2019 Year-end Results for the 12 months ended 30 September 2019 18 - - PowerPoint PPT Presentation

2019 Year-end Results for the 12 months ended 30 September 2019

18 NOVEMBER 2019

FORWARD LOOKING STATEMENTS

Barloworld may, in this document, make certain statements that are not historical facts that relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to our future prospects, developments and business strategies. Examples of such forward-looking statements include, but are not limited to, statements regarding exchange rate fluctuations, volume growth, increases in market share, return on invested 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 identi such forward-looking statements, but are not the exclusive means of identiing such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and there are risks that the predictions, forecasts, projections and

• ther forward-looking statements will not be achieved. If one or more of these risks materialise, or should underlying

assumptions prove incorrect, our actual results may differ materially from those anticipated. You should understand that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. Forward-looking statements apply only as of the date on which they are made, and we do not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise. All references to years refer to the financial year 30 September. Comprehensive additional information is available on our website: www.barloworld.com

1

Opening and welcome Zanele Salman, Head Investor Relations Safety video Highlights Dominic Sewela, Barloworld Group CE Financial overview Nopasika Lila, Barloworld Group FD Automotive and Logistics update Kamogelo Mmutlana, CEO Charl Groenewald, CE Barloworld Equipment Russia update Quinton Mcgeer, CEO Barloworld Equipment SnA update Emmy Leeka, CEO Strategy update and Group Outlook Dominic Sewela, Barloworld Group CE Questions and answers

PRESENTATION OVERVIEW

2

Highlights and group strategy

DOMINIC SEWELA GROUP CHIEF EXECUTIVE

4

KEY HIGHLIGHTS:  Successful implementation of Khula Sizwe, scheme oversubscribed and funding target met  Mbewu programme launched, focused on providing support and funding for the growth of social enterprises  Member of Dow Jones Sustainability Emerging Markets, FTSE4Good and FTSE/JSE Responsible Investment Indeces

Target:

ZERO HARM

WORK ENVIRONMENT

2017 2018 2019 Non-Renewable Energy (GJ) 3 060 499 2 922 370 2 829 289 GHG Emissions (tCO2e) (Scope 1 and 2) 267 940 255 103 243 478 Lost -Time Injury Frequency Rate (LTIFR) 0.77 0.70 0.58 Number of Work Related Fatalities 3 2 1

BUILDING A SUSTAINABLE FUTURE FOR OUR PEOPLE, ENVIRONMENT AND COMMUNITIES

GROUP HIGHLIGHTS

5

PLEASING EQUIPMENT AND STRONG AUTOMOTIVE RESULTS

Normalised headline earnings per share

1 167cents

up 1.4% (2018: 1 151 cents) Revenue

R56.8bn

down 5.4% (2018: R60.1bn) Free cash generated during the period

R3.1bn

(2018: R3.6bn) Return on invested capital

11.9%

(2018: 12.3%) Total dividend per share

462 cents

(2018: 462 cents) Special dividend declared

228 cents

2019 ACHIEVEMENTS

 Strong free cash generated  Group ROIC in line with expectations  Business structure and leadership driving strategy implementation and culture change  Managing for intrinsic value approach fully adopted  Barloworld Business System journey on track, contributing to performance  Avis Fleet held for sale at 30 September 2019  Wagner Asia in Mongolia due diligence complete

6

DELIVERING VALUE BY FOCUSING ON THE RIGHT AREAS

12.8% 18.4% 13.1% 6.3% 11.2% 12.7% 21.6% 12.4% 11.0% 12.3% 12.5% 17.7% 13.2% 9.5% 11.9%

SEGMENTAL 12 MONTH ROLLING ROIC

7

HURDLE RATE 13.0%

2019 WACC 13.2%

Equipment southern Africa Equipment Russia^ Automotive Logistics* Group 13.0%

AVERAGE INVESTED CAPITAL (R million) 2017 10.2 2.6 10.0 2.1 27.1 2018 10.9 2.9 10.0 1.8 26.3 2019 11.5 3.3 9.6 1.4 25.5

* Core operations. ^ In terms of USD.

Financial

• verview

NEW ACCOUNTING STANDARDS IMPACTING THE FINANCIAL STATEMENTS – IFRS 15 AND 9

9

The accounting policies applied in the preparation of the financial statements are consistent with those applied in the prior year except for the adoption of IFRS 15 Revenue from contracts with customers (IFRS 15) and IFRS 9 Financial instruments (IFRS 9) (refer to annexure 4). The adoption of IFRS 9 and 15 has not materially affected the group’s results but has resulted in the separate disclosure of contract assets and liabilities on the statement

• f financial position, together with enhanced disclosures as required by these new

accounting standards.

