BWO.L Regulatory News (BWO)

15 May 2006 08:02

Barloworld Ld15 May 2006 Barloworld Limited Reviewed interim results for the six months ended 31 March 2006 Corporate action enhances group profile and performance * Revenues up 8% to R19 462 million (1H'05: R18 015 million) * Operating profit increases 16% to R1 748 million (1H'05: R1 511 million) * Strong performance in cement and turnaround in scientific business * Cash generated from operations up 30% to R 1 913 million * Headline earnings per share up 10% to 402 cents (1H'05: 367 cents) * Dividend increased 15% to 150 cents per share * Intended disposal of steel tube division announced Tony Phillips, CEO of Barloworld, said: "In line with our ongoing focus on value creation, we made progress in a numberof areas during the period. Highlights included a strong performance from ourcement business, the turnaround in the scientific operations and theannouncement of the intended sale of the steel tube division. For the full yearwe expect continued growth in our southern African businesses and furtherrecovery from the offshore operations." 15 May 2006 Enquiries Barloworld Limited: Rowan Goeller Tel +27 11 445 1300 e-mail rowang@barloworld.com For background information visit www.barloworld.com Chairman & Chief Executive's Report First half sets platform for full year Group revenue grew by 8% due to increased activity in our cement, equipment,coatings and motor businesses within southern Africa. Operating profitincreased by 16%, with margins rising to 9.0% (1H'05: 8.4%). Notable resultswere the strong performance of our cement business and the turnaround in ourscientific operations. Cash generated from operations increased by 30% to R1 913million. Headline earnings per share increased by 10% to 402 cents per share. Thedividend has been increased by 15% to 150 cents per share for the interimperiod. Corporate action enhances group profile and performance We are pleased to report significant steps taken in streamlining the futuregroup profile. In particular, negotiations have reached an advanced stage inrelation to the disposal of the steel tube business to a management ledconsortium which includes black economic empowerment. It is anticipated thatthis transaction will be concluded soon. In addition negotiations have commenced to sell our US handling lease book andwe are investigating various alternatives in respect of the UK handling leasingbusiness. The focus on restructuring businesses that are not achieving our requiredreturns has proved to be successful in the scientific group and Truck Center. Weare currently in an advanced stage of remodeling and restructuring the UKhandling business. On the acquisition front, the offer for Wattyl Limited amounting to R1 411million (A$321 million) still remains subject to competition authority approvalin Australia. Approval has been received from the South African competition authorities forthe acquisition of Prostart (automotive refinish) and Midas Paints in thecoatings division. These two transactions are expected to contribute positivelyto the division in the second half. In the Motor division the purchase of the Avis and Budget operations in Denmarkwas completed during November 2005 and we have also acquired the 50% stake inAvis Fleet Services owned by Wesbank with effect from 14 April 2006. Directorate Ms Sibongile Mkhabela was appointed to the board on 27 January 2006. As anindependent non-executive director she will bring a diverse range of skills toour board deliberations and we look forward to her contribution. Outlook Our southern African operations contributed 85% of operating profit for theperiod and their strong performance is expected to continue. In particular, thecivil construction sector is forecast to enter a period of sustained growth asgovernment and private enterprise starts to invest in infrastructure and growthopportunities. The mining industry is also starting to invest in major expansionprojects. This will benefit our cement, equipment and logistics divisions.Firmer rental rates and continued strong rental and new vehicle demand shouldboost the result from our motor division, and the coatings division shouldbenefit from the growth initiatives put in place in the first half. In Spain, the construction outlook remains buoyant and strong publicinfrastructure spend is expected to continue for the medium-term. Evidence of the strength of demand for capital equipment in all territories canbe seen in the fact that we currently have the largest ever order book at R5.1billion placed on Caterpillar Inc. in the 78 years of our partnership. Our handling business in the US continues to be underpinned by solid growth inthe south-east region. Management initiatives in the Truck Center are achievingpositive results and we expect a strong contribution in the second half with arecord order book of over 3 000 trucks. Trading conditions in the UK are currently weak and this is affecting ourhandling and scientific businesses. However, we look forward to an improvedperformance from our handling business as the benefits from the cost reductioninitiatives are realised. In line with our focus on value creation, we will continue with our efforts togrow in areas where we have core expertise and dispose of interests that nolonger fit the profile of the group. We expect to achieve our medium-term goalof doubling the value of the company in four years by the end of this year. Overall, we anticipate an improved result in the second half and resulting goodgrowth for the full year. WAM Clewlow AJ Phillips Chairman Chief Executive