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BAW BAWP
BAW
Barloworld Limited - Reviewed interim results for the six months ended 31 March
2006
Barloworld Limited
(Registration number 1918/000095/06)
JSE codes: BAW and BAWP
ISIN codes: ZAE000026639 and ZAE000026647
Reviewed interim results for the six months ended 31 March 2006
Corporate action enhances group profile and performance
* Revenues up 8% to R19 462 million (1H"05: R18 015 million)
*Operating profit increases 16% to R1 748 million (1H"05: R1 511 million)
*Strong performance in cement and turnaround in scientific business
*Cash generated from operations up 30% to R 1 913 million
*Headline earnings per share up 10% to 402 cents (1H"05: 367 cents)
*Dividend increased 15% to 150 cents per share
*Intended disposal of steel tube division announced
Tony Phillips, CEO of Barloworld, said:
"In line with our ongoing focus on value creation, we made progress in a number
of areas during the period. Highlights included a strong performance from our
cement business, the turnaround in the scientific operations and the
announcement of the intended sale of the steel tube division. For the full year
we expect continued growth in our southern African businesses and further
recovery from the offshore operations."
15 May 2006
Enquiries
Barloworld Limited: Rowan Goeller Tel +27 11 445 1300, e-mail
rowang@barloworld.com
For background information visit www.barloworld.com
Chairman & Chief Executive"s Report
First half sets platform for full year
Group revenue grew by 8% due to increased activity in our cement, equipment,
coatings and motor businesses within southern Africa. Operating profit
increased by 16%, with margins rising to 9.0% (1H"05: 8.4%). Notable results
were the strong performance of our cement business and the turnaround in our
scientific operations. Cash generated from operations increased by 30% to R1 913
million.
Headline earnings per share increased by 10% to 402 cents per share. The
dividend has been increased by 15% to 150 cents per share for the interim
period.
Corporate action enhances group profile and performance
We are pleased to report significant steps taken in streamlining the future
group profile. In particular, negotiations have reached an advanced stage in
relation to the disposal of the steel tube business to a management led
consortium which includes black economic empowerment. It is anticipated that
this transaction will be concluded soon.
In addition negotiations have commenced to sell our US handling lease book and
we are investigating various alternatives in respect of the UK handling leasing
business.
The focus on restructuring businesses that are not achieving our required
returns has proved to be successful in the scientific group and Truck Center. We
are currently in an advanced stage of remodeling and restructuring the UK
handling business.
On the acquisition front, the offer for Wattyl Limited amounting to R1 411
million (A$321 million) still remains subject to competition authority approval
in Australia.
Approval has been received from the South African competition authorities for
the acquisition of Prostart (automotive refinish) and Midas Paints in the
coatings division. These two transactions are expected to contribute positively
to the division in the second half.
In the Motor division the purchase of the Avis and Budget operations in Denmark
was completed during November 2005 and we have also acquired the 50% stake in
Avis Fleet Services owned by Wesbank with effect from 14 April 2006.
Directorate
Ms Sibongile Mkhabela was appointed to the board on 27 January 2006. As an
independent non-executive director she will bring a diverse range of skills to
our board deliberations and we look forward to her contribution.
Outlook
Our southern African operations contributed 85% of operating profit for the
period and their strong performance is expected to continue. In particular, the
civil construction sector is forecast to enter a period of sustained growth as
government and private enterprise starts to invest in infrastructure and growth
opportunities. The mining industry is also starting to invest in major expansion
projects. This will benefit our cement, equipment and logistics divisions.
Firmer rental rates and continued strong rental and new vehicle demand should
boost the result from our motor division, and the coatings division should
benefit from the growth initiatives put in place in the first half.
In Spain, the construction outlook remains buoyant and strong public
infrastructure spend is expected to continue for the medium-term.
Evidence of the strength of demand for capital equipment in all territories can
be seen in the fact that we currently have the largest ever order book at R5.1
billion placed on Caterpillar Inc. in the 78 years of our partnership.
Our handling business in the US continues to be underpinned by solid growth in
the south-east region. Management initiatives in the Truck Center are achieving
positive results and we expect a strong contribution in the second half with a
record order book of over 3 000 trucks.
Trading conditions in the UK are currently weak and this is affecting our
handling and scientific businesses. However, we look forward to an improved
performance from our handling business as the benefits from the cost reduction
initiatives are realised.
In line with our focus on value creation, we will continue with our efforts to
grow in areas where we have core expertise and dispose of interests that no
longer fit the profile of the group. We expect to achieve our medium-term goal
of doubling the value of the company in four years by the end of this year.
Overall, we anticipate an improved result in the second half and resulting good
growth for the full year.
WAM Clewlow AJ Phillips
Chairman Chief Executive Officer
Group Financial Review
Cement drives operating performance
Strong demand in most of the southern African businesses boosted revenue from
continuing operations by 8% to R19 462 million.
Operating profit rose by 16% to R1 748 million driven by a strong performance in
our cement business. Operating profit margins increased to 9.0% (1H"05: 8.4%).
Headline earnings per share of 402 cents (1H"05: 367 cents) is 10% higher than
last year.
The charge for fair value adjustments on financial instruments increased to R69
million (1H"05: R47 million) and arises mainly from the effect of rand
appreciation on marking to market forward cover contracts in the equipment
business. It also includes the impact of marking to market the option contract
taken out to hedge the exchange rate risk on the proposed Wattyl transaction.
Finance costs increased to R245 million (1H"05: R199 million), principally as a
result of the acquisition of Avis Denmark in November 2005 and increases in
working capital in line with activity levels.
