barloworld limited results · barloworld limited results for the year ended 30 september 2016 3 ......

for the year ended 30 September 2016

Barloworld Limited Results

Clive Thomson

CE, Barloworld Limited

Overview

Barloworld Limited Results for the year ended 30 September 2016

3

Salient features

Revenue up 6% to R66.5bn

Operating profit up 4% to R4 135m

Profit before non-operating and capital items up 14% to R2 693m

Cash generated from operations of R7 827m (2015: R1 123m)

Headline earnings per share up 3% to 838 cents

Headline earnings per share (excluding B-BBEE charge) down 9%

Total dividend per share of 345 cents maintained


4

Overview and key developments

Equipment

and

Handling

Equipment

southern

Africa

• Operating margin resilient at 8.5% despite continued decline in mining equipment sales

• Positive cash generation of R3.0bn compared to cash utilisation of R1.7bn in 2015

Equipment

Russia• Strong performance on the back of gold mining deliveries and solid aftermarket business

Equipment

Iberia• Power systems dominates revenues as construction equipment recovery confined to small

machine market

Handling • Signed agreement post year end to dispose of Handling and Agriculture SA into a 50/50 JV

company with BayWA AG at net asset value

Group

Group • Dominic Sewela appointed CEO-designate effective 1 Oct 2016 as part of a structured

succession plan

• Safety focus continues – tragically, one work-related fatality in a vehicle collision

• Obtained Level 3 B-BBEE rating under the revised Codes

• Constituent of the Dow Jones Sustainability Emerging Markets Index and the

FTSE / JSE Responsible Investment Top 30 Index

Automotive

and

Logistics

Car Rental • Continue to extract value from the Avis and Budget dual brand strategy

Avis Fleet • Solid result achieved and high level of financial returns maintained

Motor Trading • Acquisition of Union Motors and majority stake in Salvage Management and Disposal (SMD)

delivered to expectation and provide platform for future growth

Logistics • Increased our stake in Barloworld Transport to 79%

• Disposed Supply Chain Software business to LLamasoft effective 31 Dec 2015

• Acquired refrigerated network businesses KLL Group and 51% of Aspen Logistics


5

44%

56%

Revenue (R66.5bn)

55%

45%

Operating profit (R4.1bn)

Group revenue and operating profit split – September 2016

Automotive and Logistics Equipment and Handling

Financial overview

Don Wilson

Finance director


7

Income statement highlights

(Rm) FY’16 FY’15 % chg

Revenue 66 547 62 720 6

EBITDA 6 674 6 479

Operating profit 4 135 3 995 4

B-BBEE charge (251)

Operating profit including B-BBEE charge 4 135 3 744 10

Fair value adjustments on financial instruments (209) (198)

Net finance costs (1 233) (1 185)

Profit before non-operating and capital items 2 693 2 361 14

Non-operating and capital items 120 (6)

Taxation (809) (808)

Profit after tax 2 004 1 547 30

(Loss) / income from associates (25) 287

Net profit 1 979 1 834

HEPS (cents) 838.1 813.8 3

HEPS excl. B-BBEE charge (cents) 838.1 925.5 (9)


8

Income statement highlights – Revenue


Revenue 66 547 62 720 6

Equipment and Handling 29 362 29 506 -

Southern Africa 18 547 20 307 (9)

Europe 4 473 3 793 18

Russia 4 837 3 379 43

Handling 1 505 2 027 (26)

Automotive and Logistics 37 183 33 213 12

Automotive 31 427 28 704 9

Logistics 5 756 4 509 28

Corporate 2 1

Average exchange rates (Rands) FY’16 FY’15 % chg

United States Dollar 14.75 11.98 23

Euro 16.32 13.73 19

British Sterling 20.99 18.52 13


9



Revenue 66 547 62 720 6

EBITDA 6 674 6 479


B-BBEE charge (251)










