Commentary

About Barloworld

Barloworld is a distributor of leading international brands providing integrated rental, fleet management, product support and logistics solutions. The core divisions of the group comprise Equipment and Power (earthmoving equipment and power systems), Automotive and Logistics (car rental, motor retail, fleet services, used vehicles and disposal solutions, logistics management and supply chain optimisation). We offer flexible, value adding, innovative business solutions to our customers backed by leading global brands. The brands we represent on behalf of our principals include Caterpillar, Avis, Budget, Audi, BMW, Ford, General Motors, Jaguar Land Rover, Mazda, Mercedes-Benz, Toyota, Volkswagen, Hyster, Massey Ferguson and others.

Barloworld has a proven track record of long-term relationships with global principals and customers. We have an ability to develop and grow businesses in multiple geographies including challenging territories with high growth prospects. One of our core competencies is an ability to leverage systems and best practices across our chosen business segments. As an organisation we are committed to sustainable development and playing a leading role in empowerment and transformation. The company was founded in 1902 and currently has operations in over 20 countries around the world with 78% of just over 20 000 employees in South Africa.

Salient features

  • Revenue
    up 2% to
    R32.5 billion

  • Operating profit
    up 5% to
    R1 849 million

  • Cash generated
    from operations of
    R929 million

    (1H’16: R1 771 million)

  • Headline earnings per share
    up 9% to
    365 cents

  • Interim dividend
    per share up 9% to
    125 cents

Dominic Sewela

Dominic Sewela, CE of Barloworld Limited, said:

“The group produced a pleasing overall result in challenging trading conditions. The Automotive division achieved a record result in a tough vehicle market with all segments showing positive growth. Logistics performance was below prior year due to the weakening trading conditions.
Equipment Russia outperformed expectations, while activity levels in Iberia remain disappointing. Equipment southern Africa produced an improved operating result despite the slowdown in mining demand. This was underpinned by good aftermarket activity. Income from our Bartrac joint venture in the Katanga province of the Democratic Republic of Congo, was well up on the prior year. The outlook for global economic growth remains positive and this is reflected in the increased demand for commodities and improved commodity prices. Some recovery in sub-Saharan Africa growth is expected, notwithstanding the downside risks due to lower oil prices and possible further credit-rating downgrades for South Africa. A strategic review process has been completed outlining our focus on fixing and addressing underperforming businesses, optimising the existing portfolio and pursuing targeted high growth opportunities.”

15 May 2017

Chairman and chief executive’s report

Overview

The global economy continues to show improvement boosted by strong growth in Asia. Despite weak first quarter growth, the US economy is still expected to expand by close to 2% in the current year. The US Federal Reserve has shown confidence in the recovery of the US economy and is likely to push for further interest increases during the course of the year. The anti-globalisation and protectionist rhetoric of the Trump administration has however fuelled fears of increased barriers to free global trade.

The South African economy has been adversely affected by the fall out following the cabinet reshuffle announced by President Zuma on 30 March. The full impact of the resultant sovereign ratings downgrade by S&P and Fitch is likely to be felt. Business and consumer confidence levels have been shaken which is likely to negatively affect both investment as well as consumer spending going forward. The South African economy grew by 0.3% in 2016 and the outlook for growth in 2017, while clouded by recent events, is now forecast to be of the order of 0.7%.

Group revenue for the six months to March 2017 grew by 2% to R32.5 billion while operating profit increased by R93 million (5.3%) to R1 849 million.

Headline earnings per share increased by 30 cents (9%) to 365 cents per share favourably impacted by a strong operating performance and reduced losses from associates.

An interim dividend of 125 cents per share (1H’16: 115 cents) has been declared.

Operational review

Equipment and Handling
Equipment southern Africa

Revenue to March of R8.2 billion is R1 billion (11%) below last year mainly as a result of reduced mining activity particularly outside of South Africa. The stronger Rand negatively impacted revenue during the period by R185 million.

Operating profit to March of R713 million is up by R12 million (1.7%) with South Africa trading ahead of last year and the other African territories all trading behind the prior year. The operating margin for the period improved from 7.6% to 8.7% mainly as a result of the increased aftersales mix which represented 61% of total revenue compared to 54% last year.

