barloworld limited resultscompulsory subscription price per share of r179.69 1 501 901 shares...

Barloworld Limited Results

for the six months ended 31 March 2015

Barloworld Limited Results for the six months ended 31 March 2015

Overview

Clive Thomson

CE, Barloworld Limited


3

● Revenue up 3% to R30.7 billion

● Operating profit up 6% to R1 744 million

● Group operating margin increased from 5.5% to 5.7%

● Headline earnings per share from continuing operations up 16% to 367 cents

● Headline earnings per share up 9% to 367 cents

● Interim dividend per share increased 8% to 115 cents

Salient features


4

Overview and key developments

Equipment

and

Handling

Equipment

southern Africa • Resilient operating result despite weakness in mining and construction sectors

Equipment Iberia • Pleasing turnaround to profitability following actions taken to reduce cost base

Equipment Russia • Challenging economic environment impacted by oil price decline and

international sanctions

Power systems • Growth in SA but reduced oil price impacts results in Angola and Russia

Handling • Reduced profitability impacted by Agriculture Russia losses

Automotive

and

Logistics

Car Rental • Successfully integrated the Budget brand effective 1 Mar 2015

Motor Retail

• Acquired GM Ferndale in Cape Town effective 1 Dec 2014

Avis Fleet • Acquired leasing business in Tanzania effective 3 Nov 2014

Logistics • Significant new contracts awarded and solid sales pipeline

Barloworld Group • Safety focus continues – no work-related fatalities

• Proposed amendments to close out 2008 B-BBEE transaction

• Remain in JSE Socially Responsible Investment (SRI) Index


Financial overview

Don Wilson

Finance director


6

Income statement highlights

(Rm) 1H’15 1H’14 % chg

Continuing operations

Revenue 30 668 29 887 3

EBITDA 2 991 2 800

Operating profit 1 744 1 639 6

Fair value adjustments on financial instruments (158) (108)

Net finance costs (559) (525)

Profit before exceptional items 1 027 1 006 2

Exceptional items (12) (49)

Taxation (321) (345)

Income from associates 132 95 39

Net profit from continuing operations 826 707 17

HEPS – continuing operations (cents) 367 316 16

HEPS (cents) 367 336 9


7


(Rm) 1H’15 1H’14 % chg


Revenue 30 668 29 887 3

Equipment and Handling 14 254 14 771 (4)

Southern Africa 9 927 9 618 3

Europe 1 861 2 277 (18)

Russia 1 484 1 929 (23)

Handling 982 947 4

Automotive and Logistics 16 414 15 112 9

Automotive 14 168 12 930 10

Logistics 2 246 2 182 3

Corporate 4

Average exchange rates (Rands) 1H’15 1H’14 % chg

United States Dollar 11.44 10.47 9

Euro 13.57 14.31 (5)

British Sterling 17.77 17.22 3


8


(Rm) 1H’15 1H’14 % chg


Revenue 30 668 29 887 3

EBITDA 2 991 2 800












9


(Rm) 1H’15 1H’14 % chg


Revenue 30 668 29 887 3

EBITDA 2 991 2 800


Equipment and Handling 940 923 2

Southern Africa 826 768 8

Europe 10 (32)

Russia 101 156 (35)

Handling 3 31

Automotive and Logistics 836 775 8

Automotive 780 719 9

Logistics 56 56

Corporate (32) (59)


10


(Rm) 1H’15 1H’14 % chg


Revenue 30 668 29 887 3

EBITDA 2 991 2 800












11

Statement of financial position

(Rm) 1H’15 FY’14


Non-current assets 17 708 17 287

Current assets (excluding cash) 27 141 22 557

Cash and cash equivalents 3 125 4 162

Total assets 47 974 44 006

Interest of all shareholders 17 909 17 486

Total debt 14 763 11 316

Other liabilities 15 302 15 204

Total equity and liabilities 47 974 44 006

Net debt 11 638 7 154


12

Summarised statement of cash flows

(Rm) 1H’15 1H’14

Operating cash flows before working capital 3 214 2 925

Increase in working capital (3 944) (3 234)

Net investment in leasing assets and vehicle rental fleet (1 421) (1 713)

Cash utilised in operations (2 151) (2 022)