HEPS (cents) 838.1 813.8 3



10

Income statement highlights – Operating profit


Revenue 66 547 62 720 6

EBITDA 6 674 6 479


Equipment and Handling 2 264 2 368 (4)

Southern Africa 1 585 1 894 (16)

Europe 55 71 (23)

Russia 599 397 51

Handling 25 6

Automotive and Logistics 1 877 1 688 11

Automotive 1 654 1 529 8

Logistics 223 159 40

Corporate (6) * (61)

* Excluding B-BBEE charge of R251 million


11



Revenue 66 547 62 720 6

EBITDA 6 674 6 479


B-BBEE charge (251)










HEPS (cents) 838.1 813.8 3



12

Statement of financial position

(Rm) FY’16 FY’15

Non-current assets 20 179 19 906

Current assets (excluding cash) 21 987 25 680

Cash and cash equivalents 3 028 2 372

Assets held for sale 828 197

Total assets 46 022 48 155

Interest of all shareholders 19 679 20 042

Total debt 11 044 13 124

Other liabilities 15 232 14 946

Liabilities held for sale 67 43

Total equity and liabilities 46 022 48 155

Net debt 8 016 10 752


13

Summarised statement of cash flows

(Rm) FY’16 FY’15

Operating cash flows before working capital 7 161 7 094

Movement in working capital 2 119 (3 370)

Net investment in leasing assets and vehicle rental fleet (1 453) (2 601)

Cash generated by operations 7 827 1 123

Other net cash flows (2 112) (1 947)

Dividends paid (772) (814)

Net cash retained from / (utilised in) operating activities 4 943 (1 638)

Net cash used in investing activities (1 436) (1 826)

Net cash inflow / (outflow) 3 507 (3 464)


14

Investment in working capital

(Rm) FY’16 FY’15

Inventories – decrease / (increase) 2 668 (1 558)

Receivables – decrease / (increase) 797 (393)

Payables – decrease (1 346) (1 419)

Total working capital – decrease / (increase) 2 119 (3 370)

(Rm) FY’16 FY’15

Equipment southern Africa 1 666 (2 279)

Equipment Europe 221 (234)

Equipment Russia 406 225

Handling 27 (447)

Automotive 94 (200)

Logistics (104) (133)

Corporate (191) (302)

Total working capital – decrease/(increase) 2 119 (3 370)


15

Summarised statement of cash flows

(Rm) FY’16 FY’15

Operating cash flows before working capital 7 161 7 094

Movement in working capital 2 119 (3 370)

Net investment in leasing assets and vehicle rental fleet (1 453) (2 601)

Cash generated by operations 7 827 1 123

Other net cash flows (2 112) (1 947)

Dividends paid (772) (814)

Net cash retained from / (utilised in) operating activities 4 943 (1 638)

Net cash used in investing activities (1 436) (1 826)

Net cash inflow / (outflow) 3 507 (3 464)


16

Debt maturity profile

Total interest bearing debt Redemption

(Rm) Total Short-term Long-term

South Africa 10 432 2 303 8 129

Offshore 612 362 250

Total debt Sept 2016 11 044 2 665 8 379

Total debt Sept 2015 13 124 4 050 9 074

Ratio of long-term to short-term debt 76:24 (Sept 2015 – 69:31)

Current year long term bonds issued for R1.2bn

Current year long term bank funding raised for R1.4bn

R9.6bn (committed R7.2bn) unutilised bank facilities at Sept 2016

Cash and cash equivalents R3 028m (Sept 2015 – R2 372m)


17

Capital structure remains strong

Group segmental gearing ratios within target ranges:

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

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

Ratio at 30 Sept 2016 29 720 216 56 41

Ratio at 30 Sept 2015 43 688 211 67 55

Net debt of R8 016m (2015: R10 752m)

EBITDA interest cover 5.0 x (2015: 5.2 x)

Net debt to EBITDA 1.2 x (2015: 1.8 x)

Moody’s Global Scale Rating of Baa3 and National Scale Rating of Aa3.za (stable outlook)