Bartrac, our joint venture in the Katanga province of the DRC, produced a profit of R41 million in the period compared to a loss of R27 million last year. The Glencore Katanga mine which suspended mining during the course of last year has now mobilised a part of their fleet to gear up for the new processing plant which is expected to come on stream in the fourth quarter of 2017. This has necessitated placing additional technicians on site to achieve the required service levels for the mine.

While our profitability in Angola has improved compared to last year, the current oil price has not resolved the hard currency shortage prevailing in that country. We continued to curtail our trading operations during the period but have once again generated cash resulting in increased cash on hand at the end of March.

Equipment Iberia
Activity levels in both Spain and Portugal remain disappointing. Revenue to March of €133 million was €5.6 million (4.1%) down on last year.

The operating profit to date of €591 000 (R8 million) was well down on the €1 389 000 generated last year (R23 million).

Our associate Energyst produced a significant loss during the period arising from the loss of a major contract in Argentina.

Equipment Russia
The Russian economy continues to fight its way out of the two-year recession with the Central Bank of Russia cutting interest rates to stimulate growth. Any further weakening of the oil price is, however, seen as a risk to this recovery.

Equipment Russia produced a strong performance in the first six months with revenue of US$167.5 million (R2 267 million) 6% up on the US$157.9 million
(R2 347 million) of last year. The increase was driven by stronger mining machine sales as well as improved parts demand. The stronger Rand shaved
R232 million off revenue for the period.

Operating profit to March of US$19.4 million is 24% (US$3.7 million) ahead of last year. In Rand terms operating profit of R262 million showed a 12% improvement on last year.

Handling
The joint venture (JV) with BayWa AG was finalised at the end of February with net proceeds of R301 million received in respect of the transaction. The results of the new JV renamed BHBW (SA) have therefore been disclosed in associate income from 1 March 2017.

Automotive and Logistics
Automotive

The division generated revenue to March of R16 321 million which was R1 564 million (11%) ahead of last year with all the business segments showing good revenue growth. The operating profit of R863 million was R106 million (14%) up on last year with an improved operating margin of 5.3% compared to 5.1% in 2016.

Car rental
Revenue for the first half of R3 262 million was R411 million (14%) above the comparative period last year. This was driven by a 4.2% increase in billed days, a higher average rate per day of 2.3% and strong revenue growth from used vehicle sales due to a combination of increased units and higher average selling prices. Average fleet utilisation for the period was above 75% in line with the prior year.

Year-to-date operating profit of R297 million showed a R31 million (12%) improvement on last year mainly due to the excellent used vehicle result.

Avis Fleet
Revenue for the six months increased by 4.7% to R1 688 million. Operating profit of R292 million was R32 million (12.3%) up on last year aided by improved used vehicle profitability.

Motor Trading
Revenue increased by R1 078 million (11%) to R11 371 million and was positively impacted by the acquisitions of the two Union Motors Mercedes-Benz dealerships by NMI-DSM and the Salvage Management and Disposals business in 2016. Revenue for the first six months was negatively impacted by lower new vehicle sales on the back of a 7.1% decline in the South African dealer market.

Operating profit to March of R274 million was R43 million (19%) ahead of last year mainly as a result of the acquisitions completed last year.

In October 2016, we acquired the balance of the shares (49%) in the N4 Jaguar Land Rover business with the related property.

Logistics
Revenue to March of R3 199 million exceeded the prior year by R561 million (21%) mainly due to the KLL and Aspen acquisitions in January 2016 as well as the full impact of the additional contracts added within Supply Chain and Transport during 2016.

Year-to-date operating profit of R51 million was R11 million below last year due to tougher trading conditions in the period as well as costs related to the finalisation of the Supply Chain software disposal.

Strategic review

The group completed a comprehensive strategic review and a new strategy was presented and approved by the board in March 2017.

The group’s future ambitions are supported through achieving top quartile shareholder returns; driving profitable growth across all businesses; institutionalising a high-performance culture; and continuing to make a world of difference to our stakeholders. Key initiatives include fixing and addressing underperforming businesses; optimising the existing portfolio; and pursuing targeted high-growth opportunities.

Human resources, diversity and sustainable development

Tragically there were two work-related fatalities in March 2017. Our condolences go out to the bereaved families. Support has been extended to both families in terms of counselling and financial assistance. We have heightened our focus on safety across the group and appropriate measures have been incorporated in ongoing safety programmes.

