Year-end results for the 12 months ended 30 September 2020...Profit before non operating capital...

Year-end results for the 12 months ended 30 September 2020

30 NOVEMBER 2020

FORWARD LOOKING STATEMENTS

Barloworld may, in this document, make certain statements that are not historical facts that relate to analyses and other information based on forecasts of future resultsand estimates of amounts not yet determinable. These statements may also relate to our future prospects, developments and business strategies. Examples of suchforward-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 business performance outlook. Words such as “believe”,“anticipate”, “expect”, “intend", “seek”, “will”, “plan”, “could”, “may”, “endeavour”, “target”, “forecast” and “project” and similar expressions are intended to identify suchforward-looking statements, but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks anduncertainties, both general and specific, and there are risks that the predictions, forecasts, projections and other forward-looking statements will not be achieved. If oneor more of these risks materialise, or should underlying assumptions prove incorrect, our actual results may differ materially from those anticipated. You shouldunderstand that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentionsexpressed 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 to update or revise any of them, whether as aresult of new information, future events or otherwise.

All references to years refer to the financial year end 30 September 2020.

Comprehensive additional information is available on our website: www.barloworld.com

2

http://www.barloworld.com/

PRESENTATION OVERVIEW

3

Opening and welcome Zanele Salman, Head Investor Relations

Highlights Dominic Sewela, Group CEO

Financial overview Nopasika Lila, Group FD

Automotive and Logistics update Kamogelo Mmutlana, CE

Barloworld Equipment Russia update Quinton McGeer, CE

Barloworld Equipment snA update Emmy Leeka, CE

Strategy Update and Group Outlook Dominic Sewela, Group CEO

Questions and answers

Group highlights

DOMINIC SEWELA

GROUP CEO

SUSTAINABLE VALUE CREATION

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) EMBEDDED IN THE BUSINESS

Sustainable development underpins group

strategic ambitions

Balancing stakeholder interests

Sustainability commitment in existing operations

and acquisitions

Constituent of various indices

Set targets and drive initiatives to create

sustainable shared value

5


ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) EMBEDDED IN THE BUSINESS

Sustainable development underpins group

strategic ambitions

Balancing stakeholder interests

Sustainability commitment in existing operations

and acquisitions

Constituent of various indices

Set targets and drive initiatives to create

sustainable shared value

6


FOR OUR PEOPLE, COMMUNITIES & ENVIRONMENT

COMMUNITIES ENVIRONMENT

Barloworld foundation:

Trustees appointed with full governance framework

Received R47m in dividends

Mbewu Leadership Incubation

program – R30m investment

COVID-19 relief fund:

R22m to 50 Enterprise Supplier Development beneficiaries

+800 jobs sustained in SMMEs

Safety is a key priority across

Barloworld

Continued focus on “zero harm”

LTIFR 0.52 (2019: 0.57)

Regrettably, we have had

employee fatalities:

2 work-related in Logistics (motor vehicle accidents)

6 due to COVID-19 during the period

Focus on energy consumption, emissions, water and waste management

Improvement against 2015 baseline

-20% non-renewable energy (GJ)

-23% emissions (scope 1 and 2) (tCO2e)

-13% water (municipal sources) (ML)

Water scheme initiative in Zambia providing access to clean, safe water during COVID-19

7

PEOPLE

HIGHLIGHTS

AND STRATEGIC ACTIONS

Share buy-back

Completed acquisition

of Tongaat Hulett Starch

Completed Equipment

Mongolia acquisition

Special dividend 485m

*Subject to true up

1.6bn

4.9bn*

2.8bn

Strong net debt position 2.6bn

Cash payout to impacted

employees (retrenchment) 395m

Total savings from austerity

measures taken during

the period691m

Cash generated from

operations 5.8bn

8

Financial overview

NOPASIKA LILA

GROUP FINANCE DIRECTOR

NEW ACCOUNTING STANDARDS IMPACTING THE FINANCIAL STATEMENTS –IFRS 16 LEASES

10

The accounting policies applied in the preparation of the financial statements, 30 September 2020 are consistent with those applied at 30 September 2019 except for the adoption of IFRS 16 Leases effective1 October 2019.

The adoption of IFRS 16 impacts the following:

Operating profit/HEPS;

Finance costs

Operating and Investing cash flows;

Right of Use (ROU) Asset and Lease Liability.

