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Barloworld Limited - Audited results for the year ended 30 September 2002
Barloworld Limited
(Reg no. 1918/000095/06)
JSE code: BAW
ISIN code: ZAE000026639
Audited results for the year ended 30 September 2002
Revenue R 35 999 million +29%
Operating profit R 2 067 million +39%
Cash flow from operations R 2 209 million +49%
Earnings per share 592 cents +31%
(excluding exceptional items)
Headline earnings per share 622 cents +25%
Net asset value per share 5 872 cents +23%
(including investments at fair value)
Total ordinary dividend per share 275 cents +25%
Special centenary dividend per share 100 cents
STRONG GROWTH IN OUR CENTENARY YEAR
Revenues grew 29% to R35 999 million during the period under review. Trading
conditions in Europe and Australia were good, and in South Africa markets
improved. By contrast, demand for our products and services in the United States
remained depressed and business in the rest of Africa slowed slightly.
Operating profit rose 39% to R2 067 million. All business segments improved
their results except Industrial Distribution and Scientific Products, both of
which have major operations in the United States and suffered from the
prevailing recessionary conditions. Operating margins increased from 5.3% to
5.7% despite the impact of lower profits in the United States.
Our operations outside South Africa accounted for 51% of segmental profits
including associate income (2001:64%).
Cash flow from operations was strong rising 49% to R2 209 million. This was
driven by our management focus on maximising cash flow returns in our
businesses.
Taxation rose from R383 million to R636 million. The effective tax rate
excluding exceptional items, Secondary Tax on Companies (STC), and goodwill
amortisation increased to 28.5% (2001: 24.5%), with the prior period being
favourably impacted by a release of over provisions.
Exceptional profits of R369 million included profits on the sale of properties,
investments and subsidiaries and the realisation of translation reserves on the
liquidation of offshore subsidiaries, partially offset by impairment losses and
provision for pension fund closure costs. This compares with exceptional costs
of R278 million in 2001 which were primarily impairment losses.
Earnings per share excluding exceptional items rose 31% to 592 cents.
Approximately 72 cents per share (12%) of earnings arose from translation of
profits from our off shore businesses as a result of the weakening rand.
Headline earnings per share rose 25% to 622 cents. This growth was achieved
notwithstanding the once-off impact of the R100 million (R70 million net of tax)
provision for pension fund closure costs that adversely affects headline
earnings.
The balance sheet remains healthy and total assets rose by R 5 151 million from
30 September 2001, due primarily to replacement and expansion capital
expenditure, increases in rental assets, acquisition of subsidiaries and
investments, and the impact of the weakening currency on international assets.
Net asset value per share including investments at fair value rose to 5 872
cents compared with 4 774 cents at 30 September 2001.
The directors have declared a final dividend of 185 cents per share (2001: 145
cents) resulting in a 25% increase in the total ordinary dividends declared for
the year to 275 cents (2001: 220 cents). A special centenary dividend
amounting to 100 cents per share has also been declared.
Segmental review
* The segment profits stated in the following tables includes operating profit,
fair value adjustments on financial instruments and goodwill amortisation but is
calculated before investment income, interest paid and taxation. The prior year
numbers have been restated to include goodwill amortisation so as to ensure
comparability.
VBM delivers operational improvements throughout the company
The implementation of Value Based Management (VBM) throughout the company is a
key driver of increased cash flow, profit and value creation. VBM makes every
management team within Barloworld focus on creating value for all our
stakeholders and is a long-term strategic programme. The benefits of the many
VBM-driven initiatives within the organisation are reflected throughout these
results and will continue to increase value as we profitably grow our businesses
into the future.