Officer Group Financial Review Cement drives operating performance Strong demand in most of the southern African businesses boosted revenue fromcontinuing operations by 8% to R19 462 million. Operating profit rose by 16% to R1 748 million driven by a strong performance inour cement business. Operating profit margins increased to 9.0% (1H'05: 8.4%). Headline earnings per share of 402 cents (1H'05: 367 cents) is 10% higher thanlast year. The charge for fair value adjustments on financial instruments increased to R69million (1H'05: R47 million) and arises mainly from the effect of randappreciation on marking to market forward cover contracts in the equipmentbusiness. It also includes the impact of marking to market the option contracttaken out to hedge the exchange rate risk on the proposed Wattyl transaction. Finance costs increased to R245 million (1H'05: R199 million), principally as aresult of the acquisition of Avis Denmark in November 2005 and increases inworking capital in line with activity levels. The taxation charge (before STC) of R439 million represents an effective taxrate of 29.1% (1H'05: 30.0%), excluding prior year taxation and taxation onexceptional items. The increase of 12% in the STC charge to R116 million is aconsequence of the higher final dividend paid by the company in January 2006. Net profit from continuing operations rose by 15% to R1 008 million (1H'05: R878million). Steel tube business disclosed as discontinued Following progress made in disposing of the steel tube division it has beenaccounted for as a discontinued operation and is separately disclosed in thecurrent and comparative reporting period. The loss of R116 million from thediscontinued operation includes an impairment charge which has been recorded inorder to reflect the net assets of the division at the anticipated recoverableamount from the disposal. Gearing target revised Total interest-bearing borrowings of R9 762 million represent a group debt toequity ratio of 78% (September 2005: 63%). The gearing for the trading, leasingand car rental segments is as follows: Total debt to Trading Leasing Car rental Total Groupequity (%) Target range 20 - 40 600 - 800 200 - 300 Ratio at31 March 2006 35 589 275 78 Interest cover for the trading segment at 10.5 times remains well above the 5times target. The group therefore has the financial flexibility to increase itsdebt to equity ratio for the trading segment and the board has approved arevised target range of 30-50%. Capital structure optimisation In order to simplify its capital structure, the company is seeking approval fromshareholders for the repurchase and cancellation of its existing treasury sharesrepresenting 8.3% of its issued share capital. We are also considering ways offurther optimising the group's capital structure which may involve on-marketshare buybacks as and when conditions are suitable. Strong cash generation and healthy balance sheet Cash generated from operations increased by 30% to R1 913 million. Net cashapplied to investing activities of R1 654 million includes the acquisition ofbusinesses for R262 million; property, plant and equipment and intangibles forR824 million; and a further net investment of R799 million in rental assets andhire vehicles. The group's balance sheet remains strong with total assets employed in thebusiness growing by 4% in the past six months to R29 778 million. The effect ofcurrency movement on translation was not material. Capital commitments of R2 364 million include the approved expansions within ourcement business estimated at R1 500 million. 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 taxation assetsand liabilities. In the case of the leasing businesses, net assets are reducedby interest-bearing liabilities. Comparatives have been stated on a consistentbasis. Comparative numbers have been restated as per note 15. The commentaries in the operational reviews reflect performance in the relevantlocal currencies. EQUIPMENT Revenue Operating profit including fair Net operating assets value adjustments 6 months ended Year ended 6 months ended Year 6 months Year ended ended endedR million 31 Mar 06 31 Mar 05 30 Sep 05 31 Mar 06 31 Mar 05 30 Sep 05 31 Mar 06 30 Sep 05 - Europe 2 519 2 608 5 301 218 237 483 2 459 2 388- Southern Africa 2 830 2 314 4 983 189 174 423 2 092 1 835 5 349 4 922 10 284 407 411 906 4 551 4 223 Share of associate income after taxation 10 ( 1) 8 The business in this division arises mainly from our enduring partnership of over 78 years with Caterpillar Inc. as their dealer in 16 countries. Revenue in Iberia maintained recent high levels in local currency. Margins,however, declined slightly due to competitive pressure, although this wasbalanced by an improved mix with increased after sales business. A renewedeffort on recovering market share has been initiated. Rental focus has beenimproved by the integration of all short-term rental business under the singlebrand of Barloworld Mera. Labour costs increased in line with increasedactivity, early retirement benefits and an initiative to introduce youngermanagement skills. The southern African markets were characterised by the highest levels ofactivity seen for some time, with machine sales growing strongly. Revenues rose22%, with sales of Caterpillar machines being boosted by growth in mining andconstruction activity. Earnings from the handling and agriculture divisionsdeclined in difficult markets. While trading profit grew at a similar rate torevenue growth, the effect of the currency volatility and fair value adjustmentson financial instruments