diluted 1 099,6 1 117,1
Earnings per share from continuing
operations (cents)
- basic 773,7 764,4
- diluted 759,6 749,8
Earnings per share from discontinued
operation (cents)
- basic 346,3 374,5
- diluted 340,0 367,3
* Reclassified - refer note 9
CONSOLIDATED BALANCE SHEET
at 30 September
Audited
R million Notes 2007 2006
ASSETS
Non-current assets 12 019 14 289
Property, plant and equipment 6 847 8 299
Goodwill 2 046 3 005
Intangible assets 274 323
Investment in associates and joint ventures 928 749
Finance lease receivables 619 566
Long-term financial assets 686 597
Deferred taxation assets 619 750
Current assets 18 636 21 365
Vehicle rental fleet 3 902 3 441
Inventories 5 869 5 907
Trade and other receivables 6 185 7 026
Taxation 32 17
Cash and cash equivalents 1 201 2 134
Assets classified as held for sale 4 1 447 2 840
Total assets 30 655 35 654
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 223 327
Other reserves 2 584 3 461
Retained income 8 334 9 881
Interest of shareholders of Barloworld 11 141 13 669
Limited
Minority interest 80 691
Interest of all shareholders 5 11 221 14 360
Non-current liabilities 6 638 7 920
Interest-bearing 4 379 5 475
Deferred taxation liabilities 610 870
Provisions 344 468
Other non-interest-bearing 1 305 1 107
Current liabilities 12 796 13 374
Trade and other payables 6 854 6 663
Provisions 600 536
Taxation 445 705
Amounts due to bankers and short-term loans 4 687 4 409
Liabilities directly associated with assets 4
classified as held for sale 210 1 061
Total equity and liabilities 30 655 35 654
Condensed consolidated cash flow statement
for the year ended 30 September
Audited
R million 2007 2006
Cash flows from operating activities
Operating cash flows before movements in working 6 370 6 077
capital
Increase in working capital (531) (10)
Cash generated from operations 5 839 6 067
Finance costs (902) (630)
Realised fair value adjustments on financial (16) 136
instruments
Dividends received from investments and associates 41 104
Interest received 338 261
Taxation paid (1 412) (1 007)
Cash flow from operations 3 888 4 931
Cash flow from operations - continuing operations 2 695 2 533
Cash flow from operations - discontinued operations 1 193 2 398
Dividends paid (including minority shareholders) (2 629) (1 295)
Cash retained from operating activities 1 259 3 636
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of subsidiaries, investments and (349) (814)
intangibles
Proceeds on disposal of subsidiaries, investments
and intangibles 1 432 44
Net investment in fleet leasing and rental assets (2 283) (2 108)
Acquisition of other property, plant and equipment (1 485) (1 217)
Replacement capital expenditure (451) (508)
Expansion capital expenditure (1 034) (709)
Proceeds on disposal of property, plant and 121 593
equipment
Proceeds on sale of leasing assets 1 684 564
Net cash used in investing activities (880) (2 938)
Net cash inflow before financing activities 379 698
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on share issue 139 90
Buy-back of shares in company (1 160)
Proceeds from long-term borrowings 1 376 1 742
Repayment of long-term borrowings (3 207) (1 903)
Increase in short-term interest-bearing liabilities 704 1 007
Net cash used in financing activities (988) (224)
Net (decrease)/increase in cash and cash (609) 474
equivalents
Cash and cash equivalents at beginning of year 2 134 1 399
Effect of foreign exchange rate movement on cash (6) 242
balance
Effect of cash balances classified held for sale 19
Effect of cash balance on unbundling Pretoria
Portland Cement (318) -
Cash and cash equivalents at end of year 1 201 2 134
Cash balances not available for use due to
reserving restrictions 235 405
Acquisition of subsidiaries, investments and
intangibles:
Inventories acquired 57
Receivables acquired 226
Payables, taxation and deferred taxation acquired (230)
Borrowings net of cash (512)
Property, plant and equipment, non-current assets,
goodwill and
minority shareholders 744
Total net assets acquired 285
Goodwill arising on acquisitions 238
Net cash cost of subsidiaries acquired 523
Investments and intangible assets acquired 349 291
Cash amounts paid to acquire subsidiaries,
investments and intangibles 349 814
Bank balances and cash in subsidiaries acquired 12
CONSOLIDATED STATEMENT OF RECOGNISED INCOME
AND EXPENSE for the year ended 30 September
Audited
R million 2007 2006
Exchange differences on translation of foreign
operations (513) 1 832
(Loss)/gain on cash flow hedges (163) 139
Deferred taxation on cash flow hedges 39 (18)
(Loss)/gain of revaluation of available for sale
investments (22) 18
Deferred taxation on revaluation of available for
sale investments (8)
Other reserve movements (71)
Net actuarial losses on post-retirement benefit
obligations (54) (55)
Actuarial losses on post-retirement benefit (42) (79)
obligations
Taxation effect (12) 24
Net (loss)/income recognised directly in equity (713) 1 837
Net profit 2 559 2 746
Total recognised income and expense for the year 1 846 4 583
Attributable to:
Minority shareholders 289 381
Barloworld Limited shareholders 1 557 4 202
1 846 4 583
SALIENT FEATURES
for the year ended 30 September
Audited
R million 2007 2006*
Number of ordinary shares in issue, net of buy-back
(000) 203 843 200 716
Net asset value per share including investments at
fair value (cents) 5 714 6 973
Total borrowings to total shareholders` funds (%)
- Trading segment** 38,2 31,3
- Total group 80,8 73,3
Interest cover (times)
- Trading segment** 5,1 6,6
- Total group 3,4 3,7
Return on net assets (%)
- Trading segment** 28,9 27,8
- Total group 20,6 19,8
Cash flow return on investment - CFROIr (%) 12,2 12,3
Return on ordinary shareholders` funds
(excluding exceptional items) (%) 18,9 18,0
* Reclassified - refer note 9.
