year-end results 2018 · automotive logistics group wacc 12.5% segmental 12 month rolling roic...
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YEAR-END RESULTS 2018
for the 12 months ended 30 September 2018
HIGHLIGHTS AND
GROUP STRATEGY
DOMINIC SEWELA
Group chief executive
Barloworld Limited
Results for the year end 30 September 2018
BEE proposed
transaction
board approved
Iberia exit
generates
R2.5bn in cash
Logistics
turnaround
on track
838.0975.0
1150.9
0.0
500.0
1000.0
1500.0
2016 2017 2018
-5%
345390
462
0
100
200
300
400
500
2016 2017 2018
18%
4.33.4 3.6
0.0
2.0
4.0
6.0
8.0
2016 2017 2018
9.310.5
11.4
0
5
10
15
2016 2017 2018
GROUP HIGHLIGHTS - 2018
HEPS growth % Total dividend per share (cents)
Free Cash (Rbn) ROE %
5%18%
Barloworld Limited
Results for the year end 30 September 2018
7.8%
18.1%
12.8%
6.0%
9.4%
12.8%
18.4%
13.1%
2.5%
11.2%
12.7%
21.6%
12.4%
8.7%
12.3%
-5.5%
-0.5%
4.5%
9.5%
14.5%
19.5%
Equipment
southern
Africa
Equipment
Russia
Automotive Logistics Group
WACC 12.5%
SEGMENTAL 12 MONTH ROLLING ROIC – HURDLE RATE 13.0%
AVERAGE INVESTED CAPITAL
FY16 R11.5bn R2.8bn R9.8bn R2.6bn R29.4bn
FY17 R10.2bn R2.6bn R10.0bn R2.4bn R27.1bn
FY18 R10.9bn R2.9bn R10.0bn R1.9bn R26.3bn
Barloworld Limited
Results for the year end 30 September 2018
CORPORATE LEVEL STRATEGY UPDATE
FIX OPTIMISE GROW
Address underperforming
business units:
Iberia exit complete –
Released R2.5bn
Logistics turnaround
on track
Further asset disposals in
Logistics (SmartMatta, ME)
Realise full potential of
business units:
Equipment SnA operational
transformation
Motor Retail restructure and
cost optimisation
Optimal capital allocation
across portfolio:
Restructure of Leasing and Rental
Assets
Targeted growth:
Considering
opportunities that fit the
group’s capabilities
Optimise group
capital structure:
Through value-
enhancing growth or
capital reduction
ACTIVE SHAREHOLDER
Allocate Resources, Capital and Talent across the group
Strengthened group’s core capabilities to deliver on new strategy
2.5
4.0
2.0
Iberia Auto Leasing Equip Rental
Invested Capital
FINANCIAL OVERVIEW
DON WILSON
Finance director
Barloworld Limited
Results for the year end 30 September 2018
Revenue
R63.4bnup 2%
(FY17: R62bn)
Operating profit
R4.4bnup 8%
(FY17: R4.1bn)
Income from associates
R235mup 153%
(FY17: R93m)
Profit before non-operating & capital items
R3.2bnup 22%
(FY17: R2.7bn)
Effective tax rate
28.5%(FY17: 23.9%)
Headline earnings per share
1 151 centsup 18%
(FY17: 975 cents)
INCOME STATEMENT HIGHLIGHTS FROM CONTINUING OPERATIONS
Barloworld Limited
Results for the year end 30 September 2018
REVENUE SEGMENTAL
Rbn
18.3
5.1
0.8
31.6
6.2
62.0
19.8
7.8
0.1
29.8
5.9
63.4
0
10
20
30
40
50
60
70
Equipmentsouthern Africa
Equipment Russia Handling Automotive Logistics GROUP
2017 2018
Barloworld Limited
Results for the year end 30 September 2018
1785
582
-5
1747
101
-128
4082
1790
804
-20
1701
262
-133
4404
-300
200
700
1200
1700
2200
2700
3200
3700
4200
4700
Equipmentsouthern Africa
EquipmentRussia
Handling Automotive Logistics Corporate GROUP
2017 2018
OPERATING PROFIT SEGMENTAL
Rm
+8%
Barloworld Limited
Results for the year end 30 September 2018
STATEMENT OF FINANCIAL POSITION
