BWO.L Regulatory News (BWO)

19 Nov 2007 07:01

Barloworld Ld19 November 2007 Barloworld Limited Audited Results for the year ended 30 September 2007 Barloworld Limited Highlights • Revenue from continuing operations up 23% to R43 238 million • Trading profit up 33% • Operating profit from continuing operations up 24% to R2 741 million • HEPS - from continuing operations up 13% - from continuing operations (excluding STC on special dividend) up 21% • Strategic actions completed ahead of schedule • Significant shareholder value unlocked - Special dividend of R1 billion (R5 per share) paid - R19,3 billion distribution of PPC shares to shareholders Clive Thomson, CEO of Barloworld, said: "Barloworld embarked on an exciting new course during 2007. The group has beenrepositioned as a distributor of leading international brands providingintegrated rental, fleet management, product support and logistics solutions. We made good progress in executing the strategic actions announced at our AGM on25 January 2007 to achieve that strategic positioning. PPC has been unbundled,the coatings division is being separately listed on the JSE Limited in earlyDecember and the scientific division and Freightliner truck business have beensold. These actions have unlocked significant value for our shareholders. The group delivered a strong trading performance during the year, driven by ourequipment division together with good performances from both automotive andlogistics. We have made significant progress on the transformation front during the yearand our broad-based BEE transaction is on track for implementation in the firsthalf of 2008. Barloworld is in a strong position to capitalise on favourable tradingconditions across most of our chosen business segments. The outlook for therefocused group is positive and, based on the currently prevailing economicclimate, we expect continued growth in all of our operations in the year ahead". Chairman and Chief Executive's Report Future direction of the group Barloworld has been repositioned as a distributor of leading internationalbrands providing integrated rental, fleet management, product support andlogistics solutions. The group will comprise businesses that fit this strategic profile, meet strictperformance criteria, and demonstrate good growth potential. Following the completion of our announced strategic actions the restructuredBarloworld group will consist of the following core divisions: • Equipment (earthmoving and power systems).• Automotive (car rental, fleet services and motor trading).• Handling (forklift truck distribution and fleet management).• Logistics (logistics and supply chain management). Strong trading performance The trading performance is based on the results from continuing operations andinclude, equipment, automotive, handling, logistics and the coatings division. Revenue from continuing operations increased by 23% to R43,2 billion, impactedby favourable trading conditions in most of the businesses. Operating profit from continuing operations rose by 24% to R2 741 million drivenby strong growth in the southern African equipment business and a pleasingresult in Spain. The automotive division continues to perform well, with asignificant contribution from Avis Rent a Car Southern Africa. The turnaround ofmotor retail Australia continued with the business more than doubling itsoperating profit. In southern Africa new vehicle sales slowed in the last sixmonths of the year. We have seen continued improvements in our handling businessin the UK and Europe while the marked slowdown in the US economy impacted the UShandling business. The logistics division is beginning to make a meaningfulcontribution to group profits with strong organic growth from the business inAfrica. PPC and scientific have been disclosed as discontinued in the current year. Coatings produced a good performance for the full year and will be disclosed asdiscontinued in 2008 following its unbundling and listing. A significant downsizing of the corporate office is substantially complete.Redundancy costs amounting to R92 million have been provided against operatingprofit. Estimated annualised savings from these initiatives amount toapproximately R100 million, certain of which have already been realised in 2007. Headline earnings per share (HEPS) from continuing operations increased by 13%to 811,7 cents per share. This was impacted by the R125 million secondarytaxation on companies (STC) charge provided on the R5 per share special dividendpaid on 2 April 2007. Adjusting for this STC charge, HEPS increased by 21%. In addition to the special distribution of 500 cents per share the boarddeclared a final dividend of 200 cents per share. The final dividend is notdirectly comparable to the prior period due to the unbundling of PPC. Theordinary dividends of 175 cents (interim) and 200 cents (final) declared inrespect of the current year's earnings, plus the final dividend of 166 centsdeclared by PPC (equivalent to 308 cents per Barloworld share) represent, intotal, an improvement of 14% over the dividends paid to shareholders last year. Strategic actions to unlock shareholder value Unbundling of PPC and Coatings The unbundling of Pretoria Portland Cement Company Limited (PPC) was completedin line with our stated timeline on 16 July 2007. This represented adistribution to shareholders of shares in PPC with a market value of R19,3billion. A decision was also taken to list the coatings division as Freeworld CoatingsLimited on the JSE Limited and unbundle its shares to Barloworld shareholders.The shareholder general meeting to approve this transaction will be held on 23November 2007 and, subject to the necessary approvals, the company will belisted on 3 December 2007 and its shares distributed to shareholders on 10December 2007. PPC and coatings will have a successful future as independent listed companiesand we wish the respective companies, boards and management teams well for thefuture. Disposal of businesses The sale of the steel tube division to a management and BEE consortium wasfinalised in November 2006 as was the sale of the major part of our UK leasingbook in the handling division. As stated at the half year, a decision was takento exit the Finaltair biomass energy joint venture in Spain. Within the handling division, we sold DitchWitch of Georgia in April 2007 andBarloworld Vacuum Technology and the Freightliner Truck Center operations inJuly 2007. A substantial part of the coatings Australia assets were sold at net asset valueto PPG Industries in July 2007. The decision to dispose of the scientific division is being implemented in linewith our stated timeframes. Melles Griot was sold in July 2007 for aconsideration around tangible net asset value. The laboratory business has beensold for approximately £75 million, subject to certain