Capital Equipment
Year ended 30 Revenue Segment Net assets
Sept profit*
R million 2002 2001 2002 2001 2002 2001
Europe 6 472 4 629 553 415 1 777 1 518
South Africa 2 790 2 065 88 73 1 197 749
Rest of Africa 868 1 266 103 130 190 377
10 130 7 960 744 618 3 164 2 644
Share of 0 (3)
associate
income
In Europe, activity levels remained high against a background of the continuing
public sector infrastructure investment programme in Spain with a slowdown
evidenced in Portugal. The developing Siberian business continued to make
satisfactory progress. Total revenues in Europe rose by 40% and profits by 33%.
Activity levels rose in South Africa as a result of growth in the mining
industry and for the first time since 1996, an improvement in the construction
sector. The Smart PartnershipT strategy resulted in further growth in long-term
contract business. Profits in South Africa rose 21% as costs were well
contained.
In Rest of Africa, both Botswana and Namibia continued to perform well while the
business climate in Angola improved. This was offset by lower activity levels in
Zambia resulting in a lower profit contribution.
Industrial Distribution
Year ended 30 Sept Revenue Segment Net assets
profit*
R million 2002 2001 2002 2001 2002 2001
Europe 2 202 1 684 95 75 946 728
North America 3 812 3 367 28 86 1 545 1 527
6 014 5 051 123 161 2 491 2255
Share of associate 0 (8)
income
In Europe, the operations in the United Kingdom and Belgium generated a 27%
profit improvement as a result of an excellent second half in the United Kingdom
with good order intake.
In North America, United States materials handling equipment demand declined
further as capital spending remained constrained by the recession and new lift
truck deliveries fell 26%. The business environment also affected Barloworld
Freightliner where new truck demand was flat compared with 2001. Lower volumes
overall, combined with restructuring charges following staff reductions,
resulted in substantially lower profits for the region.
Motor
Year ended 30 Revenue Segment Net assets
Sept profit*
R million 2002 2001 2002 2001 2002 2001
South Africa 6 851 5 805 146 79 799 735
Rest of Africa 357 281 10 7 24 30
Australia 1 656 460 28 7 472 414
8 864 6 546 184 93 1 295 1 179
Share of 46 29
associate income
Revenue grew 18% in South Africa as a result of increased market share and
exchange rate-led price increases. Substantial margin and cost control
improvements saw profits rise 85%.
In Rest of Africa (Botswana and Namibia) the profits grew 43% on revenue growth
of 27%.
In Australia, the business benefited from both a buoyant market and the
additional business flowing from the dealerships acquired in the period July to
September 2001 and profits quadrupled. The underperforming Mitsubishi
dealerships were sold in July 2002.
The overall segmental operating margin showed a strong improvement from 1.4% to
2.1% and profits doubled.
Share of associate income grew strongly as a result of a good performance from
Avis Southern Africa Limited (26% owned).
Cement & Lime
Year ended 30 Revenue Segment Net assets
Sept profit*
R million 2002 2001 2002 2001 2002 2001
South Africa 2 226 1 771 586 406 2 591 2 106
Rest of Africa 345 199 44 39 635 117
2 571 1 970 630 445 3 226 2 223
Share of 34 24
associate income
South African cement demand increased strongly in the second half of the year
and exports grew, while lime sales were unchanged. Continued cost reductions and
efficiency improvements resulted in a 44% rise in profits as revenues rose 26%.
The Rest of Africa included the contribution from Porthold in Zimbabwe, which
was acquired in October 2001. While Zimbabwe and Botswana cement demand was
buoyant, the imposition of price controls by the government of Zimbabwe
adversely impacted profitability.
Scientific Products
Year ended 30 Revenue Segment Net assets
Sept profit*
R million 2002 2001 2002 2001 2002 2001
Europe 1 459 903 57 68 1 171 929
North America 720 724 (52) 60 601 450
Asia 157 178 4 8 133 127
2 336 1 805 9 136 1 905 1 506
In Europe, the Laboratory business performed strongly in a stable trading
environment with excellent progress made in integrating the four businesses
acquired from Protean Plc. However, this was offset by a greatly reduced demand
from the telecommunications sector for Melles Griot laser and optics products
and as a result, profits were lower.