Equipment southern Africa

Divisional overview


19

Revenue of R18.5bn is 8.7% down in a difficult trading environment

Operating profit of R1 585m impacted by continued weakness in the mining sector

Aftermarket resilient but demand impacted by production curtailment in certain regions

Active working capital management and cost containment measures paying off

Positive cash generation of R3.0bn (2015: R1.7bn utilised)

Angola impacted by low oil price and hard currency shortages

Geographic and commodity spread provided resilience in a tough climate

Operational review – Equipment southern Africa

0 1 000 2 000

SouthernAfrica

Operating profit (Rm)

Sept 2016 Sept 2015

Margin

8.5%

9.3%

-16%


20

0

5

10

15

20

25

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Rbn

Equipment sales Product support

Southern Africa sales history

30%

28%34%

46%

36%

33%

41%

46%

50%

56%


21

31%

56%

8%5%

2016

39%

50%

6%5%

2015

Southern Africa revenue profile by line of business – September

New equipment Product support Used equipment Rental


22

29%

52%

15%

4%

2016

40%

43%

13%

4%

2015

Southern Africa new equipment sales by industry – September

Mining Construction Power Contract mining


23

Income from DRC associate R13m (2015: R265m) impacted by weak copper price

Temporary suspension of mining activity by largest customer following geotechnical (slope) failure

o New copper processing plant expected to be commissioned H2’17

Very low new machines sales in DRC this year

Significant negative aftermarket impact due to parked machine fleets

Ongoing internal restructuring to reduce cost base

Improved performance in H2’16

Long term outlook remains positive

o 2nd largest high quality global copper reserves

Income from associates (DRC joint venture)

Source of copper price graph: www.ifcmarkets.com


24

Surface mining project outlook

Coal PGM / Zinc / Manganese Diamonds Uranium

Coal of Africa – Makhado (2018)

South 32 – Wwk – VDD (2017)

Sekoko – Waterberg (2017)

Foskor – Phalaborwa (2017)

Glencore – Zonnebloem (2018)

Shanduka - Argent Project (2017)

Vale – Moatize Expansion (2017-2018)

ICVL – Minas Benga (2017)

Chitotolo / Catoca (2017)

Valencia – (Norasa) (2020)

Debswana – Orapa Cut 3 (2020)

Tshipi Borwa (2019)

Vedanta Gamsberg (2017)

Exxaro – Belfast Project (2019)

Debswana – Jwaneng Cut 9 (2019)


25

SA generator sales lower due to reduced power outages

Solar PV presenting growth opportunities – 300kW (peak) power plant installed in Isando

Benefits include

Significant electricity cost savings

Carbon emissions reduction

Intended roll out to other group facilities and external customers

Power Systems – opportunities in Solar PV


26

Firm back orders at R1.3bn (2015: R1.7bn)

Certain green shoots are evident in mining sector

Aftermarket activity to improve based on higher average age of mining fleet

The need for infrastructure development will underpin construction demand

Revenue outlook for 2017 range of R18.0bn to R19.0bn (2016: R18.5bn)

Equipment southern Africa – outlook

0 1 000 2 000

SouthernAfrica

Order book (Rm)

Sept 2016 Sept 2015

Equipment Russia

Divisional overview


28

Strong result under challenging economic conditions – operating profit of R599m

Operating margin increased to 12.4% from 11.8%

Mining segment improvement driven by gold and base metals with coal remaining depressed

Sustained aftermarket activity continued to support operating result

Tight cost control and efficiency improvements across the business

Strong positive cash generation and financial returns

Operational review – Equipment Russia

0 250 500 750

Russia


Sept 2016 Sept 2015

Margin

12.4%

11.8%

+51%


29

0

100

200

300

400

500

600

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

$m


Russia sales history

24%

25%

29%

36%

28%

27%33%

46%

61%

51%


30

43%

51%

1% 4%

2016

34%

61%

1% 4%

2015

Russia revenue profile by line of business – September



31

68%

7%

8%

4%

13%

2016

59%10%

18%

5%

8%

2015

Russia new equipment sales by industry – September

Mining Construction Power Oil and gas Other


32

Mining opportunities

Polyus

6 units 34 units

$10.1m $103m (2018)