regulatory requirementsbeing met. The transaction is expected to be concluded before the end ofDecember 2007. Where applicable, impairment provisions have been made to write down goodwill orassets to their estimated recoverable amounts. BEE and transformation The process to finalise the details of the group's broad-based black economicempowerment (BEE) transaction is on track. Whilst the transaction will lead toapproximately 10% empowerment at holding company level, it is anticipated thatit will result in an effective 25% empowerment of our South African operations. Participants in the transaction will include employees, current and future blackmanagement, community-based corporate social investment (CSI) partners, blacknon-executive directors, as well as a number of strategic equity and blackbusiness partners. The transaction is expected to be implemented in the firsthalf of 2008. We have made good progress on the transformation of our South African businessesduring the year. We have appointed black CEOs within equipment (Dominic Sewela),motor retail (Litha Nkombisa) and logistics (Isaac Shongwe). Isaac Shongwe, Dominic Sewela and Sibani Mngomezulu (Executive - Governance andCorporate Affairs) were appointed to the group executive committee during theyear. Board and other management changes Clive Thomson was appointed as Chief Executive Officer (CEO) of BarloworldLimited effective from 18 December 2006. Dumisa Ntsebeza was appointed interim Chairman on 25 January 2007 and confirmedas Chairman on 6 June 2007. Isaac Shongwe was appointed as an executive director and CEO of BarloworldLogistics Africa, while Hixonia Nyasulu, Gordon Hamilton and Trevor Munday wereappointed as independent non-executive directors effective 26 January 2007. Warren Clewlow, Tony Phillips, John Gomersall, Mike Coward, Lester Day and EddieTheron retired from the board in the current year. We would like to thank themfor their valuable contributions to the company over many years. In other executive management moves, John Blackbeard has taken over as CEO ofthe handling division on 1 October 2007. Peter Bulterman has been appointed asCEO of equipment southern Africa and to the board of our Siberian joint venture,while Viktor Salzmann has taken over as the Managing director of equipmentIberia. Outlook Within our equipment division in southern Africa, growth in the mining andconstruction sectors is expected to result in a further increase in activity. Wehave entered into a joint venture in the mineral-rich Katanga province of theDemocratic Republic of Congo, which will provide us with further growthopportunities. In Angola, we expect increasing demand with a number ofsignificant infrastructure projects under way. In Iberia, we are seeing solid demand for equipment in Spain and expectconditions to remain stable for the short to medium term. Conditions inPortugal, however, are expected to remain weak in the short term. In the automotive division we expect sustained growth in the car rentalbusiness, however increased interest rates and the National Credit Act areimpacting the sales of passenger vehicles within motor retail. In the fleetservices business, we are delivering vehicles into new fleet contracts and arein a good position to further grow our fleet under management. Our handling business in Europe is benefiting from the streamlining of itsoperating structure. In the US, slowing economic conditions will carry throughto the business. Overall we expect to show good profit improvement next year asa result of the restructuring undertaken. Growth in the logistics division is expected to continue at a rapid pace insouthern Africa and various international expansion opportunities are beingexplored. The implementation of our BEE transaction in the first half of 2008 is anexciting development which is expected to deliver significant benefits to thegroup. We are in a strong position to capitalise on favourable trading conditionsacross most of our chosen business segments. The outlook for the refocused groupis very positive and, based on the currently prevailing economic climate, weexpect continued growth in all of our businesses in the year ahead. DB Ntsebeza CB ThomsonChairman Chief Executive Officer Group financial review Revenue from continuing operations increased by 23% to R43 238 million. Goodgrowth was delivered in the equipment division, particularly in Southern Africawhere demand was bolstered by mining and infrastructural projects. Operating profit from continuing operations rose by 24% to R2 741 million andthe operating margin was maintained at 6,3% (2006: 6,3%). The margin, andoperating profit, benefited in 2006 from a R149 million gain arising from thereduction in UK pension obligations. Included in favourable fair value adjustments on financial instruments of R287million (2006: R233 million) is a gain of R312 million arising from the markingto market of PPC shares. The shares are held as a hedge against the company'sliability to share option holders arising from the unbundling of PPC in July2007. Prior year fair value adjustments include R141 million gains in equipmentsouthern Africa which mainly arose prior to the implementation of hedgeaccounting and a foreign currency gain of R54 million. Finance costs increased by R274 million to R816 million. This was mainly due tohigher interest rates and increased working capital required to support thegrowth in revenue. Income from investments increased to R272 million (2006: R202 million) largelyas a result of the financing of growth in the Avis Fleet Services business bythe central treasury. Exceptional charges of R160 million includes the impairments of the Finaltairinvestment (R140 million), goodwill in Avis Scandinavia (R101 million) and Truck Center (R59 million), less the release of R197 millionfrom the foreign currency translation reserve following the disposal of offshoreassets and businesses in the handling division. Taxation rose by 4% to R658 million (2006: R633 million). Secondary Taxation onCompanies (STC) increased to R151 million (2006: R27 million) mainly due to thecharge of R125 million on the special R5 per share dividend paid in April 2007.The effective taxation rate (excluding exceptional items, STC and prior yeartaxation) was 29,0% (2006: 28,7%). Income from associates and joint ventures declined to R68 million (2006: R72million) due to slightly lower earnings in the automotive joint ventures. Headline earnings per share (HEPS) from continuing operations increased by 13%to 812 cents (2006: 720 cents). HEPS from discontinued operations for the current financial year amounted to 370cents(2006: 451 cents). The consolidated cash flow statement for 2007 includes the cash flows of alldivisions and businesses while they were subsidiaries of the Barloworld group. Net cash inflows before financing activities amounted