In the United States, the decline in the semiconductor and telecommunications
sectors caused a sharp reduction in sales volumes and the first half losses in
the Melles Griot laser and photonics business continued, albeit at a slower
rate. The restructuring of the business continued and significant cost
economies have been achieved through the consolidation of the Irvine operations
into the larger facility in Carlsbad.
Coatings
Year ended Revenue Segment Net assets
30 Sept profit*
R million 2002 2001 2002 2001 2002 2001
South Africa 1 071 911 78 43 445 395
Rest of 114 85 14 8 23 22
Africa
Australia & 1 235 796 36 (44) 312 293
Asia
Europe 81 98 3 4 16 21
2 501 1 890 131 11 796 731
Share of 28 7
associate
income
In South Africa, a good result was achieved as the markets for decorative
coatings and automotive coatings grew, efficiency improvements continued and
margins rose, converting an 18% revenue growth into an 81% profit increase.
Operations in the Rest of Africa countries also enjoyed better trading
conditions and higher profits.
In Australia, higher revenues and continued progress in all aspects of the
business including better margins and lower costs resulted in a strong
turnaround to profitability.
The UK business traded profitably until it was sold in June 2002.
Share of associate income grew strongly as a result of good performances from
all of the joint ventures that operate in the industrial coatings markets.
Steel Tube
Year ended 30 Revenue Segment Net assets
Sept profit*
R million 2002 2001 2002 2001 2002 2001
South Africa 1 720 1 343 84 9 486 419
Share of 11 7
associate
income
In the first half of the financial year international dollar prices of steel
rose from their lowest levels in many years and ended the year some 15% above
their long-term average. The rand prices rose faster as a result of a rapidly
weakening currency, particularly in the early part of the year. Demand for steel
products in South Africa rose.
These factors led to a less hostile market environment that, together with
substantial improvements in productivity and increased exports, produced the
best result for the business since the South African fixed investment boom of
1996.
Financial Services, Logistics and Other
Year ended 30 Revenue Segment Net assets
Sept profit*
R million 2002 2001 2002 2001 2002 2001
Leasing 862 629 77 (2) 4 992 3 455
Logistics and 1 001 751 24 (72) 1 502 1895
Other
1 863 1 380 101 (74) 6 494 5350
The leasing operations returned to profitability following the normalisation of
bad debt levels in the capital equipment leasing book in South Africa. The total
leasing book grew to R5.2 billion (R3.6 billion at 30 September 2001), driven
primarily by growth in Europe and the United States.
The logistics businesses in both Spain and South Africa traded profitably.
The balance of Logistics & Other includes the UK paper business, corporate
operations in the United Kingdom and South Africa, and shared services such as
treasury, risk management and information technology.
Acquisitions and disposals
The more significant acquisitions during the year included Portland Holdings in
Zimbabwe through Pretoria Portland Cement Company Limited (PPC) for R428
million; 1 518 153 additional shares in PPC (now 66% owned) for R98 million; a
Sterling Truck dealership in Memphis, Tennessee, through the purchase of its
stock for R9 million; 50% of Execulink and 100% of Supply Chain Solutions (SCS),
both logistics companies, for R10 million and R16 million respectively; 10.83%
of Energyst, a company dedicated to the rental of Caterpillar generator sets in
Europe for R33 million and 50% of Finaltair, a joint venture to exploit the
production and sale of energy in Europe for R25 million.
Disposals included PPC`s 32.9% stake in Natal Portland Cement to the Portuguese
cement company Cimpor-Cimentos de Portugal SPGS, S.A. for R328 million; PPC`s
25% stake in Ash Resources for R8 million; our 50% share in steel trading
company Stemcor (South Africa) for R13 million; the Australian Mitsubishi motor
dealerships for R16 million and the business of Plascon International in the
United Kingdom. The disposal of the steel distribution branches of Robor
Stewarts and Lloyds was substantially completed.