Sovrudnik

4 units 2 units 10 units

$1.6m $0.9m $2.3m

Gross

36 units

$65m (2018)

Muna

37 units

$47m (2018)

Kekura

37 units

$21m (2018)

AS Siyaniye (Kupol)

6 units 2 units

$4.2m $0.9m

ZDK Pavlik

10 units 2 units

$10.0m $1.9m

GV Gold Ugakhan

17 units 8 units 1 unit

$17.8m $8.7m $0.9m

Bystrinsky

17 units

$23.0m

Norilsk Nickel

10 units 4 units 10 units

$8.3m $2.3m $7.8m

Greenfields / major projectsFirm ordersDelivered


33

Oil price volatility – creating uncertainty and limiting capital investments

Commodity prices showing signs of recovery – mining tender activity increasing

Plan to capitalise on mining greenfield opportunities

Protect and grow aftermarket revenues through technology solutions

2017 revenue outlook range of $300m to $370m (2016: $329m)

Equipment Russia – outlook

0 10 20 30

Russia

Order book ($m)

Sept 2016 Sept 2015

Equipment Europe

Divisional overview


35

Macroeconomic environment in Spain remains positive but uncertainty created by two

inconclusive general elections

Recovery in construction equipment industry confined to small machine market

Solid performance in marine power systems business

Operating profit of R55m impacted by weaker result in Portugal

Operating expenses include R9.7m restructuring costs in Portuguese operation

Operational review – Equipment Europe

0 50 100


Sept 2016 Sept 2015

Margin

1.2%

1.9%

-23%


36

0

100

200

300

400

500

600

700

800

900

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

€m


Iberia sales history

30%

30%

34%

40%37%

33% 35%

41% 44% 44%


37

41%

44%

12%

3%

2016

37%

44%

16%

3%

2015

Iberia revenue by line of business – September



38

4%

44%

52%

2016

2%

46%

52%

2015

Iberia new equipment sales by industry – September

Mining ConstructionPower


39

Offshore vessels (fishing / tug / ferry) make up 66% of vessel construction market in Spain

Capability enhancement to capture opportunity

Complete propulsion system offering

Marine asset intelligence

Expanded aftermarket service capability

Prime product and aftermarket opportunity

Armon / Armas new ferry – €10.4m tender underway for full propulsion package

New tug boat – €2.1m firm order for main propulsion and auxiliary power engines

Balearia repowering – €4.4m firm order

Power Systems – marine evolution and opportunities


40

Macroeconomic environment expected to show some improvement in 2017

Machine industry in Spain continues to deliver growth but concentrated in small equipment

Marine aftermarket will underpin operating result

Focus on cost management and improved efficiencies

2017 revenue outlook range of €270m to €300m (2016: €274m)

Equipment Europe – outlook

0 20 40 60

Iberia

Order book (€m)

Sep-16 Sep-15

Handling

Divisional overview


42

Operating profit benefitted from exiting the agriculture business in Russia

Agriculture SA sales impacted by severe drought

Cost base reduced to match the smaller business

Successful inventory reduction in H2’16 improves cash generation

Agreement to dispose of Handling and Agriculture SA assets into 50/50 JV with BayWa at NAV