TRANSACTIONS IMPACTING THE FINANCIAL STATEMENTS

11

OPERATIONAL CHANGES: AVIS FLEET AND NMI-DSM

2020 2019

Income statement

Avis Fleet Continuing Operations Held for sale (discontinued operation)

Restated to continuing operations

NMI-DSM Equity accounted

(50% shareholding)

Consolidated for 11 months (51.18%

shareholding), Equity accounted 1 month

(50% shareholding)

Mongolia Results for 1 month consolidated

Statement of financial position

Avis Fleet Assets and liabilities consolidated in group Assets and liabilities consolidated in group

NMI-DSM Investment in associate Subsidiary for 11 months, Investment in

associate for 1 month

Mongolia Assets and liabilities consolidated in group

FINANCIAL OVERVIEW SEPTEMBER 2020

12

IMPACT OF EXCEPTIONAL ITEMS OF FINANCIAL PERFORMANCE IN 2020

Normalised Headline (Loss)/

Earnings#

(30 cents)Down from

(2019: 1 167 cents earnings)

Net profit after tax

impact of IFRS 16:

R105m (reduction in net profit)

Effective 1 October 2019

Khula Sizwe costs

IFRS 2 Charges R223m

Implementation costs R13mUp from

(2019: R73m)

Non-operating and capital items

(R1.9b)Down from

(2019: R75m profit)

Fair value adjustments on financial

Instruments loss

(R340m)Down from

(2019: R 22m profit)

Effective tax rate

251%Up from

(2019: 28.6%)

# Group excluding IFRS 16 and B-BBEE transaction charges

Rm 2020

IFRS 16

Impact

2020

Excl.

IFRS 16

2019

Restated

Change %

Incl.

IFRS 16

Revenue 49 683 49 683 60 206 (17%)

EBITDA 4 829 (549) 4 280 6 471 (25%)

Depreciation and amortisation of intangibles (2 797) 403 (2 394) (2 501) 12%

Operating profit before B-BBEE transaction 2 033 (147) 1 886 3 970 (49%)

B-BBEE transaction charge (236) (236) (73) (>100%)

Operating profit 1 797 (147) 1 650 3 897 (54%)

Fair value adjustment on financial instruments (340) (340) 22 (>100%)

Net finance cost (1 119) 285 (834) (931) (20%)

Profit before non operating capital items 338 138 476 2 988 (89%)

Non-operating and capital items (1 900) (1 900) 75 > 100%

(Loss)/profit before taxation (1 562) 44 (1 425) 3 063 (> 100%)

Taxation (889) (33) (923) (850) (6%)

(Loss)/profit after taxation (2 451) 105 (2 347) 2 213 (> 100%)

(Loss)/Income from Associates and JVs (48) (48) 231 (> 100%)

(Loss)/profit – Continuing operations (2 499) 105 (2 395) 2 444 (> 100%)

Profit from discontinued operations - - - 33 (>100%)

(Loss)/profit for the period (2 499) 105 (2 395) 2 477 (> 100%)

STATEMENT OF COMPREHENSIVE INCOME

Revenue: On a comparable basis revenue decreased by 12% from 2019 considering the inclusion of R3.9bn in 2019 from NMI-DSM now classified as an associate.

Non-operating and capital items largely impacted by goodwill impairments (R702m),investment write-offs (R194m) and Impairment of intangible assets and PPE (R993m).

Included in the Fair value adjustment on financial instruments are forex losses of R154m which were incurred in the Equipment business in Angola due to the currency devaluation. The USD denominated cash resulted in a R186m loss(2019: R171m gain)

13

A CHALLENGING YEAR

CONTINUING REVENUE SEGMENTAL

14

TOUGH TRADING CONDITIONS PREVAILED IN FY’20; FY’19 INCLUDES NMI-DSM 11 MONTHS

n Equipment southern Africa

n Equipment Eurasia

n Automotive Trading

n Rent A Car

n Leasing

n Logistics

Rm 2020

IFRS 16

impact

2020

Excl. IFRS 16

2019

Restated

Change %

(incl. IFRS 16)

Revenue 49 683 – 49 683 60 206 (17%)

20.4

6.2

18.7

6.3 3.4 5.2

60.2

17.6

7.612.6

5.1 3.0 3.8

49.7

Equipmentsouthern

Africa

EquipmentEurasia

AutomotiveTrading

Rent A Car Leasing Logistics Total Group

REVENUE (R billion)

FY'19 FY'20 Includes

R3.9bn NMI-

DSM Revenue.

FY’19 in Automotive Trading includes 3.9bn NMI revenue

35

1525

10

68

2020(%)

34

1031

10

69

2019(%)

Includes R3.9bn

NMI-DSM

Revenue.

OPERATING PROFIT SEGMENTAL

ROBUST RUSSIAN RESULT AND AFRICAN RESULTS UNDER PRESSURE

15

1836

719 561 523625

38 (408)

3,897

1,191834

(12) (142)

444

(153) (441) 83

1,796

Equipmentsouthern

Africa

EquipmentEurasia

AutomotiveTrading

Rent A Car Leasing Logistics Corporate KhulaSizwe

Total Group

OPERATING PROFIT (R million)

FY'19 FY'20

Includes R125m

NMI-DSM Operating

profit.

Includes R147m IFRS

16 impact.