Other net cash flows (1 005) (935)

Dividends paid (531) (481)

Net cash applied to operating activities (3 687) (3 438)

Net cash applied to investing activities (503) (440)

Net cash outflow (4 190) (3 878)


13

Investment in working capital

(Rm) 1H’15 1H’14

Inventories – (increase) (2 427) (1 737)

Receivables – (increase) (1 123) (820)

Payables – (decrease) (394) (677)

Total working capital – (increase) (3 944) (3 234)

(Rm) 1H’15 1H’14

Equipment southern Africa (2 039) (2 373)

Equipment Europe (16) (70)

Equipment Russia 140 (243)

Handling (590) (181)

Automotive (811) (147)

Logistics (307) (252)

Corporate (321) 32

Total working capital – (increase) (3 944) (3 234)


14

Capital structure remains strong

Group segmental gearing ratios

Debt to equity (%) Trading Leasing Car Rental Total group

Target range 30 - 50 600 - 800 200 - 300 Gross Net

Ratio at 31 Mar 2015 56 634 229 82 65

Ratio at 31 Mar 2014 53 599 219 79 68

Ratio at 30 Sept 2014 40 662 205 65 41

● Net debt of R11 638m (Mar 2014: R11 198m) increased by R440m

● Net debt to equity ratio 65% (Mar 2014: 68%)

● EBITDA interest cover 5.0 x (Mar 2014: 5.2 x)


15

Debt maturity profile

Interest bearing debt Redemption

(Rm) Total Short-term Long-term

South Africa 13 040 6 130 6 910

Offshore 1 723 486 1 237

Total debt March 2015 14 763 6 616 8 147

Total debt March 2014 13 008 4 777 8 231

Total debt September 2014 11 316 4 395 6 921

● Ratio of long-term to short-term debt 55:45 (Sept 2014 – 61:39)

● Refinancing of BAW2, BEE loan of R1.2bn and off shore PLC bilaterals underway

● R5.1bn unutilised bank facilities at Mar 2015

● Cash and cash equivalents R3 125m (Sept 2014 – R4 162m)

● R710m 7yr fixed-rate bond raised in Mar


16

● Sept 2008 transaction matures Sept 2015

● Proposed amendments – Circular distributed to shareholders 15 May 2015

● Amendments will unlock value for BEE participants and increase Barloworld black

ownership

● Proposed share buyback to minimise shareholder dilution

● Shareholder approval – special general meeting to be held 19 Jun 2015

Close out of 2008 B-BBEE transaction


17

Close out of 2008 B-BBEE transaction – financial impact

IFRS2 charge (Rm)

Cashflow (Rm)

Shares issued

Original agreement

Estimated cash value accumulated in structure of R269.9m

Compulsory subscription price per share of R179.69

1 501 901 shares subscribed for by BEE parties at R179.69 269.9 1 501 901

Proposed amendments

Termination of compulsory subscription and lock-in 155.3

Additional allocation of 450 000 shares with lock-in 42.8 450 000

Proposed share buyback

Share buyback (1 951 901 shares @ R95.1) (185.6) (1 951 901)

Total 198.1 84.3 -


Divisional overview


Divisional overview

Equipment southern Africa

20


● Operating profit up 8% despite continued weakness in the mining sector

● Parts sales growth and improvement in service productivity

● Cost control and efficiency optimisation contributed to margin improvement

● Income from associates and joint ventures in line with prior period

Operational review – Equipment southern Africa

0 500 1 000

SouthernAfrica

Operating profit (Rm)

1H'15 1H'14

Margin

8.3%

8.0%

21


Southern Africa sales history

37%

30%

28%

34%

46%

36%

33%

41%

46%

51%

0

5

10

15

20

2006 2007 2008 2009 2010 2011 2012 2013 2014 1H'15

Rbn

Equipment sales Product support

22


Southern Africa revenue profile by line of business – March

36%

51%

8%

5%

2015

New equipment Product support

Used equipment Rental

46%

44%

6% 4%

2014



23


Southern Africa new equipment sales by industry – March

27%

43%

14%

11%

5%

2015

Mining Construction

EMPR Power

Contract mining

30%

34%

21%

10%

5%

2014

Mining Construction

EMPR Power

Contract mining

24


Surface mining opportunities 2015 - 2020

Coal

Orapa Cut 3 (2019)

