2019 Year-end Results for the12 months ended 30 September 2019
74
2019 Year-end Results for the 12 months ended 30 September 2019 18 NOVEMBER 2019
Transcript of 2019 Year-end Results for the12 months ended 30 September 2019
2019 Year-end Results for the 12 months ended 30 September 2019
18 NOVEMBER 2019
FORWARD LOOKING STATEMENTS
Barloworld may, in this document, make certain statements that are not historical facts that relate to analyses and otherinformation based on forecasts of future results and estimates of amounts not yet determinable. These statements may alsorelate to our future prospects, developments and business strategies. Examples of such forward-looking statements include,but are not limited to, statements regarding exchange rate fluctuations, volume growth, increases in market share, return oninvested capital, growth opportunities, capital distribution and cost reductions, including in connection with our businessperformance outlook. Words such as “believe”, “anticipate”, “expect”, “intend", “seek”, “will”, “plan”, “could”, “may”,“endeavour”, “target”, “forecast” and “project” and similar expressions are intended to identi such forward-looking statements,but are not the exclusive means of identiing such statements. By their very nature, forward-looking statements involveinherent risks and uncertainties, both general and specific, and there are risks that the predictions, forecasts, projections andother forward-looking statements will not be achieved. If one or more of these risks materialise, or should underlyingassumptions prove incorrect, our actual results may differ materially from those anticipated. You should understand that anumber of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimatesand intentions expressed in such forward-looking statements.
Forward-looking statements apply only as of the date on which they are made, and we do not undertake any obligation toupdate or revise any of them, whether as a result of new information, future events or otherwise.
All references to years refer to the financial year 30 September.
Comprehensive additional information is available on our website: www.barloworld.com
1
Opening and welcome Zanele Salman, Head Investor Relations
Safety video
Highlights Dominic Sewela, Barloworld Group CE
Financial overview Nopasika Lila, Barloworld Group FD
Automotive and Logistics updateKamogelo Mmutlana, CEO
Charl Groenewald, CE
Barloworld Equipment Russia update Quinton Mcgeer, CEO
Barloworld Equipment SnA update Emmy Leeka, CEO
Strategy update and Group Outlook Dominic Sewela, Barloworld Group CE
Questions and answers
PRESENTATION OVERVIEW
2
Highlights and group strategy
DOMINIC SEWELAGROUP CHIEF EXECUTIVE
4
KEY HIGHLIGHTS:
Successful implementation of KhulaSizwe, scheme oversubscribed and funding target met
Mbewu programme launched, focused on providing support and funding for the growth of social enterprises
Member of Dow Jones Sustainability Emerging Markets, FTSE4Good and FTSE/JSE Responsible Investment Indeces
Target:
ZERO HARM WORK ENVIRONMENT
2017 2018 2019
Non-Renewable
Energy (GJ) 3 060 499 2 922 370 2 829 289
GHG Emissions
(tCO2e) (Scope 1
and 2)
267 940 255 103 243 478
Lost -Time Injury
Frequency Rate
(LTIFR)0.77 0.70 0.58
Number of Work
Related Fatalities 3 2 1
BUILDING A SUSTAINABLE FUTURE FOR OUR PEOPLE, ENVIRONMENT AND COMMUNITIES
GROUP HIGHLIGHTS
5
PLEASING EQUIPMENT AND STRONG AUTOMOTIVE RESULTS
Normalised headline
earnings per share
1 167centsup 1.4%
(2018: 1 151 cents)
Revenue
R56.8bndown 5.4%
(2018: R60.1bn)
Free cash generated
during the period
R3.1bn(2018: R3.6bn)
Return on invested capital
11.9%(2018: 12.3%)
Total dividend per share
462 cents(2018: 462 cents)
Special dividend declared
228 cents
2019 ACHIEVEMENTS
Strong free cash generated
Group ROIC in line with expectations
Business structure and leadership driving strategy implementation and culture change
Managing for intrinsic value approach fully adopted
Barloworld Business System journey on track, contributing to performance
Avis Fleet held for sale at 30 September 2019
Wagner Asia in Mongolia due diligence complete
6
DELIVERING VALUE BY FOCUSING ON THE RIGHT AREAS
12.8%
18.4%
13.1%
6.3%
11.2%
12.7%
21.6%
12.4%
11.0%
12.3%12.5%
17.7%
13.2%
9.5%
11.9%
SEGMENTAL 12 MONTH ROLLING ROIC
7
HURDLE RATE 13.0%
2019 WACC 13.2%
Equipment
southern
Africa
Equipment
Russia^
Automotive Logistics* Group
13.0%
AVERAGE INVESTED CAPITAL (R million)
2017 10.2 2.6 10.0 2.1 27.1
2018 10.9 2.9 10.0 1.8 26.3
2019 11.5 3.3 9.6 1.4 25.5
* Core operations.
^ In terms of USD.
Financial overview
NEW ACCOUNTING STANDARDS IMPACTING THE FINANCIAL STATEMENTS – IFRS 15 AND 9
9
The accounting policies applied in the preparation of the financial statements are
consistent with those applied in the prior year except for the adoption of IFRS 15
Revenue from contracts with customers (IFRS 15) and IFRS 9 Financial instruments
(IFRS 9) (refer to annexure 4).
The adoption of IFRS 9 and 15 has not materially affected the group’s results but has
resulted in the separate disclosure of contract assets and liabilities on the statement
of financial position, together with enhanced disclosures as required by these new
accounting standards.
