BarloworldLimited
Reviewed interim results for the six months ended 31 March 2004
Barloworld is an international industrial brand management company
24 000 people ........... in 33 countries
providing business solutions
through leading industrial brands, supported by service, relationships and attention to detail
to make our customers’ businesses excel
In November 2003 we said:
“The company is in great shape and we
look forward to making further progress
in 2004.”
H1 04 results: rand highlights
Rand revenues down 2%
Operating margins increase to 6.8%
SA 65% of segmental profits (2003: 41%)
Operating cash flows up 48%
HEPS up 77% to 374 cents
* See P5 of announcement for definition of Segment Result
Revenue up 8% in constant currency terms
8 572
1 055
4 337
1 013 1 329
4 524
2 293
8 455
953 1 307
0
2 000
4 000
6 000
8 000
10 000
12 000
South Africa Rest of Africa Europe North America Australia &Asia
Constant currency* revenue (Rm)
H1 03 H1 04
* For this constant currency analysis H1 03 numbers in all regions except South Africa and Rest of Africa have been restated at the equivalent exchange rate used to translate the H1 04 numbers.
Constant currency segment results up 49%
* See P5 of announcement for definition of Segment Result. For this constant currency analysis H1 03 numbers in all regions except South Africa and Rest of Africa have been restated at the equivalent exchange rate used to translate the H1 04 numbers.
50 62
391
11
7831
399
57 42
516
10
132
17
188
-54-46
- 100
0
100
200
300
400
500
600
Equipment IndustrialDistribution
Motor Cement andLime
Scientific Coatings Steel Tube Corp Ops &Other
Constant currency segment result* (Rm)
H1 03 H1 04
Operational highlights
Equipment: Spain powers on
Industrial Distribution: US sales grow strongly with market
Motor: restructuring in full swing
Cement and Lime: efficiency improvements take full advantage of record cement demand
Coatings: margin growth especially in South Africa
Scientific: turnaround at Melles Griot
Acquisitive growth
Adding more of what we have– Avis Southern Africa (34.7% to 100%)– PPC shares (67.4% to 70.1%)
Adding territory– Texarkana Truck Center (US, Freightliner)– Geveke Intern Transport BV (Netherlands, Handling)
Expanding business solutions– ZA Trans (South Africa, Logistics)
Disposals and restructuring for value
During the year:– Three motor dealerships in manufacturer rationalisation/BEE– Henry Cooke paper business – Melles Griot Ely facility
Still to be finalised:– SA Equipment Leasing Book to WesBank– 75% of Afripack to BEE consortium
Financial review
Clive ThomsonFinance Director
H1 04: Income statement – key issues
Rand H1 03 H1 04%
change
Revenue (million) 17 915 17 532 (2)
Operating profit (million) 1 120 1 184 6
Financial instrument adjustments (million) (313) (57)
Finance costs (million) (298) (182) (61)
Exceptional Items (million) 46 159
Taxation (million) (274) (428)
Headline EPS (cents) 211 374 77
Dividend (cents) 90 115 28
Strong rand impacts profit translation
Average rate H1 03 H1 04Rand
appreciation
US$ 9.0423 6.7659 25.2%
Euro 9.3408 8.2522 11.7%
GBP 14.3450 11.9851 16.5%
Impact of translation of offshore profits on HEPS estimated at 16 cents
Comparative impact of financial instrument adjustments
R million H1 03 H1 04
Equipment SA
Other Operations
(298)
(15)
(77)
20
Financial instrument adjustments* (313) (57)
Recoupment at operating level 71 84
Impact on profit before tax (242) 27
* Realised component for H1 04 = R15 million
H1 03: 25% rand appreciation v US$ drives negative fair value adjustments
Rand appreciation = 25%
10.57
7.89
Fair value adjustments= (R313m)
H1 04: less appreciation and greater volatility
Rand appreciation = 9%
6.96
6.29
Fair value adjustments= (R57m)
Taxation rate analysis
H1 04 H1 03 FY 03
R million Reviewed Reviewed AuditedTax per income statement 428 274 604
Prior year tax (11) 30
Tax on exceptionals (27) 11
STC (60) (59) (58)
Tax before STC & exceptionals 341 204 587
Profit before exceptionals 1 048 658 1 762
Dividend income (12) (14) (30)
Profit before exceptionals and dividends received 1 036 644 1 732
Effective tax rate excluding exceptionals, STC, prior year tax and dividends received (%) 32,9% 31,6% 33,9%
Exceptional items
H1 04 H1 03 FY 03
R million Reviewed Reviewed Audited
Profit on disposal of properties, investments and subsidiaries 64 50
123