Prospects
We remain focused on value creation for all stakeholders and will continue to
build our success on a platform of Value Based Management. This has been the key
driver in improving our underlying profitability in all phases of the business
cycle over the past three years.
While the global outlook remains uncertain, South Africa is showing encouraging
signs of economic growth translating into fixed capital formation which should
benefit our businesses and we look forward to another year of good progress in
2003.
WAM Clewlow
Chairman
AJ Phillips
Chief Executive Office
DC Arnold
Director, Finance & Administration
13 November 2002
Income Statement
R million 2002 2001 % change
Revenue 35 999 27 945 29
Operating profit 2 067 1 487 39
Finance costs (346) (305)
Income from investments 253 254
Goodwill amortisation (116) (88)
Profit before exceptional 1 858 1 348 38
items
Exceptional items 369 (278)
Profit before taxation 2 227 1 070 108
Taxation 636 383
Profit after taxation 1 591 687 132
Income from associates 119 31
Minority interests (207) (101)
Net profit 1 503 617 144
Weighted average number of 195284 195613
ordinary shares in issue
during the year, net of buy
back (000) - basic
Net profit per share (cents)
- basic 770 316 144
- fully diluted 751 311 141
Earnings per share excluding
exceptional items (cents)
- basic 592 452 31
- fully diluted 579 444 30
Headline earnings per share 622 499 25
Ordinary dividends per share 275 220 25
(cents)
- interim 90 75
- final 185 145
Special centenary dividend per 100 -
share (cents)
Balance Sheet
R million 2002 2001
Assets
Non-current assets 13 872 10 714
Property, plant and equipment 7 811 6 053
Other non-current assets 971 819
Goodwill and intangible assets 1 657 1 530
Investment in associates and 373 332
joint ventures
Finance lease receivables 2 675 1 723
Deferred tax assets 385 257
Current assets 13 225 11 232
Inventories 5 895 4 771
Trade and other receivables 5509 4641
Taxation 67 39
Cash and cash equivalents 1 754 1 781
Total assets 27 097 21 946
Equity and liabilities
Capital and reserves
Share capital and premium 682 682
Non-distributable reserves 3789 2 319
Retained surplus 6727 6 059
Equity portion of convertible 36 17
bond
Interest of shareholders of 11 234 9 077
Barloworld Limited
Minority interest 791 625
Interest of all shareholders 12 025 9 702
Non-current liabilities 5 195 3 845
Interest-bearing 3 248 2 411
Deferred tax liabilities 617 318
Convertible bond 263 225
Non-interest bearing 1 067 891
Current liabilities 9 877 8 399
Amounts due to bankers and short- 3 677 3 586
term loans
Taxation 479 361
Trade and other payables 5 168 4 113
Provisions 553 339
Total equity and liabilities 27 097 21 946
Cash Flow
R million 2001
2002
Cash available from operations 1 487
2209
Dividends paid (including (436)
outside shareholders) (649)
Net cash flow from operating 1 051
activities 1 560
Net cash used in investing (2 004)
activities (1 793)
Acquisition of subsidiaries (1 018)
and investments (431)
Buy-back of Barloworld shares (90)
-
Acquisition of property, plant
and equipment:
(871) (629)
- replacement
- expansion (40)
(410)
- rental assets (1 041) (654)
Proceeds on disposal of 427
subsidiaries, investments and
property, plant and equipment 960
& other movements
Net cash outflow before (953)
financing activities (233)
Net cash (used in)/ from 1 625
financing activities (24)
Net (decrease)/increase in 672
cash and cash equivalents (257)
Cash and cash equivalents at 944
beginning of year 1 781
Effect of foreign exchange 165
rate movements 230
Cash and cash equivalents at 1 781
end of year 1 754
Statement of Changes in Equity
R million 2002 2001
Interest of Barloworld Limited
shareholders at beginning of
year
- As previously reported 9 077 7 898
- Adjustment to opening (16)
balance on first time adoption
of IAS39
- As restated 9 061 7 898
Net movements not recognised 1 160 943