The taxation charge (before STC) of R439 million represents an effective tax
rate of 29.1% (1H"05: 30.0%), excluding prior year taxation and taxation on
exceptional items. The increase of 12% in the STC charge to R116 million is a
consequence of the higher final dividend paid by the company in January 2006.
Net profit from continuing operations rose by 15% to R1 008 million (1H"05: R878
million).
Steel tube business disclosed as discontinued
Following progress made in disposing of the steel tube division it has been
accounted for as a discontinued operation and is separately disclosed in the
current and comparative reporting period. The loss of R116 million from the
discontinued operation includes an impairment charge which has been recorded in
order to reflect the net assets of the division at the anticipated recoverable
amount from the disposal.
Gearing target revised
Total interest-bearing borrowings of R9 762 million represent a group debt to
equity ratio of 78% (September 2005: 63%). The gearing for the trading, leasing
and car rental segments is as follows:
Total debt to Trading Leasing Car rental Total Group
equity (%)
Target range 20 - 40 600 - 800 200 - 300
Ratio at
31 March 2006 35 589 275 78
Interest cover for the trading segment at 10.5 times remains well above the 5
times target. The group therefore has the financial flexibility to increase its
debt to equity ratio for the trading segment and the board has approved a
revised target range of 30-50%.
Capital structure optimisation
In order to simplify its capital structure, the company is seeking approval from
shareholders for the repurchase and cancellation of its existing treasury shares
representing 8.3% of its issued share capital. We are also considering ways of
further optimising the group"s capital structure which may involve on-market
share buybacks as and when conditions are suitable.
Strong cash generation and healthy balance sheet
Cash generated from operations increased by 30% to R1 913 million. Net cash
applied to investing activities of R1 654 million includes the acquisition of
businesses for R262 million; property, plant and equipment and intangibles for
R824 million; and a further net investment of R799 million in rental assets and
hire vehicles.
The group"s balance sheet remains strong with total assets employed in the
business growing by 4% in the past six months to R29 778 million. The effect of
currency movement on translation was not material.
Capital commitments of R2 364 million include the approved expansions within our
cement business estimated at R1 500 million.
CB Thomson
Finance Director
Operational reviews
In the case of the leasing businesses, the operating profit is net of interest
paid. Income from associates, which includes our share of earnings from joint
ventures, is shown at the profit after taxation level.
Net operating assets comprise total assets less non-interest bearing
liabilities. Cash is excluded as well as current and deferred taxation assets
and liabilities. In the case of the leasing businesses, net assets are reduced
by interest-bearing liabilities. Comparatives have been stated on a consistent
basis.
Comparative numbers have been restated as per note 15.
The commentaries in the operational reviews reflect performance in the relevant
local currencies.
EQUIPMENT
Revenue Operating profit Net operating
including fair assets
value adjustments
6 months ended Year 6 months Year 6 Year
ended ended ended months ended
ended
R million 31 Mar 31 Mar 30 Sep 31 31 30 31 Mar 30
06 05 05 Mar Mar Sep 06 Sep
06 05 05 05
- Europe 2 519 2 608 5 301 218 237 483 2 459 2 388
- Southern 2 830 2 314 4 983 189 174 423 2 092 1 835
Africa
5 349 4 922 10 284 407 411 906 4 551 4 223
Share of associate income after 10 ( 1) 8
taxation
The business in this division arises mainly from our enduring partnership
of
over 78 years with Caterpillar Inc. as their dealer in 16 countries.
Revenue in Iberia maintained recent high levels in local currency. Margins,
however, declined slightly due to competitive pressure, although this was
balanced by an improved mix with increased after sales business. A renewed
effort on recovering market share has been initiated. Rental focus has been
improved by the integration of all short-term rental business under the single
brand of Barloworld Mera. Labour costs increased in line with increased
activity, early retirement benefits and an initiative to introduce younger
management skills.
The southern African markets were characterised by the highest levels of
activity seen for some time, with machine sales growing strongly. Revenues rose
22%, with sales of Caterpillar machines being boosted by growth in mining and
construction activity. Earnings from the handling and agriculture divisions
declined in difficult markets. While trading profit grew at a similar rate to
revenue growth, the effect of the currency volatility and fair value adjustments
on financial instruments resulted in lower reported operating profit growth. The
energy business has benefited from the recent power outages in the Western Cape,
with improved sales and maintenance of generators. A new enlarged R35 million
facility in Durban was opened in April 2006.
Associate income includes the results from the Siberian joint venture business,
which is well on track to meet the $100 million sales target for the year.
All territories recorded high levels of order intake reflecting confidence in
the future. At March 2006 there are firm customer orders of R3 013 million
(September 2005: R2 890 million). Due to current and expected customer demand,
and longer supplier lead times, we currently have the largest ever order book
placed on Caterpillar at R5.1 billion. We are working closely with Caterpillar
to ensure that we are able to satisfy our customers" requirements.
INDUSTRIAL DISTRIBUTION
Revenue Operating profit Net operating
including fair assets
value adjustments
6 months ended Year 6 months Year 6 Year
ended ended ended months ended
ended
R million 31 Mar 31 Mar 30 Sep 31 31 30 31 Mar 30
06 05 05 Mar Mar Sep 06 Sep
06 05 05 05
- Europe 852 977 1 983 ( 2) 22 41 539 437
- North 1 929 1 810 3 922 30 19 75 1 001 992
America
Trading 2 781 2 787 5 905 28 41 116 1 540 1 429
- Europe 145 184 367 12 24 66 227 260
- North 49 48 98 ( 8) ( 1) ( 40) 60 52
America
Leasing* 194 232 465 4 23 26 287 312
2 975 3 019 6 370 32 64 142 1 827 1 741
*Net operating assets after deducting interest-bearing borrowings
The US handling business continues to show solid growth, with increased margins
and a strong order book. The Truck Center continues to improve, with new
management initiatives proving successful and a record order book of over 3 000
trucks.
