| Mon 20 Nov 2006, 12:52 | | Barloworld Limited - Audited results for the year |
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BAW BAWP
BAW
Barloworld Limited - Audited results for the year ended
30 September 2006
Barloworld Limited
(Registration number 1918/000095/06)
JSE codes: BAW and BAWP
ISIN codes: ZAE000026639 and ZAE000026647
Audited results for the year ended 30 September 2006
Strong second half delivers profit growth and record cash flows
*Headline earnings per share +32% to 1 171 cents
*Revenue +13% to R42 693 million
*Operating profit up 21% to R4 133 million
*Cash flow from operations +38% to R4 931 million
*Dividend +32% to 600 cents per share
Tony Phillips, CEO of Barloworld, said:
"The positive result for the year under review has benefited from
higher capital investment activity in the southern African
economies. This has stimulated strong cement, motor vehicle and
coatings demand. The equipment division has seen a significant
increase in activity in both the construction and mining sectors,
with continued high levels of activity in Spain."
"Our offshore divisions have delivered positive results after recent
restructuring initiatives, and the recovery in the scientific and
Freightliner businesses is particularly pleasing."
"We have a favourable outlook as the southern African capital
investment cycle is gaining impetus, together with continued strong
demand for our other products in the region. Further improvements
are expected in the offshore businesses, and overall we expect to
report another year of sustained progress in 2007."
20 November 2006
Enquiries
Barloworld Limited: Rowan Goeller Tel +27 11 445 1300, e-mail
rowang@barloworld.com
For background information visit www.barloworld.com
Chairman and Chief Executive"s report
Our goal at Barloworld is sustainable value creation by focusing on
a core group of businesses that demonstrate market leading
characteristics. We continue to do this in three ways:
1. improve the performance of our businesses, as measured by Cash
Flow Return on Investment (CFROI);
2. grow our core businesses into new geographies, and
3. expand into complementary products and services
Barloworld"s performance in 2006 reflects the ongoing favourable
economic conditions in South Africa, boosted by growing capital
investment in the southern African region. Positive growth in our
offshore operations primarily reflects the benefits of restructuring
undertaken in both the industrial distribution and scientific
businesses.
We have achieved a seven year compound annual growth rate in
headline earnings per share of 20.4% since the inception of Value
Based Management (VBM) in 1999. Our real CFROI (R) has improved to
12.3% from 6.2% over this period and remains well above our real
hurdle rate of 8%.
Strong second half delivers profit growth and record cash flows
In southern Africa the equipment business, led by sales of
Caterpillar equipment, had a significantly better year as the
capital investment cycle accelerated in both the construction and
mining industries. The cement business continued to grow strongly
with sales volumes increasing by 17% during the financial year.
Another year of record new vehicle sales benefited the motor
division, along with a pleasing recovery in our rental rates in
southern Africa which boosted the car rental result. The coatings
business delivered another year of solid growth in revenue.
Our Iberian equipment business continues to generate satisfactory
returns supported by ongoing public infrastructure investment in
Spain. The Siberian joint venture comfortably exceeded its US$100
million revenue target and remains an exciting growth business. The
focus to improve the performance of some of the offshore businesses
has delivered promising results. The US handling business had
another year of strong growth, and the Truck Center significantly
increased its contribution. The UK handling business, while down
against the previous year, has shown a strong recovery trend through
the year. The scientific division benefited from a reduced cost base
and significantly improved profitability. The Scandinavian car
rental result was pleasing after an adverse change in pricing policy
by a major vehicle supplier in Sweden in the first half of the year.
In Australia, the motor business has started to reflect the benefits
of our dealership upgrade strategy.
The proposed acquisition of Wattyl was turned down by the Australian
Competition and Consumer Commission (ACCC) and we are now pursuing
options to restructure and down size our coatings business in
Australia. We remain committed to the Asia-Pacific region and will
continue to pursue a number of other avenues for expansion in the
coatings and motor businesses.
A strong second half resulted in revenue growth of 13% for the full
year and operating margin expansion to 9.7% (2005: 9.1%). Operating
profits increased 21% to R4 133 million.
Headline earnings per share of 1 171 cents (2005: 888 cents)
benefited from stronger operational results, positive fair value
adjustments on forward cover contracts owing to the weaker rand and
an accounting gain arising largely from a change in accounting
policy for defined benefit pension funds in the UK. Net profit
attributable to Barloworld Limited shareholders grew 27%.
Cash flows from operations remained strong at R4 931 million (2005:
R3 576 million).
A final dividend of 450 cents per share (2005: 325 cents) was
declared, resulting in the total dividend in respect of this year"s
earnings increasing by 32% to 600 cents per share (2005: 455 cents).
Corporate activity continues to enhance value
In line with our goal of sustainable value creation, during the year
under review we acquired the Avis and Budget car rental businesses
in Denmark and the 50% of Avis Fleet Services that we did not
already own. Prostart (automotive refinish coatings) and Midas
Paints were also acquired.
We announced the sale of the steel tube business to the management
team and an empowerment grouping, which remains subject to final
signature on the funding agreements. We have sold the bulk of our US
and UK handling leasing books to finance partners as we were unable
to generate acceptable returns from pure finance business.
During the past six months we have repurchased 10 145 835 Barloworld
ordinary shares at an average price of R113.97. The total cost of
the share buyback program was R1 160 million.
We continue to review all our businesses in terms of their ability
to generate the required sustainable real CFROI(R) hurdle rate of
8%.