TRANSACTIONS IMPACTING THE FINANCIAL STATEMENTS
10
OPERATIONAL CHANGES: AVIS FLEET AND NMI-DSM
2019 2018
Income statement
Avis Fleet Held for sale (discontinued operation in 19;
On dilution to 50% in 20 JV results will be
equity accounted in continuing operations)
Continuing operation
NMI-DSM Consolidated for 11 months
Equity accounted for 1 month
(50% shareholding and loss of control)
Fully consolidated for 12 months:
(51.18% shareholding)
Statement of financial position
Avis Fleet Assets and liabilities held for sale Assets and liabilities consolidated in group
NMI-DSM Investment in associate Subsidiary
Statement of cash flows
Avis Fleet Consolidated in the statement of cash flows
– refer to Annexure 4 for a breakdown of
Avis Fleet cash flows
Consolidated in the statement of cash flows
NMI-DSM Cashflows consolidated for 11 months.
From 1 September 2019 dividends
received included in dividends from
associates
Cashflows consolidated for 12 months.
FINANCIAL HIGHLIGHTS FROM CONTINUING OPERATIONS
11
DISCONTINUED OPERATION: AVIS FLEET
Continuing HEPS
867cents5%
(2018: 910 cents)
Revenue
R56.8bn5%
(2018: R60.1bn)
Operating profit incl. B-BBEE
R3.3bn13%
(2018: R3.8bn)
Fair value gain on
financial instruments
R32m(2018: R122m loss)
Total dividend per share
462 cents(2018: 462 cents)
Free cash flow*
R3.1bn(2018: R3.6bn)
Finance
costs
R1 085m(2018: R1 145m)
Effective
tax rate**
28.8%(2018: 29.1%)
Special dividend per share
228 cents^
* Including discontinued operations. ** Excluding Avis Fleet finance costs (annexure 4). ^ Includes 6.6 million BEE Foundation shares. Refer to
Supplementary schedules for closing and average exchange rates.
DIVIDENDS PER SHARE
12
SPECIAL DIVIDEND OF R500 million
115 125145
165
230
265
317 297
228
2016 2017 2018 2019
DIVIDENDS PER SHARE (cents)
1H 2H Special
345
390
462
690
CONTINUING REVENUE SEGMENTAL
13
RESILIENT IN TOUGH TRADING CONDITIONS
36
1133
11
9
2019(%)
33
1333
11
10
2018(%)
n Equipment southern Africa n Equipment Russia
n Automotive Trading n Rent A Car
n Logistics
19.8
7.8
20.0
6.5
5.9
60.1
20.4
6.2
18.7
6.3
5.2
56.8
Equip
ment
so
uth
ern
Afr
ica
Equip
ment
Russia
Auto
motive T
radin
g
Re
nt A
Car
Lo
gis
tics
Tota
l G
rou
p
REVENUE (R billion)
2018 2019
OPERATING PROFIT SEGMENTAL
14
POSITIVE EQUIPMENT AND MOTOR TRADING RESULT
50
20
15
141
2019(%)
46
21
13
14
6
2018(%)
n Equipment southern Africa n Equipment Russia
n Automotive Trading n Rent A Car
n Logistics
1 7
90
80
4
524
536
262
(133
)
3,7
62
1 8
36
719
561
523
38
(409
)
3,2
72
Equip
ment
so
uth
ern
Afr
ica
Equip
ment
Russia
Auto
motive T
radin
g
Re
nt A
Car
Lo
gis
tics
Co
rpora
te
Tota
l G
rou
p
OPERATING PROFIT (R million)
2018 2019
PRE-CORPORATE
OTHER PERTINENT ISSUES IN 2019
► Net operating expenses favourably impacted by improved GP margin resulting from change in sales mix in our Equipment businesses.
► Corporate costs impacted by:
BEE transaction costs R73 million
GMP charges R88 million
Investments in skills R40 million
Strategic projects R43 million
► Realised fair value adjustments in operating cash flows: R130 million (2018: R140 million).
15
► Fair value gains recognised in the income statement of R32 million (2018: losses R122
million) impacted by an unrealised gain of R173 million driven by the decision to
convert GBP150 million of the Equipment Iberia sale proceeds to USD in March 2019 in
anticipation
of the acquisition of the Mongolian Caterpillar dealership.
1,192
1,151 1,167
1,100
+35+8
+42
+1
+66
-41 -8-15
-13-50
-16-34
-35
-33
1,000
1,040
1,080
1,120
1,160
1,200
1,240
1,280
HE
PS
- S
ep 2
018
Eq
uip
me
nt Ib
eria
prio
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ar
pro
fits
HE
PS
fro
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on
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pe
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BW
E s
nA
excl a
ssocia
tes
DR
C
Ba
rze
m a
nd o
the
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Eq
uip
me
nt R
ussia
Au
tom
otive
- e
xclu
din
g A
vis
fle
et
Avis
Fle
et
Log
istics e
xcl K
LL
KL
L lo
sses
Han
dlin
g
Corp
ora
te e
xcl ab
norm
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Fv a
dju
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ts o
n U
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dep
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orp
UK
net
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nd
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01
9
HEPS AND NORMALISED HEPS ANALYSIS
16
INCLUDING AVIS FLEET*
* Refer to Annexure 3.1.