The focus remains on coaching and mentoring programmes aimed at ensuring we have the leadership capability, talent and skills to realise our strategic targets, and to ensure that the profile of our workforce reflects the societies in which we operate. In addition, our attraction and retention strategies are aimed at an “inclusive workforce” where every employee believes they come to work with a sense of purpose and leave with a sense of achievement.

A wide range of diversity and inclusion initiatives which include partnering with emerging suppliers are under way. We are engaging with our principals to advance their localisation activities, which would support emerging localisation and industrialisation programmes in South Africa. The partnership with the South African Department of Trade and Industry has resulted in the launch of the Barloworld Siyakhula Incubation Hub in March 2017, which supports 63 small and medium enterprises to date that have created some 830 new jobs. Our activities remain centred around enhancing our diversity profile and resulting competitiveness.

We are monitoring progress against our various sustainable development objectives and in support of our renewable energy goal, additional solar photovoltaic capacity is being installed.

Changes in directorate and executive management

At the annual general meeting held on 8 February 2017 the following director changes took place:

  • Independent non-executive director, Mr Steven Pfeiffer, retired having reached the retirement age for nonexecutive directors of 70 years.
  • Mr Clive Thomson retired as an executive director of the board, member of sub-committees and chief executive of the Barloworld group as part of a structured succession plan.
  • Mr Dominic Sewela succeeded Mr Thomson as chief executive for the Barloworld group.
  • Mr Peter Bulterman also retired as an executive director of the board in terms of a planned process to reduce the number of executives represented on the board. Mr Bulterman remains in the employ of the company as the chief executive of the Equipment division.

Ms Hester Hickey and Messrs Peter Schmid and Michael Lynch-Bell were appointed as independent non-executive directors of the Barloworld Limited board with effect from 1 April 2017 in line with a structured board nomination process.

Mr John Blackbeard retired from the company and the board of Barloworld Limited and its sub-committees at the end of April 2017 following the disposal of the Handling and Agriculture South Africa businesses into a 50:50 JV with BayWa AG.

Ms Babalwa Ngonyama resigned from the Barloworld Limited board with effect from 11 May 2017 due to increased external executive commitments.

Mr Kamogelo Mmutlana was appointed chief executive of the Barloworld Logistics division with effect from 1 March, following Mr Steve Ford’s resignation at the end of February 2017.

The board wishes to thank the non-executive and executive directors that have departed for their valuable service to the board and Barloworld over the years.

Funding

Group net debt at the end of March of R9 085 million increased by R1 069 million from September 2016. This was R1 983 million down on March 2016. The net cash outflow for the period of R857 million was mainly due to increased working capital of R362 million and an investment of R773 million in the Avis fleet leasing and Equipment rental fleet.

In line with previous years, we believe that we will be able to reverse the working capital utilisation in the second half to ensure that the group is cash positive for the year.

Outlook

Recent Caterpillar Inc. results indicate an improvement in global mining aftermarket and rebuild activity and they currently project the number of mining trucks produced in their factories to double in 2017. The Equipment southern Africa firm order book at March 2017 has increased to R1.9 billion compared to the
R1.3 billion at September 2016 on the back of improved demand in mining and construction.

The Equipment Russia firm order book at March stood at US$53 million compared to US$21 million at September 2016. This order book would, however, increase to US$173 million with the inclusion of the US$120 million Polyus Gold mining truck order finalised after period end. The pipeline of major projects in Siberia and the Russian Far East currently being negotiated provide an exciting outlook for mining activity in our territory.

The Equipment Iberia firm order book at March of €44 million was well up on the September level of €26 million. The order book for new machines has improved significantly from last year and now represents approximately 49% of the total firm orders with Power Systems representing 51%. While industry machines sales are projected to rise sharply during the year, the increase is weighted towards smaller construction equipment.

New vehicle sales in South Africa are expected to remain under pressure impacted by declining consumer and business confidence. Consequently we do not expect dealer new vehicle volumes to show growth this year. In response to that we are taking steps to improve the returns and sustainability of our Motor Retail dealerships.

In Car Rental we are forecasting continued growth in the foreign in-bound segment and a continued strong contribution from the sales of used vehicles.