Rm FY'18 FY'17 Value chg % chg
Total Assets 49 259 46 324 2 935 6.3
Cash 7 893 3 925 3 968 101.1
Gross debt 11 169 9 678 1 491 15.4
Net debt 3 276 5 753 (2 477) ( 43)
Barloworld Limited
Results for the year end 30 September 2018
SUMMARISED STATEMENT OF CASH FLOWS
Rm FY'18 FY'17 Value chg
Operating cash flows before working capital 8 111 7 307 804
Movement in working capital (increase) / decrease (2 065) 1 539 (3 604)
Net investment in leasing assets and vehicle rental
fleet(2 224) (2 881) 657
Cash generated from operations 3 822 5 965 (2 143)
Net cash generated / (used) in investing activities 1 891 (329) 2 220
Net cash inflow 2 638 2 602 36
Free cash flow 3 591 3 405 186
Barloworld Limited
Results for the year end 30 September 2018
INVESTMENT IN WORKING CAPITAL
Rm FY’18 FY’17
Inventories – movement (1 466) 719
Receivables – movement (1 423) (500)
Payables – movement 824 1 320
Total working capital – (increase) / decrease (2 065) 1 539
Rm FY’18 FY’17
Equipment southern Africa (1 245) 1 019
Equipment Iberia (91) 385
Equipment Russia (497) (138)
Automotive (171) 167
Logistics 77 (8)
Other (138) 114
Total working capital – (increase) / decrease (2 065) 1 539
Barloworld Limited
Results for the year end 30 September 2018
DEBT MATURITY PROFILE
Total interest bearing debt Redemption
Rm Total Short-term Long-term
South Africa 10 010 4 091 5 919
Offshore 1 159 1 083 76
Total debt Sept 2018 11 169 5 174 5 995
Total debt Sept 2017 9 678 2 055 7 623
Ratio of long-term to short-term debt 54:46 (Sept 2017 – 79:21)
R10.5bn (committed R8.0bn) unutilised bank facilities at Sept 2018
Cash and cash equivalents R7 893m (Sept 2017 – R3 925m)
Barloworld Limited
Results for the year end 30 September 2018
CAPITAL STRUCTURE REMAINS STRONG
Group segmental gearing ratios within target range:
Debt to equity (%) Trading Leasing Car Rental Total group
Target range 30 - 50 600 - 800 200 - 300 Gross Net
Ratio at
30 Sept 201825 614 204 49 14
Ratio at
30 Sept 201721 560 203 46 28
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
EMMY LEEKA
CEO: Equipment southern Africa
DIVISIONAL OVERVIEW
Barloworld Limited
Results for the year ended 30 September 2018
Revenue up 8% due to improved machine sales growth of 21%
Operating margin decreased to 9.1% due to sales mix, exchange rate impact and
investment in operational and digital transformation
Solid performance in the DRC JV significantly boosting attributable income
Marginal decrease in return on invested capital (ROIC) to 12.7% (2017:12.8%)
OPERATIONAL REVIEW - EQUIPMENT SOUTHERN AFRICA
Operating profit (Rm) Margin
9.1%
9.8%
0 500 1 000 1 500 2 000
SouthernAfrica
Sept 2018 Sept 2017
Barloworld Limited
Results for the year ended 30 September 2018
AFTERMARKET CONTRIBUTION REMAINS STRONG
Rbn
30%
28%
34%
46%
36%
33%
41%
46%50%
56% 57%
52%
0%
10%
20%
30%
40%
50%
60%
0
5
10
15
20
25
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Equipment sales Product support
Barloworld Limited
Results for the year ended 30 September 2018
37%
52%
6%5%
SOUTHERN AFRICA REVENUE BY LINE OF BUSINESS - SEPTEMBER
2018
29%
57%
10%
4%
2017
New equipment Product support Used equipment Rental
Barloworld Limited
Results for the year ended 30 September 2018