cents
STATEMENT OF FINANCIAL POSITION: YEAR ON YEAR CHANGE
17
IMPACT OF DECONSOLIDATION OF AVIS FLEET AND NMI-DSM
R million 2019 2018
Value
change
Non-current assets 14 540 19 231 (4 691)
Current assets 26 871 29 531 (2 660)
Assets classified as held for sale 5 780 497 5 283
Total assets 47 191 49 259 (2 068)
Equity 23 895 22 750 1 145
Non-current liabilities 7 336 8 917 (1 581)
Current liabilities 13 738 17 466 (3 728)
Liabilities classified as held for sale 2 222 126 2 096
Total equity and liabilities 47 191 49 259 (2 068)
Increase in investments in associates offset by
deconsolidation of Avis Fleet and NMI-DSM assets
Decrease in receivables; inventories and cash coupled
with deconsolidation of Avis Fleet and NMI-DSM assets
2019: Avis Fleet; Logistics Middle East and Smart Matta;
Barlow Park; other properties
2018: Logistics Middle East, Smart Matta, KLL; Barlow Park
Continued profitability of the group
NAV per share R112 (2018 R105)
Reduction in group borrowings offset by increase in the
UK pension fund deficit and coupled with deconsolidation
of Avis Fleet
Reduction in group borrowings, payables and
deconsolidation of Avis Fleet
2019: Avis Fleet; Logistics Middle East and Smart Matta
2018: Logistics Middle East, Smart Matta, KLL
DEBT MATURITY PROFILE
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Ratio of long-term to short-term debt 56:44 (Sept 2018 – 54:46)
R1.2 billion long-term bonds issued in current financial year
R1.7 billion bonds repaid in current year
R10.6 billion (committed R7.1 billion) unutilised bank facilities at Sept 2019
Cash and cash equivalents R7.3 billion (Sep 2018 – R7.9 billion)
STABLE YOY
R million Total
Short-term
redemption
Long-term
Redemption
South Africa 7 839 3 218 4 621
Offshore 530 530
Total debt Sep 2019 8 369 3 748 4 621
Total debt Sep 2018 11 171 5 176 5 995
EXPLAINING NET DEBT
19
AVIS FLEET: GROUP VS EXTERNAL FUNDING
R million
2019
Balance
sheet as
disclosed
Avis Fleet
(held for
sale)
Non-core
Logistics
(held for
sale)
2019
Balance
sheet
including
held for sale
2018
Balance
sheet
including
held for sale
Value
change
%
change
Cash 7 226 48 29 7 303 7 912 (609) (8)
Gross debt 7 808 561 8 369 11 171 (2 802) (25)
Net debt 582 513 (29) 1 066 3 259 (2 193) (67)
7,912
6,474
3,064
7,303 +765
+242
-1,927
-1,762
-486-1,057
-2,858
-1,000
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Opening cash Operatingcashflowsbefore WC
Working Capital Investment infleet and vehicle
assets
Other cashmovements in
operatingactivities
Investingactivity
Free Cash Flow Dividend paid Financingactivities
Non cashmovements
Closing cashbalance
CASH FLOW
FREE CASH FLOW R3 064m (2018: R3 591m)
20
cents
R2.5 billion
cash proceeds
from Iberia
Cash
proceeds from
Iberia still held
CASH INTEREST COVER, NET DEBT, EBITDA/ INTEREST COVER
21
FAVOURABLE TRENDS
Cash interest cover 4.7 x (2018: 3.2 x)
5,684
3,259
1,066
5.056.08
5.71
0
1
2
3
4
5
6
7
-
1,000
2,000
3,000
4,000
5,000
6,000
2017 2018 2019
Net debt EBITDA/interest cover
Net debt/ EBITDA 0.2 x (2018: 0.5 x)
R million times
CAPITAL STRUCTURE
Group segmental gearing ratios within target ranges:
22
Net debt of R1 065 million (2018: R3 276 million)
Below target ranges due to strong cash inflows in second half
EBITDA interest cover 5.71 x (2018: 6.08 x)
Net debt to EBITDA 0.2 x (2018: 0.5 x)
Moody’s confirmed Global Scale Rating of Baa3 (negative outlook) and National Scale Rating of Aa1.za
REMAINS STRONG
% Trading Leasing Car Rental
Total group
Gross
Total group
Net
Debt to equity
Target range 30 – 50 600 – 800 200 – 300
Ratio at 30 Sep 2019 13 604 208 35 4.5
Ratio at 30 Sep 2018 25 614 204 49 14
FOCUS ON CAPITAL ALLOCATION AND GROWTH
Corporate Initiatives:
Capacity for growth: Acquisitions
UK capital restructure
Realise full potential of existing businesses:
Operational transformation – Barloworld Business System
NMI – transition from subsidiary to associate (loss of control) effective 1 September 2019
Restructure Avis Fleet and Equipment Rental assets
23
DELIVER VALUE >15%
ROE 2019 Uplift by 2022
10.1% 3.0% – 4.0%
Medium term target capital structure:
Debt: Equity 40% – 60%(excluding IFRS 16)
9.310.5
11.410.1
0
2
4
6
8
10
12
2016 2017 2018 2019
ROE (%)
Automotive and Logistics
KAMOGELO MMUTLANACEOAUTOMOTIVE AND LOGISTICS
AUTOMOTIVE
25
2019 HIGHLIGHTS
Enhancing
returns
Balanced
portfolio
Operating
environment
Financial
performance
Optimise returns through exiting of Avis Fleet Tanzania Avis Fleet: Held for sale – Transaction in 2020 as part of Group capital release