to R379 million (2006:R698 million). Total assets declined by 14% to R30 655 million. The decline arose mainly due tothe unbundling of the cement division and the disposals of the UK lease assets,steel tube division, Melles Griot, Freightliner dealerships and most ofcoatings' Australian assets. The currency effect on translation of offshore net assets resulted in a decreaseof R229 million following the appreciation of the rand at30 September 2007 when compared with 30 September 2006. The vehicle rental fleet increased to R3 902 million (2006: R3 441 million). Assets classified as held for sale of R1 447 million (2006: R2 840 million)comprise the laboratories business (R972 million) and vehicles and equipmentrental fleets (R475 million). Total interest-bearing borrowings of R9 066 million reduced byR1 460 million in the year. The reduction was mainly attributable to theunbundling of PPC (R194 million) and the disposals referred to above. Borrowings in the three segments utilised in the group for gearing purposes, areall within the defined target ranges as follows: Total debt to equity (%) Trading Leasing Car rental Total groupTarget range 30 - 50 600 - 800 200 - 300Ratio at 30 September 2007 38 646 216 81 The total debt to equity ratio for the group of 81% compares to 73% last year. The maturity profile of the group's borrowings is weighted in favour of theshort-term component (52%). The group is planning to implement a BEE transactionearly in 2008 and it is expected that this will result in the replacement ofexisting short term debt with longer term borrowings. Cash and cash equivalents totalled R1 201 million(2006: R2 134 million). Reserving requirements in the company's captiveinsurance operations restrict the use of cash balances of R235 million (2006:R405 million). Dividends totalling 375 cents per share were declared in respect of this year'searnings (2006: 600 cents). The company paid a special 500 cents per share dividend on 2 April 2007. The year ahead The group's balance sheet remains strong and further reduction in debt willresult from the expected disposal of the laboratories business and the repaymentof intercompany debt on the unbundling of coatings. The group has committed £55million (R773 million) to address the funding deficit in the UK defined benefitpension funds. The focus in 2008 will be on concluding the unbundling of coatings, the disposalof laboratories, implementing the proposed BEE transaction and increasing thelong term component of our debt. In terms of International Financial ReportingStandards the BEE transaction will lead to a once-off, non cash, charge to theincome statement. DG WilsonFinance Director Pro forma results for restructured Barloworld The following pro forma represents the results of the Barloworld group for 2007and 2006 excluding the results of cement, steel tube, coatings, scientific, theUK lease book, and the Freightliner, DitchWitch, Vacuum Technology and Finaltairbusinesses. All these divisions and businesses have either been unbundled orsold this year or are in the process of being unbundled or sold. This analysis is prepared to assist readers to better understand the currentyear's operating performance of the core businesses that will comprise the "future" Barloworld group. Year ended 30 September UnauditedR million 2007 2006 % changeRevenue 38 378 30 312 27Trading profit 2 446 1 710 43Pension fund gain 149Corporate office redundancies and closure costs (92)Operating profit 2 354 1 859 27Fair value adjustments on financial instruments 295 224 2 649 2 083Net finance costs (522) (322)Profit before exceptional items 2 127 1 761 21Exceptional items (115) 117 2 012 1 878Taxation (657) (529) 24Secondary Tax on Companies (149) (26)Profit after taxation 1 206 1 323Income from associates and joint ventures 53 53Net profit 1 259 1 376Headline earnings 1 388 1 220 14Headline earnings per share (cents) 685 589 16Headline earnings per share excluding STC onspecial dividend (cents) 747 589 27 Revenue increased by 27% to R38 378 million mainly due to strong growth in theequipment division. Growth of 44% in the division's revenue was driven by thesouthern African region where demand was bolstered by mining and infrastructuralprojects. Trading profit rose by 43% to R2 446 million. Profit grew strongly in theequipment division on the back of higher revenue and in logistics which hasgrown rapidly since its formation in 2002. The corporate office redundancies and closure costs of R92 million in 2007relate to the downsizing of the South African and UK corporate offices and theclosure of the Botswana and Namibia corporate offices. Operating profit increased by 27% to R2 354 million (2006: R1 859 million). Favourable fair value adjustments on financial instruments of R295 million(2006: R224 million) relate mainly to the marking to market of PPC shares. In2006, gains of R141 million related to foreign currency transactions in thesouthern African equipment business. Most of these gains were incurred prior tothe adoption of hedge accounting which had the effect of reducing earningsvolatility arising from foreign currency fluctuations. Finance costs net of investment income increased by R200 million to R522 millionmainly due to higher interest rates and increased working capital requirements.It is anticipated that the coatings division will be unbundled withapproximately R900 million of debt which will favourably impact the future groupfinance costs. No benefit has been reflected in the year end 2007 pro formafigures. Exceptional items of R115 million (loss) include R101 million relating to theimpairment of goodwill in Avis Scandinavia. Taxation increased by 24% to R657 million. STC increased to R149 million (2006:R26 million) due to R125 million being incurred on the special dividend paid inApril 2007. Headline earnings increased by 14% to R1 388 million (2006: R1 220 million) andHEPS increased by 16% to 685 cents. 