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MERRILL LYNCH CONFERENCE
12 -13 March 2019
Barloworld Limited
Merrill Lynch Conference March 2019
BEE transaction
approved
on 14 Feb 2019
Iberia exit
generates
R2.5bn in cash
Logistics
turnaround
on track
838.0975.0
1150.9
0.0
500.0
1000.0
1500.0
2016 2017 2018
-5%
345390
462
0
100
200
300
400
500
2016 2017 2018
18%
4.33.4 3.6
0.0
2.0
4.0
6.0
8.0
2016 2017 2018
9.310.5
11.4
0
5
10
15
2016 2017 2018
GROUP HIGHLIGHTS - 2018
HEPS growth % Total dividend per share (cents)
Free Cash (Rbn) ROE %
5%18%
Barloworld Limited
Merrill Lynch Conference March 2019
7.8%
18.1%
12.8%
6.0%
9.4%
12.8%
18.4%
13.1%
2.5%
11.2%
12.7%
21.6%
12.4%
8.7%
12.3%
-5.5%
-0.5%
4.5%
9.5%
14.5%
19.5%
Equipment
southern
Africa
Equipment
Russia
Automotive Logistics Group
WACC 12.5%
SEGMENTAL 12 MONTH ROLLING ROIC – HURDLE RATE 13.0%
AVERAGE INVESTED CAPITAL
FY16 R11.5bn R2.8bn R9.8bn R2.6bn R29.4bn
FY17 R10.2bn R2.6bn R10.0bn R2.4bn R27.1bn
FY18 R10.9bn R2.9bn R10.0bn R1.9bn R26.3bn
Barloworld Limited
Merrill Lynch Conference March 2019
CORPORATE LEVEL STRATEGY UPDATE
FIX OPTIMISE GROW
Address underperforming
business units:
Iberia exit complete –
Released R2.5bn
Logistics turnaround
on track
Further asset disposals in
Logistics (SmartMatta, ME)
Realise full potential of
business units:
Equipment SnA operational
transformation
Motor Retail restructure and
cost optimisation
Optimal capital allocation
across portfolio:
Restructure of Leasing and Rental
Assets
Targeted growth:
Considering
opportunities that fit the
group’s capabilities
Optimise group
capital structure:
Through value-
enhancing growth or
capital reduction
ACTIVE SHAREHOLDER
Allocate Resources, Capital and Talent across the group
Strengthened group’s core capabilities to deliver on new strategy
2.5
4.0
2.0
Iberia Auto Leasing Equip Rental
Invested Capital
Barloworld Limited
Merrill Lynch Conference March 2019
Revenue
R63.4bnup 2%
(FY17: R62bn)
Operating profit
R4.4bnup 8%
(FY17: R4.1bn)
Income from associates
R235mup 153%
(FY17: R93m)
Profit before non-operating & capital items
R3.2bnup 22%
(FY17: R2.7bn)
Effective tax rate
28.5%(FY17: 23.9%)
Headline earnings per share
1 151 centsup 18%
(FY17: 975 cents)
INCOME STATEMENT HIGHLIGHTS FROM CONTINUING OPERATIONS
EQUIPMENT SOUTHERN AFRICA
DIVISIONAL OVERVIEW
Barloworld Limited
Merrill Lynch Conference March 2019
Revenue up 8% due to improved machine sales growth of 21%
Operating margin decreased to 9.1% due to sales mix, exchange rate impact and
investment in operational and digital transformation
Solid performance in the DRC JV significantly boosting attributable income
Marginal decrease in return on invested capital (ROIC) to 12.7% (2017:12.8%)
OPERATIONAL REVIEW - EQUIPMENT SOUTHERN AFRICA
Operating profit (Rm) Margin
9.1%
9.8%
0 500 1 000 1 500 2 000
SouthernAfrica
Sept 2018 Sept 2017
Barloworld Limited
Merrill Lynch Conference March 2019
AFTERMARKET CONTRIBUTION REMAINS STRONG
Rbn
30%
28%
34%
46%
36%
33%
41%
46%50%
56% 57%
52%
0%
10%
20%
30%
40%
50%
60%
0
5
10
15
20
25
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Equipment sales Product support
Barloworld Limited
Merrill Lynch Conference March 2019
37%
52%
6%5%
SOUTHERN AFRICA REVENUE BY LINE OF BUSINESS - SEPTEMBER
2018
29%
57%
10%
4%
2017
New equipment Product support Used equipment Rental
Barloworld Limited
Merrill Lynch Conference March 2019
20%
49%
8%
23%
SOUTHERN AFRICA NEW EQUIPMENT SALES BY INDUSTRY - SEPTEMBER
2018
30%
40%
14%
16%
2017
Mining Construction Energy & Transportation Power Contract mining
Barloworld Limited
Merrill Lynch Conference March 2019
BARTRAC JV IN DRC DELIVERS SOLID PERFORMANCE
ASSOCIATE INCOME (Rm)