Etango-Bannerman (2019-20)

Exxaro Medupi Exp (2015)

Argent- Shanduka (2015)

Sedibelo PPM (2016)

Belfast Project–Exxaro (2016-18)

Zambeze Rio Tinto (2017)

Moatize exp - Vale (2016)

ResGen – Boikarabelo (2016)

Waterberg Coal –Sekoko (2017)

Kipanya BHP (2016-2018)

Zonnebloem Xstrata (2017)

Mogalakwena Amplats (2017)

Cateruca - AEMR (2016-18) Lumwana-Barrick Gold (2018)

Jwaneng Cut 9 (2017-20)

Iron ore Diamonds Platinum Copper

Anglo – New Largo (2017)

Uranium

Vedanta (2016)

Zinc

Sishen - KIO (2015-20)

25


● Order of $42m received for 8 Cat 793D

mining trucks and 1 Cat 6090 hydraulic

mining shovel

● Rental of 8 Cat MT4400 electric drive mining

trucks (240t)

● Vale forecast 90 large mining trucks

requirement by 2018 – doubling existing fleet

● Investment of $11m in a new warehouse

● Initial Cat fleet is in first planned component

replacement cycle over the next 18 months

● The Nacala corridor railway line from Tete to

Nacala has been completed

Mozambique | Vale Moatize Project

Cat 6090 Hydraulic Mining Shovel loading a Cat 797F truck

Barloworld Equipamentos Mozambique’s new branch in Tete Total order value

$42m

26


● Mota-Engil has secured a 18 month contract

with Vale Mozambique for the Moatize

Phase II project

● Order of $29.7m confirmed for

• 13 x Cat 777G trucks

• 2 x Cat 6030 hydraulic shovels

• 1 x Cat 980H tyre handler

● Delivery & commissioning Apr/May 2015

● Fleet to be supported from our branch in Tete

Mozambique | Mota-Engil Africa

Cat 6030 Hydraulic Mining Shovel

The two Cat 6030 hydraulic mining shovels currently

undergoing assembly in Tete

Total order value

$29.7m

27


● Mining sector expected to remain under pressure

● Infrastructure demands improving construction market sentiment in Africa

● Aftermarket revenues to show continued growth

● Repair and rebuild centre to continue operating at full capacity

● Order book higher at R2.3bn (Sept 2014: R1.9bn) due to recent orders

● Revenue outlook range of R20.0bn – R22.0bn maintained (2014: R20.9bn)

Equipment southern Africa – outlook

0 1 000 2 000 3 000

SouthernAfrica

Order book (Rm)

Mar 2015 Sept 2014


Divisional overview

Equipment Russia

29


● Revenue under pressure due to commodity price weakness and sanctions impact

● Mining industry still delaying large greenfields projects and fleet replacements

● Strong aftermarket performance supporting overall result

● Tight cost control and efficiency improvements across business

● EMPR aftermarket providing a strong contribution

● Positive cash generation in the period

Operational review – Equipment Russia

0 100 200

Russia

Operating Profit (Rm)

1H'15 1H'14

Margin

6.8%

8.1%

30


Russia sales history

25%

24%

25%

29% 36%

28%

27% 33%

46%

60%

0

100

200

300

400

500

600

2006 2007 2008 2009 2010 2011 2012 2013 2014 1H'15

$m


31


Russia revenue by line of business – March

34%

60%

2% 4%

2015



48%

46%

2% 4%

2014



32


Russia new equipment sales by industry – March

64%

6%

16%

9%

5%

2015

Mining Construction Power

Oil and gas Other

54% 18%

14%

6%

8%

2014

Mining Construction Power

Oil and gas Other

33


*estimated start of project

Surface mining – medium term greenfields project opportunities

Opportunity 2016 2017 2018 2019 2020

Units 15 15 84 82 75

US Dollars $20m $20m $130m $150m $130m

34


Power of Siberia pipeline opportunity

Estimated opportunity over 3 year period

Pipe-laying machines = 90 units

Construction and forestry = 320 units

CAT machines preparing the ground for

pipe-laying

Camp of Stroytrans Gas – one of the main

contractors for the pipeline project

Pipes laid down – ready for next phase of

welding together, digging the trench then

pipe-laying

35


● Economic and political situation expected to remain challenging

● Focus on cost reduction, stock realisation and positive cash generation

● Capitalise on Power of Siberia opportunity

● Strong aftermarket performance expected to continue

● Order book of $16m (Sept 2014: $14m)