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 taxation assetsand liabilities. In the case of the leasing businesses, net assets are reducedby interest-bearing liabilities. Comparatives have been re-classified as per note 9. Equipment Operating profit Revenue Net operating Year ended Year ended assets 30 Sept 30 Sept 30 SeptR million 2007 2006 2007 2006 2007 2006- Southern Africa 9 333 6 212 972 504 2 740 2 304- Europe 7 422 5 415 612 474 3 738 3 368 16 755 11 627 1 584 978 6 478 5 672 Share of associate income 36 27 This division offers customers new, used and rental Caterpillar equipmentsolutions and support in 11 southern African countries as well as Spain,Portugal and Siberia. In southern Africa, record commodity prices continue to fuel expansion of minesand development of new mining projects, boosting results for the mining businessin terms of both new machine sales and product support. Our joint venture in the DRC's Katanga province received its first majorequipment orders from two new mining ventures. The Katanga operation dovetailswell with the growing opportunity in the adjoining Zambian copper belt. Accelerated infrastructural spend, particularly in South Africa and Angola, hasincreased demand for Caterpillar construction machines and the allied Metsocrushing and screening product. Activity in the used equipment joint ventureincreased, with machines sourced from the rental fleet providing an attractivealternative to competing brands. The Iberian business reported increased level of activity, driven by growth inpublic works construction and some market share gains. Indicators show thatinfrastructure spending by government remains strong in Spain. Constructionactivity is slow in Portugal with infrastructure investment dampened bygovernment spending constraints. New marketing strategies have been introduced in both the machine sales andafter sales segments in Iberia and these are expected to continue to yieldbenefits. The Siberian joint venture, Vostochnaya Technica, posted pleasing results basedon continued growth and diversification in mining, coupled with a number ofsignificant power generation orders. The after sales business also performedwell. The formal Common Goals agreement between Barloworld Equipment and Caterpillaris ensuring alignment on key strategies. The issues of lead times and machineavailability due to global demand remain a challenge. In order to sustain the equipment business through the current growth phase, wewill continue to make considerable investments in people, skills and facilities. The equipment division entered the new financial year with a healthy order bookamounting to R5,4 billion (2006: R4,8 billion). Automotive Operating profit Revenue Net operating Year ended Year ended assets 30 Sept 30 Sept 30 SeptR million 2007 2006 2007 2006 2007 2006- Southern Africa 1 209 1 108 325 250 2 820 2 400- Europe 1 134 805 81 69 2 427 2 536Car rental 2 343 1 913 406 319 5 247 4 936- Southern Africa 9 948 9 307 184 210 1 363 1 020- Australia 2 448 1 719 48 23 743 666Trading 12 396 11 026 232 233 2 106 1 686Leasing SouthernAfrica* 701 631 76 63 346 276 15 440 13 570 714 615 7 699 6 898Share of associateincome 17 27 * Net operating assets after deducting interest-bearing borrowings. Our integrated motor vehicle usage solutions strategy continued to yieldbenefits, with an improved 4,6% (2006: 4,5%) operating margin for the division. Avis Rent a Car Southern Africa increased profitability by 30% through firmerrates, higher rental days and improved utilisation, as well as benefits beingderived from a number of focused strategic initiatives. Our Scandinavian carrental business, which includes both Avis and Budget brands, reported animproved operating profit, driven by a strong performance in Norway and ourongoing operational and profitability initiatives. The Swedish operation hasbeen successfully turned around after last year's change in the vehicle pricingstrategy of a major supplier. A significant number of assets have been removedfrom the balance sheet across the region by converting corporate rental stationsinto licensees, the benefits of which will be realised going forward. In southern Africa, the record growth in new vehicle sales over the past threeyears has slowed in the last six months. Rising interest rates and theintroduction of the National Credit Act have been the major factors causing theslowdown. In spite of this, our dealership network, including associateoperations held up well. Notwithstanding an increase in Subaru units sold, thedepreciation of the rand against the yen placed severe pressure on margins whichnegatively affected our importation and distribution business and hencesignificantly impacted our southern African trading result. Our Australianoperation more than doubled its operating profit following the strategicrepositioning of our represented brands, against a background of an 8% growth inAustralian industry sales. Our fleet services business reported a 20% increase in profitability due tointerest rate margin improvement and a number of new contracts secured, both ofwhich will continue to positively benefit profitability into the future. NMI-DSM, our DaimlerChrysler empowerment joint venture, delivered positiveresults for the year. However, the start-up costs in Phakisaworld FleetSolutions, our fleet services empowerment joint venture, and our exit from AuricAuto early in the year negatively impacted the associate result when compared tothe prior year. Handling Operating profit Revenue Net operating Year ended Year ended assets 30 Sept 30 Sept 30 SeptR million 2007 2006 2007 2006 2007 2006- Europe 2 690 1 995 55 23 688 670- North America 4 330 4 697 72 115 579 1 180Trading 7 020 6 692 127 138 1 266 1 850Leasing* 164 353 6 8 107 292 7 184 7 045 133 146 1 373 2 142 * Net operating assets after deducting interest-bearing borrowings. At the January 2007 Barloworld annual general meeting it was announced that wewould substantially restructure the group in order to bring about a more focusedbusiness entity. It was decided to focus activities within the division on itscore materials handling business, Hyster forklifts and related product. Allother businesses have been exited. This included the US and UK leasingbusinesses, the Freightliner operation, DitchWitch and the Vacuum Technologybusiness in the UK. Consequently the reported results above are not comparableand have been restated below to reflect the core handling operations only andshow a 14% operating profit growth off a much reduced revenue level. Operating profit Revenue Year ended Year ended 30 Sept 30 SeptHandling businesses 2007 2006 2007 2006- Europe 2 628 1 937 51 21- North America 1 879 1 810 71 83Trading 4 507 3 747 122 104Leasing 164 353 6 8 4 671 4 100 128 112 The total UK market showed good growth of 8% despite the manufacturing sectordeclining significantly in line with the strong currency position. Our progresswas impacted by the process change required in new equipment contract financingas a result of the sale of the leasing business. The operating profit of theEuropean businesses includes redundancy costs of €600 000 depressing its strongtrading performance. The total European open order book remains strong at avalue of £44,3 million reflecting 1 834 units against 1 461 units last year. There was a marked slowdown in the US economy during the year and this carriedthrough to our business. In 2007, the south eastern US industry declined by 20%,while our sales decreased by 10% to 3 502 units. Despite the reduced market wefinished the year strongly and the order book grew by 239 trucks over last yearto 1 078 units at a value of $39 million. Logistics Revenue* Operating profit Net operating Year ended Year ended assets 30 