resulted in lower reported operating profit growth. Theenergy business has benefited from the recent power outages in the Western Cape,with improved sales and maintenance of generators. A new enlarged R35 millionfacility in Durban was opened in April 2006. Associate income includes the results from the Siberian joint venture business,which is well on track to meet the $100 million sales target for the year. All territories recorded high levels of order intake reflecting confidence inthe future. At March 2006 there are firm customer orders of R3 013 million(September 2005: R2 890 million). Due to current and expected customer demand,and longer supplier lead times, we currently have the largest ever order bookplaced on Caterpillar at R5.1 billion. We are working closely with Caterpillarto ensure that we are able to satisfy our customers' requirements. INDUSTRIAL DISTRIBUTION Revenue Operating profit including Net operating assets fair value adjustments 6 months ended Year ended 6 months ended Year 6 months Year ended ended endedR million 31 Mar 06 31 Mar 05 30 Sep 05 31 Mar 06 31 Mar 30 Sep 05 31 Mar 06 30 Sep 05 05- Europe 852 977 1 983 ( 2) 22 41 539 437- North America 1 929 1 810 3 922 30 19 75 1 001 992Trading 2 781 2 787 5 905 28 41 116 1 540 1 429- Europe 145 184 367 12 24 66 227 260- North America 49 48 98 ( 8) ( 1) ( 40) 60 52Leasing* 194 232 465 4 23 26 287 312 2 975 3 019 6 370 32 64 142 1 827 1 741 *Net operating assets after deducting interest-bearing borrowings The US handling business continues to show solid growth, with increased marginsand a strong order book. The Truck Center continues to improve, with newmanagement initiatives proving successful and a record order book of over 3 000trucks. In Europe, flat UK industry conditions and further remodeling and restructuringhas negatively impacted on the overall result for the European handlingbusiness. However, restructuring benefits, a healthy order book and thetraditional seasonal strength are expected to contribute towards a recovery inthe second half. The leasing business was impacted by lower activity levels and adjustments inrespect of amended lease conditions on lift truck contracts. The Freightlinerfinance book continues to be managed out as planned, down to R37.0 million(US$6.0 million) from R74.4 million ($11.7 million) at 30 September 2005.Negotiations on the sale of the US handling leasing book are well advanced andvarious options for the future of the UK handling book are under consideration. The outlook for the second half is positive due to expected improvements in theUK handling business and enhanced seasonal and industry driven factors at TruckCenter. MOTOR Revenue Operating profit including fair Net operating assets value adjustments 6 months ended Year ended 6 months ended Year 6 months Year ended ended endedR million 31 Mar 06 31 Mar 05 30 Sep 05 31 Mar 06 31 Mar 05 30 Sep 05 31 Mar 06 30 Sep 05- Southern Africa 4 503 4 275 8 795 87 78 175 894 640- Australia 764 728 1 607 4 4 12 345 399Trading 5 267 5 003 10 402 91 82 187 1 239 1 039- Southern Africa 546 470 881 134 124 210 2 480 2 396- Europe 322 213 478 ( 7) 16 66 1 825 1 231Car rental 868 683 1 359 127 140 276 4 305 3 627Leasing Southern 320 299 638 33 43 88 339 334Africa* 6 455 5 985 12 399 251 265 551 5 883 5 000 Share of associate income after taxation 12 11 23 *Net operating assets after deducting interest-bearing borrowings The southern African motor retail operations continued to perform well as thenew vehicle market maintained its strong growth, driven by the increased size ofthe South African consumer market, low interest rates and new product offeringsfrom manufacturers. New vehicle sales increased by 15% over the period. Growingdemand for used vehicles in the region resulted in a 16% increase in retailsales of used vehicles. In Australia, new vehicle sales increased by 6% and usedretail sales volumes were marginally lower. While Avis Rent a Car Southern Africa experienced an increase in rental days of19%, pressure on rental rates and increasing costs resulted in lower margins.Rental rates are now firming and an increased focus on specific cost items areanticipated to assist margins in the period ahead. In Scandinavia, rental daysincreased by 12% on a comparable basis. The successful integration of theDenmark operations, which were acquired with effect from 1 November 2005, wasmore than offset by a significant increase in fleet costs in Sweden resultingfrom changes in the supply and pricing strategy of our major vehicle supplier.Plans are being implemented to restore Sweden's profitability. In the fleet services division, lower used vehicle margins in this segment andcontinued pressure on finance margins contributed to the subdued result.However, new business continues to be won which should result in long-termprofit growth. Full ownership of Avis Fleet Services was secured in April 2006. Associate income includes a strong performance from our DaimlerChrysler BEEjoint venture in KwaZulu-Natal. The outlook for the second half of the year is positive, underpinned bycontinued strong new vehicle sales and rental demand. CEMENT Revenue Operating profit including fair Net operating assets value adjustments 6 months ended Year ended 6 months ended Year 6 months Year ended ended endedR million 31 Mar 06 31 Mar 05 30 Sep 05 31 Mar 06 31 Mar 05 30 Sep 05 31 Mar 06 30 Sep 05 Southern Africa 2 183 1 813 3 974 855 642 1 502 2 569 2 502 Share of associate income after taxation 2 2 *Net operating assets include goodwill arising on PPC shares purchased by Barloworld The