Automotive Trading FY’19 includes R125m NMI-DSM Operating

profit

Total group FY’20 includes R147m IFRS 16 impact

Rm 2020

IFRS 16

impact

2020

Excl. IFRS 16

2019

Restated

Change %

(incl. IFRS 16)

Operating profit 1 797 (147) 1 650 3 897 (54%)

n Equipment southern Africa

n Equipment Eurasia

n Automotive Trading

n Rent A Car

n Leasing

n Logistics

47

33

17

3

2020(%)

43

17

13

12

151

2019(%)

FAIR VALUE ADJUSTMENTS OF FINANCIAL INSTRUMENTS

IMPACT OF FOREIGN EXCHANGE MOVEMENTS WELL MANAGED

16

Higher fair value adjustments of financial instruments was due to weakening local currencies against the USD offset by

hedging gains in our Equipment business.

Rm 2020

IFRS 16

impact

2020

Excl. IFRS 16

2019

Restated

Change %

(incl. IFRS 16)

Fair value adjustment on financial instruments (340) – (340) 22 >100%

NET FINANCE COSTS

NET FINANCE COSTS CONTAINED THOUGH IMPACTED BY IFRS 16

17

Rm 2020

IFRS 16

impact

2020

Excl. IFRS 16

2019

Restated

Change %

(incl. IFRS 16)

Net Finance cost (1 119) 285 (834) (931) (20%)

Higher finance costs against FY’19 were driven by IFRS 16 (R285m finance cost impact).

Whilst debt levels are higher in the group there was some relief from marginally lower funding costs in SA.

NON-OPERATING AND CAPITAL ITEMS

18

COVID-19 AND ECONOMIC DOWNTURN IMPACT FUTURE EXPECTATIONS RESULTING IN IMPAIRMENTS

Rm 2020

IFRS 16

impact

2020

Excl. IFRS 16

2019

Restated

Change %

(incl. IFRS 16)

Non-operating and capital items (1 900) – (1 900) 75 >100%

Non-operating and capital items largely affected by impairments: 2020 2019

Car Rental Goodwill (619) –

Equipment Botswana, Zambia, Angola, Mozambique, Malawi Goodwill and indefinite life intangibles (765) –

BHBW Investment in JV (194) –

Impairment of Property (Equipment Angola; Zambia; Mozambique; Botswana) (140) –

Impairment of Right Of Use assets, Property and intangibles impairments (172) –

Other impairments and losses (137)

Write up of investment NMI-DSM 212

Non-operating and capital items (1 900) 75

PROFITS AND LOSSES FROM ASSOCIATES AND JOINT VENTURES

19

RESULTS UNDER PRESSURE

Rm 2020

IFRS 16

impact

2020

Excl. IFRS 16

2019

Restated

Change %

(excl. IFRS 16)

(Loss)/Income from Associates and JVs (48) – (48) 231 (>100%)

Rm FY’20 FY’19

Bartrac (41) 268

NMI-DSM 52 4

BHBW (58) (16)

Other (1) (25)

Total (48) 231

268

4

-16 -25-41

52

-58

-1

Bartrac NMI-DSM BHBW Other

FY'19 FY'20

HEPS AND NORMALISED HEPS ANALYSIS

20

CHALLENGES PERSIST

1,100

-30 -268

+30

+89

+34+33

-328

-143

-24 -159

-11

-224

-37 -68

-20

-218

-18-66 -109

-75-52

-400

-300

-200

-100

-

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

STATEMENT OF FINANCIAL POSITION SEPTEMBER 2020

21

FINANCIAL POSITION REMAINS STRONG

Commentary

There was an increase in goodwill and intangible assets as a result of the Mongolia acquisition of R1.2 billion

offset by impairments. As a result of the adoption of IFRS 16 there was an increase in right of use assets

of R1.6 billion.

The decrease in working capital and vehicle rental fleet were offset by the acquired Mongolia working

capital balances

FY’20: BWE snA properties whereas in FY’19 BWE snA properties and included Logistics Middle East,

Smartmatta as well as the Barlow park

Losses were generated to FY’20 and the dividend (ordinary & special) of R1.1bn and share buy back of R1.6bn

has also contributed to lower equity

Higher borrowings and lease liabilities increase due to IFRS16.

Higher borrowings together with lease liabilities (IFRS 16) and contract assets (IFRS 15) including the current

liabilities in Mongolia of R856m

FY’19 BWE snA properties and included Logistics Middle East and Smartmatta

R million

2020 2019

Restated

Non-current assets 20 470 19 206

Current assets 27 379 27 885

Assets classified as held for sale 29 327

Total assets 47 878 47 388

Equity 19 750 23 895

Non-current liabilities 11 251 7 930

Current liabilities 16 877 15 485

Liabilities classified as held for sale 0 78

Total equity and liabilities 47 878 47 388

CASH FLOWS AND NET DEBT (EXCL. IFRS 16)

