Barloworld Limited Results for the year ended 30 September 2014 - - PowerPoint PPT Presentation

Barloworld Limited Results

for the year ended 30 September 2014

Barloworld Limited Results for the year ended 30 September 2014

Overview

Clive Thomson CE, Barloworld Limited

Barloworld Limited Results for the year ended 30 September 2014

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• Revenue up 4% to R62.1bn
• Operating profit up 16% to R3 830m
• Basic earnings per share increased 33% to 1 012 cents
• Headline earnings per share from continuing operations up 10% to 857 cents
• Total dividend per share increased 10% to 320 cents
• Australian motor retail operations disposal for R1.3bn

Salient features

Barloworld Limited Results for the year ended 30 September 2014

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Key developments

Group

Corporate

• Tragically 3 work-related fatalities due to motor vehicle accidents – safety priority
• Workforce diversity focus – Level 2 B-BBEE rating
• Driving talent and people development initiatives
• Constituent of the Dow Jones Sustainability Emerging Markets Index

Automotive and Logistics

Car Rental

• Enhanced level of financial return through operating efficiencies

Motor Retail

• Successful disposal of the Australian operations generating proceeds of R1.3bn
• Acquired Leach Toyota in Kuruman effective 10 Mar 2014
• Acquired 51% of Jaguar Land Rover Witbank effective 1 Jul 2014

Fleet Services

• Acquired fleet leasing company in Tanzania effective 4 Nov 2014

Logistics

• Acquired extra heavy abnormal transport business effective 5 Sept 2014
• Sold loss making airfreight business in the Far East effective 1 Nov 2013

Equipment and Handling

Equipment southern Africa

• Successful integration of EMPR which delivered results well ahead of acquisition

expectations Equipment Russia

• Pleasing performance notwithstanding impact of Ukraine crisis and mining

slowdown Equipment Iberia

• Improving macro economic outlook but construction sector remains subdued
• Implemented restructuring in Spain which will lower cost base by €7.4m into 2015

Power Systems • Strategic plan finalised with Caterpillar to grow electric power, marine, petroleum and industrial segments Handling

• Acquisition of AGCO agricultural dealership in Zambia in Sept
• Netherlands Handling business sold in Dec 2013 to complete exit of international

Handling operations

Barloworld Limited Results for the year ended 30 September 2014

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Group revenue and operating profit split – September 2014

50% 50%

Revenue

Equipment and Handling Automotive and Logistics 58% 42%

Operating profit

Equipment and Handling Automotive and Logistics

Barloworld Limited Results for the year ended 30 September 2014

Financial overview

Don Wilson Finance director

Barloworld Limited Results for the year ended 30 September 2014

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Income statement highlights

(Rm) FY’14 FY’13 % chg Continuing operations Revenue 62 101 59 498 4 EBITDA 6 170 5 389 Operating profit 3 830 3 313 16 Fair value adjustments on financial instruments (156) (47) Net finance costs (1 078) (972) Profit before exceptional items 2 596 2 294 13 Exceptional items (66) (79) Taxation (837) (729) Income from associates and joint ventures 217 185 17 Net profit after taxation 1 910 1 671 14 Discontinued operations Profit from discontinued operations 428 46 Net profit 2 338 1 717 36 Basic earnings per share (EPS) 1012 763 33 Headline earnings per share (HEPS) group 883 821 Headline earnings per share (HEPS) continuing operations 857 780 10

Barloworld Limited Results for the year ended 30 September 2014

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Income statement highlights

(Rm) FY’14 FY’13 % chg Continuing operations Revenue 62 101 59 498 4 Equipment and Handling 30 960 30 682 1 Southern Africa 20 903 19 126 9 Europe 4 134 4 377 (6) Russia 3 994 4 645 (14) Handling 1 929 2 534 (24) Automotive and Logistics 31 137 28 806 8 Corporate 4 10 Average exchange rates (Rands) FY’14 FY’13 % chg United States Dollar 10.57 9.28 14 Euro 14.35 12.18 18 British Sterling 17.56 14.48 21