strong South African economy, together with increasing investment inpublic-sector infrastructure, continues to create a growing demand for cement.South African domestic cement industry sales remained buoyant with volume growthof more than 13% over the comparable period last year. The re-commissioning of the Jupiter kiln in Johannesburg was successfullycompleted in the March quarter and provides an additional 550 000 tons per annumof cement capacity. The Batsweledi project is progressing according to plan andwithin budget. Design and process changes have increased the original estimated1 million tons capacity to 1.25 million tons of cement per annum for the samecapital expenditure. In order to meet demand during this period all kilns were fully operational.However, these older kilns cannot be run cost effectively for a sustainedperiod, and replacement will become necessary if cement demand continues togrow. The surge in building activity, especially in the residential sector, continuesdue to lower interest rates. Although growth in the residential sector appearsto be slowing, increased investment on infrastructural projects is likely tooffset this. This bodes well for future industry cement demand, which thecompany estimates could grow by around 12% in the current financial year. Theshortage of skills and delivery of infrastructural services are increasinglyproving to be a constraint in the residential construction sector. The companyshould, however, continue to report an improved performance for the second halfof the year. In view of the positive outlook for cement demand, the PPC board has approvedthe planning phase to expand and modernise the capacity in the Western Cape,complementing the capacity expansion project underway in the inland region. Inaddition, the planning phase of a state-of-the-art cement milling facility inthe inland region is in process. Estimated capital expenditure for these twoprojects, if approved, could be in the region of R3 billion and would beincurred over three years commencing during the next financial year. COATINGS Revenue Operating profit including fair Net operating assets value adjustments 6 months ended Year ended 6 months ended Year 6 months Year ended ended endedR million 31 Mar 06 31 Mar 05 30 Sep 05 31 Mar 06 31 Mar 05 30 Sep 05 31 Mar 06 30 Sep 05 Southern Africa 978 809 1 558 152 150 283 664 522Australia & Asia 466 471 949 ( 17) ( 16) ( 30) 229 254 1 444 1 280 2 507 135 134 253 893 776 Share of associate income after taxation 9 9 20 While revenue grew by 21% in the southern African region, margins were impactedby increased costs. These related primarily to non-recurring costs for growthinitiatives such as the launch of the Bristol brand in South Africa, the openingof the Plascon concept store and a new warehouse in Port Elizabeth. Along withincreased marketing spend, the positive benefit of these initiatives will becomeapparent in future periods. The automotive business grew significantly on theback of the strong vehicle market in South Africa, with the refinish marketbeing particularly active. Both the Prostart and Midas acquisitions have beenapproved by the competition authorities and will contribute in the second half.The recently acquired ICC colourants business continues to perform strongly. In Australia, the offer for Wattyl remains subject to competition authorityapproval. Profitability in Australia remains under pressure but steps are beingtaken to reduce fixed costs, with restructuring and non-recurring costs ofapproximately R4.4 million (A$1 million) being incurred during the period. Thecommercial phase of our project in China remains on track. The outlook for the second half remains favourable due to continued steadygrowth in the southern Africa coatings market. SCIENTIFIC Revenue Operating profit including fair Net operating assets value adjustments 6 months ended Year ended 6 months ended Year 6 months Year ended ended endedR million 31 Mar 06 31 Mar 05 30 Sep 05 31 Mar 06 31 Mar 05 30 Sep 05 31 Mar 06 30 Sep 05 Europe 479 501 1 009 35 6 23 631 629North America 200 178 382 ( 1) ( 8) ( 6) 268 359Asia 69 70 135 3 3 4 84 87 748 749 1 526 37 1 21 983 1 075 The restructuring undertaken in Europe last year has produced the expectedreduction in costs. Sales are on target in all areas except the UK and Italy.The British National Health Service is experiencing severe financialdifficulties and this, together with imported product from the East, isdepressing sales. The elections and increased competition have reduced demandfor our products in Italy. Overall margins have improved despite large increasesin the cost of energy and the continued high prices of plastic raw materials.The science equipment businesses are performing well. The US has benefited from the cost reductions resulting from last year'srestructuring. The business has also enjoyed a modest improvement in volumes,led in part by an upturn in semi-conductor activity. Activity in certain laserproduct lines has improved appreciably over last year. The outlook is mixed with the trading weakness in the UK set to continue for theforeseeable future whereas the apparent upturn in the semi-conductor industryshould benefit US profits in the latter part of the year. CORPORATE AND OTHER Revenue Operating profit including fair Net operating assets value adjustments 6 months ended Year ended 6 months ended Year 6 months Year ended ended endedR million 31 Mar 06 31 Mar 05 30 Sep 05 31 Mar 06 31 Mar 05 30 Sep 05 31 Mar 06 30 Sep 05 Southern Africa 184 153 561 ( 21) ( 4) 21 1 064 870Europe 124 94 177 ( 17) ( 