TRANSACTIONS IMPACTING THE FINANCIAL STATEMENTS

10

OPERATIONAL CHANGES: AVIS FLEET AND NMI-DSM

2019 2018 Income statement Avis Fleet Held for sale (discontinued operation in 19; On dilution to 50% in 20 JV results will be equity accounted in continuing operations) Continuing operation NMI-DSM Consolidated for 11 months Equity accounted for 1 month (50% shareholding and loss of control) Fully consolidated for 12 months: (51.18% shareholding) Statement of financial position Avis Fleet Assets and liabilities held for sale Assets and liabilities consolidated in group NMI-DSM Investment in associate Subsidiary Statement of cash flows Avis Fleet Consolidated in the statement of cash flows – refer to Annexure 4 for a breakdown of Avis Fleet cash flows Consolidated in the statement of cash flows NMI-DSM Cashflows consolidated for 11 months. From 1 September 2019 dividends received included in dividends from associates Cashflows consolidated for 12 months.

FINANCIAL HIGHLIGHTS FROM CONTINUING OPERATIONS

11

DISCONTINUED OPERATION: AVIS FLEET

Continuing HEPS

867cents

5%

(2018: 910 cents)

Revenue

R56.8bn

5%

(2018: R60.1bn)

Operating profit incl. B-BBEE

R3.3bn

13%

(2018: R3.8bn)

Fair value gain on financial instruments

R32m

(2018: R122m loss)

Total dividend per share

462 cents

(2018: 462 cents)

Free cash flow*

R3.1bn

(2018: R3.6bn)

Finance costs

R1 085m

(2018: R1 145m)

Effective tax rate**

28.8%

(2018: 29.1%)

Special dividend per share

228 cents^

* Including discontinued operations. ** Excluding Avis Fleet finance costs (annexure 4). ^ Includes 6.6 million BEE Foundation shares. Refer to Supplementary schedules for closing and average exchange rates.

DIVIDENDS PER SHARE

12

SPECIAL DIVIDEND OF R500 million

115 125 145 165 230 265 317 297 228 2016 2017 2018 2019 DIVIDENDS PER SHARE (cents) 1H 2H Special

345 390 462 690

CONTINUING REVENUE SEGMENTAL

13

RESILIENT IN TOUGH TRADING CONDITIONS

36 11 33 11 9 2019 (%) 33 13 33 11 10 2018 (%)

n Equipment southern Africa n Equipment Russia n Automotive Trading n Rent A Car n Logistics 19.8 7.8 20.0 6.5 5.9 60.1 20.4 6.2 18.7 6.3 5.2 56.8

Equipment southern Africa Equipment Russia Automotive Trading Rent A Car Logistics Total Group

REVENUE (R billion)

2018 2019

OPERATING PROFIT SEGMENTAL

14

POSITIVE EQUIPMENT AND MOTOR TRADING RESULT

50 20 15 14 1 2019 (%) 46 21 13 14 6 2018 (%)

n Equipment southern Africa n Equipment Russia n Automotive Trading n Rent A Car n Logistics 1 790 804 524 536 262 (133) 3,762 1 836 719 561 523 38 (409) 3,272

Equipment southern Africa Equipment Russia Automotive Trading Rent A Car Logistics Corporate Total Group

OPERATING PROFIT (R million)

2018 2019 PRE-CORPORATE

OTHER PERTINENT ISSUES IN 2019

► Net operating expenses favourably impacted by improved GP margin resulting from change in sales mix in our Equipment businesses. ► Corporate costs impacted by:

 BEE transaction costs

R73 million

 GMP charges

R88 million

 Investments in skills

R40 million

 Strategic projects

R43 million

► Realised fair value adjustments in operating cash flows: R130 million (2018: R140 million).

15

► Fair value gains recognised in the income statement of R32 million (2018: losses R122 million) impacted by an unrealised gain of R173 million driven by the decision to convert GBP150 million of the Equipment Iberia sale proceeds to USD in March 2019 in anticipation

• f the acquisition of the Mongolian Caterpillar dealership.

1,192 1,151 1,167 1,100 +35 +8 +42 +1 +66

• 41
• 8
• 15
• 13
• 50
• 16
• 34
• 35
• 33

1,000 1,040 1,080 1,120 1,160 1,200 1,240 1,280

HEPS - Sep 2018 Equipment Iberia prior year profits HEPS from continuing operations BWE snA excl associates DRC Barzem and other Equipment Russia Automotive - excluding Avis fleet Avis Fleet Logistics excl KLL KLL losses Handling Corporate excl abnormal Fv adjustments on USD deposits CorpUK net of tax UK and RSA Normalised HEPS - Sep 2019 Pension fund GMP B-BBEE costs Group HEPS operations - Sep 2019

HEPS AND NORMALISED HEPS ANALYSIS

16

INCLUDING AVIS FLEET*

* Refer to Annexure 3.1.

cents

STATEMENT OF FINANCIAL POSITION: YEAR ON YEAR CHANGE

17

IMPACT OF DECONSOLIDATION OF AVIS FLEET AND NMI-DSM

R million 2019 2018 Value change

Non-current assets 14 540 19 231 (4 691) Current assets 26 871 29 531 (2 660) Assets classified as held for sale 5 780 497 5 283 Total assets 47 191 49 259 (2 068) Equity 23 895 22 750 1 145 Non-current liabilities 7 336 8 917 (1 581) Current liabilities 13 738 17 466 (3 728) Liabilities classified as held for sale 2 222 126 2 096 Total equity and liabilities 47 191 49 259 (2 068)

