YEAR-END RESULTS for the 12 months ended 30 September 2018

Transcription

1 YEAR-END RESULTS 2018 for the 12 months ended 30 September 2018

2 HIGHLIGHTS AND GROUP STRATEGY DOMINIC SEWELA Group chief executive

3 GROUP HIGHLIGHTS HEPS growth % Total dividend per share (cents) % % % % 462 BEE proposed transaction board approved Free Cash (Rbn) ROE % Iberia exit generates R2.5bn in cash Logistics turnaround on track Results for the year end 30 September 2018

4 SEGMENTAL 12 MONTH ROLLING ROIC HURDLE RATE 13.0% 19.5% 18.1% 18.4% 21.6% 14.5% 12.8% 12.7% 12.8% 13.1% 12.4% WACC 12.5% 12.3% 9.5% 7.8% 8.7% 9.4% 11.2% 6.0% 4.5% 2.5% -0.5% -5.5% Equipment southern Africa Equipment Russia Automotive Logistics Group 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 Results for the year end 30 September 2018

5 CORPORATE LEVEL STRATEGY UPDATE FIX OPTIMISE GROW Address underperforming business units: Iberia exit complete Released R2.5bn Realise full potential of business units: Equipment SnA operational transformation Targeted growth: Considering opportunities that fit the group s capabilities Logistics turnaround on track Further asset disposals in Logistics (SmartMatta, ME) Motor Retail restructure and cost optimisation Optimal capital allocation across portfolio: Restructure of Leasing and Rental Assets Optimise group capital structure: Through valueenhancing growth or capital reduction Invested Capital Iberia Auto Leasing Equip Rental ACTIVE SHAREHOLDER Allocate Resources, Capital and Talent across the group Strengthened group s core capabilities to deliver on new strategy Results for the year end 30 September 2018

6 FINANCIAL OVERVIEW DON WILSON Finance director

7 INCOME STATEMENT HIGHLIGHTS FROM CONTINUING OPERATIONS Revenue R63.4bn up 2% (FY17: R62bn) Operating profit R4.4bn up 8% (FY17: R4.1bn) Profit before non-operating & capital items R3.2bn up 22% (FY17: R2.7bn) Effective tax rate 28.5% (FY17: 23.9%) Income from associates R235m up 153% (FY17: R93m) Headline earnings per share cents up 18% (FY17: 975 cents) Results for the year end 30 September 2018

8 REVENUE SEGMENTAL Rbn Equipment southern Africa Equipment Russia Handling Automotive Logistics GROUP Results for the year end 30 September 2018

9 OPERATING PROFIT SEGMENTAL Rm % Equipment southern Africa Equipment Russia Handling Automotive Logistics Corporate GROUP Results for the year end 30 September 2018

10 STATEMENT OF FINANCIAL POSITION Rm FY'18 FY'17 Value chg % chg Total Assets Cash Gross debt Net debt (2 477) ( 43) Results for the year end 30 September 2018

11 SUMMARISED STATEMENT OF CASH FLOWS Rm FY'18 FY'17 Value chg Operating cash flows before working capital Movement in working capital (increase) / decrease (2 065) (3 604) Net investment in leasing assets and vehicle rental fleet (2 224) (2 881) 657 Cash generated from operations (2 143) Net cash generated / (used) in investing activities (329) Net cash inflow Free cash flow Results for the year end 30 September 2018

12 INVESTMENT IN WORKING CAPITAL Rm FY 18 FY 17 Inventories movement (1 466) 719 Receivables movement (1 423) (500) Payables movement Total working capital (increase) / decrease (2 065) Rm FY 18 FY 17 Equipment southern Africa (1 245) Equipment Iberia (91) 385 Equipment Russia (497) (138) Automotive (171) 167 Logistics 77 (8) Other (138) 114 Total working capital (increase) / decrease (2 065) Results for the year end 30 September 2018