Changes in Directorate
Ms S Mkhabela was appointed to the board as an independent non-
executive director on 27 January 2006 and Mr DG Wilson joined the
board on 29 September 2006 and will succeed Mr CB Thomson as finance
director. Mr LS Day, CEO of Barloworld Equipment will retire at the
end of November 2006 and is succeeded by Mr CB Thomson. Mr MD Coward
will resign to head the consortium which is acquiring the steel tube
division.
Black Economic Empowerment
Advisors have been appointed for the evaluation of various
alternatives for a broad based black economic empowerment (BBBEE)
equity transaction for the company. A committee of the board
comprising the CEO and four non-executive directors will be making
recommendations to the board when the advisors have completed their
task.
A positive outlook
In southern Africa, the equipment division should benefit from
increased infrastructure and mining investment. While cement demand
growth is expected to continue, albeit at a slower rate, revenue
growth in the cement division will be limited by capacity
constraints. In the motor division the improved rental rates will
positively impact the car rental result, and the higher interest
rate environment and new fleet business will boost the fleet
services contribution. Vehicle retail sales growth is expected to
slow due to the increased interest rates in South Africa. The
coatings division will benefit from the integration of the new
acquisitions.
Our Iberian Caterpillar business continues to deliver consistently
good results. We expect continued growth in the US materials
handling operations and a further improvement in the UK. By contrast
the effect of the new emission standards in the US could impact
Truck Center new unit sales during the early part of 2007. The
positive trend in the scientific business is expected to continue.
The overall outlook for 2007 is favourable and we look forward to
another year of good progress as the southern African capital
investment cycle gains momentum with continued, albeit slower,
growth in residential housing and vehicle retail sales. We have set
a new medium-term goal of doubling the value of the company before
the world cup of soccer comes to South Africa in 2010, and will
continue to focus on enhancing returns and growing profits to
achieve this objective.
WAM Clewlow AJ Phillips
Chairman Chief Executive Officer
Group financial review
Revenues increased by 13% to R42 693 million, with operating profit
rising 21% to R4 133 million. Good growth was delivered in the
southern African equipment division due to increasing infrastructure
and mining expenditure while the cement business benefited from
strong demand in the domestic building and construction industry.
Operating results were also boosted by a reduction in UK pension
liabilities discussed below.
The weakening of the rand against the US dollar in the second half
of the year contributed to positive mark-to-market adjustments in
the fair value of derivative financial instruments. In addition
hedges concluded to protect the company against negative currency
movements during the term of the offer to acquire Wattyl in
Australia were closed out at a profit of R54 million when we allowed
the offer to lapse.
In order to reduce earnings volatility resulting from fluctuations
in foreign exchange rates, the company implemented hedge accounting
for Caterpillar machine purchases for the southern African equipment
business with effect from 1 June 2006. The effect of this change is
that R140 million (R99 million after tax) in fair value adjustments
which would otherwise have been included in income are now reflected
in equity. Fair value adjustments continued to impact income in
respect of the purchase of parts and other vehicle and equipment
brands where hedge accounting has not yet been implemented.
Finance costs increased by R164 million to R605 million. This was
mainly due to the acquisitions of Avis Denmark in November 2005 and
the remaining 50% of Avis Fleet Services in April 2006. Interest
cover remained strong at 5.8 times (2005: 6.0 times).
Income from investments increased to R273 million (2005: R198
million), due mainly to the refinancing by central treasury of the
funding of Avis Fleet Services when the company became a wholly-
owned subsidiary.
Taxation rose by 31% to R1 370 million in line with the higher
profits. The effective taxation rate (excluding exceptional items,
secondary tax on companies and prior year taxation) increased to
30.0% (2005: 29.0%).
Income from associates and joint ventures increased by R19 million
to R72 million. The improvement was largely attributable to higher
profits contributed by the Siberian joint venture in the equipment
division and the motor division empowerment joint ventures.
Exceptional profits of R120 million (2005: R7 million) included
gains on disposal of properties, investments and subsidiaries of
R143 million less impairments of goodwill and capital assets of R23
million.
Following the decision taken earlier this year to dispose of the
steel tube division, this business has been reflected as a
discontinued operation. The net loss of R112 million comprises an
impairment of R156 million reduced by the after tax profits earned
during the year of R44 million.
Net profit from continuing operations increased by 34% to R2 858
million (2005: R2 139 million), while headline earnings per share
(HEPS) increased by 32% from 888 cents to 1 171 cents. This
includes a benefit resulting from an accounting policy change and
initiatives to address the UK pension deficits. In particular, the
transition from a final pay plan to a career average revalued
earnings (CARE) plan has reduced pension obligations by R149 million
pre-tax (GBP10.5 million). In terms of IAS 19, this has been
recognised in income in the current year.
Total assets grew by 25% to R35 654 million. The currency effect on
translation of offshore net assets resulted in an increase in net
assets of R1 832 million following the depreciation of the rand in
the second half of the year.
Assets classified as held for sale increased to R2 840 million
(2005: R180 million). The increase is mainly attributable to the
pending sales of the steel tube division and the UK leasing assets.
Total interest-bearing borrowings of R9 884 million rose by R1 842
million in the year. The increased borrowings arose mainly due to
the acquisitions referred to above, growth in fleet leasing and
rental assets and capital expenditure. Borrowings in the three
segments utilised in the group for gearing purposes are all within
the defined target ranges as follows:
Total debt to equity Trading Leasing Car Total
(%) Rental Group
Target range 30-50 600-800 200-300
Ratio at 30 September
2006 32 689 233 73
Cash flow from operations rose by 38% to R4 931 million. Working
capital increased by R10 million while net cash used in investing
activities amounted to R2 938 million.