49) ( 54) 143 85 308 247 738 ( 38) ( 53) ( 33) 1 207 955 In southern Africa, results were adversely affected by the mark-to-marketadjustment on the option contract entered into in order to hedge the exchangerate risk on the proposed Wattyl transaction. In Europe, results were favorably impacted by a lower charge to the incomestatement in respect of pension fund deficits. The logistics businesses in South Africa and Spain have been consolidated undera single executive management team and growth prospects remain good. Dividend declaration for the six months ended 31 March 2006: Dividend Number 154 Notice is hereby given that the following dividend has been declared in respectof the six months ended 31 March 2006: Number 154 (interim dividend) of 150cents per ordinary share (2005: 130 cents per ordinary share). In compliance with the requirements of the JSE Securities Exchange South Africa,the following dates are applicable: Last day to trade cum dividend Friday 2 June 2006 Shares trade ex dividend Monday 5 June 2006 Record date Friday 9 June 2006 Payment date Monday 12 June 2006 Share certificates may not be dematerialised or rematerialised between Monday, 5June 2006 and Friday, 9 June 2006, both days inclusive. On behalf of the Board, S Mngomezulu, Secretary Directors Independent: WAM Clewlow (Chairman), SAM Baqwa, MJ Levett, S Mkhabela, DBNtsebeza, G Rodriquez de Castro de los Rios***, EP Theron, RC Tomkinson*, SBPfeiffer** Executive: AJ Phillips (Chief Executive)*, PJ Blackbeard, MD Coward, LS Day*, BPDiamond, JE Gomersall*, AJ Lamprecht, M Laubscher, PM Surgey, CB Thomson *British **American ***Spanish CONDENSED CONSOLIDATED INCOME STATEMENT Six months ended Year ended 31 March 31 March % 30 September 2006 2005 Change 2005 Reviewed Reviewed AuditedR million Notes Restated Restated Continuing operations Revenue 19 462 18 015 8 37 798Operating profit 3 1 748 1 511 16 3 399Fair value adjustments on financial 4 ( 69) ( 47) ( 57)instrumentsFinance costs 5 ( 245) ( 199) ( 438)Income from investments 81 71 186Profit before exceptional items 1 515 1 336 13 3 090Exceptional items 6 20 26 7Profit before taxation 1 535 1 362 3 097Taxation 7 ( 558) ( 505) (1 035)Profit after taxation 977 857 14 2 062Income from associates and joint 31 21 53venturesNet profit from continuing operations 1 008 878 15 2 115 Discontinued operation(Loss) / profit from discontinued 11 ( 116) 2 23operationNet profit 892 880 2 138 Attributable to:Minority shareholders 160 117 314Barloworld Limited shareholders 732 763 1 824 892 880 2 138 Net profit per share* (cents) - basic 349.6 369.9 879.6 - diluted 342.5 360.8 859.9 Net profit per share from continuingoperations* (cents) - basic 405.0 368.9 10 868.5 - diluted 396.8 359.9 10 849.1 Net profit per share from discontinued operation* (cents) - basic -55.4 1.0 11.1 - diluted -54.3 0.9 10.8 * Refer note 2 for details of headline earnings per share calculation CONDENSED CONSOLIDATED BALANCE SHEET 31 March 31 March 30 September 2006 2005 2005 Reviewed Reviewed AuditedR million Notes Restated Restated ASSETSNon-current assets 14 003 13 989 14 070Property, plant and equipment 7 969 7 739 7 922Goodwill 2 573 2 487 2 485Intangible assets 252 249 260Investment in associates and joint ventures 9 552 328 518Finance lease receivables 1 349 1 542 1 495Long-term financial assets 10 781 1 147 840Deferred taxation assets 527 497 550 Current assets 15 775 14 154 14 535Vehicle rental fleet 2 764 2 110 2 196Inventories 4 686 5 102 4 825Trade and other receivables 6 082 5 854 5 935Cash and cash equivalents 1 386 1 000 1 399Assets classified as held for sale 11 857 88 180 Total assets 29 778 28 143 28 605 EQUITY AND LIABILITIESCapital and reservesShare capital and premium 1 461 1 385 1 397Other reserves 1 239 2 013 1 541Retained income 9 182 8 166 9 143Interest of shareholders of Barloworld Limited 11 882 11 564 12 081Minority interest 567 496 644Interest of all shareholders 12 449 12 060 12 725 Non-current liabilities 7 058 6 402 7 103Interest-bearing 5 453 4 604 5 410Deferred taxation liabilities 937 810 906Provisions 400 577 383Other non-interest bearing 268 411 404 Current liabilities 10 271 9 681 8 777Trade and other payables 4 900 4 855 5 208Provisions 531 492 480Taxation 311 451 457Amounts due to bankers and short-term loans 4 309 3 883 2 632Liabilities directly associated with assets 11 220classified as held for sale Total equity and liabilities 29 778 28 143 28 605 CONDENSED CONSOLIDATED CASH FLOW STATEMENT Six months ended Year ended 31 March 31 March 30 September 2006 2005 2005 Reviewed Reviewed AuditedR million Notes Restated Restated Cash flow from operating activitiesOperating cash flows before movements in working capital 2 739 2 414 5 275Increase in working capital ( 826) ( 948) ( 475)Cash generated from operations 1 913 1 466 4 800Realised fair value adjustments on financial instruments ( 27) ( 27) ( 18)Finance costs and investment income ( 141) ( 120) ( 231)Taxation paid ( 651) ( 506) ( 975)Cash flow from operations 1 094 813 3 576Dividends paid (including minority shareholders) ( 933) ( 883) (1 197)Net cash from / (used in) operating activities 161 ( 70) 2 379 Net cash applied to investing activities (1 654) (1 324) (2 980)Acquisition of subsidiaries and investments ( 262) ( 254) ( 443)Acquisition of property, plant and equipment and intangibles ( 824) ( 660) (1 186)Net investment in rental assets 12 ( 459) ( 441) (1 090)Net investment in car hire vehicles 12 ( 340) ( 157) ( 592)Reduction in instalment sale and leasing 168 4 53receivablesProceeds on disposal of subsidiaries, investmentsand