Increase in investments in associates offset by deconsolidation of Avis Fleet and NMI-DSM assets Decrease in receivables; inventories and cash coupled with deconsolidation of Avis Fleet and NMI-DSM assets 2019: Avis Fleet; Logistics Middle East and Smart Matta; Barlow Park; other properties 2018: Logistics Middle East, Smart Matta, KLL; Barlow Park Continued profitability of the group NAV per share R112 (2018 R105) Reduction in group borrowings offset by increase in the UK pension fund deficit and coupled with deconsolidation

• f Avis Fleet

Reduction in group borrowings, payables and deconsolidation of Avis Fleet 2019: Avis Fleet; Logistics Middle East and Smart Matta 2018: Logistics Middle East, Smart Matta, KLL

DEBT MATURITY PROFILE

18

 Ratio of long-term to short-term debt 56:44 (Sept 2018 – 54:46)  R1.2 billion long-term bonds issued in current financial year  R1.7 billion bonds repaid in current year  R10.6 billion (committed R7.1 billion) unutilised bank facilities at Sept 2019  Cash and cash equivalents R7.3 billion (Sep 2018 – R7.9 billion)

STABLE YOY

R million Total Short-term redemption Long-term Redemption

South Africa 7 839 3 218 4 621 Offshore 530 530 Total debt Sep 2019 8 369 3 748 4 621 Total debt Sep 2018 11 171 5 176 5 995

EXPLAINING NET DEBT

19

AVIS FLEET: GROUP VS EXTERNAL FUNDING

R million 2019 Balance sheet as disclosed Avis Fleet (held for sale) Non-core Logistics (held for sale) 2019 Balance sheet including held for sale 2018 Balance sheet including held for sale Value change % change

Cash 7 226 48 29 7 303 7 912 (609) (8) Gross debt 7 808 561 8 369 11 171 (2 802) (25) Net debt 582 513 (29) 1 066 3 259 (2 193) (67)

7,912 6,474 3,064 7,303 +765 +242

• 1,927
• 1,762
• 486
• 1,057
• 2,858
• 1,000
• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

Opening cash Operating cashflows before WC Working Capital Investment in fleet and vehicle assets Other cash movements in

• perating

activities Investing activity Free Cash Flow Dividend paid Financing activities Non cash movements Closing cash balance

CASH FLOW FREE CASH FLOW R3 064m (2018: R3 591m)

20

cents

R2.5 billion cash proceeds from Iberia Cash proceeds from Iberia still held

CASH INTEREST COVER, NET DEBT, EBITDA/ INTEREST COVER

21

FAVOURABLE TRENDS

Cash interest cover 4.7 x (2018: 3.2 x)

5,684 3, 3,259 1,066 5.05 6.08 5.71

1 2 3 4 5 6 7

• 1,000

2,000 3,000 4,000 5,000 6,000 2017 2018 2019

Net debt EBITDA/interest cover

Net debt/ EBITDA 0.2 x (2018: 0.5 x)

R million times

CAPITAL STRUCTURE

Group segmental gearing ratios within target ranges:

22

 Net debt of R1 065 million (2018: R3 276 million)  Below target ranges due to strong cash inflows in second half  EBITDA interest cover 5.71 x (2018: 6.08 x)  Net debt to EBITDA 0.2 x (2018: 0.5 x)  Moody’s confirmed Global Scale Rating of Baa3 (negative outlook) and National Scale Rating of Aa1.za

REMAINS STRONG

% Trading Leasing Car Rental Total group Gross Total group Net

Debt to equity Target range 30 – 50 600 – 800 200 – 300 Ratio at 30 Sep 2019 13 604 208 35 4.5 Ratio at 30 Sep 2018 25 614 204 49 14

FOCUS ON CAPITAL ALLOCATION AND GROWTH

Corporate Initiatives:  Capacity for growth: Acquisitions  UK capital restructure  Realise full potential of existing businesses:

 Operational transformation – Barloworld Business System  NMI – transition from subsidiary to associate (loss of control) effective 1 September 2019  Restructure Avis Fleet and Equipment Rental assets

23

DELIVER VALUE >15% ROE 2019 Uplift by 2022 10.1% 3.0% – 4.0%

Medium term target capital structure:

Debt: Equity 40% – 60%

(excluding IFRS 16)

9.3 10.5 11.4 10.1 2 4 6 8 10 12 2016 2017 2018 2019

ROE (%)

Automotive and Logistics

KAMOGELO MMUTLANA CEO AUTOMOTIVE AND LOGISTICS

AUTOMOTIVE

25

2019 HIGHLIGHTS

Enhancing returns Balanced portfolio Operating environment Financial performance

 Optimise returns through exiting of Avis Fleet Tanzania  Avis Fleet: Held for sale – Transaction in 2020 as part of Group capital release program  Outperformed market in new vehicle unit sales  Improved used vehicle margins in subdued market  Growth in total managed fleet  NAAMSA total new vehicle market decline by 3%  Low business and consumer confidence  New vehicle market impacted by vehicle price inflation and financing affordability  Despite the second quarter GDP growth, no immediate recovery in new vehicle market  SAVRALA car rental market show marginal growth on prior year  Automotive delivered an excellent result  Strong cash generation  Delivered ROIC above Group target  Focus on cost and balance sheet management rewarded

