| Wed 17 Nov 2010, 7:20 | | BAW/BAWP - Barloworld Limited - Audited results for the year ended 30 September |
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BAW/BAWP - Barloworld Limited - Audited results for the year ended 30 September
2010
Barloworld Limited
(Registration number 1918/000095/06)
JSE codes: BAW and BAWP
ISIN codes: ZAE000026639
ZAE000026647
AUDITED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2010
- Revenue R40 830 million (2009: R45 269 million)
- EBITDA R3 318 million (2009: R4 061 million)
- HEPS from continuing operations 212 cents (2009: 351 cents)
- Agreement to acquire remaining 50% of Caterpillar dealership in Russia
- Disposal of car rental Scandinavia concluded for R1 billion enterprise value
- Net cash inflow before financing R2 286 million (2009: R1 207 million)
- Net debt reduced by R3 billion
- Strong working capital management
- Order books starting to rebuild across most businesses
- Total dividend of 75 cents per share (2009: 110 cents)
Clive Thomson, CEO of Barloworld, said:
"The second half of the financial year yielded a significantly stronger
performance than the first half due to improved trading conditions for most of
our businesses and the results of actions taken to realign our cost base with
prevailing activity levels. Cash flow for the year was strong as a result of
intense focus on working capital management and the successful execution of the
Scandinavian car rental disposal.
An exciting development is our agreement to acquire the remaining 50% of our
Caterpillar joint venture in Russia, subject to regulatory approvals. This will
provide us with significant long term growth opportunities in the mining,
infrastructure, power and forestry segments in Siberia and the Russian Far East.
The recently announced acquisition by Caterpillar of Bucyrus International will,
once completed, provide a major opportunity to broaden our product line and
after market offering to customers in the mining industry.
Our financial position is strong and we are well placed to benefit from some
positive trends emerging in the economies and market sectors where we operate.
Our focus is now firmly on executing profitable growth initiatives to drive
financial returns and value creation for our stakeholders in the year ahead."
17 November 2010
Chairman and Chief Executive`s Report
Operational review
In the current year, we were impacted by difficult trading conditions in most of
our markets. We have however seen a noticeable improvement in trading conditions
towards the back end of our financial year, which contributed to a strongly
improved second half result compared to the first.
Group operating profit for the year of R1 376 million is 31% down on 2009.
Headline earnings per share from continuing operations (HEPS) is 212 cents
(2009: 351 cents). HEPS of 171 cents was earned in the second six months, 13%
higher than the 151 cents earned in the second half of 2009.
Our net cash inflow before financing activity was very strong at R2 286 million,
89% up on the cash inflow last year of R1 207 million. Together with the
reduction in debt following the disposal of our car rental business in
Scandinavia our net debt has reduced by R3 billion (37%) in the year.
Since reaching a peak in March 2009 of R10.1 billion our net debt has been
reduced by some R5.1 billion over the past eighteen months with our focus on
managing our working capital down in line with prevailing activity levels. Our
financial position is strong and we are well placed to fund growth opportunities
as our markets recover.
Equipment
Following the decline in activity towards the end of last year, Equipment
southern Africa experienced difficult trading conditions for most of 2010. The
division entered the current year with a vastly reduced order book compared to
2009 and this resulted in revenue in the first half being 39% below the first
half of 2009. Despite this we ended the year with a good operating margin and
significantly improved cash generation.
A commodity-led recovery that had shown some signs in the first half only gained
real traction in the last quarter of the financial year. Increased mining
activity in coal, iron ore and copper driven by demand from China and other
emerging markets supported this recovery. In South Africa our mining business
was driven by coal and iron ore while our Zambian business, which was the second
biggest contributor to profitability in southern Africa, benefitted from
increased demand on the back of a stronger copper price.
Our business in Mozambique has delivered the first tranche of the equipment
order to Vale for their Moatize coal mining project. In April we received a
further substantial order for the Riversdale coal mining project which we
forecast to start delivering towards the end of this calendar year. Revenue in
Angola in dollar terms reduced by 48% compared to the prior year as a
consequence of infrastructure project deferrals.
Construction in South Africa showed a flurry of activity ahead of the FIFA World
Cup but has shown few signs of recovery subsequent to this event. The South
African government has budgeted to spend close to R850 billion on infrastructure
over the next three years but this has been slow to materialise in the form of
new contracts awarded.
The Caterpillar machine population in southern Africa has more than doubled over
the past five years. This increased population is now beginning to generate
strong after sales activity which significantly lessened the impact of the
recession on our results.
Spain is projected to have a negative GDP growth in 2010 and the economy
continues to face a number of structural challenges. The government has taken
positive steps to reduce the fiscal deficit through the implementation of an
austerity budget which reduces public spending and includes tax increases. Our
business in Spain is however highly dependent on the public works sector which
remains depressed following sharp declines in the level of public tenders.
The steps taken to realign the Iberian cost base in 2009 as well as additional
measures during the current financial year have started to bear fruit. The loss
incurred in the first half included a large element of restructure costs, the
benefits of which have started to come through in the second half. While Iberia
ended the year in a loss position, the business was marginally profitable in the
second half and Portugal was profitable for the full year. The focus on working
capital management continued in the current year and the business generated a
further euro 21 million in cash on top of the euro 93 million positive cash flow
in 2009.
Revenue in our Russian operations for the year in dollar terms increased by 20%
mainly due to robust mining and construction demand as well as a strong
improvement in our after sales activity due to the installed machine population.
The business generated an operating margin of just under 6% which represents a
credible performance for a young dealership in a growth phase. Continued focus
on working capital management produced a positive cash flow of $34 million.
Automotive
The division delivered a record result in a competitive trading environment.
