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BARLOWORLD LIMITED - Trading statement

Release Date: 14/11/2019 14:32
 
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Trading statement

Barloworld Limited
(Incorporated in the Republic of South Africa)
(Registration number 1918/000095/06)
(Income Tax Registration number 9000/051/71/5)
(Share code: BAW)
(JSE ISIN: ZAE000026639)
(Share code: BAWP)
(Bond issuer code: BIBAW)
(JSE ISIN: ZAE000026647)
(Namibian Stock Exchange share code: BWL)
("Barloworld” or the “company" or the “group”)

Trading statement

The group is expected to produce a resilient result for the year ended 30 September 2019
notwithstanding the impact on the group’s operating performance of the following:
   • once-off items;
   • non-core businesses held for sale or closure within Logistics; and
   • the classification of the Avis Fleet business as held for sale and discontinued operations at 30
     September 2019.

In challenging trading conditions, the group has generated strong cash flows and the balance sheet is
geared for growth.

Equipment

Equipment southern Africa produced an improved operating performance despite difficult trading
conditions. Growth in this division was largely driven growth in aftermarket sales. The group’s joint
venture (JV) in the Katanga province of the Democratic Republic of Congo delivered strong earnings
despite reduced activities in key customer operations. Losses from the group’s investment in the
Zimbabwean operation of Barzem and continued losses in BHBW have negatively impacted on equity
accounted earnings. Following a record result in 2018, Equipment Russia’s performance was well
down on the prior year. Despite higher import duties and other geopolitical challenges, Russia
exceeded our expectations buoyed by continued strength in the mining sector.

Automotive

The Automotive division produced a strong operating performance notwithstanding the challenging
trading environment that continues from the previous year. Whilst revenues were impacted by declines
in the premium market segment, increased competition and lower used car profits, cost containment
and prudent invested capital management contributed to improved performance in this division.
Logistics

In Logistics, revenue and operating profit were significantly impacted by the closure of KLL, the
currency impact on our Zimbabwean business, and contracts not renewed. This led to a disappointing
result on the back of the gains made in the prior year. The three year turnaround strategy is a key
focus area for management.

Once-off items

As noted at the half year, the performance of the group was impacted by a once-off charge of
R88 million (£4.7 million) required to equalise the Guaranteed Minimum Pensions (GMP) in the UK
defined benefit pension scheme. Furthermore, once-off costs related to the implementation of our
“Khula Sizwe” B-BBEE transaction were incurred in the year. Both of these charges impacted the
corporate segmental operating result together with continued investment in corporate actions and
building critical skills at the corporate centre to drive the active shareholder model.

Classification of the Avis Fleet business as held for sale and discontinued operations at 30
September 2019

In September, management took a firm decision to dilute the group’s interest in the Avis Fleet business
to a 50% shareholding, with the ultimate intention to form a joint venture with external parties. In terms
of IFRS 5: Non-current assets held for sale and discontinued operations, the group will report the
results of the Avis Fleet business separately as a discontinued operation and assets and liabilities held
for sale in the annual financial statements. Consequently, the comparative income statement will be
restated and the group’s results from continuing operations will exclude the results of the Avis Fleet
business going forward, save for certain attributable funding and related charges.

Dilution of the group’s interest in NMI-DSM to 50% effective 1 September 2019

The group reduced its shareholding in NMI-DSM to 50% effective 1 September 2019 and as such, this
entity has been deconsolidated from the group and earnings from this date have been equity
accounted for.

Normalised headline earnings per share from continuing operations (HEPS)

Due to the number of items impacting on the group’s results in the current year, the company will be
presenting normalised HEPS from continuing operations including Avis Fleet (normalised HEPS from
continuing operations). Normalisation adjustments will be consistent with those presented at the half
year, being the GMP charge incurred by our defined benefit pension scheme in the UK and the costs
of implementing our B-BBEE deal Khula Sizwe. For comparative purposes, the results of Avis Fleet,
now held for sale and discontinued operations, have been included.

Basic earnings per share (EPS), basic headline earnings per share (HEPS) and normalised
basic HEPS

Barloworld expects basic EPS, basic HEPS and normalised basic HEPS for the year ended
30 September 2019 to be as follows:

                                          30               Expected range of              30 September
                                     September                 increase/                  2019 Expected
                                        2018                  (decrease)                     results
                                     As reported
 Basic EPS cents
 Continuing                            1,042.8                (7%) to (17%)                969.8    865.5
 Group                                 1,823.8               (30%) to (40%)               1,276.7 1,094.3
 In the 2018 financial year the group’s earnings per share was favorably impacted by the
 foreign exchange gains arising from the sale of our Equipment Iberia operations.


 Basic HEPS cents
 Continuing                            1,150.9               (20%) to (30%)                920.7   805.6
 Group                                 1,192.1                (5%) to (15%)              1,132.5 1,013.3

 Normalised HEPS cents
 Continuing incl. Avis Fleet           1,150.9                   0 to   5%               1,150.9 1,208.4
 Group                                 1,192.1                   0 to  (5%)              1,192.1 1,132.5

Notes:

    1. For the year ended 30 September 2018 Avis Fleet was reported as part of the group’s continuing
       operations. Therefore, basic EPS and basic HEPS for the year ended 30 September 2018
       presented above have not yet been restated in line with how Barloworld will be reporting its results
       for the year ended 30 September 2019, which will classify Avis Fleet as a discontinued operation.
    2. Normalised basic HEPS figures are the responsibility of the directors and have been presented for
       illustrative purposes only. Because of their nature, normalised basic HEPS figures may not fairly
       present Barloworld’s basic HEPS.

Net debt and funding

Net debt at year end is well down on the prior year mainly as a result of strong cash flows in the year
and the retention of the R2.5 billion proceeds from the sale of Equipment Iberia, a portion of which is
being retained for investment in the Mongolian Caterpillar dealership (refer to the renewal of cautionary
announcement released on SENS on 11 November 2019).

In September 2019 Barloworld refinanced Bond BAW24 of R501 million and issued BAW 31 for
R500 million. Overall debt maturity is well balanced into future years.

The information contained in this trading statement has not been reviewed nor reported on by
Barloworld’s independent external auditors.

The group's results for the year ended 30 September 2019 are scheduled to be released on SENS on
or about 18 November 2019.

Sandton

14 November 2019

Equity Sponsor: Nedbank Corporate and Investment Banking, a division of Nedbank Limited
Debt Sponsor: Absa Corporate and Investment Bank, a division of Absa Bank Limited

Date: 14/11/2019 02:32:00
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