Economic outlook in the DRC remains stable post elections
Key customers continue to invest in existing operations focusing on productivity
improvements
Outlook for BARTRAC expected to be in line with prior year
265
13
97
251
0
50
100
150
200
250
300
FY 2015 FY 2016 FY 2017 FY 2018
Barloworld Limited
Merrill Lynch Conference March 2019
MINING OPPORTUNITIES
ANGOLAZAMBIA
MOZAMBIQUE
NAMIBIA
RSA
ZIMBABWEBOTSWANA
Kolomela
$80m
Gamsberg
24 units
$80m
Platreef
20 units
$50m
Mopani
17 units
$11.3m
Luaxe
8 units
$14,1m
Belfast
25 units
$200m
Mota Engil
35 units
$101m
Mogalakwena
12 units
$50m
Vale
2 units
$13m
Venetia
20 units 1 unit
$100m <$1m
Greenfields/Major Projects Firm order Delivered FY18 to date
Tharisa
11 units
$16m
Trollope
3 units 6 unit
$4.6m $7m
Barloworld Limited
Merrill Lynch Conference March 2019
COMMODITY MIX – MINING UNIT SALES BY COMMODITY - 2012 - 2018
COALGlencore
South 32
Exxaro
Vale
COPPER
Mopani Copper
Vedanta
Barrick
Palabora Copper
DML
FQM
DIAMONDSDeBeers
Debswana
Namdeb
Petra
Catoca
GOLD B2GoldNew Kleinfontein
Gold One
IRON ORESishen
KolomelaAssmang
MANGANESE South 32UMK
Assmang
PLATINUMPGM
Anglo Platinum
Impala
Tharisa
URANIUM Rossing Uranium Swakop Uranium
ZINCSkorpion
Rosh Pinah
Coal23%
Contractors18%
Copper12%
Diamonds13%
Gold4%
Iron Ore4%
Manganese3%
Other7%
Platinum2%
Rental12%
Uranium1%
Zinc1%
Barloworld Limited
Merrill Lynch Conference March 2019
Commodities fundamentals remain favourable
Government commitment in Infrastructure
Mining investments to boost growth
Competitive aftermarket solutions to drive aftermarket growth
Investment in operational and digital transformation
Continued focus to improve returns in underperforming businesses
Firm order book as at February 2019 - R2.36bn
EQUIPMENT SOUTHERN AFRICA OUTLOOK
1.5
2.4
Sep-17
Sep-18
Order book (Rbn)
EQUIPMENT RUSSIA
DIVISIONAL OVERVIEW
Barloworld Limited
Merrill Lynch Conference March 2019
Record results with revenue of $606m, up 57%, driven by strong prime product sales,
particularly gold and coal, including $100m Polyus project
Operating profit of R804m - US Dollar terms up 41% to $61.7m (2017: $43.7m)
Operating margin impacted by sales mix
Continued aftermarket growth from direct parts sales, component and machine rebuilds
Return on invested capital of 21.6%, economic profit of $20m and positive cash
generation of $22.2m
OPERATIONAL REVIEW – RUSSIA
0 250 500 750 1 000
Russia
Sept 2018 Sept 2017
Operating profit (Rm)
10.3%
11.3%
38%
Margin
Barloworld Limited
Merrill Lynch Conference March 2019
24%
25%
29%36%
28%
27%33%
46%
61%51%
51%
37%
-
100
200
300
400
500
600
700
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Equipment sales Product support
AFTERMARKET CONTRIBUTION DRIVING PROFITABILITY
$m
Barloworld Limited
Merrill Lynch Conference March 2019
57%37%
3%
1% 2%
RUSSIA REVENUE PROFILE BY LINE OF BUSINESS – SEPTEMBER
2018
45%
51%
1%1%
2%
2017
New equipment Product support Technology RentalUsed equipment
Barloworld Limited
Merrill Lynch Conference March 2019
83%
10%
4% 2%1%
RUSSIA NEW EQUIPMENT SALES BY INDUSTRY – SEPTEMBER
2018
76%
13%
7%
3% 1%
2017
Mining Infrastructure Energy & Transportation SEM Other
Barloworld Limited
Merrill Lynch Conference March 2019
MINING OPPORTUNITIES
Norilsk
Mirniy Yakutsk
Nerungry
Omsk
Barnaul
Novosibirsk
TomskAchinsk
KemerovoKrasnoyarsk
Chita
Ulan-UdeIrkutsk
Magadan
Anadyr
Petropavloysk-Kamchatskiy
Greenfields/Major Projects Firm order Delivered in FY 2018
Polyus
35 units 40 units
$122.2m $116.7m
Norilsk Nickel
17 units 6 units 5 units
$15.8m $4.6m $4.5m
KRU
23 units 2 units 11 units
$44.6m $2.9m $11.8m
Arshanovskiy
14 units 14 units
$15.4m $13m
Zadubrovskiy Noviy
20 units 6 units 30 units
$18.8m $5.4m $23.4m
Alrosa