The company acquired 10 145 835 ordinary shares during the year
pursuant to its share buyback programme. A total of R1 160 million
was expended in acquiring the shares at an average cost of R113.97
per share.
The company"s balance sheet is strong and cash generation prospects
remain good.
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 tax
assets and liabilities. In the case of leasing businesses, net
assets are reduced by interest-bearing liabilities.
Comparatives have been restated as per note 9.
EQUIPMENT
Revenue Operating Net operating
profit incl assets
fair value
adjustments
Year ended 30 Sept Year ended 30 30 Sept
Sept
R million 2006 2005 2006 2005 2006 2005
- Europe 5 415 5 281 474 475 3 368 2 378
- Southern 6 212 4 953 645 424 2 304 1 833
Africa
11 627 10 234 1 119 899 5 672 4 211
Share of 27 8
associate
income
The business arises mainly from our long standing relationship with
Caterpillar Inc. as their dealer partner in 16 countries.
Revenue in Iberia increased 2.5% with flat operating profit due to
machine margin pressures and costs incurred on employee early
retirement programs. Construction remains the most dynamic sector
within the Spanish economy, growing faster than the domestic
economy. Long lead times for new equipment have resulted in
increased demand for used equipment, with the certification and
rebuild programmes being catalysts for growth. Service demand
remains at a high level. Demand for power systems has been strong,
but availability has dampened growth in this business.
In southern Africa, revenue growth of 25% resulted from increased
sales of large mining and construction machines, together with
stronger demand for our equipment management services that manifests
itself in higher sales of parts, service and maintenance contracts.
The segment result improved by 52%, boosted by a weakening rand,
with operating margins before fair value adjustments lower at 8.1%
(2005: 9.6%) due to new machines being a higher proportion of the
sales mix. The construction sector was positively impacted by
growing South African government infrastructure spending and
commercial and industrial building developments. Strong demand for
commodities has positively impacted our performance in the mining
sector. Business continued to improve in our other southern African
territories, especially Angola.
Our handling business improved market share in a growing market,
although the delayed introduction of new Hyster product offerings
impacted results. The agricultural business remains highly
profitable and we achieved market leadership in both Massey Ferguson
tractors and CLAAS harvesters.
Associate income increased strongly as our Siberian joint venture
more than doubled revenue and profits. Siberia remains an area of
vast potential for capital equipment and we are investing in our
infrastructure in the region in order to be able to benefit from the
expected growth. This year saw the opening of a new facility in
Novosibirsk.
Customer orders at year end amounted to R4 849 million, R1 959
million higher than last year. Most of this order commitment will be
delivered in the 2007 financial year in line with our customers"
expectations. At year end we had orders placed on Caterpillar for
equipment amounting to $906 million, an increase of 67% from the
previous year. Tyres for mining equipment are expected to remain in
limited supply until 2009 and this may adversely impact deliveries
of some products.
INDUSTRIAL DISTRIBUTION
Revenue Operating Net operating
profit incl assets
fair value
adjustments
Year ended 30 Year ended 30 Sept
Sept 30 Sept
2006 2005 2006 2005 2006 2005
R million
- Europe 1 995 1 982 23 41 670 437
- North 4 697 3 922 115 75 1 180 990
America
Trading 6 692 5 904 138 116 1 850 1 427
- Europe 257 367 33 66 309 261
- North 96 98 ( 25) ( 40) ( 17) 52
America
Leasing* 353 465 8 26 292 313
7 045 6 369 146 142 2 142 1 740
* Net operating assets after deducting interest-bearing borrowings.
The division experienced a period of very positive change, contrary
to the marginal increase in profitability compared to the previous
year.
The UK handling market fell 8.4% to 29 028 units. This was almost
entirely in the lower price range warehousing market which in itself
fell 15%. The year end order book was consistent with last year at
1 192 units but reflects a higher value despite the smaller market.
The second half showed a marked improvement after difficulties with
our mobile service technology, the restructuring of the back office
administration taking longer than originally anticipated and changes
in the senior management structure.
In the Netherlands and Belgium, the market grew 9.4% to 22 703 units
with warehousing making up a strong 58.7% share. The year end order
books at 269 units were relatively unchanged from last year.
The US handling business delivered another year of solid growth at
the operating level. The total new equipment market grew 1.8% to 39
263 units. The open order book at 839 units was very similar to last
year but higher in revenue value as a result of the product mix. The
executive management team was restructured to align the organisation
with our business segmentation.
In the Truck Center business, the "pre-buy" ahead of the 2007 engine
emission changes increased class 6-8 industry new sales in the US
market by 10.2% to 432 145 units for the year to September. A
further acceleration will be seen in both the market and our
deliveries during the last three months of the calendar year. Our
new unit sales for the fiscal year grew 4.6% to 3 630, resulting in
revenue growth of 8.7% at a slightly improved margin. The order
book ended the year at 2 023 units, slightly higher than last year.
The major focus of the business remained on the growth and
improvement of the aftermarket parts and service activities and
these absorbed 79% of operating costs for the year (2005: 73%).
Good progress has been made on the sale of the leasing books, with
the US book sold to a joint venture between GE Capital and Hyster
Capital. A small residual balance remains covering a few specific
short term and early expiring contracts. The disposal of the UK
leasing business to GE Capital was finalised in November 2006. The
leases related to the UK Ministry of Defence contracts are not
assignable and will accordingly continue to be managed out of our UK
operation.