Revenue increased by 9% primarily supported by improving new vehicle unit sales,
albeit from a low base.
Avis Rent a Car southern Africa increased revenue by 5% compared to the prior
year. Improved profitability was mainly as a result of increased profits on sale
of used vehicles in the first half. Fleet utilisation remained strong at 74%.
Motor retail in southern Africa produced a good result on the back of improved
industry sales, while motor retail in Australia produced a strong performance by
growing market share.
Revenue in Avis Fleet Services was flat year on year with operating profit
slightly below last year. The fleet under finance grew by 1% while fleet under
maintenance increased by 27%. A strong used vehicle contribution was partially
offset by lower net interest margins.
Handling
Our handling business in all territories continued to experience difficult
trading conditions in the current year. While the US and the UK are now emerging
from recession, we continue to receive mixed signals regarding the state and
sustainability of the recovery. In southern Africa the handling business
suffered from lower activity within our customer base while the agriculture
business was impacted by weak maize prices and the lack of a low cost tractor
range.
Although the US and UK continued to incur losses, these were at significantly
reduced levels compared to the prior year. Belgium reported a small loss while
the Netherlands, SA and Agriculture achieved profits but at levels below the
prior year. Cash flow was strong with a net inflow for the division of GBP26
million.
Logistics
Revenue for the logistics division was 10% down on 2009 levels following lower
activity levels in Europe, Middle East and Asia while revenue in southern Africa
was in line with the prior year.
The southern African results were impacted by reduced activity in the
construction and automotive segments in supply chain management, however
improved volumes in the fast moving consumer goods and retail sector compensated
for such shortfalls. The international business was adversely impacted by
reduced freight forwarding volumes in the Far East while the Sea Air business
experienced margin pressure on increased volumes at fixed contract prices.
Corporate activity
We have reached agreement to acquire the remaining 50% of the shares in our
Russian Caterpillar dealership for $52 million (R363 million), subject to
various regulatory and other approvals. This business represents a significant
long term opportunity for the group due to the growth expected in the mining,
infrastructure, power and forestry segments.
The disposal of car rental Scandinavia was finalised at the end of July. The
disposal process which absorbed a great deal of management time and effort has
achieved a good result for the group. The sale has resulted in a debt reduction
of close to R800 million with the final balance owing in terms of the agreement
of NOK150 million (R180 million) due by end December 2010.
We further successfully completed the sale of the remaining 50% in the Subaru
import and distribution business to Toyota Tsusho Corporation.
A decision has been taken to dispose of our logistics African and Asian non-
corporate trader businesses, which form part of the Middle East and Asia
operations, and negotiations are progressing with a view to concluding the
transaction early in the new calendar year.
Empowerment, transformation and sustainability
We continued our initiatives to drive improvements in all elements of the DTI
broad based black economic empowerment (BBBEE) scorecard. In this regard it was
pleasing that Barloworld`s ranking in the 2010 FM Top Empowerment Companies
survey improved significantly to position No 21 and we achieved first place as
the most empowered company in the general industrial sector. Each of our
divisions or significant business units is independently audited and have all
achieved Level 2 or Level 3 empowerment ratings.
In terms of our sustainability initiatives it was also pleasing to be recognised
as one of the top four companies in the CDP 2010 South Africa JSE 100 Joint
Carbon Disclosure and Carbon Performance ratings.
Directorate
Mr Peter Bulterman was appointed as an executive director of the Barloworld
Limited board with effect from 1 October 2009 and subsequently appointed a
member of the risk and sustainability committee with effect from 1 October 2010.
Independent non-executive directors, Messrs Sango Ntsaluba and Gordon Hamilton
were appointed to the risk and sustainability committee from 1 October 2009 with
Mr Ntsaluba as chairman. Mr Johnson Njeke was appointed to this committee from 1
October 2010.
Outlook
Equipment southern Africa is entering the new year with a strong order book
particularly from mining customers. The delivery of the Riversdale order in
Mozambique is expected to boost activity in the first half. The anticipated
recovery of the construction market in South Africa and Angola driven by
governmental infrastructure spending is not expected before mid 2011 calendar
year.
The austerity measures introduced by the Spanish government mean that the public
works sector will remain subdued for most of 2011. The existing order book in
Iberia is dominated by power, and emerging opportunities in the marine and
industrial markets could favourably impact this segment.
In Russia, order books have increased significantly on the back of a recovery in
mining activity and we expect a strong first half of next year.
Our automotive division remains strategically well positioned. Trading
conditions in the car rental industry will be challenging for the next year. The
motor retail businesses will continue to benefit from increasing consumer
confidence and improving credit availability in both southern Africa and
Australia. The fleet services business is expected to perform well.
The economic recovery in most of our territories has already favourably impacted
the handling business where improved order books and increasing demand for short
term rental will ensure an improved performance in 2011. The recovery of the
maize price should boost our agriculture business as this has a direct
correlation with tractor sales in southern Africa. The introduction of a new
range of low cost tractors will also boost activity levels.
The logistics southern African business is close to finalising a number of
significant supply chain contracts which are expected to generate profitable
growth in 2011. Volumes in the dedicated transport segment should improve
following a pick-up in the construction sector. The Middle East and Asia
business will benefit from the restructuring initiatives currently underway.
With the very good cash generation in the current year, gearing levels have
reduced considerably and our financial position is strong. We are well placed to
pursue attractive growth opportunities that will improve financial returns and
drive value creation for all our stakeholders in the year ahead.
DB Ntsebeza CB Thomson
Chairman Chief Executive Officer
Group Financial Review
Revenue for the year declined by 10% to R40.8 billion. The bulk of the shortfall
occurred in our equipment businesses where total revenue fell by R4.8 billion
(28%). The drop off in activity levels experienced in Equipment southern Africa
in the second half of 2009 continued into the current year while demand in
Iberia remained weak throughout the year.