10 units 15 units
$8m $9.9m
Pavlik
14 units
$14m
Kekura
11 units
$8.1m
Service Integrator
17 units 14 units 7 units
$15.9m $8.1m $4.2m
NordGold
6 units 7 units 16 units
$14.4m $16.7m $25.5m
Barloworld Limited
Merrill Lynch Conference March 2019
Increased duties on US Sourced Products:
• Large machines: TTT, wheel loaders, motor graders, mining trucks, wheel dozers,
pipelayers
Potential sanctions under consideration by US Senate / Congress:
• Chemical warfare act on the basis of Skripal poisoning
• Defending American Security Against Kremlin Aggression Act (meddling in elections)
Rusal sanctions lifted following Deripaska’s removal as majority owner
Russian economy showing small growth despite the sanctions
Commodities driving revenue include coal, gold, nickel and copper
EQUIPMENT RUSSIA – GEOPOLITICAL LANDSCAPE
Barloworld Limited
Merrill Lynch Conference March 2019
Geopolitical environment remains volatile but yet “stable”
Increased retaliatory customs duties have impacted mining product opportunities
US sourced units sales are estimated to decrease by 52% in 2019 vs 2018 of which
approximately 50% can be attributed to increased customs duties.
Firm order book remains strong
Growth consolidation, tight control over expenses and working capital management
Aftermarket revenues generate a solid contribution to overall dealership profitability
Russian mining sector and commodity outlook maintain positive trajectory
EQUIPMENT RUSSIA - OUTLOOK
64
44
81
March 2018
September 2018
February 2019
Order book ($m)
+84%
Large deals (68)
AUTOMOTIVE
DIVISIONAL OVERVIEW
Barloworld Limited
Merrill Lynch Conference March 2019
Margin
5.7%
5.5%
OPERATIONAL REVIEW - AUTOMOTIVE
Revenue R29.8bn (FY’17: R31.6bn) – down 5.6% (Comparable basis up 0.3%)
Operating profit for the division at R1 701m (FY’17: R1 747m) – down 2.6%
Operating margin achieved for the year at 5.7% (FY’17: 5.5%)
Achieved ROIC of 12.4% (FY’17: 13.1%)
Average invested capital maintained at similar levels to prior year
Generated R690m of free cash flow
0 500 1 000 1 500 2 000
BarloworldAutomotive
FY'18 FY'17
Operating profit (Rm)
-2.6%
Barloworld Limited
Merrill Lynch Conference March 2019
Operating profit down 4.6%
Increased rental days against a market
decline of 0.7%
Results negatively impacted by lower used
vehicle margin as a result of lower new
vehicle inflation
Increased rate per day, reduced damage
expenses and managed fleet cost
Maintained fleet utilisation at 76%
Generated positive free cash flow
CAR RENTAL
FY’18 FY’17 % chg
Revenue 6.53bn 6.45bn +1.3
Operating profit 536m 562m -4.6
Operating margin 8.2% 8.7% -0.5bps
Barloworld Limited
Merrill Lynch Conference March 2019
Pleasing operating profit growth of 3.2%
Finance fleet reduced due to the non-renewal
of a few key contracts
Total fleet under management up 2.0%
Strong used vehicle profit contribution from
older used vehicles
Improved ROIC by 0.5bps
Positive momentum achieved through recently securing
a few sizeable corporate contracts
AVIS FLEET
FY’18 FY’17 % chg
Revenue 3.33bn 3.57bn -6.8
Operating profit 641m 621m +3.2
Operating margin 19.3% 17.4% +1.9bps
Barloworld Limited
Merrill Lynch Conference March 2019
Revenue declined by 7.5% (Comparable basis up 1.2%)
Total dealer market up 0.5%
New units sold down 4.9% (Comparable basis -1.1%)
• Impacted by declining premium segment
Ongoing dealership portfolio review and
cost-base alignment
The SMD acquisition remains value accretive
Positive free cash flow generated
Achieved ROIC above Group hurdle rate
MOTOR TRADING
FY’18 FY’17 % chg
Revenue 19.96bn 21.58bn -7.5
Operating profit 524m 564m -7.1
Operating margin 2.6% 2.6% -
Barloworld Limited
Merrill Lynch Conference March 2019
MOTOR RETAIL