MOTOR
Revenue Operating Net operating
profit incl assets
fair value
adjustments
Year ended 30 Year ended 30 Sept
Sept 30 Sept
R million 2006 2005 2006 2005 2006 2005
- Southern Africa 9 307 8 791 223 175 1 020 640
- Australia 1 719 1 598 23 11 666 399
Trading 11 10 246 186 1 686 1 039
026 389
- Southern Africa 1 108 881 256 210 2 400 2 396
- Europe 805 478 69 66 2 536 1 231
Car rental 1 913 1 359 325 276 4 936 3 627
Leasing Southern 631 638 65 88 276 334
Africa*
13 12 636 550 6 898 5 000
570 386
Share of associate 27 23
income
* Net operating assets after deducting interest-bearing borrowings.
The southern African motor retail operations performed well in
another record year of new vehicle sales. An expanding market,
favourable interest rates, improved supply and new models
contributed to increased new and used vehicle sales. Parts, as well
as service hours, benefited from the buoyant market. The strategic
alignment of the dealership network into "Fewer, Bigger, Better"
facilities produced efficiencies and resulted in a 27% improvement
in operating profit. The Australian operations improved performance
due to our now established dealership network and an increasing
demand for certain brands we represent.
Avis Rent a Car Southern Africa benefited from a strong increase in
rental days, good utilisation and firmer rates. Growth in the fleet
resulted in a higher interest charge and other associated costs. The
Point-to-Point and truck rental businesses improved on the previous
year and contributed to the positive result. Our Scandinavian car
rental operation, which includes both Avis and Budget brands, was
severely impacted by a major vehicle supplier"s change in supply and
pricing strategy in Sweden during the first half. However,
profitability improved in the second half of the year as a result of
increased rental days, the ongoing implementation of the regional
business structure and a strong contribution from the Norwegian
operations. The Danish operations, which were acquired in November
2005, have been successfully integrated into the regional structure.
Avis Fleet Services experienced strong growth in its fleet under
management. However, lower interest rates and used vehicle margins
resulted in reduced profitability. Full ownership of the business
was secured during the year, as were significant new business
contracts. These should result in long-term profit growth.
Associate income includes another strong performance from our
DaimlerChrysler empowerment joint venture in KwaZulu-Natal, which
recorded revenues of R2.4 billion and operating profit of R102
million.
CEMENT
Revenue Operating profit Net operating
incl fair value assets*
adjustments
Year ended 30 Year ended 30 30 Sept
Sept Sept
R million 2006 2005 2006 2005 2006 2005
Southern Africa 4 863 3 974 1 905 1 502 2 565 2 502
Share of 0 2
associate
income
* Net operating assets include goodwill arising on PPC shares
purchased by Barloworld.
The South African economy continued to exhibit strong growth which
was mirrored in both the residential and non-residential
construction sectors. The cement division benefited from these
buoyant market conditions with cement volumes achieving record
levels. Regional cement sales volumes grew 17% over last year. All
production units were fully operational from February and provided
much needed additional capacity in the second half of the year,
although operating older kiln lines resulted in higher costs.
Logistics expenses also increased, due to the increased complexity
in the movements of product to our customers. This additional
expenditure put some pressure on cement margins.
The Batsweledi project, which will add 1.2 million tons of cement
capacity, is progressing according to plan and within budget. Until
the new capacity comes on line in mid-2008, cement is being imported
to supplement current capacity during periods of high demand. This
is not expected to have a material effect on earnings.
Lime revenue and operating profit improved following the
renegotiation of several long-term supply agreements and higher
volumes in the steel sector. Aggregate operations reflected
excellent volume and profit growth.
A proposal for a modern cement milling facility in the inland region
at a cost of around R600 million will be presented to the board in
the first calendar quarter of 2007. The feasibility study of
capacity expansion in the Western Cape is progressing well and a
proposal will also be presented to the board by August 2007.
The Afripack empowerment transaction with Nozala Investments (Pty)
Ltd has proved highly successful. The loan funding has been repaid,
a year earlier than the three-year term of the agreement, and the
company continues to show good profit growth. Afripack will now be
treated as an associate.
COATINGS
Revenue Operating Net operating
profit incl assets
fair value
adjustments
Year ended 30 Year ended 30 30 Sept
Sept Sept
R million 2006 2005 2006 2005 2006 2005
Southern Africa 2 019 1 520 338 281 742 514
Australia & 952 949 ( 55) ( 29) 296 254
Asia
2 971 2 469 283 252 1 038 768
Share of 18 20
associate
income
The decorative coatings business had another good year following
buoyant growth in the southern African market. Strong sales into the
roadmarking and protective coatings segments contributed to good
growth in the industrial business. The retail sector grew by 12% and
trade sales, assisted by commercial development and refurbishment,
grew by 14% as the building industry continued to expand resulting
in excellent growth in our economy brands in line with our strategy,
which impacted margins as expected. The newly acquired Midas product
range also expanded its footprint in the growing contractor market.
In the automotive group, the wholly owned refinish business
experienced an excellent year. The acquisition of the Prostart
distribution business was concluded, and has more than met
expectations. The joint venture business with DuPont, which supplies
the automotive manufacturing plants, has again performed
satisfactorily and continues to maintain its position.
2006 proved to be another good year for the colourant systems
business achieving an annual volume growth of 19%. Export volumes
increased substantially over the year and now contribute more than
42% of sales volume in this business.
