BWO.L Regulatory News (BWO)

20 Nov 2006 13:04

Barloworld Ld20 November 2006 Barloworld Limited ("Barloworld" or the "Group") Audited results for the year ended 30 September 2006 Strong second half delivers profit growth and record cash flows • Headline earnings per share +32% to 1 171 cents • Revenue +13% to R42 693 million • Operating profit up 21% to R4 133 million • Cash flow from operations +38% to R4 931 million • Dividend +32% to 600 cents per share Tony Phillips, CEO of Barloworld, said: "The positive result for the year under review has benefited from higher capitalinvestment activity in the southern African economies. This has stimulatedstrong cement, motor vehicle and coatings demand. The equipment division hasseen a significant increase in activity in both the construction and miningsectors, with continued high levels of activity in Spain." "Our offshore divisions have delivered positive results after recentrestructuring initiatives, and the recovery in the scientific and Freightlinerbusinesses is particularly pleasing." "We have a favourable outlook as the southern African capital investment cycleis gaining impetus, together with continued strong demand for our other productsin the region. Further improvements are expected in the offshore businesses, andoverall we expect to report another year of sustained progress in 2007." 20 November 2006 Enquiries Barloworld Limited: Rowan Goeller Tel +27 11 445 1300, e-mailrowang@barloworld.com For background information visit www.barloworld.com Chairman and Chief Executive's report Our goal at Barloworld is sustainable value creation by focusing on a core groupof businesses that demonstrate market leading characteristics. We continue to dothis in three ways: 1. improve the performance of our businesses, as measured by Cash Flow Return on Investment (CFROI(R)); 2. grow our core businesses into new geographies, and 3. expand into complementary products and services Barloworld's performance in 2006 reflects the ongoing favourable economicconditions in South Africa, boosted by growing capital investment in thesouthern African region. Positive growth in our offshore operations primarilyreflects the benefits of restructuring undertaken in both the industrialdistribution and scientific businesses. We have achieved a seven year compound annual growth rate in headline earningsper share of 20.4% since the inception of Value Based Management (VBM) in 1999.Our real CFROI(R) has improved to 12.3% from 6.2% over this period and remainswell above our real hurdle rate of 8%. Strong second half delivers profit growth and record cash flows In southern Africa the equipment business, led by sales of Caterpillarequipment, had a significantly better year as the capital investment cycleaccelerated in both the construction and mining industries. The cement businesscontinued to grow strongly with sales volumes increasing by 17% during thefinancial year. Another year of record new vehicle sales benefited the motordivision, along with a pleasing recovery in our rental rates in southern Africawhich boosted the car rental result. The coatings business delivered anotheryear of solid growth in revenue. Our Iberian equipment business continues to generate satisfactory returnssupported by ongoing public infrastructure investment in Spain. The Siberianjoint venture comfortably exceeded its US$100 million revenue target and remainsan exciting growth business. The focus to improve the performance of some of theoffshore businesses has delivered promising results. The US handling businesshad another year of strong growth, and the Truck Center significantly increasedits contribution. The UK handling business, while down against the previousyear, has shown a strong recovery trend through the year. The scientificdivision benefited from a reduced cost base and significantly improvedprofitability. The Scandinavian car rental result was pleasing after an adversechange in pricing policy by a major vehicle supplier in Sweden in the first halfof the year. In Australia, the motor business has started to reflect thebenefits of our dealership upgrade strategy. The proposed acquisition of Wattyl was turned down by the Australian Competitionand Consumer Commission (ACCC) and we are now pursuing options to restructureand down size our coatings business in Australia. We remain committed to theAsia-Pacific region and will continue to pursue a number of other avenues forexpansion in the coatings and motor businesses. A strong second half resulted in revenue growth of 13% for the full year andoperating margin expansion to 9.7% (2005: 9.1%). Operating profits increased 21%to R4 133 million. Headline earnings per share of 1 171 cents (2005: 888 cents) benefited fromstronger operational results, positive fair value adjustments on forward covercontracts owing to the weaker rand and an accounting gain arising largely from achange in accounting policy for defined benefit pension funds in the UK. Netprofit attributable to Barloworld Limited shareholders grew 27%. Cash flows from operations remained strong at R4 931 million (2005: R3 576million). A final dividend of 450 cents per share (2005: 325 cents) was declared,resulting in the total dividend in respect of this year's earnings increasing by32% to 600 cents per share (2005: 455 cents). Corporate activity continues to enhance value In line with our goal of sustainable value creation, during the year underreview we acquired the Avis and Budget car rental businesses in Denmark and the50% of Avis Fleet Services that we did not already own. Prostart (automotiverefinish coatings) and Midas Paints were also acquired. We announced the sale of the steel tube business to the management team and anempowerment grouping, which remains subject to final signature on the fundingagreements. We have sold the bulk of our US and UK handling leasing books tofinance partners as we were unable to generate acceptable returns from purefinance business. During the past six months we have repurchased 10 145 835 Barloworld ordinaryshares at an average