Earnings before interest, taxation, depreciation and amortisation (EBITDA)
decreased by 18% to R3 318 million while operating profit declined by 31% to R1
376 million. Reduced activity in Equipment southern Africa resulted in a
decrease in operating profit of R557 million (43%). The automotive division
continued their good performance, increasing operating profit by 10% to R772
million. Redundancy and restructuring charges of R59 million (2009: R139
million), were incurred to realign the cost base with prevailing activity
levels. The bulk of the restructuring costs (R48 million) were incurred in
Iberia.
The stronger rand resulted in losses arising from marking to market foreign
currency contracts on unhedged transactions mainly in Equipment southern Africa.
The total negative fair value adjustments on financial instruments of R89
million is lower than the R201 million incurred in 2009 due to reduced
volatility in the foreign exchange markets this year.
Net finance costs decreased by R206 million (26%) to R583 million. This was
largely due to the continued focus on reducing debt levels through improving
operating cash flows and tightly managing working capital and capital
expenditure. Total finance charges, including leasing interest classified as
cost of sales, decreased by R281 million (26%) to R809 million.
Exceptional charges of R176 million mainly comprise the impairment of goodwill
in the logistics Middle East and Asia operations reported at the interim
totalling R152 million.
Taxation, before Secondary Tax on Companies (STC), declined by 2% to R203
million. The effective taxation rate (excluding STC, prior year taxation and
taxation on exceptional items) was 33.8% (2009: 22.2%). The increased rate was
largely attributable to withholding taxes and losses incurred in low-tax
jurisdictions, while the prior year rate was reduced by the first-time
recognition of certain deferred taxation assets.
Income from associates fell by R27 million to R16 million owing to lower profits
earned in the equipment joint ventures. The contribution from the Democratic
Republic of Congo equipment joint venture declined by R62 million. Profits in
the Russian joint venture improved, particularly in the second half,
contributing R14 million to associates income.
The loss of R272 million from discontinued operations is attributable to trading
losses incurred in the Scandinavian car rental business and a loss of R187
million on the disposal of the business in July 2010.
The non-controlling interest in the current year`s earnings includes R13 million
representing the dividends paid to the holders of 14 485 013 ordinary shares in
terms of the BEE transaction concluded in 2008. These shares are not included in
issued shares for purposes of calculating headline earnings per share (HEPS).
HEPS from continuing operations of 212 cents is 40% lower than 2009 (351 cents).
Cash flow and debt
The continued focus on cash generation resulted in a net cash inflow for the
year of R2 286 million (2009: R1 207 million). Working capital decreased by R1
069 million following the reduction of R885 million in 2009. During the past
eighteen months that we have been focusing on reducing working capital,
inventories have declined by R3 832 million. Most of the reduction in the
current year was achieved in the southern African equipment business. In
addition capital expenditure in the group has been curtailed to essential
projects only. While there was some build up of the short-term car rental fleet
ahead of the FIFA World Cup in South Africa, the fleet has reduced to normal
levels at year end.
The disposal of the Scandinavian car rental business has resulted in a reduction
in group debt of R774 million with a further R180 million (NOK 150 million)
payment due by December 2010. The guarantee provided to DnB NOR for the bank
funding was cancelled in September 2010 following the repayment of the loan by
the purchaser.
Total interest bearing debt at 30 September 2010 was reduced by R2 836 million
to R6 977 million (2009: R9 813 million).
Strong collections from customers in the closing days of the financial year and
reduced supplier and short term funding commitments resulted in cash and cash
equivalents increasing by R156 million to R1 928 million (2009: R1 772 million).
Further progress was made in our initiative to address the group`s debt maturity
profile and to reduce the company`s reliance on short-term funding. Long-term
debt raised during the year included corporate bonds totalling R1 billion (BAW3
to 8) issued in September 2010. The funds raised were utilised to repay short-
term debt including R230 million of the corporate bond BAW1 which matures in
July 2011. The long-term debt maturity profile at 30 September 2010 was 61%
(2009: 63%).
Debt maturity profile
Debt
September Redemption
2010 2011 2012 2013 2014
R` million onwards
South Africa 6 453 2 369 85 46 3 953
Offshore 524 323 72 53 76
Total 6 977 2 692 157 99 4 029
In South Africa, short-term debt due for redemption in 2011 includes the balance
outstanding on BAW1 of R1 305 million (including accrued interest) and
commercial paper (CP) totalling R606 million. The CP market has remained liquid
during the current year and we expect to maintain our participation in this
market. The company has unutilised debt facilities with domestic banks totalling
R5 362 million at 30 September 2010. The offshore facilities include a
syndicated loan (undrawn at September 2010) of GBP80 million (R879 million) plus
other unutilised bank lines totalling the equivalent of R1 688 million.
Net debt at September 2010 of R5 049 million declined by R2 992 million (37%) in
the year. The bulk of the reduction was through cash inflows before financing
while the sale of car rental Scandinavia resulted in a reduction in net debt of
R774 million.
Gearing in the three business segments is as follows:
Group Group
Debt to equity (%) Car total net
Trading Leasing rental debt debt
Target range 30 - 50 600 - 800 200 - 300
Ratio at 30 34 482 202 64 47
September 2010
Ratio at 30 49 567 205 81 67
September 2009
Total assets employed by the group decreased by R4 405 million to R25 690
million. The decrease was largely due to reduced working capital and the
disposal of car rental Scandinavia. The stronger rand resulted in a decrease of
R1 271 million in total assets and R820 million in shareholders` funds.