In Europe, flat UK industry conditions and further remodeling and restructuring
has negatively impacted on the overall result for the European handling
business. However, restructuring benefits, a healthy order book and the
traditional seasonal strength are expected to contribute towards a recovery in
the second half.
The leasing business was impacted by lower activity levels and adjustments in
respect of amended lease conditions on lift truck contracts. The Freightliner
finance book continues to be managed out as planned, down to R37.0 million
(US$6.0 million) from R74.4 million ($11.7 million) at 30 September 2005.
Negotiations on the sale of the US handling leasing book are well advanced and
various options for the future of the UK handling book are under consideration.
The outlook for the second half is positive due to expected improvements in the
UK handling business and enhanced seasonal and industry driven factors at Truck
Center.
MOTOR
Revenue Operating profit Net operating
including fair assets
value adjustments
6 months ended Year 6 months Year 6 Year
ended ended ended months ended
ended
R million 31 Mar 31 Mar 30 Sep 31 31 30 31 Mar 30 Sep
06 05 05 Mar Mar Sep 06 05
06 05 05
- Southern 4 503 4 275 8 795 87 78 175 894 640
Africa
- Australia 764 728 1 607 4 4 12 345 399
Trading 5 267 5 003 10 402 91 82 187 1 239 1 039
- Southern 546 470 881 134 124 210 2 480 2 396
Africa
- Europe 322 213 478 ( 7) 16 66 1 825 1 231
Car rental 868 683 1 359 127 140 276 4 305 3 627
Leasing 320 299 638 33 43 88 339 334
Southern
Africa*
6 455 5 985 12 399 251 265 551 5 883 5 000
Share of associate income after 12 11 23
taxation
*Net operating assets after deducting interest-bearing borrowings
The southern African motor retail operations continued to perform well as the
new vehicle market maintained its strong growth, driven by the increased size of
the South African consumer market, low interest rates and new product offerings
from manufacturers. New vehicle sales increased by 15% over the period. Growing
demand for used vehicles in the region resulted in a 16% increase in retail
sales of used vehicles. In Australia, new vehicle sales increased by 6% and used
retail sales volumes were marginally lower.
While Avis Rent a Car Southern Africa experienced an increase in rental days of
19%, pressure on rental rates and increasing costs resulted in lower margins.
Rental rates are now firming and an increased focus on specific cost items are
anticipated to assist margins in the period ahead. In Scandinavia, rental days
increased by 12% on a comparable basis. The successful integration of the
Denmark operations, which were acquired with effect from 1 November 2005, was
more than offset by a significant increase in fleet costs in Sweden resulting
from changes in the supply and pricing strategy of our major vehicle supplier.
Plans are being implemented to restore Sweden"s profitability.
In the fleet services division, lower used vehicle margins in this segment and
continued pressure on finance margins contributed to the subdued result.
However, new business continues to be won which should result in long-term
profit growth. Full ownership of Avis Fleet Services was secured in April 2006.
Associate income includes a strong performance from our DaimlerChrysler BEE
joint venture in KwaZulu-Natal.
The outlook for the second half of the year is positive, underpinned by
continued strong new vehicle sales and rental demand.
CEMENT
Revenue Operating profit Net operating
including fair assets
value adjustments
6 months ended Year 6 months Year 6 Year
ended ended ended months ended
ended
R million 31 Mar 31 Mar 30 Sep 31 31 30 31 Mar 30
06 05 05 Mar Mar Sep 06 Sep
06 05 05 05
Southern 2 183 1 813 3 974 855 642 1 502 2 569 2 502
Africa
Share of associate income after 2 2
taxation
*Net operating assets include goodwill arising on PPC shares purchased
by Barloworld
The strong South African economy, together with increasing investment in public-
sector infrastructure, continues to create a growing demand for cement. South
African domestic cement industry sales remained buoyant with volume growth of
more than 13% over the comparable period last year.
The re-commissioning of the Jupiter kiln in Johannesburg was successfully
completed in the March quarter and provides an additional 550 000 tons per annum
of cement capacity. The Batsweledi project is progressing according to plan and
within budget. Design and process changes have increased the original estimated
1 million tons capacity to 1.25 million tons of cement per annum for the same
capital expenditure.
In order to meet demand during this period all kilns were fully operational.
However, these older kilns cannot be run cost effectively for a sustained
period, and replacement will become necessary if cement demand continues to
grow.
The surge in building activity, especially in the residential sector, continues
due to lower interest rates. Although growth in the residential sector appears
to be slowing, increased investment on infrastructural projects is likely to
offset this. This bodes well for future industry cement demand, which the
company estimates could grow by around 12% in the current financial year. The
shortage of skills and delivery of infrastructural services are increasingly
proving to be a constraint in the residential construction sector. The company
should, however, continue to report an improved performance for the second half
of the year.
In view of the positive outlook for cement demand, the PPC board has approved
the planning phase to expand and modernise the capacity in the Western Cape,
complementing the capacity expansion project underway in the inland region. In
addition, the planning phase of a state-of-the-art cement milling facility in
the inland region is in process. Estimated capital expenditure for these two
projects, if approved, could be in the region of R3 billion and would be
incurred over three years commencing during the next financial year.