13 DEBT MATURITY PROFILE Total interest bearing debt Redemption Rm Total Short-term Long-term South Africa Offshore Total debt Sept Total debt Sept Ratio of long-term to short-term debt 54:46 (Sept :21) R10.5bn (committed R8.0bn) unutilised bank facilities at Sept 2018 Cash and cash equivalents R7 893m (Sept 2017 R3 925m) Results for the year end 30 September 2018

14 CAPITAL STRUCTURE REMAINS STRONG Group segmental gearing ratios within target range: Debt to equity (%) Trading Leasing Car Rental Total group Target range Gross Net Ratio at 30 Sept 2018 Ratio at 30 Sept Net debt of R3 276 (2017: R5 753m) Below target ranges due to strong cash inflows in second half EBITDA interest cover 5.9 x (2017: 5.0 x) Net debt to EBITDA 0.5 x (2017: 0.9 x) Moody s confirmed Global Scale Rating of Baa3 (stable outlook) and National Scale Rating of Aa1.za Results for the year end 30 September 2018

15 DIVISIONAL OVERVIEW EMMY LEEKA CEO: Equipment southern Africa

16 OPERATIONAL REVIEW - EQUIPMENT SOUTHERN AFRICA 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%) Operating profit (Rm) Margin Sept 2018 Sept 2017 Southern Africa 9.1% 9.8% Results for the year ended 30 September 2018

17 AFTERMARKET CONTRIBUTION REMAINS STRONG Rbn 25 Equipment sales Product support 60% 20 46% 50% 52% 50% 41% 56% 57% 40% 15 33% 30% 10 28% 34% 36% 30% 46% 20% 5 10% % Results for the year ended 30 September 2018

18 SOUTHERN AFRICA REVENUE BY LINE OF BUSINESS - SEPTEMBER % 5% 37% 10% 4% 29% 52% 57% New equipment Product support Used equipment Rental Results for the year ended 30 September 2018

19 SOUTHERN AFRICA NEW EQUIPMENT SALES BY INDUSTRY - SEPTEMBER % 20% 16% 30% 8% 14% 49% 40% Mining Construction Energy & Transportation Power Contract mining Results for the year ended 30 September 2018

20 BARTRAC JV IN DRC DELIVERS SOLID PERFORMANCE ASSOCIATE INCOME (Rm) FY 2015 FY 2016 FY 2017 FY 2018 Strong results reflecting higher commodity prices and the ramp-up of Glencore Katanga operations Outlook in the DRC remains positive as key customers continue to invest in existing operations Results for the year ended 30 September 2018

21 MINING OPPORTUNITIES Greenfields/Major Projects Firm order Delivered in FY 2018 Luaxe Venetia 8 units $14,1m ANGOLA ZAMBIA MOZAMBIQUE 20 units 1 unit $100m <$1m Mopani Mota Engil 17 units 12 units 23 units $11.3m BOTSWANA ZIMBABWE $41.3m $60m Platreef Vale 20 units $50m NAMIBIA 2 units $13m Trollope Mogalakwena 17 units $15m 12 units $50m 24 units $80m Gamsberg RSA Tharisa 11 units $16m $80m Kolomela 25 units $200m Belfast Results for the year ended 30 September 2018

22 EQUIPMENT SOUTHERN AFRICA OUTLOOK 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 at R2.4bn Order book (Rbn) Sep Sep Results for the year ended 30 September 2018

23 DIVISIONAL OVERVIEW QUINTON MCGEER CEO: Equipment Russia

24 OPERATIONAL REVIEW RUSSIA 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 Operating profit (Rm) Sept 2018 Sept 2017 Margin Russia 38% 10.3% 11.3% Results for the year ended 30 September 2018

25 AFTERMARKET CONTRIBUTION DRIVING PROFITABILITY $m 700 Equipment sales Product support % % 25% 29% 36% 28% 27% 33% 46% 61% 51% 51% Results for the year ended 30 September 2018