Going forward
In the wake of the world economic crisis our strategy of strengthening our
financial position by focusing on cash flow and debt reduction has yielded good
results. While we plan to maintain this emphasis, debt will start to increase as
we build working capital as the recovery gains momentum. Since March 2009 net
debt has declined by R5.1 billion and annual gross finance charges have dropped
by R328 million. Over this period our net debt to equity has declined from 75%
to 47% notwithstanding that currency has negatively impacted our shareholders
funds by R2.2 billion.
We believe that our financial position is strong and that we are well placed to
fund the growth strategies of the divisions. The acquisition of the remaining
50% of the equipment business in Russia subsequent to year end will be funded
utilising cash balances in our offshore business.
As we have now emerged from the worst of the financial crisis, the key financial
strategic focus for 2011 will be on financial returns, particularly improving
our return on shareholders` funds.
DG Wilson
Finance director
Operational Reviews
Equipment
Revenue Operating Net operating
profit/(loss) assets
Year ended Year ended
30 Sept 30 Sept 30 Sept
2010 2009 2010 2009 2010 2009
R million Restated
- Southern Africa 8 379 11 187 725 1 282 2 990 4 703
- Europe 3 854 5 892 (69) 11 2 626 3 462
12 233 17 079 656 1 293 5 616 8 165
Share of associate 8 51
income
Barloworld Equipment southern Africa achieved a pleasing result considering the
challenging market conditions. Despite the decline in unit sales in the first
half, we ended the year with a good operating margin and significantly improved
our cash generation by reducing working capital and containing capital
expenditure.
Strong performances in Zambia, Namibia and Mozambique partly offset the weakness
in Angola. This was largely due to increased demand for copper, diamonds and
coal. South Africa, Botswana, the DRC and Malawi produced pleasing results in a
declining market. After sales activity remained robust throughout southern
Africa and our total parts and service revenue reached a record high.
The commodities-led recovery that began in the first half has escalated rapidly
in the past six months, with our mining result improving significantly in the
last quarter. The construction sector slowed prior to the FIFA World Cup and has
continued to decline since, exacerbated by slow implementation of future
infrastructure projects in South Africa. However the rental business grew and
used machine sales improved.
Activity was slow in the Power division which continued its consolidation of
capabilities and skills to capitalise on future opportunities.
The Technical Academy in Isando trained a new intake of 250 learners and in
addition continued with the training of existing artisans and we are now one of
Caterpillar`s flagship dealers in skills development.
The operations in Iberia continued to experience difficult trading conditions in
a very challenging macro-economic environment. The construction industry bore
the brunt of the cutbacks and stoppages of public works contracts. Our primary
focus was increasing market share and we concluded equipment sales to large
Portuguese and Spanish contractors working in developing markets in Africa and
South America.
Power Systems in Iberia experienced similarly poor market conditions. The marine
market was heavily influenced by the subdued Spanish shipping industry; however
there were signs of a revival towards the end of the year.
After a difficult first half, our Russian joint venture recovered well. Mining
sector investment programmes on hold during the downturn are now recommencing
and this renewed confidence is reflected in an improved mining order book. A
world class component rebuild centre will open in Novosibirsk in 2011 to help
satisfy growing demand for after sales support.
AUTOMOTIVE
Operating Net operating
Revenue profit/(loss) assets
Year ended Year ended
30 Sept 30 Sept 30 Sept
2010 2009 2010 2009 2010 2009
R million Restated
Car rental 3 204 3 059 283 254 2 580 2 266
Southern Africa
- Southern Africa 12 341 11 525 258 232 1 599 1 682
- Australia 3 737 2 937 82 59 1 009 946
Trading 16 078 14 462 340 291 2 608 2 628
Leasing Southern 1 545 1 552 149 158 441 387
Africa*
20 827 19 073 772 703 5 629 5 281
Share of associate 4 (11)
income/(loss)
* For Leasing Southern Africa, operating profit before interest paid is R278
million (2009: R293 million) resulting in total divisional operating profit
before interest of R901 million (2009: R838 million). Net operating assets is
after deducting interest-bearing debt.
Our integrated motor vehicle usage solutions strategy remains resilient and the
division produced a record result in a competitive trading environment. An
overall operating margin of 4.3% was achieved which is in line with the prior
year. The division generated strong operating cash flow, which was used to
increase investment into rental and leasing fleets in line with activity levels.
Avis Rent a Car southern Africa produced a good result. The business maintained
high fleet utilisation and marginally increased rate per day in an aggressive
trading environment. A change in the non-risk fleet funding model, from buyback
to lease, tempered growth in operating profit to 11.4%. Underlying operating
profit grew by 20.1%.
The southern African motor retail operations delivered a solid result in a
difficult market. This was supported by increased new vehicle sales and a strong
finance and insurance contribution. The Australian operations reported a much
improved result by increasing market share in a growing market.
Our fleet services business produced a satisfactory result, underpinned by
stable fleet growth and an improved used vehicle profit contribution which was
partly offset by lower net interest margins. Excluding non-recurring items in
the prior year, underlying operating profit grew by 12.9%.
Associates include our Phakisaworld and Sizwe BEE joint ventures as well as
Subaru Southern Africa which was disposed of during the year.
HANDLING
Operating Net operating
Revenue profit/(loss) assets
Year ended Year ended
30 Sept 30 Sept 30 Sept
2010 2009 2010 2009 2010 2009
R million Restated
- Southern Africa 912 1 156 42 80 369 518
- Europe 1 734 2 127 (40) (53) 573 681
- North America 1 440 1 725 (19) (54) 383 480
4 086 5 008 (17) (27) 1 325 1 679
Share of associate 3 4
income
The division again experienced difficult trading conditions, notably in the
South African agricultural market in the second half. However, the market for
new forklift trucks began to improve particularly in the last quarter, and end-
September orders in hand were up by over a third against the previous year-end.
