Directors' report
Nature of business
Barloworld Limited (Barloworld or company) is a registered holding company for a group that is a distributor of leading international brands providing integrated rental, fleet management, product support and logistics solutions. Barloworld comprises businesses that fit the strategic profile above, meet strict performance criteria and demonstrate good growth potential.
Barloworld maintains a primary listing on the main board of the JSE Limited. The company also has secondary listings on the London and Namibia stock exchanges.
The core divisions of the group comprise:
- Equipment and Handling (earthmoving, power systems, materials handling and agriculture)
- Automotive and Logistics (car rental, motor retail, fleet services, used vehicles and disposal solutions, logistics management and supply chain optimisation)
Financial results
The summary of the consolidated annual financial statements for the year ended 30 September 2015 are set out in the integrated report.
Audit committee report
The report of the audit committee in terms of section 94(7) of the Companies Act, No 71 of 2008, as amended (the Companies Act), for the year ended 30 September 2015 is available on the company’s website, www.barloworld.com.
Year under review
The year under review is covered in the chairman, chief executive and finance director’s reports in the integrated report 2015.
Share capital
The authorised share capital of the company as at 30 September 2015 is as follows:
- 400 000 000 ordinary par value shares of R0.05 each
- 500 000 6% cumulative preference shares of R2 each.
The issued share capital of the company as at 30 September 2015 is as follows:
- 226 727 596 ordinary par value shares of R0.05 each
- 375 000 6% cumulative preference shares of R2 each.
The reduction in the issued number of shares was due to the repurchase of shares from the Barloworld black managers trust and the Barloworld education trust in terms of the close out of the 2008 B-BBEE transaction.
Further details of the authorised and issued share capital, appear in note 13 of the annual financial statements.
Dividends
Details of the dividends and distributions declared and paid are shown in the annual financial statements which are also available online at www.barloworld.com. The directors concluded that the company would be both solvent and liquid subsequent to such dividend declarations.
Acquisitions and disposals
Acquisitions
Barloworld Logistics
Barloworld Logistics acquired the remaining shares in Re-Ethical Engineering Proprietary Limited (Re), an environmental solution company, to progress its strategic intent to establish an environmental solutions division within Barloworld Logistics. Re will be rebranded to SmartMatta, incorporating the Logistics Smart partnership principal.
Avis Fleet
Avis Southern Africa Limited acquired all the shares in Tanzuk Limited, a fleet management services company incorporated in Tanzania as part of the strategic plan to expand Avis Fleet Services into selected African countries.
Disposals
International Logistics businesses
Barloworld Logistics disposed all of its shares in the Spanish Barloworld Logistica SL business and the German SAT Sea Air Transport GmbH business. The exit of these businesses will assist in the deployment of capital to Logistics businesses with higher returns.
Agriculture Russia
Barloworld Handling disposed all of its assets in the Agro Machinery LLC business in Siberia to enable the division to focus on growing the agriculture business in southern Africa.
Significant transactions
In September 2008, Barloworld implemented a Broad-Based Black Economic Empowerment (B-BBEE) transaction (2008 B-BBEE transaction) in terms of which participants subscribed for ordinary shares in Barloworld, representing in aggregate 9.56% of Barloworld’s increased issued ordinary shares after the implementation of the 2008 B-BBEE transaction.
The 2008 B-BBEE transaction comprised four components, namely an employee component (including black non-executive directors), which acquired an aggregate 2.71% of Barloworld’s ordinary shares, an educational trust component, which acquired an aggregate 0.47% of Barloworld’s ordinary shares, a community service group component (the CSGs), which acquired an aggregate 0.95% of Barloworld’s ordinary shares and a strategic black partner component (the SBPs), which acquired an aggregate 5.44% of Barloworld’s ordinary shares.
At the time of implementation of the 2008 B-BBEE transaction, the Barloworld board of directors (the board) believed that the transaction would embrace the spirit of empowerment, while achieving the goals of Barloworld’s overarching B-BBEE strategy.
The 2008 B-BBEE transaction was implemented just prior to the impact of the global financial crisis on South Africa which resulted in a decline in the Barloworld share price, and lower than expected dividends accruing to the B-BBEE participants during the term of the 2008 B-BBEE transaction. Due to these factors, the B-BBEE participants would not have been able to finance the subscription of all of the Barloworld ordinary shares which they were obliged to subscribe and any value created for the B-BBEE participants by the 2008 B-BBEE transaction would have been lost.