22

HIGHER OPERATING CASH INFLOWS; DIVIDENDS; MONGOLIA ACQUISITION AND SHARE BUY BACK HAVE INCREASED NET DEBT

8,368 7,304

5,210

6,743

9,395

+669

+798

+502 +256

-2652

-1066

-83 -2,255

-2,792

-176 -1,127 -1,563

-1,600

-600

400

1,400

2,400

3,400

4,400

5,400

6,400

7,400

8,400

9,400

10,400

11,400

12,400

13,400

14,400

15,400

COVENANTS

23

1,066

2,652

5.7

4.7

0.0

1.0

2.0

3.0

4.0

5.0

6.0

-

500

1,000

1,500

2,000

2,500

3,000

FY'19 FY'20

Net debt EBITDA/interest cover

R million times

Net debt/ EBITDA 0.6 x (2019: 0.2 x)

Covenants excl. IFRS 16: Net debt/ EBITDA <3 times, EBITDA/Interest > 2.5 times

MANAGING THE IMPACT:

24

COST CONTAINMENT MEASURES

Cost savings on

retrenchments in FY2020

to the amount of R85m

Total savings on salary

sacrifices and pension

holiday (FY2020) R201m

Property operating

leases savings on

of R32m

Capex spend significantly

reduced resulting in a

saving of R598m

Restructuring

and consolidating

subsidiaries

Travel, consulting

and events cancelled

resulting in a saving

of R85m

Cancelled all

non-essential training

Austerity applied

to other expenses

resulting in a saving

of R170m

CURRENT

INITIATIVES

DEALING WITH

COVID-19

FOCUS AREAS

25

METRICS FOCUSED

ON RETURNS

STRATEGY

IMPLEMENTATION

(EXCL IFRS 16)

STRATEGY

IMPLEMENTATION

(INCL. IFRS 16)

MANAGING FOR

VALUE TARGETS

(EXCL. IFRS 16)

HEPS* (30 cents) (82 cents)

GEARING 13.4% 25.2% 40 – 60%

ROIC* 0.6% 1% >13%

EP* (R3 037) (R3 037m) Positive delta

FCF* R274m R614m Cash conversion >50% EBITDA

* Group Normalised

Definitions

ROE: Return of Equity

ROIC: Return on Invested Capital

EP: Economic Profit

FCF: Free Cash Flow

Gearing: Net debt/Equity

Divisional overview

KAMOGELO MMUTLANA

CE

AUTOMOTIVE AND LOGISTICS


27

TRADING ENVIRONMENT

NAAMSA vehicle dealer market decline by 23% for financial year

Lower interest rate stimulated activity in market

Significant impact in car rental industry

No international travel and limited local travel

Corporate and government under pressure

Increased risk of credit losses with rising financial pressures

COVID-19 impacting port and border closures and regional and global supply chain disruptions

COVID-19 impact driving volume and margin pressure across supply chain

Variations and inconsistency in volumes due to changes in demand and supply patterns

New and used vehicles sold

Current year Prior year

Billed days


After sales revenue


Transport



28

PROGRESS ON STRATEGIC FOCUS AREAS: SETTING THE BUSINESS UP FOR 2021

Fit-for-purpose business operating model

and structure

BBS: Disciplined focus to value extraction

Leaner Divisional Executive Committee and head office

Integrated businesses to leverage synergies, efficiencies and solutions to market

Centralised Strategic Sourcing achieved realized savings and cost avoidance of R88m

Car Rental and Leasing

Rationalisation of branch network;

Realignment of cost structure; and

Converting our fleet into cash

Network rightsized impacting more than 20% branches

>40% employees retrenched, estimated savings of R270m in 2021

Able to right-size rental fleet according to demand by year end

Integrated with Avis Fleet, leverage one management structure

Motor Trading

Review dealership Portfolio, and facilities

Growth in aftersales and used vehicles

Realignment of cost structure

Logistics

Improve returns through securing contract

renewals and reducing fixed costs

Accelerating replacement operating

systems and Digital migration

Commenced with strategic roadmap in multi-purpose sites

>17% employees retrenched, estimated savings of R230m in 2021

Consolidated sites and integrated businesses

>20% employees reduction, estimated savings of R160m in 2021

High retention rate and new contract award in both Transport and Supply Chain

Transitioning fixed expense base to a variable expense base

Implemented new operating system for Freight Forwarding

Further digitization initiatives underway to enhance value proposition


Revenue impacted by

Deconsolidation of NMI-DSM and business sales and KLL closure

Lower trading activity and end-of-life cycle contracts in the prior year

Operating performance impacted by significant once off costs

Total retrenchment costs

Increased provision for expected credit losses

Khula Sizwe: Increased property costs and IFRS2 charges

ROIC lower at 1.4% (2019: 11.4%) mainly due to reduced operating profits

Strong cash generation supported by sale of properties and fleet disposals

29

FINANCIAL PERFORMANCE

Revenue (Rbn) EBITDA (Rbn)