Used sales showed strong growth against the prior year, and short-term rental
utilisation recovered to two year highs by September in some operations, albeit
on a smaller fleet.
The UK and US operations reduced the level of losses, benefitting from a modest
improvement in overall activity, a reduced cost base and improved efficiencies.
The Netherlands remained marginally profitable but Belgium swung from profit to
loss. Market shares improved in the Netherlands, Belgium and the UK.
Profits in the South African operations were significantly below prior year,
reflecting market declines and the impact of the stronger rand on margins.
Restricted supplies of small tractors depressed sales in the second half,
however new supplies have been secured for the year ahead.
The division reduced its asset base by a noteworthy 21% (16% in constant
currency) with improved receivable collections and pleasing inventory
reductions, notably in the agriculture business.
The global project to upgrade and install best practice business systems and
processes has gone live in the US, UK and Belgium, with other countries to
follow. This will underwrite improved service to our customers and higher
profits due to improved efficiency and effectiveness.
We anticipate improved trading into the new year with stronger orders on hand
and improving service and rental business. The agriculture operation is being
expanded into Mozambique and Siberia which will add further growth.
LOGISTICS
Operating Net operating
Revenue profit/(loss) assets
Year ended Year ended 30 Sept
30 Sept 30 Sept
R million 2010 2009 2010 2009 2010 2009
Southern Africa 2 256 2 257 50 92 398 342
Europe, Middle East 1 422 1 830 (40) (15) 457 707
and Asia
3 678 4 087 10 77 855 1 049
Southern African results were affected by continued lower volumes in the
construction and automotive segments and in the freight forwarding business.
Results in the dedicated transport business were impacted by declines in volumes
from the construction sector which resulted in suboptimal fleet utilisation. The
freight forwarding business had a better second half performance on the back of
mining related logistics projects into Mozambique and an upturn in volumes.
These results were partly offset by the performance of the FMCG and retail
segments where the management fee and performance based business model mitigated
the effect of volume declines. Continued investments were made in the areas of
operational excellence, knowledge management and technology which will enable
the organization to enhance its customer offering and improve market share.
The performance in the international operations was impacted by significant
reductions in volumes moved in the freight forwarding business, notwithstanding
cost saving and rationalisation initiatives undertaken. In the Sea-Air business,
margin realised was reduced due to increased volumes shipped at contracted rates
with rising variable input costs. The Spanish business stabilised in the second
half as rationalisation initiatives were implemented. A decision to exit the
Africa and Asia non-corporate trader segment of the freight forwarding business
has been taken and a turnaround strategy for the remaining businesses is being
implemented by the newly constituted management team.
CORPORATE
Revenue Operating Net operating
loss assets/
(liabilities)
Year ended Year ended
30 Sept 30 Sept 30 Sept
R million 2010 2009 2010 2009 2010 2009
Southern Africa 6 22 (41) (42) 498 372
Europe (4) (10) (390) (475)
6 22 (45) (52) 108 (103)
Share of associate 1 (1)
income/(loss)
Corporate comprises mainly the activities of the corporate offices, including
the treasuries, in South Africa and the United Kingdom.
In southern Africa the operating loss is similar to last year. Rental income
from properties purchased or developed for the equipment and handling businesses
in the past two years have been partially offset by increased funding facility
commitment fees. Net operating assets have increased mainly owing to the
purchase of a property for the Equipment division in 2010.
Dividend Declaration
Dividend declaration for the full year ended 30 September 2010
Dividend Number 164
Notice is hereby given that the following dividend has been declared in respect
of the full year ended 30 September 2010
Number 164 (final dividend) of 55 cents per ordinary share.
In compliance with the requirements of Strate and the JSE Limited, the following
dates are applicable.