COATINGS
Revenue Operating profit Net operating
including fair assets
value adjustments
6 months ended Year 6 months Year 6 Year
ended ended ended months ended
ended
R million 31 Mar 31 Mar 30 Sep 31 31 30 31 Mar 30
06 05 05 Mar Mar Sep 06 Sep
06 05 05 05
Southern 978 809 1 558 152 150 283 664 522
Africa
Australia & 466 471 949 ( 17) ( 16) ( 30) 229 254
Asia
1 444 1 280 2 507 135 134 253 893 776
Share of associate income after 9 9 20
taxation
While revenue grew by 21% in the southern African region, margins were impacted
by increased costs. These related primarily to non-recurring costs for growth
initiatives such as the launch of the Bristol brand in South Africa, the opening
of the Plascon concept store and a new warehouse in Port Elizabeth. Along with
increased marketing spend, the positive benefit of these initiatives will become
apparent in future periods. The automotive business grew significantly on the
back of the strong vehicle market in South Africa, with the refinish market
being particularly active. Both the Prostart and Midas acquisitions have been
approved by the competition authorities and will contribute in the second half.
The recently acquired ICC colourants business continues to perform strongly.
In Australia, the offer for Wattyl remains subject to competition authority
approval. Profitability in Australia remains under pressure but steps are being
taken to reduce fixed costs, with restructuring and non-recurring costs of
approximately R4.4 million (A$1 million) being incurred during the period. The
commercial phase of our project in China remains on track.
The outlook for the second half remains favourable due to continued steady
growth in the southern Africa coatings market.
SCIENTIFIC
Revenue Operating profit Net operating
including fair assets
value adjustments
6 months ended Year 6 months Year 6 Year
ended ended ended months ended
ended
R million 31 Mar 31 Mar 30 Sep 31 31 30 31 Mar 30
06 05 05 Mar Mar Sep 06 Sep
06 05 05 05
Europe 479 501 1 009 35 6 23 631 629
North 200 178 382 ( 1) ( 8) ( 6) 268 359
America
Asia 69 70 135 3 3 4 84 87
748 749 1 526 37 1 21 983 1 075
The restructuring undertaken in Europe last year has produced the expected
reduction in costs. Sales are on target in all areas except the UK and Italy.
The British National Health Service is experiencing severe financial
difficulties and this, together with imported product from the East, is
depressing sales. The elections and increased competition have reduced demand
for our products in Italy. Overall margins have improved despite large increases
in the cost of energy and the continued high prices of plastic raw materials.
The science equipment businesses are performing well.
The US has benefited from the cost reductions resulting from last year"s
restructuring. The business has also enjoyed a modest improvement in volumes,
led in part by an upturn in semi-conductor activity. Activity in certain laser
product lines has improved appreciably over last year.
The outlook is mixed with the trading weakness in the UK set to continue for the
foreseeable future whereas the apparent upturn in the semi-conductor industry
should benefit US profits in the latter part of the year.
CORPORATE AND OTHER
Revenue Operating profit Net operating
including fair assets
value adjustments
6 months ended Year 6 months Year 6 Year
ended ended ended months ended
ended
R million 31 Mar 31 Mar 30 Sep 31 31 30 31 Mar 30
06 05 05 Mar Mar Sep 06 Sep
06 05 05 05
Southern 184 153 561 ( 21) ( 4) 21 1 064 870
Africa
Europe 124 94 177 ( 17) ( 49) ( 54) 143 85
308 247 738 ( 38) ( 53) ( 33) 1 207 955
In southern Africa, results were adversely affected by the mark-to-market
adjustment on the option contract entered into in order to hedge the exchange
rate risk on the proposed Wattyl transaction.
In Europe, results were favorably impacted by a lower charge to the income
statement in respect of pension fund deficits.
The logistics businesses in South Africa and Spain have been consolidated under
a single executive management team and growth prospects remain good.
Dividend declaration for the six months ended 31 March 2006: Dividend Number 154
Notice is hereby given that the following dividend has been declared in respect
of the six months ended 31 March 2006: Number 154 (interim dividend) of 150
cents per ordinary share (2005: 130 cents per ordinary share).
In compliance with the requirements of the JSE Limited, the following dates are
applicable:
Last day to trade cum dividend Friday 2 June 2006
Shares trade ex dividend Monday 5 June 2006
Record date Friday 9 June 2006
Payment date Monday 12 June 2006
Share certificates may not be dematerialised or rematerialised between Monday, 5
June 2006 and Friday, 9 June 2006, both days inclusive.