16.510.4

17.1

14.1

2019 2020

33.6

24.6

-27%

1.70.7

1.8

1.7

2.4

2019 2020

3.5

-33%

H1

H2

H1

H2

Cash flow (Rbn)

1.2

0.6

-1.1

2020

1.8

2.3

2019

1.2

+50%

H1

H2

H1

H2

MOTOR TRADING

On a comparable basis revenue down 15%

Market contraction, South African dealer market, down 23%

Volume and premium segments performance down

Operating profit significantly down in H2, impacted by material losses suffered during strict lockdown consitions

Khula Sizwe: increased property costs and IFRS 2 charges

SMD unit sales decline, resulting in lower contribution

NMI-DSM Joint Venture outperform prior year’s result

Business activity remains under pressure although promising

30


Cash flow (Rm)Revenue (Rbn)

9.45.4

9.3

7.2

2020

12.6

2019

18.7

-33%

H1

H2

5791019

-180

2019

-100

2020

399

919

+130%

H1

H2

H2H1

EBITDA (Rm)

324

316

19524

2019 2020

640

219

-66%

H1

H2

CAR RENTAL

Revenue declined impacted by

26% decline in billed days, with significantly low activity in H2

Rate per day declined due to segment mix change since lockdown

Used vehicle market remained resilient, with margins holding up and one year old vehicles continuing to yield good returns

Operating performance impacted by rental losses since April

No inbound and limited local travel against fixed cost base

Re-alignment of cost structure, including retrenchment costs

Utilisation lower than prior year by 15bps

Branch rationalization complete, improved terms negotiated on exit

31



3.01.9

3.33.2

2019 2020

6.35.1

-19%

H1

H2

5401255

-439 -664

2019

591

2020

101

+485%

H1

H2

EBITDA (Rm)

569 635

649

1218

2019

-25

2020

610

-50%

H1

H2

AVIS FLEET

Avis Fleet to remain a wholly owned subsidiary, no longer held for sale

Integrated with Car Rental to realise benefits of scale and enhance product portfolio

Revenue down on prior year impacted by lower leasing revenue as a result of large contract lead out

Operating performance impacted

Lower margins achieved on used vehicle contribution driven by age, model and early terminations

Re-alignment of cost structure, retrenchment costs

Increased risk of estimated credit losses

32



1.8 1.3

1.61.7

2019 2020

3.43.0

-12%

H1

H2

478 521

-204

310

2019 2020

274

831

+203%

H1

H2

H1

H2

EBITDA (Rm)

722 591

729685

2019

1451

2020

1276

-12%

H1

H2

LOGISTICS

33


Revenue (Rbn) EBITDA (Rm)

2.3 1.7

2.92.1

2019 2020

5.2

3.8

-27%

49 87

146158

2019

195

2020

245

+26%

H1

H2

H1

H2

Successfully concluded Middle East and SmartMatta sale

Revenue impacted by

Business sales and KLL closure and end-of-life cycle contracts in the prior year

Down-trading and declining volumes driven by COVID-19 and the weak economic climate

Disruptive impact of community and civil unrest on the transport industries

Operating performance impacted by

High fixed costs base and increased fleet running costs due to delayed contract renewals

Once off operating costs of R121m, including retrenchment costs, provisions and review of residual values

EBITDA and Invested capital positively impacte by IFRS 16

Cash flow (Rm)

161

-233

20202019

-29-3

-72

-32

+56%

H1

H2


OUTLOOK AND STRATEGIC FOCUS AREAS

Logistics

Change management and

retention of key staff

BBS: Disciplined focus to

enhance customer retention

and experience, safety and

value extraction

Sustain the reduced fix cost

base to ensure an agile

organization

Continue to embed Strategic

Sourcing competence

Integrated Car Rental and Leasing

Embed integrated business

Profitable revenue growth

Secure new business and retain contracts

Improve customer service levels

Customer Retention

Smart Behavioural Based Safety

Program

Accelerating Digital solutions

Transition of the Fixed Costs base to

a Variable operating model

Cash generation

Motor Trading

Optimal Motor Retail portfolio brand representation and footprint

Successful implementation of multi-purpose site

Rationalisation of leased and owned facilities

Divisional overview

QUINTON MCGEER

CEO

EQUIPMENT EURASIA35


Results includes one month of the new acquisition in Mongolia – pleasing start

Revenue up 22% due to robust mining activity, particularly in the gold and other metals, while the oil price and COVID-19 impacted Construction and Oil & Gas segments negatively

Operating profit up 16% driven by revenue growth

Aftermarket business remains active but impacted by the slowdown in the coal sector

Margin realisations were good in Prime product as well as Aftermarket

Positive cash flow generated USD53m driven by profitable results and good working capital management

Returns significantly affected by additional taxation charge in accordance with IAS 12.41

Russia achieved a ROIC of 14.0% (Normalised:17.7%)