property, plant and equipment 63 184 278 Net cash outflow before financing activities (1 493) (1 394) ( 601)Net cash available from financing activities 1 530 947 601Ordinary shares issued 64 176 188Increase in interest-bearing liabilities 1 466 771 413 Net increase / (decrease) in cash and cash equivalents 37 ( 447) 0Cash and cash equivalents at beginning of period 1 399 1 443 1 443Effect of foreign exchange rate movements ( 45) 4 ( 44)Effect of cash included in assets classified as held for sale ( 5)Cash and cash equivalents at end of period 1 386 1 000 1 399 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY R million Share capital Share premium Foreign currency Legal and other translation reserve reserves Balance at 1 October 2004 as previously 10 1 199 1 393 564reportedAdjustment to opening balance for changes 19in accounting policyBalance at 1 October 2004 as restated 10 1 199 1 393 583Movement on foreign currency translation 3reserveOther reserve movements 34Net income recognised directly in equity 0 0 3 34Profit for the periodTotal recognised income and expense for 0 0 3 34the periodDividends on ordinary sharesShares issued in the current period 1 175Balance at 31 March 2005 11 1 374 1 396 617 Movement on foreign currency translation ( 281)reserveReclassifications ( 3) ( 203)Other reserve movements 3 12Net income recognised directly in equity 0 0 ( 281) ( 191)Profit for the periodTotal recognised income and expense for 0 0 ( 281) ( 191)the periodDividends on ordinary sharesShares issued in the current period 12Balance at 30 September 2005 11 1 386 1 115 426 Movement on foreign currency translation ( 326)reserveOther reserve movements 24Net income recognised directly in equity 0 0 ( 326) 24Profit for the periodTotal recognised income and expense for 0 0 ( 326) 24the periodDividends on ordinary sharesShares issued in the current period 64Balance at 31 March 2006 11 1 450 789 450 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Six months ended Year ended 31 March 31 March 30 September 2006 2005 2005 Reviewed Reviewed % AuditedR million Restated Change Restated 1. BASIS OF PREPARATION The condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting. The accounting policies used are consistent with those used for the group's 2005 annual financial statements (which were prepared in accordance with International Financial Reporting Standards) except for the adoption of the following revised or new standards: - IFRS 2 Share-based Payment - IAS 27 Consolidated and Separate Financial Statements The effect of adoption of these standards was not material and is set out in note 15. 2. RECONCILIATION OF NET PROFIT TO HEADLINE EARNINGS Net profit attributable to Barloworld 732 763 1 824 shareholders Profit on disposal of properties, ( 20) ( 24) ( 25) investments and subsidiaries Impairment of assets 5 9 21 Loss/(profit) on sale of plant and 1 3 ( 2) equipment excluding rental assets Taxation on exceptional items 2 ( 6) Interest of outside shareholders in 3 4 exceptional items Impairment loss on planned disposal of 123 discontinued operation Headline earnings 841 756 1 816 Headline earnings from continuing 830 746 1 791 operations Headline earnings from discontinued 11 10 25 operation Weighted average number of ordinary shares in issue during the period (000) - basic 209 371 206 249 207 367 - diluted 213 732 211 501 212 117 Headline earnings per share (cents) - basic 401.7 366.5 10 875.7 - diluted 393.5 357.4 10 856.1 Headline earnings per share from continuing operations (cents) - basic 396.4 361.7 10 863.6 - diluted 388.4 352.7 10 844.3 Headline earnings per share from discontinued operation (cents) - basic 5.3 4.8 8 12.1 - diluted 5.1 4.7 9 11.8 3. OPERATING PROFIT Included in operating profit are: Cost of sales (including allocation of 13 826 13 129 27 378 depreciation) Depreciation 982 871 1 797 Profit on sale of rental assets 26 72 95 (Loss) / profit on sale of other plant and ( 1) ( 3) 2 equipment 4. FAIR VALUE ADJUSTMENTS ON FINANCIAL INSTRUMENTS (Losses) / gains arising from: Forward exchange contracts and other ( 72) ( 57) ( 74) financial instruments Translation of foreign currency monetary 3 10 17 items ( 69) ( 47) ( 57) 5. FINANCE COSTS Total finance cost ( 337) ( 286) ( 623) Leasing interest classified as cost of 92 87 185 sales ( 245) ( 199) ( 438) 6. EXCEPTIONAL ITEMS Profit on disposal of properties, 20 25 27 investments and subsidiaries Impairment of assets including share of 1 ( 20) associates' impairment losses Exceptional profits 20 26 7 Taxation on exceptional items ( 1) ( 2) 5 Interest of minority shareholders ( 3) ( 4) Net exceptional profits 19 21 8 7. TAXATION Taxation per Income Statement 558 505 1 035 STC on dividends paid ( 116) ( 104) ( 142) Prior year taxation ( 2) ( 2) 9 Taxation on exceptional items ( 1) ( 2) 5 Taxation on profit before STC, prior year 439 397 907 taxation and exceptional items Profit before exceptional items 1 515 1 336 3 090 Dividends received ( 5) ( 12) ( 31) Profit before exceptional items and 1 510 1 324 3 059 dividends received Effective taxation rate excluding exceptional items, prior year taxation and dividends received (%) - excluding STC 29.1% 30.0% 29.7% - including STC 36.8% 37.8% 34.3% 8. ORDINARY DIVIDENDS Ordinary dividends per share (cents) 150 130 455 Six months ended Six months ended Year ended 31 March 2006 31 March 2005 30 September 2005 Market Book Market Book Market Book value/ value value/ value value/ value Directors' Directors' Directors' valuation valuation valuation Reviewed Reviewed AuditedR million Restated Restated 