On behalf of the Board, S Mngomezulu, Secretary
Directors
Independent: WAM Clewlow (Chairman), SAM Baqwa, MJ Levett, S Mkhabela, DB
Ntsebeza, G Rodriquez de Castro de los Rios***, EP Theron, RC Tomkinson*, SB
Pfeiffer**
Executive: AJ Phillips (Chief Executive)*, PJ Blackbeard, MD Coward, LS Day*, BP
Diamond, JE Gomersall*, AJ Lamprecht, M Laubscher, PM Surgey, CB Thomson
*British **American ***Spanish
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months ended Year
ended
31 March 31 March % 30
September
2006 2005 Change 2005
Reviewed Reviewed Audited
R million Notes Restated Restated
Continuing operations
Revenue 19 462 18 015 8 37 798
Operating profit 3 1 748 1 511 16 3 399
Fair value adjustments 4 ( 69) ( 47) ( 57)
on financial instruments
Finance costs 5 ( 245) ( 199) ( 438)
Income from investments 81 71 186
Profit before 1 515 1 336 13 3 090
exceptional items
Exceptional items 6 20 26 7
Profit before taxation 1 535 1 362 3 097
Taxation 7 ( 558) ( 505) (1 035)
Profit after taxation 977 857 14 2 062
Income from associates 31 21 53
and joint ventures
Net profit from 1 008 878 15 2 115
continuing operations
Discontinued operation
(Loss) / profit from 11 ( 116) 2 23
discontinued operation
Net profit 892 880 2 138
Attributable to:
Minority shareholders 160 117 314
Barloworld Limited 732 763 1 824
shareholders
892 880 2 138
Net profit per share*
(cents)
- basic 349.6 369.9 879.6
- diluted 342.5 360.8 859.9
Net profit per share
from continuing
operations* (cents)
- basic 405.0 368.9 10 868.5
- diluted 396.8 359.9 10 849.1
Net profit per share from discontinued
operation* (cents)
- basic -55.4 1.0 11.1
- diluted -54.3 0.9 10.8
* Refer note 2 for details of headline earnings per
share calculation
CONDENSED CONSOLIDATED BALANCE SHEET
31 March 31 March 30
September
2006 2005 2005
Reviewed Reviewed Audited
R million Notes Restated Restated
ASSETS
Non-current assets 14 003 13 989 14 070
Property, plant and equipment 7 969 7 739 7 922
Goodwill 2 573 2 487 2 485
Intangible assets 252 249 260
Investment in associates and 9 552 328 518
joint ventures
Finance lease receivables 1 349 1 542 1 495
Long-term financial assets 10 781 1 147 840
Deferred taxation assets 527 497 550
Current assets 15 775 14 154 14 535
Vehicle rental fleet 2 764 2 110 2 196
Inventories 4 686 5 102 4 825
Trade and other receivables 6 082 5 854 5 935
Cash and cash equivalents 1 386 1 000 1 399
Assets classified as held for 11 857 88 180
sale
Total assets 29 778 28 143 28 605
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 1 461 1 385 1 397
Other reserves 1 239 2 013 1 541
Retained income 9 182 8 166 9 143
Interest of shareholders of 11 882 11 564 12 081
Barloworld Limited
Minority interest 567 496 644
Interest of all shareholders 12 449 12 060 12 725
Non-current liabilities 7 058 6 402 7 103
Interest-bearing 5 453 4 604 5 410
Deferred taxation liabilities 937 810 906
Provisions 400 577 383
Other non-interest bearing 268 411 404
Current liabilities 10 271 9 681 8 777
Trade and other payables 4 900 4 855 5 208
Provisions 531 492 480
Taxation 311 451 457
Amounts due to bankers and short- 4 309 3 883 2 632
term loans
Liabilities directly 11 220
associated with assets
classified as held for sale
Total equity and liabilities 29 778 28 143 28 605
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Six months ended Year
ended
31 March 31 March 30
September
2006 2005 2005
Reviewed Reviewed Audited
R million Notes Restated Restated
Cash flow from operating
activities
Operating cash flows before movements in 2 739 2 414 5 275
working capital
Increase in working capital ( 826) ( 948) ( 475)
Cash generated from operations 1 913 1 466 4 800
Realised fair value adjustments on ( 27) ( 27) ( 18)
financial instruments
Finance costs and investment ( 141) ( 120) ( 231)
income
Taxation paid ( 651) ( 506) ( 975)
Cash flow from operations 1 094 813 3 576
Dividends paid (including ( 933) ( 883) (1 197)
minority shareholders)
Net cash from / (used in) 161 ( 70) 2 379
operating activities
Net cash applied to investing (1 654) (1 324) (2 980)
activities
Acquisition of subsidiaries and ( 262) ( 254) ( 443)
investments
Acquisition of property, plant and ( 824) ( 660) (1 186)
equipment and intangibles
Net investment in rental assets 12 ( 459) ( 441) (1 090)
Net investment in car hire 12 ( 340) ( 157) ( 592)
vehicles
Reduction in instalment sale and 168 4 53
leasing receivables
Proceeds on disposal of
subsidiaries, investments
and property, plant and equipment 63 184 278
Net cash outflow before financing (1 493) (1 394) ( 601)
activities
Net cash available from financing 1 530 947 601
activities
Ordinary shares issued 64 176 188
Increase in interest-bearing 1 466 771 413
liabilities
Net increase / (decrease) in cash and cash 37 ( 447) 0
equivalents
Cash and cash equivalents at 1 399 1 443 1 443
beginning of period
Effect of foreign exchange rate ( 45) 4 ( 44)
movements
Effect of cash included in assets ( 5)
classified as held for sale
Cash and cash equivalents at end 1 386 1 000 1 399
of period
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
R million Share Share Foreign Legal
capital premium currency and
translation other
reserve reserves
Balance at 1 October 10 1 199 1 393 564
2004 as previously
reported
Adjustment to opening 19
balance for changes in
accounting policy
Balance at 1 October 10 1 199 1 393 583
2004 as restated
Movement on foreign 3
currency translation
reserve
Other reserve movements 34
Net income recognised 0 0 3 34
directly in equity
Profit for the period
Total recognised income 0 0 3 34
and expense for the
period
Dividends on ordinary
shares
Shares issued in the 1 175
current period
Balance at 31 March 2005 11 1 374 1 396 617
Movement on foreign ( 281)
currency translation
reserve
Reclassifications ( 3) ( 203)
Other reserve movements 3 12
Net income recognised 0 0 ( 281) ( 191)
directly in equity
Profit for the period
Total recognised income 0 0 ( 281) ( 191)
and expense for the
period
Dividends on ordinary
shares
Shares issued in the 12
current period
Balance at 30 September 11 1 386 1 115 426
2005
Movement on foreign ( 326)
currency translation
reserve
Other reserve movements 24
Net income recognised 0 0 ( 326) 24
directly in equity
Profit for the period
Total recognised income 0 0 ( 326) 24
and expense for the
period
Dividends on ordinary
shares
Shares issued in the 64
current period
Balance at 31 March 2006 11 1 450 789 450
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six months ended Year
ended
31 March 31 March 30
September
2006 2005 2005
Reviewed Reviewed % Audited
R million Restated Change Restated
1. BASIS OF PREPARATION
The condensed interim
consolidated financial
statements have been
prepared in accordance with
International Accounting
Standard (IAS) 34 Interim
Financial Reporting. The
accounting policies used
are consistent with those
used for the group"s 2005
annual financial statements
(which were prepared in
accordance with
International Financial
Reporting Standards) except
for the adoption of the
following revised or new
standards:
- IFRS 2 Share-based
Payment
- IAS 27 Consolidated and
Separate Financial
Statements
The effect of adoption of
these standards was not
material and is set out in
note 15.