26 RUSSIA REVENUE PROFILE BY LINE OF BUSINESS SEPTEMBER % 2% 3% 1% 1% 2% 45% 37% 57% 51% New equipment Product support Technology Used equipment Rental Results for the year ended 30 September 2018

27 RUSSIA NEW EQUIPMENT SALES BY INDUSTRY SEPTEMBER % 2%1% 3% 1% 10% 13% 7% 83% 76% Mining Infrastructure Energy & Transportation SEM Other Results for the year ended 30 September 2018

28 MINING OPPORTUNITIES Greenfields/Major Projects Firm order Delivered in FY 2018 Polyus 35 units 40 units $122.2m $116.7m Anadyr Alrosa 10 units 15 units $8m $9.9m Norilsk Nickel 17 units 6 units 5 units $15.8m $4.6m $4.5m 14 units $14m Pavlik KRU 23 units 2 units 11 units $44.6m $2.9m $11.8m Norilsk Mirniy Yakutsk Magadan Petropavloysk- Kamchatskiy 11 units $8.1m Kekura Nerungry Arshanovskiy 14 units 14 units $15.4m $13m Omsk Novosibirsk Tomsk Achinsk Kemerovo Krasnoyarsk Barnaul Irkutsk Chita Ulan-Ude Service Integrator 17 units 14 units 7 units $15.9m $8.1m $4.2m Zadubrovskiy Noviy 20 units 6 units 30 units $18.8m $5.4m $23.4m NordGold 6 units 7 units 16 units $14.4m $16.7m $25.5m Results for the year ended 30 September 2018

29 EQUIPMENT RUSSIA - OUTLOOK Geopolitical environment remains volatile and challenging Increased retaliatory customs duties will reduce large mining product opportunities Solid firm order book despite significant deliveries executed in second half of FY 2018 Growth consolidation, tight control over expenses and working capital management Aftermarket revenues expected to improve further on the basis of increased population and anticipated machine and component rebuilds Mining sector and commodity outlook maintain positive trajectory Order book ($m) Large deals (138) -62.4% Firm Orders signed after 30 Sep 2018 Results for the year ended 30 September 2018

30 DIVISIONAL OVERVIEW KEITH RANKIN CEO: Automotive

31 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 Operating profit (Rm) FY'18 FY'17 Margin Barloworld Automotive -2.6% 5.7% 5.5% Results for the year ended 30 September 2018

32 CAR RENTAL 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 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 Results for the year ended 30 September 2018

33 AVIS FLEET 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 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 Results for the year ended 30 September 2018

34 MOTOR TRADING 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 FY 18 FY 17 % chg Revenue 19.96bn 21.58bn -7.5 Operating profit 524m 564m -7.1 Operating margin 2.6% 2.6% - Results for the year ended 30 September 2018

35 AUTOMOTIVE - OUTLOOK Car Rental Avis Fleet Motor Trading Automotive Division 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 Results for the year ended 30 September 2018

36 DIVISIONAL OVERVIEW KAMOGELO MMUTLANA CEO: Logistics

37 % % 4,367 4, % 223 5, % 6,171 5, % FINANCIAL HIGHLIGHTS REVENUE OPERATING PROFIT OPERATING MARGIN -4.0% R5 924mil (2017: R6 171m) +160% R 262mil (2017: R101m) 4.4% (2017: 1.6%) -2.6% -4.0% +21.1% 160% Results for the year end 30 September 2018

38 % 1, % 1, % 6.0% 86 2, ,403 2, % 520 FINANCIAL HIGHLIGHTS * before financing CASH FLOW* +100% R520mil (2017: R260m) NET OPERATING ASSETS -26% R1 538mil (2017: R2 082m) RETURN ON INVESTED CAPITAL 8.7% (2017: 2.5%) 100% -26% Results for the year end 30 September 2018