Impairment losses (5) (4) (45)
Reversal of provision for liquidation of pension fund
100
Other (1) 3
159 45 81
Balance sheet: March 31 2004 reflects 100% consolidation of Avis
Total assets employed up R5 089m – Avis acquisition and goodwill arising
Borrowings up R4 084m– R2 028m interest bearing debt in Avis– R1 085m cash portion of Avis acquisition– Balance primarily other acquisitions and leasing/rental growth
Gearing targets reviewed post Avis transaction
Segmentation for gearing analysis
Car Rental short-term hire of vehicles(+ Avis Rent A Car)
Leasinglong-term leasing solutions including pure asset finance and long-term rentals with maintenance (+ Avis Fleet Services)
Tradingmanufacturing / dealership operations
Gearing Segmentation
Revised gearing targets and actuals post Avis acquisition
Total debt to equity (%) Trading Leasing Car Rental Total group
Target range 20 – 40 600 - 800 200 - 300
Ratio at 31 March 2004* 34 614 264 95
* R1 085 million acquisition debt allocated between Fleet services and Rent A Car in proportion to equity
Group target depends on asset mix between the three segments Sale of Equipment Finance book projected to reduce group ratio by 13 percentage
points
Interest cover significantly improved
Interest cover (times) H1 04 H1 03 FY 03
Trading 6.6 3.0 4.1
Total group 4.6 2.4 3.1
Cash flow highlights
Strong cash generated from operations of R1 472m (2003: R994m)
Dividends paid R596m (2003: R711m)
Net cash applied to investing activities of R2 255 m (2003: R1 305m):– Cash element of Avis acquisition (R1 085 m)– Lease receivables/rental assets investment R623m (2003: R981m)– PPC shares (R189m)– Proceeds on disposals R184m
31 March 04 cash & cash equivalents R1 637m (2003: R1 547m)
Operations review
Tony PhillipsCEO
Equipment: Spain maintains and market share grows in Africa
Spain continues high plateau
Portugal turnaround
Siberia profitable
SA market share gains
SA leasing book being sold into Smart Partnership
* See P5 of announcement for definition of Segment Result. For this constant currency analysis H1 03 numbers in all regions except South Africa have been restated at the equivalent exchange rate used to translate the H1 04 numbers.
244
7293
55
-141
251
-200
-150
-100
-50
0
50100
150
200
250
300
Europe South Africa Rest of AfricaConstant currency
segment result* (Rm)
H1 03 H1 04
Equipment: southern African market positive
Equipment: order book still strong
467
582
811
598
0
500
1 000
Southern Africa Europe
Constant currency* order book
at 31 March (Rm)
H1 03 H1 04
* For this constant currency analysis H1 03 numbers in Europe have been restated at the equivalent exchange rate used to translate the H1 04 numbers.
Industrial Distribution: accelerating
Europe– Revenues rise due to Geveke
acquisition– Strong order book
US – Lift truck vols match H1 03
and order book strong– Freightliner vols treble– US$2.9m write off in
leasing book
* See P5 of announcement for definition of Segment Result. For this constant currency analysis H1 03 numbers in all regions except South Africa have been restated at the equivalent exchange rate used to translate the H1 04 numbers.
58
2
-9
55
-20
-10
0
10
20
30
40
50
60
70
Europe North America
Constant currency segment result* (Rm)
H1 03 H1 04
Industrial Distribution: lift truck order book strong
NB – growth cannot be projected into a volume forecast as these are “spot” numbers
0
500
1 000
1 500
2 000
2 500
3 000
Sep02
Oct02
Nov02
Dec02
Jan03
Feb03
Mar03
Apr03
May03
Jun03
Jul03
Aug03
Sep03
Oct03
Nov03
Dec03
Jan04
Feb04
Mar04
Units
US Europe Total
Industrial Distribution: Freightliner order book still growing
NB – growth cannot be projected into a volume forecast as these are “spot” numbers
200
700
1 200
1 700
2 200
2 700
3 200
Sep02
Oct02
Nov02
Dec02
Jan03
Feb03
Mar03
Apr03
May03
Jun03
Jul03
Aug03
Sep03
Oct03
Nov03
Dec03
Jan04
Feb04
Mar04
Units
US
SA – Good performance from
smaller business Australia
– Demand up– Results affected by facility
rebuild Rest of Africa
– Corrective action on under performance
Associates– 100% Avis assets reflected
but only 35% of income
Motor: business in transition
* See P5 of announcement for definition of Segment Result. For this constant currency analysis H1 03 numbers in all regions except South Africa and Rest of Africa have been restated at the equivalent exchange rate used to translate the H1 04 numbers.