Dividend declared Wednesday, 17 November 2010
Last day to trade cum dividend Friday, 7 January 2011
Shares trade ex dividend Monday, 10 January 2011
Record date Friday, 14 January 2011
Payment date Monday, 17 January 2011
Share certificates may not be dematerialised or rematerialised between Monday,
10 January 2011 and Friday, 14 January 2011, both days inclusive.
On behalf of the board
S Mngomezulu
Secretary
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER
Audited
2010 2009 % change
R million Notes Restated*
CONTINUING OPERATIONS
Revenue 40 830 45 269 (10)
Operating profit before items 3 318 4 061 (18)
listed below (EBITDA)
Depreciation (1 736) (1 854)
Amortisation of intangible assets (64) (61)
Leasing interest classified as (142) (152)
cost of sales
Operating profit 1 376 1 994 (31)
Fair value adjustments on (89) (201)
financial instruments
Finance costs (667) (938)
Income from investments 84 149
Profit before exceptional items 704 1 004 (30)
Exceptional items 3 (176) 22
Profit before taxation 528 1 026
Taxation (203) (207)
Secondary taxation on companies (25) (41)
Profit after taxation 300 778
Income from associates and joint 16 43
ventures
Net profit from continuing 316 821
operations
DISCONTINUED OPERATIONS
Loss from discontinued operations 4 (272) (82)
Net profit 44 739
Net profit attributable to:
Non-controlling interest in 51 68
subsidiaries
Owners of Barloworld Limited (7) 671
44 739
(Loss)/earnings per share (cents)
- basic (3,3) 321,8
- diluted (3,3) 319,6
Earnings per share from continuing
operations (cents)
- basic 126,5 361,1
- diluted 126,1 358,5
Loss per share from discontinued
operations (cents)
- basic (129,9) (39,3)
- diluted (129,9) (39,0)
* Restated for the treatment of IAS 7 and IAS 16
Refer note 2 for details on headline earnings per share calculation
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED
30 SEPTEMBER
Audited
R million 2010 2009
Profit for the year 44 739
Other comprehensive income
Exchange losses on translation of foreign (820) (926)
operations
Translation reserves realised on disposal of (102)
foreign subsidiaries
Loss on cash flow hedges (24) (105)
Deferred taxation on cash flow hedges 8 25
Loss on revaluation of available for sale (1)
investments
Net actuarial losses on post-retirement benefit (176) (232)
obligations
Actuarial losses on post-retirement benefit (238) (321)
obligations
Taxation effect 62 89
Other comprehensive income for the year (1 114) (1 239)
Total comprehensive income for the year (1 070) (500)
Total comprehensive income attributable to:
Non-controlling interest in subsidiaries 51 68
Owners of Barloworld Limited (1 121) (568)
(1 070) (500)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 SEPTEMBER
Audited
2010 2009
R million Notes Restated*
ASSETS
Non-current assets 11 626 12 582
Property, plant and equipment 7 575 7 854
Goodwill 2 078 2 319
Intangible assets 297 280
Investment in associates and joint ventures 552 731
Finance lease receivables 236 463
Long-term financial assets 133 279
Deferred taxation assets 755 656
Current assets 14 012 15 155
Vehicle rental fleet 1 679 1 692
Inventories 5 318 7 036
Trade and other receivables 5 030 4 747
Taxation 57 53
Cash and cash equivalents 1 928 1 627
Assets classified as held for sale 4 52 2 358
Total assets 25 690 30 095
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 295 252
Other reserves 1 750 2 688
Retained income 8 548 8 913
Interest of shareholders of Barloworld 10 593 11 853
Limited
Non-controlling interest 233 217
Interest of all shareholders 10 826 12 070
Non-current liabilities 5 670 6 486
Interest-bearing 4 285 5 278
Deferred taxation liabilities 302 249
Provisions 217 185
Other non-interest bearing 866 774
Current liabilities 9 136 10 030
Trade and other payables 5 807 5 775
Provisions 476 580
Taxation 161 108
Amounts due to bankers and short-term loans 2 692 3 567
Liabilities directly associated with assets 4 58 1 509
classified as held for sale
Total equity and liabilities 25 690 30 095
* Restated for the treatment of IAS 7 and IAS 16
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AT 30 SEPTEMBER
Share
capital
and Other Retained
R million premium reserves income
Balance at 1 October 2008 242 3 745 8 861
Total comprehensive income for the (1 007) 439
year
Transactions with owners, recorded
directly in equity
Other reserve movements (2) (56) 9
Dividends (396)
BEE charge in terms of IFRS 2 6
Shares issued in current year 12
Balance at 30 September 2009 252 2 688 8 913
Total comprehensive income for the (938) (183)
year
Transactions with owners, recorded
directly in equity
Other reserve movements (6) 7
Dividends (189)
BEE charge in terms of IFRS 2 6
Shares issued in current year 43
Balance at 30 September 2010 295 1 750 8 548
Attri-
butable to
Barloworld Interest
Limited Non- of all
share- controlling share-
R million holders interest holders
Balance at 1 October 2008 12 848 185 13 033
Total comprehensive income for the (568) 68 (500)
year
Transactions with owners, recorded
directly in equity
Other reserve movements (49) 2 (47)
Dividends (396) (38) (434)
BEE charge in terms of IFRS 2 6 6
Shares issued in current year 12 12
Balance at 30 September 2009 11 853 217 12 070
Total comprehensive income for the (1 121) 51 (1 070)
year
Transactions with owners, recorded
directly in equity
Other reserve movements 1 (1)
Dividends (189) (34) (223)
BEE charge in terms of IFRS 2 6 6
Shares issued in current year 43 43
Balance at 30 September 2010 10 593 233 10 826
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 SEPTEMBER
Audited
2010 2009
R million Restated*
CASH FLOWS FROM OPERATING ACTIVITIES
Operating cash flows before movements in 3 457 3 845
working capital
Operating cash flows - continuing operations 3 344 3 661
Operating cash flows - discontinued 113 184
operations
Decrease in working capital 1 069 885
Cash generated from operations before 4 526 4 730
investment in rental assets
Net investment in fleet leasing assets (847) (760)
Net investment in vehicle rental fleet (209) (69)
Cash generated from operations 3 470 3 901
Finance costs (691) (994)
Realised fair value adjustments on financial (102) (180)
instruments
Dividends received from investments and 6 14
associates
Interest received 82 146
Taxation paid (200) (603)
Cash flow from operations 2 565 2 284
Dividends paid (including non-controlling (223) (434)
interest)
Cash retained from operating activities 2 342 1 850
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of subsidiaries, investments and (3) 219
intangibles
Proceeds on disposal of subsidiaries, 309 7
investments and intangibles
Net investment leasing receivables 135 (139)
Acquisition of other property, plant and (565) (910)
equipment
Replacement capital expenditure (346) (522)
Expansion capital expenditure (219) (388)
Proceeds on disposal of property, plant and 68 180
equipment
Net cash used in investing activities (56) (643)
Net cash inflow before financing activities 2 286 1 207
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on share issue 43 12
Proceeds from long-term borrowings 1 920 4 379
Repayment of long-term borrowings (2 928) (4 328)
Decrease in short-term interest-bearing (826) (710)
liabilities
Net cash used in financing activities (1 791) (647)
Net increase in cash and cash equivalents 495 560
Cash and cash equivalents at beginning of year 1 627 1 238
Cash and cash equivalents held for sale at 145 31
beginning of year
Effect of foreign exchange rate movement on (106) (57)
cash balances
Effect of cash balances classified as held for (6) (145)
sale
Cash disposed (227)
Cash and cash equivalents at end of year 1 928 1 627
Cash balances not available for use due to 413 360
reserving restrictions
* Restated for the treatment of IAS 7 and IAS 16
This movement includes the repayment of loans by joint ventures and associates
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30
SEPTEMBER
1. Basis of preparation
The condensed financial information has been prepared in accordance with the
framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the AC 500 standards as
issued by the Accounting Practices Board and the information as required by IAS
34: Interim Financial Reporting. The report has been prepared using accounting
policies that comply with IFRS which are consistent with those applied in the
financial statements for the year ended 30 September 2009, except for the new or
amended Standards and new Interpretations adopted as detailed in note 8.