Barloworld Limited Results for the year ended 30 September 2014

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Income statement highlights

(Rm) FY’14 FY’13 % chg Continuing operations Revenue 62 101 59 498 4 EBITDA 6 170 5 389 Operating profit 3 830 3 313 16 Fair value adjustments on financial instruments (156) (47) Net finance costs (1 078) (972) Profit before exceptional items 2 596 2 294 13 Exceptional items (66) (79) Taxation (837) (729) Income from associates and joint ventures 217 185 17 Net profit after taxation 1 910 1 671 14 Discontinued operations Profit from discontinued operations 428 46 Net profit 2 338 1 717 36 Basic earnings per share (EPS) 1012 763 33 Headline earnings per share (HEPS) group 883 821 Headline earnings per share (HEPS) continuing operations 857 780 10

Barloworld Limited Results for the year ended 30 September 2014

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Income statement highlights

(Rm) FY’14 FY’13 % chg Continuing operations Revenue 62 101 59 498 4 EBITDA 6 170 5 389 Operating profit 3 830 3 313 16 Equipment and Handling 2 284 2 123 8 Southern Africa 1 968 1 678 17 Europe (168) (16) Russia 429 407 5 Handling 55 54 2 Automotive and Logistics 1 644 1 322 24 Corporate (98) (132)

Barloworld Limited Results for the year ended 30 September 2014

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Income statement highlights

(Rm) FY’14 FY’13 % chg Continuing operations Revenue 62 101 59 498 4 EBITDA 6 170 5 389 Operating profit 3 830 3 313 16 Fair value adjustments on financial instruments (156) (47) Net finance costs (1 078) (972) Profit before exceptional items 2 596 2 294 13 Exceptional items (66) (79) Taxation (837) (729) Income from associates and joint ventures 217 185 17 Net profit after taxation 1 910 1 671 14 Discontinued operations Profit from discontinued operations 428 46 Net profit 2 338 1 717 36 Basic earnings per share (EPS) 1012 763 33 Headline earnings per share (HEPS) group 883 821 Headline earnings per share (HEPS) continuing operations 857 780 10

Barloworld Limited Results for the year ended 30 September 2014

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Statement of financial position

(Rm) FY’14 FY’13 Non-current assets 17 287 16 023 Current assets (excluding cash) 22 557 21 518 Cash and cash equivalents 4 162 2 695 Assets classified as held for sale 371 Total assets 44 006 40 607 Interest of all shareholders 17 486 15 907 Total debt 11 316 10 253 Other liabilities 15 204 14 341 Liabilities classified as held for sale 106 Total equity and liabilities 44 006 40 607 Net debt 7 154 7 558

Barloworld Limited Results for the year ended 30 September 2014

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Summarised statement of cash flows

(Rm) FY’14 FY’13 Operating cash flows before working capital 6 302 5 924 (Increase) / decrease in working capital (470) 539 Net investment in leasing assets and vehicle rental fleet (2 879) (2 208) Cash generated from operations 2 953 4 255 Other net cash flows (1 997) (1 648) Dividends paid (742) (598) Net cash retained from operating activities 214 2 009 Net cash applied to investing activities (69) (1 349) Net acquisitions (1 385) (1 454) Proceeds on disposal 1 316 105 Net cash inflow 145 660

Barloworld Limited Results for the year ended 30 September 2014

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Investment in working capital

(Rm) FY’14 FY’13 Inventories – (increase) / decrease (251) 17 Receivables – (increase) (350) (176) Payables – increase 131 698 Total working capital – (increase) / decrease (470) 539 (Rm) FY’14 FY’13 Equipment southern Africa (636) 265 Equipment Europe 140 32 Equipment Russia 159 (32) Handling (14) (267) Automotive and Logistics 111 165 Corporate (230) 376 Total working capital – (increase) / decrease (470) 539

Barloworld Limited Results for the year ended 30 September 2014

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Debt maturity profile

Interest bearing debt Redemption (Rm) Total Short-term Long-term South Africa 10 775 4 074 6 701 Offshore 541 321 220 Total debt Sept 2014 11 316 4 395 6 921 Total debt Sept 2013 10 253 2 968 7 285