9. INVESTMENT IN ASSOCIATES AND JOINT VENTURES Joint ventures 351 172 297 133 247 148 Unlisted associates 298 169 155 72 330 191 649 341 452 205 577 339 Loans and advances 211 123 179 552 328 518 10. LONG-TERM FINANCIAL ASSETS Listed investments 8 8 8 8 8 8 Unlisted investments 36 36 346 346 36 36 Investment in Portland 295 295 302 302 295 295 Holdings Limited 339 339 656 656 339 339 Other long-term financial 442 491 501 assets 781 1 147 840 Six months ended Year ended 31 March 31 March 30 September 2006 2005 2005 Reviewed Reviewed AuditedR million Restated Restated 11. DISCONTINUED OPERATION AND ASSETS CLASSIFIED AS HELD FOR SALE The Steel Tube segment has been classified as a disposal group held for sale effective 31 March 2006. Results from discontinued operation are as follows: Revenue 796 777 1 603 Operating profit 12 22 43 Fair value adjustments on financial instruments 3 2 1 Finance costs ( 4) ( 14) ( 25) Income from investments 0 0 1 Profit before exceptional items 11 10 20 Exceptional items ( 5) ( 11) ( 3) Profit before taxation 6 ( 1) 17 Taxation ( 1) 0 2 Profit after taxation 5 ( 1) 19 Income from associates and joint ventures 2 3 4 Net profit of discontinued operation before 7 2 23 impairment loss Impairment loss on write-down to fair value less ( 163) costs to sell Taxation on impairment loss 40 Impairment loss after taxation ( 123) Loss from discontinued operation per income ( 116) statement The cash flows from the discontinued operation are as follows: Cash flows from operating activities 11 (29) (52) Cash flows from investing activities (9) (15) (20) Cash flows from financing activities (14) (8) 31 The major classes of assets and liabilities comprising the disposal group classified as held for sale are as follows: Property, plant and equipment and intangibles 229 Investment in associates 9 Inventories 280 Trade and other current receivables 288 Cash and cash equivalents 5 Assets of disposal group held for sale before 811 impairment loss Impairment loss on write-down to fair value less ( 123) costs to sell Assets of disposal group held for sale after 688 impairment loss Trade and other payables, and total for liabilities associated with assets classified as held for sale ( 220) Net assets of disposal group 468 Assets classified as held for sale comprise the following: Assets of disposal group classified as held for 688 sale Vehicles and equipment removed from rental fleets 169 to be sold Total assets classified as held for sale per 857 balance sheet Six months ended Year ended 31 March 31 March 30 September 2006 2005 2005 Reviewed Reviewed AuditedR million Restated Restated 12. NET INVESTMENT IN RENTAL ASSETS AND CAR HIRE VEHICLES Rental assets 459 441 1 090 Additions 719 532 1 832 Proceeds on disposals ( 260) ( 91) ( 742) Car hire vehicles 340 157 592 Additions 1 174 981 2 296 Proceeds on disposals ( 834) ( 824) (1 704) 13. COMMITMENTS Capital commitments to be incurred 2 364 604 2 842 Contracted 1 521 423 1 762 Approved but not yet contracted 843 181 1 080 Operating lease commitments 1 579 1 048 1 682 14. CONTINGENT LIABILITIES Guarantees, claims and other contingent 503 266 296 liabilities Buy-back and repurchase commitments* 958 709 1 071 Share of buy-back and repurchase commitments of 16 24 joint ventures \* The related assets are estimated to have a value at least equal to the repurchase commitments. 15. COMPARATIVE INFORMATION Comparative information has been restated for the effects of adopting IFRS 2 Share-based Payment. The effect of the restatement is as follows: R million Previously Adjustment Restated stated EFFECT AS AT 30 SEPTEMBER 2004 Retained income 7 936 ( 18) 7 918 Minority interest 719 ( 1) 718 Equity compensation reserve 19 19 Interest of all shareholders 11 821 11 821 FOR THE SIX MONTHS ENDED 31 MARCH 2005 Net profit 892 ( 12) 880 Net profit attributable to minority shareholders 117 117 Net profit attributable to Barloworld Limited 775 ( 12) 763 shareholders Retained income 8 196 ( 30) 8 166 Minority interest 497 ( 1) 496 Equity compensation reserve 31 31 Interest of all shareholders 12 060 12 060 The effect was a reduction in earnings and diluted earnings per share of 6 cents. FOR THE YEAR ENDED 30 SEPTEMBER 2005 Net profit 2 176 ( 38) 2 138 Net profit attributable to minority shareholders 315 ( 1) 314 Net profit attributable to Barloworld Limited 1 861 ( 37) 1 824 shareholders Retained income 9 198 ( 55) 9 143 Minority interest 646 ( 2) 644 Equity compensation reserve 57 57 Interest of all shareholders 12 725 12 725 The effect was a reduction in earnings per share of 18 cents, and diluted earnings per share of 17 cents. FOR THE SIX MONTHS ENDED 31 MARCH 2006 The impact on the results for the six months ended 31 March 2006 was a charge to operating profit of R11 million. The adoption of the new standard had no taxation impact. The effect on current period earnings and diluted earnings per share was a reduction of 5 cents. 16. PORTLAND HOLDINGS LIMITED (PORTHOLD) The results of Porthold, a wholly owned Zimbabwean subsidiary have in terms of the exclusions contained in the revised IAS 27 Consolidated and Separate Financial Statements, not been consolidated into the Group results as at 31 March 2006. Significant constraints impacting on the normal operation of Porthold, has resulted in the board concluding that management does not have the ability to exercise effective control over the business and as a result, the results of Porthold have continued to be excluded from the group results in the current period. Severe restrictions are placed on our ability to access foreign currency and remit funds and as a result the investment continues to be accounted for on a fair value investment basis with dividends only being recognised to the extent they are received. 