In Avis Fleet the financed fleet has increased slightly through organic growth as well as the addition of a number of smaller fleets. The renewals of certain existing longstanding contracts have been delayed and are now only likely to impact our next financial year.

The Logistics business is a good indicator of the state of the economy and with the current uncertainty for the South African economy we have noted some signs of slowing in both the Supply Chain as well as the Transport businesses. We nonetheless continue to forecast an improvement in the traditionally stronger second half.

The outlook for global economic growth remains positive and this is reflected in the increased demand for commodities and improved commodity prices. Some recovery in sub-Saharan Africa growth is expected, notwithstanding the downside risks due to lower oil prices and possible further credit-rating downgrades for South Africa. While we have seen some pick up in mining machine demand in southern Africa, it is still too early to call a sustained upturn in the mining cycle. We do, however, believe that the major mining groups are approaching a significant decision point where they will need to either invest in replacement capital expenditure or incur operating expenditure for rebuilds of existing machine fleets.

A strategic review process has been completed outlining our focus on fixing and addressing underperforming businesses, optimising the existing portfolio and pursuing targeted high-growth opportunities.

DB Ntsebeza
Chairman
DM Sewela
Group chief executive

Group financial review

Revenue for the first six months increased by R585 million (2%) to R32.5 billion with the bulk of the improvement in Automotive and Logistics which showed increases of R1.6 billion (11%) and R0.5 billion (21%) respectively. Revenue in Equipment Russia was up by 6% in Dollar terms while Equipment Iberia was down in Euro terms. Rand revenues for both regions were negatively impacted by the stronger Rand exchange rate. In Equipment southern Africa revenue decreased by R1 billion (11%) as a result of reduced mining activity and a stronger Rand. The stronger Rand reduced total revenue by R0.7 billion.

Earnings before interest, taxation, depreciation and amortisation (EBITDA) was up by 7.6% to R3 205 million with depreciation and amortisation up by 11% as a result of new acquisitions and increases in the leasing and rental fleets.

Operating profit rose by 5.3% to R1 849 million with the operating margin up slightly to 5.7%. In Equipment southern Africa, operating profit was up by 1.7%, driven largely by a higher mix of aftersales. In Equipment Russia operating profit in Dollar terms was 24% ahead of the prior period, due to higher mining equipment demand as well as increased parts sales. Equipment Iberia operating profit was down on the comparative period.

Automotive produced a strong result with operating profit up 14% to R863 million in a tough trading environment with all business units showing an improvement on the prior period. Logistics generated an operating profit of R51 million which was R11 million down on the prior period.

The net negative fair value adjustments on financial instruments of R123 million (1H’16: R55 million) mainly comprise the cost of forward points on foreign exchange contracts and currency losses on bank balances in Equipment southern Africa, as well as losses on unhedged transactions in Handling South Africa. The prior year benefited from currency gains in Equipment southern Africa.

Finance costs increased by R15 million to R680 million. This is mainly due to higher interest rates in South Africa.

Losses from non-operating and capital items of R38 million mainly relates to the disposal costs of the Handling business and the impairment of an intangible asset in Logistics off-set by profit on sale of property in Automotive.

The taxation charge reduced by R12 million to R306 million while the effective taxation rate for the period (excluding prior year taxation and taxation on non-operating and capital items) increased slightly to 27.9% (1H’16: 27.7%).

The loss from associates of R7 million compared favourably to a loss of R41 million last year. The improvement is largely driven by the Bartrac joint venture in the Katanga province of the DRC which recorded a profit of R41 million in the first half compared to a loss in the prior year of R27 million. This was offset by the increased loss in Energyst our European associate to R50 million (of which R19 million relates to goodwill impairment).

Headline earnings per share (HEPS) was up by 9% to 365 cents per share compared to the 335 cents in the prior period.

Basic earnings per share (EPS) of 337 cents is 9% lower than the 368 cents in the prior period mainly due to the losses from non-operating and capital items in the current year.

Cash flow

Cash generated from operations of R929 million was down on the R1 771 million generated in the prior period, due to the increased net investment in fleet leasing assets and equipment rental fleet. Working capital increased by R362 million which was in line with the prior period. Equipment southern Africa reduced working capital by R561 million, while Automotive and Logistics showed an absorption of R895 million in the period.