Sept 30 Sept 30 SeptR million 2007 2006 2007 2006 2007 2006Southern Africa 1 088 683 76 37 400 433Europe 371 280 19 28 67 50 1 459 963 95 65 467 483 *Excludes intergroup revenue of R747 million (2006: R666 million). Since its formation during 2002, Barloworld Logistics has grown into one of theleading logistics and supply chain management businesses in southern Africa withcomplementary operations in Iberia, the UK, USA and UAE, a staff complement of 1700 and approximately R5 billion annual logistics activity under management. What was particularly pleasing this year was the coming of age of BarloworldLogistics Africa who continued to lead the local industry through strong organicgrowth and BEE transformation. Our business in Iberia had to digest the loss ofa major client whilst at the same time implementing new systems and proceduresto bring them more in line with the southern African logistics business model. Reported revenue up 52% excludes approximately R747 million (2006: R666 million)of intra-company revenue. We have experienced strong organic growth through ourblue-chip client base inside and outside the Barloworld group. Our ability toachieve such growth while keeping the net asset base constant highlights theasset efficiency of our logistics business model as well as tight workingcapital management. We expect the logistics industry to continue as one of the world's most dynamicand exciting industries for the foreseeable future. During next year this shouldtranslate into continued, strong organic growth in Africa, especially southernAfrica. At the same time we will be exploring a number of international growthopportunities for the division. Coatings Revenue Operating profit Net operating Year ended Year ended assets 30 Sept 30 Sept 30 SeptR million 2007 2006 2007 2006 2007 2006Southern Africa 2 347 2 024 383 331 817 752 Share of associate income 15 18 The division will be unbundled from Barloworld, subject to attaining therequired approval, before the end of 2007. The year was characterised by further strong performances from the African-basedoperations. We reported last year that the investment in the Australianoperations would be reduced. In line with this, the division sold a substantialpart of the Australian investment which resulted in a significantly lower assetintensive presence in Australia, but leaving the division potential to take upfuture opportunities in the Asia Pacific region. Operating profit, including ourAustralian operations up to the date of sale to PPG Industries, was up 26%. We were also pleased to implement our first BEE transaction in the automotivebusiness with our partners Izingwe Holdings taking a stake in the Prostartrefinish operations. Cement Revenue Operating profit Net operating Year ended Year ended assets* 30 Sept 30 Sept 30 SeptR million 2007 2006 2007 2006 2007 2006Southern Africa 4 016 4 863 1 527 1 903 0 2 565 Share of associate income 5 0 * Net operating assets include goodwill arising on PPC shares purchased byBarloworld. PPC was unbundled from Barloworld on 16 July 2007 and resulted in a distributionto Barloworld shareholders of PPC shares with a market value of R19,3 billion. The group provided another solid performance on the back of continued growth incement volumes. Operating profit for the nine months to end June was 12% higherthan last year. Buoyant market conditions necessitated the import of cement, tomeet customer demand. The imported cement was produced abroad to PPCspecifications and sold at negligible margin. We focused on maximising ourefficiencies, though this was not without its challenges due to increasedenergy, logistics and maintenance costs. The Batsweledi (Dwaalboom) capacity expansion project is progressing withinbudget and on time. Plant commissioning is expected in April 2008 bringing 1,25million tons per year additional capacity. Higher plant maintenance activity at our major customers impacted local salesvolume of lime. Notwithstanding this decline there was a significant increase inoperating profit largely due to the impact of renegotiated long-term supplyagreements. Scientific Revenue Operating profit Net operating Year ended Year ended assets 30 Sept 30 Sept 30 SeptR million 2007 2006 2007 2006 2007 2006Europe 1 191 1 027 104 62 683 834North America 388 429 (4) 10 71 316Asia 121 146 4 8 8 109 1 700 1 602 104 80 762 1 259 The Melles Griot business was sold to CVI Laser during the year with completionof the sale taking place in July 2007. Melles Griot started the year strongly with recoveries in Japan and Europe.While the sales run rate was lower than the previous year, the operating profitrun rate for the 10 months of the financial year to July 2007 was 11% higher. Nova Capital Management has signed an agreement to purchase the laboratorybusiness for approximately £75 million and the transaction is expected to becomplete by the end of December 2007. The laboratory group continued to show good improvement in operating profitdespite revenue being flat. This has been achieved through better control of thecost base and growth in the higher margin scientific equipment businesses.Demand grew in Spain, France, Germany and the US but trading conditions in theUK and Italy remained difficult. Corporate and other Revenue Operating profit Net operating Year ended Year ended assets 30 Sept 30 Sept 30 SeptR million 2007 2006 2007 2006 2007 2006Southern Africa 53 52 (111) (57) 633 491Europe 0 0 (57) 129 (807) (669) 53 52 (168) 72 (174) (178) In southern Africa, results were adversely affected by redundancy and relatedcosts of R81 million associated with the downsizing of the South African corporate office and the closure of the Botswana and Namibia corporate offices. In Europe, the downsizing and relocation of the London office to Maidenheadincurred costs of R11 million (£0,8 million). In 2006 a pre-tax gain of R149million (£10,5 million) arose due to a reduction in the defined benefit pensionliabilities in the United Kingdom. Net operating assets increased in southern Africa mainly due to the PPC sharesheld to cover the company's liability to share option holders. The PPC sharesare carried at market value. As a result of the redundancy initiatives, annualised cost savings ofapproximately R100 million is expected to be achieved. DIVIDEND DECLARATIONfor the year ended 30 September 2007 Dividend number 158 Notice is hereby given that the following dividend has been declared in respectof the year ended 30 September 2007: Number 158 (final dividend) of 200 centsper ordinary share (2006: final dividend of 450 cents per ordinary share). In compliance with the requirements of the JSE Limited, the following dates areapplicable. Date declared Monday, 19 November 2007Last day to trade cum dividend Friday, 4 January 2008First trading day ex dividend Monday, 7 January 2008Record date Friday, 11 