Automotive and Logistics
Automotive provides customers with a range of innovative vehicle usage solutions to meet their specific requirements for short-term vehicle usage, outright ownership through franchised motor vehicle retailing representing leading OEMs, long-term vehicle usage and fleet management solutions.
Logistics offers integrated supply chain solutions, including warehousing and distribution, dedicated transport services, transportation management services and freight forwarding.
Leadership team
Keith Rankin
Chief executive officer
Barloworld Automotive
Steve Ford
Chief executive officer
Barloworld Logistics
Financial highlights
| Revenue up 12.0% | Operating profit up 11.2% | Operating margin maintained at | ||
| R37.2 billion |
R1 877 million |
5.0% |
||
| (2015: R33.2 billion) |
(2015: R1 688 million) | (2015: 5.0%) |
Brands represented
| Automotive | |
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|
| Logistics | |
 |
Financial and non-financial performance indicators
| Revenue | Operating profit/(loss) |
Net operating assets |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Economic Year ended 30 September |
2016 Rm |
2015 Rm |
2016 Rm |
2015 Rm |
2016 Rm |
2015 Rm |
|||||||||
| Automotive | 31 427 | 28 704 | 1 654 | 1 529 | 8 686 | 8 047 | |||||||||
| – Car Rental | 5 967 | 5 202 | 536 | 471 | 2 534 | 1 994 | |||||||||
| – Avis Fleet | 3 641 | 3 362 | 560 | 572 | 3 786 | 3 785 | |||||||||
| – Motor Trading | 21 819 | 20 140 | 558 | 486 | 2 366 | 2 268 | |||||||||
| Logistics | 5 756 | 4 509 | 223 | 159 | 2 472 | 2 403 | |||||||||
| – Southern Africa | 5 527 | 3 980 | 226 | 186 | 2 348 | 2 241 | |||||||||
| – Europe and Middle East | 229 | 529 | (3) | (27) | 124 | 162 | |||||||||
| 37 183 | 33 213 | 1 877 | 1 688 | 11 158 | 10 450 | ||||||||||
| Share of associate loss | (4) | (7) | |||||||||||||
| Petrol and diesel (ML) |
Electricity (MWh) |
Non-renewable energy (GJ) |
GHG emissions (tCO2e) (scope 1 and 2) |
Water (ML)^ |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Environmental Year ended 30 September |
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
| Automotive | 9.94 | 9.96 | 38 986 | 39 296 | 488 542 | 489 944 | 63 022 | 63 265 | 388 | 397 | |||||||||||||||
| – Car Rental | 3.43 | 3.55 | 6 157 | 6 243 | 139 749 | 143 983 | 14 110 | 14 495 | 126 | 122 | |||||||||||||||
| – Avis Fleet | 0.69 | 0.73 | 1 516 | 1 731 | 29 637 | 31 761 | 3 111 | 3 328 | 12 | 17 | |||||||||||||||
| – Motor Trading | 5.82 | 5.68 | 31 313 | 31 322 | 319 156 | 314 200 | 45 801 | 45 442 | 250 | 258 | |||||||||||||||
| Logistics | 54.81 | 49.83 | 15 935 | 11 825 | 2 145 218 | 1 940 546 | 161 684 | 143 710 | 133 | 99 | |||||||||||||||
| – Southern Africa | 54.75 | 49.71 | 14 299 | 9 376 | 2 137 213 | 1 927 797 | 160 450 | 141 990 | 129 | 93 | |||||||||||||||
| – Europe and Middle East | 0.06 | 0.12 | 1 636 | 2 449 | 8 005 | 12 749 | 1 234 | 1 720 | 4 | 6 | |||||||||||||||
| 64.75 | 59.79 | 54 921 | 51 121 | 2 633 760 | 2 430 490 | 224 706 | 206 975 | 521 | 496 | ||||||||||||||||
| Employee headcount |
LTIFR | Work-related fatalities |
B-BBEE rating* | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Social Year ended 30 September |
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||
| Automotive | 8 033 | 7 603 | 1.09 | 1.37 | 0 | 0 | ||||||||||||||
| – Car Rental | 2 091 | 2 070 | 0.36 | 0.71 | 0 | 0 | 3** | 2 | ||||||||||||
| – Avis Fleet | 573 | 655 | 1.01 | 0.39 | 0 | 0 | 2 | 4 | ||||||||||||
| – Motor Trading | 5 369 | 4 878 | 1.41 | 1.78 | 0 | 0 | 3** | 4 | ||||||||||||
| Logistics | 5 172 | 4 100 | 0.79 | 1.13 | 0 | 0 | ||||||||||||||
| – Southern Africa | 5 032 | 3 885 | 0.81 | 1.17 | 0 | 0 | 2 | 2 | ||||||||||||
| – Europe and Middle East | 140 | 215 | 0.00 | 0.29 | 0 | 0 | ||||||||||||||
| 13 205 | 11 703 | 0.95 | 1.26 | 0 | 0 | |||||||||||||||
^ Municipal sources.