Net cash used in the investment activities of R105 million was favourably impacted by the proceeds of R301 million received from the sale of assets of the Handling SA businesses into a joint venture company with BayWa AG. The net cash outflow before financing activities for the year of R857 million was
R844 million higher than the R13 million outflow last year.

In line with previous years we expect to reduce our working capital utilisation in the second half to ensure that we are cash positive for the full year.

Financial position

Total assets employed in the group increased by R2.0 billion (4%) to R48 billion compared to September 2016. This was driven by an increase in fleet leasing and Equipment rental fleet, while the stronger Rand reduced total assets by R578 million.

Total interest-bearing debt at 31 March 2017 increased by R1.3 billion to R12.3 billion (September 2016: R11 billion) while cash and cash equivalents increased by R0.2 billion to R3.2 billion. Net interest-bearing debt at 31 March 2017 of R9 billion was R1.1 billion up on the R8 billion at September 2016.

Debt

In April 2017, the BAW13 bond for R450 million matured and was repaid utilising existing facilities.

A bond auction planned for 6 April 2017 was postponed due to the uncertainty in the market, following the cabinet reshuffle and the sovereign ratings downgrade.

At the subsequent auction held on 4 May 2017, a three-year unsecured bond totalling R582 million (BAW25) was issued. While there are sufficient unutilised long-term borrowing facilities to cover upcoming maturities for the balance of the year, the group is in the process of finalising additional committed facilities to maintain its liquidity position.

South African short-term debt at March includes commercial paper totalling R597 million (September 2016: R807 million). While this market has remained active, liquidity and spreads have been negatively impacted by interest rate uncertainty. We expect to maintain our participation in this market to the extent permitted by overall liquidity in the market.

Cash and cash equivalents at March of R3.2 billion included US$51.5 million (R689 million) held in Angola of which US$47.5 million was denominated in Kwanza and the rest in US Dollar. The cash held in Kwanza has increased from the US$37.5 million (R516 million) held at September 2016.

At the end of March, the group had unutilised borrowing facilities of R7.6 billion, of which R6.5 billion was committed. The group’s ratio of long-term to short-term debt was 66:34 (September 2016: 76:24). This position has improved subsequent to the issuance of BAW25 in May 2017 and the finalisation of the new facilities.

The long-term and short-term issuer Global Scale Rating of Baa3 and P-3 and long-term and short-term issuer National Scale Rating of Aa3.za and P-1.za assigned by Moody’s Investors Services, remains valid until June 2017. The outlook on the ratings is stable.

The group total debt to equity ratio at 31 March 2017 was 63% (September 2016: 56%), while group net debt to equity was 47% (September 2016: 41%).

Gearing in the three segments remain in line with group target ranges:

Debt to equity (%) Trading   Leasing   Car Rental   Group
total debt
  Group
net debt
 
Target range 30 – 50   600 – 800   200 – 300          
Ratio at 31 March 2017 32   604   279   63   47  
Ratio at 31 March 2016 38   662   248   64   53  
Ratio at 30 September 2016 29   720   216   56   41  

Accounting policies

The condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The basis is consistent with the prior period except for the reclassification of the interest-bearing floorplan facilities reported in 2016.

Consistent with this change reported in the 2016 annual financial statements, Barloworld’s comparative results for the six months ended to 31 March 2016 have been restated to reflect changes in disclosure of the interest-bearing floorplan liabilities.

Dividend

An interim dividend totalling 125 cents per share was declared in respect of the half year’s earnings (2016: 115 cents). All issued shares are entitled to receive dividends. The interim dividend declared is covered 2.9 times by headline earnings (2016: 2.9 times).

Going forward

The group remains committed to improving returns. This is particularly relevant in our Equipment businesses in southern Africa and Iberia as well as Logistics which are generating below target returns. The group will also focus on generating positive free cash flow in 2017 through strict control of working capital and capital expenditure in the second half. We will also proactively take steps for the early refinancing of debt that is maturing within the next 18 months.