20%
49%
8%
23%
SOUTHERN AFRICA NEW EQUIPMENT SALES BY INDUSTRY - SEPTEMBER
2018
30%
40%
14%
16%
2017
Mining Construction Energy & Transportation Power Contract mining
Barloworld Limited
Results for the year ended 30 September 2018
BARTRAC JV IN DRC DELIVERS SOLID PERFORMANCE
ASSOCIATE INCOME (Rm)
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
265
13
97
251
0
50
100
150
200
250
300
FY 2015 FY 2016 FY 2017 FY 2018
Barloworld Limited
Results for the year ended 30 September 2018
MINING OPPORTUNITIES
ANGOLAZAMBIA
MOZAMBIQUE
NAMIBIA
RSA
ZIMBABWEBOTSWANA
Kolomela
$80m
Gamsberg
24 units
$80m
Platreef
20 units
$50m
Mopani
17 units
$11.3m
Luaxe
8 units
$14,1m
Belfast
25 units
$200m
Mota Engil
12 units 23 units
$41.3m $60m
Mogalakwena
12 units
$50m
Vale
2 units
$13m
Venetia
20 units 1 unit
$100m <$1m
Greenfields/Major Projects Firm order Delivered in FY 2018
Trollope
17 units
$15m
Tharisa
11 units
$16m
Barloworld Limited
Results for the year ended 30 September 2018
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
EQUIPMENT SOUTHERN AFRICA OUTLOOK
1.5
2.4
Sep-17
Sep-18
Order book (Rbn)
QUINTON MCGEER
CEO: Equipment Russia
DIVISIONAL OVERVIEW
Barloworld Limited
Results for the year ended 30 September 2018
Record results with revenue of $606m, up 57%, driven by strong prime product sales,
particularly gold and coal, including $100m Polyus project
Operating profit of R804m - US Dollar terms up 41% to $61.7m (2017: $43.7m)
Operating margin impacted by sales mix
Continued aftermarket growth from direct parts sales, component and machine rebuilds
Return on invested capital of 21.6%, economic profit of $20m and positive cash
generation of $22.2m
OPERATIONAL REVIEW – RUSSIA
0 250 500 750 1 000
Russia
Sept 2018 Sept 2017
Operating profit (Rm)
10.3%
11.3%
38%
Margin
Barloworld Limited
Results for the year ended 30 September 2018
24%
25%
29%36%
28%
27%33%
46%
61%51%
51%
37%
-
100
200
300
400
500
600
700
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Equipment sales Product support
AFTERMARKET CONTRIBUTION DRIVING PROFITABILITY
$m
Barloworld Limited
Results for the year ended 30 September 2018
57%37%
3%
1% 2%
RUSSIA REVENUE PROFILE BY LINE OF BUSINESS – SEPTEMBER
2018
45%
51%
1%1%
2%
2017
New equipment Product support Technology RentalUsed equipment
Barloworld Limited
Results for the year ended 30 September 2018
83%
10%
4% 2%1%
RUSSIA NEW EQUIPMENT SALES BY INDUSTRY – SEPTEMBER
2018
76%
13%
7%
3% 1%
2017
Mining Infrastructure Energy & Transportation SEM Other
Barloworld Limited
Results for the year ended 30 September 2018
MINING OPPORTUNITIES
Norilsk
Mirniy Yakutsk
Nerungry
Omsk
Barnaul
Novosibirsk
TomskAchinsk
KemerovoKrasnoyarsk
Chita
Ulan-UdeIrkutsk
Magadan
Anadyr
Petropavloysk-Kamchatskiy
Greenfields/Major Projects Firm order Delivered in FY 2018
Polyus
35 units 40 units
$122.2m $116.7m
Norilsk Nickel
17 units 6 units 5 units
$15.8m $4.6m $4.5m
KRU
23 units 2 units 11 units
$44.6m $2.9m $11.8m
Arshanovskiy
14 units 14 units
$15.4m $13m
Zadubrovskiy Noviy
20 units 6 units 30 units
$18.8m $5.4m $23.4m
Alrosa
10 units 15 units
$8m $9.9m
Pavlik
14 units
$14m
Kekura
11 units
$8.1m
Service Integrator
17 units 14 units 7 units