50
12
-5
47
-10
0
10
20
30
40
50
60
South Africa Rest of Africa Australia
Constant currency segment result* (Rm)
H1 03 H1 04
Motor: SA motor demand up 13.9% year on year but only 7.7% from 2002
197 170
172 979183 140
0
50 000
100 000
150 000
200 000
250 000
H1 02 H1 03 H1 04
Cumulative total units:
all catagories
Rent A Car Southern Africa – Market share maintained at ± 40%– Rental days up 3% to 1.79m– Fleet of 12 455 vehicles (2003: 12 804)
Rent A Car Scandinavia– Total rental days up 10% to 0.61m– Fleet of 4 880 vehicles (2003: 4 565)
Fleet Services Southern Africa– Vehicles on balance sheet 14 995 (14 577)– Vehicles under maintenance contracts 16 950 (11 859)
Motor: Avis H1 04 key performance indicators
Cement and Lime: impressive performance
Strong domestic cement demand (+15%) and further efficiency improvements
Zimbabwe de-consolidated
Lime demand lower
* See P5 of announcement for definition of Segment Result.
0
100
200
300
400
500
600
South Africa Rest of Africa
Segment result*
(Rm)
Cement and Lime: SA cementitious demand stronger than anticipated
5 263
4 6674 400
0
1 000
2 000
3 000
4 000
5 000
6 000
H1 02 H1 03 H1 04
H1 SA cementitious demand
(000 tons)
Efficiency improvements in all territories
SA– Strong decorative demand
Rest of Africa– matched H1 03
Australia– buoyant market
Coatings: good result
* See P5 of announcement for definition of Segment Result. For this constant currency analysis H1 03 numbers in all regions except South Africa and Rest of Africa have been restated at the equivalent exchange rate used to translate the H1 04 numbers.
58
176
21
4
105
0
20
40
60
80
100
120
South Africa Rest of Africa Australia
Constant currency
segment trading result* (Rm)
H1 03 H1 04
Scientific: on track for solid H2 turnaround
Europe– Weak Q1 Laboratory
demand recovers in Q2 – Restructuring costs– Melles Griot Ely sold
US– Laser and optics market
upturn– Benefits flow from
restructuring
* See P5 of announcement for definition of Segment Result. For this constant currency analysis H1 03 numbers in all regions have been restated at the equivalent exchange rate used to translate the H1 04 numbers.
15
1 2
-6
8
-10
-5
0
5
10
15
20
Europe NorthAmerica
AsiaConstant currency
segment trading result* (Rm)
H1 03 H1 04
Depressed projects demand– Mining – Exporters
Low export margins
Signs of a domestic upturn
Steel Tube: set for H2 recovery
* See P5 of announcement for definition of Segment Result.
0
5
10
15
20
25
30
35
South Africa
Segment result*
(Rm)
Corporate Operations and Other
South Africa– Gain on fair value adjustments– Good progress in Logistics
business development
Europe– ₤3m charge for UK pension fund
deficits
* See P5 of announcement for definition of Segment Result. For this constant currency analysis H1 03 numbers in all regions except South Africa and Rest of Africa have been restated at the equivalent exchange rate used to translate the H1 04 numbers.
-43
-9
-24
-2 -1
-21
-50
-45
-40
-35
-30
-25-20
-15
-10
-5
0South Africa Rest of Africa Europe
Constant currency
segment trading result* (Rm)
H1 03 H1 04
Short term - excellent prospects for FY 04: VBM will enhance benefit of better markets
Region Drivers for Barloworld Conditions / key issues
Southern
AfricaGDP/GFCF and mining
Good GFCF activity (esp. cement and paint)
Mining still patchy
Benefits of 100% Avis (incl. profits and cash flows)
Spain &
Portugal
Infrastructure spend and
GDP
Continued strength in Spain
Recovery in Portugal
UKGDP and manufacturing
activity UK Laboratory and Handling improving
USAGDP, distribution and
manufacturing in SE
Industrial Distribution margins/volumes rising
Melles Griot turnaround
Australia GDP and housing Margin enhancement on higher volumes
Medium-term: VBM foundation to structured value creation growth strategy
VBM-driven “quality of business” improvements ongoing
CommunityShareholders EmployeesCustomers
More of the same in new geographies
Expand existing and new business
solutions and Smart
Partnerships
Add complementary
brands
2x4x4
www.barloworld.com
“The outlook for the full year is excellent.”
IAS39/21 group impact
Pre IAS 21/39 IAS 21/39 Total Realised UnrealisedInventory
Recorded at FEC blend rate Spot rate at transaction date
28 (8) 36
Operating profit
Cost of sales adjustment Cost of sales adjustment 84 93 (9)
Trade creditors/debtors
Recorded at FEC blend rate Month end spot adj (115) (102) (13)
Forward exchange contracts
Held at historical cost-nil Marked-to-market 62 28 34
Foreign currency bank accounts
Stated at month end spot Stated at month end spot 6 2 4
Other monetary items (8) 2 (10)
Total impact 57 15 42
Contra with operating profit (84)
Net income statement impact (before tax) (27)