Audited
R million 2010 2009
2. Reconciliation of net profit to headline
earnings
Net (loss)/profit attributable to Barloworld (7) 671
shareholders
Adjusted for the following:
Loss/(profit) on disposal of discontinued 289 (60)
operations (IFRS 5)
Profit on disposal of subsidiaries and investments (38)
(IAS 27)
Realisation of translation reserve on disposal of (102)
offshore subsidiaries (IAS 21)
Profit on disposal of properties (IAS 16) (22) (14)
Impairment of goodwill (IFRS 3) 152
Impairment/(reversal) of impairment of investments 33 (12)
in associates (IAS 28) and joint ventures (IAS 31)
Impairment of plant and equipment (IAS 16) 51
Loss/(profit) on sale of intangible assets (IAS 38) 4 (1)
Profit on sale of plant and equipment excluding (2)
rental assets (IAS 16)
Taxation effects of remeasurements 5
Headline earnings 358 589
Headline earnings from continuing operations 443 731
Headline loss from discontinued operation (85) (142)
Weighted average number of ordinary shares in issue
during the year (000)
- basic 209 469 208 518
- diluted 210 187 209 967
Headline earnings per share (cents)
- basic 170,9 282,5
- diluted 170,3 280,5
Headline earnings per share from
continuingoperations (cents)
- basic 211,5 350,6
- fully diluted 210,7 348,1
Headline loss per share from discontinued
operations (cents)
- basic (40,6) (68,1)
- diluted (40,6) (67,6)
Audited
R million 2010 2009
3. Exceptional items
Profit on disposal of properties, investments and 60 18
subsidiaries
Impairment of goodwill (152)
(Impairment)/reversal of impairment of investments (33) 4
Impairment of property, plant and equipment (51)
Gross exceptional (loss)/profit from continuing (176) 22
operations
Taxation charge on exceptional items (5)
Net exceptional (loss)/profit profit from (176) 17
continuing operations
Gross exceptional loss from discontinued operations (1)
Net exceptional (loss)/profit - total group (176) 16
Audited
2010 2009
R million Restated*
4. Discontinued operations and assets classified
as held for sale
The car rental Scandinavia business segment was
sold on 31 July 2010.
Results from discontinued operations are as
follows:
Revenue 1 219 1 451
Operating profit before items listed below 104 160
(EBITDA)
Depreciation (190) (291)
Amortisation of intangible assets (3) (4)
Operating loss (89) (135)
Fair value adjustments on financial instruments (1)
Finance costs (24) (56)
Income from investments 4 11
Loss before exceptional items (109) (181)
Exceptional items (gross of taxation) (1)
Loss before taxation (109) (182)
Taxation 24 39
Net loss of discontinued operations before (85) (143)
(loss)/profit on disposal
Loss on disposal of discontinued operations before (289)
taxation
Realisation of translation reserve 102
Net (loss)/profit on disposal of discontinued (187) 61
operations after taxation
Loss from discontinued operations per income (272) (82)
statement
The cash flows from the discontinued operations
are as follows:
Cash flows from operating activities (6) 172
Cash flows from investing activities 183 (17)
Cash flows from financing activities (92) (40)
Assets classified as held for sale consist of the
following:
- Car rental Scandinavia 2 345
- Logistics African and Asian trading business 52
- Other assets 13
52 2 358
Liabilities directly associated with assets
classified as held for sale consist of the
following:
- Car rental Scandinavia 1 509
- Logistics African and Asian trading business 58
58 1 509
* Restated for the treatment of IAS 7 and IAS 16
Audited
R million 2010 2009
5. Dividends
Ordinary shares
Final dividend No 162 paid on 18 January 2010: 70 147 312
cents per share (2009: No 160 - 150 cents per
share)
Interim dividend No 163 paid on 7 June 2010: 20 42 84
cents per share (2009: No 161 - 40 cents per
share)
189 396
Paid to non-controlling interest 34 38
223 434
Dividends per share (cents) 75 110
- interim (declared May) 20 40
- final (declared November) 55 70
6. Contingent liabilities
Bills, lease and hire-purchase agreements 1 367 1 212
discounted with recourse, other guarantees and
claims
Litigation, current or pending, is not considered
likely to have a material adverse effect on the
group.
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 eight years up to 2015 and are
limited to the sales price received for the
business.
Buy-back and repurchase commitments not reflected 224 294
on the balance sheet
The related assets are estimated to have a value
atleast equal to the repurchase commitment.
There are no material contingent liabilities in
joint venture companies.
7. Commitments
Capital expenditure commitments to be incurred:
Contracted 1 016 920
Approved but not yet contracted 331 503
1 347 1 423
Operating lease commitments 1 950 2 151
Finance lease commitments 820 986
Capital expenditure will be financed by funds generated by the business,
existing cash resources and borrowing facilities available to the group.