Forecasts and information by Dr. Neal Bruton, adjusted by management
2019 total market expected to be 2% -
3% down on prior year
0
100
200
300
400
500
600
700
800
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Total South African Vehicle Market
Passenger LCV M&HCV
Barloworld Limited
Merrill Lynch Conference March 2019
Car
Rental
Avis
Fleet
Motor
Trading
Automotive
Division
AUTOMOTIVE - OUTLOOK
Car rental industry rental day growth to remain subdued
Yield management and dual brand strategy to deliver top line revenue growth
Continued contribution from used vehicle disposals but margins under pressure
Leverage technology and mobility solutions to improve customer experience
Well positioned to maintain market leadership
Positive outlook for Corporate growth
City of Johannesburg non-specialised contract not renewed
Challenging trading conditions in the new vehicle market to persist
Premium segment remains under pressure
Ongoing review of underperforming dealerships and brands
SMD to remain value accretive and leverage inter group synergies
Balanced portfolio will continue to provide resilience throughout the cycle
Continued focus on achieving optimal returns above Group hurdle rates
Reviewing various funding options to enhance return on capital
Explore value enhancing growth opportunities
LOGISTICS
DIVISIONAL OVERVIEW
Barloworld Limited
Merrill Lynch Conference March 2019
2.8
%
3.5
% 3.9
%
1.6
%
4.4
%
2014 2015 2016 2017 2018
12
2
15
9
22
3
10
1
26
2
2014 2015 2016 2017 2018
-4.0%R5 924mil
(2017: R6 171m)
+160%R 262mil
(2017: R101m)
4.4%(2017: 1.6%)
4,3
67
4,5
09
5,7
56
6,1
71
5,9
24
2014 2015 2016 2017 2018
FINANCIAL HIGHLIGHTS
REVENUE OPERATING PROFIT OPERATING MARGIN
-2.6%-4.0%
+21.1%
160%
Barloworld Limited
Merrill Lynch Conference March 2019
4.7
%
5.6
%
6.0
%
2.5
%
8.7
%
2014 2015 2016 2017 2018
1,7
61
2,4
03
2,4
72
2,0
82
1,5
38
2014 2015 2016 2017 2018
-62
4
-73
0
86 26
0
52
0
2014 2015 2016 2017 2018
FINANCIAL HIGHLIGHTS
CASH FLOW*
NET OPERATING
ASSETS
RETURN ON
INVESTED CAPITAL
* before financing
+100%R520mil
(2017: R260m)
-26%R1 538mil
(2017: R2 082m)
8.7%(2017: 2.5%)
100%
-26%
Barloworld Limited
Merrill Lynch Conference March 2019
Integration of Transport
& SCM businesses
Headcount optimisation
Multiple operational
improvements
implemented
More streamlined
operations
Leveraging group
buying power
Creating shared value
with suppliers
Sub-optimal business
units held for sale
Exit of sub-optimal
contracts
Customer-focused
operating model to
support future growth
SG&A COST
REDUCTION
OPERATIONAL
PERFORMANCEPROCUREMENT
OPERATING
MODEL
KEY ACHIEVEMENTS
Barloworld Limited
Merrill Lynch Conference March 2019
3
LOGISTICS STRATEGIC OUTLOOK
VISION
TO BE AN INTERNATIONAL LEADER IN SUPPLY CHAIN
FULFILLMENT THAT DELIGHTS STAKEHOLDERS
421
Achieve full potential
of existing
business & assets
Further review of
portfolio for
enhanced returns
Unlock high
value profit pools
as supply chain partner
of choice
Enhance business
models through
technology
CONSOLIDATE
GAINS
OPTIMISE
PORTFOLIO
EXPLORE
NEW MARKETSDIGITISE
Barloworld Limited
Merrill Lynch Conference March 2019
DIVERSE BLUE CHIP CUSTOMER BASE
SUSTAINABILITY AND
INCLUSIVE GROWTH
Barloworld Limited
Merrill Lynch Conference March 2019
BLACK PUBLIC
SCHEME
MANAGEMENT
TRUST
BARLOWORLD SABARLOWORLD
LOGISTICS
B-BBEE TRANSACTION SALE OF PROPERTIES
38% 32% 30%
Sale of PropertiesPROPCO
EMPLOYEE
TRUST
Lease payment
100%
BARLOWORLD
FOUNDATION
100%
FOUNDATION
3%
EXTERNAL
FUNDER
Loan
Barloworld Limited
Merrill Lynch Conference March 2019
B-BBEE TRANSACTION HIGHLIGHTS
Transformation Creation of a long term sustainable BBBEE transaction
Contribute to transformation and inclusive growth of the South African economy