2. RECONCILIATION OF NET PROFIT TO HEADLINE
EARNINGS
Net profit attributable to 732 763 1 824
Barloworld shareholders
Profit on disposal of ( 20) ( 24) ( 25)
properties, investments and
subsidiaries
Impairment of assets 5 9 21
Loss/(profit) on sale of 1 3 ( 2)
plant and equipment
excluding rental assets
Taxation on exceptional 2 ( 6)
items
Interest of outside 3 4
shareholders in exceptional
items
Impairment loss on planned 123
disposal of discontinued
operation
Headline earnings 841 756 1 816
Headline earnings from 830 746 1 791
continuing operations
Headline earnings from 11 10 25
discontinued operation
Weighted average number of
ordinary shares
in issue during the period
(000)
- basic 209 371 206 249 207 367
- diluted 213 732 211 501 212 117
Headline earnings per share
(cents)
- basic 401.7 366.5 10 875.7
- diluted 393.5 357.4 10 856.1
Headline earnings per share
from continuing operations
(cents)
- basic 396.4 361.7 10 863.6
- diluted 388.4 352.7 10 844.3
Headline earnings per share
from discontinued operation
(cents)
- basic 5.3 4.8 8 12.1
- diluted 5.1 4.7 9 11.8
3. OPERATING PROFIT
Included in operating
profit are:
Cost of sales (including 13 826 13 129 27 378
allocation of depreciation)
Depreciation 982 871 1 797
Profit on sale of rental 26 72 95
assets
(Loss) / profit on sale of ( 1) ( 3) 2
other plant and equipment
4. FAIR VALUE ADJUSTMENTS ON
FINANCIAL INSTRUMENTS
(Losses) / gains arising
from:
Forward exchange ( 72) ( 57) ( 74)
contracts and other
financial instruments
Translation of foreign 3 10 17
currency monetary items
( 69) ( 47) ( 57)
5. FINANCE COSTS
Total finance cost ( 337) ( 286) ( 623)
Leasing interest 92 87 185
classified as cost of
sales
( 245) ( 199) ( 438)
6. EXCEPTIONAL ITEMS
Profit on disposal of 20 25 27
properties, investments
and subsidiaries
Impairment of assets 1 ( 20)
including share of
associates" impairment
losses
Exceptional profits 20 26 7
Taxation on exceptional ( 1) ( 2) 5
items
Interest of minority ( 3) ( 4)
shareholders
Net exceptional profits 19 21 8
7. TAXATION
Taxation per Income 558 505 1 035
Statement
STC on dividends paid ( 116) ( 104) ( 142)
Prior year taxation ( 2) ( 2) 9
Taxation on exceptional ( 1) ( 2) 5
items
Taxation on profit before 439 397 907
STC, prior year taxation
and exceptional items
Profit before exceptional 1 515 1 336 3 090
items
Dividends received ( 5) ( 12) ( 31)
Profit before exceptional 1 510 1 324 3 059
items and dividends
received
Effective taxation rate
excluding exceptional
items,
prior year taxation and
dividends received (%)
- excluding STC 29.1% 30.0% 29.7%
- including STC 36.8% 37.8% 34.3%
8. ORDINARY DIVIDENDS
Ordinary dividends per 150 130 455
share (cents)
Six months Six months Year ended
ended ended
31 March 2006 31 March 2005 30 September
2005
Market Book Market Book Market Book
value/ value value/ value value/ value
Directors" Directors" Directors"