Trading conditions in the Australian coatings industry remained
difficult with retail industry volumes declining 1.7%. Cost
reduction initiatives through further restructuring of our business
during the year resulted in substantial once off costs. This
included closing the White Knight factory at Seven Hills and
transferring production to the Villawood factory in Sydney. The
Hemmant factory in Brisbane was also closed with production
similarly relocated. Restructuring costs of approximately A$4
million were incurred. A concerted effort to find a sustainable
strategic solution to the sub optimal market structure in Australia
continued and we made an offer to acquire Wattyl Limited. Despite
various proposals from Barloworld to successfully complete the
transaction, the ACCC decided not to approve the transaction in a
form acceptable to us. We therefore allowed the bid to lapse. The
hedge gains less the costs of the bid produced a gain for Barloworld
of R36 million, which is reflected in the corporate segment. Steps
to sell the retail Bristol branded store network to a third party
are well advanced.
Barloworld Coatings continues to investigate the attractive
opportunities for growth in the Chinese coatings market and
expansion of its presence in the region and elsewhere.
SCIENTIFIC
Revenue Operating Net operating
profit incl assets
fair value
adjustments
Year ended 30 Year ended 30 30 Sept
Sept Sept
R million 2006 2005 2006 2005 2006 2005
Europe 1 027 1 009 62 23 834 629
North America 429 382 10 ( 6) 316 359
Asia 146 135 8 4 109 87
1 602 1 526 80 21 1 259 1 075
The laboratory group"s performance improved mainly as a result of
fixed cost reduction initiatives that were put in place in the
previous financial year and continued strong growth in the science
equipment business. Trading, however, was weaker than expected in
the UK and Europe, while markets to which we export realised
improved revenues and margins, particularly in the US, Asia and
Africa. Margins have improved despite significant increases in the
cost of energy and plastic raw materials, which are both at record
high levels.
Melles Griot produced a good improvement on last year as the
semiconductor market rebounded in 2006. The biotechnology, metrology
and photonics markets saw growth, activity in the defence sector
increased and year on year revenue growth was realised for most
products. North America and Asia realised good growth in sales
whereas the distribution business in Europe saw reduced revenue.
Margins improved by almost 3% as a result of improved supply chain
and inventory management processes as well as increased sourcing
from low cost countries.
CORPORATE AND OTHER
Revenue Operating Net operating
profit incl assets
fair value
adjustments
Year ended 30 Year ended 30 30 Sept
Sept Sept
R million 2006 2005 2006 2005 2006 2005
Southern 735 561 41 21 925 871
Africa
Europe 280 177 159 ( 21) ( 619) ( 759)
1 015 738 200 0 306 112
In southern Africa, results were favourably impacted by a net
benefit of R36 million arising from the offer to acquire Wattyl.
This represents a profit earned on currency hedges concluded to
protect the company against negative currency movements during the
term of the offer, less associated acquisition costs.
In Europe results were favourably impacted by a change in accounting
policy for post-employment benefit obligations. An accounting gain
in terms of IAS 19 amounting to R149 million pre-tax (GBP10.5
million) arose due to a reduction in the defined benefit pension
liabilities in the United Kingdom. This followed a move by
consensual agreement, to career average revalued earnings as a basis
for determining pension benefits. Net operating liabilities exceed
assets by R619 million due to the liability of R777 million (2005:
R747 million) for the pension fund deficits which have been brought
on balance sheet in terms of the accounting policy change.
In the logistics business, gross revenue over the last 5 years
(including Barloworld clients) has increased at a compound rate in
excess of 40% per annum to almost R4 billion this year. During the
year Barloworld"s logistics operations in South Africa and Spain
were integrated to widen the skills base, share best practices and
expand the Iberian offering to include integrated supply chain
solutions. Sales activity increased during the year in Barloworld
Logistics Africa, our 25% BBBEE owned operating company. Our leading
BEE status resulted in the securing of a number of blue chip clients
and projects which will continue to provide sustainable growth.
Dividend declaration for the year ended 30 September 2006: Dividend
Number 155
Notice is hereby given that the following dividend has been declared
in respect of the year ended 30 September 2006: Number 155 (final
dividend) of 450 cents per ordinary share (2005: 325 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 05 January 2007
Shares trade ex dividend Monday 08 January 2007
Record date Friday 12 January 2007
Payment date Monday 15 January 2007
Share certificates may not be dematerialised or rematerialised
between Monday, 08 January 2007 and Friday, 12 January 2007, both
days inclusive.