36

STRONG RESULTS

Revenue (Rbn) Operating profit (Rm) Operating margin (%)

2019 2020 2019 2020 2019 2020

6.27.5

719834 11.6 11.1

+22% +16% -0.5bps

25% 29% 36%28% 27%

33% 46% 61%51%

51%37% 51% 49%

-

100

200

300

400

500

600

700

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

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%

Global

Financial

Crisis

Crimea

Crisis and

Sanctions

Sanctions and

Retaliatory

Duties

Oil drops

to ~USD30

Revenue mix: product support vs equipment sales

USDm

78%

14%

5% 3%

Mining Infrastructure Power Other

2020 New equipment revenue (%)

Mining segment remains the

main contributor to equipment sales

AFTERMARKET CONTRIBUTION REMAINS HEALTHY

37

11.6%10.9%

COVID-19

DIVERSIFIED COMMODITY EXPOSURE DEFENDS AGAINST CYCLICALITY

38

34%

30%

8%

4%

9%

16%

2019 Revenue (%)

n Gold

Coal

n Copper/nickel/aluminium

n Construction

n Diamond

Other

41%

15%

15%

3%

9%

17%

2020 Revenue (%)

39Greenfields/Major Projects Firm order (Nov 2020) YTD Sept 2020

Polyus Existing Projects

USD156m USD60m USD37m

Norilsk Nickel

USD115m USD0.9m USD6m

Alrosa

USD8m USD2m USD 3m

Pavlik

USD8m USD16m

NordGold

USD25m USD12m

KazMinerals (2023-2025)

USD300m

Polyus Sukhoi Log

USD585m

MINING ACCOUNTS

SUEK

USD17m

OT

USD 40.7m USD1.1m USD0.8m

ETT

USD9.5m USD14m

ER/MMC

USD 35m

Aspire

USD 15m

DIVISIONAL STRATEGY

40

KEY INITIATIVES REMAIN RELEVANT

OVERALL OUTLOOK

Integrating Mongolia, capitalising on mining opportunities and optimising best practice in Eurasia region

Uncertainty due to COVID-19, constrained and muted economic outlook

Current trading trajectory expected to continue, mining sector and commodity outlook remaining stable

Tight control on expenses and working capital management

Strong aftermarket revenues contribution expected in 2021, supporting overall profitability

Focus on capturing new Greenfields and Brownfields to expand the volume of aftermarket business

ROIC expected to remain well above 13% hurdle rate

41

Strong Order book (USD million)

113

105

2019

202037 USD37m firm orders

signed after close

Divisional overview

EMMY LEEKA - CEO

EQUIPMENT SOUTHERN AFRICA42


STRONG BUSINESS FUNDAMENTALS AND CASH GENERATION

Revenue down 13.9% compared to prior year

Operating profit margin of 6.8% (2019: 9.0%) mitigated by cost containment but offset by once off separation costs

Share of associate loss of R39m due to lower activity levels in the DRC

Invested capital significantly reduced by 20.4% to R9 167m (2019: R11 314m)

Strong free cash flow generation of R3 407m (2019: R2 014m)

Efforts to fix the business starting to yield results

EBITDA (Rm) CASH (Rm)

738

1683

2669

331

20202019

2014

3407

+69%REVENUE (Rb)

H2

H1

10.0 8.9

10.48.7

2019 2020

20.4

17.6

-14%

H2

H1

H2

H1

43

1077 1024

1321796

2019 2020

2398

1820

-24%

Mining Construction Energy & Transportation

2020

30%

9%

40%

21%

2019

Contract Mining

Construction includes Agriculture & Forestry

25%

8%

42%

25%

NEW EQUIPMENT SALES BY MARKET SEGMENT

44

RESILIENT UNDERLYING MINING SEGMENT

47 48 44

714

171

2

19

16

17

6

12

54

37

4115 73 3

2018 2019 2020

Coal Platinum Gold Diamonds Copper Iron Ore Manganese Other

Other includes Uranium, Zinc, Gemstones and Mineral sands

Mining machines sales split by commodity (%)

COMMODITY MIX

45

DIVERSE COMMODITY EXPOSURE DEFENDS AGAINST CYCLICALITY

33%

41%

43%50%

56% 57% 52%54%

55%

9.4%

8.7%9.0% 9.0%

8.5%

9.8%9.1%

9.0%

6.8%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0

5000

10000

15000

20000

2012 2013 2014 2015 2016 2017 2018 2019 2020

Sales in Rm

Aftermarket Equipment Sales Operating Profit margin

SALES MIX

46

RESILIENT AFTERMARKET CONTRIBUTION

Operating Profit Margin (%)

Average Invested Capital (Rm)