valuation valuation valuation
Reviewed Reviewed Audited
R million Restated
Restated
9. INVESTMENT IN
ASSOCIATES AND
JOINT VENTURES
Joint ventures 351 172 297 133 247 148
Unlisted 298 169 155 72 330 191
associates
649 341 452 205 577 339
Loans and 211 123 179
advances
552 328 518
10. LONG-TERM
FINANCIAL ASSETS
Listed 8 8 8 8 8 8
investments
Unlisted 36 36 346 346 36 36
investments
Investment in 295 295 302 302 295 295
Portland Holdings
Limited
339 339 656 656 339 339
Other long-term 442 491 501
financial assets
781 1 147 840
Six months ended Year ended
31 March 31 March 30 September
2006 2005 2005
Reviewed Reviewed Audited
R million Restated Restated
11. DISCONTINUED OPERATION AND
ASSETS CLASSIFIED AS HELD FOR
SALE
The Steel Tube segment has
been classified as a disposal
group held for sale effective
31 March 2006.
Results from discontinued
operation are as follows:
Revenue 796 777 1 603
Operating profit 12 22 43
Fair value adjustments on 3 2 1
financial instruments
Finance costs ( 4) ( 14) ( 25)
Income from investments 0 0 1
Profit before exceptional 11 10 20
items
Exceptional items ( 5) ( 11) ( 3)
Profit before taxation 6 ( 1) 17
Taxation ( 1) 0 2
Profit after taxation 5 ( 1) 19
Income from associates and 2 3 4
joint ventures
Net profit of discontinued 7 2 23
operation before impairment
loss
Impairment loss on write-down ( 163)
to fair value less costs to
sell
Taxation on impairment loss 40
Impairment loss after taxation ( 123)
Loss from discontinued ( 116)
operation per income statement
The cash flows from the
discontinued operation are as
follows:
Cash flows from operating 11 (29) (52)
activities
Cash flows from investing (9) (15) (20)
activities
Cash flows from financing (14) (8) 31
activities
The major classes of assets
and liabilities comprising the
disposal group classified as
held for sale are as follows:
Property, plant and equipment 229
and intangibles
Investment in associates 9
Inventories 280
Trade and other current 288
receivables
Cash and cash equivalents 5
Assets of disposal group held 811
for sale before impairment
loss
Impairment loss on write-down ( 123)
to fair value less costs to
sell
Assets of disposal group held 688
for sale after impairment loss
Trade and other payables, and
total for liabilities
associated with assets
classified as held for sale ( 220)
Net assets of disposal group 468
Assets classified as held for
sale comprise the following:
Assets of disposal group 688
classified as held for sale
Vehicles and equipment removed 169
from rental fleets to be sold
Total assets classified as 857
held for sale per balance
sheet
Six months ended Year ended
31 March 31 March 30 September
2006 2005 2005
Reviewed Reviewed Audited
R million Restated Restated
12. NET INVESTMENT IN RENTAL ASSETS AND CAR HIRE VEHICLES
Rental assets 459 441 1 090
Additions 719 532 1 832
Proceeds on disposals ( 260) ( 91) ( 742)
Car hire vehicles 340 157 592
Additions 1 174 981 2 296
Proceeds on disposals ( 834) ( 824) (1 704)
13. COMMITMENTS
Capital commitments to be 2 364 604 2 842
incurred
Contracted 1 521 423 1 762
Approved but not yet contracted 843 181 1 080
Operating lease commitments 1 579 1 048 1 682
14. CONTINGENT LIABILITIES
Guarantees, claims and other 503 266 296
contingent liabilities
Buy-back and repurchase 958 709 1 071
commitments*
Share of buy-back and repurchase 16 24
commitments of joint ventures
*The related assets are estimated
to have a value at least equal to
the repurchase commitments.
15. COMPARATIVE INFORMATION
Comparative information has been restated for the effects of adopting IFRS
2 Share-based Payment.
The effect of the restatement is as follows:
R million Previously Adjustment Restated
stated
EFFECT AS AT 30 SEPTEMBER 2004
Retained income 7 936 ( 18) 7 918
Minority interest 719 ( 1) 718
Equity compensation reserve 19 19
Interest of all shareholders 11 821 11 821
FOR THE SIX MONTHS ENDED 31 MARCH 2005
Net profit 892 ( 12) 880
Net profit attributable to 117 117
minority shareholders
Net profit attributable to 775 ( 12) 763
Barloworld Limited shareholders
Retained income 8 196 ( 30) 8 166
Minority interest 497 ( 1) 496
Equity compensation reserve 31 31
Interest of all shareholders 12 060 12 060
The effect was a reduction in earnings and diluted earnings per share of 6
cents.
FOR THE YEAR ENDED 30 SEPTEMBER 2005
Net profit 2 176 ( 38) 2 138
Net profit attributable to 315 ( 1) 314
minority shareholders
Net profit attributable to 1 861 ( 37) 1 824
Barloworld Limited shareholders
Retained income 9 198 ( 55) 9 143
Minority interest 646 ( 2) 644
Equity compensation reserve 57 57
Interest of all shareholders 12 725 12 725
The effect was a reduction in earnings per share of 18 cents, and diluted
earnings per share of 17 cents.
FOR THE SIX MONTHS ENDED 31 MARCH 2006
The impact on the results for the six months ended 31 March 2006 was a
charge to operating profit of R11 million.
The adoption of the new standard had no taxation impact.
The effect on current period earnings and diluted earnings per share was a
reduction of 5 cents.
16. PORTLAND HOLDINGS LIMITED (PORTHOLD)
The results of Porthold, a wholly owned Zimbabwean subsidiary have
in terms of the exclusions contained in the revised IAS 27
Consolidated and Separate Financial Statements, not been
consolidated into the Group results as at 31 March 2006.
Significant constraints impacting on the normal operation of
Porthold, has resulted in the board concluding that management does
not have the ability to exercise effective control over the business
and as a result, the results of Porthold have continued to be
excluded from the group results in the current period. Severe
restrictions are placed on our ability to access foreign currency
and remit funds and as a result the investment continues to be
accounted for on a fair value investment basis with dividends only
being recognised to the extent they are received.
17. RELATED PARTY TRANSACTIONS
There has been no significant change in related party relationships
since the previous year.
Other than in the normal course of business, there has been no
significant transactions during the six months with associate
companies, joint ventures and other related parties.
18. SUBSEQUENT EVENTS
The minority shareholding in Avis Fleet Services was purchased from
Wesbank on 14 April 2006.