On behalf of the Board, S Mngomezulu, Secretary
CONSOLIDATED INCOME
STATEMENT
for the year ended 30
September
Audited
R million Notes 2006 2005* %
change
CONTINUING OPERATIONS
Revenue 42 693 37 696 13
Operating profit 4 133 3 423 21
Fair value adjustments on 235 ( 57)
financial instruments
Finance costs ( 605) ( 441)
Income from investments 273 198
Profit before exceptional 4 036 3 123 29
items
Exceptional items 3 120 7
Profit before taxation 4 156 3 130
Taxation (1 370) (1 044)
Profit after taxation 2 786 2 086
Income from associates and 72 53
joint ventures
Net profit from continuing 2 858 2 139 34
operations
DISCONTINUED OPERATION
(Loss) / profit from 4 ( 112) 24
discontinued operation
Net profit 2 746 2 163
Attributable to:
Minority shareholders 389 314
Barloworld Limited 2 357 1 849 27
shareholders
2 746 2 163
Earnings per share (cents)**
- basic 1 138.9 891.7 28
- diluted 1 117.1 871.7 28
Earnings per share from
continuing operations
(cents)
- basic 1 193.0 880.1 36
- diluted 1 170.2 860.4 36
Earnings per share from
discontinued operation
(cents)
- basic (54.1) 11.6 (566)
- diluted (53.1) 11.3 (570)
* Restated - refer note 9
** Refer note 2 for details
of headline earnings per
share calculation
CONSOLIDATED BALANCE SHEET
at 30 September
Audited
R million Notes 2006 2005*
ASSETS
Non-current assets 14 289 14 158
Property, plant and equipment 8 299 7 922
Goodwill 3 005 2 485
Intangible assets 323 260
Investment in associates and joint 749 518
ventures
Finance lease receivables 566 1 495
Long term financial assets 597 655
Deferred taxation assets 750 823
Current assets 21 365 14 465
Vehicle rental fleet 3 441 2 196
Inventories 5 907 4 793
Trade and other receivables 7 026 5 859
Taxation 17 38
Cash and cash equivalents 2 134 1 399
Assets classified as held for sale 4 2 840 180
Total assets 35 654 28 623
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 327 1 397
Other reserves 3 461 1 462
Retained income 9 881 8 627
Interest of shareholders of Barloworld 13 669 11 486
Limited
Minority interest 691 644
Interest of all shareholders 5 14 360 12 130
Non-current liabilities 7 920 7 761
Interest-bearing 5 475 5 410
Deferred taxation liabilities 870 905
Provisions 468 383
Other non-interest-bearing 1 107 1 063
Current liabilities 13 374 8 732
Trade and other payables 6 663 5 163
Provisions 536 480
Taxation 705 457
Amounts due to bankers and short-term loans 4 409 2 632
Liabilities directly associated with 4 1 061 0
assets classified as held for sale
Total equity and liabilities 35 654 28 623
* Restated - refer note 9
CONDENSED CONSOLIDATED CASH FLOW
STATEMENT
for the year ended 30 September
Audited
R million 2006 2005*
Cash flow from operating activities
Operating cash flows before movements in 6 077 5 275
working capital
Increase in working capital ( 10) ( 475)
Cash generated from operations 6 067 4 800
Realised adjustments on financial 136 ( 18)
instruments
Finance costs and investment income ( 265) ( 231)
Taxation paid (1 007) ( 975)
Cash flow from operations 4 931 3 576
Dividends paid (including minority (1 295) (1 197)
shareholders)
Cash retained from operating activities 3 636 2 379
Net cash used in investing activities (2 938) (2 980)
Acquisition of subsidiaries, ( 814) (443)
investments and intangibles
Proceeds on disposal of subsidiaries and 44 69
investments
Net investment in fleet leasing and (2 108) (1 629)
rental assets
Acquisition of property, plant and (1 217) (1 186)
equipment
Proceeds on disposal of property, plant 593 209
and equipment
Proceeds on sale of leasing assets 564 -
Net cash inflow/(outflow) before 698 ( 601)
financing activities
Net cash (used in)/available from ( 224) 601
financing activities
Proceeds on share issue 90 188
Buy-back of shares in company (1 160)
Increase in interest-bearing liabilities 846 413
Net increase in cash and cash 474 -
equivalents
Cash and cash equivalents at beginning 1 399 1 443
of year
Effect of foreign exchange rate 242 (44)
movements on cash balance
Effect of cash balances classified as 19
held for sale
Cash and cash equivalents at end of year 2 134 1 399
Cash balances not available for use due 405 344
to reserving restrictions
Acquisition of subsidiaries, investments
and intangibles:
Inventories acquired 57 11
Receivables acquired 226 96
Payables, taxation and deferred taxation ( 230) ( 90)
acquired
Borrowings net of cash ( 512) 25
Property, plant and equipment, non- 744 55
current assets, goodwill and minority
shareholders
Total net assets acquired 285 97
Goodwill arising on acquisitions 238 21
Total purchase consideration 523 118
Investments and intangible assets 291 325
acquired
Cash amounts paid to acquire 814 443
subsidiaries, investments and
intangibles
Bank balances and cash in subsidiaries 12 36
acquired
* Restated - refer note 9
CONDENSED
CONSOLIDATED
STATEMENT OF
RECOGNISED INCOME
AND EXPENSE
for the year ended Audited
30 September
R million 2006 2005
Exchange 1 832 ( 186)
differences on
translation of
foreign operations
Gain on cash flow 139 2
hedges
Deferred taxation ( 18)
on cash flow hedges
Gain of revaluation 18 12
of available for
sale investments
Deferred taxation ( 8) ( 2)
on revaluation of
available for sale
investments
Other reserve ( 71) ( 31)
movements
Net actuarial ( 55) ( 86)
losses on post-
retirement benefit
obligations
Actuarial losses on ( 79) ( 123)
post-retirement
benefit obligations
Taxation effect 24 37
Net income/(loss) 1 837 ( 291)
recognised directly
in equity
Net profit 2 746 2 163
Total recognised 4 583 1 872
income and expense
for the year
Attributable to:
Minority 381 302
shareholders
Barloworld Limited 4 202 1 570
shareholders
4 583 1 872
The statement of recognised income and expense has
been prepared in terms of the requirements of IAS 19
Employee Benefits regarding the change in accounting
policy for the treatment of actuarial gains and
losses (refer note 9).
SALIENT FEATURES
for the year ended 30 September Audited
2006 2005*
Number of ordinary shares in 200 716 208 612
issue, net of buyback (000)
Net asset value per share 6 973 5 620
including investments at fair
value (cents)
Total borrowings to total
shareholders" funds (%)
- Trading segment** 31.7 20.9
- Total group 73.3 66.3
Interest cover (times)
- Trading segment** 10.6 11.3
- Total group 5.8 6.0
Return on net assets (%)
- Trading segment** 26.8 25.6
- Total group 19.1 18.3
Cash flow return on investment - 12.3 10.3
CFROI (R) (%)
Return on ordinary shareholders" 18.0 16.8
funds (excluding exceptional
items)(%)
* Restated - refer note 9
** Trading segment includes manufacturing and dealership
businesses, but excludes leasing and car rental.