$15.9m $8.1m $4.2m
NordGold
6 units 7 units 16 units
$14.4m $16.7m $25.5m
Barloworld Limited
Results for the year ended 30 September 2018
Geopolitical environment remains volatile and challenging
Increased retaliatory customs duties will reduce large mining product opportunities
Solid firm order book despite significant deliveries executed in second half of FY 2018
Growth consolidation, tight control over expenses and working capital management
Aftermarket revenues expected to improve further on the basis of increased population and
anticipated machine and component rebuilds
Mining sector and commodity outlook maintain positive trajectory
EQUIPMENT RUSSIA - OUTLOOK
21
64
44 32
2016
2017
2018
Firm Orders signed after 30 Sep 2018
Order book ($m)
Large deals (138)
-62.4%
KEITH RANKIN
CEO: Automotive
DIVISIONAL OVERVIEW
Barloworld Limited
Results for the year ended 30 September 2018
Margin
5.7%
5.5%
OPERATIONAL REVIEW - AUTOMOTIVE
Revenue R29.8bn (FY’17: R31.6bn) – down 5.6% (Comparable basis up 0.3%)
Operating profit for the division at R1 701m (FY’17: R1 747m) – down 2.6%
Operating margin achieved for the year at 5.7% (FY’17: 5.5%)
Achieved ROIC of 12.4% (FY’17: 13.1%)
Average invested capital maintained at similar levels to prior year
Generated R690m of free cash flow
0 500 1 000 1 500 2 000
BarloworldAutomotive
FY'18 FY'17
Operating profit (Rm)
-2.6%
Barloworld Limited
Results for the year ended 30 September 2018
Operating profit down 4.6%
Increased rental days against a market
decline of 0.7%
Results negatively impacted by lower used
vehicle margin as a result of lower new
vehicle inflation
Increased rate per day, reduced damage
expenses and managed fleet cost
Maintained fleet utilisation at 76%
Generated positive free cash flow
CAR RENTAL
FY’18 FY’17 % chg
Revenue 6.53bn 6.45bn +1.3
Operating profit 536m 562m -4.6
Operating margin 8.2% 8.7% -0.5bps
Barloworld Limited
Results for the year ended 30 September 2018
Pleasing operating profit growth of 3.2%
Finance fleet reduced due to the non-renewal
of a few key contracts
Total fleet under management up 2.0%
Strong used vehicle profit contribution from
older used vehicles
Improved ROIC by 0.5bps
Positive momentum achieved through recently securing
a few sizeable corporate contracts
AVIS FLEET
FY’18 FY’17 % chg
Revenue 3.33bn 3.57bn -6.8
Operating profit 641m 621m +3.2
Operating margin 19.3% 17.4% +1.9bps
Barloworld Limited
Results for the year ended 30 September 2018
Revenue declined by 7.5% (Comparable basis up 1.2%)
Total dealer market up 0.5%
New units sold down 4.9% (Comparable basis -1.1%)
• Impacted by declining premium segment
Ongoing dealership portfolio review and
cost-base alignment
The SMD acquisition remains value accretive
Positive free cash flow generated
Achieved ROIC above Group hurdle rate
MOTOR TRADING
FY’18 FY’17 % chg
Revenue 19.96bn 21.58bn -7.5
Operating profit 524m 564m -7.1
Operating margin 2.6% 2.6% -
Barloworld Limited
Results for the year ended 30 September 2018
Car
Rental
Avis
Fleet
Motor
Trading
Automotive
Division
AUTOMOTIVE - OUTLOOK
Car rental industry rental day growth to remain subdued
Yield management and dual brand strategy to deliver top line revenue growth