** Trading segment includes manufacturing and dealership businesses, but
excludes leasing and car rental.
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September
1. BASIS OF PREPARATION
This report has been has been prepared in accordance
with International Accounting Standard (IAS) 34 Interim Financial
Reporting and was extracted from the group consolidated financial
statements, which have been prepared in accordance with
International Financial Reporting Standards (IFRS), in compliance with
the Companies Act of South Africa and the Listing Requirements of
the JSE Limited. The basis of preparation is consistent with the prior
year, except as detailed in note 9 below.
For a better understanding of the group`s financial position, the
results of its operations and cash flows for the year, this summarised
report should be read in conjunction with the annual financial
statements from which it was derived.
2 Reconciliation of net profit to headline earnings
Audited
R million 2007 2006*
Net profit attributable to Barloworld Limited 2 270 2 357
shareholders
Loss on disposal of discontinued operations net of
taxation 60 156
Loss/(profit) on disposal of properties,
investments and subsidiaries 20 (140)
Impairment of assets 323 27
Realisation of translation reserve on disposal of
offshore subsidiaries (197) -
(Profit)/loss on sale of plant and equipment
(excluding
rental assets) and intangible assets (7) 4
Taxation on exceptional items (79) 19
Interest of minority shareholders in exceptional 4 -
items
Headline earnings 2 394 2 423
Headline earnings from continuing operations 1 645 1 489
Headline earnings from discontinued operation 749 934
Weighted average number of ordinary shares
in issue during the year (000)
- basic 202 673 206 959
- diluted 206 444 210 998
Headline earnings per share (cents)
- basic 1 181,3 1 170,8
- diluted 1 159,7 1 148,4
Headline earnings per share from continuing
operations (cents)
- basic 811,7 719,5
- fully diluted 796,9 705,7
Headline earnings per share from discontinued
operation (cents)
- basic 369,6 451,3
- diluted 362,8 442,7
*Reclassified - refer note 9.
3. Exceptional items
(Loss)/profit on disposal of properties,
investments
and subsidiaries (34) 139
Realisation of translation reserve on disposal of
offshore subsidiaries 197
Net impairment of property, plant and equipment,
investments and goodwill (323) (23)
Gross exceptional (losses)/profits (160) 116
Taxation 79 (19)
(81) 97
Discontinued operation (net of taxation and 9 (3)
minorities)
Net exceptional (losses)/profits (71) 94
4. Discontinued operations and assets classified
as held for sale
Following the decision to dispose of Scientific, Steel tube and
Coatings Australia and the unbundling of Cement, these
segments have been classified as discontinued. All the disposals
have been concluded at balance sheet date, with the exception
of the Laboratory business, a division of Scientific.
Results from discontinued operation are as follows:
Revenue 7 021 9 187
Operating profit 1 630 2 021
Fair value adjustments on financial instruments 13 (4)
Finance costs (86) (88)
Income from investments 68 74
Profit before exceptional items 1 625 2 003
Exceptional items (gross of taxation) 14 (3)
Profit before taxation 1 639 2 000
Taxation (609) (730)
Profit after taxation 1 030 1 270
Income from associates and joint ventures 6 4
Net profit of discontinued operation before
impairment loss 1 036 1 274
Impairment loss on write-down to fair value less
costs to sell (63) (185)
Taxation on impairment loss 3 29
Impairment loss after taxation (60) (156)
Profit from discontinued operations per income 976 1 118
statement
*Reclassified - refer note 9.