22% 12% 66% 2019 SALES (R billion) 31% 36% 33% 2019 OPERATING PROFIT (R million)

AUTOMOTIVE

26

SALES AND OPERATING PROFIT BY BUSINESS UNIT

n Car Rental 6.3 n Avis Fleet 3.4 n Motor Trading 18.7 n Car Rental 523 n Avis Fleet 625 n Motor Trading 561

R28.4 billion R1.7 billion

Divisional Overview

KAMOGELO MMUTLANA CEO AUTOMOTIVE AND LOGISTICS

FINANCIAL PERFORMANCE

 Revenue down 4.8% – comparable basis down 1.0%  Strong performance from Motor Trading  Achieved 13.2% ROIC (2018: 12.4%)  R0.8 billion reduction invested capital  R1.3 billion in free cash flow (2018: R690 million)  Avis Fleet held for sale  Deconsolidation NMI-DSM, effective 1 September 2019

28

AUTOMOTIVE

Continuing operations 2018 2019 Change (%) 2018 2019 Change (%)

Revenue (R billion) 29.81 28.38

• 4.8

26.48 25.00

• 5.6

Operating profit (R million) 1701 1709

• 0.5

1060 1084 +2.3 Operating margin (%) 5.7 6.0 +0.3bps 4.0 4.3 +0.3bps

BUSINESS UNIT PERFORMANCE

 Operating profit down 2.5%

 Positive 2H growth in Car rental market, following

negative 1H

 Limited rental rate increases in highly competitive

environment

 Billed days negatively impacted by leisure

 Increased used vehicle margin despite subdued market  Vehicle costs well managed  0.2bps improvement on ROIC – reduced invested capital R0.4 billion  Optimise returns through operational efficiencies

29

CAR RENTAL

2018 2019 Change (%)

Revenue (R billion) 6.53 6.27

• 3.9

Operating profit (R million) 536 523

• 2.5

Operating margin (%) 8.2 8.3 +0.1bps

26,304 27,209 26,991 26,624 76% 76% 76% 76%

FY16 FY17 FY18 FY19

Fleet Utilisation

BUSINESS UNIT PERFORMANCE

 Revenue down 6.1% – comparable basis down 0.4%  Operating profit up 7.1% – comparable up 9.7%  Outperformed new market – vehicle units sales down 4.8%

 represented dealer market declined by 5.6%

 Premium segment continues to decline and volume brands under pressure  Delivered sterling performance in double digits ROIC growth  Optimisation of cost base and portfolio strengthened results  Record year from SMD (Salvage Management and Disposal)

30

MOTOR TRADING

2018 2019 Change (%)

Revenue (R billion) 19.96 18.74

• 6.1

Operating profit (R million) 524 561 +7.1 Operating margin (%) 2.6 3.0 +0.4bps

53,174 51,677 50,363 47,790 NEW AND USED VEHICLES

2016 2017 2018 2019

15.8% 14.3% 18.3% ROIC

2017 2018 2019

44,188 43,099 45,749 48,963 SALVAGE UNITS

2016 2017 2018 2019

AUTOMOTIVE

 Balanced portfolio will continue to provide resilience throughout the cycle

 Low growth expected in car rental days for the short term  Continue to grow new and used vehicle sales despite limited growth  Healthy pipelines for fleet growth in Southern Africa

 Acquisition of BMW Centurion concluded, effective 1 October  BMW to implement agency model, effective January 2020  Continued focus on delivering ROIC above hurdle rate  Positive free cash generation  Barloworld Business System Rollout – operational efficiencies and customer experience

31

OUTLOOK

Divisional

• verview

CHARL GROENEWALD CEO LOGISTICS

FINANCIAL PERFORMANCE

 2019 disappointing operating performance of R38 million impacted by:

 Identified non-core businesses held for sale  Onerous leases  Poor economic conditions, civil unrest and unplanned

port strikes

 Turnaround challenges  Lower trading volumes and non-renewal of contracts in 2018  Increased fleet management costs driven by fleet ownership

model change  Continuing operating profit of R160 million drove a normalised ROIC of 9.5%

33

LOGISTICS

Continuing operations 2018 2019 Change (%) Revenue (R billion) 5.02 4.60

• 8.4

Operating profit (R million) 310 160

• 48

Operating margin (%) 6.2 3.5

• 2.7bps

Total kilometers (‘m) 130.6 120.8

• 7.5

LOGISTICS: CONTINUING OPERATIONS CONSOLIDATING GAINS, SOLID BASE FOR 2020

Customer Retention Growth Fix & Optimise

 5% growth in Global solutions

 Transport: new business won in LT Contract and Energy  Solid pipeline of opportunities pursued  Leveraging Emerging Trucker and Digital Solutions  100% Supply Chain solutions  90% Transport  Go-live with new Managed Transport solution  Management continuity and cultural transformation  Conclude disposal of non-core businesses  Strengthened Team to support Supply Chain & Select Transport Growth  Reduce cost of engagement and facilitate skills