price of R113.97. The total cost of the share buybackprogram was R1 160 million. We continue to review all our businesses in terms of their ability to generatethe required sustainable real CFROI(R) hurdle rate of 8%. Changes in Directorate Ms S Mkhabela was appointed to the board as an independent non-executivedirector on 27 January 2006 and Mr DG Wilson joined the board on 29 September2006 and will succeed Mr CB Thomson as finance director. Mr LS Day, CEO ofBarloworld Equipment will retire at the end of November 2006 and is succeededby Mr CB Thomson. Mr MD Coward will resign to head the consortium which isacquiring the steel tube division. Black Economic Empowerment Advisors have been appointed for the evaluation of various alternatives for abroad based black economic empowerment (BBBEE) equity transaction for thecompany. A committee of the board comprising the CEO and four non-executivedirectors will be making recommendations to the board when the advisors havecompleted their task. A positive outlook In southern Africa, the equipment division should benefit from increasedinfrastructure and mining investment. While cement demand growth is expected tocontinue, albeit at a slower rate, revenue growth in the cement division will belimited by capacity constraints. In the motor division the improved rental rateswill positively impact the car rental result, and the higher interest rateenvironment and new fleet business will boost the fleet services contribution.Vehicle retail sales growth is expected to slow due to the increased interestrates in South Africa. The coatings division will benefit from the integrationof the new acquisitions. Our Iberian Caterpillar business continues to deliver consistently good results.We expect continued growth in the US materials handling operations and a furtherimprovement in the UK. By contrast the effect of the new emission standards inthe US could impact Truck Center new unit sales during the early part of 2007.The positive trend in the scientific business is expected to continue. The overall outlook for 2007 is favourable and we look forward to another yearof good progress as the southern African capital investment cycle gains momentumwith continued, albeit slower, growth in residential housing and vehicle retailsales. We have set a new medium-term goal of doubling the value of the companybefore the world cup of soccer comes to South Africa in 2010, and will continueto focus on enhancing returns and growing profits to achieve this objective. WAM Clewlow AJ PhillipsChairman Chief Executive Officer Group financial review Revenues increased by 13% to R42 693 million, with operating profit rising 21%to R4 133 million. Good growth was delivered in the southern African equipmentdivision due to increasing infrastructure and mining expenditure while thecement business benefited from strong demand in the domestic building andconstruction industry. Operating results were also boosted by a reduction in UKpension liabilities discussed below. The weakening of the rand against the US dollar in the second half of the yearcontributed to positive mark-to-market adjustments in the fair value ofderivative financial instruments. In addition hedges concluded to protect thecompany against negative currency movements during the term of the offer toacquire Wattyl in Australia were closed out at a profit of R54 million when weallowed the offer to lapse. In order to reduce earnings volatility resulting from fluctuations in foreignexchange rates, the company implemented hedge accounting for Caterpillar machinepurchases for the southern African equipment business with effect from 1 June2006. The effect of this change is that R140 million (R99 million after tax) infair value adjustments which would otherwise have been included in income arenow reflected in equity. Fair value adjustments continued to impact income inrespect of the purchase of parts and other vehicle and equipment brands wherehedge accounting has not yet been implemented. Finance costs increased by R164 million to R605 million. This was mainly due tothe acquisitions of Avis Denmark in November 2005 and the remaining 50% of AvisFleet Services in April 2006. Interest cover remained strong at 5.8 times(2005: 6.0 times). Income from investments increased to R273 million (2005: R198 million), duemainly to the refinancing by central treasury of the funding of Avis FleetServices when the company became a wholly-owned subsidiary. Taxation rose by 31% to R1 370 million in line with the higher profits. Theeffective taxation rate (excluding exceptional items, secondary tax on companiesand prior year taxation) increased to 30.0% (2005: 29.0%). Income from associates and joint ventures increased by R19 million to R72million. The improvement was largely attributable to higher profits contributedby the Siberian joint venture in the equipment division and the motor divisionempowerment joint ventures. Exceptional profits of R120 million (2005: R7 million) included gains ondisposal of properties, investments and subsidiaries of R143 million lessimpairments of goodwill and capital assets of R23 million. Following the decision taken earlier this year to dispose of the steel tubedivision, this business has been reflected as a discontinued operation. The netloss of R112 million comprises an impairment of R156 million reduced by theafter tax profits earned during the year of R44 million. Net profit from continuing operations increased by 34% to R2 858 million (2005:R2 139 million), while headline earnings per share (HEPS) increased by 32% from888 cents to 1 171 cents. This includes a benefit resulting from an accountingpolicy change and initiatives to address the UK pension deficits. In particular,the transition from a final pay plan to a career average revalued earnings(CARE) plan has reduced pension obligations by R149 million pre-tax (£10.5million). In terms of IAS 19, this has been recognised in income in the currentyear. Total assets grew by 25% to R35 654 million. The currency effect on translationof offshore