4. Discontinued operations and assets classified
as held for sale (continued)
The cash flows from the discontinued operations are
as follows:
Cash flows from operating activities (16) 1 339
Cash flows from investing activities 349 (404)
Cash flows from financing activities (811) (51)
Assets classified as held for sale consist of the
following:
- Laboratory 972
- Steel Tube 715
- Handling leasing assets# 1 717
- Rental fleets, leasing and other assets 475 249
- Other 159
1 447 2 840
Liabilities directly associated with assets
classified as
held for sale consist of the following:
- Laboratory 210
- Steel Tube 347
- Handling leasing assets# 597
- Other 117
210 1 061
5. Interest of all shareholders
Balance at the beginning of the year 14 360 12 130
Net (loss)/income recognised directly in equity (713) 1 837
Net profit for the year 2 559 2 746
Reclassifications and other reserve movements 9 46
Purchase of minority shareholding in subsidiary (34)
Buy-back of shares (1 160)
Dividends/capital distributions on ordinary shares (2 629) (1 295)
Effect of Cement unbundling (2 504)
Shares issued in current year 139 90
Interest of shareholders at the end of the year 11 221 14 360
* Reclassified - refer note 9.
# In addition, an amount of R916 million intergroup borrowings had to be
settled from the proceeds of the sale of the assets.
6. Dividends
Ordinary shares
Final dividend No 155 paid on 15 January 2007: 450
cents
per share (2006: No 153 - 325 cents per share) 911 745
Special dividend paid on 2 April 2007: 500 cents 1 017
per share
Interim dividend (Capital distribution) No 157 paid
on
2 July 2007:
175 cents per share (2006: No 154 - 150 cents per 357 312
share)
2 285 1 057
Dividend attributable to the treasury shares (62)
Paid to Barloworld Limited shareholders 2 285 995
Paid to minority shareholders 344 300
2 629 1 295
Dividends per share (cents) 375 600
- interim (declared May) 175 150
- final (declared November) 200 450
7. CONTINGENT LIABILITIES
Bills, lease and hire-purchase agreements
discounted with
recourse,other guarantees and claims 989 622
The group has given guarantees to the purchaser of
the coatings Australian business relating to
environmental
claims. The guarantees are for a maximum period of
seven years and are limited to the sales price
received
for the business.
Warranties and guarantees have been given as a
consequence
of the various disposals completed during the year.
None
are expected to have a material impact on the
financial results of the group.
Litigation, current or pending, is not considered
likely to
have a material adverse effect on the group.
Buy-back and repurchase commitments not reflected
on the
balance sheet 449 1 250
The related assets are estimated to have a value at least equal to
the repurchase commitment.
There are no material contingent liabilities in joint venture companies.
8. COMMITMENTS
Capital expenditure commitments to be incurred:
Contracted 1 908 2 106
Approved but not yet contracted 383 999
2 291 3 105
Operating lease commitments 1 939 2 509
Finance lease commitments 877 1 050
9. Accounting policies and comparative information
The group adopted the following amended standard and new interpretations during
the current year:
- IFRIC Interpretation 4 Determining Whether an Arrangement Contains a Lease
- IFRIC Interpretation 12 Service Concession Arrangements
- IFRIC Interpretation 14 IAS 19: Limit on a Defined Benefit Asset; Minimum
Funding Requirement and their interaction
- IAS 23 Borrowing costs Amendment
- The South African Institute of Chartered Accountants Circular 8/2007 on
Headline Earnings
The impact of adopting these standards was not significant.
Comparative information has been restated for the treatment of Cement,
Scientific and Coatings Australia businesses as discontinued operations (refer
note 4).
The aggregate effect of the above changes on the annual financial statements for
the year ended 30 September 2006 is as follows:
Reclassification
Previously of discontinued
R million stated operations Reclassified
Income statement
Revenue 42 693 (7 412) 35 281
Operating profit 4 133 (1 926) 2 207
Fair value adjustments on
financial instruments 235 (2) 233
Finance costs (605) 63 (542)
Income from investments 273 (71) 202
Profit before exceptional 4 036 (1 936) 2 100
items
Exceptional items 120 (4) 116
Profit before taxation 4 156 (1 940) 2 216
Taxation (1 211) 578 (633)
Secondary taxation on (159) 132 (27)
companies
Profit after taxation 2 786 (1 230) 1 556
Income from associates and
joint ventures 72 0 72
Net profit from continuing 2 858 (1 230) 1 628
operations
(Loss)/profit from
discontinued operation (112) 1 230 1 118
Net profit 2 746 - 2 746
Attributable to:
Minority shareholders 389 - 389
Barloworld Limited 2 357 - 2 357
shareholders
2 746 - 2 746
Earnings per share (cents) - 1 138,9 - 1 138,9
basic
Earnings per share (cents) - 1 117,1 - 1 117,1
diluted
The restatements have not impacted on the balance sheet and cash flow statement.