program
Outperformed market in new vehicle unit sales Improved used vehicle margins in subdued market Growth in total managed fleet
NAAMSA total new vehicle market decline by 3% Low business and consumer confidence New vehicle market impacted by vehicle price inflation and financing affordability Despite the second quarter GDP growth, no immediate recovery in new vehicle market SAVRALA car rental market show marginal growth on prior year
Automotive delivered an excellent result Strong cash generation Delivered ROIC above Group target Focus on cost and balance sheet management rewarded
22%
12%
66%
2019 SALES (R billion)
31%
36%
33%
2019 OPERATING PROFIT(R million)
AUTOMOTIVE
26
SALES AND OPERATING PROFIT BY BUSINESS UNIT
n Car Rental 6.3
n Avis Fleet 3.4
n Motor Trading 18.7
n Car Rental 523
n Avis Fleet 625
n Motor Trading 561
R28.4 billion R1.7 billion
Divisional Overview
KAMOGELO MMUTLANACEOAUTOMOTIVE AND LOGISTICS
FINANCIAL PERFORMANCE
Revenue down 4.8% – comparable basisdown 1.0%
Strong performance from Motor Trading
Achieved 13.2% ROIC (2018: 12.4%)
R0.8 billion reduction invested capital
R1.3 billion in free cash flow(2018: R690 million)
Avis Fleet held for sale
Deconsolidation NMI-DSM,effective 1 September 2019
28
AUTOMOTIVE
Continuing operations
2018 2019 Change
(%)
2018 2019 Change
(%)
Revenue (R billion) 29.81 28.38 -4.8 26.48 25.00 -5.6
Operating profit (R million) 1701 1709 -0.5 1060 1084 +2.3
Operating margin (%) 5.7 6.0 +0.3bps 4.0 4.3 +0.3bps
BUSINESS UNIT PERFORMANCE
Operating profit down 2.5%
Positive 2H growth in Car rental market, following negative 1H
Limited rental rate increases in highly competitive environment
Billed days negatively impacted by leisure
Increased used vehicle margin despite subdued market
Vehicle costs well managed
0.2bps improvement on ROIC – reduced investedcapital R0.4 billion
Optimise returns through operational efficiencies
29
CAR RENTAL
2018 2019 Change
(%)
Revenue (R billion) 6.53 6.27 -3.9
Operating profit (R million) 536 523 -2.5
Operating margin (%) 8.2 8.3 +0.1bps
26,304
27,209
26,991
26,624
76% 76% 76% 76%
50%
55%
60%
65%
70%
75%
80%
25,800
26,000
26,200
26,400
26,600
26,800
27,000
27,200
27,400
FY16 FY17 FY18 FY19
Fleet Utilisation
BUSINESS UNIT PERFORMANCE
Revenue down 6.1% – comparable basis down 0.4%
Operating profit up 7.1% – comparable up 9.7%
Outperformed new market – vehicle units salesdown 4.8%
represented dealer market declined by 5.6%
Premium segment continues to decline and volume brands under pressure
Delivered sterling performance in double digitsROIC growth
Optimisation of cost base and portfoliostrengthened results
Record year from SMD (Salvage Managementand Disposal)
30
MOTOR TRADING
2018 2019 Change
(%)
Revenue (R billion) 19.96 18.74 -6.1
Operating profit (R million) 524 561 +7.1
Operating margin (%) 2.6 3.0 +0.4bps
53,174 51,677 50,363 47,790
NEW ANDUSED VEHICLES
2016 2017 2018 2019
15.8% 14.3%18.3%
ROIC 2017 2018 2019
44,188 43,09945,749
48,963
SALVAGEUNITS
2016 2017 2018 2019
AUTOMOTIVE
Balanced portfolio will continue to provide resilience throughout the cycle
Low growth expected in car rental days for the short term
Continue to grow new and used vehicle sales despite limited growth
Healthy pipelines for fleet growth in Southern Africa
Acquisition of BMW Centurion concluded, effective 1 October
BMW to implement agency model, effective January 2020
Continued focus on delivering ROIC above hurdle rate
Positive free cash generation
Barloworld Business System Rollout – operational efficiencies and customer experience
31
OUTLOOK
Divisional overview
CHARL GROENEWALDCEOLOGISTICS
FINANCIAL PERFORMANCE
2019 disappointing operating performance of R38 million
impacted by:
Identified non-core businesses held for sale
Onerous leases
Poor economic conditions, civil unrest and unplanned
port strikes
Turnaround challenges
Lower trading volumes and non-renewal of contracts in 2018
Increased fleet management costs driven by fleet ownership
model change
Continuing operating profit of R160 million drove a normalised
ROIC of 9.5%
33
LOGISTICS
Continuing operations 2018 2019 Change (%)
Revenue (R billion) 5.02 4.60 -8.4
Operating profit (R million) 310 160 -48
Operating margin (%) 6.2 3.5 -2.7bps
Total kilometers (‘m) 130.6 120.8 -7.5
LOGISTICS: CONTINUING OPERATIONS
CONSOLIDATING GAINS, SOLID BASE FOR 2020
Customer Retention
Growth
Fix & Optimise
5% growth in Global solutions