net assets resulted in an increase in net assets of R1 832 millionfollowing the depreciation of the rand in the second half of the year. Assets classified as held for sale increased to R2 840 million (2005: R180million). The increase is mainly attributable to the pending sales of the steeltube division and the UK leasing assets. Total interest-bearing borrowings of R9 884 million rose by R1 842 million inthe year. The increased borrowings arose mainly due to the acquisitionsreferred to above, growth in fleet leasing and rental assets and capitalexpenditure. Borrowings in the three segments utilised in the group for gearingpurposes are all within the defined target ranges as follows: Total debt to equity (%) Trading Leasing Car Rental Total Group Target range 30-50 600-800 200-300Ratio at 30 September 2006 32 689 233 73 Cash flow from operations rose by 38% to R4 931 million. Working capitalincreased by R10 million while net cash used in investing activities amounted toR2 938 million. The company acquired 10 145 835 ordinary shares during the year pursuant to itsshare buyback programme. A total of R1 160 million was expended in acquiring theshares at an average cost of R113.97 per share. The company's balance sheet is strong and cash generation prospects remain good. CB Thomson,Finance Director Operational reviews In the case of the leasing businesses, the operating profit is net of interestpaid. Income from associates, which includes our share of earnings from jointventures, is shown at the profit after taxation level. Net operating assets comprise total assets less non-interest bearingliabilities. Cash is excluded as well as current and deferred tax assets andliabilities. In the case of leasing businesses, net assets are reduced byinterest-bearing liabilities. Comparatives have been restated as per note 9. EQUIPMENT Revenue Operating profit incl Net operating assets fair value adjustments Year ended 30 Sept Year ended 30 Sept 30 SeptR million 2006 2005 2006 2005 2006 2005 - Europe 5 415 5 281 474 475 3 368 2 378 - Southern Africa 6 212 4 953 645 424 2 304 1 833 11 627 10 234 1 119 899 5 672 4 211Share of associate income 27 8 The business arises mainly from our long standing relationship with CaterpillarInc. as their dealer partner in 16 countries. Revenue in Iberia increased 2.5% with flat operating profit due to machinemargin pressures and costs incurred on employee early retirement programs.Construction remains the most dynamic sector within the Spanish economy, growingfaster than the domestic economy. Long lead times for new equipment haveresulted in increased demand for used equipment, with the certification andrebuild programmes being catalysts for growth. Service demand remains at a highlevel. Demand for power systems has been strong, but availability has dampenedgrowth in this business. In southern Africa, revenue growth of 25% resulted from increased sales of largemining and construction machines, together with stronger demand for ourequipment management services that manifests itself in higher sales of parts,service and maintenance contracts. The segment result improved by 52%, boostedby a weakening rand, with operating margins before fair value adjustments lowerat 8.1% (2005: 9.6%) due to new machines being a higher proportion of the salesmix. The construction sector was positively impacted by growing South Africangovernment infrastructure spending and commercial and industrial buildingdevelopments. Strong demand for commodities has positively impacted ourperformance in the mining sector. Business continued to improve in our othersouthern African territories, especially Angola. Our handling business improved market share in a growing market, although thedelayed introduction of new Hyster product offerings impacted results. Theagricultural business remains highly profitable and we achieved marketleadership in both Massey Ferguson tractors and CLAAS harvesters. Associate income increased strongly as our Siberian joint venture more thandoubled revenue and profits. Siberia remains an area of vast potential forcapital equipment and we are investing in our infrastructure in the region inorder to be able to benefit from the expected growth. This year saw the openingof a new facility in Novosibirsk. Customer orders at year end amounted to R4 849 million, R1 959 million higherthan last year. Most of this order commitment will be delivered in the 2007financial year in line with our customers' expectations. At year end we hadorders placed on Caterpillar for equipment amounting to $906 million, anincrease of 67% from the previous year. Tyres for mining equipment are expectedto remain in limited supply until 2009 and this may adversely impact deliveriesof some products. INDUSTRIAL DISTRIBUTION Revenue Operating profit incl Net operating assets fair value adjustments Year ended 30 Sept Year ended 30 Sept 30 SeptR million 2006 2005 2006 2005 2006 2005 - Europe 1 995 1 982 23 41 670 437 - North America 4 697 3 922 115 75 1 180 990Trading 6 692 5 904 138 116 1 850 1 427 - Europe 257 367 33 66 309 261 - North America 96 98 ( 25) ( 40) ( 17) 52Leasing* 353 465 8 26 292 313 7 045 6 369 146 142 2 142 1 740 * Net operating assets after deducting interest-bearing borrowings. The division experienced a period of very positive change, contrary to themarginal increase in profitability compared to the previous year. The UK handling market fell 8.4% to 29 028 units. This was almost entirely inthe lower price range warehousing market which in itself fell 15%. The year endorder book was consistent with last year at 1 192 units but reflects a highervalue despite the smaller market. The second half showed a marked improvementafter difficulties with our mobile service technology, the restructuring of theback office administration taking longer than originally anticipated and changesin the senior management structure. In the Netherlands and Belgium, the market grew 9.4% to 22 703 units withwarehousing making up a strong 58.7% share. The year end order books at 269units were relatively