in income statement
Buy-back of Barloworld shares (90)
Exchange gains on translation 1 359 993
of foreign entities
Translation reserve realised (201)
on liquidation of offshore
subsidiaries
Increase in fair value of 7
hedging instruments
Hedge reserve movement (11)
Increase in other reserves 6 40
movements
Net movements recognised 1 013 236
through the income statement
Hedge reserve released to (30)
income
Reserve released on disposal (1)
of available for sale
investments
Net profit for the year 1 503 617
Dividends on ordinary shares (459) (381)
Interest of Barloworld Limited 11 234 9 077
shareholders at end of year
Other group salient features
2002 2001
Number of ordinary shares in 195 284 195 284
issue, net of buy back (000)
Net asset value per share 5 872 4 774
including investments at
fair value (cents)
Total liabilities to total 120 123
shareholders` funds (%)
Total borrowings to total
shareholders` funds
- gross excluding leasing 23.3 31.1
operations (%)
- gross including leasing 59.8 64.1
operations (%)
Interest cover (times)
- gross excluding leasing 6.1 5.4
operations (times)
- gross including leasing 3.8 3.3
operations (times)
SEGMENTAL SUMMARY
Revenue Segment
profit*
R million 2002 2001 2002 2001
Capital 10 130 7 960 744 618
Equipment
Industrial 6 014 5 051 123 161
Distribution
Motor 8 864 6 546 184 93
Cement & 2 571 1 970 630 445
Lime
Scientific 2 336 1 805 9 136
Products
Coatings 2 501 1 890 131 11
Steel Tube 1 720 1 343 84 9
Financial 1 863 1 380 101 (74)
Services,
Logistics &
Other
35 999 27 2 006 1 399
945
Less: Gains (55) -
on financial
instruments 116 88
Add:
Goodwill
amortisation
Operating 2 067 1 487
profit
Income from Net assets
associates#
R million 2002 2001 2002 2001
Capital - 3 164 2 644
Equipment (3)
Industrial - 2 491
Distribution (8) 2 255
Motor 46 1 295 1 179
29
Cement & 34 3 226 2 223
Lime 24
Scientific - - 1 905 1 506
Products
Coatings 28 7 796 731
Steel Tube 11 7 486 419
Financial - - 6 494 5 350
Services,
Logistics &
Other
119 56 19 857 16 307
Less: Gains
on financial
instruments
Add:
Goodwill
amortisation
Operating
profit
* Segment profit includes operating profit, fair value adjustments on financial
instruments and goodwill amortisation, but is calculated before investment
income, interest paid and taxation.
# Includes dividends from associates and share of retained income
Notes
1. Net profit excluding exceptional items
R million 2002 2001
Net profit attributable to 1 503 617
ordinary shareholders
Impairment losses 131 207
Profit on disposal of
properties, investments (352) (6)
and subsidiaries
Realisation of translation
reserve on liquidation (201)
of offshore subsidiaries
Provision for pension fund 100
closure costs
Gain arising on PPC share
issue to acquire Portland (60)
Holdings
Other 3 64
(379) 265
Attributable exceptional
items of associates 10 13
(impairment losses)
Gross exceptional (369) 278
(profits)/losses
Taxation (32) 3
Interest of outside 54 (14)
shareholders
Net exceptional (347) 267
(profits)/losses
Net profit excluding 1 156 884
exceptional items
2. Reconciliation to Headline earnings
Net profit excluding 1 156 884
exceptional items
Provision for pension fund
closure costs (70)
(net of deferred tax)
Goodwill amortisation 116 88
Interest in associate goodwill 11
amortisation
Loss on sale of plant and
equipment (excluding rental 1 4
assets)
Headline earnings 1 214 976
3. Contingent liabilities
Guarantees and claims 394 300
4. Accounting policies and disclosures
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) on a basis consistent with the previous
year, except for the adoption of IAS 39 Financial Instruments: Recognition and
Measurement and IAS 40 Investment Properties, which have been applied for the
first time during the year under review. There has been no material impact on
earnings per share as a result of the adoption of these Standards.