RSA Namibia Mozambique Zambia Malawi Botswana Angola southern Africa

2019 6 798 405 1 092 758 98 473 1 809 11 486

2020 6 270 294 1 103 694 92 208 1 471 10 240

17

.1%

17

.2%

15

.1%

12

.2%

6.7

%

-9.7

%

0.7

%

12

.5%

8.6

%

24

.6%

-1.5

%

-14

.1%

-10

.8%

16

.4%

-9.1

%

3.8

%

RSA Namibia Mozambique Zambia Malawi Botswana Angola southern Africa

2019 2020 Hurdle rate

Group hurdle rate 13,0%

FINANCIAL RETURNS BY COUNTRY

47

RETURNS IMPACTED BY COVID-19 WITH STRONG RESULTS IN NAMIBIA & BOTSWANA

BARTRAC JV

Significant reduction in activity levels at key customers operations

Global economic slowdown with volatile commodity prices

Investment delays in the cobalt sector due to Covid-19

Expected recovery in commodity prices to improve activity levels in 2021

Current year share of loss includes prior year deferred tax liability adjustment of R21 million

48

NEGATIVE RETURNS DUE TO LOWER ACTIVITY LEVELS

251268

-41

2018 2019 2020

Associate Income from Bartrac (Rm)

ANGOLA ZAMBIA

MOZAMBIQUE

NAMIBIA

RSA

ZIMBABWE

BOTSWANA

Greenfields/Major Projects Replacements

Copper

USD20m

LUMWANA USD35m

Copper

USD50m

Copper

USD30m

Iron Ore

HUSAB USD31m

Uranium

GAMSBERG IIUSD67m

Zinc

SWARTBERGUSD23m

Copper

USD30m

Manganese

Coal

USD34mTEMO COAL

Coal

USD15m USD15m

MOGALAKWENA

Platinum

USD80m USD59m

Coal

USD65m

MAFUBE

Coal

USD23m

Coal

USD50mIMVULA

Coal

USD105m

KAPSTEVEL

Iron Ore

USD70m

MINING PROJECTS OUTLOOK

49

PROJECT DEMAND REMAINS

Reduce costs

Gross expenses

reduced

Focus on

services growth

Aftermarket

contribution improved

Grow

market share

Overall market

share increased

Improve regional

performance

Improve execution

through Barloworld

Business System

Optimise

invested capital

Invested capital

reduced by R2,3bn

FIX

DIVISIONAL STRATEGY

51

POSITIVE PROGRESS ON FIXING THE BUSINESS

MIN

ING

Robust sector with activity levels expected to improve supported by a rebound in commodity prices

Contract Mining model resilient and expected to remain

CATFin to continue supporting emerging contractors and contract miners

CO

NS

TR

UC

TIO

N

Construction industry to remain slow potentially boosted by RSA infrastructure investment

LNG projects in Rovuma region to bolster Construction and Energy & Transportation sales

GE

NE

RA

L

COVID-19 infection rates and impact on global economy and local operations unclear

Leveraging BBS to grow market share (machines and aftermarket) and optimize costs

OUTLOOK

52

CAUTIOUSLY OPTIMISTIC OUTLOOK FOR 2021

199

Strong Order Book (R million)

2 2982020 2 497

2019 2 077

Strategy Update and Outlook

DOMINIC SEWELA

GROUP CEO53

12.7

21.6

14.3

11.5 12.1 11 12.312.5

17.318.3

11.7 11.5

0.4

11.9

3.8

12.2

1.7

-3.2

9.1

-7.5

1

Equipmentsouthern Africa Equipment Eurasia Motor Trading Car Rental Leasing Logistics Group

Sep-18

Sep-19

Sep-20

ROIC% (INCLUDING IFRS 16)

AVERAGE INVESTED CAPITAL (Rbn)

2018 10.9 2.9 2.6 3.6 3.8 1.8 29.1

2019 11.5 3.3 2.3 3.5 3.9 1.4 28.7

2020 9.2 5.4 3.6 2.8 3.1 1.9 24.7

13.0%

54

GROUP

OUTLOOK AND STRATEGIC FOCUS AREAS

Capital allocation

Continue with disciplined

capital allocation to ensure

strong balance sheet.

Acquisitive growth

Deliver value from

THS acquisition.

Focus on bolt- on

acquisitions that support

Industrial Equipment and

Consumer Industries.

Growth through

programmatic M&A within

approved guardrails and

identified sectors.

Equipment

Deliver full potential

in Southern Africa.

Value unlock from Mongolia

in short to medium term.

Eurasia consolidation

Active shareholder model

Drive strategic priorities

across the group –

integrated capabilities

Avis Rent/Lease

Integrate and stabilise car

rental and leasing business.

Review business

performance in line

with market conditions.

Logistics

Concluded further

restructuring, benefits

to be realised in 2021.

Considering expressions

of interest.

Review

Automotive portfolio

Reduced divisional costs

in line with changing

market conditions.