unchanged from last year. The US handling business delivered another year of solid growth at the operatinglevel. The total new equipment market grew 1.8% to 39 263 units. The open orderbook at 839 units was very similar to last year but higher in revenue value as aresult of the product mix. The executive management team was restructured toalign the organisation with our business segmentation. In the Truck Center business, the "pre-buy" ahead of the 2007 engine emissionchanges increased class 6-8 industry new sales in the US market by 10.2% to 432145 units for the year to September. A further acceleration will be seen inboth the market and our deliveries during the last three months of the calendaryear. Our new unit sales for the fiscal year grew 4.6% to 3 630, resulting inrevenue growth of 8.7% at a slightly improved margin. The order book ended theyear at 2 023 units, slightly higher than last year. The major focus of thebusiness remained on the growth and improvement of the aftermarket parts andservice activities and these absorbed 79% of operating costs for the year (2005:73%). Good progress has been made on the sale of the leasing books, with the US booksold to a joint venture between GE Capital and Hyster Capital. A small residualbalance remains covering a few specific short term and early expiring contracts.The disposal of the UK leasing business to GE Capital was finalised in November2006. The leases related to the UK Ministry of Defence contracts are notassignable and will accordingly continue to be managed out of our UK operation. MOTOR Revenue Operating profit incl Net operating assets fair value adjustments Year ended 30 Sept Year ended 30 Sept 30 SeptR million 2006 2005 2006 2005 2006 2005 - Southern Africa 9 307 8 791 223 175 1 020 640 - Australia 1 719 1 598 23 11 666 399Trading 11 026 10 389 246 186 1 686 1 039 - Southern Africa 1 108 881 256 210 2 400 2 396 - Europe 805 478 69 66 2 536 1 231Car rental 1 913 1 359 325 276 4 936 3 627Leasing Southern Africa* 631 638 65 88 276 334 13 570 12 386 636 550 6 898 5 000Share of associate income 27 23 * Net operating assets after deducting interest-bearing borrowings. The southern African motor retail operations performed well in another recordyear of new vehicle sales. An expanding market, favourable interest rates,improved supply and new models contributed to increased new and used vehiclesales. Parts, as well as service hours, benefited from the buoyant market. Thestrategic alignment of the dealership network into "Fewer, Bigger, Better"facilities produced efficiencies and resulted in a 27% improvement in operatingprofit. The Australian operations improved performance due to our nowestablished dealership network and an increasing demand for certain brands werepresent. Avis Rent a Car Southern Africa benefited from a strong increase in rental days,good utilisation and firmer rates. Growth in the fleet resulted in a higherinterest charge and other associated costs. The Point-to-Point and truck rentalbusinesses improved on the previous year and contributed to the positive result.Our Scandinavian car rental operation, which includes both Avis and Budgetbrands, was severely impacted by a major vehicle supplier's change in supply andpricing strategy in Sweden during the first half. However, profitabilityimproved in the second half of the year as a result of increased rental days,the ongoing implementation of the regional business structure and a strongcontribution from the Norwegian operations. The Danish operations, which wereacquired in November 2005, have been successfully integrated into the regionalstructure. Avis Fleet Services experienced strong growth in its fleet under management.However, lower interest rates and used vehicle margins resulted in reducedprofitability. Full ownership of the business was secured during the year, aswere significant new business contracts. These should result in long-term profitgrowth. Associate income includes another strong performance from our DaimlerChryslerempowerment joint venture in KwaZulu-Natal, which recorded revenues of R2.4billion and operating profit of R102 million. CEMENT Revenue Operating profit incl Net operating assets* fair value adjustments Year ended 30 Sept Year ended 30 Sept 30 SeptR million 2006 2005 2006 2005 2006 2005Southern Africa 4 863 3 974 1 905 1 502 2 565 2 502Share of associate income 0 2 * Net operating assets include goodwill arising on PPC shares purchased byBarloworld. The South African economy continued to exhibit strong growth which was mirroredin both the residential and non-residential construction sectors. The cementdivision benefited from these buoyant market conditions with cement volumesachieving record levels. Regional cement sales volumes grew 17% over last year.All production units were fully operational from February and provided muchneeded additional capacity in the second half of the year, although operatingolder kiln lines resulted in higher costs. Logistics expenses also increased,due to the increased complexity in the movements of product to our customers.This additional expenditure put some pressure on cement margins. The Batsweledi project, which will add 1.2 million tons of cement capacity, isprogressing according to plan and within budget. Until the new capacity comeson line in mid-2008, cement is being imported to supplement current capacityduring periods of high demand. This is not expected to have a material effecton earnings. Lime revenue and operating profit improved following the renegotiation ofseveral long-term supply agreements and higher volumes in the steel sector.Aggregate operations reflected excellent volume and profit growth. A proposal for a modern cement milling facility in the inland region at a costof around R600 million will be presented to the board in the first calendarquarter of 2007. The feasibility study of capacity expansion in the Western Capeis progressing well and a proposal will also be presented to the board by August2007. The Afripack empowerment transaction with Nozala Investments (Pty) Ltd hasproved highly successful. The loan funding has been repaid, a year earlier thanthe three-year term of the agreement, and the company continues to show goodprofit growth. Afripack will now be treated as an associate. COATINGS Revenue Operating profit incl Net operating assets fair value adjustments Year ended 30 Sept Year ended 30 Sept 30 SeptR million 2006 2005 2006 2005 2006 2005 Southern Africa 2 019 1 520 338 281 742 514Australia & Asia 952 949 ( 55) ( 29) 296 254 2 971 2 469 283 252 1 038 768Share of associate income 18 20 The decorative coatings business had another good year following buoyant growthin the southern African market. Strong sales into the roadmarking and protectivecoatings segments contributed to good growth in the industrial business. Theretail sector grew by 12% and trade sales, assisted by commercial developmentand refurbishment, grew by 14% as the building industry continued to expandresulting in excellent growth in our economy brands in line with our strategy,which impacted margins as expected. The newly acquired Midas product range alsoexpanded its footprint in the growing contractor market. In the automotive group, the wholly owned refinish business experienced anexcellent year. The acquisition of the Prostart distribution business wasconcluded, and has more than met expectations. The joint venture business withDuPont, which supplies the automotive manufacturing plants, has again performedsatisfactorily and continues to maintain its position. 2006 proved to be another good year for the colourant systems business achievingan annual volume growth of 19%. Export volumes increased substantially over theyear and now contribute more than 42% of sales volume in this business. Trading conditions in the Australian coatings industry remained difficult withretail industry volumes declining 1.7%. Cost reduction initiatives throughfurther restructuring of our business during the year resulted in substantialonce off costs. This included closing the White Knight factory at Seven Hillsand transferring production to the Villawood factory in Sydney. The Hemmantfactory in Brisbane was also closed with production similarly relocated.Restructuring costs of approximately A$4 million were incurred. A concertedeffort to find a sustainable strategic solution to the sub optimal marketstructure in Australia continued and we made an offer to acquire Wattyl Limited.Despite various proposals from Barloworld to successfully complete thetransaction, the ACCC decided not to approve the transaction in a formacceptable to us. We therefore allowed the bid to lapse. The hedge gains lessthe costs of the bid produced a gain for Barloworld of R36 million, which isreflected in the corporate segment. Steps to sell the retail Bristol brandedstore network to a third party are well advanced. Barloworld Coatings continues to investigate the attractive opportunities forgrowth in the Chinese coatings market and expansion of its presence in theregion and elsewhere. SCIENTIFIC Revenue Operating profit incl Net operating assets fair value adjustments Year ended 30 Sept Year ended 30 Sept 30 SeptR million 2006 2005 2006 2005 2006 2005 Europe 1 027 1 009 62 23 834 629North America 429 382 10 ( 6) 316 359Asia 146 135 8 4 109 87 1 602 1 526 80 21 1 259 1 075 The laboratory group's performance improved mainly as a result of fixed costreduction initiatives that were put in place in the previous financial year andcontinued strong growth in the science equipment business. Trading, however, wasweaker than expected in the UK and Europe, while markets to which we exportrealised improved revenues and margins, particularly in the US, Asia and Africa.Margins have improved despite significant increases in the cost of energy andplastic raw materials, which are both at record high levels. Melles Griot produced a good improvement on last year as the semiconductormarket rebounded in 2006. The biotechnology, metrology and photonics markets sawgrowth, activity in the defence sector increased and year on year revenue growthwas realised for most products. North America and Asia realised good growth insales whereas the distribution business in Europe saw reduced revenue. Marginsimproved by almost 3% as a result of improved supply chain and inventorymanagement processes as well as increased sourcing from low cost countries. CORPORATE AND OTHER Revenue Operating profit incl Net operating assets fair value adjustments Year ended 30 Sept Year ended 30 Sept 30 Sept R million 2006 2005 2006 2005 2006 2005 Southern Africa 735 561 41 21 925 871 Europe 280 177 159 ( 21) ( 619) ( 759) 1 015 738 200 0 306 112 In southern Africa, results were favourably impacted by a net benefit of R36million arising from the offer to acquire Wattyl. This represents a profitearned on currency hedges concluded to protect the company against negativecurrency movements during the term of the offer, less associated acquisitioncosts. In Europe results were favourably impacted by a change in accounting policy forpost-employment benefit obligations. An accounting gain in terms of IAS 19amounting to R149 million pre-tax (£10.5 million) arose due to a reduction inthe defined benefit pension liabilities in the United Kingdom. This followed amove by consensual agreement, to career average revalued earnings as a basis fordetermining pension benefits. Net operating liabilities exceed assets by R619million due to the liability of R777 million (2005: R747 million) for thepension fund deficits which have been brought on balance sheet in terms of theaccounting policy change. In the logistics business, gross revenue over the last 5 years (includingBarloworld clients) has increased at a compound rate in excess of 40% per annumto almost R4 billion this year. During the year Barloworld's logisticsoperations in South Africa and Spain were integrated to widen the skills base,share best practices and expand the Iberian offering to include integratedsupply chain solutions. Sales activity increased during the year in BarloworldLogistics Africa, our 25% BBBEE