Continued contribution from used vehicle disposals but margins under pressure
Leverage technology and mobility solutions to improve customer experience
Well positioned to maintain market leadership
Positive outlook for Corporate growth
City of Johannesburg non-specialised contract not renewed
Challenging trading conditions in the new vehicle market to persist
Premium segment remains under pressure
Ongoing review of underperforming dealerships and brands
SMD to remain value accretive and leverage inter group synergies
Balanced portfolio will continue to provide resilience throughout the cycle
Continued focus on achieving optimal returns above Group hurdle rates
Reviewing various funding options to enhance return on capital
Explore value enhancing growth opportunities
KAMOGELO MMUTLANA
CEO: Logistics
DIVISIONAL OVERVIEW
Barloworld Limited
Results for the year end 30 September 2018
2.8
%
3.5
% 3.9
%
1.6
%
4.4
%
2014 2015 2016 2017 2018
12
2
15
9
22
3
10
1
26
2
2014 2015 2016 2017 2018
-4.0%R5 924mil
(2017: R6 171m)
+160%R 262mil
(2017: R101m)
4.4%(2017: 1.6%)
4,3
67
4,5
09
5,7
56
6,1
71
5,9
24
2014 2015 2016 2017 2018
FINANCIAL HIGHLIGHTS
REVENUE OPERATING PROFIT OPERATING MARGIN
-2.6%-4.0%
+21.1%
160%
Barloworld Limited
Results for the year end 30 September 2018
4.7
%
5.6
%
6.0
%
2.5
%
8.7
%
2014 2015 2016 2017 2018
1,7
61
2,4
03
2,4
72
2,0
82
1,5
38
2014 2015 2016 2017 2018
-62
4
-73
0
86 26
0
52
0
2014 2015 2016 2017 2018
FINANCIAL HIGHLIGHTS
CASH FLOW*
NET OPERATING
ASSETS
RETURN ON
INVESTED CAPITAL
* before financing
+100%R520mil
(2017: R260m)
-26%R1 538mil
(2017: R2 082m)
8.7%(2017: 2.5%)
100%
-26%
Barloworld Limited
Results for the year end 30 September 2018
Integration of Transport
& SCM businesses
Headcount optimisation
Multiple operational
improvements
implemented
More streamlined
operations
Leveraging group
buying power
Creating shared value
with suppliers
Sub-optimal business
units held for sale
Exit of sub-optimal
contracts
Customer-focused
operating model to
support future growth
SG&A COST
REDUCTION
OPERATIONAL
PERFORMANCEPROCUREMENT
OPERATING
MODEL
KEY ACHIEVEMENTS
Barloworld Limited
Results for the year end 30 September 2018
3
LOGISTICS STRATEGIC OUTLOOK
VISION
TO BE AN INTERNATIONAL LEADER IN SUPPLY CHAIN
FULFILLMENT THAT DELIGHTS STAKEHOLDERS
421
Achieve full potential
of existing
business & assets
Further review of
portfolio for
enhanced returns
Unlock high
value profit pools
as supply chain partner
of choice
Enhance business
models through
technology
CONSOLIDATE
GAINS
OPTIMISE
PORTFOLIO
EXPLORE
NEW MARKETSDIGITISE
SUSTAINABILITY AND
INCLUSIVE GROWTH
DOMINIC SEWELA
Group chief executive
Barloworld Limited
Results for the year end 30 September 2018
BLACK PUBLIC
SCHEME
MANAGEMENT
TRUST
BARLOWORLD SABARLOWORLD
LOGISTICS
B-BBEE TRANSACTION SALE OF PROPERTIES
38% 32% 30%
Sale of PropertiesPROPCO
EMPLOYEE
TRUST
Lease payment
100%
BARLOWORLD
FOUNDATION
100%
FOUNDATION
3%
EXTERNAL
FUNDER
Loan
Barloworld Limited
Results for the year end 30 September 2018
B-BBEE TRANSACTION HIGHLIGHTS
Transformation Creation of a long term sustainable BBBEE transaction
Contribute to transformation and inclusive growth of the South African economy