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September
Audited
R million 2006 2005*
1 Basis of preparation
This report has been extracted from
the group consolidated financial
statements, which have been
prepared in accordance with
International Financial Reporting
Standards (IFRS), in compliance
with the Companies Act of South
Africa and the Listing Requirements
of the JSE Limited. The basis of
preparation is consistent with
the prior year, except as detailed
in note 9 below.For a better
understanding of the group"s
financial position, the results
of its operations and cash flows
for the year, this summarised
report should be read in
conjunction with the annual
financial statements from which it was derived.
2 Reconciliation of net profit to
headline earnings
Net profit attributable to
Barloworld Limited
Shareholders 2 357 1 849
Impairment loss on disposal of Steel
Tube after
Taxation 156 -
Profit on disposal of properties,
investments
and subsidiaries ( 140) ( 25)
Impairment of assets 27 21
Loss/(Profit) on sale of plant
and equipment
(excluding rental assets) and
intangible assets 4 ( 2)
Taxation on exceptional items 19 ( 6)
Interest of outside shareholders in
exceptional items - 4
Headline earnings 2 423 1 841
Headline earnings from continuing
Operations 2 373 1 815
Headline earnings from discontinued
Operation 50 26
Weighted average number of ordinary
shares in issue during the year (000)
- basic 206 959 207 367
- diluted 210 998 212 117
Headline earnings per share (cents)
- basic 1 170.8 887.8
- diluted 1 148.4 867.9
Headline earnings per share from
continuing operations (cents)
- basic 1 146.6 875.3
- fully diluted 1 124.7 855.7
Headline earnings per share from
discontinued operation (cents)
- basic 24.2 12.5
- diluted 23.7 12.3
3 Exceptional items
Profit on disposal of properties, investments
and subsidiaries 143 27
Impairment losses ( 23) ( 21)
Other 1
Gross exceptional profits 120 7
Taxation ( 20) 5
Interest of outside shareholders - ( 4)
100 8
Discontinued operation
(net of taxation) ( 6) ( 2)
Net exceptional profits 94 6
* Restated - refer note 9
4 Discontinued operation and assets
classified as held for sale
The Steel Tube segment has been classified
as a disposal group held for sale.
Results from discontinued operation are
as follows:
Revenue1 75 1 590
Operating profit 95 44
Fair value adjustments on financial
Instruments ( 6) 1
Finance costs ( 25) ( 25)
Income from investments 3 1
Profit before exceptional items 67 21
Exceptional items
(gross of taxation) ( 7) ( 3)
Profit before taxation 60 18
Taxation ( 20) 2
Profit after taxation 40 20
Income from associates and
joint ventures 4 4
Net profit of discontinued
operation before
impairment loss 44 24
Impairment loss on write-down to
fair value less costs to sell ( 185)
Taxation on impairment loss 29
Impairment loss after taxation ( 156)
Loss from discontinued operation
per income statement ( 112)
The cash flows from the discontinued
Operation are as follows:
Cash flows from operating activities 80 ( 54)
Cash flows from investing activities ( 24) ( 20)
Cash flows from financing activities ( 75) 31
Assets classified as held for sale
consist of the following:
- Steel Tube discontinued operation 715
- Industrial Distribution
leasing assets 1 717
- Vehicle and equipment
rental fleets 249 180
- Other 159
2 840 180
Liabilities directly associated with assets
classified as held for sale consist
of the following:
- Steel Tube discontinued operation 347
- Industrial Distribution leasing
liabilities# 597
- Other 117
1 061 0
5 Interest of all shareholders
Balance at the beginning of the year 12 130 11 821
Adjustment to opening balance for
changes in accounting policies ( 586)
Net income/(loss) recognised directly
in equity 1 837 ( 291)
Net profit 2 746 2 163
Reclassifications and other
reserve movements 46 34
Purchase of minority shareholding in
Subsidiary ( 34) ( 2)
Buy-back of shares (1 160)
Dividends on ordinary shares (1 295) (1 197)
Shares issued in current year 90 188
Interest of shareholders at the end of
the year 14 360 12 130
* Restated - refer note 9
# In addition, an amount of R 916 million inter group
borrowings will be settled from the proceeds on the sale of
the assets.
6 Dividends
Ordinary shares
Final dividend No 153 paid on 16
January 2006: 325 cents per share
(2005: No 151 - 265 cents per share) 745 602
Interim dividend No 154 paid
on 12 June 2006: 150 cents
per share
(2005: No 152 - 130 cents per share) 312 296
1 057 898
Dividend attributable to the
treasury shares ( 62) ( 75)
Paid to Barloworld Limited shareholders 995
823
Paid to minority shareholders 300 374
1 295 1 197
Dividends per share (cents) 600 455
- interim (declared May) 150 130
- final (declared November) 450 325
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
for the year ended 30 September
Audited
R million 2006 2005*
7 Contingent Liabilities
bills, lease and hire-purchase agreements
discounted with recourse, other
guarantees and claims
Litigation, current or pending,
is not considered likely to have a
material adverse effect on the group 622 296
Buy-back and repurchase commitments
not reflected on the balance sheet 1 250 1 071
The related assets are estimated
to have a value at least equal to the
repurchase commitment.
There are no material contingent
liabilities in joint venture companies.