* B-BBEE rating for South Africa only. 2016 based on revised dti Codes of Good Practice.
** Rating under Barloworld Limited.
Automotive
Operating context
| Economic | The Automotive division operates in markets that are influenced by interest rates, consumer and business confidence and overall economic activity, all of which were under pressure during the financial year. |
| Industry | The South African vehicle industry market saw a strong decline in new vehicle sales volumes in the financial year under review and softer market conditions are expected to carry through to 2017. South African new vehicle sales declined by 9.5% over the previous financial year due to weak consumer confidence, while the used vehicle market provided good opportunities as new vehicle prices increased further. Statistics from the South African Vehicle Rental and Leasing Association (SAVRALA) showed the car rental market grew by 6.9%. Demand for outsourced vehicle management services has slowed in line with the overall economy. |
| Impact | In the context of this challenging environment the division performed very well in maintaining a similar operating margin and growing the operating profit compared to the prior year through organic and acquisitive growth and a continued focus on prudent management actions. |
Our vision provides clear purpose and direction to the organisation: A business that inspires a world of difference by creating shared value as a leading provider of innovative vehicle usage solutions, generating superior shareholder returns and delivering sustainable societal outcomes
Business overview
An integrated model
Customers are offered a range of innovative solutions from single-unit transactions to bespoke solutions, appropriate to the clients’ specific needs, complemented by Barloworld service excellence. The range of services offered has been expanded through the acquisition of controlling interests in businesses focused on the disposal of assets through various electronic platforms. Through a structured approach, the division ensures that each business unit applies best practice within its core businesses, a strong focus on operational excellence, and strives for a market-leading position in each key segment. In addition, this approach maximises the direct and indirect synergies that exist between the business units through running an integrated business focused on the automotive sector.
The divisional platform provides for leadership and guidance across key areas of the business. The leadership approach recognises the important role of every employee and institutionalises initiatives and structures aimed at developing, harnessing and directing collective employee wisdom towards our value-creation objectives, while ensuring that employees share in the value created. An integrated approach to good people management is entrenched throughout the division.
Car Rental
Avis Budget Rent a Car operates short-term vehicle rental from over 190 customer service centres focused on the tourism, corporate, local and replacement market segments throughout southern Africa. At peak, the car rental fleet comprised some 30 800 vehicles. The operations in South Africa, Botswana, Mozambique, Namibia and Swaziland are company owned and the remainder are sub-licensed.
Avis Point 2 Point is a chauffeur-driven inner-city transfer service, while Avis and Budget Van Rental operate via a sub-licensee network in South Africa. Avis Car Sales disposes of ex-rental vehicles into the trade and to retail customers.
Avis Fleet
Avis Fleet provides long-term lease vehicles and a range of fleet management services to operators of passenger and commercial vehicles in southern Africa, Ghana and Tanzania. The business accepts residual value and maintenance risk on behalf of its leasing customers, while adding value through the design of customised fleet solutions, which include the leasing of fit-for-purpose vehicles, the administration of service and maintenance plans, vehicle licensing, managed maintenance services, fuel management including billing, analysis and forensics, accident claims management, traffic fines and open-road tolling management, vehicle procurement and disposal.
Motor Trading
Motor Trading operates 47 leading motor vehicle franchise dealerships in South Africa and Botswana. Brands include Audi, BMW, Chrysler, Ford, General Motors, Jaguar Land Rover, Mazda, Mercedes-Benz, Toyota and Volkswagen. Products include the sale of new and used vehicles with supporting finance and insurance products, and aftermarket services including parts sales, service and accident repair centres. Complementing the dealer footprint, Barloworld Fleet Marketing develops and maintains strong relationships with key corporate customers requiring a range of ownership solutions.
2016 performance review
Revenue of R31.4 billion and a record operating profit of R1 654 million resulted in an operating margin of 5.3% (2015: 5.3%). Permanent employees grew to 8 033 in nine countries. The Automotive business units performed ahead of expectation given the difficult trading conditions while the division’s integrated model and approach improved profits in difficult trading conditions.