Joint venture to be equity accounted from completion date

Operational review – Handling

0 10 20 30

Handling


Sept 2016 Sept 2015

Margin

1.7%

0.3%

+316%

Automotive

Divisional overview


44

Record result in a challenging trading environment

Revenue R31.4bn (2015: R28.7bn) – up 9.5%

Operating profit R1 654m (2015: R1 529m) – up 8.2%

Operating margin for the year maintained at 5.3%

Strong used vehicle profit contribution

Operational review – Automotive

0 100 200 300 400 500 600 700

Car Rental

Avis Fleet

Motor Trading

Sept 2016 Sept 2015

Margin

+14%

-2.1%

+15%

9.0%

9.1%

15.4%

17.0%

2.6%

2.4%



45

Well balanced Automotive portfolio provides resilience

Revenue CAGR of 11% delivers operating profit CAGR of 16%

Inter-business unit synergies continue to deliver value

Recently acquired businesses performing in line with expectation

Integrated business model delivers value

0

300

600

900

1200

1500

1800

2011 2012 2013 2014 2015 2016

Rm Operating profit by BU

Car Rental Motor Trading Avis Fleet

0

300

600

900

1200

1500

1800

2011 2012 2013 2014 2015 2016

RmOperating profit

Operating profit 1H Operating profit 2H


46

Car Rental FY’16 (growth)

Rental days +3.8%

Rental revenue per day +5.4%

Very good operating profit growth of 14%

Sustained growth in rental days

Pleasing revenue per day increase

Fleet utilisation maintained at 75%

Strong used vehicle profit contribution

Customer satisfaction remains above 90%

Car Rental


47

Avis Fleet FY’16 (growth)

Finance fleet -2.4%

Under maintenance -2.3%

Operating profit down 2.1%

Financed fleet negatively impacted by the non-renewal

of Lesotho contract

Net reduction in OEM maintenance plans

Reduced fleet terminations impacted used contribution

Customer retention rates remain high

Avis Fleet


48

Motor Trading FY’16 (growth)

New unit sales -6.4%

Parts revenue +13%

Service hours +0.6%

Increased operating profit by 15% supported by recent

acquisitions

Two Mercedes-Benz dealerships (1 Mar 2016)

Majority share in SMD (1 May 2016)

Result impacted by weaker new vehicle market

Positive contribution from aftermarket revenues

Improved performance from used vehicles

Market share maintained

Motor Trading


49

Automotive – outlook

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

supported by the dual brand strategy

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

Continued positive contribution from used vehicle disposals

Motor Trading Challenging trading conditions to continue, impacting overall margins

Recent acquisitions to contribute positively to revenue and profitability

Avis Fleet Well positioned for continued organic growth

Maintain market leadership position and continue to achieve strong return on equity

Awaiting outcome of large contract renewals

Automotive

Division

2017 revenue outlook range of R33bn to R34bn (2016: R31.4bn)

Logistics

Divisional overview


51

Revenue up 28% and operating profit up 40% on last year

Favourable trading on key supply chain management contracts

Growth in Transport volumes coupled with margin improvements

Record trading within Freight Forwarding South Africa

Addition of new contracts and SmartMatta acquisition during 2015 having full financial impact

Acquisition of the entire equity of KLL Group and 51% of Aspen providing multi-party,

multi-temperature warehousing and distribution capability from 1 Jan 2016

Operational review – Logistics

0 100 200 300

Logistics


Sept 2016 Sept 2015

Margin

3.9%

3.5%

+40%


52

Diverse blue chip customer base


53

Remains positive with good growth opportunities through

Annualised work won during 2016 supporting the 2017 financial year

Diversifying and extending service offerings

Leveraging investment in SmartMatta, KLL and Aspen

Tough trading conditions are expected to continue in mining and infrastructure sectors

especially in specialised transport and cross border

2017 revenue outlook range of R6.3bn – R7.0bn (2016: R5.8bn)

Logistics – outlook

Group outlook


55

Group outlook

Clive Thomson, CE of Barloworld, said:

“All our businesses have a clear strategic focus and strong market positions.

As a result of positive cash generation the group’s balance sheet is strong and we are well placed to

capitalise on organic and acquisitive growth opportunities as they arise.

We have the right leadership in place in all of our businesses and expect 2017 to be another year of solid

progress for the group.”

21 November 2016

for the year ended 30 September 2016

Barloworld Limited Results

barloworld limited results · barloworld limited results for the year ended 30 september 2016 3 ......

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