8 Commitments
Capital expenditure commitments
to be incurred:
Contracted 2 106 1 762
Approved but not yet contracted 999 1 080
3 105 2 842
Operating lease commitments 2 509 1 682
Finance lease commitments 1 050 1 522
9 Accounting policies and comparative information
The group changed its accounting policy in the current year in
respect of the treatment of actuarial gains and losses. In
terms of the allowed treatment per IAS19 Employee Benefits,
actuarial gains and losses are now recognised in full in the
period in which they occur, outside profit or loss, in the
Statement of Recognised Income and Expense.
In addition, the following new or revised Standards and
Interpretations were adopted during the current year:
- IAS 27 (Revised) Consolidated and Separate Financial
Statements
- IFRS 2 Share-based Payment
- IFRIC Interpretation 8 Scope of IFRS 2
- AC 503 Accounting for Black-Economic Empowerment
Transactions
- IFRIC Interpretation 11 IFRS 2 - Group and Treasury Share
Transactions
- The South Afircan Institute of Chartered Accountants"
Circular 9/2006 - Transactions giving rise to adjustments to
Revenue/Purchases
- IFRS6 Exploration for and Evaluation of Mineral Resources
- IFRIC Interpretation 5 Rights to Interests Arising from
Decommissioning, Restoration and Environmental Rehabilitation
Funds
- IFRIC Interpretation 6 Liabilities Arising from
Participating in a Specific Market - Waste Electrical and
Electronic Equipment
- IFRIC Interpretation 7 Applying the Restatement Approach
Under IAS 29 Financial Reporting in Hyperinflationary Economies
- IFRIC Interpretation 9 Reassessment of Embedded Derivatives
- IFRIC Interpretation 10 Interim Financial Reporting and
Impairment
- IAS 21 (Revised) The effects of Changes in Foreign Exchange
Rates
* Restated - refer note 9
Consolidated Notes to the consolidated financial Statements
for the year ended 30 September
(continued)
Comparative information has been restated for the treatment
of the Steel Tube segment as a discontinued operation (refer
note 4), for the effects of the change in accounting policy
in terms of IAS 19, the adoption of IFRS 2 and the
requirements of Circular 9/2006.
The aggregate effect of the above changes on the annual
financial statements for the year ended 30 September 2005 is
as follows:
R million Previously Re- Other Restated
stated classification restatem
of ents
Discontinued
operation*
Income
statement
Revenue 39 401 (1 603) ( 102) 37 696
Operating 3 480 ( 45) ( 12) 3 423
profit
Fair value ( 56) ( 1) - ( 57)
adjustments
on financial
instruments
Finance costs ( 463) 25 ( 3) ( 441)
Income from 187 ( 1) 12 198
investments
Profit before 3 148 ( 22) ( 3) 3 123
exceptional
items
Exceptional 4 3 - 7
items
Profit before 3 152 ( 19) ( 3) 3 130
taxation
Taxation (1 033) ( 2) ( 9) (1 044)
Profit after 2 119 ( 21) ( 12) 2 086
taxation
Income from 57 ( 4) - 53
associates
and joint
ventures
Net profit 2 176 ( 25) ( 12) 2 139
from
continuing
operations
Profit/(loss) 0 25 ( 1) 24
from
discontinued
operation
Net profit 2 176 - ( 13) 2 163
Attributable
to:
Minority 315 ( 1) 314
shareholders
Barloworld 1 861 - ( 12) 1 849
Limited
shareholders
2 176 - ( 13) 2 163
Earnings per 897.4 - (5.7) 891.7
share (cents)
- basic
Earnings per 877.3 - (5.6) 871.7
share (cents)
- diluted
Balance Sheet
Long term 840 - ( 185) 655
financial
assets
Deferred 550 - 273 823
taxation
assets
Inventories 4 825 - ( 32) 4 793
Trade and 5 897 - ( 38) 5 859
other
receivables
Other 1 484 - ( 22) 1 462
reserves
Retained 9 198 - ( 571) 8 627
income
Minority 646 - ( 2) 644
interest
Total 12 725 - ( 595) 12 130
shareholders
interest
Deferred 906 - ( 1) 905
taxation
liabilities
Non-interest- 404 - 659 1 063
bearing
liabilities
Trade and 5 208 - ( 45) 5 163
other
payables
* Before restatement.
10 Portland Holdings Limited (Porthold)
The results of Porthold, a wholly owned Zimbabwean subsidiary have
not been consolidated into the Group results as at 30 September 2006.
There are significant constraints impacting on the normal operation
of Porthold and the board concluded that management does not have the
ability to exercise effective control over the business. In view of
the circumstances, the results of Porthold have continued to be
excluded from the group results in the current year and have been
accounted for on a fair value investment basis.
11 Related party transactions
There has been no significant change in related party relationships
since the previous year.
The disposal of the Steel Tube division (note 4) to a consortium
including management and directors of Barloworld Robor (Pty) Limited
is considered to be a related party transaction. An opinion has been
obtained from an independent professional expert, approved by the JSE
Limited, that the transaction is fair and reasonable to Barloworld
shareholders.
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.
12 Post Balance Sheet
events
Subsequent to the year end, the disposal transaction of the UK
Leasing assets has been concluded. The disposal of the Steel Tube
segment has been approved by the competition authorities but is
still subject to signature of the loan agreements.
13 Audit
opinion
The consolidated financial statements for the year have been
audited by Deloitte & Touche and the accompanying unmodified audit
report as well as their unmodified audit report on this set of
condensed financial information is available for inspection at the
company"s registered office.
20 November 2006
Sponsor: J.P.Morgan Equities Limited
Date: 20/11/2006 12:53:43 PM Produced by the JSE SENS Department