In the current year, the financial statements reflect the long term loan made by
the PPC Group to Saldanha Steel separately from the capitalised lease liability
relating to the leased facilities at Saldanha. In the prior year the loan and
liability were subject to set-off with only the net liability being shown. If a
similar disclosure had been applied in 2001, it would have resulted in an
increase in non-current assets of R111.9 million and a corresponding increase in
non-current liabilities. No changes to comparatives have been made as the
impact on the financial statements is not considered material.
In the current year, dividends received from associates and joint ventures have
been included with Income from associates on the face of the income statement,
whereas they were previously disclosed under Income from investments. No
changes to income statement comparatives have been made as there is no impact on
reported earnings per share.
5. Post-balance sheet event
Agreement has been reached for the sale of the third party South African motor
vehicle finance book to Wesbank, a division of First Rand Bank Limited, for an
estimated gross consideration of R830 million. The final consideration will be
determined by the value of the finance contracts at the effective date. The deal
will be effective on the first day of the month following granting of approval
by the competition authorities. Proceeds from the sale will be used to retire
the external debt used to fund the leases and will have a positive impact on the
gearing of the Group balance sheet.
6. Audit opinion
Deloitte & Touche has provided an unqualified audit opinion on the financial
statements for the year. These have been approved by the board and abridged for
purposes of this report. Both the auditors` opinion and the financial statements
are available for inspection at the company`s registered office.
Dividend declaration for the year ended 30 September 2002:
Dividend Numbers 146 and 147
Notice is hereby given that the following dividends have been declared in
respect of the year ended 30 September 2002:
- Number 146 (final dividend) of 185 cents per ordinary share (2001:145 cents
per ordinary share)
- Number 147 (special centenary dividend) of 100 cents per ordinary share.
In compliance with the requirements of the JSE Securities Exchange South Africa,
the following dates are applicable:
Last day to trade ordinary shares "CUM" dividend
Friday 10 January 2003
Ordinary shares trade "EX" dividend
Monday 13 January 2003
Record date
Friday 17 January 2003
Payment date
Monday 20 January 2003
Share certificates may not be dematerialised or rematerialised between Monday 13
January 2003 and Friday 17 January 2003 both days inclusive.
On behalf of the Board, M J Barnett, Secretary
Sandton, 13 November 2002
DIRECTORS
Non executive: WAM Clewlow (Chairman) RKJ Chambers MJ Levett DB Ntsebeza
SB Pfeiffer** G Ross Russell* LA Tager EP Theron RC Tomkinson*
Executive: AJ Phillips (Chief Executive)* DC Arnold K Brown** MD Coward
LS Day* BP Diamond R Fernandez Urrutia *** JE Gomersall* AJ Lamprecht
PJ Maybury* PM Surgey
*British **USA ***Spanish
ADDRESSES
Registered office and business address:
180 Katherine Street
PO Box 782248
Sandton
2146, South Africa
United Kingdom registrar:
Lloyds TSB Registrars
The Causeway, Worthing
West Sussex, BN99 6DA, England
Transfer secretaries:
Computershare Investor Services Limited
9th Floor - 70 Marshall Street
Johannesburg
2091
Postal address:
P O Box 1053
Johannesburg
2000, South Africa
For more information contact Barloworld
Tel +27 11 445 1202
e-mail invest@barloworld.com
www.barloworld.com
13 November 2002
Date: 14/11/2002 07:46:38 AM Produced by the JSE SENS Department
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