Broad-based
Creation of a broad-based Foundation issued with 3% of Barloworld
Foundation mandate of poverty alleviation, education and youth development
Broad-based participation of 14 000 employees
Public Offer to the black public
Longevity Foundation shareholding permanent
Minimum 15-year empowerment period
Sustainability
The sale of a R2.8bn property portfolio to a black controlled company (PropCo)
PropCo will raise external debt of up to 80% of the acquisition price of the Properties
Grow its property portfolio over time
Strategic
alignment
Sale of property portfolio aligned to strategic focus to maximise and unlock value of all assets
Protect and grow the market leading positions of the
South African operations
Reliable, credible partner to public and private sector clients
Efficient
structure
B-BBEE ownership equivalent to 14%
Whilst limiting dilution to shareholders
Barloworld Limited
Merrill Lynch Conference March 2019
BARLOWORLD FOUNDATION
BARLOWORLD FOUNDATION
Aligned with the national development
imperatives of advancing inclusive
economic transformation and growth.
Focus will be on:
• Poverty alleviation,
• Education,
• Youth development and advocacy
Permanent shareholding, not allowed
to sell into perpetuity
Increases Barloworld’s annual social impact
spend to [R60] million per annum
BARLOWORLD FOUNDATION
3%
Barloworld Limited
Merrill Lynch Conference March 2019
SALE OF PROPERTIES
Disposal price based on:
• Future value of properties of R2.8 billion (being the current market value (as above) increased by
the value of capex committed on properties under development
• Discount of 5% to the future value
Ten year lease between Barloworld (through Barloworld SA and Logistics) and Propco
* Independent Property Valuation
Property type Properties’ Market Value GLA
Motor Retail R1.676 billion 128 913
Industrial R940.3 million 149 901
Commercial R95.28 million 9 150
Mixed – Commercial and Industrial R13.8 million 5 264
Residential and Vacant Land R29.4 million 595
Total R2.755 billion* 293 823
Barloworld Limited
Merrill Lynch Conference March 2019
Note 1: The amounts are based on a market cap of circa R24.97 billion
Refer to other costs included with the transaction detail on slides 16, 17 and 18
The average BEE transaction’s economic cost is around 2.7% for every 10%. This is normally for shorter term
transactions (5 – 8 years). The total economic cost of this 14% transaction is 3.4% per 10%. This is slightly above the
average, however, the longer tenure (15 years) compensates shareholders for this extra cost
Of the total costs of 4.70%, 3% relate to the Foundation and the costs of the property transaction amount to 1.70%
The market related rental escalation of the property portfolio was informally determined as 7% vs the 8% rental
escalation as part of this transaction. The cost to the Barloworld shareholder is the present value of the difference in
rentals paid over the market rental period, which amounts to R80 million
TOTAL ECONOMIC COST TO SHAREHOLDERS
ECONOMIC COST TO SHAREHOLDERPercentage of
Market Cap
Rand
Equivalent (1)
Foundation (Free issue of shares) 3.00% 749 167 085
Property transaction Facilitation costs
Employees (Grades 2 – 10) (100% facilitation of equity portion) 0.70% 174 187 586
Junior Management (Grades 10 -14) (100% facilitation of equity portion) 0.11% 26 422 682
Senior Management (Grades 15 – 23) (95% facilitation of equity portion) 0.32% 81 126 815
Total IFRS 2 Costs 1.13% 281 737 083
Discount on Property sale 0.57% 143 246 370
Facilitation Costs 1.70% 424 983 453
Total BEE Facilitation Costs (Public Scheme Successful) 4.70% 1 174 150 538
MERRILL LYNCH CONFERENCE
12 -13 March 2019