Transport: new business won in LT Contract and Energy
Solid pipeline of opportunities pursued
Leveraging Emerging Trucker and Digital Solutions
100% Supply Chain solutions
90% Transport
Go-live with new Managed Transport solution
Management continuity and cultural transformation
Conclude disposal of non-core businesses
Strengthened Team to support Supply Chain & Select Transport Growth
Reduce cost of engagement and facilitate skills optimization through Automotive integration
Continued focus on delivering ROIC between 11- 13%
LOGISTICS STRATEGY
35
CONSOLIDATE
GAINS
Capitalise on scale
provided through
integration and
reduce cost of
engagement
OPTIMISE
PORTFOLIO
Exit non-core and
improve sub-optimal
businesses Leverage
Barloworld Business
System
EXPLORE NEW
MARKETS
Grow internal
fulfilment business
in equipment and
automotive
INNOVATION
FOR GROWTH
Transform business
models to enable
exponential growth
VISION
To be the logistics and supply chain partner of choice
1 2 3 4
5
TURNAROUND AND TRANSFORMATION JOURNEY CONTINUES
Divisional overview
QUINTON MCGEERCEOEQUIPMENT RUSSIA
FINANCIAL PERFORMANCEEQUIPMENT RUSSIA
Revenue of $432.5 million down 28.6% –2018 included large package mining machine deals not repeated in 2019
The impact of increased import dutieson business performance was less severe than originally anticipated
Operating profit of $50.1 million down 18.7% (2018:$61.7 million)
Operating profit margin in USD improved to 11.6% (2018: 10.3%) – positively impactedby sales mix and continued cost control
ROIC of 17.7% (2018: 21.6%)
Cash generation of $36.6 million(2018: $22.3 million)
37
2018 2019 Change
(%)
Revenue (R billion) 7.78 6.19 -20.4
Operating profit (R million) 804 719 -10.6
Operating margin (%) 10.3 11.6 +1.3bps
AFTERMARKET DRIVING PROFITABILITY
24%25%
29%36%
28% 27%33% 46% 61% 51%
51%37% 51%
-
100
200
300
400
500
600
700
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Product support Equipment sales OP Margin
3.4%5.6%
9.6% 9.1%
8.7%
10.5%
11.2%
12.1%
11.0%
10.2%
6.1%5.2%
Global
Financial
Crisis
Crimea
Crisis and
Sanctions
Sanctions and
Retaliatory
Duties
Oil drops
to ~USD30
Revenue mix: product support vs equipment sales
$m
11.6%
76
16
7 2
Mining Infrastructure Power Other
2019 New equipment revenue (%)
Mining is the main contributor
to equipment sales
38
DIVERSIFIED COMMODITY EXPOSUREDEFENDS AGAINST CYCLICALITY
39
40
139
7
9
22
2013 REVENUE (%)
35
31
8
7
4
15
2019 REVENUE (%)
n Gold
n Coal
n Copper/nickel/aluminium
n Oil
n Diamond
n Other
n Gold
n Coal
n Copper/nickel/aluminium
n Oil
n Diamond
n Other
-
50
100
150
200
250
300
350
400
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Opening Firm Orders Annual sales
FIRM ORDER BOOK TRENDS
USD million
40
MINING ACCOUNTS
41
Norilsk
Mirniy Yakutsk
Nerungry
Omsk
Barnaul
Novosibirsk
KemerovoAchinsk
MezhdurechenskKrasnoyarsk
Chita
Ulan-UdeIrkutsk
Magadan
Anadyr
Petropavloysk-
Kamchatskiy
Greenfields/Major Projects Firm order (September 2019) YTD September 2019
Polyus
$21.8m $35.0 $16.7m
Norilsk Nickel
$30.7m $24.5m $11.1m
Alrosa
$4.5m $1.9m
Pavlik
$23.9m $0.6m
Kekura
$20.0m
Service Integrator
$6.0m $6.0m $6.6m
NordGold
$12.5m $19.2m
KazMinerals (2023)
$300m $2.4m
SUEK (underground)
$17.4m $22.6m
OVERALL OUTLOOK
Russia is a key market for the group, with the mining sector and commodity outlook expectedto remain stable
The impact of increased import duties on business performance expected to stay unchanged
Pleasing growth in the firm order book
Aftermarket revenues expected to improve on the back of increased machine population, component rebuilds and salvage capabilities
Operational excellence initiated through BBS
Continued focus on balance sheet efficiencies to support returns and cash generation
42
Strong Order book
$44 million
End of September ($113 million)
+213%
Additional $25 million of new firm orders signed after 30 September
$25 million
2018
2019
Divisional overview
EMMY LEEKACEOEQUIPMENT SOUTHERN AFRICA
Section five
43
FINANCIAL PERFORMANCEEQUIPMENT SOUTHERN AFRICA
Revenue up 3.3% driven by 7.7%aftermarket growth
Machine sales flat, gains in mining equipment sales offset by reduction in construction equipment sales
Rest of Africa revenue contribution down to 32%
Operating profit up 2.6% to R1.84 billion
Operating margins in line with prioryear despite continued investmentin operational transformation
Associate income up 1% to R249 million boosted by strong performance from JV in DRC
Return on invested capital at 12.5%
Strong cash generation of R2 014 million