● Revenue outlook range reduced to $250 – $300m (2014: $382m)

Equipment Russia – outlook

0 5 10 15

Russia

Order book ($m)

Mar 2015 Sept 2014


Divisional overview

Equipment Iberia

37


● Operating profit of R10m (€0.8m) represents a R42m (€2.9m) turnaround

● Restructuring costs of €970k included in 1H

● Operating costs 10% below prior period as savings from restructuring are realised

● Market leadership position retained

● Cash flow remains positive with €4m cash generated

● Income from associates strongly up due to Energyst turnaround

Operational review – Equipment Iberia

- 40 - 20 0 20

Operating profit/(loss) (Rm)

1H'15 1H'14

Margin

0.5%

-1.4%

38


Machine industry – Spain

● Spanish new machine market shows growth in 2014 calendar year – the first industry

growth since 2007

● Majority of growth currently in small construction equipment

0

5 000

10 000

15 000

20 000

25 000

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

Actual Outlook

Units

39


Iberia sales history

32%

30% 30%

34%

40% 37% 33%

35%

41%

44%

0

100

200

300

400

500

600

700

800

900

2006 2007 2008 2009 2010 2011 2012 2013 2014 1H'15

€m


40


Iberia revenue by line of business – March

36%

44%

17%

3%

2015



36%

40%

21%

3%

2014



41


Iberia new equipment sales by industry – March

1%

43%

8%

48%

2015

Mining Construction

Other Power

16%

28%

14%

42%

2014

Mining Construction

Other Power

42


● Macro economic indicators continue to show improvement

● Aftermarket anticipated to show continued growth

● Expect to remain profitable for the full year

● Order book of €36m slightly up on Sept 2014 (€33m) with outlook for machines and

power systems improving

● Revenue outlook range of €290m – €315m maintained (2014: €290m)

Equipment Iberia – outlook

0 20 40 60

Iberia

Order book (€m)

Mar 2015 Sep 2014


Divisional overview

Power systems

44


● SA load shedding generates strong rental and new electric power demand

● Activity in Angola and Russia negatively impacted by lower oil price

● Bank of Mozambique genset contract for $18m concluded for Maputo head office

● Transnet tugboat contract for $17m, with invoicing to start in 2H’15

Operational review – Power systems

45


● Power systems remains a significant medium term growth opportunity

● Mozambique growing off a low base

● Spanish Marine business expected to pick up 2H’15 and 2016

● Order book increased from $78m to $95m with strong projects pipeline

● 2015 revenue outlook range reduced to $300m – $340m (2014: $344m)

Power systems – outlook

0 50 100

Power

Order book* ($m)

Mar 2015 Sept 2014

* Included with Equipment order books by geography


Divisional overview

Handling

47


● Operating profit of R3m (1H’14: R31m) adversely impacted by Agriculture Russia

● Growth in sales and market share for Agriculture SA, but weaker margins

● Start-up Zambian operation on stream

● Order book up to R201m (Sept 2014: R167m)

● 2015 revenue outlook range of R2.0bn – R2.4bn maintained (2014: R1.93bn)

Operational review – Handling

0 100 200

Handling

Order book (Rm)

Mar 2015 Sept 2014


Divisional overview

Automotive

49


● Revenue: R14.2bn (1H’14: R12.9bn) – up 9.6%

● Operating profit R780m (1H’14: R719m) – up 8.5%

● Operating margin for the period 5.5% (1H’14: 5.6%)

● All business units performed well

Operational review – Automotive

Margin

0 100 200 300

Car Rental

Motor Retail

Avis Fleet


1H'15 1H'14

+6%

+8%

+12% 9.2% 10.3%

2.6% 2.5%

16.8% 17.1%

50


● Well balanced Automotive portfolio

provides resilience

● Revenue (1H) CAGR of 11% delivers

operating profit (1H) CAGR of 21%

● Operating margins improved from 3.9%

to 5.5% (1H’11 – 1H’15)