• Ratio of long-term to short-term debt 61:39 (Sept 2013 – 71:29)
• In Dec 2013 the company issued three senior unsecured notes totalling R1.5bn
• 5 year bank revolving credit facility R1bn
• Barloworld Transport banking facilities of R561m
• R8.4bn (committed R6.1bn) unutilised bank facilities at Sept 2014
• Cash and cash equivalents R4 162m (Sept 2013 – R2 695m)

Barloworld Limited Results for the year ended 30 September 2014

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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 2014 40 662 205 65 41 Ratio at 30 Sept 2013 38 666 224 64 48

• Net debt of R7 154m (2013: R7 558m)
• EBITDA interest cover 5.5 x (2013: 5.4 x)

Barloworld Limited Results for the year ended 30 September 2014

Divisional overview

Barloworld Limited Results for the year ended 30 September 2014

Divisional overview

Equipment southern Africa

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Barloworld Limited Results for the year ended 30 September 2014

• Revenue up 9.3% to R20.9bn
• Operating profit up 17.3% to R1 968m
• Operating margin expansion due to aftermarket mix and rental growth
• EMPR continues to deliver well ahead of acquisition projections
• Geographic spread provided resilience in a tough mining climate
• Zambia, Mozambique and Namibia delivered strong results
• Income from joint ventures up 23.7% to R223m

Operational review – Equipment southern Africa

1 000 2 000 3 000 Southern Africa

Operating profit (Rm)

Sep 2014 Sep 2013

Margin

9.4% 8.8%

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Barloworld Limited Results for the year ended 30 September 2014

Southern Africa sales history

37% 30% 28% 34% 46% 36% 33% 41% 43%

5 10 15 20 2006 2007 2008 2009 2010 2011 2012 2013 2014 Rbn Equipment sales Product support

21

Barloworld Limited Results for the year ended 30 September 2014

Southern Africa revenue – Sept 2014

47% 43% 6% 4%

Revenue by line of business

New equipment Product support Used equipment Rental

28% 30% 21% 9% 12%

New equipment sales by industry

Mining Construction EMPR Power Contract mining

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Barloworld Limited Results for the year ended 30 September 2014 *Using a constant R/$ exchange rate of R9.25

Equipment industry outlook (southern Africa)

5 10 15 20 25 30

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

*Rbn

Building Construction Heavy Construction Contract Mining Mining Houses Actual Outlook

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Barloworld Limited Results for the year ended 30 September 2014

Surface mining opportunities 2015 - 2020

Coal

Orapa Cut 3 (2015-2016) 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 (2015) 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)

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Barloworld Limited Results for the year ended 30 September 2014

Underground mining opportunities 2015 - 2020

ARM/Vale - Lubambe Glencore Mopani Glencore Rosh Pinah De Beers Venetia Hebei iron/IDC – Palabora (lift 2) Ivanhoe Platinum Cheyenne Mining Vaalbult – Highwall Mine Kangra – Kusiponga Anglo – New Denmark Continental – De Wittekrans Sasol Bossjespruit Lonmin – Boabab PGM- Waterberg

Coal Iron ore Diamonds Platinum Copper

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Barloworld Limited Results for the year ended 30 September 2014

• EMPR deliveries and shorter lead times from CAT contribute to lower levels of firm

back orders at R1.9bn (Sept 2013: R3.5bn)

• Replacement orders for new mining equipment only expected from H2 2015
• Deferral of mining capex sustains growth in rental and aftersales
• Infrastructure development in southern Africa bodes well for construction demand
• 2015 revenue outlook range of R20.0bn to R22.0bn (2014: R20.9bn)

Equipment southern Africa – outlook

2 000 4 000 Southern Africa

Order book (Rm)

Sept 2014 Sept 2013

Barloworld Limited Results for the year ended 30 September 2014

Divisional overview

Equipment Russia

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Barloworld Limited Results for the year ended 30 September 2014