44
2018 2019 Change
(%)
Revenue (R billion) 19.78 20.43 +3.3
Operating profit (R million) 1790 1836 +2.6
Operating margin (%) 9.1 9.0 -0.1pp
RESILIENT AFTERMARKET CONTRIBUTIONTO TOTAL REVENUE
4545
38%33%
41%
43%
50% 56% 57% 52%54%
9.8%9.4%
8.7%9.0% 9.0%
8.5%
9.8%
9.1% 9.0%
8.6%
8.6%
8.2%8.4%
8.3%7.5%
8.3%8.6% 8.5%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
R-
R5,000
R10,000
R15,000
R20,000
2011 2012 2013 2014 2015 2016 2017 2018 2019
Sales in R million
Aftermarket Equipment Sales Operating margin EBIT margin
ROIC MARGINALLY BELOW HURDLE RATE, IMPROVING RETURNS IN REST OF AFRICA
46
Average invested capital
RSA Namibia Mozambique Zambia Malawi Botswana Angola
Southern
Africa
2018 6 650 392 749 753 86 517 1 736 10 880
2019 6 798 405 1 092 758 98 473 1 809 11 486
18
.6%
27
.6%
11
.6%
2.4
%
8.2
%
-2.5
%
-3.4
%
12
.7%
17
.1%
17
.2%
15
.1%
12
.2%
6.7
%
-9.7
%
0.7
%
12
.5%
RSA Namibia Mozambique Zambia Malawi Botswana Angola SouthernAfrica
2018 2019 Hurdle rate
Group hurdle rate 13%
NEW EQUIPMENT SALES BY PRODUCT SEGMENT
47
50
8
42
2019 (%)
n Mining
n Construction
n Energy and Transportation
43
8
49
2018 (%)
n Mining
n Construction
n Energy and Transportation
NEW MACHINES SALES TO SECTOR
48
DEMAND FOR MINING REMAIN STRONG
Sales into Mining led by significant shift from
owner to contract mining
Contract mining demand greater than 50%
of total sales into the mining sector
Machine availability, financing (CATFin) and
product mix remain instrumental to sales growth
55% 74% 72%
2017 2018 FY19
Machine sales to sector
Mining Construction
3847 48
24
16 17
3710 3
32 7
149
511
571
25
125
2017 2018 FY19
Coal Diamonds Iron Ore Other Platinum Phosphate Manganese Gold Copper
Other refers: Uranium, zinc, Gemstone and mineral sands
Mining machines sales split by commodity (%)
DIVERSE COMMODITY EXPOSURE
49
DEFENDS AGAINST CYCLICALITY
BARTRAC JV: POSITIVE RETURNS DESPITE HEADWINDS
Bartrac continues to deliver strong returns, despite
challenging regulatory and fluctuating commodity
prices
Opportunity to capture growing Chinese operators in the region
Working capital management and cash generation remain key focus areas
Share of income expected to decline in 2020 due to a reduced level of activities at key customer operations
97
251268
2017 2018 2019
Associate income from Bartrac (R million)
50
MINING PROJECTS OUTLOOK
51
Tharisa
$4m $6.5m
Vale
$11m $14m $8.5mANGOLA ZAMBIA
MOZAMBIQUE
NAMIBIA
RSA
ZIMBABWE
BOTSWANAKolomela
$100m
Golder
$50m
Makhado Coal
$80m
Mogalakwena
$15m $45m
Greenfields/Major Projects Firm order Delivered 19 to date
Venetia
$50m
Orapa
$100m
Maravi Copper
$17m
Mota Engil
$40m
OUTLOOK
52
MINING
Mining in RSA expected to remain stable supported by favorable
commodity prices.
Headwinds expected in the near term in DRC mainly due to reduced
activities in 2020.
CONSTRUCTION
RSA construction market unlikely to turn in the near term. Opportunity to
grow market share in both machines and aftermarket through competitive
product range and aftermarket solutions.
ENERGY &
TRANSPORTATION
Focus on Mozambique and Rovuma LNG opportunities
Leverage local packaging to grow market share
GENERAL
Order book remains strong at R2.1 billion (Sept 2018: R2.4 billion)
Focus on cost and invested capital reduction
Positive cash generation
R2 429 million
R 2 077 million
Order book
2018
2019
Strategy update and Outlook
DOMINIC SEWELAGROUP CHIEF EXECUTIVE
Equipment operational
transformation
Motor retail
portfolio review
Motor retail cost
base reduction
Avis Fleet – held for
sale 19, JV structure
Automotive restructure
of car rental assets
UK capital restructure
Acquisition of
CAT dealership
in Mongolia
Acquisitive growth
opportunities
Logistics improvement
and restructuring
Logistics disposal of
underperforming assets
Middle East
Smartmatta
KLL
FOCUSED ON IMPLEMENTING OUR STRATEGY
54
UNLOCKING VALUE FROM THE BUSINESS
GROUP OUTLOOK
Challenging macroeconomic environment as well as volatile geopolitical dynamicsin key markets expected to prevail in the short term
Barloworld will continue to generate resilient results
Good market positions, strong customer relationships, well established footprint,deep knowledge of industry and local market dynamics
Strategy implementation creates a platform to deliver value in the short to medium term
Equipment
Southern African order book to remain strong driven by demand from contract miners –Batrac JV impacted by reduced level of activities at key customer operations.