• ptimization through Automotive integration

 Continued focus on delivering ROIC between 11- 13%

LOGISTICS STRATEGY

35

CONSOLIDATE GAINS

Capitalise on scale provided through integration and reduce cost of engagement

OPTIMISE PORTFOLIO

Exit non-core and improve sub-optimal businesses Leverage Barloworld Business System

EXPLORE NEW MARKETS

Grow internal fulfilment business in equipment and automotive

INNOVATION FOR GROWTH

Transform business models to enable exponential growth

VISION

To be the logistics and supply chain partner of choice

1 2 3 4 5

TURNAROUND AND TRANSFORMATION JOURNEY CONTINUES

Divisional

• verview

QUINTON MCGEER CEO EQUIPMENT RUSSIA

FINANCIAL PERFORMANCE EQUIPMENT RUSSIA

 Revenue of $432.5 million down 28.6% – 2018 included large package mining machine deals not repeated in 2019  The impact of increased import duties

• n business performance was less severe

than originally anticipated  Operating profit of $50.1 million down 18.7% (2018:$61.7 million)  Operating profit margin in USD improved to 11.6% (2018: 10.3%) – positively impacted by sales mix and continued cost control  ROIC of 17.7% (2018: 21.6%)  Cash generation of $36.6 million (2018: $22.3 million)

37

2018 2019 Change (%)

Revenue (R billion) 7.78 6.19

• 20.4

Operating profit (R million) 804 719

• 10.6

Operating margin (%) 10.3 11.6 +1.3bps

AFTERMARKET DRIVING PROFITABILITY

24% 25% 29% 36% 28% 27% 33% 46% 61% 51% 51% 37% 51%

• 100

200 300 400 500 600 700 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Product support Equipment sales OP Margin

3.4% 5.6% 9.6% 9.1% 8.7% 10.5% 11.2% 12.1% 11.0% 10.2% 6.1% 5.2% Global Financial Crisis Crimea Crisis and Sanctions Sanctions and Retaliatory Duties Oil drops to ~USD30

Revenue mix: product support vs equipment sales

$m 11.6%

76 16 7 2

Mining Infrastructure Power Other

2019 New equipment revenue (%) Mining is the main contributor to equipment sales

38

DIVERSIFIED COMMODITY EXPOSURE DEFENDS AGAINST CYCLICALITY

39

40 13 9 7 9 22 2013 REVENUE (%) 35 31 8 7 4 15 2019 REVENUE (%)

n Gold n Coal n Copper/nickel/aluminium n Oil n Diamond n Other n Gold n Coal n Copper/nickel/aluminium n Oil n Diamond n Other

• 50

100 150 200 250 300 350 400 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Opening Firm Orders Annual sales

FIRM ORDER BOOK TRENDS

USD million

40

MINING ACCOUNTS

41

Norilsk Mirniy Yakutsk Nerungry Omsk Barnaul Novosibirsk Kemerovo Achinsk Mezhdurechensk Krasnoyarsk Chita Ulan-Ude Irkutsk Magadan Anadyr Petropavloysk- Kamchatskiy Greenfields/Major Projects Firm order (September 2019) YTD September 2019 Polyus $21.8m $35.0 $16.7m

Norilsk Nickel

$30.7m $24.5m $11.1m

Alrosa $4.5m $1.9m Pavlik $23.9m $0.6m Kekura $20.0m Service Integrator $6.0m $6.0m $6.6m NordGold $12.5m $19.2m KazMinerals (2023) $300m $2.4m SUEK (underground) $17.4m $22.6m

OVERALL OUTLOOK

 Russia is a key market for the group, with the mining sector and commodity outlook expected to remain stable  The impact of increased import duties on business performance expected to stay unchanged  Pleasing growth in the firm order book  Aftermarket revenues expected to improve on the back of increased machine population, component rebuilds and salvage capabilities  Operational excellence initiated through BBS  Continued focus on balance sheet efficiencies to support returns and cash generation

42

Strong Order book

$44 million End of September ($113 million)

+213%

Additional $25 million of new firm

• rders signed after 30 September

$25 million

2018 2019

Divisional

• verview

EMMY LEEKA CEO EQUIPMENT SOUTHERN AFRICA

 Section five

43

FINANCIAL PERFORMANCE EQUIPMENT SOUTHERN AFRICA

 Revenue up 3.3% driven by 7.7% aftermarket growth

 Machine sales flat, gains in mining equipment

sales offset by reduction in construction equipment sales

 Rest of Africa revenue contribution down to 32%

 Operating profit up 2.6% to R1.84 billion  Operating margins in line with prior year despite continued investment in operational transformation  Associate income up 1% to R249 million boosted by strong performance from JV in DRC  Return on invested capital at 12.5%  Strong cash generation of R2 014 million

44

2018 2019 Change (%)

Revenue (R billion) 19.78 20.43 +3.3 Operating profit (R million) 1790 1836 +2.6 Operating margin (%) 9.1 9.0

• 0.1pp

RESILIENT AFTERMARKET CONTRIBUTION TO TOTAL REVENUE

45 45

38% 33% 41% 43% 50% 56% 57% 52% 54%

9.8% 9.4% 8.7% 9.0% 9.0% 8.5% 9.8% 9.1% 9.0% 8.6% 8.6% 8.2% 8.4% 8.3% 7.5% 8.3% 8.6% 8.5%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