• Pleasing result under difficult economic and political circumstances
• Operating profit up 5% to R429m at 10.7% margin
• Sustained aftermarket activity continued to support result
• Tight cost control and efficiency improvements
• EMPR performing well supported by aftermarket growth
• Expansion in power rental fleet to oil & gas customers

Operational review – Equipment Russia

200 400 600 Russia

Operating Profit (Rm)

Sep 2014 Sep 2013

Margin

10.7% 8.8%

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Barloworld Limited Results for the year ended 30 September 2014

Russia sales history

25% 24% 25% 29% 36% 28% 27% 33% 46% 100 200 300 400 500 600

2006 2007 2008 2009 2010 2011 2012 2013 2014 US$m Equipment sales Product support

29

Barloworld Limited Results for the year ended 30 September 2014

Russia revenue profile – Sept 2014

48% 46% 1% 5%

Revenue by line of business

New equipment Product support Used equipment Rental 60% 17% 10% 3% 10%

New equipment sales by industry

Mining Construction Power Oil and gas Other

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Barloworld Limited Results for the year ended 30 September 2014

Surface mining – green field projects

Opportunity 2015 2016 2017 Units 50 87 110 Dollars US$57m US$184m US$280m

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Barloworld Limited Results for the year ended 30 September 2014

Power of Siberia opportunity

Total length – 4000 km Length on VT territory – 2100 km

• Phase 1 ~ 3200 km
• Phase 2 ~ 800 km

Project costs – $55 bn

Estimated opportunity over 3 year period: Pipe-laying machines = 90 units Construction and Forestry = 320 units

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Barloworld Limited Results for the year ended 30 September 2014

• Order book significantly lower, driven by downturn in mining industry
• Ukraine crisis and US/EU sanctions continue to create uncertainty
• Gold mining relatively active while coal market remains depressed
• A number of promising green field mining sites are close to development stage
• Significant pipeline opportunities
• Focus remains on growing aftermarket revenues
• 2015 revenue outlook range of US$350m to US$400m (2014: US$382m)

Equipment Russia – outlook

20 40 60 Russia

Order book (US$m)

Sept 2014 Sept 2013

Barloworld Limited Results for the year ended 30 September 2014

Divisional overview

Equipment Iberia

34

Barloworld Limited Results for the year ended 30 September 2014

• Revenue down 21% in Euro terms as large package deals not repeated
• Improving macro economic conditions but construction market remains subdued
• Operating loss in Spain necessitated further headcount reduction
• Restructuring costs of €6.2m (R88.5m) – will generate 2015 savings of €7.4m
• Power Systems activity continues to underpin revenues
• Market leadership position maintained

Operational review – Equipment Iberia

• 400
• 200

Operating profit (Rm)

Sept 2014 Sept 2013

Margin

• 4.1%
• 0.3%

35

Barloworld Limited Results for the year ended 30 September 2014

Machine industry – Spain

5 000 10 000 15 000 20 000 25 000

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Actual Outlook Units

36

Barloworld Limited Results for the year ended 30 September 2014

Iberia sales history

32% 30% 30% 34% 40% 37% 33% 35% 41% 100 200 300 400 500 600 700 800 900

2006 2007 2008 2009 2010 2011 2012 2013 2014 EURm Equipment sales Product support

37

Barloworld Limited Results for the year ended 30 September 2014

Iberia revenue profile – Sept 2014

39% 41% 17% 3%

Revenue by line of business

New equipment Product support Used equipment Rental 8% 37% 7% 48%

New equipment sales by industry

Mining Construction Other Power

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Barloworld Limited Results for the year ended 30 September 2014

Cost savings – Iberia

Headcount Payroll costs Other operating costs 2008 2 382 €114.5m €43.2m 2014 1 373 €67.8m €19.1m 2015 estimate 1 211 €61.0m €17.6m

• €53.5m reduction in payroll costs from 2008 to 2015
• €25.6m reduction in other operating costs from 2008 to 2015
• Total saving of €79.1m

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Barloworld Limited Results for the year ended 30 September 2014