In light of this, and to conclude the 2008 B-BBEE transaction in a fair and equitable manner for the SBPs, the CSGs, Barloworld and shareholders, the board proposed amendments to the 2008 B-BBEE transaction including the termination of the obligation to subscribe for shares in excess of the cash available in the respective funding special purpose vehicles and the termination of restrictions imposed upon the shares issued. In addition, to further the objective of increasing black ownership in Barloworld, the company proposed the issue of an additional 450 000 ordinary shares to the SBPs and the CSGs participants at par value of R0.05 per share. Details of this are contained in the circular to shareholders dated 15 May 2015. The amendments were approved by the shareholders at the general meeting held on 19 June 2015.
The 2008 B-BBEE transaction also included a black managers trust (BMT) set up to reward and retain black managers in the group. This element of the transaction terminated without any value accruing to any of the participants. The board was of the opinion that the black managers play a vital part in the success of the company and therefore approved a ‘cash payment benefit’ based on the original rules of the BMT. This resulted in 183 current and past black managers receiving a R46.4 million cash award in recognition of their contributions over the past seven years.
Directors
Biographical notes of the current directors are provided in the full corporate governance report of the integrated report and the annual general meeting (AGM) booklet available on the company’s website www.barloworld.com. Details of directors’ remuneration, forfeitable shares, share appreciation rights and options appear in the consolidated annual financial statement.
Changes in directorate
Mr M Laubscher retired from the board of Barloworld with effect from 4 February 2015, after 28 years’ service with the company due to health-related reasons.
According to the company’s memorandum of incorporation (MOI), the below directors retire by rotation at the forthcoming AGM:
NP Dongwana
AGK Hamilton
B Ngonyama
OI Shongwe
DG Wilson
All retiring directors are eligible and have offered themselves for re-election, with the exception of Mr AGK Hamilton.
Mr Hamilton, having reached retirement age, will retire from the board and as chairman of the audit committee and member of other sub-committees of the board at the forthcoming AGM.
Mr A Landia has indicated that he will be stepping down from the board with effect from 31 December 2015 as a result of increased external business commitments.
Company secretary and registered office
The company secretary is Lerato Manaka and her business address and that of the registered office are:
Business address
180 Katherine Street
Sandton
2146
South Africa
Postal address
PO Box 782248
Sandton
2146
South Africa
Auditors
Deloitte & Touche continued in office as auditors for the company and its subsidiaries.
At the forthcoming AGM, pursuant to the requirements of the Companies Act, shareholders will be requested to reappoint Deloitte & Touche as the registered independent external auditors of Barloworld Limited as of 30 September 2015 and to confirm Mr B Nyembe, as newly appointed designated lead independent external auditor. The current designated lead independent external auditor, Mr G Berry, has reached his five-year cycle and in accordance with the Companies Act and IFAC Code will be rotating following the completion of the 2015 financial year audit.
Insurance
Insurance cover has been placed on behalf of the group in the London and South African insurance markets up to R2 billion per operating division in excess of R20 million. The group captive provides insurance cover for losses that may occur below the R20 million level, retaining R30 million in the annual aggregate.
Subsidiary companies
Details of principal subsidiary companies appear on the consolidated annual financial statements.
Special resolutions
The following significant special resolutions were passed by subsidiaries of Barloworld Limited since the date of the previous directors’ report:
Financial assistance in terms of section 45 of the Companies Act
Barloworld is a listed holding company with a large number of subsidiary companies which together comprise the Barloworld group of companies. The subsidiaries are from time to time required to provide financial assistance to companies within the group including related and inter-related companies in the form of operational loan funding, credit guarantees and general financial assistance as contemplated in section 45 of the Act.
Conversion of South African public companies to private companies
All South African subsidiary public companies under the group namely: Barloworld Farms, Barloworld Trust Company, Barlows Cement Investments, Federated Blaikie, WF Johnstone & Company, Barloworld Motor and Avis Southern Africa were converted from public companies to private companies, in accordance with the Companies Act, as recommended by the audit committee.
International Financial Reporting Standards (IFRS)
The company’s financial statements were prepared in accordance with IFRS.
Corporate governance
The summary report on the corporate governance and the application of the principles of King III for the year ended 30 September 2015 is set out in the Corporate governence review of the integrated report. The detailed corporate governance report is available on the company’s website www.barloworld.com.
Going concern
The directors consider that the company has adequate resources to continue operating for the foreseeable future and that it is therefore appropriate to adopt the going-concern basis in preparing the company’s financial statements. The directors have satisfied themselves that the company is in a sound financial position and that it has access to sufficient borrowing facilities to meet its foreseeable cash requirements.
Major shareholders
Shareholders holding beneficially, directly or indirectly, in excess of 3% of the issued share capital of the company at 30 September 2015 is detailed in the Shareholder profile of the integrated report.
Events after the reporting period
No material events have occurred between the date of these financial statements and the date of approval, the knowledge of which would affect the ability of the users of these statements to make proper evaluations and decisions.