R- R5,000 R10,000 R15,000 R20,000 2011 2012 2013 2014 2015 2016 2017 2018 2019

Sales in R million

Aftermarket Equipment Sales Operating margin EBIT margin

ROIC MARGINALLY BELOW HURDLE RATE, IMPROVING RETURNS IN REST OF AFRICA

46

Average invested capital RSA Namibia Mozambique Zambia Malawi Botswana Angola Southern Africa 2018 6 650 392 749 753 86 517 1 736 10 880 2019 6 798 405 1 092 758 98 473 1 809 11 486 18.6% 27.6% 11.6% 2.4% 8.2%

• 2.5%
• 3.4%

12.7% 17.1% 17.2% 15.1% 12.2% 6.7%

• 9.7%

0.7% 12.5% RSA Namibia Mozambique Zambia Malawi Botswana Angola Southern Africa 2018 2019 Hurdle rate Group hurdle rate 13%

NEW EQUIPMENT SALES BY PRODUCT SEGMENT

47

50 8 42

2019 (%)

n Mining n Construction n Energy and Transportation

43 8 49

2018 (%)

n Mining n Construction n Energy and Transportation

NEW MACHINES SALES TO SECTOR

48

DEMAND FOR MINING REMAIN STRONG

 Sales into Mining led by significant shift from

• wner to contract mining

 Contract mining demand greater than 50%

• f total sales into the mining sector

 Machine availability, financing (CATFin) and product mix remain instrumental to sales growth

55% 74% 72%

2017 2018 FY19

Machine sales to sector

Mining Construction

38 47 48 24 16 17 3 7 10 3 3 2 7 14 9 5 11 5 7 1 2 5 12 5

2017 2018 FY19

Coal Diamonds Iron Ore Other Platinum Phosphate Manganese Gold Copper

Other refers: Uranium, zinc, Gemstone and mineral sands

Mining machines sales split by commodity (%)

DIVERSE COMMODITY EXPOSURE

49

DEFENDS AGAINST CYCLICALITY

BARTRAC JV: POSITIVE RETURNS DESPITE HEADWINDS

 Bartrac continues to deliver strong returns, despite challenging regulatory and fluctuating commodity prices  Opportunity to capture growing Chinese operators in the region  Working capital management and cash generation remain key focus areas  Share of income expected to decline in 2020 due to a reduced level of activities at key customer operations

97 251 268

2017 2018 2019

Associate income from Bartrac (R million)

50

MINING PROJECTS OUTLOOK

51

Tharisa

$4m $6.5m

Vale

$11m $14m $8.5m

ANGOLA ZAMBIA MOZAMBIQUE NAMIBIA RSA ZIMBABWE BOTSWANA

Kolomela

$100m

Golder

$50m

Makhado Coal

$80m

Mogalakwena

$15m $45m Greenfields/Major Projects Firm order Delivered 19 to date

Venetia

$50m

Orapa

$100m

Maravi Copper

$17m

Mota Engil

$40m

OUTLOOK

52

MINING

 Mining in RSA expected to remain stable supported by favorable commodity prices.  Headwinds expected in the near term in DRC mainly due to reduced activities in 2020.

CONSTRUCTION

 RSA construction market unlikely to turn in the near term. Opportunity to grow market share in both machines and aftermarket through competitive product range and aftermarket solutions.

ENERGY & TRANSPORTATION

 Focus on Mozambique and Rovuma LNG opportunities  Leverage local packaging to grow market share

GENERAL

 Order book remains strong at R2.1 billion (Sept 2018: R2.4 billion)  Focus on cost and invested capital reduction  Positive cash generation

R2 429 million R 2 077 million

Order book 2018 2019

Strategy update and Outlook

DOMINIC SEWELA GROUP CHIEF EXECUTIVE

Equipment operational transformation Motor retail portfolio review Motor retail cost base reduction Avis Fleet – held for sale 19, JV structure Automotive restructure

• f car rental assets

UK capital restructure Acquisition of CAT dealership in Mongolia Acquisitive growth

• pportunities

Logistics improvement and restructuring Logistics disposal of underperforming assets Middle East Smartmatta KLL

FOCUSED ON IMPLEMENTING OUR STRATEGY

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UNLOCKING VALUE FROM THE BUSINESS

GROUP OUTLOOK

 Challenging macroeconomic environment as well as volatile geopolitical dynamics in key markets expected to prevail in the short term  Barloworld will continue to generate resilient results

 Good market positions, strong customer relationships, well established footprint,

deep knowledge of industry and local market dynamics

 Strategy implementation creates a platform to deliver value in the short to medium term

Equipment  Southern African order book to remain strong driven by demand from contract miners – Batrac JV impacted by reduced level of activities at key customer operations.  Equipment Russia outlook remains positive – pipeline for major projects remains strong Automotive  Continued focus on achieving optimal returns above group hurdle rates Logistics  Turnaround project continues, much improved performance expected

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Thank you

Supplementary information

ANNEXURE 1: CHALLENGING REGULATORY AND OPERATING ENVIRONMENT

RSA  Slowdown in Construction sector but some recovery in Mining  Impact of new Mining Charter and DTI code