10. Related party transactions
There has been no significant changes in related-party relationships since the
previous year.
The sale of the Steel Tube division to a management and BEE consortium was
finalised in November 2006. The results of the division for the two months of
the financial year up its disposal were included in the current earnings, but
were not material to the group. The sale proceeds were received during the year
and in accordance with the sale agreement, an interest- bearing loan of R118
million was advanced to the purchaser, secured by owned properties
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.
11. Post-Balance Sheet events
Subsequent to the year-end the following material events have occurred:
- An agreement has been signed for the disposal of the Laboratory business. The
disposal will become effective once certain conditions precedent are fulfilled.
- A circular relating to the proposed unbundling of the Coatings division and a
prelisting statement for that business, have been sent to shareholders. The
unbundling is subject to shareholder and other regulatory approval. Inter-group
borrowings of R855 million were settled by Coatings on 5 November 2007.
- The group has committed to pay ?55 million (R759 million) to address the
funding deficit in the UK pension funds. An amount of ?35 million (R483 million)
has been paid to date.
12. Audit opinion
The consolidated financial statements for the year have been audited by Deloitte
& Touche and the accompanying unmodified audit report as well as their
unmodified audit report on this set of condensed financial information is
available for inspection at the company`s registered office.
Segmental Summary (audited)
Fair value
adjustments on
Operating financial
Revenue profit/(loss) instruments
Year ended Year ended Year ended 30
30 Sept 30 Sept Sept
R million 2007 2006 2007 2006 2007 2006
Equipment 16 755 11 627 1 584 978 (9) 141
Automotive 15 440 13 570 714 615 (7) 21
Handling 7 184 7 045 133 146
Logistics 1 459 963 95 65
Coatings 2 347 2 024 383 331 (8) 9
Corporate 53 52 (168) 72 311 62
Total continuing
operations 43 238 35 281 2 741 2 207 287 233
Scientific 1 700 1 602 104 80
Cement 4 016 4 863 1 527 1 903 13 2
Steel tube 348 1 775 32 95 (6)
Coatings
Australia 957 947 (33) (57)
Total
discontinued
operations 7 021 9 187 1 630 2 021 13 (4)
Total group 50 259 44 468 4 371 4 228 300 229
Operating profit/(loss)
including Net operating
fair value adjustments assets/(liabilities)
Year ended 30 Sept 30 Sept
R million 2007 2006 2007 2006
Equipment 1 575 1 119 6 478 5 672
Automotive 707 636 7 699 6 898
Handling 133 146 1 373 2 142
Logistics 95 65 467 483
Coatings 375 340 817 752
Corporate 143 134 (174) (178)
Total continuing
operations 3 028 2 440 16 660 15 769
Scientific 104 80 762 1 259
Cement 1 540 1 905 2 565
Steel tube 32 89 368
Coatings Australia (33) (57) 286
Total discontinued
operations 1 643 2 017 762 4 478
Total group 4 671 4 457 17 422 20 247
ADDRESSES
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
Transfer secretaries - South Africa
Link Market Services South Africa (Proprietary) Limited
(Registration number 2000/007239/07)
11 Diagonal Street
Johannesburg, 2001
(PO Box 4844, Johannesburg)
Tel: +27 11 630 0000
Transfer secretaries - United Kingdom
Equiniti Limited
Aspect House, Spencer Road
Lancing, West Sussex
BN99 6DA, England
Tel: +44 190 383 3381
Transfer secretaries - Namibia
Transfer Secretaries (Proprietary) Limited
(Registration number 93/713)
Shop 8, Kaiser Krone Centre
Post Street Mall
Windhoek, Namibia
(PO Box 2401, Windhoek, Namibia)
Tel: +264 61 227 647
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 and power systems),
automotive (car rental, fleet services and motor trading), handling (forklift
truck distribution and fleet management) and logistics (logistics and supply
chain management).
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, Budget, Mercedes, Chrysler, BMW,
General Motors, Ford, Toyota, Volkswagen, Audi, Nissan, Subaru, 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 26 countries
around the world with approximately half of our 19 000 people in South Africa.
For background information visit www.barloworld.com
19 November 2007
Sponsor: J P Morgan
Date: 19/11/2007 08:00:03 Produced by the JSE SENS Department.
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