January 2008Payment date Monday, 14 January 2008 Share certificates may not be dematerialised or rematerialised between Monday, 7January 2008 and Friday, 11 January 2008, both days inclusive. On behalf of the boardS MngomezuluSecretary CONSOLIDATED INCOME STATEMENTfor the year ended 30 September Audited %R million Notes 2007 2006* changeContinuing operationsRevenue 43 238 35 281 23Trading profit 2 741 2 058 33Pension fund gain 149Operating profit 2 741 2 207 24Fair value adjustments on financial instruments 287 233Finance costs (816) (542)Income from investments 272 202Profit before exceptional items 2 484 2 100 18Exceptional items 3 (160) 116Profit before taxation 2 324 2 216Taxation (658) (633)Secondary taxation on companies (151) (27)Profit after taxation 1 515 1 556Income from associates and joint ventures 68 72Net profit from continuing operations 1 583 1 628Discontinued operationsProfit from discontinued operations 4 976 1 118Net profit 2 559 2 746Attributable to:Minority shareholders 289 389Barloworld Limited shareholders 2 270 2 357 2 559 2 746Earnings per share (cents)- basic 1 120,0 1 138,9- diluted 1 099,6 1 117,1Earnings per share from continuing operations (cents)- basic 773,7 764,4- diluted 759,6 749,8Earnings per share from discontinued operation (cents)- basic 346,3 374,5- diluted 340,0 367,3 * Reclassified - refer note 9 CONSOLIDATED BALANCE SHEETat 30 September AuditedR million Notes 2007 2006ASSETSNon-current assets 12 019 14 289Property, plant and equipment 6 847 8 299Goodwill 2 046 3 005Intangible assets 274 323Investment in associates and joint ventures 928 749Finance lease receivables 619 566Long-term financial assets 686 597Deferred taxation assets 619 750Current assets 18 636 21 365Vehicle rental fleet 3 902 3 441Inventories 5 869 5 907Trade and other receivables 6 185 7 026Taxation 32 17Cash and cash equivalents 1 201 2 134Assets classified as held for sale 4 1 447 2 840Total assets 30 655 35 654EQUITY AND LIABILITIESCapital and reservesShare capital and premium 223 327Other reserves 2 584 3 461Retained income 8 334 9 881Interest of shareholders of Barloworld Limited 11 141 13 669Minority interest 80 691Interest of all shareholders 5 11 221 14 360Non-current liabilities 6 638 7 920Interest-bearing 4 379 5 475Deferred taxation liabilities 610 870Provisions 344 468Other non-interest-bearing 1 305 1 107Current liabilities 12 796 13 374Trade and other payables 6 854 6 663Provisions 600 536Taxation 445 705Amounts due to bankers and short-term loans 4 687 4 409Liabilities directly associated with assets classified as held for sale 4 210 1 061Total equity and liabilities 30 655 35 654 Condensed consolidated cash flow statementfor the year ended 30 September AuditedR million 2007 2006Cash flows from operating activitiesOperating cash flows before movements in working capital 6 370 6 077Increase in working capital (531) (10)Cash generated from operations 5 839 6 067Finance costs (902) (630)Realised fair value adjustments on financial instruments (16) 136Dividends received from investments and associates 41 104Interest received 338 261Taxation paid (1 412) (1 007)Cash flow from operations 3 888 4 931Cash flow from operations - continuing operations 2 695 2 533Cash flow from operations - discontinued operations 1 193 2 398Dividends paid (including minority shareholders) (2 629) (1 295)Cash retained from operating activities 1 259 3 636CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of subsidiaries, investments and intangibles (349) (814)Proceeds on disposal of subsidiaries, investments and intangibles 1 432 44Net investment in fleet leasing and rental assets (2 283) (2 108)Acquisition of other property, plant and equipment (1 485) (1 217) Replacement capital expenditure (451) (508) Expansion capital expenditure (1 034) (709)Proceeds on disposal of property, plant and equipment 121 593Proceeds on sale of leasing assets 1 684 564Net cash used in investing activities (880) (2 938)Net cash inflow before financing activities 379 698CASH FLOWS FROM FINANCING ACTIVITIESProceeds on share issue 139 90Buy-back of shares in company (1 160)Proceeds from long-term borrowings 1 376 1 742Repayment of long-term borrowings (3 207) (1 903)Increase in short-term interest-bearing liabilities 704 1 007Net cash used in financing activities (988) (224)Net (decrease)/increase in cash and cash equivalents (609) 474Cash and cash equivalents at beginning of year 2 134 1 399Effect of foreign exchange rate movement on cash balance (6) 242Effect of cash balances classified held for sale 19 Effect of cash balance on unbundling PretoriaPortland Cement (318) -Cash and cash equivalents at end of year 1 201 2 134Cash balances not available for use due to reserving restrictions 235 405Acquisition of subsidiaries, investments and intangibles:Inventories acquired 57Receivables acquired 226Payables, taxation and deferred taxation acquired (230)Borrowings net of cash (512)Property, plant and equipment, non-current assets, goodwill and minority shareholders 744Total net assets acquired 285Goodwill arising on acquisitions 238Net cash cost of subsidiaries acquired 523Investments and intangible assets acquired 349 291Cash amounts paid to acquire subsidiaries, investments and intangibles 349 814Bank balances and cash in subsidiaries acquired 12 CONSOLIDATED STATEMENT OF RECOGNISED INCOMEAND EXPENSE for the year ended 30 September AuditedR million 2007 2006Exchange differences on translation of foreignoperations (513) 1 832(Loss)/gain on cash flow hedges (163) 139Deferred taxation on cash flow hedges 39 (18)(Loss)/gain of revaluation of available for sale investments (22) 18Deferred taxation on revaluation of available for sale investments (8)Other reserve movements (71)Net actuarial losses on post-retirement benefit obligations (54) (55)Actuarial losses on post-retirement benefit obligations (42) (79)Taxation effect (12) 24Net (loss)/income recognised directly in equity (713) 1 837Net profit 2 559 2 746Total recognised income and expense for the year 1 846 4 583Attributable to:Minority shareholders 289 381Barloworld Limited shareholders 1 557 4 202 1 846 4 583 SALIENT FEATURES for the year ended 30 September AuditedR million 2007 2006*Number of ordinary shares in issue, net of buy-back (000) 203 843 200 716Net asset value per share including investments at fair value(cents) 5 714 6 973Total borrowings to total shareholders' funds (%)- Trading segment** 38,2 31,3- Total group 80,8 73,3Interest cover (times)- Trading segment** 5,1 6,6- Total group 3,4 3,7Return on net assets (%)- Trading segment** 28,9 27,8- Total group 20,6 19,8Cash flow return on investment - CFROI(R) (%) 12,2 12,3Return on ordinary shareholders' funds(excluding exceptional items) (%) 18,9 18,0 * Reclassified - refer note 9. ** Trading segment includes manufacturing and dealership businesses, butexcludes leasing and car rental. CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 September 1. BASIS OF PREPARATION This report has been has been prepared in accordancewith International Accounting Standard (IAS) 34 Interim FinancialReporting and was extracted from the group consolidated financialstatements, which have been prepared in accordance withInternational Financial Reporting Standards (IFRS), in compliance withthe Companies Act of South Africa and the Listing Requirements ofthe JSE Limited. The basis of preparation is consistent with the prioryear, except as detailed in note 9 below. For a better understanding of the group's financial position, theresults of its operations and cash flows for the year, this summarisedreport should be read in conjunction with the annual financialstatements from which it was derived. 