Equipment Russia outlook remains positive – pipeline for major projects remains strong
Automotive
Continued focus on achieving optimal returns above group hurdle rates
Logistics
Turnaround project continues, much improved performance expected
55
Thank you
Supplementary information
ANNEXURE 1: CHALLENGING REGULATORY AND OPERATING ENVIRONMENT
RSA
Slowdown in Construction
sector but some recovery
in Mining
Impact of new Mining
Charter and DTI code
on local manufacturing
and procurement
MOZAMBIQUE
Localisation of workforce
High level of inflation
High exposure to
metallurgical coal
DRC
Increase in royalties
50% localization
of services
High exposure to
copper and cobalt
ZAMBIA
New sales
tax/mining charter
Overtime and
housing legislation
High exposure
to copper
ANGOLA
Oil price key to
economic recovery
Currency devaluation
and shortage of forex
Limited allocation
of letters of credit
Subdued equipment/
Power market
BOTSWANA
High exposure to
diamonds/single
customer dependency
NAMIBIA
Increasing Chinese
presence in construction
Marginal profitability
in uranium mines
MALAWI
Subdued construction
driven market
ZIMBABWE
Underdeveloped
mining industry
Hyperinflation
58
ANNEXURE 2.1: IMPACT OF CURRENCY YOY
59
ZAR DEPRECIATION YOY
Closing rate Average rate
Rand 2019 2018 2019 2018
Exchange rates
United States Dollar 15.16 14.15 14.31 13.01
Euro 16.53 16.44 16.14 15.48
British Sterling 18.68 18.45 18.27 17.53
R million
Increase/
(decrease) in
revenue
Increase/
(decrease) in
operating profit
Headline earnings
improvement/
(decline) due to
exchange rates
Equipment southern Africa 477 60 31
Equipment Russia 559 67 49
Automotive 40 3 (0)
Handling 2 1 1
Logistics 10 0 0
Corporate Office – (8) (0)
Total Group 1 087 123 81
ANNEXURE 2.2: ANGOLA CURRENCY EXPOSURE
60
GREAT STRIDES MADE
66
64
57
2017 2018 2019
USD-LINKED INVESTMENT IN ANGOLAN GOVERNMENT BONDS (USDm)
30
10 10
2017 2018 2019
RESTRICTED KWANZA CASH (USDm)
ANNEXURE 3.1: NORMALISED HEPS FROM CONTINUING OPERATIONS
61
INCLUDING AVIS FLEET
Reconciliation of normalised HEPS:
Group HEPS per the 2019 financial statements 1 100.0
Add back UK Guaranteed Minimum Pension adjustment 34.8
Add B-BBEE Khula Sizwe costs 32.6
Normalised HEPS including Avis Fleet 1 167.4
ANNEXURE 3.2: PROFORMA CONTINUING HEPS
62
867
131
51
FY18 FY19
cents
Continuing HEPS Leasing interest in continuing operations 50% JV leasing interest
1 049
910
Avis Fleet held for sale (discontinued operation in 19). On dilution to 50% in 20 the JV
results will be equity accounted in continuing operations.
AVIS FLEET JV PROFORMA IMPACT
Khula Sizwe Implementation and IFRS 16 (refer to Annexure 9.1 and 9.2).
ANNEXURE 4 EXTRACTS FROM THE ANNUAL FINANCIAL STATEMENTS
Refer to the link below for the following extracts of Notes to the financial statements:
Note 1: Operating and Geographical Segments
Note 5: Finance costs
Note 8: Taxation
Note 13: Investments in Associates and Joint Ventures
Note 20: Discontinued Operations and Assets Held for Sale
Note 23: Provisions
Note 25.2: Contract Liabilities
Note 33: Changes in Accounting policies
Link: https://www.barloworld.com/investors/
63
ANNEXURE 5: INVESTMENT IN WORKING CAPITAL
64
STRONG IMPROVEMENT YOY
Rm 2019 2018
Working capital
Inventories – movement 686 (1 466)
Receivables – movement 244 (1 423)
Payables – movement (165) 824
Total working capital – decrease/ (increase) 765 (2 065)
Rm 2019 2018
Segmental
Equipment southern Africa 733 (1 245)
Equipment Iberia (91)
Equipment Russia (7) (497)
Automotive 501 (171)
Logistics (129) 77
Other (333) (138)
Total working capital – decrease/ (increase) 765 (2 065)
ANNEXURE 6: CASH FLOW AND NET DEBT RECONCILIATION
65
IMPACT 2019: WORKING CAPITAL (2018: EQUIPMENT IBERIA)
R million
2019
Actual
2018
Actual
Net debt to CF reconciliation
Net debt – beginning of the year (3 259) (5 735)
Net debt – end of the period (1 064) (3 259)
Change in net debt 2 193 2 476
(Consumed)/ generated as follows:
Net cash applied to operating activities after dividends 2 493 747
Net cash (used in)/ retained investing activities (486) 1 891
Non-controlling interest purchases 9 (257)
Khula Sizwe black public funding 164
Effect of USD-denominated cash 171
Shares repurchased for equity-settled share-based payments (122) (43)
Translation and other movements in financing activities (36) 137
2 193 2 476
ANNEXURE 7: OTHER PERTINENT ISSUES
Effective tax rate of 28.8% on continuing earnings (excluding Avis Fleet – refer Annexure X)– tax rate expected to increase above 30% (currency may impact 2020)
2020 Capex expected to be in line with 2019
Khula Sizwe implementation (refer to appendix)
IFRS 16 (refer to appendix)
66
LOOKING FORWARD
ANNEXURE 8: FOCUS AREAS GOING FORWARD
67
METRICS FOCUSED
ON RETURNS
STRATEGY
IMPLEMENTATION
MANAGING FOR
VALUE TARGETS
ROE 10.1%
HEPS GROWTH* 1 167 >15%
GEARING** 4.5% 40 – 60%
ROIC 11.9% >13%
EP (323) Positive delta
FCF R3 064 million Cash conversion >50% EBITDA
DIVIDENDS 462 cents plus special dividend R500 million 2.5 – 3 times cover
* Continuing operations incl. Avis Fleet. ** Net debt: equity.