Car Rental grew rental days in southern Africa by 3.8% on the back of a well-controlled fleet at a 75% utilisation rate. The revenue per day improved by 5.4% in a competitive trading environment resulting in revenue growth of 15% to R6 billion while operating profit grew 14% to R536 million. The operating margin decreased to 9.0% from 9.1% in the prior year mainly as a result of cost pressure in the car rental business. The Budget brand integration has provided good growth opportunities in the non-contracted market segments and the business has settled its dual-brand value proposition.
Avis Fleet has done well to replace financed fleet units which were lost as the outsourced fleet management contract with the government of Lesotho was not renewed and terminated on 30 September 2015. The business delivered a solid performance with operating profit decreasing by 2.1% to R560 million. Reduced fleet terminations negatively impacted the overall used vehicle profit contribution. Avis Fleet is addressing the performance of the recently entered African countries.
Motor Trading produced a good result, supported by recent acquisitions of Toyota/Volkswagen dealerships in Postmasburg, Mercedes-Benz Union Motors and Salvage Management and Disposals. New vehicle unit sales were down 6.4% versus a market decline of 9.5% for the financial year. Aftermarket activity improved, resulting in a 13% increase in parts turnover, while service hours grew by 0.6%. Operating profit grew to R558 million from R486 million in the prior year and the operating margin improved to 2.6% (2015: 2.4%).
The future to 2020: trends and operating context
The continuing uncertainty in world markets remains challenging and the division will continue to prudently manage all aspects of the business.
Our strategic planning process supports astute capital allocation in identified growth areas that exceed internal hurdle rates, while developments in the future of mobility will continue to be closely monitored.
Urbanisation is a key trend affecting all areas of the business and the division is considering various alternatives, including the further use of technology, to deal with the consequences of changing customer needs.
Mobility is a growing trend and consists of technology-enabled solutions to provide the mobile user with an all-encompassing travel experience. The division’s principals are actively pursuing ways to service this growing trend. The future of motor vehicle retailing in large city centres will continue to change as property values increase, requiring the optimal use of space and technology to serve a changing customer base.
Further investigations into alternative property solutions continue to be sought in order to both serve the brands we represent and our customers while maintaining a sustainable business. The division is well aligned to its principals on these and other changing trends and remains well positioned to capitalise where appropriate.
Avis Fleet will continue to focus on profitability in its African operations and on growing business in the public sector. Other issues material to the future success of the division include optimising the car rental business through a principal-aligned multi-brand strategy.
Motor Trading will continue to align to well-established OEM brands in the South African market, which will support the optimisation of the motor retail dealership portfolio in order to complement our overall vehicle usage strategy and is well positioned to deal with the opportunities that are present in the asset disposal market while serving the growth of our automotive business.
2017 outlook
It is expected that 2017 will yield limited growth in all business units except for the benefits of the full year effect of recent acquisitions under Motor Trading. Optimising the inherent synergies of our South African innovative vehicle usage solutions offering remains central to our strategy.
The Car Rental operations will focus on rental yields, maintaining high fleet utilisation and optimising their asset base. We further anticipate another strong contribution from used vehicle disposals. Additional products and services will be provided to cater for evolving customer needs.
The renewal of certain contracts within Avis Fleet remains critical to maintaining our leading market position for the business and we will continue to seek attractive growth opportunities in various markets.
Our Motor Trading operations will continue a “Fewer, Bigger, Better” strategy, coupled with pursuing efficiencies through the centralisation and coordination of common functions, improving asset turnover and reducing working capital. The business will continue to focus on leveraging customer synergies that exist with other business units while maximising the cash flows from the unit.
Focus on meeting and exceeding divisional return on equity (ROE) targets within each business unit will remain a key priority.
The 2017 revenue outlook range for the Automotive division is R33 billion to R34 billion compared to revenues of R31.4 billion in 2016.
Technology is increasingly playing a bigger role in affecting a shift in customer buying behaviour where the trend is moving from customers visiting dealerships and/or purchasing used vehicles at auctions, to buying and making purchasing decisions online.
Within the Barloworld Automotive value chain, the disposal of used vehicles forms a key part of the business model, and technology is progressively underpinning the disposal infrastructure and capability. For this reason, the division identified and invested in two opportunities that will strengthen the disposal of assets through innovative technology and online disposal platforms, one being Salvage Management and Disposals (SMD).