owned operating company. Our leading BEE statusresulted in the securing of a number of blue chip clients and projects whichwill continue to provide sustainable growth. Dividend declaration for the year ended 30 September 2006: Dividend Number 155 Notice is hereby given that the following dividend has been declared in respectof the year ended 30 September 2006: Number 155 (final dividend) of 450 centsper ordinary share (2005: 325 cents per ordinary share). In compliance with the requirements of the JSE Limited, the following dates areapplicable: Last day to trade cum dividend Friday 05 January 2007Shares trade ex dividend Monday 08 January 2007Record date Friday 12 January 2007Payment date Monday 15 January 2007 Share certificates may not be dematerialised or rematerialised between Monday,08 January 2007 and Friday, 12 January 2007, both days inclusive. On behalf of the Board, S Mngomezulu, Secretary CONSOLIDATED INCOME STATEMENT for the year ended 30 September Audited R million Notes 2006 2005* % change CONTINUING OPERATIONS Revenue 42 693 37 696 13 Operating profit 4 133 3 423 21 Fair value adjustments on financial instruments 235 ( 57) Finance costs ( 605) ( 441) Income from investments 273 198 Profit before exceptional items 4 036 3 123 29 Exceptional items 3 120 7 Profit before taxation 4 156 3 130 Taxation (1 370) (1 044) Profit after taxation 2 786 2 086 Income from associates and joint ventures 72 53 Net profit from continuing operations 2 858 2 139 34 DISCONTINUED OPERATION (Loss) / profit from discontinued operation 4 ( 112) 24 Net profit 2 746 2 163 Attributable to: Minority shareholders 389 314 Barloworld Limited shareholders 2 357 1 849 27 2 746 2 163 Earnings per share (cents)** - basic 1 138.9 891.7 28 - diluted 1 117.1 871.7 28 Earnings per share from continuing operations (cents) - basic 1 193.0 880.1 36 - diluted 1 170.2 860.4 36 Earnings per share from discontinued operation (cents) - basic (54.1) 11.6 (566) - diluted (53.1) 11.3 (570) * Restated - refer note 9 ** Refer note 2 for details of headline earnings per share calculation CONSOLIDATED BALANCE SHEETat 30 September AuditedR million Notes 2006 2005* ASSETSNon-current assets 14 289 14 158Property, plant and equipment 8 299 7 922Goodwill 3 005 2 485Intangible assets 323 260Investment in associates and joint ventures 749 518Finance lease receivables 566 1 495Long term financial assets 597 655Deferred taxation assets 750 823Current assets 21 365 14 465Vehicle rental fleet 3 441 2 196Inventories 5 907 4 793Trade and other receivables 7 026 5 859Taxation 17 38Cash and cash equivalents 2 134 1 399Assets classified as held for sale 4 2 840 180 Total assets 35 654 28 623EQUITY AND LIABILITIESCapital and reservesShare capital and premium 327 1 397Other reserves 3 461 1 462Retained income 9 881 8 627Interest of shareholders of Barloworld Limited 13 669 11 486Minority interest 691 644Interest of all shareholders 5 14 360 12 130 Non-current liabilities 7 920 7 761Interest-bearing 5 475 5 410Deferred taxation liabilities 870 905Provisions 468 383Other non-interest-bearing 1 107 1 063Current liabilities 13 374 8 732Trade and other payables 6 663 5 163Provisions 536 480Taxation 705 457Amounts due to bankers and short-term loans 4 409 2 632Liabilities directly associated with assets classified as 4 1 061 0held for sale Total equity and liabilities 35 654 28 623 * Restated - refer note 9 CONDENSED CONSOLIDATED CASH FLOW STATEMENTfor the year ended 30 September AuditedR million 2006 2005* Cash flow from operating activitiesOperating cash flows before movements in working capital 6 077 5 275Increase in working capital ( 10) ( 475)Cash generated from operations 6 067 4 800Realised adjustments on financial instruments 136 ( 18)Finance costs and investment income ( 265) ( 231)Taxation paid (1 007) ( 975)Cash flow from operations 4 931 3 576Dividends paid (including minority shareholders) (1 295) (1 197)Cash retained from operating activities 3 636 2 379Net cash used in investing activities (2 938) (2 980)Acquisition of subsidiaries, investments and intangibles ( 814) ( 443)Proceeds on disposal of subsidiaries and investments 44 69Net investment in fleet leasing and rental assets (2 108) (1 629)Acquisition of property, plant and equipment (1 217) (1 186)Proceeds on disposal of property, plant and equipment 593 209Proceeds on sale of leasing assets 564 -Net cash inflow/(outflow) before financing activities 698 ( 601)Net cash (used in)/available from financing activities ( 224) 601Proceeds on share issue 90 188Buy-back of shares in company (1 160)Increase in interest-bearing liabilities 846 413 Net increase in cash and cash equivalents 474 -Cash and cash equivalents at beginning of year 1 399 1 443Effect of foreign exchange rate movements on cash balance 242 ( 44)Effect of cash balances classified as held for sale 19Cash and cash equivalents at end of year 2 134 1 399 Cash balances not available for use due to reserving restrictions 405 344 Acquisition of subsidiaries, investments and intangibles:Inventories acquired 57 11Receivables acquired 226 96Payables, taxation and deferred taxation acquired ( 230) ( 90)Borrowings net of cash ( 512) 25Property, plant and equipment, non-current assets, goodwill and 744 55minority shareholdersTotal net assets acquired 285 97Goodwill arising on acquisitions 238 21Total purchase consideration 523 118Investments and intangible assets acquired 291 325Cash amounts paid to acquire subsidiaries, investments and 814 443intangiblesBank balances and cash in subsidiaries acquired 12 36 * Restated - refer note 9 CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEfor the year ended 30 September AuditedR million 2006 2005 Exchange differences on translation of foreign operations 1 832 ( 186)Gain on cash flow hedges 139 2Deferred taxation on cash flow hedges ( 18)Gain of revaluation of available for sale investments 18 12Deferred taxation on revaluation of available for sale investments ( 8) ( 2)Other reserve movements ( 71) ( 31)Net actuarial losses on post-retirement benefit obligations ( 55) ( 86)Actuarial losses on post-retirement benefit obligations ( 79) ( 123)Taxation effect 24 37 Net income/(loss) recognised directly in equity 1 837 ( 291)Net profit 2 746 2 163Total recognised income and expense for the year 4 583 1 872 Attributable to: Minority shareholders 381 302 Barloworld Limited shareholders 4 202 1 570 4 583 1 872 The statement of recognised income and expense has been prepared in terms of therequirements of IAS 19 Employee Benefits regarding the change in accountingpolicy for the treatment of actuarial gains and losses (refer note 9). SALIENT FEATURESfor the year ended 30 September Audited 2006 2005* Number of ordinary shares in issue, net of buyback (000) 200 716 208 612 Net asset value per share including investments at fair value (cents) 6 973 5 620 Total borrowings to total shareholders' funds (%) - Trading segment** 31.7 20.9 - Total group 73.3 66.3 Interest cover (times) - Trading segment** 10.6 11.3 - Total group 5.8 6.0 Return on net assets (%) - Trading segment** 26.8 25.6 - Total group 19.1 18.3 Cash flow return on investment - CFROI(R) (%) 12.3 10.3 Return on ordinary shareholders' funds (excluding exceptional items)(%) 18.0 16.8 * Restated - refer note 9 ** Trading segment includes manufacturing and dealership businesses, but excludes leasing and car rental. CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 30 September Audited R million 2006 2005* 1 Basis of preparation This report has been extracted from the group consolidated financial statements, which have been prepared in accordance with International Financial Reporting Standards (IFRS), in compliance with the Companies Act of South Africa and the Listing Requirements of the JSE Limited. The basis of preparation is consistent with the prior year, except as detailed in note 9 below. For a better understanding of the group's financial position, the results of its operations and cash flows for the year, this summarised report should be read in conjunction with the annual financial statements from which it was derived. 2 Reconciliation of net profit to headline earnings Net profit attributable to Barloworld Limited shareholders 2 357 1 849 Impairment loss on disposal of Steel Tube after taxation 156 - Profit on disposal of properties, investments and subsidiaries ( 140) ( 25) Impairment of assets 27 21 Loss/(Profit) on sale of plant and equipment (excluding rental assets) and 4 ( 2) intangible assets Taxation on exceptional items 19 ( 6) Interest of outside shareholders in exceptional items 4 - Headline earnings 2 423 1 841 Headline earnings from continuing operations 2 373 1 815 Headline earnings from discontinued operation 50 26 Weighted average number of ordinary shares in issue during the year (000) - basic 206 959 207 367 - diluted 210 998 212 117 Headline earnings per share (cents) - basic 1 170.8 887.8 - diluted 1 148.4 867.9 Headline earnings per share from continuing operations (cents) - basic 1 146.6 875.3 - fully diluted 1 124.7 855.7 Headline earnings per share from discontinued operation (cents) - basic 24.2 12.5 - diluted 23.7 12.3 3 Exceptional items Profit on disposal of properties, investments and subsidiaries 143 27 Impairment losses ( 23) ( 21) Other 1 Gross exceptional profits 120 7 Taxation ( 20) 5 Interest of outside shareholders ( 4) - 100 8 Discontinued operation (net of taxation) ( 6) ( 2) Net exceptional profits 94 6 * Restated - refer note 9 CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 30 September Audited R million 2006 2005* 4 Discontinued operation and assets classified as held for sale The Steel Tube segment has been classified as a disposal group held for sale. Results from discontinued operation are as follows: Revenue 1 775 1 590 Operating profit 95 44 Fair value adjustments on financial instruments ( 6) 1 Finance costs ( 25) ( 25) Income from investments 3 1 Profit before exceptional items 67 21 Exceptional items (gross of taxation) ( 7) ( 3) Profit before taxation 60 18 Taxation ( 20) 2 Profit after taxation 40 20 Income from associates and joint ventures 4 4 Net profit of discontinued operation before impairment loss 44 24 Impairment loss on write-down to fair value less costs to sell ( 185) Taxation on impairment loss 29 Impairment loss after taxation ( 156) Loss from discontinued operation per income statement ( 112) The cash flows from the discontinued operation are as follows: Cash flows from operating activities 80 ( 54) Cash flows from investing activities ( 24) ( 20) Cash flows from financing activities ( 75) 31 Assets classified as held for sale consist of the following: - Steel Tube discontinued operation 715 - Industrial Distribution leasing assets 1 717 - Vehicle and equipment rental fleets 249 180 - Other 159 2 840 180 Liabilities directly associated with assets classified as held for sale consist of the following: - Steel Tube discontinued operation 347 - Industrial Distribution leasing liabilities# 597 - Other 117 1 061 0 5 Interest of all shareholders Balance at the beginning of the year 12 130 11 821 Adjustment to opening balance for changes in accounting policies ( 586) Net income/(loss) recognised directly in equity 1 837 ( 291) Net profit 2 746 2 163 Reclassifications and other reserve movements 46 34 Purchase of minority shareholding in subsidiary ( 34) ( 2) Buy-back of shares (1 160) Dividends on ordinary shares (1 295) (1 197) Shares issued in current year 90 188 Interest of shareholders at the end of the year 14 360 12 130 * Restated - refer note 9 # In addition, an amount of R 916 million inter group borrowings will be setlled from the proceeds on the sale of the assets. CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 30 September Audited R million 2006 2005* 6 Dividends Ordinary shares Final dividend No 153 paid on 16 January 2006: 325 cents per share (2005: No 151 745 602 - 265 cents per share) Interim dividend No 154 paid on 12 June 2006: 150 cents per share (2005: No 152 - 312 296 130 cents per share) 1 057 898 Dividend attributable to the treasury shares ( 62) ( 75) Paid to Barloworld Limited shareholders 995 823 Paid to minority shareholders 300 374 1 295 1 197 Dividends per share (cents) 600 455 - interim (declared May) 150 130 - final (declared November) 450 325 7 Contingent liabilities Bills, lease and hire-purchase agreements discounted with recourse, other 622 296 guarantees and claims Litigation, current or pending, is not considered likely to have a material adverse effect on the group. Buy-back and repurchase commitments not reflected on the balance sheet 1 250 1 071 The related assets are estimated to have a value at least equal to the repurchase commitment. There are no material contingent liabilities in joint venture companies. 