Considering optimal

capital deployment

in Motor Retail

55

OUTLOOK

56

INGRAIN (TONGAAT HULETT STARCH)

Closed out MAC Process, business is resilient

and performed well above expectations

Market leader in Starch and Glucose

in B2B Consumer Industries

Unlock identified improvements through

the Barloworld Business System

Business expected to continue delivering

good EBITDA margins and strong operating

cash flows

Volumes

Strong growth in key segments

2021 market recovery in alcoholic beverages

and confectionary

Continuing benefits from diverse

customer base

Maize and co-products

Low exposure to the current high maize prices until the

end of Q1 2021

International edible oil and soya prices support

increased co-product recoveries

Pricing

Expected lower maize crops in key

international export markets and improved

global demand, supportive of international

starch and glucose prices

ACQUISITION OF THS

Thank you

BARLOWORLD INVESTOR RELATIONS

TEL: +27 11 445 1000

E-MAIL: [email protected]

57

Supplementary information

ANNEXURE 3.1: IMPACT OF CURRENCY

59

(EXCLUDING THE FAIR VALUE IMPACT OF THE USD CASH HELD IN THE UK)

Closing rate Average rate

Rand Sep 2020 Sep 2019 Sep 2020 Sep 2019

Exchange rates

United States Dollar 16.68 15.17 16.81 15.16

British Sterling 21.56 18.68 22.12 18.59

R million

Increase/

(decrease) in

revenue

Increase/

(decrease) in

operating profit

Headline earnings

improvement/

(decline) due to

exchange rates

Equipment southern Africa 459 1 (40)

Equipment Russia 827 101 53

Automotive 28 1 9

Handling 53 7 1

Logistics 1 1 2

Corporate Office (13) (54)

Total Group 1 368 98 (29)

ANNEXURE 3.2 INVESTMENT IN WORKING CAPITAL SEPTEMBER 2020

60

CASH INVESTED IN WORKING CAPITAL ACROSS ALL BUSINESSES

Rm Sep 2020 Sep 2019

Working capital

Inventories – movement (221) 686

Receivables – movement 1 064 244

Payables – movement (174) (165)

Total working capital – (increase)/decrease 670 765

Rm Sep 2020 Sep 2019

Segmental

Equipment southern Africa 2 592 733

Equipment Eurasia 231 (7)

Automotive (1 161) 501

Logistics (47) (129)

Other (945) (333)

Total working capital – (increase)/decrease 670 765

ANNEXURE 3.3 DEBT MATURITY PROFILE

Ratio of long-term to short-term debt 45:55

R15.6 billion (committed R14.5 billion) unutilised bank facilities at FY’20

Cash and cash equivalents R6.7 billion(FY’19 – R7.3 billion)

61

BALANCE FUNDING PORTFOLIO AND STRONG BORROWING CAPACITY

1,327

2,660

1,352 25%

50%

25%

0%

10%

20%

30%

40%

50%

60%

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

FY21 FY22 FY23

MATURITY PROFILE OF BONDS

Debt

Rm

28

72

RATE(%)

2 792

3,951

CURRENCY(Rm)

n Fixed

n Variable

RATE (%)

n South Africa

n Offshore

CURRENCY (Rm)

ANNEXURE 3.4 NORMALISED HEPS RECONCILIATION

62

GROUP NORMALISED HEADLINE EARNINGS/(LOSS)

Sep 2020

Rm Actual Last year % change

Headline (loss)/earnings – Group (535) 2 321 (123)

Adjusted for:

BEE charges net of tax 219 66

IFRS 16 impact 105

GMP 71

USD denominated cash 151 (139)

Normalised headline earnings – Group (60) 2 320 (103)

Normalised headline (loss)/EPS (cents) (30) 1 098 (103)

ANNEXURE 3.5: MONGOLIA ACQUISITION

63

Rm 2020

Net assets 2 718

Non controlling interest (8)

Goodwill 328

Consideration transferred 3 038

Consideration paid in cash 2 822

Less: cash and cash equivalents (162)

Net cash Paid to 2 660

ANNEXURE 3.6: THS ACQUISITION

64

Rm 2020

Net assets 2 450

Goodwill 2 536

Total 4 986

Purchase price* 4 986

* This is the provisional price subject to true up

PROVISIONAL

ANNEXURE 3.7 B-BBEE ‘KHULA SIZWE’ TRANSACTION CHARGE

65

2020 2020 2020 2019

IFRS 2 and Implementation Charges 30 September 2020

Rm

Total

Barloworld

Group

Barloworld

operating

segments

Khula Sizwe

segment

IFRS 2

Management trust* 123 108 15 -

Employee trust** 55 30 25 -

Black public*** 45 - 45 -

Total IFRS 2 charge 223 138 85 -

Implementation charge 13 13 - 73

Total B-BBEE transaction charge 236 151 85 73

*Incurred over 5 years **incurred over 2 years ***once-off charge

IFRS 2 CHARGES

Year-end results for the 12 months ended 30 September 2020...Profit before non operating capital...

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