• n local manufacturing

and procurement MOZAMBIQUE  Localisation of workforce  High level of inflation  High exposure to metallurgical coal

DRC

 Increase in royalties  50% localization

• f services

 High exposure to copper and cobalt

ZAMBIA

 New sales tax/mining charter  Overtime and housing legislation  High exposure to copper

ANGOLA

 Oil price key to economic recovery  Currency devaluation and shortage of forex  Limited allocation

• f letters of credit

 Subdued equipment/ Power market

BOTSWANA

 High exposure to diamonds/single customer dependency

NAMIBIA

 Increasing Chinese presence in construction  Marginal profitability in uranium mines

MALAWI

 Subdued construction driven market

ZIMBABWE

 Underdeveloped mining industry  Hyperinflation

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ANNEXURE 2.1: IMPACT OF CURRENCY YOY

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ZAR DEPRECIATION YOY

Closing rate Average rate Rand 2019 2018 2019 2018

Exchange rates United States Dollar 15.16 14.15 14.31 13.01 Euro 16.53 16.44 16.14 15.48 British Sterling 18.68 18.45 18.27 17.53

R million Increase/ (decrease) in revenue Increase/ (decrease) in

• perating profit

Headline earnings improvement/ (decline) due to exchange rates

Equipment southern Africa 477 60 31 Equipment Russia 559 67 49 Automotive 40 3 (0) Handling 2 1 1 Logistics 10 Corporate Office – (8) (0) Total Group 1 087 123 81

ANNEXURE 2.2: ANGOLA CURRENCY EXPOSURE

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GREAT STRIDES MADE

66 64 57 2017 2018 2019 USD-LINKED INVESTMENT IN ANGOLAN GOVERNMENT BONDS (USDm) 30 10 10 2017 2018 2019 RESTRICTED KWANZA CASH (USDm)

ANNEXURE 3.1: NORMALISED HEPS FROM CONTINUING OPERATIONS

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INCLUDING AVIS FLEET

Reconciliation of normalised HEPS: Group HEPS per the 2019 financial statements 1 100.0 Add back UK Guaranteed Minimum Pension adjustment 34.8 Add B-BBEE Khula Sizwe costs 32.6 Normalised HEPS including Avis Fleet 1 167.4

ANNEXURE 3.2: PROFORMA CONTINUING HEPS

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867 131 51 FY18 FY19 cents Continuing HEPS Leasing interest in continuing operations 50% JV leasing interest 1 049 910

Avis Fleet held for sale (discontinued operation in 19). On dilution to 50% in 20 the JV results will be equity accounted in continuing operations.

AVIS FLEET JV PROFORMA IMPACT

Khula Sizwe Implementation and IFRS 16 (refer to Annexure 9.1 and 9.2).

ANNEXURE 4 EXTRACTS FROM THE ANNUAL FINANCIAL STATEMENTS Refer to the link below for the following extracts of Notes to the financial statements:  Note 1: Operating and Geographical Segments  Note 5: Finance costs  Note 8: Taxation  Note 13: Investments in Associates and Joint Ventures  Note 20: Discontinued Operations and Assets Held for Sale  Note 23: Provisions  Note 25.2: Contract Liabilities  Note 33: Changes in Accounting policies Link: https://www.barloworld.com/investors/

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ANNEXURE 5: INVESTMENT IN WORKING CAPITAL

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STRONG IMPROVEMENT YOY

Rm 2019 2018

Working capital Inventories – movement 686 (1 466) Receivables – movement 244 (1 423) Payables – movement (165) 824 Total working capital – decrease/ (increase) 765 (2 065)

Rm 2019 2018

Segmental Equipment southern Africa 733 (1 245) Equipment Iberia (91) Equipment Russia (7) (497) Automotive 501 (171) Logistics (129) 77 Other (333) (138) Total working capital – decrease/ (increase) 765 (2 065)

ANNEXURE 6: CASH FLOW AND NET DEBT RECONCILIATION

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IMPACT 2019: WORKING CAPITAL (2018: EQUIPMENT IBERIA)

R million 2019 Actual 2018 Actual

Net debt to CF reconciliation Net debt – beginning of the year (3 259) (5 735) Net debt – end of the period (1 064) (3 259) Change in net debt 2 193 2 476 (Consumed)/ generated as follows: Net cash applied to operating activities after dividends 2 493 747 Net cash (used in)/ retained investing activities (486) 1 891 Non-controlling interest purchases 9 (257) Khula Sizwe black public funding 164 Effect of USD-denominated cash 171 Shares repurchased for equity-settled share-based payments (122) (43) Translation and other movements in financing activities (36) 137 2 193 2 476

ANNEXURE 7: OTHER PERTINENT ISSUES  Effective tax rate of 28.8% on continuing earnings (excluding Avis Fleet – refer Annexure X) – tax rate expected to increase above 30% (currency may impact 2020)  2020 Capex expected to be in line with 2019  Khula Sizwe implementation (refer to appendix)  IFRS 16 (refer to appendix)