8 Commitments Capital expenditure commitments to be incurred: Contracted 2 106 1 762 Approved but not yet contracted 999 1 080 3 105 2 842 Operating lease commitments 2 509 1 682 Finance lease commitments 1 050 1 522 9 Accounting policies and comparative information The group changed its accounting policy in the current year in respect of the treatment of actuarial gains and losses. In terms of the allowed treatment per IAS19 Employee Benefits, actuarial gains and losses are now recognised in full in the period in which they occur, outside profit or loss, in the Statement of Recognised Income and Expense. In addition, the following new or revised Standards and Interpretations were adopted during the current year: - IAS 27 (Revised) Consolidated and Separate Financial Statements - IFRS 2 Share-based Payment - IFRIC Interpretation 8 Scope of IFRS 2 - AC 503 Accounting for Black-Economic Empowerment Transactions - IFRIC Interpretation 11 IFRS 2 - Group and Treasury Share Transactions - The South Afircan Institute of Chartered Accountants' Circular 9/2006 - Transactions giving rise to adjustments to Revenue/Purchases - IFRS6 Exploration for and Evaluation of Mineral Resources - IFRIC Interpretation 5 Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds - IFRIC Interpretation 6 Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment - IFRIC Interpretation 7 Applying the Restatement Approach Under IAS 29 Financial Reporting in Hyperinflationary Economies - IFRIC Interpretation 9 Reassessment of Embedded Derivatives - IFRIC Interpretation 10 Interim Financial Reporting and Impairment - IAS 21 (Revised) The effects of Changes in Foreign Exchange Rates * Restated - refer note 9 CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 30 September Comparative information has been restated for the treatment of the Steel Tube segment as a discontinued operation (refer note 4), for the effects of the change in accounting policy in terms of IAS 19, the adoption of IFRS 2 and the requirements of Circular 9/2006. The aggregate effect of the above changes on the annual financial statements for the year ended 30 September 2005 is as follows: R million Previously Reclassification Other Restated stated of Discontinued restatements operation* Income statement Revenue 39 401 (1 603) ( 102) 37 696 Operating profit 3 480 ( 45) ( 12) 3 423 Fair value adjustments on financial instruments ( 56) ( 1) - ( 57) Finance costs ( 463) 25 ( 3) ( 441) Income from investments 187 ( 1) 12 198 Profit before exceptional items 3 148 ( 22) ( 3) 3 123 Exceptional items 4 3 - 7 Profit before taxation 3 152 ( 19) ( 3) 3 130 Taxation (1 033) ( 2) ( 9) (1 044) Profit after taxation 2 119 ( 21) ( 12) 2 086 Income from associates and joint ventures 57 ( 4) - 53 Net profit from continuing operations 2 176 ( 25) ( 12) 2 139 Profit/(loss) from discontinued operation 0 25 ( 1) 24 Net profit 2 176 - ( 13) 2 163 Attributable to: Minority shareholders 315 ( 1) 314 Barloworld Limited shareholders 1 861 - ( 12) 1 849 2 176 - ( 13) 2 163 Earnings per share (cents) - basic 897.4 - (5.7) 891.7 Earnings per share (cents) - diluted 877.3 - (5.6) 871.7 Balance Sheet Long term financial assets 840 - ( 185) 655 Deferred taxation assets 550 - 273 823 Inventories 4 825 - ( 32) 4 793 Trade and other receivables 5 897 - ( 38) 5 859 Other reserves 1 484 - ( 22) 1 462 Retained income 9 198 - ( 571) 8 627 Minority interest 646 - ( 2) 644 Total shareholders interest 12 725 - ( 595) 12 130 Deferred taxation liabilities 906 - ( 1) 905 Non-interest-bearing liabilities 404 - 659 1 063 Trade and other payables 5 208 - ( 45) 5 163 * Before restatement. 10 Portland Holdings Limited (Porthold) The results of Porthold, a wholly owned Zimbabwean subsidiary have not been consolidated into the Group results as at 30 September 2006. There are significant constraints impacting on the normal operation of Porthold and the board concluded that management does not have the ability to exercise effective control over the business. In view of the circumstances, the results of Porthold have continued to be excluded from the group results in the current year and have been accounted for on a fair value investment basis. 11 Related party transactions There has been no significant change in related party relationships since the previous year. The disposal of the Steel Tube division (note 4) to consortium including management and directors of Barloworld Robor (Pty) Limited is considered to be a related party transaction. An opinion has been obtained from an independent professional expert, approved by the JSE Limited, that the transaction is fair and reasonable to Barloworld shareholders. 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. 12 Post Balance Sheet events Subsequent to the year end, the disposal transaction of the UK Leasing assets has been concluded. The disposal of the Steel Tube segment has been approved by the competition authorities but is still subject to signature of the loan agreements. 13 Audit opinion The consolidated financial statements for the year have been audited by Deloitte & Touche and the accompanying unmodified audit report as well as their unmodified audit report on this set of condensed financial information is available for inspection at the company's registered office. This information is provided by RNS The company news service from the London Stock Exchange