2 Reconciliation of net profit to headline earnings AuditedR million 2007 2006*Net profit attributable to Barloworld Limited shareholders 2 270 2 357Loss on disposal of discontinued operations net of taxation 60 156Loss/(profit) on disposal of properties, investments and subsidiaries 20 (140)Impairment of assets 323 27Realisation of translation reserve on disposal of offshore subsidiaries (197) -(Profit)/loss on sale of plant and equipment (excludingrental assets) and intangible assets (7) 4Taxation on exceptional items (79) 19Interest of minority shareholders in exceptional items 4 -Headline earnings 2 394 2 423Headline earnings from continuing operations 1 645 1 489Headline earnings from discontinued operation 749 934Weighted average number of ordinary sharesin issue during the year (000)- basic 202 673 206 959- diluted 206 444 210 998Headline earnings per share (cents)- basic 1 181,3 1 170,8- diluted 1 159,7 1 148,4Headline earnings per share from continuingoperations (cents)- basic 811,7 719,5- fully diluted 796,9 705,7Headline earnings per share from discontinuedoperation (cents)- basic 369,6 451,3- diluted 362,8 442,7 *Reclassified - refer note 9. 3. Exceptional items (Loss)/profit on disposal of properties, investmentsand subsidiaries (34) 139Realisation of translation reserve on disposal of offshore subsidiaries 197 -Net impairment of property, plant and equipment,investments and goodwill (323) (23)Gross exceptional (losses)/profits (160) 116Taxation 79 (19) (81) 97Discontinued operation (net of taxation and minorities) 9 (3)Net exceptional (losses)/profits (71) 94 4. Discontinued operations and assets classified as held for sale Following the decision to dispose of Scientific, Steel tube andCoatings Australia and the unbundling of Cement, these segments have beenclassified as discontinued. All the disposals have been concluded at balancesheet date, with the exception of the Laboratory business, a division ofScientific. Results from discontinued operation are as follows:Revenue 7 021 9 187Operating profit 1 630 2 021Fair value adjustments on financial instruments 13 (4)Finance costs (86) (88)Income from investments 68 74Profit before exceptional items 1 625 2 003Exceptional items (gross of taxation) 14 (3)Profit before taxation 1 639 2 000Taxation (609) (730)Profit after taxation 1 030 1 270Income from associates and joint ventures 6 4Net profit of discontinued operation beforeimpairment loss 1 036 1 274Impairment loss on write-down to fair value less costs to sell (63) (185)Taxation on impairment loss 3 29Impairment loss after taxation (60) (156)Profit from discontinued operations per income statement 976 1 118 *Reclassified - refer note 9. 4. Discontinued operations and assets classified as held for sale (continued) The cash flows from the discontinued operations are as follows:Cash flows from operating activities (16) 1 339Cash flows from investing activities 349 (404)Cash flows from financing activities (811) (51)Assets classified as held for sale consist of the following:- Laboratory 972- Steel Tube 715- Handling leasing assets# 1 717- Rental fleets, leasing and other assets 475 249- Other 159 1 447 2 840Liabilities directly associated with assets classified asheld for sale consist of the following:- Laboratory 210- Steel Tube 347- Handling leasing assets# 597- Other 117 210 1 061 5. Interest of all shareholders Balance at the beginning of the year 14 360 12 130Net (loss)/income recognised directly in equity (713) 1 837Net profit for the year 2 559 2 746Reclassifications and other reserve movements 9 46Purchase of minority shareholding in subsidiary (34)Buy-back of shares (1 160)Dividends/capital distributions on ordinary shares (2 629) (1 295)Effect of Cement unbundling (2 504)Shares issued in current year 139 90Interest of shareholders at the end of the year 11 221 14 360 * Reclassified - refer note 9. # In addition, an amount of R916 million intergroup borrowings had to besettled from the proceeds of the sale of the assets. 6. Dividends Ordinary sharesFinal dividend No 155 paid on 15 January 2007: 450 centsper share (2006: No 153 - 325 cents per share) 911 745Special dividend paid on 2 April 2007: 500 cents per share 1 017Interim dividend (Capital distribution) No 157 paid on2 July 2007:175 cents per share (2006: No 154 - 150 cents per share) 357 312 2 285 1 057Dividend attributable to the treasury shares (62)Paid to Barloworld Limited shareholders 2 285 995Paid to minority shareholders 344 300 2 629 1 295Dividends per share (cents) 375 600- interim (declared May) 175 150- final (declared November) 200 450 7. CONTINGENT LIABILITIESBills, lease and hire-purchase agreements discounted withrecourse,other guarantees and claims 989 622The group has given guarantees to the purchaser of the coatings Australianbusiness relating to environmentalclaims. The guarantees are for a maximum period of seven years and arelimited to the sales price receivedfor the business.Warranties and guarantees have been given as a consequenceof the various disposals completed during the year. Noneare expected to have a material impact on the financial results of the group.Litigation, current or pending, is not considered likely tohave a material adverse effect on the group.Buy-back and repurchase commitments not reflected on thebalance sheet 449 1 250 The related assets are estimated to have a value at least equal tothe repurchase commitment. There are no material contingent liabilities in joint venture companies. 