17. RELATED PARTY TRANSACTIONS There has been no significant change in related party relationships since the previous year. Other than in the normal course of business, there has been no significant transactions during the six months with associate companies, joint ventures and other related parties. 18. SUBSEQUENT EVENTS The minority shareholding in Avis Fleet Services was purchased from Wesbank on 14 April 2006. The group acquired the Midas paint business on 3 May 2006. These transactions are not expected to have a material impact on current year earnings or net asset value. 19. AUDITOR'S REVIEW Deloitte & Touche has reviewed these interim results. The unqualified review opinion is available for inspection at the company's registered office. Six months ended Year ended 31 March 31 March 30 September 2006 2005 2005 Reviewed Reviewed Audited Restated Restated Number of ordinary shares in issue, net of buyback 210 206 208 221 208 612(000)Net asset value per share including investmentsat market value (cents) 5 799 5 672 5 905Total liabilities to total shareholders' funds (%) 131.7 126.6 117.7Total borrowings to total shareholders' funds (%) - Trading segment* 34.6 28.9 19.8 - Total group 78.4 70.4 63.2Interest cover (times) - Trading segment* 10.5 10.2 10.5 - Total group 5.5 5.5 5.8 * Trading segment includes manufacturing and dealership businesses, but excludes leasing and car rental SEGMENTAL SUMMARY Revenue 6 months ended Year endedR million 31 Mar 06 31 Mar 05 30 Sep 05 Reviewed Reviewed Audited Restated Restated Equipment 5 349 4 922 10 284Industrial distribution 2 975 3 019 6 370Motor 6 455 5 985 12 399Cement 2 183 1 813 3 974Coatings 1 444 1 280 2 507Scientific 748 749 1 526Corporate and other 308 247 738Total continuing operations 19 462 18 015 37 798Discontinued operation-Steel tube 796 777 1 603 20 258 18 792 39 401 Operating profit 6 months ended Year endedR million 31 Mar 06 31 Mar 05 30 Sep 05 Reviewed Reviewed Audited Restated Restated Equipment 445 453 957Industrial distribution 32 64 142Motor 261 269 559Cement 856 646 1 509Coatings 139 133 253Scientific 37 1 21Corporate and other ( 22) ( 55) ( 42)Total continuing operations 1 748 1 511 3 399Discontinued operation-Steel tube 12 22 43 1 760 1 533 3 442 Fair value adjustments on financial instruments 6 months ended Year endedR million 31 Mar 06 31 Mar 05 30 Sep 05 Reviewed Reviewed Audited Restated Restated Equipment ( 38) ( 42) ( 51)Industrial distributionMotor ( 10) ( 4) ( 8)Cement ( 1) ( 4) ( 7)Coatings ( 4) 1ScientificCorporate and other ( 16) 2 9Total continuing operations ( 69) ( 47) ( 57)Discontinued operation-Steel tube 3 2 1 ( 66) ( 45) ( 56) Operating profit including fair value adjustments 6 months ended Year endedR million 31 Mar 06 31 Mar 05 30 Sep 05 Reviewed Reviewed Audited Restated Restated Equipment 407 411 906Industrial distribution 32 64 142Motor 251 265 551Cement 855 642 1 502Coatings 135 134 253Scientific 37 1 21Corporate and other ( 38) ( 53) ( 33)Total continuing operations 1 679 1 464 3 342Discontinued operation-Steel tube 15 24 44 1 694 1 488 3 386 Net operating assets R million 31 Mar 06 30 Sep 05 Reviewed Audited Restated Equipment 4 551 4 223Industrial distribution 1 827 1 741Motor 5 883 5 000Cement 2 569 2 502Coatings 893 776Scientific 983 1 075Corporate and other 1 207 955Total continuing operations 17 913 16 272Discontinued operation-Steel tube 468 593 18 381 16 865 Addresses Registered office and business address Transfer secretaries Barloworld Limited Ultra Registrars (Pty) Limited180 Katherine Street Physical address: 5th Floor,PO Box 782248 11 Diagonal StreetSandton Johannesburg2146, South Africa 2000, South AfricaPh: +27 11 445 1000E mail: invest@barloworld.com Postal address: P O Box 4844 JohannesburgUnited Kingdom registrar 2000, South AfricaLloyds TSB RegistrarsThe Causeway, Worthing Ph: +27 11 834 2266West Sussex, BN99 6DA, England E mail: info@ultrareg.co.zaPh: +44 190 350 2541 About Barloworld Barloworld is a diversified industrial company founded in 1902. We haveoperations in thirty-one countries around the world and approximately half ofour twenty five thousand people are in South Africa. We offer our customersbusiness solutions backed by leading industrial brands, supported by service,relationships and attention to detail. These include both the sale of productsand services and rental and fleet service options. Through our business philosophy of Value Based Management we focus on creating sustainable value forall our stakeholders simultaneously. We manufacture, market and distribute our products and services and market anddistribute leading international brands on behalf of principals. Our brands include PPC Surebuild (cement), Plascon, Taubmans, Bristol and WhiteKnight (coatings), Melles Griot (photonics), Sterilin (disposable plastics) andCarbolite (laboratory products). We also have a rapidly growing BarloworldLogistics supply chain solutions business in southern Africa and Europe. Our principals include Caterpillar, NACCO (Hyster lift trucks), DaimlerChrysler(including Freightliner trucks) as well as many of the world's other leadingmotor vehicle brands. We are also the Avis licensee for southern Africa and forboth Avis and Budget in Sweden, Norway and Denmark. 15 May 2006 Sponsor: J.P.Morgan Equities Limited This information is provided by RNS The company news service from the London Stock Exchange