39 KEY ACHIEVEMENTS SG&A COST REDUCTION OPERATIONAL PERFORMANCE PROCUREMENT OPERATING MODEL 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 Results for the year end 30 September 2018

40 LOGISTICS STRATEGIC OUTLOOK CONSOLIDATE GAINS OPTIMISE PORTFOLIO EXPLORE NEW MARKETS DIGITISE 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 VISION TO BE AN INTERNATIONAL LEADER IN SUPPLY CHAIN FULFILLMENT THAT DELIGHTS STAKEHOLDERS Results for the year end 30 September 2018

41 SUSTAINABILITY AND INCLUSIVE GROWTH DOMINIC SEWELA Group chief executive

42 B-BBEE TRANSACTION SALE OF PROPERTIES FOUNDATION MANAGEMENT TRUST EMPLOYEE TRUST BLACK PUBLIC SCHEME 38% 32% 30% 3% BARLOWORLD FOUNDATION Sale of Properties PROPCO Loan EXTERNAL FUNDER 100% BARLOWORLD SA 100% BARLOWORLD LOGISTICS Lease payment Results for the year end 30 September 2018

43 B-BBEE TRANSACTION HIGHLIGHTS Transformation Creation of a long term sustainable BBBEE transaction Contribute to transformation and inclusive growth of the South African economy Longevity Foundation shareholding permanent Minimum 15-year empowerment period 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 employees Public Offer to the black public 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 Results for the year end 30 September 2018

44 BARLOWORLD FOUNDATION Aligned with the national development imperatives of advancing inclusive economic transformation and growth. BARLOWORLD FOUNDATION Focus will be on: Poverty alleviation, 3% Education, Youth development and advocacy BARLOWORLD FOUNDATION Permanent shareholding, not allowed to sell into perpetuity Increases Barloworld s annual social impact spend to [R60] million per annum Results for the year end 30 September 2018

45 SALE OF PROPERTIES Property type Properties Market Value GLA Motor Retail R1.676 billion Industrial R940.3 million Commercial R95.28 million Mixed Commercial and Industrial R13.8 million Residential and Vacant Land R29.4 million 595 Total R2.755 billion* * Independent Property Valuation 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 Results for the year end 30 September 2018

46 TOTAL ECONOMIC COST TO SHAREHOLDERS ECONOMIC COST TO SHAREHOLDER Percentage of Market Cap Rand Equivalent (1) Foundation (Free issue of shares) 3.00% Property transaction Facilitation costs Employees (Grades 2 10) (100% facilitation of equity portion) 0.70% Junior Management (Grades 10-14) (100% facilitation of equity portion) 0.11% Senior Management (Grades 15 23) (95% facilitation of equity portion) 0.32% Total IFRS 2 Costs 1.13% Discount on Property sale 0.57% Facilitation Costs 1.70% Total BEE Facilitation Costs (Public Scheme Successful) 4.70% The total economic cost of 4.70% for a transaction size of [14%], which equates to 3.4% per 10% is slightly above the average of 2.7% for every 10%. However, the longer tenure of the proposed transaction 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% for a [14%] BEE shareholding The market related rental escalation of the property portfolio is 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. Note 1: The amounts are based on the current market cap of circa R24.97 billion Results for the year end 30 September 2018

47 GROUP OUTLOOK DOMINIC SEWELA Group chief executive

48 GROUP OUTLOOK South African consumers remain under pressure in a slowing economy Constrained disposable income Greater certainty on the gazetted Mining Charter to drive more positive sentiment Establishment of infrastructure fund for economic stimulus Likely to boost construction sector in SA Continue focus on executing our medium term strategy Drive businesses to their full potential Optimal allocation of capital Strong foundation for value-enhancing acquisitive growth opportunities Pursue opportunities that fit the group s capabilities Optimisation of the group s capital structure Results for the year end 30 September 2018

49 YEAR-END RESULTS 2018 for the 12 months ended 30 September 2018 QUESTIONS?