SMD operates in the vehicle auction market, offering an end-to-end salvage management solution primarily to corporate and insurance markets. SMD has a national footprint with 14 branches across South Africa. All vehicles are disposed through an online platform, some being simulcast to buyers at the physical auction. SMD has a dedicated fleet of towing vehicles to deliver vehicles to customers as part of a value added service. The business invests significantly into fixed and mobile technology that enhances their customer and supplier offering. The business also presents international growth opportunities.
In partnering with SMD, not only did it enhance and broaden the overall automotive offering to our customers and provide many natural synergies with the existing automotive business unit, it also positioned us well for the future, a future where innovation and technology is key.
Operating context
| Economic | The tough economic conditions and a downturn in the mining sector negatively impacted certain segments of the business. |
| Industry |
The group operates in a highly unionised environment where labour unrest and ongoing risk of unprotected strikes has to be proactively monitored and managed. Our business is exposed to changing regulations in the environmental and transportation sectors that present both a risk and an opportunity. |
| Impact | We exited the cranes business linked to the sectors under economic stress. Seeking commercial opportunities through the optimisation of supply chain processes and environmental solutions in response to environmental sector complexities. |
To be an international provider of smart supply chain solutions in partnership with leading clients
Business overview
Partnership for smart supply chain solutions
Established in 2001, Barloworld Logistics has grown into a significant supply chain solutions business through partnerships with blue chip clients in southern Africa with complementary operations in the Middle East delivering innovative supply chain solutions.
By combining strategy, planning and management with excellent operational execution, we analyse, design, implement, manage and operate entire supply chains that are far more efficient, effective, flexible and responsive to ever changing market needs.
Our offering includes:
- Barloworld Transport – a variety of transport solutions from dedicated, energy, freight, linehaul, abnormal, refrigerated and specialised
- SmartMatta – environmental and waste management solutions
- Integrated Customer Solutions – dedicated integrated contracted logistics solutions that include supply chain consulting, planning, design and software, inventory solutions, warehousing and distribution, freight forwarding and clearing, road transportation and waste management
- Integrated Freight Solutions – logistics network solutions focused on freight forwarding and clearing, transport, rail and commodity specific platforms
- Advisory services and supply chain planning solutions – niche consulting, supply chain planning and design, sale and services of supply chain planning tools.
2016 performance review
Logistics delivered a positive result through organic and acquisitive growth and all under-performing businesses were sold or right-sized. Revenue was R5.8 billion, up 28% on prior year. Operating profit of R223 million was up 40% on last year, resulting in an operating margin of 3.9%.
We continued with both acquisitive and organic growth in line with our growth targets. The acquisition of multi-party, multi-temperature, multi-drop distribution network (KLL) and complementary refrigerated transport business (Aspen Logistic services) supported the result. We also increased our stake in Barloworld Transport to 78.8%. This has positioned the business well for future growth.
We disposed of the supply chain software business to Llamasoft and formed a strategic partnership with them to continue to offer leading supply chain planning tools to the markets in which we operate. In line with our focus on operational excellence, the development of technology platforms will ensure sustainable and leading technology-enabled solutions for clients as well as to leverage our service offerings across business units.
The future to 2020: trends and operating context
To be competitive there is a growing need for greater integration of end-to-end logistics solutions, vertical integration and value added services to avoid offering commoditised and undifferentiated solutions. This includes technology solutions for internal and external logistics ecosystems. This will require business model innovation, the development of smart industry solutions and ongoing proactive management of talent and attraction, development and retention of key skills that are in short supply such as data analytics.
To stay relevant both organic and acquisitive growth, ongoing development and innovation of products and services, regional and geographic expansion of our footprint will be necessary in order to harness the opportunities presented by this future context.
2017 outlook
The Logistics business is well positioned for further growth in 2017 through the aggressive business development drives aimed at delivering significant organic growth. We will continue to focus on diversifying our customer base and market exposure and will also benefit from the full year effect of integrating our newly acquired businesses.
Due to the extended sales cycles and lengthy process of breaking into new markets organically, our approach will be on targeted acquisitive growth in the right industry segments; the right geography, the right management in terms of culture fit, the right returns, and the right price supported by a clear value proposition.
We will continue with proactive management of talent, development of new skills to respond to changing market needs; and the focus will be on initiatives aimed at driving gender diversity in the industry.
The 2017 revenue outlook range for the Logistics division is between R6.3 billion and R7.0 billion compared to revenues of R5.8 billion in 2016.
