Barloworld Limited: Leading Brands

The condensed consolidated interim financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for interim reports, and the requirements of the Companies Act applicable to financial statements. The Listings Requirements require interim reports to be prepared in accordance with, IAS 34 Interim Financial Reporting and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and the Financial Pronouncements as issued by the Financial Reporting Standards Council. The accounting policies applied in the preparation of the condensed consolidated interim financial statements were derived in terms of International Financial Reporting Standards and are consistent with those accounting policies applied in the preparation of the previous consolidated financial statements.

This report was prepared under the supervision of SY Moodley (group general manager: finance) B.Com CA(SA), ACMA.

The interim taxation charges for the IAS 12 par 41 adjustments have been calculated by applying an estimated average annual effective tax rate for September 2016. A significant factor in estimating the annual effective tax rates are the exchange rates which have been estimated using a 30 September 2016 forward exchange rate based on independent exchange rate forecasts.

* The group invested in Angolan USD linked government bonds.

The assets held for sale relate to the net assets of the Agriculture Zambia operation and the South African, UK and US Supply Chain Software businesses within Barloworld Logistics. The conclusion of these transactions were well advanced as at 30 September 2015. These businesses had been sold as at 31 March 2016.

Fair value measurements recognised in the statement of financial position

Level 1 measurements are derived from quoted prices in active markets. Level 2 and level 3 measurements are determined using discounted cash flows.

On 31 December 2015, through a sale of shares and subscription agreement, Barloworld Logistics Africa (Pty) Limited acquired 100% of the KLL Group (Pty) Limited’s share capital for a total consideration of R68.6 million. R24.6 million of the consideration has been deferred and is payable after a year. The primary reason of the acquisition is to enable Barloworld Logistics to enter the multi-warehousing distribution market and give Barloworld Logistics refrigeration capability using a distribution network. The transaction gave rise to goodwill of R56.3 million which is not deductible for taxation purposes. The goodwill arising from the acquisition largely consists of knowledge and experience of the employees and potential customer contracts in the territory. The transaction was accounted for in terms of IFRS 3 Business Combinations, and thus, management has 12 months from the effective date of the transaction to finalise the accounting in terms of the transaction.

On 1 January 2016, through a sale of shares agreement, Barloworld Transport (Pty) Limited acquired 51% of the shares in Aspen Logistic Services (Pty) Limited for a total cash consideration of R37.6 million. The primary reason of the acquisition is to enable Barloworld Logistics to enter the refrigerated transport market. The transaction gave rise to goodwill of R9 million which is not deductible for taxation purposes. The goodwill arising from the acquisition largely consists of knowledge and experience of the employees and potential customer contracts in the territory. Non-controlling interest of R27 million was recognised as part of the transaction. The transaction was accounted for in terms of IFRS 3 Business Combinations, and thus, management has 12 months from the effective date of the transaction to finalise the accounting in terms of the transaction.

The Motor Trading business unit acquired the net assets of the Toyota and Volkswagen dealerships in Postmasburg on 1 November 2015 and effective 1 March 2016 also acquired the net assets and business of Union Motors Lowveld and Union Motors South Coast. The primary reason for these acquisitions was to expand the Motor Retail footprint. The total cash consideration for acquisitions is R172.9 million. The transactions gave rise to goodwill of R78.5 million which is not deductible for taxation purposes. The goodwill arising from the acquisitions consist largely of a premium paid for established profitable businesses. The transactions were accounted for in terms of IFRS 3 Business Combinations, and thus, management has 12 months from the effective date of the transaction to finalise the accounting in terms of the transaction.

The net cash proceeds on disposal of subsidiaries relates to the disposal of Barloworld Supply Chain Software for R172.9 million in December 2015 and Agriculture Zambia for R92 million in January 2016. The non-cash primarily relates to the proceeds receivable in relation to the Barloworld Supply Chain Software business.

*The related assets are estimated to have a value of at least equal to the commitment.

There has been no significant change in related party relationships and the nature of related party transactions since the previous year.

Other than in the normal course of business, there have been no other significant transactions during the year with associate companies, joint ventures and other related parties.

The Automotive division acquired a majority interest in Salvage Management and Disposal (Pty) Limited effective 1 May 2016. This transaction will be accounted for in terms of IFRS 3 Business Combinations and management will finalise the accounting treatment in the next 11 months. No other material transactions occurred after the reporting period.

These interim condensed consolidated financial statements for the period ended 31 March 2016 have been reviewed by Deloitte & Touche, who expressed an unmodified review conclusion. A copy of the auditor’s review report is available for inspection at the company’s registered office.

The auditor’s report does not necessarily report on all of the information contained in this announcement/ financial results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s engagement they should obtain a copy of that report together with the accompanying financial information from the issuer’s registered office.

Any forward-looking statements included in this announcement has not been reviewed or reported on by the auditors.