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LOOKING FORWARD

ANNEXURE 8: FOCUS AREAS GOING FORWARD

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METRICS FOCUSED ON RETURNS STRATEGY IMPLEMENTATION MANAGING FOR VALUE TARGETS ROE 10.1% HEPS GROWTH* 1 167 >15% GEARING** 4.5% 40 – 60% ROIC 11.9% >13% EP (323) Positive delta FCF R3 064 million Cash conversion >50% EBITDA DIVIDENDS 462 cents plus special dividend R500 million 2.5 – 3 times cover

* Continuing operations incl. Avis Fleet. ** Net debt: equity. Definitions ROE: Return of Equity ROIC: Return on Invested Capital EP: Economic Profit FCF: Free Cash Flow

ANNEXURE 9.1: KEY CHANGE TO THE FINANCIAL STATEMENTS FROM 2020

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KHULA SIZWE: EFFECTIVE 1 OCTOBER 2019

KHULA SIZWE: EFFECTIVE 1 OCTOBER 2019  KHULA SIZWE WILL BE CONSOLIDATED INTO THE BARLOWORLD GROUP RESUL TS  TRANSPARENT DISCLOSURE  2019 impact: Implementation costs and capex cash flows  2020 impact:

 BAW cash flow on implementation: R2.2 billion (post taxes and facilitation)

Khula Sizwe debt: R2.2 billion

 Separate segmental disclosure of Khula Sizwe stand alone results

(consolidated into the BAW group)

 Transparent disclosure of divisional rentals charged by Khula Sizwe

(reflective of IFRS 16 rental charges)

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Indicative disclosures Segmental operating result: RXX Impact of IFRS 16 (excluding Khula Sizwe): RXX Impact of Khula Sizwe: RXX Segmental operating result excluding IFRS 16 and Khula Sizwe: RXX

KHULA SIZWE: EFECTIVE 1 OCTOBER 2019

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TRANSPARENT DISCLOSURE: 2020 IMPACT

Rm

Indicative impact on consolidated headline earnings IFRS 2 charges (107) Tax relief on employee contribution (over 2 years) 24 Foundation investments (dividends) – tax exempt (30) Barloworld finance charge relief net of tax* 136 Khula Sizwe management fees (8) Khula Sizwe finance charges (209) Khula Sizwe tax charges (59) Khula Sizwe NCI – black public 30% 45 (208) Headline earnings per share impact based on 211m shares 98.58 cents Tax on sale of properties (once off outside HEPS) 136

KHULA SIZWE: EFECTIVE 1 OCTOBER 2019  IFRS 2 charge will reduce to R22m from 2022-2024  Barloworld finance charge relief calculated as R2.2b @ 8.6% net of tax  Annual rental escalation: 8%  Management fees: 3% of annual rental  Khula Sizwe finance charges calculated as R2.2 billion @ 9.6% In the event that Barloworld loses control of Khula Sizwe in terms of IFRS 10:Consolidated Financial Statements, Khula Sizwe would be ‘deconsolidated’ from the Barloworld Group. Assuming that this takes place at the end of the initial empowerment period of 10 years, this would result in the Group recognising a loss on disposal of Khula Sizwe of approximately R2.5 billion, representing the estimated net asset value of Khula Sizwe after the initial empowerment period of 10 years. The net asset value of Khula Sizwe has been estimated assuming no appreciation of the value of the Properties from the date of acquisition.

Note that funding rates have reduced from the initial estimates, hence the higher net asset value of Khula Sizwe at the end of the 10 year empowerment period compared to initial guidance.

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NOTES TO THE KHULA SIZWE TRANSACTION

ANNEXURE 9.2: KEY CHANGE TO THE FINANCIAL STATEMENTS FROM 2020 No impact on strategy or capital allocation discipline  Modified retrospective approach adopted – cumulative effect in equity  Practical expedients applied

 (onerous leases; short term <12 months; low value assets <R85k)

 Net cash flows remain the same however interest portion of lease payments now allocated to financing activities (IAS 17: operating activities) Indicative financial statement impact based on group borrowing rates:  On transition

 Right of use asset 1 Oct 2019: R2.1 – R2.3 billion  Lease liability 1 Oct 2019: R2.6 – R2.7 billion

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IFRS 16: LEASES EFFECTIVE 2020

IFRS 16: LEASES EFFECTIVE 2020 No impact on strategy or capital allocation discipline Modified retrospective approach adopted – cumulative effect in equity Practical expedients applied

(onerous leases; short term <12 months;

low value assets)

Net cash flows remain the same however the interest portion of lease payments now allocated to financing activities (IAS 17: operating activities)

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Indicative financial statement impact based on group borrowing rates:  2020 and ongoing impact

Operating profit increase: Depreciation

• f the ROU in 2020 < IAS 17 rental

expense: R500 million to R600 million Finance charge increase: R300 million to R400 million. Under IAS 17 the lease smoothing expense would have been R770 million. Profit after tax/headline earnings decrease <5% Increase in free cash flow but no

• verall net cash flow impact: increase in
• perating cash flows with corresponding

increase in financing cash out flows): R R520 million – R540 million

NB: The group lease profile and the incremental borrowing rates applied may change in the ordinary course of our

• business. As such, the actual impact of implementing IFRS 16 and this estimate may differ.