8. Accounting policies
The group adopted the following new and amended Standards and new
Interpretations during the current year:
- IAS 1 Presentation of Financial Statements (Revised)
- IAS 7 Statement of cash flows: Refer to annual financial statements note 34
- IAS 16 Property, plant and equipment: Refer to annual financial statements
note 34
- IAS 32 Financial instruments: Classification of rights issues (Revised)
- IFRS 2 Share based payment (Revised)
- IFRS 2 Group cash-settled share-based payment transactions (Revised)
- IFRS 3 Business combinations (Revised)
- IFRS 8 Operating segments: Refer to annual financial statements note 34
- IFRIC 14 Prepayments of a minimum funding requirement (Revised)
- IFRIC 17 Distributions of non-cash assets to owners
- IFRIC 19 Extinguishing financial liabilities with equity instruments
9. Related party transactions
There has been no significant change in related party relationships since the
previous year.
Other than in the normal course of business, there have been no other
significant transactions during the year with associate companies, joint
ventures and other related parties.
10. Events after the reporting period
Agreement has been reached to acquire our partner`s 50% shareholding in
Vostochnaya Technica (VT) for US$52 million (R363 million). VT distributes and
supports Caterpillar and allied equipment across Siberia and the Russian Far
East.
The transaction is subject to certain regulatory approvals but the group has
acquired control of VT from 1 October 2010 through the right to approve an
additional director. Acquisition date for values are in the process of being
determined.
11. Auditor`s opinion
The auditors, Deloitte & Touche, have issued their opinion on the group`s
financial statements for the year ended 30 September 2010. The audit was
conducted in accordance with International Standards on Auditing. They have
issued an unmodified audit opinion. These summarised provisional financial
statements have been derived from the group financial statements and are
consistent in all material respects, with the group financial statements. A copy
of their audit report is available for inspection at the company`s registered
office. Any reference to future financial performance included in this
announcement, has not been reviewed or reported on by the company`s auditors.
SALIENT FEATURES FOR THE YEAR ENDED 30 SEPTEMBER
Audited
2010 2009
Number of ordinary shares in issue, including BEE 230 452 227 440
shares (000)
Net asset value per share including investments at 5 032 5 731
fair value (cents)
OPERATING SEGMENTS (AUDITED)
Operating
Revenue profit/(loss)
Year ended Year ended
30 September 30 September
2010 2009 2010 2009
R million Restated*
Equipment 12 233 17 079 656 1 293
Automotive 20 827 19 073 772 703
Handling 4 086 5 008 (17) (27)
Logistics 3 678 4 087 10 77
Corporate 6 22 (45) (52)
Total continuing 40 830 45 269 1 376 1 994
operations
Car rental Scandinavia 1 219 1 451 (89) (135)
Total discontinued 1 219 1 451 (89) (135)
operations
Total group 42 049 46 720 1 287 1 859
Fair value Operating profit/(loss)
adjustments on including fair value
financial instruments adjustments
Year ended Year ended
30 September 30 September
R million 2010 2009 2010 2009
Equipment (58) (151) 598 1 142
Automotive 2 (2) 774 701
Handling (28) (29) (45) (56)
Logistics (7) (6) 3 71
Corporate 2 (13) (43) (65)
Total continuing (89) (201) 1 287 1 793
operations
Car rental Scandinavia (1) (89) (136)
Total discontinued (1) (89) (136)
operations
Total group (89) (202) 1 198 1 657
Net operating
assets/(liabilities)
Year ended
30 September
R million 2010 2009
Equipment 5 616 8 165
Automotive 5 629 5 281
Handling 1 325 1 679
Logistics 855 1 049
Corporate 108 (103)
Total continuing operations 13 533 16 071
Car rental Scandinavia 1 804
Total discontinued operations 1 804
Total group 13 533 17 875
* Restated for the treatment of IAS 7 and IAS 16
Corporate information
Registered office and business address
Barloworld Limited
180 Katherine Street,
PO Box 782248, Sandton, 2146,
South Africa
Tel: +27 11 445 1000
E-mail: 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
Registrars - United Kingdom
Equiniti Limited,
Aspect House, Spencer Road, Lancing,
West Sussex, BN99 6ZL, 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
Directors
Non-executive: DB Ntsebeza (Chairman), SAM Baqwa, AGK Hamilton*
SS Mkhabela, MJN Njeke, SS Ntsaluba, TH Nyasulu
G Rodriguez de Castro de los Rios+, SB Pfeiffer#
Executive: CB Thomson (Chief Executive), PJ Blackbeard
PJ Bulterman, M Laubscher, OI Shongwe, DG Wilson
*British #American +Spanish
Enquiries:
Barloworld Limited:
Sibani Mngomezulu
Tel: +27 11 445 1000
E-mail: invest@barloworld.com
College Hill:
Jacques de Bie
Tel: +27 11 447 3030
E-mail: Jacques.deBie@collegehill.co.za
For background information visit www.barloworld.com
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, motor retail and fleet services), Handling (materials
handling and agriculture) 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, Audi, BMW, Ford, General
Motors, Mercedes-Benz, Toyota, Volkswagen and others.
Barloworld has a proven track record of long-term relationships with global
principals and customers. We have an ability to develop and grow businesses in
multiple geographies including challenging territories with high growth
prospects. One of our core competencies is an ability to leverage systems and
best practices across our chosen business segments. As an organisation we are
committed to sustainable development and playing a leading role in empowerment
and transformation.
The company was founded in 1902 and currently has operations in 38 countries
around the world with approximately 60% of our eighteen thousand employees in
South Africa.
Sponsor:
J.P. Morgan Equities Limited
Date: 17/11/2010 07:20:01 Produced by the JSE SENS Department.
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