Broad-based
Creation of a broad-based Foundation issued with 3% of Barloworld
Foundation mandate of poverty alleviation, education and youth development
Broad-based participation of 14 000 employees
Public Offer to the black public
Longevity Foundation shareholding permanent
Minimum 15-year empowerment period
Sustainability
The sale of a R2.8bn property portfolio to a black controlled company (PropCo)
PropCo will raise external debt of up to 80% of the acquisition price of the Properties
Grow its property portfolio over time
Strategic
alignment
Sale of property portfolio aligned to strategic focus to maximise and unlock value of all assets
Protect and grow the market leading positions of the
South African operations
Reliable, credible partner to public and private sector clients
Efficient
structure
B-BBEE ownership equivalent to 14%
Whilst limiting dilution to shareholders
Barloworld Limited
Results for the year end 30 September 2018
BARLOWORLD FOUNDATION
BARLOWORLD FOUNDATION
Aligned with the national development
imperatives of advancing inclusive
economic transformation and growth.
Focus will be on:
• Poverty alleviation,
• Education,
• Youth development and advocacy
Permanent shareholding, not allowed
to sell into perpetuity
Increases Barloworld’s annual social impact
spend to [R60] million per annum
BARLOWORLD FOUNDATION
3%
Barloworld Limited
Results for the year end 30 September 2018
SALE OF PROPERTIES
Disposal price based on:
• Future value of properties of R2.8 billion (being the current market value (as above) increased by
the value of capex committed on properties under development
• Discount of 5% to the future value
Ten year lease between Barloworld (through Barloworld SA and Logistics) and Propco
* Independent Property Valuation
Property type Properties’ Market Value GLA
Motor Retail R1.676 billion 128 913
Industrial R940.3 million 149 901
Commercial R95.28 million 9 150
Mixed – Commercial and Industrial R13.8 million 5 264
Residential and Vacant Land R29.4 million 595
Total R2.755 billion* 293 823
Barloworld Limited
Results for the year end 30 September 2018
Note 1: The amounts are based on the current market cap of circa R24.97 billion
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.
TOTAL ECONOMIC COST TO SHAREHOLDERS
ECONOMIC COST TO SHAREHOLDERPercentage of
Market Cap
Rand
Equivalent (1)
Foundation (Free issue of shares) 3.00% 749 167 085
Property transaction Facilitation costs
Employees (Grades 2 – 10) (100% facilitation of equity portion) 0.70% 174 187 586
Junior Management (Grades 10 -14) (100% facilitation of equity portion) 0.11% 26 422 682
Senior Management (Grades 15 – 23) (95% facilitation of equity portion) 0.32% 81 126 815
Total IFRS 2 Costs 1.13% 281 737 083
Discount on Property sale 0.57% 143 246 370
Facilitation Costs 1.70% 424 983 453
Total BEE Facilitation Costs (Public Scheme Successful) 4.70% 1 174 150 538
GROUP OUTLOOK
DOMINIC SEWELA
Group chief executive
Barloworld Limited
Results for the year end 30 September 2018
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
GROUP OUTLOOK
YEAR-END RESULTS 2018
for the 12 months ended 30 September 2018
QUESTIONS?