● Inter-business unit synergies including

• Used vehicle disposal solutions

• New vehicle procurement

• Parts and service

• Finance and insurance

● Targeted capital allocation supports

value creation

Integrated business model delivers value

0

300

600

900

1200

1500

1800

2011 2012 2013 2014 2015

Rm Operating profit

Operating profit 1H Operating profit 2H

0

300

600

900

1200

1500

1800

2011 2012 2013 2014 1H'15

Rm Operating profit by BU

Car Rental Motor Retail Avis fleet

51


Car Rental

Car Rental – southern Africa 1H’15 (growth)

Rental days +5.3%

Rental revenue per day +5.1%

● Good operating profit growth – up 12%

● Sustained growth in rental days

● Improved market share through targeted growth

● Pleasing revenue per day increase

● Operating costs well contained

● Fleet utilisation at 75%

● Strong used vehicle profit contribution

● Customer satisfaction remains above 90%

● Budget brand settling well

52


Motor Retail

Motor Retail 1H’15 (growth)

New unit sales +1.4%

Parts revenue +11%

Service hours +5.1%

● Solid result in difficult trading conditions

● Improved operating profit by 8% and increased

operating margin to 2.6% (1H’14: 2.5%)

● Gross margin expansion and cost containment

● Aftermarket revenues continued to support the result

● Good finance and insurance contribution

● Recently acquired GM Cape Town dealership

profitable

53


Avis Fleet

Avis Fleet 1H’15 (growth)

Finance fleet -0.5%

Fleet under maintenance +13%

● Operating profit growth – up 6%

● Maintained finance fleet

● Sustained growth in fleet under maintenance

● Further improved used vehicle profits

● Progressing growth opportunities in select

African territories

• Tanzania settling

• Zambian start up operations in 2H’15

54


Automotive outlook

Car Rental • Volume and revenue per day increases expected to deliver top line revenue growth,

supported by the Budget brand

• Productivity, fleet utilisation and cost focus will maintain strong return on equity

• Market leadership position to be maintained

Motor Retail • Stable performance expected in difficult market with some resilience in certain brands

• Targeted dealership acquisitions will deliver incremental profitability

• Opportunities for growth being explored within broader automotive value chain

Avis Fleet • Well positioned for continued organic growth

• Market leadership position and strong return on equity expected to be sustained

• Tanzania acquisition and Zambian start-up establishes medium term platform for growth in

targeted African regions

Automotive

Division

• Revenue outlook range of R28.0bn to R29.0bn maintained (2014: R26.8bn)


Divisional overview

Logistics

56


● Revenue up 2.9% and operating profit flat on prior year

● Operating margin for the period 2.5% (1H’14: 2.6%)

● South Africa impacted by lower volumes in mining and construction sectors

● Tough international trading environment, especially in Spain and Germany

● Exit from Ellerine Holdings complete

● New contractual revenue in excess of R750m per annum secured

Operational review – Logistics

0 20 40 60

Logistics


1H'15 1H'14

Margin

2.5%

2.6%

57


● Expecting a stronger second half on back of organic and acquisitive growth

● New contracts awarded: Telkom, Kelloggs, Glencore, Makro, Eskom, Total

● Renewed existing contracts with major clients

● Capital invested in Barloworld Transport starting to deliver value

● Diversified service offering

• Launched Barloworld Cranes

• Formalised bulk commodity solution offering

• Acquired 100% of re-environmental solutions business

● Revenue outlook range of R5.0bn – R6.0bn maintained (2014: R4.4bn)

Logistics outlook


Group outlook


59

Group outlook

Clive Thomson, CE of Barloworld, said:

“While trading conditions are expected to remain challenging in the second half, we will continue our

focus on driving operational efficiencies and tight cost control. Overall we expect our businesses to

deliver a resilient performance for the full year and are well placed to benefit in the medium term once

the mining and construction cycles move into a recovery phase.”

18 May 2015

Barloworld Limited Results

for the six months ended 31 March 2015

barloworld limited resultscompulsory subscription price per share of r179.69 1 501 901 shares...

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