• Macro economic environment expected to show continued improvement
• Industry recovery to date limited to smaller general construction machines
• Power marine and oil & gas segments to deliver steady growth
• Continued drive to capture customer aftermarket revenue opportunity
• Spain restructuring will deliver €7.4m savings in 2015
• Portugal restructure will cost €900k in Q1 2015 with 12 month payback
• 2015 revenue outlook range of €290m to €315m (2014: €290m)

Equipment Iberia – outlook

20 40 60 Iberia

Order book (€m)

Sept 2014 Sept 2013

Barloworld Limited Results for the year ended 30 September 2014

Divisional overview

Power systems

41

Barloworld Limited Results for the year ended 30 September 2014

Strong project pipeline in Power

Major projects Southern Africa Russia Iberia

• Large EP & mining projects

(Letseng Diamond, Morupule power station and Centralities)

• Mozambique LNG Plant
• Angola Sonaref refinery
• South African marine shipyards
• Power of Siberia pipeline
• Oil & gas rental
• Mining projects

(Polus, Rus. Platina)

• Data centres (Telefonica, PT)
• International oil & gas EPC

projects

• Marine engine and propulsion

system opportunities

• Industrial and rail opportunities

42

Barloworld Limited Results for the year ended 30 September 2014

• Recently awarded Transnet tug tender
• Revenue ~US$17.5m prime product sales
• After sales opportunity ~US$14.6m
• Deliveries to take place during next

3 years

• Scope of supply for 8 tug vessels
• 2 main engines per vessel
• 2 auxiliary engines per vessel
• New tender for 5 more vessels to be

issued shortly

Marine – Transnet tug vessels (South Africa)

43

Barloworld Limited Results for the year ended 30 September 2014

• Power represents a significant medium term growth opportunity
• Dedicated organisation structure established and specialist skills recruited
• Strategic plan (2015-2018) agreed with Caterpillar covering all power segments
• Order book increased from US$69m to US$78m with strong projects pipeline
• Growing international service opportunities in marine and oil & gas
• 2015 revenue outlook range of US$350m to US$410m (2014: US$344m)

Power systems – outlook

50 100 Power

Order book* (US$m)

Sept 2014 Sept 2013

* Included with Equipment order books by geography

Barloworld Limited Results for the year ended 30 September 2014

Divisional overview

Handling

45

Barloworld Limited Results for the year ended 30 September 2014

• Operating profit up 2% – remaining operations up 20%
• Agriculture SA delivers record sales with strong growth in higher tech sectors
• Sales double and breakeven established in Mozambique agriculture
• Market share growth in very difficult Russian agriculture market
• Hyster operation in SA grows profits on improved after market performance
• 2015 revenue outlook range of R2.0bn to R2.4bn (2014: R1.93bn)

Operational review – Handling

20 40 60 Handling

Operating Profit (Rm)

Sept 2014 Sept 2013

Margin

2.9% 2.1%

Barloworld Limited Results for the year ended 30 September 2014

Divisional overview

Automotive and Logistics

47

Barloworld Limited Results for the year ended 30 September 2014

• Strong result in a demanding trading environment
• Revenue: R31.1bn (FY’12: R28.8bn) – up 8.1%
• Record operating profit R1 644m (FY’13: R1 322m) – up 24%
• Operating margin for the year 5.3% (FY’13: 4.6%)
• All business segments performed well

Operational review – Automotive and Logistics

100 200 300 400 500 600 Logistics Fleet Services Motor Retail Car Rental

Operating Profit (Rm)

2014 2013

9.3% 7.8% 2.8% 2.4% 18.1% 16.7% 2.8% 2.3%

Margin

+33% +29% +16% +22%

48

Barloworld Limited Results for the year ended 30 September 2014

• Well balanced Automotive portfolio and

stable platform to grow logistics

• Revenue CAGR of 11.2% delivers
• perating profit CAGR of 26.6% over

period

• Operating margins improved from 3.6%

(FY2011) to 5.3%

• Targeted capital allocation supports

sustained long term value creation

• The divisional platform and collective

approach provides various inter-business unit synergies

Integrated business model delivers sustained value

300 600 900 1200 1500 1800

2011 2012 2013 2014

Rm

Operating profit

Operating profit 1H Operating profit 2H 300 600 900 1200 1500 1800

2011 2012 2013 2014

Rm

Operating profit by BU

Car Rental Motor Retail Fleet Services Logistics

49

Barloworld Limited Results for the year ended 30 September 2014

Car Rental

Car Rental – southern Africa FY’14 (growth) Rental days +9.9% Rental revenue per day +2.7%