Definitions
ROE: Return of Equity
ROIC: Return on Invested Capital
EP: Economic Profit
FCF: Free Cash Flow
ANNEXURE 9.1: KEY CHANGE TO THE FINANCIAL STATEMENTS FROM 2020
68
KHULA SIZWE: EFFECTIVE 1 OCTOBER 2019
KHULA SIZWE: EFFECTIVE 1 OCTOBER 2019
KHULA SIZWE WILL BE CONSOLIDATED INTO THE BARLOWORLD GROUP RESULTS
TRANSPARENT DISCLOSURE
2019 impact: Implementation costs and capex cash flows
2020 impact:
BAW cash flow on implementation: R2.2 billion (post taxes and facilitation)Khula Sizwe debt: R2.2 billion
Separate segmental disclosure of Khula Sizwe stand alone results(consolidated into the BAW group)
Transparent disclosure of divisional rentals charged by Khula Sizwe(reflective of IFRS 16 rental charges)
69
Indicative disclosures
Segmental operating result: RXX
Impact of IFRS 16 (excluding Khula Sizwe): RXX
Impact of Khula Sizwe: RXX
Segmental operating result excluding IFRS 16 and Khula Sizwe: RXX
KHULA SIZWE: EFECTIVE 1 OCTOBER 2019
70
TRANSPARENT DISCLOSURE: 2020 IMPACT
Rm
Indicative impact on consolidated headline earnings
IFRS 2 charges (107)
Tax relief on employee contribution (over 2 years) 24
Foundation investments (dividends) – tax exempt (30)
Barloworld finance charge relief net of tax* 136
Khula Sizwe management fees (8)
Khula Sizwe finance charges (209)
Khula Sizwe tax charges (59)
Khula Sizwe NCI – black public 30% 45
(208)
Headline earnings per share impact based on 211m shares 98.58 cents
Tax on sale of properties (once off outside HEPS) 136
KHULA SIZWE: EFECTIVE 1 OCTOBER 2019
IFRS 2 charge will reduce to R22m from 2022-2024
Barloworld finance charge relief calculated as R2.2b @ 8.6% net of tax
Annual rental escalation: 8%
Management fees: 3% of annual rental
Khula Sizwe finance charges calculated as R2.2 billion @ 9.6%
In the event that Barloworld loses control of Khula Sizwe in terms of IFRS 10:ConsolidatedFinancial Statements, Khula Sizwe would be ‘deconsolidated’ from the Barloworld Group.Assuming that this takes place at the end of the initial empowerment period of 10 years, thiswould result in the Group recognising a loss on disposal of Khula Sizwe of approximatelyR2.5 billion, representing the estimated net asset value of Khula Sizwe after the initialempowerment period of 10 years. The net asset value of Khula Sizwe has been estimatedassuming no appreciation of the value of the Properties from the date of acquisition.
Note that funding rates have reduced from the initial estimates, hence the higher net asset value of Khula Sizwe at the end of the 10 year empowerment period compared to initial guidance.
71
NOTES TO THE KHULA SIZWE TRANSACTION
ANNEXURE 9.2: KEY CHANGE TO THE FINANCIAL STATEMENTS FROM 2020
No impact on strategy or capital allocation discipline
Modified retrospective approach adopted – cumulative effect in equity
Practical expedients applied
(onerous leases; short term <12 months; low value assets <R85k)
Net cash flows remain the same however interest portion of lease payments now allocated to financing activities (IAS 17: operating activities)
Indicative financial statement impact based on group borrowing rates:
On transition
Right of use asset 1 Oct 2019: R2.1 – R2.3 billion
Lease liability 1 Oct 2019: R2.6 – R2.7 billion
72
IFRS 16: LEASES EFFECTIVE 2020
IFRS 16: LEASES EFFECTIVE 2020
No impact on strategy or capitalallocation discipline
Modified retrospective approachadopted – cumulative effect in equity
Practical expedients applied
(onerous leases; short term <12 months; low value assets)
Net cash flows remain the samehowever the interest portion of lease payments now allocated to financing activities (IAS 17: operating activities)
73
Indicative financial statement impact based on group borrowing rates:
2020 and ongoing impact
Operating profit increase: Depreciation of the ROU in 2020 < IAS 17 rental expense: R500 million to R600 million
Finance charge increase: R300 million to R400 million.
Under IAS 17 the lease smoothing expense would have been R770 million.
Profit after tax/headline earnings decrease <5%
Increase in free cash flow but nooverall net cash flow impact: increase in operating cash flows with corresponding increase in financing cash out flows):R R520 million – R540 million
NB: The group lease profile and the incremental borrowing rates applied may change in the ordinary course of our
business. As such, the actual impact of implementing IFRS 16 and this estimate may differ.