DG Wilson
Finance director

Operational reviews

Equipment and Handling

   Revenue  Operating profit /(loss)   Net operating assets 
   Six months ended  Year 
ended 
Six months ended  Year 
ended 
     
   31 Mar 
2017 
Rm 
Review 
   31 Mar 
2016 
Rm 
Reviewed 
30 Sept 
2016 
Rm 
Audited 
31 Mar 
2017 
Rm 
Reviewed 
   31 Mar 
2016 
Rm 
Reviewed 
30 Sept 
2016 
Rm 
Audited 
31 Mar 
2017 
Rm 
Reviewed 
30 Sept 
2016 
Rm 
Audited 
Equipment  12 409     13 833  27 857  984     960  2 239  14 905  15 642 
– Southern Africa  8 214     9 238  18 547  713     701  1 585  10 126  10 546 
– Europe  1 928     2 248  4 473     25  55  2 320  2 694 
– Russia  2 267     2 347  4 837  262     234  599  2 459  2 402 
Handling  603     719  1 505     25  547  910 
   13 012     14 552  29 362  986     963  2 264  15 452  16 552 
Share of associate loss              (7)    (39) (22)      

While Equipment southern Africa had a decline of 11% in revenue, operating profit for the same period was up in comparison to the same period last year. Operating margin for the first six months to March improved from 7.6% in 2016 to 8.7% in 2017. The continued focus on business improvement and cost reduction initiatives as well as the increase in aftersales mix contributed to the improvement in the operating margin. The associate in the Katanga province of the DRC delivered an operating profit of R41 million, against a loss of R27 million in 2016. Overall, returns improved when compared to the same period last year.

Equipment Iberia operated in an improving macroeconomic environment with new machine industry growth; however, this remains concentrated in the small equipment segment. Revenue was 4% down compared to the prior period in Euro terms driven by lower prime product revenues, while aftermarket revenues grew and overall margins were maintained. The division generated €9.9 million in cash for the period compared to a €12.5 million utilisation in the prior period. Operating profits of €0.6 million were down against the prior period. Energyst negatively impacted the associate line due to the loss of a major contract in Argentina and the business is currently undergoing restructuring to concentrate on their European operations.

Equipment Russia revenues and operating profit grew by 6% and 24% respectively in US Dollar terms. Operating margin benefited from a favourable sales mix with the increase in aftermarket sales which traditionally have higher margins. Net assets remained well controlled resulting in healthy returns and positive cash flow generation. Significant growth in customer firm orders was driven by a number of mining deal closures predominantly driven by gold and base metals mining, coupled with coal recovery.

The disposal of Handling and Agriculture SA into a joint venture with BayWa came into effect on 1 March 2017 and now trades under the name BHBW SA. Trading in agriculture is up on last year as the drought appears to have ended and South Africa seems set to produce a bumper maize crop. Net operating assets include certain retained receivables and some inventory that will be turned to cash during the balance of the year.

Automotive and Logistics

   Revenue    Operating profit /(loss)   Net operating assets 
   Six months ended  Year 
ended 
Six months ended  Year 
ended 
     
   31 Mar 
2017 
Rm 
Review 
   31 Mar 
2016 
Rm 
Reviewed 
30 Sept 
2016 
Rm 
Audited 
31 Mar 
2017 
Rm 
Reviewed 
   31 Mar 
2016 
Rm 
Reviewed 
30 Sept 
2016 
Rm 
Audited 
31 Mar 
2017 
Rm 
Reviewed 
30 Sept 
2016 
Rm 
Audited 
Automotive   16 321     14 757  31 427  863     757  1 654  10 142  8 686 
– Car Rental  3 262     2 851  5 967  297     266  536  3 687  2 534 
– Avis Fleet  1 688     1 613  3 641  292     260  560  3 764  3 786 
– Motor Trading  11 371     10 293  21 819  274     231  558  2 691  2 366 
Logistics  3 199     2 638  5 756  51     62  223  2 783  2 472 
– Southern Africa  3 108     2 509  5 527  56     66  226  2 668  2 348 
– Europe and Middle East  91     129  229  (4)    (4) (3) 115  124 
   19 520     17 395  37 183  914     819  1 877  12 925  11 158 
Share of associate loss                    (2) (4)      

The Automotive division delivered another record result for the first six months of the financial year, continuing to prove resilient in challenging market conditions. Divisional operating profit improved by 14% off revenue growth of 11%, while achieving an overall operating margin of 5.3% (1H’16: 5.1%). The division continues to focus on generating strong operational cash flows, costs and asset management to improve returns.