8. COMMITMENTS Capital expenditure commitments to be incurred:Contracted 1 908 2 106Approved but not yet contracted 383 999 2 291 3 105Operating lease commitments 1 939 2 509Finance lease commitments 877 1 050 9. Accounting policies and comparative information The group adopted the following amended standard and new interpretations duringthe current year: - IFRIC Interpretation 4 Determining Whether an Arrangement Contains a Lease - IFRIC Interpretation 12 Service Concession Arrangements - IFRIC Interpretation 14 IAS 19: Limit on a Defined Benefit Asset; Minimum Funding Requirement and their interaction - IAS 23 Borrowing costs Amendment - The South African Institute of Chartered Accountants Circular 8/2007 on Headline Earnings The impact of adopting these standards was not significant. Comparative information has been restated for the treatment of Cement,Scientific and Coatings Australia businesses as discontinued operations (refernote 4). The aggregate effect of the above changes on the annual financial statements forthe year ended 30 September 2006 is as follows: Reclassification Previously of discontinuedR million stated operations ReclassifiedIncome statementRevenue 42 693 (7 412) 35 281Operating profit 4 133 (1 926) 2 207Fair value adjustments on financial instruments 235 (2) 233Finance costs (605) 63 (542)Income from investments 273 (71) 202Profit before exceptional items 4 036 (1 936) 2 100Exceptional items 120 ( 4) 116Profit before taxation 4 156 (1 940) 2 216Taxation (1 211) 578 (633)Secondary taxation on companies (159) 132 (27)Profit after taxation 2 786 (1 230) 1 556Income from associates and joint ventures 72 0 72Net profit from continuing operations 2 858 (1 230) 1 628(Loss)/profit from discontinued operation (112) 1 230 1 118Net profit 2 746 - 2 746Attributable to:Minority shareholders 389 - 389Barloworld Limited shareholders 2 357 - 2 357 2 746 - 2 746Earnings per share (cents) - basic 1 138,9 - 1 138,9Earnings per share (cents) - diluted 1 117,1 - 1 117,1 The restatements have not impacted on the balance sheet and cash flow statement. 10. Related party transactions There has been no significant changes in related-party relationships since theprevious year. The sale of the Steel Tube division to a management and BEE consortium wasfinalised in November 2006. The results of the division for the two months ofthe financial year up its disposal were included in the current earnings, butwere not material to the group. The sale proceeds were received during the yearand in accordance with the sale agreement, an interest- bearing loan of R118million was advanced to the purchaser, secured by owned properties Other than in the normal course of business, there have been no othersignificant transactions during the year with associate companies, jointventures and other related parties. 11. Post-Balance Sheet events Subsequent to the year-end the following material events have occurred: - An agreement has been signed for the disposal of the Laboratory business. Thedisposal will become effective once certain conditions precedent are fulfilled. - A circular relating to the proposed unbundling of the Coatings division and aprelisting statement for that business, have been sent to shareholders. Theunbundling is subject to shareholder and other regulatory approval. Inter-groupborrowings of R855 million were settled by Coatings on 5 November 2007. - The group has committed to pay £55 million (R759 million) to address thefunding deficit in the UK pension funds. An amount of £35 million (R483 million)has been paid to date. 12. Audit opinion The consolidated financial statements for the year have been audited by Deloitte& Touche and the accompanying unmodified audit report as well as theirunmodified audit report on this set of condensed financial information isavailable for inspection at the company's registered office. Segmental Summary (audited) Fair value adjustments on Operating profit/(loss) financial instruments Revenue Year ended Year ended Year ended 30 Sept 30 Sept 30 SeptR million 2007 2006 2007 2006 2007 2006Equipment 16 755 11 627 1 584 978 (9) 141Automotive 15 440 13 570 714 615 (7) 21Handling 7 184 7 045 133 146Logistics 1 459 963 95 65Coatings 2 347 2 024 383 331 (8) 9Corporate 53 52 (168) 72 311 62Total continuingoperations 43 238 35 281 2 741 2 207 287 233Scientific 1 700 1 602 104 80Cement 4 016 4 863 1 527 1 903 13 2Steel tube 348 1 775 32 95 (6)CoatingsAustralia 957 947 (33) (57)Total discontinuedoperations 7 021 9 187 1 630 2 021 13 (4)Total group 50 259 44 468 4 371 4 228 300 229 Operating profit/(loss) including Net operating fair value adjustments assets/ (liabilities) Year ended 30 Sept 30 SeptR million 2007 2006 2007 2006Equipment 1 575 1 119 6 478 5 672Automotive 707 636 7 699 6 898Handling 133 146 1 373 2 142Logistics 95 65 467 483Coatings 375 340 817 752Corporate 143 134 (174) (178)Total continuingoperations 3 028 2 440 16 660 15 769Scientific 104 80 762 1 259Cement 1 540 1 905 2 565Steel tube 32 89 368Coatings Australia (33) (57) 286Total discontinuedoperations 1 643 2 017 762 4 478Total group 4 671 4 457 17 422 20 247 ADDRESSESRegistered office and business addressBarloworld Limited180 Katherine StreetPO Box 782248Sandton2146, South AfricaTel: +27 11 445 1000Email: invest@barloworld.com Transfer secretaries - South AfricaLink Market Services South Africa (Proprietary) Limited(Registration number 2000/007239/07)11 Diagonal StreetJohannesburg, 2001(PO Box 4844, Johannesburg)Tel: +27 11 630 0000 Registrars- United KingdomEquiniti LimitedAspect House, Spencer RoadLancing, West SussexBN99 6DA, EnglandTel: +44 190 383 3381 Transfer secretaries - NamibiaTransfer Secretaries (Proprietary) Limited(Registration number 93/713)Shop 8, Kaiser Krone CentrePost Street MallWindhoek, Namibia(PO Box 2401, Windhoek, Namibia)Tel: +264 61 227 647 ABOUT BARLOWORLD Barloworld is a distributor of leading international brands providing integratedrental, fleet management, product support and logistics solutions. The coredivisions of the group comprise equipment (earthmoving and power systems),automotive (car rental, fleet services and motor trading), handling (forklifttruck distribution and fleet management) and logistics (logistics and supplychain management). We offer flexible, value adding, integrated business solutions to our customersbacked by leading global brands. The brands we represent on behalf of ourprincipals include Caterpillar, Hyster, Avis, Budget, Mercedes, Chrysler, BMW,General Motors, Ford, Toyota, Volkswagen, Audi, Nissan, Subaru, Renault, Volvoand others. Barloworld has a proven track record of effectively managing long-termrelationships with global principals and customers. We have an ability todevelop and grow businesses in multiple geographies including challengingterritories with high growth prospects. One of our core competencies is anability to leverage systems and best practices across our chosen businesssegments. As an organisation, we are committed to play a leading role inempowerment and transformation. The company was founded in 1902 and currently has operations in 26 countriesaround the world with approximately half of our 19 000 people in South Africa. For background information visit www.barloworld.com 19 November 2007Sponsor: J P Morgan This information is provided by RNS The company news service from the London Stock Exchange