The group acquired the Midas paint business on 3 May 2006.
These transactions are not expected to have a material impact on
current year earnings or net asset value.
19. AUDITOR"S REVIEW
Deloitte & Touche has reviewed these interim results. The
unqualified review opinion is available for inspection at the
company"s registered office.
Six months ended Year ended
31 March 31 March 30 September
2006 2005 2005
Reviewed Reviewed Audited
Restated Restated
Number of ordinary shares in 210 206 208 221 208 612
issue, net of buyback (000)
Net asset value per share
including investments
at market value (cents) 5 799 5 672 5 905
Total liabilities to total 131.7 126.6 117.7
shareholders" funds (%)
Total borrowings to total
shareholders" funds (%)
- Trading segment* 34.6 28.9 19.8
- Total group 78.4 70.4 63.2
Interest cover (times)
- Trading segment* 10.5 10.2 10.5
- Total group 5.5 5.5 5.8
* Trading segment includes manufacturing and dealership businesses,
but excludes leasing and car rental
SEGMENTAL SUMMARY
Revenue
6 months ended Year ended
R million 31 Mar 31 Mar 30 Sep 05
06 05
Reviewed Reviewed Audited
Restated Restated
Equipment 5 349 4 922 10 284
Industrial distribution 2 975 3 019 6 370
Motor 6 455 5 985 12 399
Cement 2 183 1 813 3 974
Coatings 1 444 1 280 2 507
Scientific 748 749 1 526
Corporate and other 308 247 738
Total continuing operations 19 462 18 015 37 798
Discontinued operation-Steel tube 796 777 1 603
20 258 18 792 39 401
Operating profit
6 months ended Year ended
R million 31 Mar 31 Mar 30 Sep 05
06 05
Reviewed Reviewed Audited
Restated Restated
Equipment 445 453 957
Industrial distribution 32 64 142
Motor 261 269 559
Cement 856 646 1 509
Coatings 139 133 253
Scientific 37 1 21
Corporate and other ( 22) ( 55) ( 42)
Total continuing operations 1 748 1 511 3 399
Discontinued operation-Steel tube 12 22 43
1 760 1 533 3 442
Fair value adjustments on
financial instruments
6 months ended Year ended
R million 31 Mar 31 Mar 30 Sep 05
06 05
Reviewed Reviewed Audited
Restated Restated
Equipment ( 38) ( 42) ( 51)
Industrial distribution
Motor ( 10) ( 4) ( 8)
Cement ( 1) ( 4) ( 7)
Coatings ( 4) 1
Scientific
Corporate and other ( 16) 2 9
Total continuing operations ( 69) ( 47) ( 57)
Discontinued operation-Steel tube 3 2 1
( 66) ( 45) ( 56)
Operating profit including
fair value adjustments
6 months ended Year ended
R million 31 Mar 31 Mar 30 Sep 05
06 05
Reviewed Reviewed Audited
Restated Restated
Equipment 407 411 906
Industrial distribution 32 64 142
Motor 251 265 551
Cement 855 642 1 502
Coatings 135 134 253
Scientific 37 1 21
Corporate and other ( 38) ( 53) ( 33)
Total continuing operations 1 679 1 464 3 342
Discontinued operation-Steel tube 15 24 44
1 694 1 488 3 386
Net operating
assets
R million 31 Mar 30 Sep
06 05
Reviewed Audited
Restated
Equipment 4 551 4 223
Industrial distribution 1 827 1 741
Motor 5 883 5 000
Cement 2 569 2 502
Coatings 893 776
Scientific 983 1 075
Corporate and other 1 207 955
Total continuing operations 17 913 16 272
Discontinued operation-Steel tube 468 593
18 381 16 865
Addresses
Registered office and business Transfer secretaries
address Ultra Registrars (Pty)
Barloworld Limited Limited
180 Katherine Street Physical address:
PO Box 782248 5th Floor,
Sandton 11 Diagonal Street
2146, South Africa Johannesburg
Ph: +27 11 445 1000 2000, South Africa
E mail: invest@barloworld.com
Postal address:
United Kingdom registrar P O Box 4844
Lloyds TSB Registrars Johannesburg
The Causeway, Worthing 2000, South Africa
West Sussex, BN99 6DA, England
Ph: +44 190 350 2541 Ph: +27 11 834 2266
E mail: info@ultrareg.co.za
About Barloworld
Barloworld is a diversified industrial company founded in 1902. We have
operations in thirty-one countries around the world and approximately half of
our twenty five thousand people are in South Africa. We offer our customers
business solutions backed by leading industrial brands, supported by service,
relationships and attention to detail. These include both the sale of products
and services and rental and fleet service options. Through our business
philosophy of Value Based Management we focus on creating sustainable value for
all our stakeholders simultaneously.
We manufacture, market and distribute our products and services and market and
distribute leading international brands on behalf of principals.
Our brands include PPC Surebuild (cement), Plascon, Taubmans, Bristol and White
Knight (coatings), Melles Griot (photonics), Sterilin (disposable plastics) and
Carbolite (laboratory products). We also have a rapidly growing Barloworld
Logistics supply chain solutions business in southern Africa and Europe.
Our principals include Caterpillar, NACCO (Hyster lift trucks), DaimlerChrysler
(including Freightliner trucks) as well as many of the world"s other leading
motor vehicle brands. We are also the Avis licensee for southern Africa and for
both Avis and Budget in Sweden, Norway and Denmark.
15 May 2006
Sponsor: J.P.Morgan Equities Limited
Date: 15/05/2006 07:34:45 AM Produced by the JSE SENS Department
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