• Excellent operating profit growth – up 33%
• Sustained growth in rental days
• Pleasing revenue per day increase in a

competitive environment

• Average Rate increase of 4.8% in Q4
• Operating costs well contained
• Fleet utilisation at 76%
• Strong used vehicle profit contribution
• Sustained customer satisfaction above 90%

50

Barloworld Limited Results for the year ended 30 September 2014

Motor Retail

Motor Retail FY’14 (growth) New unit sales (Oct 2013 – Sept 2014)

• 1.1%

Parts revenue +15% Service hours +0.8%

• Delivered a good result in a declining market
• Revenue up 9.8%
• Improved operating profit by 29% and operating

margin to 2.8%

• Gross margin expansion and cost containment
• Aftersales revenues continued to support the result
• Recently acquired dealerships complement the
• verall automotive business model

51

Barloworld Limited Results for the year ended 30 September 2014

Fleet Services

Fleet Services FY’14 (growth) Finance fleet

• 1%

Under maintenance +16% Total vehicles under management (307 000) +11%

• Sustained operating profit growth – up 16%
• Maintained finance fleet
• Solid growth in fleets under maintenance
• Maintained good used vehicle profits
• Progressing growth opportunities in select African

territories

• Acquired a fleet leasing company in Tanzania

effective 4 Nov 2014

52

Barloworld Limited Results for the year ended 30 September 2014

Logistics

• Improved operating profit by 22% to R122m
• Barloworld Transport provided good operating

profit contribution

• Extra heavy transport acquisition 5 Sept 2014

enhances capability in the abnormal load transport business

• Supply chain management operations impacted by

Ellerines receivable provision of R20m

• Other Ellerines exposure fully provided
• International operations continue to face difficult

trading conditions – actions taken to restore profitability

• Exited loss making Far East airfreight business

53

Barloworld Limited Results for the year ended 30 September 2014

Automotive and Logistics outlook

Car Rental

• Volume and revenue per day increases expected to deliver top line revenue growth into 2015
• Productivity, fleet utilisation and cost focus will maintain return on equity above hurdle rates
• Market leadership position to be maintained

Motor Retail

• Solid performance expected in difficult market with some resilience in premium brands
• Targeted dealership acquisitions made will deliver incremental profitability in the year ahead
• Opportunities for growth being explored within broader automotive value chain

Fleet Services • Well positioned for continued organic growth

• Market leadership position and strong return on equity expected to be sustained
• Tanzania acquisition establishes medium term platform for growth in East Africa

Logistics

• Recent acquisitions and fleet investments to deliver benefits into 2015
• Continued organic growth with solid opportunity pipeline in southern Africa
• Steps taken to turnaround performance of international businesses
• Operating margin and return on capital expected to improve in the year ahead

Division

• Revenue outlook range of R33.0bn to R35.0bn (2014: R31.1bn)

Barloworld Limited Results for the year ended 30 September 2014

Group outlook

Barloworld Limited Results for the year ended 30 September 2014

55

Group outlook

Clive Thomson, CEO of Barloworld, said: “The group delivered a solid performance for the year with operating profits up 16% and headline earnings per share from continuing operations up 10%. While a number of geopolitical risks and economic uncertainties exist globally, our focus will remain

• n executing our strategy, driving operational efficiencies and maintaining strong cash flows. We

expect to continue to make good progress into 2015 and are well placed to benefit once the infrastructure and mining cycles move into a recovery phase across our key geographies.” 17 November 2014

Barloworld Limited Results

for the year ended 30 September 2014