Car Rental delivered a solid result, further improving operating profit by 12% off a revenue growth of 14% and achieving an operating margin of 9.1% (1H’16: 9.3%). The business grew rental day volumes, increased revenue per rental day, successfully managed fleet utilisation at 75% and maintained market leadership in a competitive environment. Avis Car Sales continued to earn good returns on the sale of ex-rental vehicles.

Avis Fleet delivered a strong result, increasing operating profit by 12% off a revenue growth of 4.7% and achieving an operating margin of 17.3% (1H’16: 16.1%). The business returned to positive financed fleet growth of 1.0%. Fleet under management declined on the back of a weaker new vehicle market. Improved profit contribution from used vehicles supported the overall results.

The Motor Trading operations delivered a pleasing result given the tough trading conditions and declining new vehicle market. Operating profit increased by 19% off a revenue growth of 11%, improving overall operating margin to 2.4% (1H’16: 2.2%). This result was supported by the recent acquisitions and improved aftersales performance.

Despite revenue being up by 21% to R3.2 billion on last year, the Logistics division’s results were negatively impacted by tougher trading conditions in the period as well as costs related to the finalisation of the Supply Chain software disposal. Operating profit is down 17% to R51 million in comparison to March 2016. A traditionally stronger second half is expected. However, the impact of the recent downgrade on the trading environment is being closely monitored.

Corporate

   Revenue  Operating profit /(loss)   Net operating assets 
   Six months ended  Year 
ended 
Six months ended  Year 
ended 
     
   31 Mar 
2017 
Rm 
Review 
   31 Mar 
2016 
Rm 
Reviewed 
30 Sept 
2016 
Rm 
Audited 
31 Mar 
2017 
Rm 
Reviewed 
   31 Mar 
2016 
Rm 
Reviewed 
30 Sept 
2016 
Rm 
Audited 
31 Mar 
2017 
Rm 
Reviewed 
30 Sept 
2016 
Rm 
Audited 
– Southern Africa           (13)    10  48  657  578 
– Europe              (38)    (36) (54) (2 747) (2 908)
            (51)    (26) (6) (2 090) (2 330)
Share of associate income                            

Corporate Office primarily comprises the operations of the group headquarters and treasury in Johannesburg, the treasury in Maidenhead (United Kingdom) and the captive insurance company.

Southern Africa has shown a higher operating loss compared to the previous comparative period largely as a result of once-off charges relating to group strategic projects and higher employment costs resulting from the group leadership transition. In Europe the higher operating loss is due mainly to increased operating costs.

Dividend declaration

Dividend number 177

Notice is hereby given that final dividend number 177 of 125 cents (gross) per ordinary share in respect of the six months ended 31 March 2017 has been declared subject to the applicable dividends tax levied in terms of the Income Tax Act (Act No. 58 of 1962) (as amended) (the Income Tax Act).

In accordance with paragraphs 11.17(a)(i) to (x) and 11.17(c) of the JSE Listings Requirements, the following additional information is disclosed:

  • The dividend has been declared out of income reserves;
  • Local dividends tax rate is 20% (twenty per centum);
  • Barloworld has 212 692 583 ordinary shares in issue;
  • The gross local dividend amount is 125 cents per ordinary share;
  • The net dividend amount is 100 cents per share.

In compliance with the requirements of Strate and the JSE Limited, the following dates are applicable:

  • Last day to trade cum dividend
Tuesday, 6 June 2017
  • Shares trade ex dividend
Wednesday, 7 June 2017
  • Record date
Friday, 9 June 2017
  • Payment date
Monday, 12 June 2017

Share certificates may not be dematerialised or rematerialised between Wednesday, 7 June 2017 and Friday, 9 June 2017, both days inclusive.

On behalf of the board

LP Manaka
Group company secretary

Directors
Non-executive: DB Ntsebeza (Chairman), NP Dongwana, FNO Edozien^, H Hickey, M Lynch-Bell*, SS Mkhabela, SS Ntsaluba, P Schmid, OI Shongwe

Executive: DM Sewela (Chief Executive), DG Wilson

^Nigerian *UK